HOUSING AUTHORITY OF THE CITY AND COUNTY OF … Documents/14-067 HCV-Section … · HOUSING...

HOUSING AUTHORITY OF THE CITY AND COUNTY OF DENVER SOLICITATION TYPE: Request For Proposal SOLICITATION NUMBER: 14-067 DESCRIPTION: HCV/Section 8 Project Based Vouchers ISSUE DATE: September 19, 2014 WRITTEN QUESTIONS DUE: Round 1 September 26, 2014 at 4:00pm Submit to [email protected] Round 2 November 10, 2014 at 4:00pm Submit to [email protected] DUE DATE: Round 1 October 9, 2014 at 4:00pm Round 2 November 24, 2014 at 4:00pm DUE TIME: 4:00pm SUBMITTAL PLACE: Denver Housing Authority Procurement Services 777 Grant Street, 1st Floor Denver, Colorado 80203 OR Via email at [email protected] DIRECT INQUIRIES TO: Nicole Williams [email protected] This RFP and any future amendments can be obtained at http://www.denverhousing.org/section8/Pages/default.aspx

mailto:[email protected]




http://www.denverhousing.org/section8/Pages/default.aspx

SOLICITATION/PROPOSAL/AWARD Solicitation Number: 14-067

Solicitation Type: Request for Proposal

Date Issued: September 19, 2014

Issued By: Housing Authority of the City and County of Denver 777 Grant Street Denver, CO 80203 [email protected]

SOLICITATION Electronic or sealed offers in one (1) unbound original and three (3) copies for furnishing the services or supplies in the attached solicitation will be received at the address specified above until 4:00pm local time on October 9, 2014 for Round One and November 24, 2014 for Round Two. Offerors should note the provision entitled LATE SUBMISSIONS ... in the Instructions to Offerors. All Offers are subject to all terms and conditions contained in this solicitation. For Information Contact: Nicole Williams Email Address: [email protected]

PROPOSAL In compliance with the above, the undersigned agrees, if the offer is accepted within 60 calendar days from the date for receipt of offers specified above, to furnish any and all items at the prices offered. The Offeror acknowledges amendments through by signing below. Name and Address of Offeror: Name and Title of Person Authorized to Sign Offer: Telephone Number: Signature: Date:

AWARD

(For DHA Use Only) Contract Number:

Contract Amount: Effective Date: End Date:

Supplies or Services: HCV/Section 8 Project Based Vouchers

SIGNATURES CONTRACTOR: (Negotiated Procurement Only) Signature: Name: Title: Date:

AUTHORITY: Signature: Name: Title: Date:

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SOLICITATION/CONTRACT TABLE OF CONTENTS SECTION TITLE PAGES Solicitation/Contract Form 2 I Introduction 3 II Scope of Work 4 III Responses 5 IV Evaluation Criteria 5 V. Technical Submission Requirements 6-9 VI. Contract Administration by Authority 9 VI. Interviews 9 VIII. Verification/Review 9 IX. Attachments 10

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I. INTRODUCTION Overview The Denver Housing Authority (DHA) is a quasi-municipal corporation with a portfolio of over 11,000 units and housing choice vouchers, providing affordable housing to more than 26,000 very low, low and middle income individuals representing over 10,000 families. DHA’s vision has the goal that every individual or family shall have quality and affordable housing, in communities offering empowerment, economic opportunity, and a vibrant living environment. DHA’s mission is to serve the residents of Denver by developing, owning and operating safe, decent and affordable housing in a manner that promotes thriving communities. Project DHA announces the availability of approximately 200 Section 8 Housing Choice tenant-based vouchers to owners that are interested in directly assigning them to their properties. This opportunity is covered more fully in the Scope of Work. Issuer The Housing Authority of the City and County of Denver (DHA) Schedule of Rounds Round 1

RFP Document Release: September 19, 2014 Written Questions (Clarifications) Due: September 26, 2014

Written Responses Issued: October 1, 2014 First Round Due date October 9, 2014 Short List Announced October 17, 2014

Interviews/ Final Selections October 24, 2014 Round 2

Remaining Vouchers Available Announced November 1, 2014 Written Questions (Clarifications) Due: November 10, 2014

Written Responses Issued: November 17, 2014 First Round Due date November 24, 2014 Short List Announced December 5, 2014

Interviews/ Final Selections December 12, 2014 This RFP and any future amendments can be obtained at. http://www.denverhousing.org/section8/Pages/default.aspx

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http://www.denverhousing.org/section8/Pages/default.aspx

II. SCOPE OF WORK Project Description DHA is seeking to award approximately 200 of its Section 8 Housing Choice tenant-based voucher inventory in order to create more “permanently” affordable housing with long-term affordability restrictions. This solicitation is only for owners of existing rental properties within the City and County of Denver that have residents who have a demonstrated need for subsidized housing. A housing unit is considered an existing unit if at the time of notice of PBV selection the units substantially complies with HUD’s Housing Quality Standards (HQS). The units must be immediately available. A minimum of 5 vouchers with a maximum 30 vouchers will be awarded for any one development. PBV assistance is limited to 25% of the units in a project unless the project is designated for the elderly or families with disabilities, and/or is for families receiving supportive services it which case it can be up to 100% of the units. The properties must be located in the City and County of Denver and provide housing that meets DHA’s goal to select sites for PBV that provide for de-concentrating poverty and expanding housing and economic opportunities. All properties must meet both HUD and DHA requirements regarding PBV assistance as noted in the Code of Federal Regulations Title 24, Part 983 found at http://portal.hud.gov/hudportal/hud?src=/program_offices/public_indian_housing/regs/fedreg and in Section 12 of DHA’s Section 8 Administrative Plan (pages 125 – 146) found at www.denverhousing.org/aboutus/agencyplan/Pages/default.aspx Under the PBV regulations, DHA may apply for designation of PBVs for DHA –owned units. The regulations require that DHA offer the PBVs via a public and competitive solicitation, to which the DHA itself may respond. All proposals selected for units where DHA has an “identify of interest” must be approved by HUD, or an independent entity selected by HUD. Ineligible Units Certain Special housing types are NOT eligible for project-based assistance. These include transitional housing, owner-occupied units, shared housing, Section 202 housing, Section 236 housing (exception made for units subsidized with Section 236 reduction payments), Section 811 and units occupied by families who are not eligible for participation in the PBV program. Please see 24 CFR 983.53 for a complete list of ineligible properties. Rent Limits The units that will be listed on the project-based contract will have rent limits. HUD regulations must be followed at the time that the rents are set for the initial rental and any subsequent rent increase that is requested by the Owner. Federal Requirements Certain other Federal requirements also apply to PBV assistance, including, but not limited to:

a. Fair Housing: Non-discrimination and equal opportunity. See 24 CFR 5.105 (a) and Section 504 of the Rehabilitation Act. Selected projects are subject to Fair Housing reviews which may include review of marketing and outreach plans and reasonable accommodation policies.

b. Environmental Review: PBV activities are subject to HUD environmental regulation in 24 CFR 50 and 58. DHA will obtain documentation of environmental clearance from the Responsible Entity. (See CFR 983.58).

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http://portal.hud.gov/hudportal/hud?src=/program_offices/public_indian_housing/regs/fedreg

http://www.denverhousing.org/aboutus/agencyplan/Pages/default.aspx

III. RESPONSES Offeror must submit one electronic version of their proposal OR one unbound original and three (3) bound copies of their Proposal. All Proposals shall be clear, concise and shall be limited to twenty (20) pages single-spaced on letter size paper, excluding the cover letter and table of contents. All Proposals shall be enclosed in an envelope, sealed, and clearly labeled as follows: Solicitation: HCV/Section 8 Project Based Vouchers Proposer Name: ______ RFP 14-067 First Round -- October 9, 2014 at 4:00 P.M. MDT Second Round -- November 24, 2014 at 4:00 P.M. MDT Offers shall be submitted in the following six (6) sections, which are explained in more detail below:

1 Owner experience in providing affordable housing 2 Management experience with Housing Choice vouchers 3 Description of property location that includes neighborhood characteristics and availability of services 4 Property operating budget and a 3-year financial history (audited statements if available) 5 History of 3rd party property inspections 6 Responsiveness

Content

• Description of the housing owned, including the number of units by size and bedroom count; • Number of PBVs requested, including units by size and bedroom count; • Evidence of site control; proposed contract rents; Management Plan, including supportive services to

be provided; if applicable, complete information about current tenancy and plans for any temporary relocation;

• Property operating budget and a 3 year financial history and projection of performance or current performance; and

• Experience of the owner and supportive service provider if applicable • Separate proposals must be submitted for each property proposed

IV. EVALUATION CRITERIA Evaluations will be performed by the Authority’s evaluation committee. Members of the committee shall complete a combined evaluation of qualifications using the evaluation criteria below. Numerical ranking and selection of the most qualified firm (including fee) will then occur. Utilizing the items identified in Section III of this document, the Authority’s evaluation committee will evaluate and score each offer in accordance with the following criteria: 1) Owner experience in providing affordable housing 25 Points 2) Management experience with Housing Choice vouchers and supportive services, if applicable 20 Points 3) Description of property location that includes neighborhood characteristics and availability of

services 15 Points

4) Property Operating budget and 3-year financial history 15 Points 5) History of third party property inspections 15 Points 6) Responsiveness 10 Points

Total 100 Points

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Following completion of the RFP evaluations, the Offeror(s) deemed best qualified will be selected to perform designated services as outlined in the Responses. At DHA’s discretion, Short Listed properties may be site-visited and inspected. DHA will establish a competitive range amongst the prospective proposals and will allocate approximately 200 vouchers based on the needs that are established by each awardee that include how resources are best leveraged to provide affordable housing. DHA reserves the right to allocate more or less than 200 vouchers. V. TECHNICAL SUBMISSION REQUIREMENTS The following instructions are for purposes of responding to this RFP only and will not become part of any resultant contract.

1. See HUD Form 5369B in Section IX Attachments

2. Submission of Proposals It is very important that the Proposal be properly identified on the face of the envelope as set forth below in

order to ensure that the date and time of receipt is stamped on the face of the envelope. Receiving procedures are: date and time stamp those envelopes identified as Proposals and deliver them immediately to the appropriate contracting official and only date stamp those envelopes which do not contain identification of the contents and deliver them to the appropriate procuring activity only through the routine mail delivery procedure.

(a) Proposals and modifications thereof shall be enclosed in an envelope, sealed and clearly labeled as

follows:

PROPOSAL DOCUMENTS: Name of Proposal Address of Offeror RFP Number Date and Time Proposal Due (as specified in this RFP)

(b) All Proposals transmitted by mail shall be addressed as set forth in (a) above and mailed to:

Procurement Services Housing Authority of the City and County of Denver 777 Grant Street, 1st Floor Denver, CO 80203

(c) All Proposals hand delivered shall be enclosed in an envelope and addressed as set forth in (a) above

and hand delivered to:

Procurement Services Housing Authority of the City and County of Denver 777 Grant Street, 1st Floor Denver, CO 80203

(d) The clock above the 1st Floor receptionist’s desk at 777 Grant Street shall be used to determine the

time Offers are received by the Authority.

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(e) All proposals submitted electronically shall be addressed with the same information above and delivered to:

Procurement Services Attn: Nicole Williams Procurement Officer [email protected]

(f) The Clock on the Procurement Officer’s computer shall be used to determine the time

proposals/offers are received by the Authority.

(g) Proposals or modifications will not be considered unless they have original signatures and are transmitted by mail, hand delivered or electronically delivered via email.

(h) The scope of work is being procured by the competitive proposals method, also called a Request for

Proposal (RFP). Proposal will not be publicly opened, but shall be kept confidential until after contract award.

3. Required Documents The following documents are required to be submitted with the Proposal:

(a) Solicitation/Proposal/Award Form, page 2;

(b) Representations, Certifications and Other Statements of Offerors including HUD Form 5369-C,

Section IX Attachments;

(c) Request for Taxpayer ID Number (W9)

(d) Non-Collusive Affidavit

(e) Disclosure & Lobbying Activities

(f) Worker Status Affidavit

4. Explanation to Prospective Offerors

Any Prospective Offeror desiring an explanation or interpretation of the RFP must submit a written request to the appropriate person listed in the RFP by September 26, 2014 for Round 1 and November 10, 2014 for Round 2 to allow a written reply to reach all Prospective Offerors before submission of their Proposal. Oral explanations or instructions given before the award of the contract will not be binding upon the Authority, its instrumentality, or its affiliate. Any information given to a Prospective Offeror concerning an RFP will be furnished promptly to all Prospective Offerors as an amendment to the RFP, if that information is necessary in submitting Proposals or if the lack of it would be prejudicial to any other Prospective Offerors.

5. Contract Award

(a) DHA will enter into a Housing Assistance Payment (HAP) contract resulting from this RFP to the

responsible Offeror whose Proposal conforming to this RFP will be most advantageous to the Authority, cost or price and other factors, specified elsewhere in this RFP, considered.

6. Service of Protest

(a) Any protest against the award of the contract, pursuant to this solicitation, shall be served on the

Authority within ten (10) days after the Authority announces the award. The protestor must obtain a written and dated acknowledgment of receipt of the complaint from the Authority Procurement

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Services Department. The determination of the Authority with regard to such protest or to proceed to award, notwithstanding such protest, shall be final unless appealed by the protestor.

(b) The protest must be printed, typewritten or otherwise duplicated in a legible form. The content of the

written notice must contain:

(c) The name, address and phone number of the person filing the protest and an explanation of how their substantial interests have been affected by the Authority’s determination;

(d) A statement of how and when the person filing the protest received notice of the Authority’s

determination;

(e) A statement of all issues of disputed material fact. If there are none, the protest must so indicate;

(f) A concise statement of the facts alleged, as well as the Authority’s policies which entitle the person filing the protest to relief;

(g) A demand for relief to which the person deems themselves entitled; and;

(h) Any other information the person contends is material to the protest.

7. Open Records Act

Offerors are hereby notified that information submitted as part of or in support of the Offer may be available for public inspection in compliance with the Colorado Open Records Act, C.R.S. 24-72-201 et seq.

8. Restriction on Disclosure and use of Data

If the Offeror includes proprietary or confidential information in its Proposal, but does not want that information disclosed to the public for any purpose or used by the Authority except for evaluation purposes, then the Offeror shall conspicuously display the following statement on the first page of the Proposal:

“The Proposal includes proprietary or confidential information that shall not be disclosed outside the Authority, and/or the Authority’s evaluation committee, and shall not be duplicated, used, or disclosed, in whole or in part, for any purpose other than to evaluate the Proposal.”

Offeror shall specifically identify, by page number or otherwise, the proprietary or confidential information subject to the restriction that have been included in its Proposal, pursuant to state or local law. Offeror understands and acknowledges that if the Contract is awarded the Authority shall have the right to duplicate, use or disclose the proprietary or confidential information to the extent provided in the contract; and that this restriction does not limit the Authority’s right to use the proprietary or confidential information if it is obtained from another source without restriction.

9. Retention

All Proposals are the property if the Authority and shall be retained by the Authority and therefore will not be returned to the Offeror.

10. Costs

The issuance of this RFP does not obligate the Authority to pay any costs incurred by any Offeror in connection with (a) preparation and presentation of a Proposal, (b) any supplement or modification of this RFP, or (c) negotiation with the Authority or other party arising out of or relating to this RFP or the subject matter of this RFP.

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11. RFP and Amendments

Offeror’s Proposals shall address only this RFP and amendments to this RFP

12. Conflicting Provisions

Unless otherwise specified within this RFP or contract documents, any provision in any of the RFP documents that conflicts or is inconsistent with any provisions in any of the other RFP documents, including attachments, shall be void to the extent of any such conflict or inconsistency. In the event that any provision in any document listed in the RFP conflicts with any provision of the contract, the contract shall govern.

VI. CONTRACT ADMINISTRATION BY AUTHORITY

1. Contract Administration Office

The Housing Choice Voucher Department is responsible for administration of the contract.

2. Contacts

Please direct all correspondence to the following:

Nicole Williams, Procurement Officer Housing Authority of the City and County of Denver [email protected]

3. Agency Hours

(a) DHA’s normal work hours are from 8:00 a.m. to 4:30 p.m., Monday through Friday, excluding holidays. Access to the Authority and/or its developments may be restricted to these hours and days.

(b) DHA recognizes the following holidays: New Year's Day, Martin Luther King Jr.'s Birthday (3rd Monday in January), President's Day, Memorial Day, Independence Day, Labor Day, Veteran's Day, Thanksgiving Day, Day after Thanksgiving, Christmas Eve, and Christmas Day. If a holiday falls on a Sunday, the following Monday will be observed. If a holiday falls on a Saturday, the preceding Friday will be observed.

(c) Observance of such days by the DHA personnel shall not otherwise be a reason for an additional period of performance, or entitlement of compensation, except as set forth within the executed contract.

VI. INTERVIEWS Interviews may be conducted of the short listed Offerors. The oral interview panel shall rank the Offerors on a numerical scale using the criteria contained in the Evaluation Criteria and otherwise contained herein. The Offeror’s interview team should contain key staff intended to be assigned to the project. VIII. VERIFICATION/REVIEW Upon receipt of notification from the Authority that you have been awarded the contract for the project, the following tasks shall be completed prior to execution of a contract.

1. Review scope and type of project. 2. Review program requirements for completeness and suitability with the Owner’s. 3. Review owner’s time schedule.

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IX. ATTACHMENTS

1. “The Housing and Economic Recovery Act of 2008 (HERA): Changes to the Section 8 Tenant-Based Voucher and Section 8 Project-Based Voucher Programs” (Docket No. FR-5242-F-02)

2. “The Housing and Economic Recovery Act of 2008 Applicability to HUD Public Housing, Section 8 Tenant-Based Voucher and Section 8 Project-Based Voucher Programs” (Docket No. FR-5242-N-01)

3. “Project-Based Voucher Program (24 CFR Part 983) 4. HUD Form 52641: Housing Assistance Payments Contract 5. HUD Form 52521-B: Part I of the Agreement to Enter into a Housing Assistance Payments Contract 6. HUD Form 52521-D : Part II of the Agreement to Enter into a Housing Assistance Payments Contract 7. HUD Form 5369C: Representations, Certifications, and Other Statements of Bidders 8. HUD Form 5370 C Section I: General Conditions of the Contract 9. HUD Form 5369B: Instructions to Offerors 10. Non-Collusive Affidavit 11. Disclosure & Lobbying Activities 12. Worker Status Affidavit 13. W-9

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Vol. 79 Wednesday,

No. 122 June 25, 2014

Part II

Department of Housing and Urban Development 24 CFR Parts 5, 982, and 983 The Housing and Economic Recovery Act of 2008 (HERA): Changes to the Section 8 Tenant-Based Voucher and Section 8 Project-Based Voucher Programs; Final Rule

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36146 Federal Register / Vol. 79, No. 122 / Wednesday, June 25, 2014 / Rules and Regulations

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 5, 982, and 983

[Docket No. FR–5242–F–02]

RIN 2577–AC83

The Housing and Economic Recovery Act of 2008 (HERA): Changes to the Section 8 Tenant-Based Voucher and Section 8 Project-Based Voucher Programs

AGENCY: Office of the Assistant Secretary for Public and Indian Housing, HUD. ACTION: Final rule.

SUMMARY: HERA, enacted into law on July 30, 2008, made comprehensive and significant reforms to several HUD programs, including HUD’s Public Housing, Section 8 Tenant-Based Voucher, and Project-Based Voucher programs. On November 24, 2008, HUD published a notice that provided information about the applicability of certain HERA provisions to these programs. The notice identified: those statutory provisions that are self- executing and required no action on the part of HUD for the program changes made by HERA to be implemented; and those statutory provisions that require new regulations or regulatory changes by HUD for the HERA provisions to be implemented. The notice also offered the opportunity for public comment on the guidance provided. HUD followed the November 2008 notice with a May 15, 2012, rule that proposed to establish, in regulation, the reforms made by HERA solely to the Section 8 Tenant- Based Voucher and Project-Based Voucher programs as discussed in the November 2008 notice, to make other related changes to the regulations, and to further solicit public comment. This final rule conforms the regulations of the Section 8 Tenant-Based Voucher and Project-Based Voucher programs to the statutory program changes made by HERA, makes other related changes to these regulations as discussed in the May 2012 proposed rule, and makes further changes to the two voucher program regulations as a result of issues raised by public comment or as a result of further consideration by HUD of issues pertaining to these programs. DATES: Effective Date: July 25, 2014. FOR FURTHER INFORMATION CONTACT: For information about HUD’s Voucher programs, contact Michael Dennis, Director, Office of Housing Voucher Programs, Office of Public and Indian Housing, Room 4228, telephone number 202–402–3882. The address is the

Department of Housing and Urban Development, 451 7th Street SW., Washington, DC 20410. The listed telephone number is not a toll-free number. Persons with hearing or speech impairments may access this number through TTY by calling the toll-free Federal Relay Service at 1–800–877– 8339.

SUPPLEMENTARY INFORMATION:

I. Background—November 2008 Notice and May 2012 Proposed Rule

HERA (Pub. L. 110–289, 122 Stat. 2654, approved July 30, 2008) made several changes to the U.S. Housing Act of 1937 (42 U.S.C. 1437 et seq.) (1937 Act) that affect programs administered by HUD’s Office of Public and Indian Housing (PIH), including, but not limited to, changes to the definition of income, which also affect the Office of Housing’s project-based assistance programs; the public housing agency (PHA) plan; the voucher program; and the capital and operating funds with respect to emergency funds.

November 24, 2008, Notice. HUD published a notice in the Federal Register on November 24, 2008, at 73 FR 71037, that provided information about the applicability of the 1937 Act provisions amended by HERA to HUD’s Public Housing, Section 8 Tenant-Based Voucher, and Section 8 Project-Based Voucher programs. To assist PHAs and assisted housing providers, the notice identified those provisions that are self- executing and required no action on the part of HUD for the program changes to be implemented, and those provisions that require new regulations or regulatory changes by HUD to be implemented. The notice also solicited public comment.

May 15, 2012, Proposed Rule, Generally. HUD followed the November 24, 2008 notice with a proposed rule published on May 15, 2012, at 77 FR 28742, for the purpose of: (1) Establishing, in regulation, the reforms made by HERA to the Section 8 Tenant- Based Voucher and Section 8 Project- Based Voucher programs as discussed in the November 2008 notice, taking into consideration public comment received on the notice, and (2) making other related regulatory changes. In the May 15, 2012, proposed rule, HUD explained that whether the HERA program changes are self-executing or not self- executing, a rule is necessary to ensure that the codified regulations for the programs revised by HERA reflect the HERA changes. In some cases, the regulatory change is simply a conforming change; that is, the regulatory revisions conform the

language of the regulation to the language of the 1937 Act, as amended by HERA. In other cases, however, HUD was required to exercise discretionary authority to determine how the statutory change should be implemented. HUD further explained that with respect to the conforming regulatory changes, a conforming change does not necessarily mean that HUD is adopting in regulation the statutory language verbatim. For purposes of clarity or to give precision to the statutory language or statutory intent, the conforming regulatory change may be worded differently than the statutory language.

May 15, 2012, Proposed Amendments. The following presents a brief summary of the key regulatory revisions proposed by the May 15, 2012 rule. A detailed description of all proposed amendments, including correction or updating of regulatory or statutory citations, specific terminology changes, and redesignation of regulatory sections as a result of the inclusion of new sections, and the reasons for the amendments can be found in the preamble to the proposed rule at 77 FR 28743 to 28748.

Annual Income (24 CFR 5.609(c)(14)). A conforming change was made to 24 CFR 5.609 to include the Veterans Administration (VA) disability benefits with the exclusion from income for deferred Social Security benefits in § 5.609(c)(14).

Rent to Owner: Reasonable Rent (24 CFR 982.507). The procedure for determining the rent reasonableness standard applicable to dwelling units receiving low-income housing tax credits (LIHTC) or assistance under the HOME Investments Partnerships (HOME) program was streamlined by section 2835(a)(2) of HERA, and the proposed rule revised § 982.507(c) to provide the streamlined process, with the exception of HOME-assisted units. As advised in the May 15, 2012, proposed rule, the rent reasonable applicable to HOME-assisted units would be addressed by separate rulemaking for the HOME program and included a placeholder to cross- reference to the HOME program regulations pending this issue being addressed by HOME program rulemaking.

Applicability of the Tenant-Based Voucher Rule (24 CFR 983.2). The proposed rule removed reference to ‘‘cooperative housing’’ from § 983.2(b)(3). Section 983.2(b) lists the types of situations to which the tenant- based voucher provisions of 24 CFR part 982 do not apply to the PBV program, and paragraph (b)(3) lists the special housing types to which the part 982


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provisions do not apply. The inclusion of ‘‘cooperative housing’’ in the list of special housing types to which the part 982 provisions do not apply is incorrect, and HUD proposed to correct this error.

PBV Definitions (24 CFR 983.3). The proposed rule added new definitions, and removed and revised others to reflect HERA’s amendment to section 8(o) of the 1937 Act and to remove reference to cooperative housing. In addition, the rule proposed to revise the definition of ‘‘existing housing’’ for the purpose of establishing clear and measurable standards in determining whether a proposed project is eligible for selection as existing housing. The proposed revision was intended to address the potential circumvention of rehabilitation program requirements by selecting a project as existing housing when rehabilitation will be performed on the project shortly after execution of the housing assistance payment (HAP) contract.

Description of the PBV Program (24 CFR 983.5). The proposed rule amended § 983.5(c) to provide that although a PHA has the discretion to decide whether to operate a PBV program, the PHA must notify HUD of its intent to project-base its vouchers.

Maximum Amount of PBV Assistance (24 CFR 983.6). The proposed rule amended § 983.6 to require advance notification to HUD of the PHA’s intent to project-base its vouchers.

Special Housing Types (24 CFR 983.9). The proposed rule made a conforming amendment to § 983.9 to clarify that cooperative housing is an eligible special housing type under the PBV program.

Project-Based Certificate (PBC) Program (24 CFR 983.10). Section 6904 of the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 (Pub. L. 110–28, approved May 7, 2007) provides that a PHA may renew or extend PBC housing assistance payment (HAP) contracts as PBV HAP contracts, under certain conditions. The amendment to § 983.10 implemented this change.

Owner Proposal Selection Procedures (24 CFR 983.51). The proposed rule revised paragraph (a) of § 983.51 to substitute the term ‘‘project’’ for ‘‘building’’, consistent with the statutory change made by HERA to section 8(o) of the 1937 Act. Additionally, the proposed rule slightly reworded paragraph (b)(2) to further clarify that a PHA may select, without competition, a proposal for housing assisted under a federal, state or local government housing assistance, community development, or supportive services

program that required a competition for the selection of proposals; that is, the PHA need not conduct another competition.

Housing Type (24 CFR 983.52). The proposed rule revised § 983.52, which provides standards by which a unit will be considered an existing unit for purposes of the PBV program, to provide that a unit must satisfy Housing Quality Standards (HQS) requirements within 60 days of the date of selection by a PHA. The proposed revision also would limit the total amount of work that must be performed to facilitate compliance with HQS to $1,000 per assisted unit. Additionally, the proposed revision provided that to be considered an existing unit for purposes of the PBV program, the owner must not plan to perform rehabilitation work on the units within one year after HAP contract execution that would cause the units to be in noncompliance with HQS and that would total more than $1,000 per assisted unit.

Prohibition of Assistance for Ineligible Units (24 CFR 983.53). Section 2835(a)(1)(F) of HERA allows PHAs to enter into HAP contracts with respect to units in cooperative housing and in high-rise elevator projects, and provides that such authority may be exercised without review and approval by HUD. The proposed rule revised § 983.53 to remove the requirement of advance HUD approval for HAP contracts with respect to units in high-rise elevators projects and to make cooperative housing an eligible housing type.

Prohibition of Excess Public Assistance (24 CFR 983.55). Section 2835(a)(1)(F) of HERA removes the requirement to conduct a subsidy layering review in the case of a HAP contract for an existing structure or if such a review has been conducted by the applicable state or local agency. The proposed rule, in § 983.55, clarified that the subsidy layering requirements are not applicable to existing housing.

Applicability of 25 Percent Cap on Number of PBV Units (24 CFR 983.56). Prior to amendment by HERA, PBV assistance was limited to 25 percent of the units in a building. Section 2835(a)(1)(A) of HERA amended 8(o)(13)(D)(i) of the 1937 Act to replace the term ‘‘building’’ with the term ‘‘project,’’ which is defined to mean a single building, multiple contiguous buildings, or multiple buildings on contiguous parcels of land. The proposed rule clarified that the exception to the 25 percent cap on the number of PBV units in a project includes units for elderly families and/ or disabled families; that is, a project for elderly families, a project for disabled

families, or a project that serves both categories of families.

Environmental Review (24 CFR 983.58). As stated in both the November 2008 notice and the May 2012 proposed rule, HUD noted that any federally required environmental review is ‘‘required by law or regulation,’’ and HUD has not identified any federally required environmental reviews that would be eliminated by Section 8(o)(13)(M)(ii) of the 1937 Act, as added by Section 2835(a)(1)(F) of HERA. Accordingly, HUD proposed no changes to § 983.58, except to make a minor change to § 983.58(d) to note that the term ‘‘release of funds’’ is defined in § 983.3, which is the definition section,

PHA-Owned Units (24 CFR 983.59). The proposed rule added a new paragraph § 983.59 to provide a clarification of the term of the initial and renewal HAP contract that is consistent with section 8(o)(13)(F) of the 1937 Act, which provides that the PHA and the independent HUD-approved entity must agree on the term of the HAP contract and any HAP contract renewal for PHA-owned units. Additionally, the proposed rule removed the requirement that the independent entity approved by HUD to determine initial contract rents to owner must be based on an appraisal by a licensed, state-certified appraiser.

Housing Quality Standards (24 CFR 983.101). The proposed rule revised § 983.101 to exclude cooperative housing from the list of special housing types that are inapplicable to the PBV program.

Purpose and Content of the Agreement to Enter into a HAP Contract (24 CFR 983.152). The May 15, 2012 rule proposed to clarify § 983.152 by striving to establish a bright-line definition of ‘‘commencement of construction’’ to ensure there is no confusion concerning the requirement that a PHA must enter into an agreement with the owner prior to the start of construction or rehabilitation on a project. The clarification provided that construction commences when excavation or site preparation (including clearing of the land) begins for the housing.

When Agreement Is Executed (24 CFR 983.153). The proposed rule clarified when the Agreement, referenced in § 983.153, must be executed.

Purpose of HAP contract (24 CFR 983.202). The proposed rule made explicit the existing practice authorized by § 983.153, which is that a HAP contract covers a single project, with the exception of single-family scattered site projects. If an owner has multiple projects, then each project must be


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covered by a separate HAP contract under the proposed clarification.

HAP Contract Information (24 CFR 983.203). The proposed rule revised § 983.203 to substitute the term ‘‘project’’ for ‘‘building’’, consistent with the statutory change.

Extension of Term of Initial Housing Assistance Payment (HAP) Contract (24 CFR 983.205(a)). The maximum term of the initial HAP contract provided in section 8(o)(13)(F) of the 1937 Act is extended from 10 to 15 years as a result of the amendment to the 1937 Act made by section 2835(a)(1)(B) of HERA, and the proposed rule made a conforming change to 24 CFR 983.205 to reflect the new HAP term.

Extension of Initial Term (24 CFR 983.205). The proposed rule made a conforming change to § 983.205(b) to reflect the new HAP term. Section 8(o)(13)(G) of the 1937 Act, as amended by section 2835(a)(1)(C) of HERA, provides that the maximum term for an extension of the HAP contract is 15 years, at the election of the PHA and owner. The proposed rule provided that a PHA may provide for multiple extensions; however, under no circumstances may extensions exceed 15 years cumulatively.

The proposed rule also made a clarifying change to § 983.205(d) to require HUD approval when an owner seeks to terminate a HAP contract when the rent for any contract unit is adjusted below the initial rent level.

Proposed Statutory Notice Requirements: Contract Termination or Expiration (Adding a New 24 CFR 983.206). The proposed rule added a new § 983.206 to address the notification requirements established by section 8(c)(8)(A) of the 1937 Act, as amended by HERA, that the owner must meet.

HAP Contract Amendments (to Add or Substitute Units) (Redesignated 24 CFR 983.207). Section 983.207 (formerly § 983.206) was revised to substitute the term ‘‘project’’ for ‘‘building’’, consistent with the statutory change made by HERA.

Owner Certification (Redesignated 24 CFR 983.210). Consistent with the change to § 983.53 (Prohibition of Assistance for Ineligible Units), the May 15, 2012, rule proposed to revise paragraph (i) in § 983.210 (formerly § 983.209) to clarify that the owner’s certification does not apply in the case of an assisted family’s membership in a cooperative. The proposed rule also added a new paragraph (j) to § 983.210, consistent with the revised definition of ‘‘existing housing’’, to reflect what constitutes existing PBV housing.

Removal of Unit from HAP Contract (24 CFR 983.211). The proposed rule added a new section to define when units are to be removed from the HAP contract. The proposed rule inadvertently stated that this new section clarified existing policy, but in fact the new section reflected a proposed change. In addition, the preamble explanation that the change is already referenced in part 983 was also inaccurate. The preamble language should have been included in the preceding section which discussed the owner certification requirements in § 983.210. New § 983.211 addressed removing a unit from the HAP contract. PHAs receive administrative fees based on the number of units under a HAP contract. If the PHA has not paid a housing assistance payment on behalf of a family for 180 days, the family is no longer considered a participant in the program and, as such, the PHA should no longer receive administrative fees for the unit.

How Participants Are Selected (24 CFR 983.251(a) and (d)). In § 983.251(a), the proposed rule clarified the pre- existing policy that restricts owners from leasing to family members or relatives. This section was revised to remove any ambiguity that a PHA may not approve the tenancy of a family if the owner (including a principal or other interested party) of the unit to be leased is the parent, child, grandparent, grandchild, sister, or brother of any member of the family, unless the PHA determines that approving the unit would provide reasonable accommodation for a family member who is a person with a disability. The proposed rule also provided that the owner certification, already required under § 983.209, include language that makes explicit that the unit will not be rented to the enumerated list of relatives.

The Lease: Provisions Governing Term of Lease and Governing Absence from Unit (24 CFR 983.256). The proposed rule revised § 983.256(f) pertaining to the initial term of lease to more fully address the requirements pertaining to the lease, and not simply the initial term. Revised paragraph (f) provides that the lease must allow for automatic renewal after the initial term of the lease. Consequently, the PBV program will provide tenants with long-term leases unless the owner provides a good cause for termination or nonrenewal of the lease.

Owner Termination of Tenancy and Eviction (24 CFR 983.257). The proposed rule revised § 983.257 to substitute the term ‘‘project’’ for ‘‘building’’, consistent with the statutory

change. The proposed rule also removed paragraph (b)(3) from § 983.257, which allows an owner to refuse to renew a lease without good cause upon lease expiration. This change was made for the same reasons the change was made to § 983.256(f), which is to put in place, for the PBV program, a reliable long- term lease for a tenant unless the owner provides good cause for termination of the lease or nonrenewal of the lease.

Continuation of Housing Assistance Payments (24 CFR 983.258). The proposed rule added a new § 983.258 to clarify that housing assistance payments continue until the tenant rent equals the rent to owner. After 180 days of no subsidy payments being made on behalf of the family, the unit is to be removed from the HAP contract pursuant to § 983.211.

Overcrowded, Under-Occupied, and Accessible Units (Redesignated 24 CFR 983.260). The proposed rule revised § 983.260 (formerly § 983.259) to include the term ‘‘project’’ in paragraph (b)(2)(i) of this section. The proposed rule also revised § 983.260 to clarify, in paragraph (c), that if a PHA offers the family tenant-based rental assistance, a PHA must terminate the HAP contract for a wrong-sized or accessible unit, the earlier of the expiration of the term of the family’s voucher (including any extension granted by the PHA) or the date upon which the family vacates the unit.

When Occupancy May Exceed 25 Percent Cap on the Number of PBV Units in Each Project (Redesignated 24 CFR 983.262). The proposed rule revised § 983.262(d) (formerly § 983.261) to substitute the term ‘‘project’’ for ‘‘building’’, consistent with the HERA change in terminology, and to correct an incorrect regulatory reference. Section 983.262(b) was also revised to clarify existing policy that a PHA, in referring families to excepted units, need not choose between elderly or disabled families, but may refer both.

Determination of Rent to Owner (24 CFR 983.301). Section 2835(a)(1)(D) of HERA amended section 8(o)(13)(H) of the 1937 Act to permit a PHA to use the higher section 8 rent for certain tax credit units if the LIHTC rent is less than the amount that would be permitted under section 8. The amendment made by the proposed rule to § 983.301(d) reflects the discretion granted to PHAs.

Redetermination of Rent to Owner (24 CFR 983.302). The proposed rule added a new paragraph (2) to § 983.302(c) to provide that rent paid to the owner shall not be reduced below the initial rent to owner for dwelling units under the initial HAP, except in the following


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situations: (1) To correct errors in calculations in accordance with HUD requirements; (2) if additional housing assistance has been combined with PBV assistance after execution of the initial HAP contract and a rent decrease is required pursuant to a subsidy layering review; or (3) if a decrease in rent to owner is required based on changes in the allocation of responsibility for utilities between the owner and the tenant.

Reasonable Rent (24 CFR 983.303). The proposed rule revised § 983.303(a) to include the exception to the comparability requirement of rent reasonableness, provided by the amendment to section 8(o)(13)(I)(i) made by HERA. This revision provides that the rent to owner for a contract may not exceed the reasonable rent as determined by the PHA, except that the rent to owner shall not be reduced below the initial rent in accordance with § 983.302(c)(2).

Other Subsidy: Effect on Rent to Owner (24 CFR 983.304). The proposed rule revised § 983.304(e) to clarify that rent reduction is mandatory when the results of a subsidy layering review disclose the need for rent reduction.

II. Changes Made at the Final Rule Stage

In response to public comment and further consideration of certain issues by HUD, this final rule makes the following revisions to the proposed rule. With respect to changes made in response to public comment, the issues raised by the commenter and HUD’s basis for responding to the comments are addressed in Section III of this preamble.

Rent to Owner: Reasonable Rent (24 CFR 982.507)—Preamble Clarification. As noted in Section I of this preamble, at the proposed rule stage, the procedure for determining the rent reasonableness standard applicable to dwelling units receiving low-income housing tax credits (LIHTC) was streamlined by section 2835(a)(2) of HERA. In the preamble to the proposed rule, at 77 FR 28743, HUD noted that HERA makes several changes to coordinate tax incentives for private housing and federal housing programs, including the Section 8 voucher program. In this preamble to the final rule, HUD clarifies that this provision is applicable only to the Section 8 tenant- based voucher program and not to the Section 8 project-based voucher program.

Additionally, at 77 FR 28743, HUD stated that the rent is to be considered reasonable if the rent does not exceed the greater of: (1) The rent for other

LIHTC- or HOME-assisted units in the project not occupied by families with tenant-based assistance, and (2) the payment standard established by a PHA for a unit of the size involved. However, the more accurate way for HUD to have stated this provision is as follows: ‘‘Rent reasonableness is not required if the voucher rent does not exceed the rent for other LIHTC- or HOME-assisted units in the project not occupied by families with tenant-based assistance.’’ The regulatory text for § 982.507 was stated correctly in the proposed rule and no change is required at this final rule stage.

As advised in the May 15, 2012, proposed rule, the revision to the HOME program is being made by separate rulemaking. Although a final rule making several regulatory amendments to the HOME program was published on July 24, 2013, that rule did not address this issue. Therefore, this final rule will continue to include, as a placeholder, a cross-reference to the HOME program regulations pending this issue being addressed by HOME program rulemaking.

PBV Definitions (24 CFR 983.3)— Withdrawn Proposed Revised Definition of ‘‘Existing Housing’’ but Added Revised Definition of ‘‘Special Housing Type’’. At this final rule stage, HUD determined to withdraw its proposed changes to the definition of ‘‘existing housing.’’ HUD leaves in place the currently codified definition of existing housing. Overall, commenters did not favor HUD’s proposed changes, and suggested alternatives to HUD’s proposal, which are described in Section III of this preamble. Given the many comments on HUD’s proposed changes to the definition of ‘‘existing housing’’, HUD has decided to further consider proposed revisions to the definition of ‘‘existing housing.’’ HUD will further consider what may be the best metric for determining compliance with HQS; that is, whether HUD should measure the amount of time that must pass from the date of selection to date of compliance, or identify an appropriate dollar standard of the total amount of work that must be performed, or determine some other mechanism. HUD will resubmit for public comment any proposed changes to the definition of ‘‘existing housing.’’

At this final rule stage, HUD is adopting the proposed revised definition of ‘‘special housing type’’ but with one additional change. HUD has revised the definition of ‘‘special housing type’’ to remove reference to cooperative housing.

Cross-reference to other Federal requirements (24 CFR 983.4) Revision to

‘‘Labor standards’’ cross-reference. In this final rule, HUD updates the reference to labor standards provisions applicable to assistance under the PBV program to remove the reference to labor standards ‘‘applicable to an Agreement’’ covering nine or more assisted units and substitutes a reference to labor standards ‘‘applicable to development (including rehabilitation) of a project comprising’’ nine or more units. This language clarifies that Davis-Bacon requirements may apply to existing housing (which is not subject to the agreement) when the nature of any work planned to be performed prior to HAP contract execution or after HAP contract execution, within such post-execution period as may be specified by HUD, constitutes development of the project.

Description of the PBV Program (24 CFR 983.5) and Maximum Amount of PBV Assistance (24 CFR 983.6)— Clarification of Timing of Notification Requirements. As noted in Section I of the preamble, the proposed rule amended § 983.5(c) and § 983.6 to provide that a PHA must notify HUD of its intent to project-base its vouchers.

This final rule clarifies in § 983.6 that the notification provided by a PHA to HUD of the PHA’s intent to project-base its vouchers must be provided before issuance of a Request for Proposals or a selection made pursuant to § 983.51(b)(2). This clarification is also made in § 983.5(c) by cross-reference to § 983.6(d).

Special Housing Types (24 CFR 983.9). As noted in section I the proposed rule made a conforming amendment to § 983.9 to clarify that cooperative housing is an eligible special housing type under the PBV program. This final rule clarifies the requirements for rental assistance when families lease cooperative housing from cooperative members in § 983.9(c)(3).

Owner Proposal Selection Procedures (24 CFR 983.51). In addition to the changes noted in Section I from the proposed rule, HUD is adopting a new paragraph (g) to clarify that an owner proposal selection does not require submission of a Form HUD–2530 or HUD previous participation clearance. Questions are raised from time to time as to the applicability of the previous participation review and clearance procedures and requirements that are codified in 24 CFR part 200, subpart H, to the PBV program. Section 200.213 of these regulations, entitled ‘‘Applicability of procedure’’ correctly lists the HUD programs to which the previous participation requirements apply. The PBV program is not listed as one of the programs governed by these procedures, and nor have the


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regulations in 24 CFR part 983 ever cross-referenced to the requirements in 24 CFR part 200, subpart H, to confirm the applicability of these requirements and procedures.

Housing Type (24 CFR 983.52)— Withdrawn—Proposed Revised Definition of ‘‘Existing Housing’’. For the same reasons that HUD is withdrawing its originally proposed definition of ‘‘existing housing’’ in § 983.3, HUD similarly does not adopt the originally proposed definition of ‘‘existing housing’’ in § 983.52. However, in § 983.52, HUD clarifies that units for which rehabilitation or new construction commenced after the owner’s proposal submission but prior to execution of the AHAP do not qualify as existing housing. Changes to the definition of ‘‘existing housing’’ will be addressed through the Federal Register notice described under the above discussion of § 983.3.

Prohibition of Assistance for Ineligible Units (24 CFR 983.53)—Addition of Prohibition on Assistance for Units for which Construction or Rehabilitation Commenced Prior to AHAP. As noted in Section I of this preamble, HERA allows PHAs to enter into HAP contracts with respect to units in cooperative housing and in high-rise elevator projects, and provides that such authority may be exercised without review and approval by HUD. Accordingly, the proposed rule revised § 983.53 to remove the requirement of advance HUD approval for HAP contracts with respect to units in high-rise elevators projects and to make cooperative housing an eligible housing type.

This final rule adds a new paragraph (d) to § 983.53 to clarify that a PHA may not attach or pay PBV assistance for units for which construction or rehabilitation has commenced, as defined in § 983.152 (discussed below), prior to execution of the AHAP.

Prohibition of Excess Public Assistance (24 CFR 983.55)—Further Clarification of When Subsidy Layering is Not Required. As noted in Section I of the preamble, the proposed rule clarified that the subsidy layering requirements are not applicable to existing housing. The final rule revises § 983.55 to add language that further clarifies that a ‘‘further subsidy layering review is not required for housing selected as new construction or rehabilitation of housing, if HUD’s designee has conducted a review, which included a review of PBV assistance, in accordance with HUD’s PBV subsidy layering review guidelines.’’

Applicability of 25 Percent Cap on Number of PBV Units (24 CFR 983.56)— Removal of Substitution of ‘‘Project’’ for

‘‘Building’’ in § 983.56(b)(1)(i). As noted in Section I of the preamble, HERA amended 8(o)(13)(D)(i) of the 1937 Act to replace the term ‘‘building’’ with the term ‘‘project,’’ which is defined to mean a single building, multiple contiguous buildings, or multiple buildings on contiguous parcels of land. The proposed rule clarified that the exception to the 25 percent cap on the number of PBV units in a project includes units for elderly families and/ or disabled families; that is, a project for elderly families, a project for disabled families, or a project that serves both categories of families. In response to public comment, HUD agreed with commenters that the terminology for paragraph (b)(1)(i), which addresses when PBV units are not counted in the exception to the 25 percent building cap, was ambiguous. In the final rule, HUD retains the term ‘‘building’’ when used in paragraph (b)(1)(i) to refer to a single-family building.

Purpose and Content of the Agreement to enter into HAP Contract (24 CFR 983.152)—Clarification of Prohibition on Execution of Agreement when Construction or Rehabilitation Has Commenced. As noted in Section I of the preamble, the proposed rule clarifies when the Agreement must be executed and defines the start of construction or rehabilitation. The final rule adds a cross-reference to § 983.153 and states that the prohibition on construction or rehabilitation applies after proposal submission.

When Agreement Is Executed (24 CFR 983.153)—Clarification of Prohibition on Execution of Agreement when Construction or Rehabilitation Has Commenced. As noted in Section I of the preamble, the proposed rule clarified when the Agreement, referenced in § 983.153, must be executed. The final rule further clarifies that a PHA is prohibited from entering an Agreement when after proposal submission construction or rehabilitation has started prior to the execution of the Agreement.

Extension of Initial Term (24 CFR 983.205)—Clarification of Additional Extensions beyond Initial Extension of Term. As noted in Section I of this preamble, the proposed rule made a conforming change to § 983.205(b) to reflect the new HAP term. Section 8(o)(13)(G) of the 1937 Act, as amended by HERA, provides that the maximum term for an extension of the HAP contract is 15 years, at the election of the PHA and owner. The proposed rule provided that a PHA may provide for multiple extensions; however, under no circumstances may extensions exceed 15 years cumulatively.

In response to public comment, the final rule revises this section to clarify that future extensions beyond the initial extension are allowed at the end of any extension term provided that not more than 24 months prior to the expiration of the previous extension contract, the PHA agrees to extend the term, and that such extension is appropriate to continue providing affordable housing for low-income families or to expand housing opportunities. The final rule amendment further provides that extensions after the initial extension term shall not begin prior to the expiration date of the previous extension term.

In response to public comment, the final rule also amends § 983.205(d) to remove the requirement of notice to and advance approval by HUD when owners decides to terminate the HAP contract, and maintains the existing requirement that owners provide notice to the PHA.

HAP Contract Amendments (to Add or Substitute Units) (Redesignated 24 CFR 983.207)—Addition of Language to Specify How to Add Contract Units. As noted in Section I of the preamble, the proposed rule revised § 983.207 (formerly § 983.206) to substitute the term ‘‘project’’ for ‘‘building’’, consistent with the statutory change made by HERA. In response to public comment, the final rule revises paragraph (b) to clarify how PBV contract units may be added in the same project. The revision provides that, at the discretion of the PHA, and provided that the total number of units in a project that will receive PBV assistance will not exceed 25 percent of the total number of dwelling units in the project (assisted and unassisted), (unless units were initially identified in the HAP contract as excepted from the 25 percent limitation in accordance with § 983.56(b)), or the 20 percent of authorized budget authority as provided in § 983.6, a HAP contract may be amended during the three-year period immediately following the execution date of the HAP contract to add additional PBV contract units in the same project.

Owner Certification (Redesignated 24 CFR 983.210)—Proposed Revision for Existing Housing Withdrawn. Although, at this final rule stage, HUD is withdrawing its proposed definition of ‘‘existing housing’’ in §§ 983.3 and 983.52, HUD retains proposed new paragraph (j), with certain revisions. As noted above in the discussion of § 983.4, HUD revises the reference to labor standards provisions applicable to assistance under the PBV program to clarify that Davis-Bacon requirements may apply to existing housing when the


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nature of any work (including rehabilitation) planned to be performed prior to HAP contract execution or after HAP contract execution, within such post-execution period as may be specified by HUD, constitutes development of the project. Paragraph (j) of the final rule reflects that in such case, it will be necessary for the certification to encompass compliance with Davis-Bacon wage requirements.

Removal of Unit from HAP Contract (24 CFR 983.211). As noted in Section I of the preamble, the proposed rule added a new section to define when units are to be removed from the HAP contract. Section 983.211(a) requires that units with families whose income has increased during their tenancy to an amount equivalent to the rent provider to the owner, shall be removed from the HAP Contract. If the project is partially assisted, the PHA may substitute a different unit for the unit removed from the Contract if it is possible for the HAP contract to be amended. In response to public comment, HUD at the final rule stage is providing that if the project is not partially assisted, the unit removed from the HAP contract can be re- instated when the ineligible family vacates. In addition, HUD is clarifying that the PHA may substitute a different unit for the unit removed from the contract when the first eligible substitute becomes available even if at the time a unit is removed another unit is not immediately available to substitute under the HAP contract.

How Participants Are Selected (983.251(d))—Clarification of Preferences for Services Offered. In § 983.251(d), the proposed rule substituted the word ‘‘qualify’’ for ‘‘need’’ and added ‘‘or in conjunction with specific units.’’ The language submitted at the proposed rule stage stated that a preference could be provided for disabled families who ‘‘qualify for services at a particular project or in conjunction with specific units.’’ The substitution was proposed on the basis that ‘‘qualify’’ may better convey the intent of this section. However, at the final rule stage and following further consideration of ‘‘qualify’’ versus ‘‘need’’, HUD is returning to the original language of ‘‘need services’’ out of concern that ‘‘qualify for’’ may be interpreted in such a way to limit the population eligible for the preference. Additionally, HUD is returning to the original language ‘‘services at a particular project’’ out of concern that ‘‘or in conjunction with specific units’’ may be unclear. Although HUD is retaining the language currently codified in HUD’s regulations, HUD will continue to examine the

language of this section and how it may be improved, recognizing that neither term —‘‘ need’’ or ‘‘qualify’’—may provide the clear distinction that PHAs are looking for. The best approach to helping PHAs understand the intent of this section may be for HUD to issue guidance that provides examples of how a preference may be structured.

The Lease: Provisions Governing Term of Lease and Governing Absence from Unit (24 CFR 983.256)—Clarification of Owner Termination of Lease for Good Cause. As noted in Section I of the preamble, the proposed rule revised § 983.256(f) pertaining to the initial term of lease to more fully address the requirements pertaining to the lease.

The final rule clarifies that that if the owner terminates the lease, the termination must be for good cause.

Overcrowded, Under-Occupied, and Accessible Units (Redesignated 24 CFR 983.260). The proposed rule revised § 983.260 (formerly § 983.259) to include the term ‘‘project’’ in paragraph (b)(2)(i) of this section. The proposed rule also revised § 983.260 to clarify, in paragraph (c), that, if a PHA offers the family tenant-based rental assistance under the PBV program, a PHA must terminate the HAP contract for a wrong- sized or accessible unit, the earlier of the expiration of the term of the family’s voucher (including any extension granted by the PHA) or the date upon which the family vacates the unit.

The final rule further clarifies PHA termination of housing assistance payments for wrong-sized or accessible unit by revising paragraph (c) in two respects. Paragraph (c)(1) provides that if the PHA offers the family the opportunity to receive tenant-based rental assistance under the voucher program, the PHA must terminate the housing assistance payments for a wrong-sized or accessible unit at the earlier of the expiration of the term of the family’s voucher (including any extension granted by the PHA) or the date upon which the family vacates the unit, and, as clarified in this final rule, if the family does not move out of the wrong-sized unit or accessible unit by the expiration date of the term of the family’s voucher, the PHA must remove the unit from the HAP contract.

Paragraph (c)(2) provides that if the PHA offers the family the opportunity for another form of continued housing assistance in accordance with paragraph (b)(2) of § 983.260 (not in the tenant- based voucher program), and the family does not accept the offer, does not move out of the PBV unit within a reasonable time as determined by the PHA, or both, the PHA must terminate the housing assistance payments for the wrong-sized

or accessible unit, at the expiration of a reasonable period as determined by the PHA, and, as clarified by this final rule, remove the unit from the HAP contract.

When Occupancy May Exceed 25 Percent Cap on the Number of PBV Units in Each Project (Redesignated 24 CFR 983.262)—Providing PHAs with the Option to Continue to Count an Excepted Unit Based on Elderly or Disabled Family Status, without an Elderly or Disabled Member under Certain Conditions. As noted in Section I of this preamble, the proposed rule revised § 983.262 (formerly § 983.261) to substitute the term ‘‘project’’ for ‘‘building’’, and to clarify in § 983.262(b) that a PHA, in giving a preference to excepted units, need not choose between the elderly or disabled families, but may give a preference to both.

This final rule also makes a change to respond to existing concerns with respect to excepted units based on elderly or disabled family status and the loss of occupancy of the unit by the elderly or disabled family member through death, illness, or other circumstances beyond the family’s control. Under current requirements, the family must vacate the unit and the PHA must cease paying housing assistance payments on behalf of the family because they no longer qualify for the excepted unit. The result of such requirements is often displacement of the family during a time when the family is dealing with hardship due to the loss, permanent or temporary of the elderly or disabled family member. The final rule adds a new paragraph (e) to § 983.262 to give PHAs the discretion to allow the family to continue to reside in the excepted unit, and to continue to count the unit as an excepted unit for as long as the family resides in that unit. Once the family vacates the unit, then in order to continue as an excepted unit under the HAP contract, the unit must be made available to and occupied by a qualifying family member.

Determination of Rent to Owner (24 CFR 983.301)—Clarification that the PHA Has the Discretion to Elect in the HAP Contract that Rent to Owner Shall Not be Reduced. As noted in Section I of this preamble, HERA amended section 8(o)(13)(H) of the 1937 Act to permit a PHA to use the higher section 8 rent for certain tax credit units if the LIHTC rent is less than the amount that would be permitted under section 8. The preamble to the proposed rule noted that HERA did not alter the rent reasonableness requirements of section 8(o)(10)(A), and that therefore these requirements must continue to be met. The proposed rule revised § 983.301(e)


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to provide that that the rent to owner shall not be reduced below the initial rent, with certain limitations, in accordance with § 983.302(c)(2).

The final rule revises paragraph (e) to clarify that the PHA has the discretion to elect in the HAP contract that the rent to owner shall not be reduced below the initial rent subject to the limitations of § 983.302(c)(2). Accordingly, in this final rule, paragraph (e) provides that the PHA shall determine the reasonable rent in accordance with § 983.303. The rent to the owner for each contract unit may at no time exceed the reasonable rent, except in cases where the PHA has elected within the HAP contract not to reduce rents below the initial rent to owner and where, upon redetermination of the rent to owner, the reasonable rent would result in a rent below the initial rent. If the PHA has not elected within the HAP contract to establish the initial rent to owner as the rent floor, the rent to owner shall not at any time exceed the reasonable rent.

Redetermination of Rent to Owner (24 CFR 983.302)—Further Clarification of When Rent to Owner Shall Not Be Reduced. As noted in Section I of this preamble, the proposed rule added a new paragraph (2) to § 983.302(c) to provide that rent paid to the owner shall not be reduced below the initial rent to owner for dwelling units under the initial HAP, except under certain circumstances. The final rule revises paragraph (c)(2) of § 983.302 to clarify that ‘‘if the PHA elected within the HAP contract to not reduce rents below the initial rent to owner,’’ then the rent to owner shall not be reduced below the initial rent to owner for dwelling units under the initial HAP contract except for the ‘‘exception’’ circumstances provided in the regulation.

Reasonable Rent (24 CFR 983.303). As noted in Section I of this preamble, the proposed rule revised § 983.303(a) to include the exception to the comparability requirement of rent reasonableness, provided by the amendment to section 8(o)(13)(I)(i) made by HERA. This revision provides that the rent to owner for a contract may not exceed the reasonable rent as determined by the PHA, except that the rent to owner shall not be reduced below the initial rent in accordance with § 983.302(c)(2).

This final rule further clarifies the comparability requirement of § 983.303(a). Section 983.303(a) is revised to provide that at all times during the term of the HAP contract, the rent to the owner for a contract unit may not exceed the reasonable rent as determined by the PHA, except, as provided in this final rule, where the

PHA has elected in the HAP contract to not reduce rents below the initial rent under the initial HAP contract, the rent to owner shall not be reduced below the initial rent in accordance with § 983.302(e)(2).

III. Discussion of Public Comments and HUD’s Responses

The public comment period on the proposed rule closed on July 16, 2012, and 22 public comments were received in response to HUD’s May 15, 2012 proposed rule. Comments were submitted by individual members of the public, Fair Housing interest groups, housing associations, and public housing authorities. The following presents the significant issues and questions related to the proposed rule raised by the commenters.

A few commenters submitted comments generally about their views of the rule. These comments, for which no response is required, included such comments as the following.

A commenter stated that HUD must ‘‘broaden its thinking with regard to administration of the project-based voucher program to recognize the important preservation tool that project- based vouchers are and will continue to be (particularly in light of the new Rental Assistance Demonstration (RAD) program). The commenter stated that, in reading the proposed changes, it was struck by a tension between expanding program use and flexibility with a desire to keep the program the small boutique program that it started out to be. The commenter stated that the tension is understandable in that the project-based voucher program was originally intended to be a very small (and voluntary) program to address tight rental market, but as Congress cuts back on funding for federal housing programs, the ability to preserve the existing housing stock has become more critical and Congress has recognized that it must use its scarce resources to the best outcome (in this case the preservation of a scarce supply of affordable rental housing). Other commenters stated that ‘‘the PBV program is an essential component of state and local supportive housing strategies to reduce reliance on restrictive settings which violate the Americans with Disabilities Act, such as state institutions, board and care homes, adult care homes, and nursing homes.’’ Another commenter recommended that HUD revise the program further to allow greater flexibility to support PBV assistance. The commenter stated that ‘‘HUD should lobby to increase the percentage of budget authority for PBV units when the PHA is utilizing PBVs as

replacement housing for public housing.’’

The following presents specific issues raised by commenter and HUD’s response to the comments.

Issue: Rent to Owner: Reasonable Rent (§ 982.507)

Comment: Commenters stated that HUD’s proposed language at § 982.507, regarding the rent reasonableness test, is contrary to statutory intent by limiting the rent to the lesser of the reasonable rent and the payment standard. The commenters repeated the statutory language that states ‘‘the rent shall be considered reasonable if it does not exceed the greater of (1) the rent for other LIHTC or HOME assisted units in the project not occupied by families with tenant based assistance, or (2) the payment standard established by the PHA for a unit of the size involved.’’ The commenters recommend that HUD re-evaluate the proposed language. A commenter stated that Congress also has provided that the rent is not reasonable if it exceeds both the rents charged for comparable units receiving tax credits that are not occupied by voucher holders and the PHA payment standard for the unit. The commenter stated that, in other words, if the tax credit rent is $600 and the payment standard is $650, a PHA can approve a voucher rent at $650, subject to a rent reasonableness test. Using this example, HUD could not approve a rent of $675 because it is greater than the payment standard and the tax credit rent.

HUD Response: HUD disagrees with the first commenter’s interpretation of the statute. The first subsection in the HERA amendment plainly states that a rent comparability analysis is not required by the PHA if the rent to owner does not exceed the rent for other comparable, non-voucher LIHTC units in the project. However, the second subsection of the HERA amendment is properly read as stating that if the proposed rent to owner will exceed the amount in the preceding paragraph, the amendment does not create an exception to the normal rent comparability requirement in section 8(o)(10)(A) of the U.S. Housing Act of 1937. In addition, the HERA amendment imposes an additional rent cap based on the payment standard in these cases. Therefore, if the rent requested by the owner exceeds the LIHTC rents for non-voucher families, the PHA must perform a rent comparability analysis in accordance with program requirements. In addition, the PHA must cap the rent at the payment standard. The rent to owner in these cases is therefore set at the lesser


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of the comparable market rent determined by the PHA and the payment standard.

HUD generally agrees with the commenter that used dollar amounts to illustrate the test that must be performed when the rent requested by the owner is greater than the rents charged for other comparable LIHTC units in the project that are not occupied by voucher families. However, the commenter excluded the possible impact of the required rent comparability analysis performed by the PHA. For instance, if the PHA’s comparability analysis determined that the reasonable rent was $625 that would be the rent to owner, notwithstanding the fact that the payment standard was $650.

Comment: Commenters stated that the statute does not require PHAs ‘‘to conduct a rent reasonableness test if the requested voucher rent is at or below the tax credit rent for units not occupied by a voucher holder.’’ A commenter gives an example, stating that ‘‘if the tax credit rent paid by unassisted tenants is $600 and the rent for the voucher unit is $550, the PHA would not be required to compare the unit rent to unassisted units in the private market — the rent would be deemed reasonable.

HUD Response: Rent reasonableness is required to be determined as otherwise provided by paragraph 8(o)(10) of the 1937 Act except that rent reasonableness shall not be required if the voucher rent is equal to or lesser than other comparable LIHTC units occupied by non-voucher families. The statute does not state that such rents shall be ‘‘deemed reasonable’’ as suggested by commenters. Therefore, HUD submits that the statutory language is permissive, and that while HUD may not require a rent comparability determination in the situation described, the statute does not prohibit a PHA from performing such determination if it so chooses.

Comment: Commenters stated that the proposed language could result in reducing rents below existing rents and undercut the statute. The commenters recommended that HUD revise the language ‘‘to follow the ‘greater of’ statutory language and avoid the unintended penalty for owners requesting legitimate rent increases that threaten no additional harm to assisted tenants.’’ Other commenters stated that requiring an owner to reduce rent below existing rents would be contrary to HUD’s own intentions.

HUD Response: Commenters appear to believe the statute states that the rent shall be considered reasonable if it does not exceed the greater of (1) the rent for

other LIHTC or HOME assisted units in the project not occupied by families with tenant based assistance, or (2) the payment standard established by the PHA for a unit of the size involved. The statute actually states that the rent shall not be considered reasonable if it exceeds the greater of (1) the rents charged for other comparable units receiving LIHTC or HOME assistance in the project that are not occupied by families with tenant based assistance, and (2) the payment standard established by the PHA for a unit of the size involved. The statutory language imposes a payment standard cap in addition to the required rent reasonableness test both at the time of initial rent setting and when an owner requests a rent increase. As noted previously, if the rent to owner (at initial rent setting or during rent increases) does not exceed the LIHTC rent for comparable, non-voucher units, a PHA rent reasonableness analysis is not required and there is no payment standard limitation.

Comment: A commenter requested that HUD explain why it is adding the additional rent reasonableness requirement and why HERA was able to waive the rent comparison when the rent does not exceed other LIHTC projects but not when the requested rent exceeds other LIHTC rents?

HUD Response: HUD has clarified in the preamble that if the requested rent does not exceed the rent for other LIHTC units in the project not occupied by families with tenant-based assistance, that a rent reasonableness determination is not required. HUD believes that the statute is permissive and that a PHA may perform a rent reasonableness comparison in this instance if it so chooses. The statute states that the requirements of 8(o)(10) of the 1937 Act apply including 8(o)(10)(A), which requires that the rent for dwelling units for which a housing assistance payment contract is established under subsection 8(o) of the statute shall be reasonable in comparison with rents charged for comparable dwelling units in the private, unassisted local market. The HERA amendment does not render the requirement for a rent comparison analysis pursuant to section 8(o)(10)(A) of the 1937 Act inapplicable when the test under section 8(o)(10)(F)(ii) is met. Rent reasonableness requirements pursuant to section (8)(o)(10)(A) continue to apply.

Comment: A commenter recommended that HUD clarify ‘‘that the HERA policy for determination of ‘reasonable rents’ for LIHTC units with tenant-based vouchers, incorporated in

§ 982.507(c)(2), does not apply to project-based vouchers.’’

HUD Response: HUD agrees with this comment and in this preamble to this final rule HUD has clarified that the regulatory change is only applicable to the tenant-based voucher program.

Comment: A commenter stated that the HUD should leave the existing regulatory language as is because the regulatory language complies with the requirements in HERA and HERA ‘‘does not require PHAs to lower PBV owners’ rents if/when applicable FMRs decrease by five percent or more, as has been directed by some HUD Field Offices.’’ The commenter stated that the regulation should allow ‘‘PHAs to conduct rent reasonableness if warranted, but not for PHAs to necessarily lower the existing PBV rent in these circumstances.’’ The commenter stated that ‘‘under the circumstances described above, regarding decreases in FMR values of five percent or more, a PHA receives a property owners’ annual rent increase request for a given unit but a PHA’s rent reasonableness determination justifies a lower PBV rent, than a PHA can lower the PBV rent to the rent reasonable level but not lower than the initial rent. Some HUD Field Office personnel have misinterpreted and/or misapplied the PBV regulations governing reasonable rents in the PBV program, which is why we believe that clarification of the proper implementation of this regulation is welcomed.’’

Another commenter requested that HUD revise § 982.507(c)(2) to clarify that under HERA PHAs are not required to conduct a rent reasonableness determination (in accordance with the existing regulations for Section 8 tenant- based and project-based voucher programs) if the initial rent or rent requested at subsequent intervals, is equal to or less than the rent for other comparable units receiving tax credits or assistance in the project for units that are not occupied by Section 8 tenant- based or project-based assisted households. The commenter also requested that HUD clarify that ‘‘there could be a scenario where the initial rent requested or the rent at intervals during subsequent lease terms would be ‘rent reasonable’ if it is equal to the greater of (1) the rent for other comparable units receiving such tax credits or assistance in the project for units that are not occupied by Section 8 tenant-based or project-based assisted households; or (2) a PHA’s payment standard for an applicable unit size.’’

HUD Response: The HERA change relates to rents for tenant-based voucher holders in projects with LIHTCs or


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HOME units. It does not apply to the project-based voucher program. In addition, the existing regulatory text at § 982.507 also does not apply to the project-based voucher program. The commenters’ other concerns are addressed in response to other similar comments stated above.

Issue: Revised Definition of ‘‘Existing Housing’’ (§§ 983.3, 983.52(a))

As already discussed in this preamble, HUD is not revising the definition of ‘‘existing housing’’, but nevertheless wants to share the public comments that HUD received on this issue. Commenters responded to HUD’s proposal as follows:

Comment: Several commenters submitted comments on these sections. A commenter recommended that HUD review the impact of the new limitations on existing housing. The commenter stated that while the previous text defined ‘‘existing housing’’ as any housing that met HQS upon the proposal selection date, the revised language limits existing housing to units that do not require more than $1,000 in repairs to meet HQS, and requires the owner to certify that planned rehabilitation does not exceed $1,000 in the first year of the HAP contract. Commenters stated that the proposed time limit and the monetary limit of $1,000 for performing compliance work are inappropriate.

A commenter stated that this threshold is very low and ‘‘does not accurately capture the differences between development and acquisition- only transactions.’’ Another commenter stated that this threshold may discourage owners from conducting voluntary repairs and replacements to achieve greater accessibility and/or energy efficiency. A commenter questioned what an owner should do if a tenant vacates a unit within one year after a HAP contract is executed?

A commenter stated that ‘‘an owner should have the ability to do more than $1,000 worth of work on the unit’’ because to do a simple ‘‘ ‘unit turnover’—painting, cleaning and perhaps recarpeting—would cost more than $1,000.’’ Other commenters expressed concern about the cap when scheduled rehabilitation is required.

A commenter recommended changing the definition to allow PHAs to determine the threshold or in the alternative if HUD determines a threshold is appropriate, a reasonable level based on guidelines and thresholds of other federal funding programs should be considered. ‘‘For example, low-income housing tax credits and the FHA loan programs use

higher rehabilitation thresholds of approximately $6,500 per unit.’’

Other commenters stated that the new definition is contrary to HUD’s new Rental Assistance Demonstration (RAD) program which encourages owners of certain types of assisted multifamily housing with expiring subsidy contracts to convert to PBVs. Commenter stated that many of these projects currently meet HQS but will require additional rehabilitation with tenants in place. Without the flexibility for PHAs to treat these projects as existing housing, as appropriate, many of these proposed preservation transactions will not be feasible.

A commenter stated that the same $1,000 per unit rehab number was used for Section 8 moderate rehabilitation over 8 years ago and HUD has failed to recognize inflation costs. Additionally, the commenter noted that a scheduled rehabilitation that costs more than $1,000 to meet HQS standards is not the same as a gut rehab which would require tenants to be displaced. Another commenter stated that the proposed limit will ‘‘hamper HUD’s ability to implement the recent preservation policy to encourage the conversion of Rent Supplement or Rental Assistance Payments to project-based vouchers. If HUD is indeed focused on preservation of the assisted housing stock, its rules must reflect that commitment.’’

Commenters stated that this new definition will complicate transactions when eligible residents are already in place and renovations are undertaken or when renovations must be made to new or rehabilitated units that were not originally PBV units. Other commenters stated that the new definition will significantly narrow those units that will qualify as existing housing and negatively impact the preservation of existing housing. A commenter stated that the revised definition is contrary to HERA’s goal to reduce regulatory requirements and make it easier to attach PBVs to existing housing.

Commenters stated that ‘‘the procedures for rehabilitated housing will delay the initiation of rental assistance, which will create significant cash shortfalls for many preservation transactions which rely on the PBV income stream from ‘‘Day One’’ to support new financing (for rehabilitation and often acquisition, where the property is being transferred). These projects meet HQS on Day One, but may require significant additional rehab (e.g. for energy retrofits and modernization) to satisfy the requirements of lenders and tax credit investors, or to improve long-term sustainability.’’

Commenters recommended that HUD maintain the current regulatory definition. A commenter also recommended eliminating the second half of the proposed definition. Other commenters recommended deleting the part of ‘‘the proposed definition that would eliminate the possibility of rehabbing a property in the first year of the HAP contract and by increasing the per-unit rehabilitation dollar amount for units that need immediate repair to pass HQS.’’ A commenter recommended the proposed definition be amended to allow PHAs discretion ‘‘to qualify as existing housing any property that meets (or can readily meet) HQS, regardless of the anticipated level of additional future rehabilitation, where such rehabilitation will be carried out with tenants in place and is necessary and appropriate to extend the remaining useful life of the property as affordable housing.’’ Another commenter recommended maintaining the current definition because the ‘‘flexibility has been critical to preserving existing units in communities where affordable rental housing is scarce or units are being lost due to gentrification.’’ Other commenters recommend that HUD preserve and promote the discretion of local PHA’s by keeping the current definition.

Issue: Revising the ‘‘PHA Owned Unit’’ Definition (§ 983.3)

Comment: Commenters stated that the proposed rule failed to address the definition of ‘‘PHA Owned Unit’’ and stated that the current definition causes continued confusion to industry participants, HUD, and HUD’s Office of Inspector General (OIG). A commenter stated that the purpose of distinguishing PHA-owned units in the regulation is to prevent self-dealing by PHAs where they both own and administer voucher assistance for a given unit, and that the existing definition is unnecessarily broad and in some cases has led HUD to consider units as PHA-owned where the PHA is merely a ground lessor or a mortgagee, but does not exercise control over the project itself. The commenter stated that when a unit is deemed PHA- owned, then the regulations at § 983.59 apply. Another commenter stated that these require the engagement and compensation of an independent entity, rather than the PHA, for certain functions, including inspections and rent reasonableness determinations. Another commenter recommends tightening the definition so that the § 983.59 requirements apply only in those situations where the PHA controls the project and there could actually be


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a conflict of interest in a PHA performing those functions itself.

A commenter also recommended that the definition require an independent entity to be involved when a PHA is both the owner and the voucher administrator.

Some commenters stated that HUD’s definition is so broad that PHAs are determined to ‘‘own’’ a property regardless if they have no control over the property operations. The commenters recommended that HUD tighten the definition to ensure that ownership equates with having control over the property and an actual conflict of interest exists.

Other commenters recommended using the following definition ‘‘PHA- owned unit means a unit in a project that is owned by the PHA, by a PHA instrumentality, or by a limited liability company or limited partnership in which the PHA (or PHA instrumentality) holds a controlling interest in the managing member or general partner.’’

HUD Response: HUD appreciates the commenters’ recommendations concerning the definition of PHA- owned units. However, HUD has not proposed changes to the definition, and believes that the changes proposed by the commenter should undergo public comment before HUD adopts any such change.

Issue: New Definition of ‘‘Release of Funds’’ (§ 983.3)

Comment: A commenter stated that the revised ‘‘release of funds’’ would allow HUD to issue a release of funds in lieu of use of form 7015.16 (Authority to Use Grant Funds) but stated that form 7015.16 is just one manner in which a release funds can be effectuated. The commenter recommended that the definition be revised to reference solely a ‘‘release of funds’’ or ‘‘a release of funds in accordance with [24 CFR] Part 58.’’ Another commenter recommended removing the requirement that a specific type of ‘‘Letter to Proceed’’ be used, which ‘‘would facilitate PHA and owner efforts to combine project based voucher (PBV) assistance with other forms of HUD funding in one Part 58 clearance.’’

HUD Response: The reason for the proposed change was to translate the function of form 7015.16 to actual program operations. The form grants authority to use grant funds. Issuance of a Letter to Proceed more accurately reflects the transaction since Section 8 funding under the voucher program is not provided in grant form.

Issue: Revised Definition of ‘‘Special Housing Type’’ (§ 983.3)

Comment: A commenter recommended that, as a conforming change to the rule, HUD remove reference to ‘‘cooperative housing.’’

HUD Response: HUD agrees with this comment, and the final rule removes the reference to cooperative housing from the list of housing types inapplicable to the PBV program.

Issue: Adding a Definition of ‘‘Financial Closing’’ (§ 983.3)

Comment: A commenter recommended that HUD add a definition of ‘‘financial closing’’ in order to bring clarity to when an AHAP should be executed. The commenter stated that typically, an AHAP is executed at the financial closing of the construction financing as a condition of the lenders and investors of the project, who are depending on the commitment of the PBV assistance.’’ The commenter recommended the following language: ‘‘A financial closing occurs once all of the construction financing for a project is in place and the legal documentation committing the financing to the project has been executed.’’

HUD Response: HUD appreciates the commenter’s recommendation to add a definition of financial closing to the PBV definitions. However, HUD believes that such a definition is not one that should be adopted at a final rule stage but should first undergo some measure of public comment prior to adoption.

Issue: Description of the PBV Program & Maximum Amount of PBV Assistance (§§ 983.5, 983.6)

Comment: A commenter stated that the information being sought have long been required in a PHA Annual Plans by way of HUD guidance, and the commenter referenced PIH notice, PIH 2011–54, September 20, 2011. The commenter requested that HUD explain why such information is now being requested as part of this rule. The commenter recommended that § 983.5 be revised to require that a PHA ‘‘include in its PHA plan the projected number of PBV units, their general locations and how project basing would be consistent with the plan.’’

Another commenter recommended deleting the language added at § 983.6(d) because the language adds administrative burden and HUD already has appropriate reporting mechanisms in place for PHAs. Additionally, the commenter stated that the collection of information only at the beginning of the PBV program is ineffective and the PHA

plan already requires information on PBVs. The commenter recommended that HUD ‘‘amend Part 903 or the Agency Plan template.’’

Other commenters recommended that HUD include in the section that the PHA include the required information in the PHA Plan.

HUD Response: HUD agrees that the language as proposed is unclear. HUD is seeking to obtain the information required under § 983.6 prior to the selection of individual PBV proposals. Such information is not collected through any other HUD system, and the collection is necessary to ensure that PHA’s are not exceeding the 20 percent statutory limitation on the amount of annual budget authority a PHA may project-base. As such, § 983.6 is revised, at this final rule stage, to require that a PHA submit the requested information to HUD before issuance of a Request for Proposals or a selection made pursuant to § 983.51(b)(2), including information on the impact the selection will have on a PHA’s annual budget authority.

Issue: Applicability of Owner Proposal Selection Procedures to Public Housing Revitalization and Replacement Efforts (§ 983.51(b))

Comment: A commenter stated that it supported the change to allow owner selection without a competition in connection with ‘‘public housing improvement, development or replacement efforts.’’ The commenter stated it would constitute an ‘‘important administrative streamlining in complex public housing revitalization processes, without appreciatively affecting competitive opportunities for receipt of PBV.’’

HUD Response: HUD believes that the commenter misunderstood HUD’s intent. Neither the proposed nor this final rule makes the change stated by the commenter. Neither does the rule make changes to the section that prohibits the attachment of PBV assistance to public housing units. The proposed rule simply reiterates the basis for the requirement.

Comment: Commenters recommended dropping ‘‘the requirement that a prior competitive selection process not involve any consideration that the project would receive PBV assistance.’’ The commenters stated the language is unclear and creates obstacles for owners. A commenter recommended the language be revised by deleting ‘‘, and the earlier competitive selection did not involve any consideration that the project would receive project-based assistance.’’ Another commenter stated that this requirement is overly burdensome because it puts ‘‘PHAs and


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owners in an untenable position since they cannot compete for vouchers without tax credits and cannot compete for tax credits without PBV assistance.’’ The commenter stated if deleting the requirement is not accepted than the language should be limited to instances ‘‘in which points were awarded for the inclusion of such vouchers.’’

HUD Response: Deleting the restriction would allow for the inclusion in a competitive selection process that a project will receive PBV assistance prior to an actual PBV selection. HUD believes that accepting the commenters’ suggestion would lead to the distortion of both the competitive nature of the PBV program and the legitimacy of the rationale allowing for the selection of units that have undergone other recent legitimate competitive selections. Eliminating the requirement, as suggested, would give an advantage to prospective PBV project owners in the competitive selection upon which a PHA is relying to select units under the PBV program which would result in a HUD program requirement that could possibly taint the outcome of another Federal, State or local housing program. HUD therefore declines the commenters’ recommendation to remove the current regulatory language.

Comment: Commenters recommended that HUD ‘‘change the current requirement for a local competitive process in instances where a PHA will attach project-based vouchers to units in which it has an ownership interest as part of an initiative to improve, develop or replace a public housing property or site, provided that the PHA includes the initiative in its PHA Plan.’’

The commenters stated that: ‘‘In this narrow circumstance where a PHA desires to control the revitalization or replacement of its public housing through the use of PBVs for its own units, the requirement to conduct a competitive process is unlikely to be cost-effective and will add delay and uncertainty to critical public housing revitalization efforts.’’ The commenters specifically recommended providing three options, and suggested the following language for the third option: ‘‘(3) Selection of a proposal without a competitive process for PHA-owned housing as part of an initiative to improve, develop, or replace a public housing property or site.’’

HUD Response: HUD appreciates the commenters’ recommendation. However, these changes were not offered at the proposed rule stage and HUD believes that they should first undergo public comment before adopting the commenters’ suggestions in a rule for effect. HUD, however, will

consider the commenter’s recommendation if HUD decides to propose a substantive change to the competitive selection requirements in future rulemaking.

Issue: Restrictions on Using PBVs in Public Housing (§§ 983.51(d), 983.54(a))

Comment: Commenters expressed concern and recommend that HUD clarify the current language restricting the use of PBVs in public housing because it could be interpreted to prevent the combining of public housing capital funds (including HOPE VI) with project-based vouchers. The commenters stated that the current language is contrary to the goal of preservation and believes that this was not HUD’s intended outcome.

A commenter recommended that the existing regulation be revised to prohibit the use of PBV assistance with units that receiving public housing operating funds only, revise the final sentence of § 983.51(e) to read as follows: ‘‘Under no circumstances may PBV assistance be used with a unit receiving public housing operating funds.;’’ and revise § 983.54(a) to read as follows: ‘‘Units receiving public housing operating funds.’’

HUD Response: HUD appreciates the commenters’ concern, however, the concern has been previously addressed by the Department in the 2005 PBV Final Rule, 70 FR 59892, 59900. The Proposed Rule and this Final Rule simply restate HUD’s longstanding legal interpretation on using project-based voucher assistance in public housing units. Therefore, as stated in the 2005 PBV Final Rule, HUD reiterates that Congress’ adoption of disparate or parallel statutory provisions for the public housing and voucher programs affirms that public housing and voucher programs are intended to operate as separate, and mutually exclusive, subsidy systems under the 1937 Act. It is not permissible by law to combine voucher funds with public housing funds. For HOPE VI funds that predate fiscal year (FY) 2000, it is generally permissible to combine these funds in accordance with the terms of the relevant HOPE VI appropriations act if the HOPE VI funds were not used to develop or operate public housing units. It is not permissible in any case to combine HOPE VI funds appropriated on and after FY 2000 (Section 24 funds), because Section 24 funds are public housing funds. If Capital Funds or Section 24 funds are used in the development of affordable housing, pro- ration must occur. For example, if a project receives $2,000 in non-public housing HOPE VI funds and $1,000 in

Capital Funds and there are 60 units in the development, 20 of the units (one- third) are being funded with capital funds and, therefore, cannot be combined with project-based vouchers. Provided that the remaining 40 units (two-thirds) are not receiving any Public Housing funds, the units may be assisted under the PBV program.

Issue: New Language Allowing PHAs Greater Flexibility (§ 983.51)

Comment: A commenter recommended that HUD add a paragraph (g) to this section that would allow the number of ‘‘units under a HAP contract to be increased up to the number awarded on the proposal selection date without an additional competitive selection’’ at any time. The commenter stated that this change will help stabilize projects and provide long- term affordable housing when owners lose units for no fault of their own, including over-income tenants and wrong-sized families, and that the change is crucial because the regulations at § 983.211 and § 983.258 clarify that a unit must be removed from the HAP Contract if a unit is over- income or otherwise not eligible, but § 983.207 only allows the addition of a unit within three years of the execution of the HAP Contract.

Another commenter stated that to the extent that a unit loses subsidy for no fault of the owner, the regulations should clarify that the unit can be included in the HAP Contract upon lease-up of a subsequent eligible resident. The feasibility of projects is based upon the commitment of a certain level of PBV assistance during the full term of the HAP Contract. In order to preserve the affordability of the projects, the PHA must be able to provide the originally committed level of assistance when the amount of subsidy is decreased through no fault of the owner. The commenter recommended the following language ‘‘Once a PBV proposal has been selected pursuant to this section, the PHA may increase the units under the HAP contract up to the number of units originally awarded upon the proposal selection.’’

HUD Response: HUD appreciates the commenters’ recommendation. However, similar to HUD’s response to recommendations to change the procedures governing an owner’ proposal selection for public housing revitalization and replacement efforts, HUD believes that these changes should first undergo public comment before adopting the commenters suggestions in a rule for effect. If in a future rulemaking HUD proposes a substantive change to the competitive selection


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requirements, the recommendations of the commenters will be considered.

Issue: Subsidy Layering Review Not Required for Existing Housing (§ 983.55)

Comment: A commenter recommended that HUD clarify the change to § 983.55(a) by inserting a period after ‘‘existing housing’’ and making the ‘‘nor’’ clause into a separate sentence.

HUD Response: HUD agrees with the commenter and the final rule clarifies the sentence as suggested by the commenter.

Issue: Cap on Number of PBV Units in Each Project (§ 983.56)

Comment: Commenters stated that § 983.56 is unclear in regard to the types of units excluded, such as single family project units, and requests clarification in how to apply the 25 percent cap to PBV units in a project. A commenter stated it is unclear ‘‘in the context of a project that may combine multifamily structures with structures containing one or two units. The rule was previously understood to exclude from the general calculation any building of less than four units, and we would suggest clarifying the rule to continue this practice.’’

HUD Response: HUD agrees with the commenter and in this final rule does not contain the proposed change to replace the word building with project in § 983.56(b)(1)(i).

Comment: A commenter recommended the following language, ‘‘Combining exception categories. Exception categories in a multifamily housing project may be combined, such that excepted units in a single project may include elderly families, disabled families, and families receiving supportive services, or any combination thereof. Additionally a project may include excepted and non-excepted units (i.e., only those units over the 25 percent per-project cap must be excepted units).’’

HUD Response: HUD believes the intent of the regulation is adequately discussed in the preamble and does not believe further revision to the proposed regulatory text is necessary.

Issue: Termination of Rental Assistance for Families in ‘‘Excepted’’ Properties That No Longer Qualify for Benefits (§§ 983.56(b)(2)(ii)(B)&(C), 983.257(c), 983.261(d))

Comment: Commenters stated that the rule leaves ‘‘unchanged, provisions in three current sections pertaining to project-based units that are ‘‘excepted’’ from the 25 percent per-property cap on voucher project basing . . . that requires

remaining members of a family that no longer qualifies for elderly or disabled family status to vacate their home.’’ Commenters stated that these provisions are contrary to other provisions, such as allowing families to remain in homes at the end of a FSS contract, contrary to VAWA, and contrary to HUD policy, and the commenter, as an example, referenced HUD’s policy for allocating VASH vouchers in the event of domestic violence. HUD–VASH Qs and As, No. D.4.’’

HUD Response: HUD agrees with the commenters that family members residing in a unit that no longer qualifies for elderly or disabled family status should not be required to vacate the unit under conditions that are beyond the control of the family, and Section II of this preamble advises of the change that HUD is making at this final rule stage to address this concern.

Comment: Commenters stated that the rule requires that to maintain occupancy the occupants must work, a requirement that is counter to the principle that housing should be voluntary, and the commenter references Notice PIH 2011– 33, dated as recently as June 24, 2011, which provides that ‘‘Under no circumstance may a PHA terminate assistance from the public housing program as a consequence of unemployment, underemployment, or otherwise failing to meet the work activity requirement for a particular public housing development.’’

Commenters recommended that the PBV termination rule be removed or HUD should ‘‘[p]redicate such terminations on the availability of tenant-based vouchers so that a family can move with continued assistance (similar to the policy that applies to over-or under-housed families at § 983.259 and that applies to public housing families at Notice PIH 2011– 33); or if the property is partially assisted, allow the family to remain, substituting the housing assistance contract of their unit with another unit, if available, as is currently allowed at § 983.261(d).’’ Another commenter stated: ‘‘If the property is fully assisted, allow the family to remain but when the family vacates the new tenant would be subject to the requirements that apply to ‘‘excepted’’ units.’’

HUD Response: The statutory exception to the 25 percent limitation on dwelling units receiving assistance under a PBV contract specifically requires that families receive supportive services. If a family continues to reside in an excepted unit after failing, without good cause, to complete the service requirement, the unit must be removed from the HAP contract since it only

qualifies as an excepted unit if the family is receiving supportive services.

The service requirement is a condition of occupancy of the PBV unit and is a family obligation contained within the Statement of Family Responsibility that must be signed prior to leasing the unit. A family’s failure to complete the service requirement, without good cause, is considered a violation of family obligations and grounds for termination from the program.

HUD disagrees that the service requirement is a work requirement. Occupancy in a unit excepted from the 25 percent limitation on PBV units in a family project is not based on employment, but rather the statute provides that the exception is allowed for units leased by families receiving supportive services.

Issue: Environmental Review for Existing Structures (§ 983.58)

Comment: Commenters expressed disagreement with HUD’s interpretation of the statutory language (Section 2835(a)(1)(f) of HERA). Commenters stated that the current interpretation renders the HERA provision meaningless. Another commenter stated that ‘‘HERA specifically provided that PHAs would not be required to undertake environmental reviews of an existing structure ‘except to the extent that such a review is otherwise required by law or regulation.’ ’’ Other commenters stated that ‘‘HUD should have interpreted the phrase ‘otherwise required’ as required by a law or regulation related to other funding for the units.’’

A commenter stated that HUD’s interpretation violates principles of statutory construction by rendering the language superfluous, and HUD’s failure to implement the statute accurately has caused PHAs additional administrative burdens, ‘‘particularly for PHAs using Project-Based Vouchers for substantial numbers of existing units on different sites.’’

A commenter recommended that HUD replace § 983.58(c), with the following: ‘‘(c) Existing housing. Existing housing under this part 983 is exempt from environmental review, unless required by law or regulation related to funding for the units other than PBV assistance. If an environmental review is required, the RE [responsible entity] that is responsible for the environmental review under 24 CFR part 58 must determine whether or not PBV assistance is categorically excluded from review under the National Environmental Policy Act and whether or not the assistance is subject to review


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under the laws and authorities listed in 24 CFR 58.5.’’

HUD Response: Section 2835(a)(1)(F) of HERA adds section 8(o)(13)(M)(ii) to the 1937 Act and specifically relieves PHAs from undertaking any environmental review before entering into a HAP contract for an existing structure, except to the extent such a review is otherwise required by law or regulation. A number of broadly applicable Federal statutes, executive orders, and regulations require environmental reviews of various types to be performed by Federal agencies prior to agency actions, including approving Federal assistance for a project. In the case of Section 8, Section 26 of the 1937 Act provides for the assumption by a state or unit of general local government of these environmental review responsibilities. Contrary to the commenters’ insistence that HUD’s interpretation of the statute renders it meaningless, Section 8(o)(13)(M)(ii) simply does not relieve a state, unit of general local government, or HUD of these responsibilities to undertake an environmental review of existing projects prior to execution of a HAP, and does not authorize HUD to declare such projects exempt from environmental review.

Comment: A commenter stated that the environmental review should be limited for existing PBV to situations where such review is required by funding sources for the units other than PBV. The commenter stated that this step will eliminate the need for PHA efforts that do not contribute significantly to environmental protection or the well-being of residents, as Congress intended.

HUD Response: Environmental reviews on existing projects are appropriately less extensive than for new construction, and include evaluation of factors such as flood hazards and site contamination that do affect the well-being of residents.

Issue: New Language for PHA Owned Units (§ 983.59)

Comment: A commenter recommends that HUD add language ‘‘to allow PHAs to pass the costs of the PBV program to the owners and remove the requirement that an independent entity must approve a renewal.’’ The commenter states that PHAs have actual expenses in providing PBV assistance which are not covered by administrative fees, and that therefore, the ‘‘regulations should make clear that the PHA may pass those costs on to the owner to be paid as operating costs of the project, provided that the payment of the tenant shall not be increased. Additionally, since an

independent entity is already approving the amount of assistance and the inspection of units, we do not believe that the independent entity is necessarily best suited to determine the appropriateness of renewals.’’

Another commenter suggested that § 983.59(b) be deleted and the following language replace paragraph (d)(1). ‘‘The PHA may compensate the independent entity from PHA ongoing administrative fee income (including amounts credited to the administrative fee reserve). The PHA may not use other program receipts to compensate the independent entity for its services; provided, however, that the PHA may pass such costs on to the owner to be paid as an operating cost of the project.’’

HUD Response: The suggested changes involve statutory requirements and therefore cannot be accepted. Section 8(o)(13)(F) of the 1937 Act requires that for PHA-owned housing, the term of the contract shall be agreed upon by the agency and the unit of general local government or other entity approved by HUD in the manner provided under section 8(o)(11) of the 1937 Act. Section 8(o)(11) provides that the agency is responsible for payments for determinations made by the unit of general local government or other approved HUD entity.

Issue: Elimination of an Independent Real Estate Appraisal (§ 983.59)

Comment: A commenter stated that the proposal ‘‘to eliminate the current requirement for a real estate appraisal to determine initial contract rents to a Section 8 building owner’’ is misguided and HUD provides unsubstantiated evidence for the proposed change. The commenter recommended that the provision be deleted from the final rule and HUD should maintain the appraisal requirement.

Another commenter stated that there are certified appraiser readily available, citing that ‘‘as of December 31, 2011, the number of active real estate appraisers in the U.S. stood at 86,800. Of this figure, approximately 30 percent, or 26,000, are classified as Certified General Real Property Appraisers.’’ Another commenter stated that appraisers provide timely services, with research indicating appraisal times have stayed relatively constant, and cost competitive services, reports indicating costs have declined over the years. A commenter recommended that HUD clarify what data or research supports the conclusion that certified appraisers are not readily available, do not provide timely service, and do not provide cost competitive services.

Another commenter stated that ‘‘it is in the best interests of the Department and taxpayers that the contract rents [paid] to building owners be based on independent and objective market information. This information is best provided by qualified real estate appraisers. Real estate appraisers are trained to provide the information sought by HUD in an objective and independent manner. We believe doing otherwise actually puts the limited funds set aside for Section 8 vouchers at risk.’’

HUD Response: Based on the commenter’s concerns that rents for PHA-owned units will not continue to be determined through a state-certified appraiser and, therefore, determinations will lose objectivity, HUD believes that the same objective can be achieved through rent reasonableness determinations by an independent entity. This requirement was only administratively imposed and because the same results can be achieved otherwise, HUD is eliminating the requirement as proposed.

Issue: Eliminate Requirement That an Independent Entity Inspecting PHA Units Furnish a Copy of Each Inspection Report to the HUD Field Office (§ 983.103)

Comment: A commenter stated that ‘‘there is no evidence that this paperwork-generating requirement has resulted in better unit conditions.’’ The commenter recommends deleting in § 983.103(f)(2) the language: ‘‘and to the HUD field office where the project is located’’.

HUD Response: HUD has not proposed a change to § 983.103(f)(2). Nonetheless, to address the commenter’s concern, HUD believes there is value in the requirement in that it furthers the statutory intent to provide independent oversight of PHA owned housing in certain areas of program administration.

Issue: Commencement of Construction (§§ 983.152, 983.153)

Comment: Commenters responded to HUD’s request for comments on the applicability of the commencement of new construction requirement for projects receiving other federal funds on which construction has already started. Commenters stated that this change would have an impact on all possible new owners that are interested in a PBV property after construction has begun rather than just those receiving other federal funds. A commenter stated ‘‘that it is not uncommon for site preparation to have begun before a developer submits a proposal for funding. The


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proposed ‘commencement of construction’ standard eliminates a funding agency’s opportunity to influence a developer to incorporate PBV units into the development after its selection. Beyond foreclosing opportunities to incorporate PBV units into a development, it is not apparent that this definition of commencement of construction serves a useful purpose.’’ A commenter recommended that HUD provide ‘‘the greatest flexibility allowed by law for owners and PHAs to enter into AHAPs, even after the proposed definition of ‘commencement of construction.’ ’’

Another commenter stated that it recognized the necessity of complying with NEPA and not commencing work prior to completion of environmental reviews, but stated that it sees ‘‘no other HUD objective served by this rule that could not be accomplished by far less restrictive means.’’ Other commenters stated that the complexity of financings and regulatory requirements requires flexibility for developers and finances during the process, especially when a project doesn’t initially rely on PBV. A commenter stated that the layering of financing is subject to HUD workload constraints and consequent delays that have severely impacted the ability of projects to meet placed-in-service (PIS) deadlines. Another commenter stated that HUD could require that the environmental review be completed prior to ‘‘early start activities’’ and that they are in accordance with other applicable federal requirements, such as Davis-Bacon wage standards and Section 3 hiring requirements, without requiring an executed AHAP contract. The commenter recommended a simple ‘‘certification from the owner (with HUD’s standard text regarding potential penalties for false statements) that all work performed prior to AHAP execution has been so performed. If a PHA requests the early release of funding for early start work, HUD may require such a certification at that time.’’

Several commenters stated that there seems to be no apparent policy rationale offered for HUD’s position and recommended revising § 983.152(a) to allow an exception for extenuating circumstances. Commenters stated that they recognized the need that all part 983 requirements be met, but stated that the PHA can certify to those requirements without HUD concerning itself with the timing of executing the AHAP contract.

A commenter stated that the recommended definition will severely limit the use of the PBV program and ‘‘does not reflect the realities of how the development process works, and is not

necessitated by any regulatory requirements.’’ Another commenter recommended that HUD tie the execution of the AHAP to the financial closing for the construction or rehabilitation work, provided the PHA has certified the owner has met the other HUD requirements. Specifically, the commenter suggested § 983.152(a) be revised as follows: ‘‘Requirement. The PHA must enter into an Agreement with the owner upon financial closing. The Agreement must be in the form required by HUD’’ and that § 983.153(c) be revised to read as follows: ‘‘Prompt execution of Agreement. The Agreement must be executed after the subsidy layering and environmental approvals are received from HUD at financial closing.’’

HUD Response: The determination of start of construction is necessary to ensure that units are constructed or rehabilitated in compliance with section 12(a) of the 1937 Act, and Davis-Bacon wage rates, where applicable. The Section 8 program, including the PBV program, is subject to statutory labor standards provisions in Section 12(a) of the 1937 Act. Section 12(a) of the U.S. Housing Act requires the applicability of Davis-Bacon prevailing wages to the development of low-income housing projects containing nine or more Section 8-assisted units, where there is an agreement for Section 8 use before construction or rehabilitation is commenced. HUD’s position has long been that once a Section 8 housing project has been initially developed and placed under a HAP contract, a later decision by an owner to repair or rehabilitate the project as it ages does not constitute ‘‘development’’ of the Section 8 project and is not subject to Davis-Bacon wage rates. However, construction, including rehabilitation work, performed in connection with the initial placement of a project under a PBV HAP contract constitutes development of the project and is subject to Davis-Bacon wage rates where the project contains nine or more assisted units.

The final rule provides a clear definition of start of construction and rehabilitation, and requires that no construction or rehabilitation can proceed after proposal submission and prior to an AHAP being executed. After AHAP execution all construction and rehabilitation must be carried out in accordance with the AHAP and program requirements which may include Davis Bacon wage requirements.

Issue: Extension of Initial Term (§ 983.205)

Comment: Several commenters expressed disagreement with HUD’s interpretation that the PBV contract must end after a 15-year renewal. A commenter stated that HUD’s interpretation is contrary to the statute and proposed the limit be for a maximum of 30 years. The commenter stated that the extension contracts need to continue to give homeless people more protection.

Other commenters stated that HUD should comply with the spirit of the original PBV statute which refers to long-term affordability and unlimited number of extensions of the initial HAP contract for up to 15 years. Other commenters stated that continued renewals are extremely important to ensure long-term affordability and is essential to preserving the stock of housing affordability to extremely low income people.

A few commenters stated that the language as written is confusing. The commenters asked ‘‘Is HUD attempting to limit the entire term of the contract to 30 years? In other words, if a PHA provides a 15 year initial HAP contract with an agreement to extend for another 15 years, HUD will disallow any further extensions?’’

A commenter stated that it seeks clear language that allows for multiple renewals of 15 year terms so not to lose the already limited inventory of affordable housing to the market.

Other commenters stated that the proposed rule violates the explicit HERA amendment, which permits an advance agreement for a potentially unlimited number of 15-year extensions so long as the property meets HQS and the rents do not exceed applicable limitations. A commenter recommended removing sentences two and three, and replacing sentence one as follows: ‘‘A PHA may agree to enter into one or more extensions at the time of the initial HAP contract or any time before expiration of the contract, for an additional term or terms of up to 15 years each if the PHA determines an extension is appropriate to continue providing affordable housing for low- income families.’’

A commenter recommended that HUD remove sentences two and three, and replace the first sentence as follows, ‘‘A PHA at the time of the initial HAP contract or any time before expiration of the contract, for an additional term or terms of up to 15 years each if the PHA determines an extension is appropriate to continue providing affordable housing for low-income families.’’


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Another commenter stated that § 983.205(b) should be revised to ‘‘clarify that HAP contracts may be extended for up to 15-year terms, with no stated limit on the number of extensions.’’

A commenter stated that the statute gives the PHA the authority to extend the contract ‘‘upon a PHA’s informed judgment about what is reasonably appropriate in order to achieve long- term affordability of the housing or to expand housing opportunities.’’ The commenter also stated that ‘‘Congress’ use of the word ‘‘terms,’’ and use of the word ‘‘each’’ to modify 15 years, demonstrates that Congress’ statutory language in HERA was not intended to limit a PHA to extend PBV HAP contracts to a ‘‘term’’ of up to 15 years exclusively.

Another commenter recommended removing the language at the end of § 983.205 and using the following language: ‘‘Extension of term. A PHA may agree to enter into an extension at the time of the initial HAP contract term or any time before expiration of the contract, for additional terms of up to 15 years each if the PHA determines an extension is appropriate to continue providing affordable housing for low- income families. In the case of PHA- owned units, any extension of the initial term of the HAP contract shall be determined in accordance with § 983.59.’’

HUD Response: The proposed rule allows for an extension at the beginning of the initial HAP contract term. Essentially, an initial 30-year commitment is permissible at the commencement of the HAP contract provided the PHA is able to make the requisite determination that an extension is appropriate to continue providing affordable housing for low- income families or to expand housing opportunities. A 15 year initial term and a 15 year extension is consistent with requirements under LIHTC program under which the project owner must agree to maintain an agreed upon percentage of low income units for an initial 15 year compliance period and subsequent 15-year extended use period. The required LIHTC extended use period ensures that a 15-year PBV extension is appropriate to continue providing affordable housing for low- income families. The HERA amendment, and HUD’s reasonable implementation of it, facilitates preservation of affordable housing for the LIHTC compliance period and extended use period. In addition, provided that the PBV program is not repealed, owners and PHAs will have the opportunity at the end of the 30 year

period to go beyond 30 years of assistance (HUD uses LIHTCs as an example since LIHTCs are the main source of financing used with PBVs. The Department is not asserting that because the LIHTC period is 30 years, this is dispositive on how long extensions may be). HUD’s initial limitation on contract extensions is not intended to bar the possibility for future extensions.

The final rule therefore allows for future extensions at the end of any extension term provided that not more than 24 months prior to the expiration of any extension contract, the PHA agrees to an extension of the term at the end of the previous term, and that such extension is appropriate to continue providing affordable housing for low- income families or to expand housing opportunities. HUD is, exercising its discretion to establish a reasonable limit on the cumulative term of any contract extension in this manner because HUD believes allowing a PHA and owner to extend a HAP contract for an endless number of terms during the initial HAP contract, as suggested by some commenters, may conflict with the PHA’s statutorily required determination that must be made prior to extending the underlying contract both initially and for subsequent extensions.

Issue: Terminating a HAP Contract When a Rent Reduction Falls Below Initial Rent Level (§ 983.205)

Comment: A commenter requested that HUD clarify why it is requiring, given there is no statutory requirement, for ‘‘an owner seeking to terminate a HAP contract when the rent for any contract unit is adjusted below the initial rent level would be required to provide a notice to the PHA and HUD and seek HUD approval.’’ Another commenter stated that the continued allowance that an owner can terminate a contract if a rent reduction is below the initial rent level creates a conflict with § 983.302. The commenter recommended changing § 983.302(c)(2) to include an ‘‘a requirement that the owner accept the regular, tenant-based voucher of a prior PBV tenant. The use of a voucher in the unit would be subject to regular HCV rules of rent reasonableness and HQS compliance. But if an owner opts out of a PBV contract rather than accept a rent reduction, the PHA finds the rent to be reasonable, and the tenant wants to remain and pay the likely additional rent above the PHA payment standard, HUD’s rules should encourage such stability.’’

HUD Response: The regulation reflects an existing requirement. Under

the May 15, 2012, rule, HUD proposed that the owner provide notice to HUD, as well as the PHA, and receive approval from HUD when terminating the HAP contract due to a rent reduction causing rents to fall below the initial rent level. Upon further consideration, HUD withdraws its proposed change and maintains the current regulatory language. A commenter stated that there is a conflict between the existing regulation of allowing the owner to terminate the contract if a rent reduction causes the rent to fall below the initial rent level, and § 983.302. HUD disagrees since in limited circumstances, as enumerated in § 983.302(c)(2) the rent to owner may be required to be reduced below the initial rent (e.g., if additional housing assistance has been combined with PBV assistance after execution of the initial HAP contract and a rent decrease is required pursuant to the prohibition of excess public assistance (see § 983.55)). The commenter also suggests that HUD require an owner to accept a regular voucher when the owner exercises the right to terminate assistance in accordance with (§ 983.205). HUD declines to make the change since HUD does not have the authority to require that an owner accept a voucher.

Issue: Statutory Notice Requirements (§ 983.206)

Comment: Several commenters expressed their support for this provision. Several commenters expressed support for the requirement in § 983.206(b) and (d) that would require owners to provide tenants one- year notice of the owner’s intent to terminate a PBV housing assistance payment contract. Certain commenters suggested that the notice be in writing and that the notice require ‘‘owners, after a contract is terminated, to accept any replacement tenant-based assistance provided to residents who had been assisted with PBV.’’ Other commenters stated that providing notice to tenants will allow them ‘‘to search for and secure affordable replacement housing.’’ The commenters also noted support for (d) that ‘‘ensures that tenants must be able to remain in their units without a rent increase if the owner fails to provide timely notice.’’

A commenter recommended replacing the word ‘‘notify’’ with ‘‘provide written notice’’ in § 983.206(b) and revising § 983.206(d)(1). The commenter suggested that when the owner does not give timely written notice than the owner must permit the tenants in assisted units to remain in their units for the required notice period until one year following the legally required


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notice, with no increase in the tenant portion of their rent and with no eviction. This same commenter recommended adding a paragraph (e) stating: ‘‘Following termination of the contract, an owner shall accept any replacement tenant-based assistance provided to assisted tenants in residence at the time of the termination, provided that this requirement shall not limit the reasonable market rent charged by the owner.’’

Another commenter requested that HUD reconsider requiring owners to provide notice one year prior to termination because it is not required by the statue and may have disadvantages to residents. The commenter stated that the statute does not require notice for the PBV program when it is tenant- based assistance. Specifically, the commenter noted that ‘‘unlike other project based programs, if the PBV HAP Contract is terminated, each resident would receive a tenant-based voucher to either stay at the project or move to another place of their choice. A year of notice is counter-productive since it causes great concern for the residents, even though their housing assistance is not in jeopardy.’’ The commenter recommended that HUD require 60 days’ notice and HUD could consider requiring that ‘‘if the Owner will continue to operate the project as rental housing, the tenants may not be evicted except under the terms of their lease.’’

HUD Response: HUD appreciates the comments in support of § 983.206, but disagrees with the commenter’s that stated that the statutory requirement to provide a one-year notice of termination or expiration does not apply to the PBV program. Section 8(c)(8) applies to project based assistance and Section 8(f) of the statute defines project-based assistance to include assistance provided under Section 8(o)(13) (PBV assistance).

Issue: Recommending a Change to the 3-Year Limit on Adding Units to an Existing HAP Contract (§ 983.207)

Comment: Certain commenters objected to the existing three year limit for a PHA to add units to a HAP contract. The commenters stated that the need to add usually because ‘‘families living in those units were not eligible for the vouchers’’ upon execution of the HAP contract. The commenters recommended HUD provide no limit on adding units.

Another commenter requested that HUD clarify § 983.207(d) so ‘‘that the PHA may amend the HAP Contract at any time to add additional units, provided that the total number of units does not exceed the original award/HAP

Contract. To the extent those units were part of the initial award, the fact that the contract was terminated with respect to specific units in accordance with 24 CFR 983.211 should not make those units ineligible for assistance provided that future families are eligible for assistance.’’ Another commenter recommended amending § 983.207(b) by adding that ‘‘or at any time when a unit that has been occupied by an ineligible family since that execution date becomes occupied by an eligible family’’ after the language ‘‘during the three-year period immediately following the execution date of the HAP contract.’’ A commenter stated that allowing units to be added after the three years from the initial HAP contract where turnover provides ‘‘would facilitate contract administration, as well as financing when renovations are involved.’’

Another commenter stated that being able to add units is important for the feasibility of the project and the PHA should be able to increase the number of units under the HAP contract to the number originally awarded. This same commenter recommended the following language for § 983.207(b): ‘‘Amendment to add contract units. At the discretion of the PHA, a HAP contract may be amended to add additional PBV contract units in the same project up to the number of units originally awarded upon the proposal selection. An amendment to the HAP contract is subject to all PBV requirements (e.g. rents are reasonable), except that a new PBV request for proposals is not required. The anniversary and expiration dates of the HAP contract for the additional units must be the same as the anniversary and expiration dates of the HAP contract term for the PBV units originally placed under HAP contract.’’

HUD Response: HUD appreciates the commenters’ recommendation and is providing for the reinstatement of some units to the HAP contract under § 983.211.

Issue: Amendment To Add Contract Units—Clarifying the 25% Per-Project Cap When Adding Units to an Existing HAP Contract (§ 983.207)

Comment: Commenters requested that HUD amend § 983.207(b) to clarify that the HAP can ‘‘assist more than the 25% per-project cap if the assisted units are excepted units in accordance with 983.56.’’ A commenter recommended that HUD strike the language and simply require additional units to comply with the regulations in 24 CFR part 983.

HUD Response: HUD agrees with the commenter and the final rule makes this clarification. The rule clarifies that the 25 percent limitation applies unless the

units are excepted units pursuant to § 983.56.

Issue: Removal of Units From HAP Contract (§§ 983.211, 983.258)

Comment: A commenter stated that the change proposed to § 983.211 is important, but recommended that HUD ‘‘improve on the proposed rule by allowing a PHA, where there is not another unit that can be substituted to maintain the number of PBV units in the property, to allow the unit to remain under the PBV contract despite the absence of housing assistance payments for the unit. The commenter stated that alternatively, HUD should allow the reduction in units under the PBV contract to be temporary, to enable the original number of PBV units to be restored if a unit becomes vacant and is rented to an eligible family. (A change in § 983.258 also would be required to implement this recommended policy.)’’

Another commenter stated that volume for PBVs are governed by budget authority rather than number of units, so ‘‘allowing units with unsubsidized families to remain under HAP contract would facilitate program administration with no negative effects on the program.’’ Other commenters stated that HUD’s proposal does not provide a return of PBV units to the HAP Contract. The commenters recommended that if units are removed from the HAP contract without fault of the owner, the units should be added back to the HAP contract with no delay when the units are re-released to eligible families.

HUD Response: HUD appreciates the commenters’ recommendation and is adopting language that allows for a project that is not partially assisted to re-instate units when an ineligible family vacates and clarifying when a partially assisted unit may substitute a unit in § 983.211. However, the other changes recommended by the commenters should first undergo public comment before being adopted in a rule for effect. HUD will consider such changes in future rulemaking for the PBV program.

Issue: Participant Selection—Preference for People With Disabilities (§ 983.251)

Comment: Commenters stated that the interpretation of § 983.251(d) has been challenging for PHAs and HUD, and that the use of the word ‘‘qualify’’ in place of ‘‘need’’ in the rule is an improvement in tenant selection preference policies. A commenter stated that PBV can be used to create supportive housing properties or sub-set of units at a property, and the housing could have outside service providers or on-site services provided. Other commenters


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recommended that the language be changed to ‘‘(d) Preference for services offered. In selecting families, PHAs may give preference to disabled families who qualify for services offered in conjunction with the assisted units, in accordance with the limits under this paragraph. . . .’’

HUD Response: HUD appreciates the commenters’ feedback and recommendations. As noted earlier in this preamble, the final rule uses the existing codified term ‘‘need’’ and does not substitute ‘‘qualify’’ for ‘‘need’’ based on concern that ‘‘qualify’’ may be interpreted in such a way as to exclude tenants eligible for the preference. Further, HUD does not adopt the commenters’ phrase of ‘‘services offered in conjunction with the assisted units’’ because HUD returns to the existing language ‘‘services offered at a particular project.’’ HUD believes the language distinguishing between ‘‘services offered at a particular project and services offered in conjunction with specific units’’ may be misinterpreted as more limiting than the existing language.

Issue: Participant Selection— Rescreening (§ 983.251(b))

Comment: Commenters stated that tenants residing at the time of conversion from one form of assistance to PBVs should be exempt from rescreening in fulfillment of ‘‘HUD’s duty to minimize displacement in administration of its programs, 42 U.S.C. 5313 note.’’ Other commenters recommended adding as the second to last sentence of § 983.251(b) the following language, ‘‘In addition, such families who were recipients of another form of HUD rental assistance at the time of project selection will not be subject to additional elective screening requirements and may be evicted from the property only for good cause in accordance with the lease.’’

HUD Response: HUD does not have the statutory authority to eliminate mandatory PHA screening requirements. The issue of permissive screening activities a PHA may engage in is beyond the scope of this rule. Any changes HUD might seek to make in the future would require that such changes be proposed to give interested parties the opportunity to comment.

Issue: Termination of Leases (§ 983.256) Comment: Commenters stated that the

preamble to the proposed rule states the intent is to provide ‘‘a reliable long-term lease for a tenant unless the owner provides good cause for termination of the lease or nonrenewal of the lease.’’ However, § 983.256(f)(3)(i) of the

proposed regulatory text continues to allow an owner to terminate a lease without good cause. Other commenters recommended that HUD revise the language to state ‘‘(i) The owner terminates the lease for good cause.’’ A commenter recommended that that language be changed to protect those who may be targeted because of bias. Another commenter recommended that § 983.256 include explicit language stating that a tenancy may only be terminated for good cause.

HUD Response: The PBV regulations at §§ 983.256 and 983.257 must be read in conjunction with the cross-referenced tenant-based regulation (§ 982.310) which only allows termination for good cause. The PBV provision that allowed an owner to renew without good cause, former § 983.257(b)(3), has been removed. Nonetheless, to eliminate the possibility of confusion, the final rule revises § 983.256 to clearly state that an owner may only terminate a lease for good cause during the lease term.

Issue: Overcrowded, Under-Occupied, and Accessible Units (§ 983.260)

Comment: A commenter stated the rule ‘‘states that a PHA must terminate PBV for a family in a wrong-sized unit or in a unit with unneeded accessibility features, while also requiring a PHA to provide continued housing assistance.’’ Other commenters requested that HUD clarify by providing guidance regarding the type of assistance that should be offered and suggested adding language stating that ‘‘an appropriate unit must be offered if one is available in the same building or development. If an appropriate unit is not available, a PHA may offer another form of project-based assistance. However, a PHA must always offer tenant-based voucher assistance in addition to project-based assistance, allowing a family to choose the form of assistance.’’

A commenter recommended that for families that resided in a unit for at least a year the PHA should be required to offer tenant-based voucher assistance ‘‘and allow the family to choose the form of assistance it will receive. In addition, when a family has received a tenant-based voucher because its PBV assistance is terminated due to unit size or accessibility features, the rule should explicitly require the PHA to help the family find an appropriate unit, consistent with the requirement in 24 CFR § 982.403.’’ This same commenter stated that the proposed change is confusing and fails to provide protections for family similar to other HUD project-based rental assistance programs. The commenter requested that HUD use the existing language

concerning termination of the ‘‘housing assistance payment’’ to prevent confusion that the ‘‘HAP contract’’ is being terminated and ‘‘ensure that units are not made unavailable for other families who would be eligible for project-based assistance when a vacating family receives a tenant-based voucher. In addition, the final rule should clarify that such termination should occur only when an available unit has been identified for a family receiving a tenant-based voucher. This change is consistent with the parallel rule in the regular tenant-based program, and is necessary to avoid causing the displaced family to become homeless.

HUD Response: The PBV regulations at §§ 983.260(c)(1) and 983.260(c)(2) are clarified in this final rule to express HUD’s intent that if a family does not move out of the wrong-sized or accessible PBV unit by the expiration of the term of the family’s voucher (including any extension) or within a reasonable time of the PHA’s offer of assistance in accordance with § 983.260(c)(2), the PHA must remove the unit from the HAP contract.

Issue: Suggested Change to Utility Allowance (§ 983.301(f))

Comment: A commenter recommended that HUD revise the RAD program and other preservation conversions that have a PHA utility allowance, but permit the use of property based utility allowances when available. The commenter stated that the rule directs PHAs ‘‘to use their current PHA wide utility allowances for purposes of calculating rents’’ which works when PBVs ‘‘are added to a previously unassisted project where the property utility data is not available. However, for properties that have had HUD assistance, it is very likely that the property will have its own utility allowance which is probably more up to date than the PHA allowance and certainly will be reflective of the property.’’ Allowing the use of the PHA utility allowance creates a disincentive ‘‘for the property owner to undertake energy efficiency retrofits.’’

HUD Response: This rule is limited to revising and updating regulations for the PBV program. Regulations applicable to RAD, which is a demonstration program, are covered by the RAD notices.

Issue: Implementation of the Rent Floor Permissible Rather Than Mandatory (§§ 983.301, 983.302, 983.303)

Comment: Commenters stated that the current language in §§ 983.301 and 983.302 goes beyond the statutory


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language of HERA. A commenter stated that HERA explicitly delegated the authority to make the decision about rent floors for a PBV contract to the PHA, and doing so makes good policy sense. For example, the commenter stated that ‘‘It may be important to have such rent security in locations where it could reasonably be expected that rents are volatile and the PBV contract will enable the owner to leverage additional funds for development or rehabilitation. But in other situations, such as where the PBV contract is for existing housing, such rent security could potentially come at the expense of a PHA’s ability to assist additional families.’’ Other commenters recommended that these two regulatory sections be revised to allow the PHA in its discretion to not reduce the rents below the initial rents, if the contract rents are not reasonable. PHAs need to retain this discretion to weigh the needs of the particular project against other projects.

A commenter requested that HUD make it clear that PHAs could reduce the rent based on the reasons specific in the rule and clarify ‘‘that whether or not the PHA has agreed contractually to not reduce rents below the initial rent, a PHA is not required to reduce PBV rents below the initial rent if the FMR declines by more than 5% or the rent would otherwise exceed 110% of FMR. PHAs should be able to make the decisions of whether to reduce PBV rents when the FMR declines on a case- by-case basis.’’

Another commenter suggested that HUD change § 983.301(e) to require that the ‘‘rent to the owner for each contract unit may at no time exceed the reasonable rent, except in cases where, upon redetermination of the rent to owner, the reasonable rent would result in a rent below the initial rent.’’ The commenter stated that the statutory language does not require the stipulation in the PBV HAP contract and ‘‘if a PHA chooses to include this stipulation in the PBV HAP contract with the consent of the owner, the language in HERA requires that the provision stipulate the maximum rent permitted for a dwelling unit shall not be less than the initial rent for the dwelling unit under the initial housing assistance payments contract covering the PBV assisted unit.’’

HUD Response: HUD appreciates the comments received on the implementation of the HERA provision allowing initial PBV rents to be considered the rent floor for purposes of rent adjustments, but HUD disagrees with the commenters’ opinion that the statutory provision explicitly delegates the authority to make the decision about

rent floors for a PBV contract to the PHA. Congress explicitly delegated certain decisions to PHAs in HERA (e.g., the statute specifically states that the PHA may, in its discretion continue to provide assistance under the contract . . . for a dwelling unit that becomes vacant . . .). In regard to rent adjustments, the statute states, in relevant part, that the contract may provide that the maximum rent permitted for a dwelling unit shall not be less than the initial rent for the dwelling unit under the initial housing assistance payments contract. Since the HAP contract is a HUD-prescribed form, HUD proposed a reasonable policy to implement the statutory provision. However, while HUD does not agree that the statute explicitly delegates the authority to PHAs, HUD agrees that PHAs are in the best position to make such determinations based on their individual markets, and other local considerations. Therefore, the final rule provides that the PHA may elect, in the HAP contract, to establish that the initial contract rent shall serve as the rent floor. The PBV HAP contract will also be revised.

Issue: Removing Families With Below- Market Rents Who Are Not Receiving PBV Assistance From the Rent Reasonableness Calculation (§ 983.303)

Comment: Commenters stated that HUD has recognized when a housing conversion action takes place, an owner will often not raise rents on existing tenants who are not receiving rental subsidies in connection with the conversion. The commenters suggested adding a new § 983.303(c)(4) stating ‘‘Units in the premises or project for which the owner is continuing below- market rents to families who were in occupancy but did not receive project- based voucher assistance at the beginning of the HAP contract are not to be taken into consideration for rent reasonableness determinations.’’

HUD Response: The commenters are requesting that HUD expand the definition of assisted units for purposes of rent comparability to include units in the project for which the owner is continuing below-market rents to families who were in occupancy but did not receive project-based voucher assistance at the beginning of the HAP contract. In the very limited cases where a property has undergone a housing conversion action, HUD allows units occupied by tenants on the date of the eligibility event who do not receive vouchers to be considered assisted units if the owner chooses to continue charging below market rents to those families by offering lower rents, rent

concessions, or other assistance to those families. These non-voucher families in a housing conversion action are often long-time tenants, many of whom are elderly and who had been paying below market rents prior to the housing conversion action. Considering such units assisted for purposes of rent reasonableness is an exception to the long-standing policy that an assisted unit is a unit that is assisted under a Federal, State, or local government program. However, for rent reasonableness determinations in the Housing Choice Voucher program, including the project-based voucher program, in the case of a family moving into a multifamily property, the PHA may choose to only consider the most recent rentals in determining the rents that the owner is charging for comparable unassisted units. In some markets, new tenants routinely pay higher rents than the rents that longer time tenants in comparable units may be paying. PHAs should refer to PIH Notice 2011–46 for guidance on rent reasonableness determinations.

IV. Findings and Certifications

Executive Order 13132, Federalism

Executive Order 13132 (entitled ‘‘Federalism’’) prohibits an agency from publishing any rule that has federalism implications if the rule either: (1) Imposes substantial direct compliance costs on state and local governments and the rule is not required by statute, or (2) the rule preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Order. This rule does not have federalism implications and would not impose substantial direct compliance costs on state and local governments nor preempt state law within the meaning of the Order.

Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. This rule largely makes conforming amendments to HUD regulations that govern the public and assisted housing programs, for which changes were recently made by the Housing and Economic Recovery Act of 2008. As advised in the November 24, 2008, notice that preceded this rule, the statutory changes made to these programs were largely self-executing, and required only


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conforming regulatory amendments. This rule makes those conforming amendments. The statutory changes to the programs, as reflected in the conforming amendments, impose no significant economic impact on a substantial number of small entities. This rule makes other changes for the purposes of updating certain regulations to reflect current practices, and clarifying other regulations which, based on experience, HUD determined would benefit from clarification. Therefore, the undersigned certifies that this rule will not have a significant impact on a substantial number of small entities.

Environmental Impact A Finding of No Significant Impact

(FONSI) with respect to the environment was made at the proposed rule stage in accordance with HUD regulations in 24 CFR part 50 that implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). That FONSI remains applicable to this final rule and is available for public inspection during regular business hours in the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW., Room 10276, Washington, DC 20410– 0500. Due to security measures at the HUD Headquarters building, please schedule an appointment to review the FONSI by calling the Regulations Division at 202–402–3055 (this is not a toll-free number).

Unfunded Mandates Reform Act Title II of the Unfunded Mandates

Reform Act of 1995 (2 U.S.C. 1531– 1538) (UMRA) establishes requirements for federal agencies to assess the effects of their regulatory actions on state, local, and tribal governments and the private sector. This rule does not impose any federal mandates on any state, local, or tribal government or the private sector within the meaning of UMRA.

Paperwork Reduction Act The information collection

requirements contained in this interim rule have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520), and assigned OMB Control Number 2577– 0169. In accordance with the Paperwork Reduction Act, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information, unless the collection displays a currently valid OMB control number.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance numbers applicable to the programs that would be affected by this rule are: 14.195, 14.850, 14.856, and 14.871.

List of Subjects

24 CFR Part 5

Administrative practice and procedure, Aged, Claims, Drug abuse, Drug traffic control, Grant programs— housing and community development, Grant programs—Indians, Individuals with disabilities, Loan programs— housing and community development, Low and moderate income housing, Mortgage insurance, Pets, Public housing, Rent subsidies, Reporting and recordkeeping requirements.

24 CFR Part 982

Grant programs—housing and community development, Housing, Low- and moderate-income housing, Rent subsidies, Reporting and recordkeeping requirements.

24 CFR Part 983

Grant programs—housing and community development, Housing, Low- and moderate-income housing, Rent subsidies, Reporting and recordkeeping requirements.

Accordingly, for the reasons stated in the preamble, HUD amends 24 CFR parts 5, 982, and 983, as follows.

PART 5—GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS

■ 1. The authority citation for part 5 continues to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437f, 1437n, 3535(d), Sec. 327, Pub. L. 109– 115, 119 Stat. 2936, and Sec. 607, Pub. L. 109–162, 119 Stat. 3051.

■ 2. In § 5.609, paragraph (c)(14) is revised to read as follows:

§ 5.609 Annual income.

* * * * * (c) * * * (14) Deferred periodic amounts from

supplemental security income and Social Security benefits that are received in a lump sum amount or in prospective monthly amounts, or any deferred Department of Veterans Affairs disability benefits that are received in a lump sum amount or in prospective monthly amounts. * * * * *

PART 982—SECTION 8 TENANT BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM


Authority: 42 U.S.C. 1437f and 3535(d).

■ 4. In § 982.507, paragraph (a)(1) and the introductory text to paragraph (b) are revised, paragraph (c) is redesignated as paragraph (d), and a new paragraph (c) is added to read as follows:

§ 982.507 Rent to owner: Reasonable rent.

(a) PHA determination. (1) Except as provided in paragraph (c) of this section, the PHA may not approve a lease until the PHA determines that the initial rent to owner is a reasonable rent. * * * * *

(b) Comparability. The PHA must determine whether the rent to owner is a reasonable rent in comparison to rent for other comparable unassisted units. To make this determination, the PHA must consider: * * * * *

(c) Units assisted by low-income housing tax credits or assistance under HUD’s HOME Investment Partnerships (HOME) program. (1) General. For a unit receiving low-income housing tax credits (LIHTCs) pursuant to section 42 of the Internal Revenue Code of 1986 or receiving assistance under HUD’s HOME Program (for which the regulations are found in 24 CFR part 92), a rent comparison with unassisted units is not required if the voucher rent does not exceed the rent for other LIHTC- or HOME-assisted units in the project that are not occupied by families with tenant-based assistance.

(2) LIHTC. If the rent requested by the owner exceeds the LIHTC rents for non- voucher families, the PHA must perform a rent comparability study in accordance with program regulations and the rent shall not exceed the lesser of the:

(i) Reasonable rent as determined pursuant to a rent comparability study; and

(ii) The payment standard established by the PHA for the unit size involved.

(3) HOME Program. [Reserved] * * * * *

PART 983—PROJECT-BASED VOUCHER (PBV) PROGRAM




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■ 6. In § 983.2, paragraphs (b)(3), (c)(2)(i), and (c)(7) are revised to read as follows:

§ 983.2 When the tenant-based voucher rule (24 CFR part 982) applies.

* * * * * (b) * * * (3) Provisions on the following special

housing types: Shared housing, manufactured home space rental, and the homeownership option.

(c) * * * (2) * * * (i) Section 982.310 (owner

termination of tenancy) applies to the PBV program, but to the extent that those provisions differ from § 983.257, the provisions of § 983.257 govern; and * * * * *

(7) In subpart M of part 982: (i) Sections 982.603, 982.607, 982.611,

982.613(c)(2), 982.619(a), (b)(1), (b)(4), (c); and

(ii) Provisions concerning shared housing (§ 982.615 through § 982.618), manufactured home space rental (§ 982.622 through § 982.624), and the homeownership option (§ 982.625 through § 982.641).

■ 7. In § 983.3(b): ■ a. Definitions for ‘‘housing credit agency’’, ‘‘partially assisted project,’’ ‘‘project’’, ‘‘project-based certificate (PBC) program’’, and ‘‘release of funds’’ are added in alphabetical order; ■ b. The following definitions are revised: ‘‘Excepted units’’ ‘‘premises,’’ ‘‘qualifying families,’’ ‘‘special housing type,’’ and ‘‘wrong-size unit’’; and ■ c. The definitions for ‘‘partially assisted building’’ and ‘‘state certified appraiser’’ are removed.

§ 983.3 PBV definitions.

* * * * * (b) * * * Excepted units (units in a multifamily

project not counted against the 25 percent per- project cap). See § 983.56(b)(2)(i). * * * * *

Housing credit agency. For purposes of performing subsidy layering reviews for proposed PBV projects, a housing credit agency includes a State housing finance agency, a State participating jurisdiction under HUD’s HOME program (see 24 CFR part 92), or other State housing agencies that meet the definition of ‘‘housing credit agency’’ as defined by section 42 of the Internal Revenue Code of 1986. * * * * *

Partially assisted project. A project in which there are fewer contract units than residential units. * * * * *

Premises. The project in which the contract unit is located, including common areas and grounds.

Project. A project is a single building, multiple contiguous buildings, or multiple buildings on contiguous parcels of land. Contiguous in this definition includes ‘‘adjacent to’’, as well as touching along a boundary or a point.

Project-based certificate (PBC) program. The program in which project- based assistance is attached to units pursuant to an Agreement executed by a PHA and owner before January 16, 2001 (see § 983.10). * * * * *

Qualifying families (for purpose of exception to 25 percent per-project cap). See § 983.56(b)(2)(ii).

Release of funds (for purposes of environmental review). Release of funds in the case of the project-based voucher program, under 24 CFR 58.1(b)(6)(iii) and § 983.58, means that HUD approves the local PHA’s Request for Release of Funds and Certification by issuing a Letter to Proceed (in lieu of using form HUD–7015.16) that authorizes the PHA to execute an ‘‘agreement to enter into housing assistance payment contract’’ (AHAP) or, for existing housing, to directly enter into a HAP with an owner of units selected under the PBV program. * * * * *

Special housing type. Subpart M of 24 CFR part 982 states the special regulatory requirements for single-room occupancy (SRO) housing, congregate housing, group homes, and manufactured homes. Subpart M provisions on shared housing, manufactured home space rental, and the homeownership option do not apply to PBV assistance under this part. * * * * *

Wrong-size unit. A unit occupied by a family that does not conform to the PHA’s subsidy guideline for family size, by being either too large or too small compared to the guideline. ■ 8. In § 983.4, the ‘‘Labor standards’’ paragraph is revised to read as follows:

§ 983.4 Cross-reference to other Federal requirements.

* * * * * Labor standards. Regulations

implementing the Davis-Bacon Act, Contract Work Hours and Safety Standards Act (40 U.S.C. 3701–3708), 29 CFR part 5, and other federal laws and regulations pertaining to labor standards applicable to development (including rehabilitation) of a project comprising nine or more assisted units. * * * * *

■ 9. In § 983.5, paragraph (c) is revised to read as follows:

§ 983.5 Description of the PBV program.

* * * * * (c) PHA discretion to operate PBV

program. A PHA has discretion whether to operate a PBV program. HUD approval is not required, except that the PHA must notify HUD of its intent to project-base its vouchers, in accordance with § 983.6(d). ■ 10. In § 983.6, paragraph (d) is added to read as follows:

§ 983.6 Maximum amount of PBV assistance.

* * * * * (d) Before a PHA issues a Request for

Proposals in accordance with § 983.51(b)(1) or makes a selection in accordance with § 983.51(b)(2), the PHA must submit the following information to a HUD field office for review:

(1) The total amount of annual budget authority;

(2) The percentage of annual budget authority available to be project-based; and

(3) The total amount of annual budget authority the PHA is planning to project-base pursuant to the selection and the number of units that such budget authority will support. ■ 11. In § 983.9, paragraph (a)(2) is revised and a new paragraph (c) is added to read as follows:

§ 983.9 Special housing types. (a) * * * (2) In the PBV program, the PHA may

not provide assistance for shared housing, manufactured home space rental, or the homeownership option. * * * * *

(c) Cooperative housing. (1) Applicability of part 983. Except as provided in paragraph (c)(3) of this section, assistance under this housing type is subject to the regulations of part 983, except the following sections of part 983, subpart F: §§ 983.256(b) and (c), 983.258 and 983.259 do not apply.

(2) Applicability of part 982. (i) Cooperative housing under the PBV program is also subject to the requirements of 24 CFR 982.619(b)(2), (b)(3), (b)(5), (d), and (e).

(ii) Cooperative housing under the PBV program is not subject to the requirements of 24 CFR 982.619(a), (b)(1), (b)(4), and (c).

(3) Assistance in cooperative housing. Rental assistance for PBV cooperative housing where families lease cooperative housing units from cooperative members is not a special housing type and all requirements of 24 CFR 983 apply.


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(4) Rent to owner. The regulations of 24 CFR part 983, subpart G, apply to PBV housing under paragraph (c) of this section. The reasonable rent for a cooperative unit is determined in accordance with § 983.303. For cooperative housing, the rent to owner is the monthly carrying charge under the occupancy agreement/lease between the member and the cooperative.

(5) Other fees and charges. Fees such as application fees, credit report fees, and transfer fees shall not be included in the rent to owner. ■ 12. In § 983.10, paragraph (b) is revised and a new paragraph (c) is added to read as follows:

§ 983.10 Project-based certificate (PBC) program.

* * * * * (b) What rules apply? Units under the

PBC program are subject to the provisions of 24 CFR part 983, codified as of May 1, 2001, with the following exceptions:

(1) PBC renewals. (i) General. Consistent with the PBC HAP contract, at the sole option of the PHA, HAP contracts may be renewed for terms for an aggregate total (including the initial and any renewal terms) of 15 years, subject to the availability of appropriated funds.

(ii) Renewal of PBC as PBV. At the sole discretion of the PHA, upon the request of an owner, PHAs may renew a PBC HAP contract as a PBV HAP contract. All PBV regulations (including 24 CFR part 983, subpart G—Rent to Owner) apply to a PBC HAP contract renewed as a PBV HAP contract with the exception of §§ 983.51, 983.56, and 983.57(b)(1). In addition, the following conditions apply:

(A) The term of the HAP contract for PBC contracts renewed as PBV contracts shall be consistent with § 983.205.

(B) A PHA must make the determination, within one year before expiration of a PBC HAP contract, that renewal of the contract under the PBV program is appropriate to continue providing affordable housing for low- income families.

(C) The renewal of PBC assistance as PBV assistance is effectuated by the execution of a PBV HAP contract addendum as prescribed by HUD and a PBV HAP contract for existing housing.

(2) Housing quality standards. The regulations in 24 CFR 982.401 (housing quality standards) (HQS) apply to units assisted under the PBC program.

(i) Special housing types. HQS requirements for eligible special housing types, under this program, apply (See 24 CFR 982.605. 982.609 and 982.614).

(ii) Lead-based paint requirements. (A) The lead-based paint requirements at 24 CFR 982.401(j) do not apply to the PBC program.

(B) The Lead-based Paint Poisoning Prevention Act (42 U.S.C. 4821–4846), the Residential Lead-based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851– 4856), and implementing regulations at 24 CFR part 35, subparts A, B, H, and R, apply to the PBV program.

(iii) HQS enforcement. The regulations in 24 CFR parts 982 and 983 do not create any right of the family or any party, other than HUD or the PHA, to require enforcement of the HQS requirements or to assert any claim against HUD or the PHA for damages, injunction, or other relief for alleged failure to enforce the HQS.

(c) Statutory notice requirements. In addition to provisions of 24 CFR part 983 codified as of May 1, 2001, § 983.206 applies to the PBC program. ■ 13. In § 983.51: ■ a. Paragraph (a) is amended by removing the term ‘‘building’’ and adding in its place ‘‘project’’ in the last sentence; ■ b. Paragraph (b)(2) is revised; and ■ c. Paragraph (g) is added to read as follows:

§ 983.51 Owner proposal selection procedures.

* * * * * (b) * * * (2) Selection based on previous

competition. The PHA may select, without competition, a proposal for housing assisted under a federal, State, or local government housing assistance, community development, or supportive services program that required competitive selection of proposals (e.g., HOME, and units for which competitively awarded low-income housing tax credits (LIHTCs) have been provided), where the proposal has been selected in accordance with such program’s competitive selection requirements within 3 years of the PBV proposal selection date, and the earlier competitively selected housing assistance proposal did not involve any consideration that the project would receive PBV assistance. * * * * *

(g) Owner proposal selection does not require submission of form HUD–2530 or other HUD previous participation clearance. ■ 14. In § 983.52, paragraph (a) is revised to read as follows.

§ 983.52 Housing type.

* * * * * (a) Existing housing—A housing unit

is considered an existing unit for

purposes of the PBV program, if at the time of notice of PHA selection the units substantially comply with HQS.

(1) Units for which rehabilitation or new construction began after owner’s proposal submission but prior to execution of the AHAP do not subsequently qualify as existing housing.

(2) Units that were newly constructed or rehabilitated in violation of program requirements also do not qualify as existing housing. * * * * * ■ 15. In § 983.53 is revised by: ■ a. Adding the word ‘‘and’’ after the semicolon in paragraph (a)(5); ■ b. Removing paragraph (a)(6); ■ c. Redesignating paragraph (a)(7) as paragraph (a)(6); ■ d. Removing paragraph (b); ■ e. Redesginating paragraphs (c) and (d) as paragraphs (b) and (c) respectively; ■ f. Revising newly redesignated paragraph (b); and ■ g. Adding a new paragraph (d).

§ 983.53 Prohibition of assistance for ineligible units.

* * * * * (b) Prohibition against assistance for

owner-occupied unit. The PHA may not attach or pay PBV assistance for a unit occupied by an owner of the housing. A member of a cooperative who owns shares in the project assisted under the PBV program shall not be considered an owner for purposes of participation in the PBV program. * * * * *

(d) Prohibition against assistance for units for which commencement of construction or rehabilitation occurred prior to AHAP. The PHA may not attach or pay PBV assistance for units for which construction or rehabilitation has commenced as defined in § 983.152 after proposal submission and prior to execution of an AHAP. ■ 16. In § 983.55, paragraphs (a) and (b) are revised to read as follows:

§ 983.55 Prohibition of excess public assistance.

(a) Subsidy layering requirements. The PHA may provide PBV assistance only in accordance with HUD subsidy layering regulations (24 CFR 4.13) and other requirements. The subsidy layering review is intended to prevent excessive public assistance for the housing by combining (layering) housing assistance payment subsidy under the PBV program with other governmental housing assistance from federal, state, or local agencies, including assistance such as tax


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concessions or tax credits. The subsidy layering requirements are not applicable to existing housing. A further subsidy layering review is not required for housing selected as new construction or rehabilitation of housing, if HUD’s designee has conducted a review, which included a review of PBV assistance, in accordance with HUD’s PBV subsidy layering review guidelines.

(b) When subsidy layering review is conducted. The PHA may not enter into an Agreement or HAP contract until HUD or a housing credit agency approved by HUD has conducted any required subsidy layering review and determined that the PBV assistance is in accordance with HUD subsidy layering requirements. * * * * * ■ 17. In § 983.56: ■ a. The section heading is revised; ■ b. The word ‘‘building’’ is removed and ‘‘project’’ is added in its place everywhere it appears in paragraph (a), including the heading of paragraph (a), and in paragraph (b)(1) introductory text, (b)(1)(ii), (b)(2)(i), and (b)(3)(i); ■ c. Paragraph (b)(2)(ii)(A) is revised; ■ d. The reference ‘‘§ 983.261(d)’’ in paragraph (b)(2)(ii)(B) is removed and ‘‘§ 983.262(d)’’ is added in its place; ■ e. Paragraph (b)(3) is redesignated as paragraph (b)(4), and a new paragraph (b)(3) is added; and ■ f. Paragraph (c) is revised to read as follows.

§ 983.56 Cap on number of PBV units in each project. * * * * *

(b) * * * (2) * * * (ii) * * * (A) Elderly and/or disabled families;

and/or * * * * *

(3) Combining exception categories. Exception categories in a multifamily housing project may be combined. * * * * *

(c) Additional, local requirements promoting partially assisted projects. A PHA may establish local requirements designed to promote PBV assistance in partially assisted projects. For example, a PHA may:

(1) Establish a per-project cap on the number of units that will receive PBV assistance or other project-based assistance in a multifamily project containing excepted units or in a single- family building,

(2) Determine not to provide PBV assistance for excepted units, or

(3) Establish a per-project cap of less than 25 percent. ■ 18. In § 983.58, paragraph (d)(1)(i) is revised to read as follows:

§ 983.58 Environmental review.

* * * * * (d) * * * (1) * * * (i) The responsible entity has

completed the environmental review procedures required by 24 CFR part 58, and HUD has approved the environmental certification and HUD has given a release of funds, as defined in § 983.3(b); * * * * * ■ 19. In § 983.59: ■ a. Paragraph (b)(1) is revised; ■ b. Paragraph (b)(2) is redesignated as paragraph (b)(3), and a new paragraph (b)(2) is added; and ■ c. Paragraph (d) is revised to read as follows:

§ 983.59 PHA-owned units.

* * * * * (b) * * * (1) Determination of rent to owner for

the PHA-owned units. Rent to owner for PHA-owned units is determined pursuant to §§ 983.301 through 983.305 in accordance with the same requirements as for other units, except that the independent entity approved by HUD must establish the initial contract rents based on PBV program requirements;

(2) Initial and renewal HAP contract term. The term of the HAP contract and any HAP contract renewal for PHA- owned units must be agreed upon by the PHA and the independent entity approved by HUD. Any costs associated with implementing this requirement must be paid for by the PHA; and * * * * *

(d) Payment to independent entity. (1) The PHA may compensate the independent entity from PHA ongoing administrative fee income (including amounts credited to the administrative fee reserve). The PHA may not use other program receipts to compensate the independent entity for its services.

(2) The PHA, and the independent entity, may not charge the family any fee for the services provided by the independent entity. ■ 20. In § 983.101, paragraph (b) is revised to read as follows:

§ 983.101 Housing quality standards.

* * * * * (b) HQS for special housing types. For

special housing types assisted under the PBV program, HQS in 24 CFR part 982 apply to the PBV program. (Shared housing, manufactured home space rental, and the homeownership option are not assisted under the PBV program.) HQS contained within 24 CFR part 982 that are inapplicable to the PBV

program pursuant to § 983.2 are also inapplicable to special housing types under the PBV program. * * * * * ■ 21. In § 983.152: ■ a. Paragraphs (a), (b), and (c) are redesignated as paragraphs (b), (a) and (d), respectively; ■ b. Newly redesignated paragraph (b) is revised; and ■ c. A new paragraph (c) is added to read as follows:

§ 983.152 Purpose and content of the Agreement to enter into HAP contract.

* * * * * (b) Requirement. The PHA must enter

into an Agreement with the owner at such time as provided in § 983.153. The Agreement must be in the form required by HUD headquarters (see 24 CFR 982.162).

(c) Commencement of construction or rehabilitation. The PHA may not enter into an agreement if commencement of construction or rehabilitation has commenced after proposal submission.

(1) Construction begins when excavation or site preparation (including clearing of the land) begins for the housing;

(2) Rehabilitation begins with the physical commencement of rehabilitation activity on the housing. * * * * * ■ 22. In § 983.153, add introductory text and revise paragraph (c) to read as follows:

§ 983.153 When Agreement is executed. The agreement must be promptly

executed, in accordance with the following conditions: * * * * *

(c) Prohibition on construction or rehabilitation. The PHA shall not enter into the Agreement with the owner if construction or rehabilitation has commenced after proposal submission ■ 23. In § 983.202, paragraph (a) is revised to read as follows:

§ 983.202 Purpose of HAP contract. (a) Requirement. The PHA must enter

into a HAP contract with the owner. With the exception of single family scattered site projects, a HAP contract shall cover a single project. If multiple projects exist, each project shall be covered by a separate HAP contract. The HAP contract must be in such form as may be prescribed by HUD. * * * * * ■ 24. In § 983.203, paragraph (h) is revised to read as follows:

§ 983.203 HAP contract information.

* * * * *


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(h) The number of units in any project that will exceed the 25 percent per- project cap (as described in § 983.56), which will be set-aside for occupancy by qualifying families (elderly and/or disabled families and families receiving supportive services); and * * * * *

■ 25. In § 983.205, paragraphs (a) and (b) are revised to read as follows:

§ 983.205 Term of HAP contract.

(a) 15-year initial term. The PHA may enter into a HAP contract with an owner for an initial term of up to 15 years for each contract unit. The length of the term of the HAP contract for any contract unit may not be less than one year, nor more than 15 years. In the case of PHA-owned units, the term of the initial HAP contract shall be determined in accordance with § 983.59.

(b) Extension of term. A PHA may agree to enter into an extension at the time of the initial HAP contract term or any time before expiration of the contract, for an additional term of up to 15 years if the PHA determines an extension is appropriate to continue providing affordable housing for low- income families. A HAP contract extension may not exceed 15 years. A PHA may provide for multiple extensions; however, in no circumstance may such extensions exceed 15 years, cumulatively. Extensions after the initial extension are allowed at the end of any extension term provided that not more than 24 months prior to the expiration of the previous extension contract, the PHA agrees to extend the term, and that such extension is appropriate to continue providing affordable housing for low- income families or to expand housing opportunities. Extensions after the initial extension term shall not begin prior to the expiration date of the previous extension term. Subsequent extensions are subject to the same limitations described in this paragraph. Any extension of the term must be on the form and subject to the conditions prescribed by HUD at the time of the extension. In the case of PHA-owned units, any extension of the initial term of the HAP contract shall be determined in accordance with § 983.59. * * * * *

■ 26A. Sections 983.206, 983.207, 983.208, and 983.209 are redesignated, respectively, as §§ 983.207, 983.208, 983.209, and 983.210.

■ 26B. A new § 983.206 is added to read as follows.

§ 983.206 Statutory notice requirements: Contract termination or expiration.

(a) Notices required in accordance with this section must be provided in the form prescribed by HUD.

(b) Not less than one year before termination of a PBV or PBC HAP contract, the owner must notify the PHA and assisted tenants of the termination.

(c) For purposes of this section, the term ‘‘termination’’ means the expiration of the HAP contract or an owner’s refusal to renew the HAP contract.

(d)(1) If an owner does not give timely notice of termination, the owner must permit the tenants in assisted units to remain in their units for the required notice period with no increase in the tenant portion of their rent, and with no eviction as a result of an owner’s inability to collect an increased tenant portion of rent.

(2) An owner may renew the terminating contract for a period of time sufficient to give tenants one-year advance notice under such terms as HUD may require. ■ 27. In redesignated § 983.207, paragraph (b) is revised to read as follows:

§ 983.207 HAP contract amendments (to add or substitute contract units).

* * * * * (b) Amendment to add contract units.

At the discretion of the PHA, and provided that the total number of units in a project that will receive PBV assistance will not exceed 25 percent of the total number of dwelling units in the project (assisted and unassisted), (unless units were initially identified in the HAP contract as excepted from the 25 percent limitation in accordance with § 983.56(b)), or the 20 percent of authorized budget authority as provided in § 983.6, a HAP contract may be amended during the three-year period immediately following the execution date of the HAP contract to add additional PBV contract units in the same project. An amendment to the HAP contract is subject to all PBV requirements (e.g., rents are reasonable), except that a new PBV request for proposals is not required. The anniversary and expiration dates of the HAP contract for the additional units must be the same as the anniversary and expiration dates of the HAP contract term for the PBV units originally placed under HAP contract. * * * * * ■ 28. In redesignated § 983.210, paragraph (i) is revised and a new paragraph (j) is added to read as follows:

§ 983.210 Owner certification. * * * * *

(i) The family does not own or have any interest in the contract unit. The certification required by this section does not apply in the case of an assisted family’s membership in a cooperative.

(j) Repair work on a project selected as an existing project that is performed after HAP execution within such post- execution period as specified by HUD may constitute development activity, and if determined to be development activity, the repair work undertaken shall be in compliance with Davis- Bacon wage requirements. ■ 29. A new § 983.211 is added to subpart E to read as follows:

§ 983.211 Removal of unit from HAP contract.

(a) Units occupied by families whose income has increased during their tenancy resulting in the tenant rent equaling the rent to the owner, shall be removed from the HAP Contract 180 days following the last housing assistance payment on behalf of the family.

(b) If the project is fully assisted, a PHA may reinstate the unit removed under paragraph (a) of this section to the HAP contract after the ineligible family vacates the property. If the project is partially assisted, a PHA may substitute a different unit for the unit removed under paragraph (a) of this section to the HAP contract when the first eligible substitute becomes available.

(c) A reinstatement or substitution of units under the HAP contract, in accordance with paragraph (b) of this section, must be permissible under § 983.207. The anniversary and expirations dates of the HAP contract for the unit must be the same as it was when it was originally placed under the HAP contract. The PHA must refer eligible families to the owner in accordance with the PHA’s selection policies. ■ 30. In § 983.251, a new paragraph (a)(4) is added to read as follows:

§ 983.251 How participants are selected. (a) * * * (4) A PHA may not approve a tenancy

if the owner (including a principal or other interested party) of a unit is the parent, child, grandparent, grandchild, sister, or brother of any member of the family, unless the PHA determines that approving the unit would provide reasonable accommodation for a family member who is a person with disabilities. * * * * * ■ 31. In § 983.256, paragraphs (f) and (g) are revised to read as follows:


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§ 983.256 Lease.

* * * * * (f) Term of lease. (1) The initial lease

term must be for at least one year. (2) The lease must provide for

automatic renewal after the initial term of the lease. The lease may provide either:

(i) For automatic renewal for successive definite terms (e.g., month- to-month or year-to-year); or

(ii) For automatic indefinite extension of the lease term.

(3) The term of the lease terminates if any of the following occurs:

(i) The owner terminates the lease for good cause;

(ii) The tenant terminates the lease; (iii) The owner and the tenant agree

to terminate the lease; (iv) The PHA terminates the HAP

contract; or (v) The PHA terminates assistance for

the family. (g) Lease provisions governing

absence from the unit. The lease may specify a maximum period of family absence from the unit that may be shorter than the maximum period permitted by PHA policy. (PHA termination-of-assistance actions due to family absence from the unit are subject to 24 CFR 982.312, except that the unit is not terminated from the HAP contract if the family is absent for longer than the maximum period permitted.)

§ 983.257 [Amended]

■ 32. In § 983.257, paragraph (b) is removed and paragraph (c) is redesignated as paragraph (b) and amended by removing the word ‘‘per- building’’ and adding in its place ‘‘per- project’’.. ■ 33A. Sections 983.258, 983.259, 983.260, and 983.261 are redesignated as §§ 983.259, 983.260, 983.261, and 983.262, respectively. ■ 33B. A new § 983.258 is added to read as follows:

§ 983.258 Continuation of housing assistance payments.

Housing assistance payments shall continue until the tenant rent equals the rent to owner. The cessation of housing assistance payments at such point will not affect the family’s other rights under its lease, nor will such cessation preclude the resumption of payments as a result of later changes in income, rents, or other relevant circumstances if such changes occur within 180 days following the date of the last housing assistance payment by the PHA. After the 180-day period, the unit shall be removed from the HAP contract pursuant to § 983.211.

■ 34. In redesignated § 983.260, the word ‘‘building’’ is removed and ‘‘project’’ is added in its place everywhere it appears in paragraph (b)(2)(i), and paragraph (c) is revised to read as follows:

§ 983.260 Overcrowded, under-occupied, and accessible units. * * * * *

(c) PHA termination of housing assistance payments. (1) If the PHA offers the family the opportunity to receive tenant-based rental assistance under the voucher program, the PHA must terminate the housing assistance payments for a wrong-sized or accessible unit at the earlier of the expiration of the term of the family’s voucher (including any extension granted by the PHA) or the date upon which the family vacates the unit. If the family does not move out of the wrong- sized unit or accessible unit by the expiration date of the term of the family’s voucher, the PHA must remove the unit from the HAP contract.

(2) If the PHA offers the family the opportunity for another form of continued housing assistance in accordance with paragraph (b)(2) of this section (not in the tenant-based voucher program), and the family does not accept the offer, does not move out of the PBV unit within a reasonable time as determined by the PHA, or both, the PHA must terminate the housing assistance payments for the wrong-sized or accessible unit, at the expiration of a reasonable period as determined by the PHA, and remove the unit from the HAP contract. ■ 35. In redesignated § 983.262, the section heading and paragraphs (b) and (d) are revised and a new paragraph (e) is added to read as follows.

§ 983.262 When occupancy may exceed 25 percent cap on the number of PBV units in each project. * * * * *

(b) In referring families to the owner for admission to excepted units, the PHA must give preference to elderly and/or disabled families, or to families receiving supportive services. * * * * *

(d) A family (or the remaining members of the family) residing in an excepted unit that no longer meets the criteria for a ‘‘qualifying family’’ in connection with the 25 percent per project cap exception (i.e., a family that does not successfully complete its FSS contract of participation or the supportive services requirement as defined in the PHA administrative plan or the remaining members of a family that no longer qualifies for elderly or

disabled family status where the PHA does not exercise its discretion under paragraph (e) of this section) must vacate the unit within a reasonable period of time established by the PHA, and the PHA shall cease paying housing assistance payments on behalf of the non-qualifying family. If the family fails to vacate the unit within the established time, the unit must be removed from the HAP contract unless the project is partially assisted, and it is possible for the HAP contract to be amended to substitute a different unit in the project in accordance with § 983.207(a); or the owner terminates the lease and evicts the family. The housing assistance payments for a family residing in an excepted unit that is not in compliance with its family obligations (e.g., a family fails, without good cause, to successfully complete its FSS contract of participation or supportive services requirement) shall be terminated by the PHA.

(e) The PHA may allow a family that initially qualified for occupancy of an excepted unit based on elderly or disabled family status to continue to reside in a unit, where through circumstances beyond the control of the family (e.g., death of the elderly or disabled family member or long term or permanent hospitalization or nursing care), the elderly or disabled family member no longer resides in the unit. In this case, the unit may continue to count as an excepted unit for as long as the family resides in that unit. Once the family vacates the unit, in order to continue as an excepted unit under the HAP contact, the unit must be made available to and occupied by a qualifying family. ■ 36. In § 983.301, paragraphs (d) and (e) are revised to read as follows:

§ 983.301 Determining the rent to owner. * * * * *

(d) Rent to owner for other tax credit units. Except in the case of a tax-credit unit described in paragraph (c)(1) of this section, the rent to owner for all other tax credit units may be determined by the PHA pursuant to paragraph (b) of this section.

(e) Reasonable rent. The PHA shall determine the reasonable rent in accordance with § 983.303. The rent to the owner for each contract unit may at no time exceed the reasonable rent, except in cases where, the PHA has elected within the HAP contract not to reduce rents below the initial rent to owner and, upon redetermination of the rent to owner, the reasonable rent would result in a rent below the initial rent. If the PHA has not elected within the HAP contract to establish the initial rent to


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owner as the rent floor, the rent to owner shall not at any time exceed the reasonable rent. * * * * * ■ 37. In § 983.302: ■ a. Paragraph (c) is revised to read as set forth below; and ■ b. The reference in paragraph (e)(3) to ‘‘§ 983.206(c)’’ is removed and ‘‘§ 983.207(c)’’ is added in its place.

§ 983.302 Redetermination of rent to owner.

* * * * * (c) Rent decrease. (1) If there is a

decrease in the rent to owner, as established in accordance with § 983.301, the rent to owner must be decreased, regardless of whether the owner requested a rent adjustment.

(2) If the PHA has elected within the HAP contract to not reduce rents below the initial rent to owner, the rent to owner shall not be reduced below the initial rent to owner for dwelling units under the initial HAP contract, except:

(i) To correct errors in calculations in accordance with HUD requirements;

(ii) If additional housing assistance has been combined with PBV assistance after the execution of the initial HAP

contract and a rent decrease is required pursuant to § 983.55; or

(iii) If a decrease in rent to owner is required based on changes in the allocation of responsibility for utilities between the owner and the tenant. * * * * * ■ 38. In § 983.303, paragraphs (a), (b)(3), and (f)(1) are revised to read as follows:

§ 983.303 Reasonable rent. (a) Comparability requirement. At all

times during the term of the HAP contract, the rent to the owner for a contract unit may not exceed the reasonable rent as determined by the PHA, except that where the PHA has elected in the HAP contract to not reduce rents below the initial rent under the initial HAP contract, the rent to owner shall not be reduced below the initial rent in accordance with § 983.302(e)(2).

(b) * * * (3) Whenever the HAP contract is

amended to substitute a different contract unit in the same building or project; and * * * * *

(f) Determining reasonable rent for PHA-owned units. (1) For PHA-owned

units, the amount of the reasonable rent must be determined by an independent agency approved by HUD in accordance with § 983.59, rather than by the PHA. The reasonable rent must be determined in accordance with this section. * * * * *

■ 39. In § 983.304, paragraph (e) is revised to read as follows:

§ 983.304 Other subsidy: effect on rent to owner.

* * * * * (e) Other subsidy: rent reduction. To

comply with HUD subsidy layering requirements, at the direction of HUD or its designee, a PHA shall reduce the rent to owner because of other governmental subsidies, including tax credits or tax exemptions, grants, or other subsidized financing. * * * * *

Dated: June 16, 2014.

Sandra B. Henriquez, Assistant Secretary for Public and Indian Housing. [FR Doc. 2014–14632 Filed 6–24–14; 8:45 am]

BILLING CODE 4210–67–P


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71037 Federal Register / Vol. 73, No. 227 / Monday, November 24, 2008 / Notices

information to the responsible entity or to HUD to assist in the completion of those requirements.

6. HUD’s Strategic Goals. HUD is committed to ensuring that programs result in the achievement of HUD’s strategic mission. HCVs awarded under this NOFA support the Department’s strategic goals of expanding access to and the availability of decent, affordable rental housing. For more information about HUD’s Strategic Plan and Annual Performance Plan, you may visit HUD’s Web site at http://www.hud.gov/offices/ cfo/reports/cforept.cfm. Also, see Section V.B. of the FY 2008 General Section for information on ‘‘HUD’s Strategic Goals to Implement HUD’s Strategic Framework and Demonstrate Results’’.

7. HUD Policy Priorities. HCVs awarded under this NOFA supports HUD’s policy of providing increased homeownership and rental opportunities for low- and moderate- income persons.

C. Reporting 1. Family Report. All successful

applicants including MTW agencies) must report the usage of voucher funds under this NOFA through required submissions of the form HUD–50058, Family Report. PHAs must enter the program code ‘‘FUP’’ on line 2n of the Family Report for families who are assisted with vouchers under this NOFA. PHAs must maintain this code on the form HUD–50058 for the duration of the family’s participation in the HCV program.

2. Racial and Ethnic Data. HUD requires that funded recipients collect race and ethnic beneficiary data. HUD has adopted the Office of Management and Budget Standards for the Collection of Race and Ethnic Data. In view of these requirements, you should use form HUD–27061, Racial and Ethic Data Reporting Form (instruction for its use), found on www.HUDclips.org for this purpose.

VII. Agency Contacts 1. Technical Assistance. Before the

application deadline date, you can contact the Public and Indian Housing Resource Center (PIHRC) for answers to your questions. However, staff is not permitted to assist in preparing your application. Also, following selection of applicants, but before awards are announced, staff may assist in clarifying or confirming information that is a prerequisite to the offer of an award. The PIHRC can be reached by calling 1– 800–955–2232 (this is a toll free number). Persons with hearing or speech impairments may access these

numbers via TTY (text telephone) by calling the Federal Information Relay Service at 1–800–877–8339 (this is a toll-free number). For technical support for registering to apply using www.grants.gov, downloading an application, or electronically submitting an application, please call Grants.gov Customer Support at 800–518–GRANTS (472687) (This is a toll-free number) or e-mail [email protected].

2. Satellite Broadcast. HUD will not have a satellite broadcast on the FUP.

VIII. Other Information

A. Public Access, Documentation and Disclosure: For information, please review section VIII.G. of the FY 2008 General Section.

B. Paperwork Reduction Act: The information collection requirements contained in this document have been submitted to the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501– 3520) and approval is pending. Once approved, HUD will publish a notice in the Federal Register notifying the public regarding the OMB approval number. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB number.

Dated: November 10, 2008. Paula O. Blunt, General Deputy Assistant Secretary for Public and Indian Housing. [FR Doc. E8–27873 Filed 11–21–08; 8:45 am] BILLING CODE 4210–67–P


[Docket No. FR–5242–N–01]

The Housing and Economic Recovery Act of 2008 Applicability to HUD Public Housing, Section 8 Tenant-Based Voucher and Section 8 Project-Based Voucher Programs

AGENCY: Office of the Assistant Secretary for Public and Indian Housing, HUD. ACTION: Notice.

SUMMARY: This notice provides information about the applicability to HUD’s public housing and Section 8 tenant-based and project-based voucher programs of certain provisions of the Housing and Economic Recovery Act of 2008. This notice provides an overview of key provisions that affect HUD’s public housing programs, identifies those provisions that are self-

implementing and require no action on the part of HUD for participants to commence taking action to be in compliance, those provisions that require implementing regulations on the part of HUD, and advises of efforts underway within HUD to further facilitate compliance with this new law, including rules and guidance that as may be necessary or appropriate. Provisions of this new law that affect project-based assisted housing programs administered by HUD’s Office of Housing are also identified. This notice also solicits comments, questions, or proposals that HUD should take into consideration in developing more detailed guidance or rules to implement those provisions of the new law that require more detailed guidance or rulemaking.

DATES: Comment Due Date: December 24, 2008.

ADDRESSES: Interested persons are invited to submit comments regarding this proposed rule to the Regulations Division, Office of General Counsel, 451 7th Street, SW., Room 10276, Department of Housing and Urban Development, Washington, DC 20410– 0500. Communications must refer to the above docket number and title. There are two methods for submitting public comments. All submissions must refer to the above docket number and title.

1. Submission of Comments by Mail. Comments may be submitted by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street, SW., Room 10276, Washington, DC 20410–0500.

2. Electronic Submission of Comments. Interested persons may submit comments electronically through the Federal eRulemaking Portal at www.regulations.gov. HUD strongly encourages commenters to submit comments electronically. Electronic submission of comments allows the commenter maximum time to prepare and submit a comment, ensures timely receipt by HUD, and enables HUD to make them immediately available to the public. Comments submitted electronically through the www.regulations.gov Web site can be viewed by other commenters and interested members of the public. Commenters should follow the instructions provided on that site to submit comments electronically.

Note: To receive consideration as public comments, comments must be submitted through one of the two methods specified above. Again, all submissions must refer to the docket number and title of the rule.

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No Facsimile Comments. Facsimile (FAX) comments are not acceptable.

Public Inspection of Public Comments. All properly submitted comments and communications submitted to HUD will be available for public inspection and copying between 8 a.m. and 5 p.m. weekdays at the above address. Due to security measures at the HUD Headquarters building, an advance appointment to review the public comments must be scheduled by calling the Regulations Division at 202–708– 3055 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number through TTY by calling the Federal Information Relay Service at 800–877– 8339. Copies of all comments submitted are available for inspection and downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For information about HUD’s Public Housing and Voucher programs, contact David Vargas, Associate Deputy Assistant Secretary for Public Housing and Voucher Programs, Office of Public and Indian Housing, Room 4206, telephone number 202–708–2815. For information about the HUD’s Capital Fund program, please contact Jeffrey Riddel, Director, Capital Program Division, Office of Public and Indian Housing, Room 4130, telephone number 202–401–8812. The address for both offices is the Department of Housing and Urban Development, 451 7th Street, SW., Washington, DC 20410. The listed telephone numbers are not toll-free numbers. Persons with hearing or speech impairments may access this number through TTY by calling the toll- free Federal Information Relay Service at 1–800–877–8339.

SUPPLEMENTARY INFORMATION:

I. Overview

The Housing and Economic Recovery Act of 2008 (Pub. L. 110–289, 122 Stat. 2654, approved July 30, 2008) (HERA) made a number of changes to the U.S. Housing Act of 1937 (42 U.S.C. 1437 et seq.) (1937 Act) that affect PIH programs, including changes to the definition of income, which also affect the Office of Housing’s project-based assistance programs; the public housing agency (PHA) plan; the voucher program; the capital and operating funds with respect to emergency funds; and establishing a collection of information on tenants in tax credit projects. This notice identifies those changes and provides information to program participants on how those changes affect HUD’s public housing programs.

II. HERA Amendments to the 1937 Act

Under the 1937 Act, HUD promotes the goal of providing decent and affordable housing for all citizens by providing funds for housing assistance. These funds directly assist PHAs to provide affordable publicly owned housing and also subsidize affordable privately owned housing. HERA makes changes that affect both public and private affordable housing, as described in this notice.

A. Definition of Annual Income

Section 2608 of Title VI of Division B of HERA amends the definition of ‘‘annual income’’ in section 3(b)(4) of the 1937 Act to exclude any deferred Department of Veterans Affairs (VA) disability benefits that are received in a lump sum amount or in prospective monthly amounts from the definition of income. Accordingly, as of the effective date of HERA, July, 30, 2008, such benefits are not to be included for purposes of determining the annual income of an applicant for or recipient of benefits under the 1937 Act. This income exclusion is similar to the existing exclusion for deferred periodic amounts from supplemental security income and Social Security benefits under 24 CFR 5.609(c)(14). Although the full amount of periodic Social Security payments is included in annual income pursuant to 24 CFR 5.609(b)(4), the deferred amount resulting from the delayed start of the periodic payment is not included in annual income. In the same way, the full amount of periodic VA disability benefit payments will continue to be included in annual income pursuant to 24 CFR 5.609(b)(4), but the deferred amount resulting from the delayed start of the disability payments will not be included in annual income. A payment qualifies as a VA disability benefit if it is identified as a disability benefit in the VA benefit award letter, regardless of whether or not the family member that is the beneficiary of the award would qualify as a person with disabilities under HUD’s regulations. For existing residents or tenants, including those residing in project-based assisted housing administered by HUD’s Office of Housing, the new exclusion for deferred payments will be made applicable at the time of annual recertification of income, or at interim examination. This provision is self- implementing without further regulatory action by HUD. HUD will later publish a conforming rule to include this item with the exclusion from income for deferred Social Security benefits at 24 CFR 5.609(c)(14).

B. Qualified Public Housing Agencies

Section 2702 of Title VII of Division B of HERA amends section 5A(b) of the 1937 Act by establishing ‘‘qualified public housing agencies,’’ a category of PHAs that are provided substantial paperwork relief, primarily with respect to the PHA Annual Plan requirements in section 5(A)(b) of the 1937 Act. The requirement for preparation and submission of a 5-year plan pursuant to section 5A(a) of the 1937 Act is not affected.

A PHA is a ‘‘qualified public housing agency’’ if the PHA is not designated as a troubled PHA, does not have a failing score under the Section 8 Management Assessment Program during the prior 12 months, and if the sum of the public housing units administered by the agency and the section 8(o) vouchers authorized under the PHA’s Consolidated Annual Contributions Contract, is 550 or less. The paperwork relief to qualified PHAs, as provided in section 2702, is effective as of the effective date of HERA, July 30, 2008, and will be made applicable to such PHAs commencing with the next date of Annual Plan submission.

HUD will make conforming changes to its regulations at 24 CFR part 903 and issue guidance, as may be determined necessary, to further address qualified PHAs, including the following statutory provisions that are applicable to qualified PHAs. The statutory provisions applicable to qualified PHAs are self-implementing.

1. Public Housing Agency (PHA) Plans. New section 5A(b)(3)(A) of the 1937Act excludes qualified PHAs from the requirement to prepare and submit an annual PHA plan.

2. Civil Rights Certification. Even though an annual PHA plan is not required of a qualified PHA, section 5A(b)(3)(B) maintains the requirement for such agencies to prepare and submit the annual civil rights certification provided for in section 5A(d)(16) of the 1937 Act. Accordingly, qualified PHAs must continue to submit their civil rights certifications to HUD for review.

3. Resident Advisory Board. A new section 5A(d)(4) is added to affirm that qualified PHAs are still subject to the requirement to establish one or more resident advisory boards. A requirement is also added to consult with, and consider the recommendations of, the resident advisory board at the annual public hearing required under new section 5A(f)(5), regarding any changes to the goals, objectives, and policies of the PHA.

4. Annual Public Meeting. As noted in paragraph B.3. of this notice, new


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section 5A(f)(5) of the 1937 Act requires a qualified PHA to conduct annually a public hearing to discuss any changes to the goals, objectives, and policies of the agency; and to invite public comment regarding such changes. The PHA must publish a notice of the hearing and relevant information, and make such information available for inspection at its principal office, at least 45 days before the date that the hearing is held.

C. Section 9 Emergency Set-Aside Section 2804 of Title VIII of Division

B of HERA strikes section 9(k) of the 1937 Act, which is entitled ‘‘Emergency Reserve and Use of Amounts.’’ The removal of section 9(k) eliminates the requirement imposed on HUD to set aside, in each fiscal year, not more than two percent of the total amount of public housing operating funds and capital funds made available each fiscal year through appropriations acts for emergencies and other disasters and housing needs resulting from any settlement of litigation. Section 9(k) was applicable to and imposed an obligation on HUD.

D. Section 8 Tenant Based Assistance: Housing Choice Voucher Program— Rent for Tax Credit Units

Subtitle B of Title VIII of HERA (sections 2831 through 2835) makes a number of changes to coordinate tax incentives for private housing and federal housing programs, including the Section 8 voucher program. As one of these changes, the procedure for determining the rent reasonableness standard applicable to dwelling units receiving low-income housing tax credits (LIHTC) or assistance under the HOME Investments Partnership (HOME) program is streamlined by section 2835(a)(2) of HERA, which adds section 8(o)(10)(F) to the 1937 Act.

A rent comparison with unassisted local market units is not required for such dwelling units if the rent does not exceed the rent for other LIHTC or HOME assisted units in the project that are not occupied by families with tenant based assistance. The rent shall be considered reasonable if it does not exceed the greater of (1) the rent for other LIHTC or HOME assisted units in the project not occupied by families with tenant based assistance, or (2) the payment standard established by a PHA for a unit of the size involved. This provision is effective and may be used commencing with the date of enactment of HERA, July 30, 2008. Accordingly, this provision is self-implementing. HUD will make conforming changes to its regulations at 24 CFR 982.507 to reflect this statutory provision.

E. Section 8 Project Based Voucher Program

Section 2835(a)(1) of HERA makes several changes to the Section 8 project- based voucher (PBV) program under section 8(o)(13) of the 1937 Act (42 U.S.C. 1437f(o)(13)) and 24 CFR part 983 of HUD’s regulations, as follows:

1. Applicability of 25 Percent Cap on Number of PBV Units. Prior to amendment by section 2835(a)(1)(A) of HERA, PBV assistance was limited to 25 percent of the units in a building. This cap in section 8(o)(13)(D)(i) of the 1937 Act is amended by replacing the term ‘‘building’’ with the term ‘‘project,’’ defined to mean a single building, multiple contiguous buildings, or multiple buildings on contiguous parcels of land. HUD will make conforming changes to its regulations at 24 CFR 983.56 to reflect this statutory provision. Accordingly, this provision is self-implementing. HUD specifically requests comments on the impact on deconcentration efforts concerning the change in terms from ‘‘building’’ to ‘‘project’’ as discussed in this Section II.E.1 of this notice.

2. Term of Initial Housing Assistance Payment (HAP) Contract. The maximum term of the initial HAP contract provided in section 8(o)(13)(F) of the 1937 Act is extended from 10 to 15 years by section 2835(a)(1)(B) of HERA. HUD considers this provision to be available for use commencing with the date of enactment of HERA, July 30, 2008. Accordingly, this provision is self- implementing. Conforming changes will be made to HUD’s regulations to reflect the longer permissible term of the initial HAP contract.

3. Extension of initial term. Section 8(o)(13)(G) of the 1937 Act is amended by HERA section 2835(a)(1)(C) to specify the maximum term for an extension of the HAP contract as 15 years, at the election of the PHA and owner. A PHA may agree to enter into an extension at the time of the initial HAP contract or any time before expiration of the contract. This provision may be utilized commencing with the date of enactment of HERA, July 30, 2008. Although this provision is self-implementing, such contract or contract extension may not exceed 15 years cumulatively. Additionally, a PHA must still determine that the extension of the contract is appropriate to achieve long-term affordability of the housing or to expand housing opportunities.

HUD will make conforming changes to its regulations, as well as any additional changes related to contract extensions that may be necessary for the

orderly administration of the PBV program.

4. Rent calculation. Language is added by section 2835(a)(1)(D) of HERA to section 8(o)(13)(H) of the 1937 Act to permit a PHA to use the higher section 8 rent for a tax credit unit if the LIHTC rent is less than the amount that would be permitted under section 8. The rent reasonableness of section 8(o)(10)(A) must also continue to be met.

This provision may be utilized commencing with the date of enactment of HERA, July 30, 2008. Accordingly, this provision is self-implementing. A conforming change to HUD’s regulations will follow.

5. Rent adjustments. Section 2835(a)(1)(E) of HERA amends section 8(o)(13)(I) of the 1937 Act to make permissive a HAP contract provision that the maximum rent on a unit shall not be less than the initial rent. Because this provision is permissive, and not mandatory, HUD is considering parameters for when its use would be appropriate. Accordingly, this provision is not self-implementing. HUD will finalize its policy on this provision through rulemaking.

6. Use of PBV in Cooperative Housing and Elevator Buildings. A new section 8(o)(13)(L) is added by section 2835(a)(1)(F) of HERA to allow PHAs to enter into HAP contracts with respect to units in cooperative housing and in high-rise elevator projects. The authority for units in high-rise elevator projects specifically states it may be exercised without review and approval by HUD. HUD considers section 8(o)(13)(L) to be effective commencing with the date of enactment of HERA, July 30, 2008. Accordingly, this provision is self-implementing. HUD will make any necessary conforming changes to its regulations.

7. Reviews. Section 2835(a)(1)(F) of HERA also provides relief from certain review requirements by adding section 8(o)(13)(M) to the 1937 Act. New section 8(o)(13)(M)(i) removes the requirement to conduct a subsidy layering review in the case of a HAP contract for an existing structure or if such a review has been conducted by the applicable state or local agency. This provision is self- implementing for existing housing. The provision, however, is not self- implementing for newly constructed or rehabilitated housing, HUD will be issuing guidance on how such reviews must be conducted for newly constructed or rehabilitated housing.

Section 8(o)(13)(M)(ii) relieves a PHA from undertaking an environmental review for an existing structure, except to the extent such a review is otherwise required by law or regulation. Under 24


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CFR part 58, federal environmental reviews are undertaken by a Responsible Entities (usually units of general local governments), not PHAs. In addition, any federally required environmental review is ‘‘required by law or regulation,’’ so there do not appear to be any federally required environmental reviews that would be eliminated by this provision.

F. Collection of Information on Tenants in Tax Credit Projects

HERA section 2835(d) adds a new section 36 to the 1937 Act to require state agencies administering LIHTC projects to furnish HUD with information on tenants residing in such projects. This provision is also applicable to project-based assisted housing programs administered by HUD’s Office of Housing. HUD must also establish standards and definitions for the information to be collected. HUD will implement this provision through a notice prepared in accordance with the Paperwork Reduction Act and to be published in the Federal Register.

Dated: November 18, 2008. Paula O. Blunt, General Deputy Assistant Secretary for Public and Indian Housing. [FR Doc. E8–27871 Filed 11–21–08; 8:45 am] BILLING CODE 4210–67–P


[Docket No. FR–5187–N–63]

Subterranean Termite Treatment Builder’s Certification and Guarantee, and the New Construction Subterranean Termite Soil Treatment Record

AGENCY: Office of the Chief Information Officer, HUD. ACTION: Notice.

SUMMARY: The proposed information collection requirement described below has been submitted to the Office of Management and Budget (OMB) for review, as required by the Paperwork Reduction Act. The Department is soliciting public comments on the subject proposal.

The collection of the requested information requires that the sites for HUD insured structures must be free of termite hazards. Builders certify and guarantee that all required treatment for termites are performed and there is no infestation of treated areas for a year. Also, pest control companies are required to provide a record of any soil treatment methods used to prevent subterranean termite infestation. The respondents for this collection are builders, pest control companies, mortgage lenders and home buyers. DATES: Comments Due Date: December 24, 2008. ADDRESSES: Interested persons are invited to submit comments regarding this proposal. Comments should refer to the proposal by name and/or OMB approval Number (2502–0525) and should be sent to: HUD Desk Officer, Office of Management and Budget, New Executive Office Building, Washington, DC 20503; fax: 202–395–6974. FOR FURTHER INFORMATION CONTACT: Lillian Deitzer, Reports Management Officer, QDAM, Department of Housing and Urban Development, 451 Seventh Street, SW., Washington, DC 20410; e- mail Lillian Deitzer at [email protected] or telephone (202) 402–8048. This is not a toll-free number. Copies of available documents submitted to OMB may be obtained from Ms. Deitzer. SUPPLEMENTARY INFORMATION: This notice informs the public that the Department of Housing and Urban Development has submitted to OMB a request for approval of the Information collection described below. This notice

is soliciting comments from members of the public and affecting agencies concerning the proposed collection of information to: (1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) Evaluate the accuracy of the agency’s estimate of the burden of the proposed collection of information; (3) Enhance the quality, utility, and clarity of the information to be collected; and (4) Minimize the burden of the collection of information on those who are to respond; including through the use of appropriate automated collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.

This Notice Also Lists the Following Information

Title of Proposal: Subterranean Termite Treatment Builder’s Certification and Guarantee, and the New Construction subterranean Termite Soil Treatment Record.

OMB Approval Number: 2502–0525. Form Numbers: HUD–NPCA–99 and

HUD–NPCA–99–B. Description of the Need for the

Information and its Proposed Use: The collection of the requested

information requires that the sites for HUD insured structures must be free of termite hazards. Builders certify and guarantee that all required treatment for termites are performed and there is no infestation of treated areas for a year. Also, pest control companies are required to provide a record of any soil treatment methods used to prevent subterranean termite infestation. The respondents for this collection are builders, pest control companies, mortgage lenders and home buyers.

Frequency of Submission: On occasion.

Number of respondents

Annual responses x Hours per

response = Burden hours

Reporting Burden .............................................................................. 63,123 126,246 0.166 21,019


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59892 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations


24 CFR Part 983

[Docket No. FR–4636–F–02]

RIN 2577–AC25

Project-Based Voucher Program

AGENCY: Office of the Assistant Secretary for Public and Indian Housing, HUD. ACTION: Final rule.

SUMMARY: This rule replaces the current project-based certificate (PBC) regulations with a comprehensive new project-based voucher program. This rule is based on statutory authorities enacted in 1998 and 2000, and follows a proposed rule and public comment. DATES: Effective date: November 14, 2005. FOR FURTHER INFORMATION CONTACT: David Vargas, Director, Office of Voucher Programs, Department of Housing and Urban Development, 451 Seventh Street, SW., Room 4210, Washington, DC 20410; telephone (202) 708–2815 (this is not a toll-free number). Persons with hearing or speech impairments may access these numbers via TTY by calling the federal Information Relay Service at (800) 877– 8339. SUPPLEMENTARY INFORMATION:

I. Background The project-based voucher law was

initially enacted in 1998, as part of the statutory merger of the certificate and voucher tenant-based assistance programs. (See section 545 of the Quality Housing and Work Responsibility Act of 1998 (Pub L. 105– 276) approved October 21, 1998) (QHWRA) amending 42 U.S.C. 1437f(o).) Under QHWRA, a public housing agency (PHA), as defined under section 3(b)(6) of the U.S. Housing Act of 1937, 42 U.S.C. 1437a(b)(6), has the option to use a portion of its available tenant-based voucher funds for project- based rental assistance. The project- based voucher law replaced an authority for project-based rental assistance in the former Section 8 certificate program.

In 2000, Congress substantially revised the project-based voucher law. (Section 8(o)(13) of the United States Housing Act of 1937, 42 U.S.C. 1473f(o)(13), as amended by section 232 of the Fiscal Year 2001 Departments of Veterans Affairs and Housing and Urban Development and Independent Agencies Appropriations Act (Pub. L. 106–377, 114 S-tat. 1441, approved October 27, 2000)). The statutory basis for project-

based housing is codified at 42 U.S.C. 1437f(o)(13) under the heading, ‘‘PHA project-based assistance.’’

Significant changes made by QHWRA and the FY 2001 Appropriations Act include:

• A PHA may project-base up to 20 percent of the PHA’s voucher funding.

• A PHA may provide project-based assistance for existing housing that does not need rehabilitation, as well as for newly constructed or rehabilitated housing.

• Project-based assistance must be consistent with the ‘‘PHA Plan.’’

• Project-basing must be consistent with the statutory goals of ‘‘deconcentrating poverty and expanding housing and economic opportunities.’’

• After one year of assistance, a family may move from a project-based voucher unit. When a slot is available, the family may switch to the PHA’s tenant-based voucher program or another comparable program.

• Except for units designated for families that are elderly, disabled, or receiving supportive services, no more than 25 percent of units in a building may have project-based voucher assistance.

• A PHA may enter into a housing assistance payments (HAP) contract for a term of up to 10 years. However, the PHA’s contractual commitment is subject to availability of appropriated funds.

• At the end of the contract term, the PHA may extend the HAP contract with an owner for a period appropriate to achieve long-term affordability or to expand housing opportunities. Extensions are subject to availability of appropriated funds.

• Generally, project-based voucher rents (rent to owner plus the allowance for tenant-paid utilities) may not exceed the lower of the reasonable rent, or 110 percent of the applicable Fair Market Rent (FMR) (or any exception payment standard approved by the Secretary), or, if applicable, the tax credit rent. This limit applies both to the initial rent and rent adjustments over the term of the HAP contract.

• There are special provisions for establishing the project-based voucher rent for a unit in a tax credit building located outside a ‘‘qualified census tract.’’ These provisions are found at 42 U.S.C. 1437f(o)(13)(H).

• Admission to project-based units is subject to the overall voucher ‘‘income- targeting’’ requirement. Under 42 U.S.C. 1437f(o)(13)(J), the income targeting provisions of section 16(b) of the U.S. Housing Act of 1937 apply. Under these provisions, at least 75 percent of the

families admitted to the PHA tenant- based and project-based voucher programs each year must be families with annual incomes below 30 percent of median income for the area. HUD’s regulations define such families as ‘‘extremely low-income families’’ at 24 CFR 5.603.

• All units must be inspected for housing quality standards (HQS) compliance before the PHA enters into a HAP contract with an owner. After the initial inspection, the PHA is not required to re-inspect each unit annually. Instead, the PHA may inspect a representative sample of units at the annual re-inspection.

• If a family moves out, the PHA may continue payments to the owner for up to 60 days. The PHA has discretion whether to provide such vacancy payments.

On January 16, 2001, (66 FR 3605), HUD published a Federal Register notice with guidance on the changes made to the project-based voucher (PBV) program in the FY 2001 Appropriations Act. By ‘‘project-based voucher program,’’ this regulation means the program statutorily codified at 42 U.S.C. 1437f(o)(13), which allows PHAs to attach to dwelling units up to 20 percent of the funding available for tenant-based assistance. The HUD guidance notice described the law, identified statutory requirements that are effective immediately, and provided guidance on how to implement the law and existing program regulations.

II. The Proposed Rule HUD published a proposed rule for

comment on March 18, 2004 (69 FR 12950). A summary overview of the proposed rule can be found at 69 FR 12950–12953. The proposed rule text begins at 69 FR 12954. The comment period for this proposed rule closed on May 17, 2004. Forty-seven commenters submitted comments during the comment period on a wide variety of issues related to this proposed rule. The commenters included a variety of entities, including PHAs, professional and trade organizations, and individuals. In response to the comments, this final rule makes certain changes to the proposed rule as described in the following section of the preamble. In addition, a summary of the issues raised by the public commenters and HUD’s responses is found at section IV of this preamble.

III. This Final Rule This final rule implements the

project-based voucher program. As of its effective date, this rule supersedes the January 2001 notice. The following

VerDate Aug<31>2005 16:29 Oct 12, 2005 Jkt 208001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\13OCR4.SGM 13OCR4


changes to the proposed rule are made by this final rule. Section IV of this preamble summarizes the public comments and HUD’s responses to them.

Subpart A—General

1. Section 983.1 This final rule makes a technical

correction in § 983.1(c), ‘‘Specific 24 CFR part 982 provisions that do not apply to PBV assistance.’’ References to § 982.551–982.555 are removed. It is not necessary to mention these sections as excepted from the sections that do not apply, because the same result is obtained by simply not mentioning them.

2. Section 983.3 In the PBV definitions under

§ 983.3(b), the definition of ‘‘baseline units’’ is deleted. Instead, the rule uses the concept of ‘‘budget authority’’ to indicate the amount of appropriated funds available to a PHA for its housing choice voucher program.

The definition of ‘‘HUD’’ is removed because it is unnecessary to restate it in this part. ‘‘HUD’’ is defined in 24 CFR 5.100.

The definition of PHA-owned unit is revised to clarify that ‘‘PHA owned’’ includes any interest by the PHA in the building in which a unit is located. This change is necessary because HUD’s experience to date has been that the definition has been misunderstood and applied differently in different geographical areas. Also, in the proposed rule, this definition cross- referenced a non-applicable portion of part 982.

The definition of ‘‘proposal selection date’’ is revised to reference the PHA’s administrative plan. Section 983.51(b) of this rule requires that the PHA’s procedures for selecting proposals be stated in the administrative plan.

The definition of ‘‘rent to owner’’ is amended. Examples of non-housing services that are not included in rent are added, and the adjective ‘‘reasonable’’ is removed. The rent reasonableness test is an overall limitation on the amount of rent to owner under the rule, and it is not necessary to include it in the definition.

A number of terms defined in the proposed rule are removed because those terms are defined in 24 CFR part 982 and are applicable to this rule under § 983.3(a)(2)(ii). These terms are: Fair market rent (FMR); family; gross rent; group home; HAP contract; owner; participant; reasonable rent; tenant; and tenant rent.

Definitions were removed and replaced with cross references for

‘‘utility allowance’’ and ‘‘utility reimbursement.’’ Both of these terms are defined at 24 CFR 5.603.

3. Section 983.5 The final rule makes two minor

technical corrections. Section 983.5(a)(4) is amended to change ‘‘rental assistance payments’’ to ‘‘housing assistance payments.’’ Section 983.5(b)(2) is amended to change ‘‘project-basing’’ to ‘‘project-based vouchers’’ (a similar change is made in § 983.6(c)).

4. Section 983.6 In paragraphs (a) and (c) of this

section dealing with the amount of project-based assistance available to a PHA, the phrase ‘‘baseline units’’ is removed. Instead, the amount of project- based funding is expressed as a percentage of the amount of budget authority allocated to the PHA.

5. Section 983.7 The Notice of Proposed Rulemaking

(NPRM) proposed that voucher program funds could not be used to pay for relocation costs under the Uniform Relocation Act in connection with assistance under this part. This final rule allows administrative fee reserves to be used for this purpose provided that payment of relocation benefits is consistent with state and local law and HUD regulations on the use of reserves, including 24 CFR 982.155, and that all other program administrative expenses have been satisfied.

6. Section 983.10 This final rule revises § 983.10(b) to

clarify that PHAs may renew PBC HAP contracts for terms of up to five years, to an aggregate total including the original term and all extensions, of 15 years, depending on the availability of appropriated funds.

Subpart B—Selection of PBV Owner Proposals

7. Section 983.51 The final rule makes several editorial

changes to this section. In addition, § 983.51(b)(2) is revised to allow PHAs to select owner proposals without a separate competition for projects that were competitively selected under another program within three years of the PBV proposal selection date. The prior competitive selection cannot have considered future PBV assistance, because such a consideration could give such projects an unfair advantage by wrongly affecting the original competition and thereby tainting the process. Also, the non-competitive selection of a project for low income

housing tax credits (LIHTCs) does not satisfy the requirement of a prior competition.

8. Section 983.52 This section adds additional detail to

the general description of housing types to which assistance may be attached under this program. Existing housing is defined to exclude housing for which new construction or rehabilitation has been started. The rule cross-references subpart D as applicable to newly constructed and rehabilitated housing.

9. Section 983.53 This section makes an editorial

change to combine § 983.53(a)(2) and (a)(4). Substantively, § 983.53(b) is revised to give PHAs the responsibility to make an initial determination (and HUD approves such determination as the statute requires) as to whether assistance may be attached to a high-rise elevator project that may be occupied by families with children because there is no practical alternative. PHAs may make this initial determination for its entire project-based program, a portion of it, or case-by-case, and HUD may approve the determination on the same basis.

10. 983.56 The NPRM proposed that the overall

cap of 25 percent of the total number of dwelling units in the building include units receiving any type of federal, project-based assistance. This final rule limits the units that count against the cap to units receiving PBV assistance under this program, revising paragraph (a)(1) accordingly and removing paragraph (a)(2). Additionally, § 983.56(b)(2)(B) is revised. In the proposed rule, this exception to the 25 percent cap on project-basing units was limited to families in a housing voucher Family Self-Sufficiency (FSS) program under section 23 of the 1937 Act, 42 U.S.C. 1437u.

This final rule revises this exemption to include units that are made available to families that are receiving any type of supportive services that the PHA specifies as qualifying services in its PHA administrative plan. If a family at the time of initial tenancy is receiving, and while the resident of an excepted unit has received, FSS supportive services or any other supportive services as defined in the PHA administrative plan, and successfully completes the FSS contract of participation or the supportive services requirement, the unit continues to count as an excepted unit for as long as the family resides in the unit. If a family in an excepted unit fails to complete the FSS contract of



participation or fails to complete another program of supportive services, such failure results in termination of assistance by the PHA, and is grounds for lease termination by the owner. The PHA is responsible for monitoring and ensuring compliance with this requirement. At the time of initial lease execution between the family and the owner, the family and the PHA sign a statement of family responsibility, and HUD will include this requirement in this statement, thus ensuring that the family is aware that the PHA will terminate assistance if the family fails to meet its obligation.

If the unit at the time of such termination is an excepted unit outside the 25 percent cap, the exception continues to apply to the unit as long as the unit is made available to another family receiving qualifying services. A family is deemed to be receiving supportive services if it has at least one family member receiving at least one qualifying service.

The section also is revised to clarify that, generally, a PHA may not require participation in medical or disability- related services. The one exception is that a PHA may require current drug and alcohol abusers to receive drug and alcohol treatment. This requirement is in accordance with HUD’s overall policy to ensure that drug and alcohol abusers do not interfere with other residents’ health, safety, or right to reasonable enjoyment of the premises of assisted housing. See, for example, 24 CFR 5.858 and 5.860.

11. Section 983.57 The NPRM proposed at § 983.57(b)(1)

that a proposed site for project-based assistance be ‘‘consistent with the goal of deconcentrating poverty and expanding housing and economic opportunities.’’ This final rule revises proposed § 983.57(b)(1) and adds seven factors that the PHA must consider in determining whether a proposed PBV site is consistent with these goals. Under this final rule, the housing site must be consistent with the deconcentration goals stated in the PHA plan and with civil rights laws and regulations, including HUD’s rules on accessibility at 24 CFR 8.4(b)(5). These include whether the site is in an Enterprise Zone, Economic Community, or Renewal Community (EZ/EC/RC); whether the concentration of assisted units will be or has decreased as a result of public housing demolition; whether the census tract is undergoing significant revitalization; whether government funding has been invested in the area; whether new market rate units are being developed in the area,

which are likely to positively impact the poverty rate in the area; if the poverty rate in the area is greater than 20 percent, whether in the past five years there has been an overall decline in the poverty rate; and whether there are meaningful opportunities for educational and economic advancement in the area. Housing under the PBV program may be selected only if consistent with the goal of deconcentrating poverty and expanding housing and economic opportunities.

12. Section 983.58 Section 983.58(c) is revised to

indicate that in the case of existing housing, the responsible entity must determine whether or not PBV assistance is categorically excluded from review under the National Environmental Policy Act and whether or not the assistance is subject to review under the laws and authorities listed in 24 CFR 58.5. The responsible entity must either complete the environmental review requirements of 24 CFR part 58, or HUD must perform the review under part 50, or the project must be determined to be exempt or categorically excluded. Section 983.58(d)(ii) of this final rule clarifies that in the case of review by the responsible entity under part 58, that entity makes the determination whether the project to be assisted is exempt or categorically excluded, and that if the project is exempt or categorically excluded, no further environmental review is needed.

Subpart C—Dwelling Units There are no substantive changes to

this subpart made in this final rule. There are some minor editorial changes.

Subpart D—Requirements for Rehabilitated and Newly Constructed Units

13. Section 983.155 The NPRM proposed that the PHA

and HUD could set requirements for the evidence of completion of a housing project under this program at § 983.155(b), along with additional documentation that could be required under proposed § 983.155(b)(2). In the final rule, reference to HUD is removed so that the PHA alone sets these requirements.

Subpart E—Housing Assistance Payments Contract

14. Section 983.202 This final rule removes an

unnecessary sentence from § 983.202(b)(2). This is an editorial change that does not alter the overall

intent of the section. The sentence stated that HUD provides funds to PHAs to make housing assistance payments to owners. This sentence is redundant as the same idea is stated in the first two sentences of the paragraph.

15. Section 983.203 This final rule conforms § 983.203(h)

to the change to the exception to the 25 percent cap, making the exception generally applicable to families receiving supportive services, rather than only to families with a contract of participation under the statutory FSS program at 42 U.S.C. 1437u (see also § 983.57, redesignated from proposed § 983.56).

16. Section 983.205 The NPRM proposed that extensions

of the HAP contract be in one-year increments. The final rule revises § 983.205(a) to allow for extensions of up to five years.

17. Section 983.206 In § 983.206(b), on ‘‘amendments to

add contract units,’’ this final rule removes ‘‘compliance with Davis-Bacon wage rates during construction’’ as an example of the legal requirements for a HAP amendment and replaces it with ‘‘rents are reasonable.’’

18. Section 983.209 This final rule adds ‘‘spouse’’ to the

list of prohibited family relationships between the owner of a PBV unit and the resident(s) of this unit at § 983.209(e).

Subpart F—Occupancy

19. Section 983.251 This section relates to protection of

in-place families; that is, families that are eligible to participate in the program as of the date the proposal is selected, and which reside in a unit that will be placed under a project-based assistance contract. This final rule finalizes similar protections for in-place families that were originally proposed, with the one difference that § 983.251(b)(2) is revised to require that such families be placed on the PHA’s waiting list, with an absolute preference for referral to owners and placement in units that become available.

This final rule adds a new § 983.251(d), entitled ‘‘Preference for services offered,’’ and redesignates proposed § 983.251(d) as § 983.251(e). This new section allows PHAs to grant a preference to families with disabilities that require the services offered at a particular project. The preference may be applied to those families, including individuals, whose disabilities



significantly interfere with their ability to obtain and maintain themselves in housing; who, without such services, will not in the future be able to maintain themselves in housing; and for whom such services cannot be provided in a non-segregated setting. Disabled residents cannot be required to accept the particular services offered. The project may be advertised as being for a particular type of disability; however, the project must be open to all otherwise eligible persons with disabilities who may benefit from the services offered.

Section 983.252, relating to information to be provided to families, is slightly revised for consistency and to make changes. Paragraph (c) is revised to include alternative formats for persons with disabilities. A new 24 CFR 983.252(d) is added regarding information for families with limited English proficiency.

Section 983.253 is revised in this final rule. Section 983.253(a)(2), stating that the owner ‘‘may apply its own admission standards,’’ is replaced with a statement that, like current 24 CFR 983.203(c)(4)(i), the owner is responsible for having written tenant selection procedures. These procedures must be consistent with the purpose of improving housing opportunities for very low-income families and be reasonably related both to program eligibility requirements and to the applicant family’s ability to perform its obligations under the lease.

20. Section 983.255 The NPRM proposed in § 983.255(a)

that a PHA has no obligation but ‘‘may opt to screen applicants for family behavior and suitability for tenancy.’’ This final rule specifies that a PHA may deny admission based on this screening. Proposed § 983.255(b)(2)(vi) gave the owner broad latitude to screen a family’s background for a variety of factors, including ‘‘other factors determined by the owner.’’ This paragraph is removed from the final rule. The owner may screen for factors ‘‘such as’’ the factors listed in § 983.255(b)(2)(i)–(v). A variety of minor revisions are made to proposed § 983.255 on information that a PHA must provide. These include the provision to the owner of any prior address of the applicant (rather than any immediately prior address) and information relating to drug trafficking by family members. This section also provides that the PHA may give the owner certain information about an applicant family, and that the PHA must disclose to the family a description of the PHA’s policy regarding such

information. The requirement that this disclosure must be included specifically in the information package given to a family is removed, although the underlying requirement to give the disclosure to the family is retained.

21. Section 983.256

This final rule strengthens the PHA’s ability to ensure that the lease meets the requirements of state and local law. Proposed § 983.256(b)(4) would have allowed the PHA to require revisions to the lease, if necessary. This final rule allows the PHA to decline to approve the tenancy if the lease does not meet the requirements of law.

This final rule adds an item to § 983.256(c), entitled ‘‘Required information.’’ New § 983.256(c)(6) requires the lease to specify ‘‘the amount of any charges for food, furniture, or supportive services.’’

The final rule revises § 983.256(f). The NPRM had proposed that, under certain conditions, leases could be for a term of less than one year. This final rule eliminates that option.

22. Section 983.257

The final rule refines the section on owner termination of tenancy and eviction by specifying in a new § 983.257(b) that the owner shall not terminate a lease under the PBV program without good cause as meant in 24 CFR 982.310 (except for 24 CFR 982.310(d)(1)(iii) and (iv), and under the eviction provisions of 24 CFR 5.858– 5.861). Otherwise, an owner may renew or non-renew a lease upon expiration, but if the owner does not renew without good cause, the family must be provided tenant-based assistance and the unit must be removed from the coverage of the HAP contract. A new § 983.257(c) is added to make the section consistent with § 983.56 and clarify that, if a family is living in a unit excepted from the 25 percent per-building cap on project- basing because of the family’s participation in an FSS or other supportive services program, failure of the family without good cause to complete its FSS or supportive services program is grounds for lease termination by the owner.

23. Section 983.258

This section provides that the owner may collect a security deposit from the tenant, and that the deposit may be used when the tenant moves out to reimburse the owner for any unpaid rent, damages to the unit, or other money that the tenant owes to the owner. This final rule makes only minor editorial revisions.

24. Section 983.260 This final rule makes a minor

technical change to this section to make the second sentence of paragraph (a) into a new stand-alone paragraph at § 983.260(d). This change is made because this sentence is actually a separate consideration from the remainder of paragraph (a). Paragraph (a) generally concerns termination of the lease at the family’s option after one year of occupancy; the new § 983.260(d) concerns termination before one year of occupancy, which is treated differently.

25. Section 983.261 This section governs referrals to units

that are excepted from the 25 percent cap on project basing. Under § 983.56(b), units in a multifamily building that are occupied by the elderly, families with disabilities, or families receiving supportive services are exempt from the overall 25 percent cap. This final rule revises § 983.261 in accordance with § 983.56 to expand the exemption from families with a contract of participation in the statutory FSS program under 42 U.S.C. 1437u to units made available to all families receiving supportive services as stated in § 983.57(b)(2)(ii). A family is ‘‘receiving supportive services’’ if it has at least one member receiving at least one such service. If a family successfully completes its supportive services program, the unit remains an excepted unit as long as the family resides in the unit. If a family fails to complete its FSS or other supportive services participation, or no longer has a member qualifying as elderly or disabled, the family must vacate the unit in a reasonable time established by the PHA and the PHA shall cease paying housing assistance on behalf of the non- qualifying family. In the case of a partially assisted building, the owner has the choice of substituting a different unit in accordance with 983.206(a) or terminating the lease. The assistance for a family that is not in compliance with its obligations, such as non-completion of its FSS program without good cause, shall be terminated by the PHA.

Subpart G—Rent to Owner

26. Section 983.301 The proposed rule would have

provided for annual redeterminations of the rent to owner (at § 983.301(a)(3)), and for the amount of rent to owner (except for certain tax credit units) to be up to the lowest of the payment standard amount for the bedroom size minus any utility allowance, the reasonable rent, or the rent requested by the owner. This final rule significantly



revises these provisions in response to public comments, which are described below at section IV of this preamble. Under this final rule, the rent to owner is established at the beginning of the HAP contract term. The rent to owner, for non-LIHTC units, may not exceed the lowest of an amount determined by the PHA, not to exceed 110 percent of the applicable FMR or HUD-approved exception payment standard for the unit size less any utility allowance; the reasonable rent; or the rent requested by the owner. The tax credit rent is similar, except that the first of the three amounts is the tax credit rent minus any utility allowance. The tax-credit rent provision applies to certain tax credit projects not located in a qualified census tract. A ‘‘qualified census tract’’ is defined as any census tract or equivalent area defined by the Census Bureau in which: (1) At least 50 percent of households have an income of less than 60 percent of Area Median Gross Income; or (2) the poverty rate is at least 25 percent and where the census tract is designated as a qualified census tract by HUD. The rent must be redetermined at the owner’s request or whenever there is a five percent or greater decrease in the published FMRs. The owner must request any rent increase at the annual anniversary of the HAP by written notice to the PHA.

Under final § 983.301(f), when determining the initial rent to the owner, the most recently published fair market rent (FMR) and utility allowance schedule applies, rather than, as proposed, the payment standard amount on the PHA’s payment standard schedule.

27. Sections 983.302 and 983.303 These sections apply to

redeterminations of the rent to owner. This final rule revises these sections so that, consistent with § 983.301, the time for redetermination is upon the owner’s request and when there is a five percent or greater decrease in the published FMR.

28. Section 983.304 This section addresses limitations on

the rent to owner for units that have subsidies under programs in addition to the PBV program. Proposed § 983.304(b)(2) would have provided that the rent to owner could not exceed the amounts allowed in these programs, enumerated under proposed § 983.304(b)(1). This final rule adds tax credit projects to this list. In addition, in order to provide paragraph designations for all sections, the proposed undesignated introductory section is redesignated § 983.304(a) in

this final rule, and the following sections are redesignated (b)–(f), accordingly.

Subpart H—Payment to Owner

29. Section 983.354 This section provides that meals and

supportive services, generally, may not be charged as part of the rent to the owner, and that an owner may not use non-payment of such charges as grounds for termination of tenancy. The exception to this general rule is that in an assisted living development, owners may charge families or their members for meals or supportive services. In the case of such a development, the final rule adds a proviso that non-payment of such charges may be grounds for the owner to terminate the lease. The HAP payment may not be used for the costs of meals and supportive services.

IV. Responses to Public Comments

Comments Addressed to the Rule Generally

Comment: One commenter questioned why the provisions applicable to the project-based voucher program do not also apply to the former PBC program. Another commenter stated that HUD should combine the certificate and voucher programs and stop having multiple versions of one program in operation.

HUD Response: The Department is required by its regulations on rulemaking at 24 CFR 10.2 to publish regulations to implement, interpret, and prescribe law and policy for future effect. Thus, these regulations cannot be made retroactive to apply to the former program.

Comment: A commenter stated that PHAs are currently being funded from quarter to quarter based on actual utilization, and that, as a result, would likely have to hold or set aside some of their tenant-based funding in order to facilitate project-based voucher development proposals. ‘‘The proposed rule should more specifically address the allocation of funding for the PBV program as it relates to this issue.’’

HUD Response: HUD does not agree that this rule should address funding issues as it relates to the PBV program. In Calendar Year 2005, PHAs were provided with a specified amount of funding that was determined at the beginning of the calendar year and was not subject to quarterly or other utilization changes. PHAs are charged with managing their resources within program requirements to ensure that they do not incur costs beyond their annual funding allocation. If a PHA elects to project-base any of its voucher

units, it must manage its resources to ensure that the agreement to enter into a HAP contract agreement and HAP contract commitments will be honored.

Comment: One commenter stated that PHAs should be able to give preferences to ‘‘CHDOs, HOME, HOPE VI, LIHTC properties’’ and similar projects, and to housing providers with a history of ‘‘responsible practices and proper reporting.’’

HUD Response: CHDOs most likely refers to community housing development organizations that are eligible to participate in certain HUD Community Development Block Grant programs. The requirements for CHDOs are stated at 570.204(c). HOME probably refers to the HOME Investment Partnerships Act, 42 U.S.C. 12701 note. HOPE VI is the popular name for the program for revitalization of public housing now codified at 42 U.S.C. 1437v.

The final rule provides that in cases where a federal, state, or local housing assistance, community development, or supportive services program that requires a competitive selection of proposals has already competitively selected proposals, a second competition for PBV is not required. The original competition, however, cannot have considered the possibility of future PBV assistance, but the selection must have been based on the project’s merits at the time of the competition. However, the PHA, if it is in accordance with its administrative plan, can give a preference to CHDOs, HOME, and LIHTC projects.

Comment: A commenter stated ‘‘we remain concerned about the need for HUD’s continued involvement in a given PHA’s administration of the PBV program.’’ This commenter stated that PHAs are independent governmental agencies and can police themselves with respect to the proper and needed use of public funds. This commenter cited proposed § 983.51 (referenced by the commenter as ‘‘dealing with PHA- owned units’’) and § 983.55 (subsidy layering) as particular concerns. Because many PHAs are heavily involved in real estate development and subsidy layering reviews—‘‘perhaps even better than a HUD staff person who is not intimate with the local real estate development market’’—PHAs should be allowed to make determinations in both those areas.

HUD Response: Congress specifically set in place safeguards against possible program abuse regarding PHA-owned units by requiring HUD to ensure that Housing Quality Standards (HQS) inspections and rent determinations are conducted by outside entities. To



protect against possible PHA bias or abuse, and to ensure fairness, HUD has promulgated program regulations to carry out Congress’ intent. The Office of Public and Indian Housing will be issuing a separate regulation to delegate subsidy layering reviews (see response to comments on § 983.55).

Comment: Five commenters commented on the relationship between 24 CFR part 982 and part 983. Four commenters stated that HUD should add a general provision that in the event of a conflict between parts 982 and 983, part 983 shall prevail over any inconsistent provisions of part 982 with respect to the PBV program. Another commenter stated that in the event that HUD has missed something in part 982 that is not applicable to the PBV program, there should be leeway for HUD to determine, short of a regulatory waiver, that the provision is inapplicable to the PBV program.

HUD Response: 24 CFR 982 is the regulation for the tenant-based voucher program. The rule identifies the provisions in 24 CFR 982 that do not apply to PBV assistance under part 983. HUD believes it has accurately cross- referenced part 982 in the 983 regulation, but if HUD determines that any errors have been made, HUD will publish corrections in the Federal Register.

Comment: A commenter stated that there is a disincentive to participation in the PBV program because PHAs want to designate a portion of their Section 8 allocation to leverage investment or LIHTCs. However, while these units are undergoing construction or substantial rehabilitation, they are counted adversely in the PHA’s lease-up rate calculation. This commenter recommends a grace period for such PHAs during construction or substantial rehabilitation. This grace period should be provided as long as there is a well- defined construction plan in place with specific time frames that are documented and submitted to HUD.

HUD Response: During construction or substantial rehabilitation, units that will have PBV assistance attached pursuant to an agreement do not require the setting aside of vouchers and budget authority committed for those units. Rather such set asides are required only after completion of the project. However, the PHA must ensure that budget authority is available for those units upon execution of the HAP contract. If a PHA is leased up to its budget authority, it must ensure that through the turnover of vouchers it will have the necessary units and dollars to meet its contractual commitments when the project is ready to be occupied.

PHAs are responsible for monitoring their leasing and turnover to ensure that they do not over-lease units or expend more budget authority than is available.

Comment: A commenter also stated that ‘‘Agencies should be able to lease the necessary number of vouchers through monthly turnover by the time they are needed for occupancy under the PBV program. To allow for this, HUD should not consider budget authority committed to PBV assistance for this reason to be unutilized.’’ This change should also be reflected in HUD’s Section Eight management assessment (SEMAP). HUD should change its procedures for determining agencies’ lease-up rates and corresponding budget authority. Similarly, another commenter stated that, should a PHA set aside vouchers to project-base, the vouchers set-aside should not count against SEMAP or any other indicator. PHAs should be able to set-aside vouchers based on projections of the expected availability of vouchers due to turnover, attrition, or expected allocation of additional vouchers.

HUD Response: See response to comment above.

Comment: One commenter stated that HUD should increase the total number of vouchers available. ‘‘This is the best and most successful housing subsidy program in the country.’’

HUD Response: The appropriations for the voucher program, as well as the percentage of voucher funding that may be project-based, are both set by Congress.

Comment: A commenter stated that ‘‘The rule proposed is still inconsistent with the congressional intent to simplify the process for project-basing vouchers * * *. Regrettably, the proposed rule continues to make the program too cumbersome to be appealing to many housing agencies.’’

HUD Response: HUD disagrees that the proposed rule makes the program too cumbersome. The proposed rule has simplified and deregulated many aspects of the PBV program, such as competition and HQS inspections. The rule also eliminates any HUD approval actions during the development process resulting in a decrease in the necessity for HUD-approved exceptions and regulatory waivers. The final rule also simplifies the selection of proposals even further than originally proposed.

Comment: A commenter stated generally that transitional housing is important because it assists the homeless with skills necessary to become good tenants to whom landlords would be willing to rent. Accordingly, the PBV rule should be modified so that it will work with transitional housing

serving homeless persons and persons with special needs.

HUD Response: The final rule provides that transitional housing is ineligible housing under the project- based voucher program. The statute governing the project-based voucher program specifically provides that low- income families assisted under the program may move after the family has occupied a unit for 12 months. If a transitional housing agreement requires a family to move prior to 12 months, the law governing the project-based voucher program does not give families the right to a tenant-based voucher prior to 12 months. Thus, in the situation described, a family would not be entitled to tenant-based assistance under the law governing the project- based voucher program.

Also, if a transitional housing agreement requires a family to move some time after the initial 12 months, a PHA would be required under the law to provide such a family with tenant- based assistance. If the project-based voucher contract with the owner extends beyond the transitional housing agreement, the PHA would also be required to refill the units vacated by the previous transitional housing participant. Given the scarcity of funding, such a result is undesirable. Additionally, if a family must leave after the initial 12-month lease in accordance with the transitional housing requirements, the PHA may not have a voucher or other form of assistance readily available. Since the participant would be required to move, the participant would have to do so without the benefit of subsidy since the PBV law only requires PHAs, after the initial 12 months, to issue a voucher or other form of assistance if available. The Department believes that transitional housing is inconsistent with the project- based voucher program. Thus, the final rule makes transitional housing an ineligible housing type under the project-based voucher program.

Subpart A (Proposed §§ 983.1–983.10) Comment: In reference to proposed 24

CFR 983.2(c)(6)(iv), one commenter stated that the proposed rule incorrectly identifies 24 CFR §§ 982.551–.555 as being under part 982, subpart K. These sections are codified under subpart L.

HUD Response: HUD agrees and this final rule includes this technical correction.

Comment: A number of commenters questioned the definition of ‘‘existing housing’’ in § 983.3, seeking specificity about dollar amounts of repair that would distinguish substantial rehabilitation from existing housing.



Five commenters suggested that there be a ‘‘safe harbor’’ dollar amount of repairs that constitute existing housing. One of these commenters asked, if existing housing requires less than $1,000 of rehabilitation, and ‘‘rehabilitation’’ is any unit that requires $3,000 or more, how are units requiring $1,000–$3,000 worth of work categorized?

HUD Response: In this final rule, HUD has retained the language contained in the proposed rule. HUD has decided not to accept the suggestion of specifying a dollar amount since costs attributable to repairs and rehabilitation are market-driven and may vary widely depending upon individual market areas. Such decisions are properly left up to the PHAs.

Comment: Commenters objected to the definition of ‘‘comparable rental assistance’’ in proposed § 983.3, stating that the definition should define comparable rental assistance as gross rent that costs the family no more that 30 percent of their adjusted income, rather than 40 percent. One of these commenters stated that setting the standard at 40 percent violates the statute, and argued that the standard should be 30 percent, subject to a limited exception if the gross rent is greater than the PHA’s payment standard.

HUD Response: The final rule defines comparable rental assistance as ‘‘a subsidy or other means to enable a family to obtain decent housing in the PHA jurisdiction renting at a gross rent that requires the tenant to pay no more than 40 percent of its adjusted monthly gross income for rent.’’ Section 8(o)(3) of the United States Housing Act of 1937 governing the voucher program provides that at any time a family initially receives voucher assistance, the family rent contribution is limited to 40 percent of adjusted income. The definition of comparable rental assistance contained within the final rule does not violate the statute.

Comment: A commenter stated that the lobbying restriction in proposed § 983.4 is obsolete.

HUD Response: HUD reviewed the lobbying restrictions in § 983.4 and determined that they are not obsolete and therefore continue to apply to the project-based voucher program.

Comment: A commenter stated that § 983.5, which describes the project- based program, should specify when PBVs count toward the PHA’s utilization rate. This commenter states that ‘‘the Agreement to enter into a Housing Assistance Payment (HAP) contract is the appropriate trigger for SEMAP purposes.’’

HUD Response: HUD has considered this comment. Currently SEMAP does not exclude units under an Agreement from total units for SEMAP scoring purposes under the leasing indicator. Since units and dollars that are committed under an agreement do not have to be set aside during the development or rehabilitation phase of a project, these units will not be excluded from the SEMAP leasing indicator. PHAs must monitor their leasing and turnover to ensure that they do not over-lease units or expend more budget authority than available. If a PHA is fully leased, it may have to withhold issuance of vouchers for a number of months based on attrition rates to ensure that units and dollars will be available at the time the HAP contract is executed.

Comment: A commenter stated that § 983.5(b), which references Section 8 administrative fees, should be revised. This commenter stated that PHAs that own PBV developments are restricted to a significantly lower administrative fee than private owners. However, PHAs must also contract for services at increasing administrative costs. This creates a disincentive to participation. Therefore, PHAs should be entitled to the same administrative fee as private owners.

HUD Response: HUD has considered this comment, but is not adopting it for the following reasons. The United States Housing Act of 1937 requires that a unit of state or local government or another entity approved by HUD perform certain functions for PHA-owned units. The act also authorizes HUD to decrease the administrative fees for PHA-owned units. In the case of PHA-owned units, some activities for which an owner is compensated from rental income under other HUD project-based programs result in a reduced administrative fee. For example, income-certification and re-examination are tasks for which PHAs are reimbursed as an owner through rental income under the PBV program.

Comment: Two commenters expressed concerns about the 20 percent cap on project basing. One of these commenters stated that the cap is too high and would force consumers ‘‘to use their vouchers in projects, at least for a period of time,’’ and will not have the option of using them with private landlords. The commenter stated that this does nothing to increase the amount of affordable, accessible housing and that the proposed regulation promotes segregation, loss of affordable units, and subjects tenants to impossible compliance regulations like workfare. This commenter recommends full

funding of the Section 8 program in its present form, as well as additional changes in regulations to allow those with very low incomes to qualify for housing under LIHTC programs, such as the 80/20 program, HPD programs, and the Mitchell-Llama programs.

Another of these commenters stated that the 20 percent cap is a ‘‘significant restriction’’ on a PHA’s ability to project-base vouchers and that HUD should pursue statutory changes to make the same flexibility that exists in the Moving to Work (MTW) program available to all PHAs.

HUD Response: The commenter refers to various assisted housing programs. The 80/20 program is a form of bond- financed tax credit that derives its name from the requirement that no more than 80 percent of the units in an LIHTC project financed with tax-exempt private activity bonds are to be occupied by individuals or families at market-rate rents, while the other 20 percent must be rented to low-income (no more than 50 percent of median) households. HPD is the New York City Department of Housing Preservation and Development. Mitchell-Lama is a New York State program of moderate- and middle- income rental and limited-equity cooperative developments. MTW is a HUD demonstration program codified under 42 U.S.C. 1437 note, which allows PHAs to design and test ways to promote self-sufficiency among assisted families, achieve programmatic efficiency and reduce costs, and increase housing choice for low-income households.

HUD must work under the current statutory framework that restricts project-based assistance to 20 percent of a PHA’s budget authority under the voucher program.

Comment: Four commenters stated that proposed § 983.7(a)(2), which provides that relocation costs may not be paid out of voucher program funds, should not prohibit PHAs from using funds in the Section 8 administrative fee reserve account to pay relocation costs.

HUD Response: HUD has considered this comment and decided to adopt it. Provided payment of relocation benefits is consistent with state and local law, and provided the use of the administrative fee reserve is consistent with 24 CFR 982.155, PHAs may use their administrative fee reserves to pay for relocation assistance after all other program administrative expenses are satisfied. Program participants should also be mindful that HUD and Congress have from time to time restricted the use of administrative fee reserves.

Comment: Proposed §§ 983.9 and 983.53(a) prohibit voucher funding to be



used with cooperative housing and shared housing. Two commenters stated that they object to this exclusion of cooperative housing. These commenters stated that this ‘‘is an arbitrary exclusion, not required by statute, and represents a change from the Initial Guidance.’’ These commenters also state that the exclusion is against HUD’s ‘‘regulations and policies for other project-based Section 8 programs, as well as tenant-based Section 8,’’ and that there are numerous examples of cooperative projects that have been good housing providers. One of these commenters stated that ‘‘denying project-based Section 8 to* * * co-ops would make the projects unfeasible and be unfair to the low-income seniors who benefit from the creation of this affordable housing.’’ This commenter also states that cooperatives have been proven to have lower operating costs than comparable rentals, and, therefore, it is in the government and public interest to encourage Section 8 in cooperatives.

Another commenter similarly objected to the exclusion of shared housing. The commenter stated that ‘‘[shared housing] can be an extremely effective supportive transitional housing model that is being extensively used around the country.’’

HUD Response: HUD considered these comments, but did not adopt them for the following reasons. Cooperative housing is not a permitted housing type under the project-based voucher program. Cooperative housing is considered homeownership and Section 8(y) of the United States Housing Act, which governs homeownership under the voucher program, limits the form of subsidy PHAs may use to provide homeownership assistance to tenant- based assistance. The comment regarding shared housing is also rejected since there are provisions to allow the use of group homes and congregate housing that are similar to shared housing. Additionally, to permit shared housing under the PBV program would require PHAs to refer families to an owner to occupy a unit with families that are not acquainted with each other, which may not be a desirable housing situation. This would result in many families refusing to share housing and as a result have families living in oversized units in violation of program guidelines.

Subpart B (Proposed §§ 983.51–983.59) Comment: A number of commenters

submitted comments regarding proposed § 983.51, which requires competitive selection of proposals for project-basing with an exception for

proposals already selected pursuant to a competitive government housing assistance, supportive services, or community development program.

More than ten commenters supported the exception to competitive selection for units that have been previously competed. Four commenters stated that this proposal would save time and money and avoid needless duplication.

Some commenters opposed requiring any competition. One commenter stated that the competitive selection procedure, including the requirement for prior competitive selection, is too rigid. This commenter stated that these Reform Act requirements do not apply to PHAs. Since there is no statutory requirement for a competitive process, PHAs should be given discretion in how they award vouchers. Another commenter stated that selection should be allowed based on a request from a developer or owner; based on a HOPE VI site or similar endeavor having PHA participation; or public notice inviting competitive proposals. Another commenter stated that proposals subject to previous competitive selection should be exempt from additional environmental, site selection, and subsidy layering reviews; however, the rule should allow PHAs to use PBVs without any competition because ‘‘agencies that need to lay out annual budgets and support their annual program operations would be placed in a compromising position. Agencies could thus face financial disincentives and opt out of using this important program.’’ Another commenter stated that there should be no competition, but PHAs should develop and provide a clear set of guidelines to applicants. This commenter stated that the statute does not require competitive selection, but does require that HAP contracts be consistent with the agency’s plan. This commenter stated that competitive selection is neither practical nor necessary, given the limited number of vouchers that will be available. Most affordable housing developments have funding from a variety of sources, and adding yet another competitive funding cycle complicates the process of financing affordable housing units, and adds unnecessary time and costs.

Some commenters criticized specific aspects of the competition provisions. Two commenters, while agreeing generally with the proposal on competitive selection, stated that the rule should make clear whether the PHA must include in its administrative plan its intent to make PBVs available based on a prior competition. Another commenter supported the prior competition exemption and also stated

that the rule should give PHAs some discretion in establishing the competitive criteria whereby they will select units for project basing. A commenter stated that a news release and web publication should be sufficient to satisfy the advertising requirement in proposed § 983.51(c). A commenter, while agreeing with competitive selection generally, stated that the prior competition exception would appear to allow subsidy layering.

HUD Response: No response is necessary to the supportive comments. As to other comments, HUD believes that many commenters misunderstand the nature of the competitive selection of proposals. The purpose of the notice is to provide interested parties a fair opportunity to participate in the program. The final rule clarifies that PHAs must publish a general notice in accordance with 983.51(c) to inform the public that the PHA is soliciting proposals for the PBV program. The notice must indicate that the PHA’s selection policy is available for viewing at the PHA’s office. In addition, the PHA’s selection criteria must be stated in the PHA’s administrative plan. HUD will clarify that PHAs may target particular units in desirable neighborhoods or key ‘‘turning point’’ buildings in established revitalizing areas. One commenter suggested allowing PHAs to substitute environmental, site selection, and subsidy layering reviews conducted under previous competitions for the project-based voucher program. In response to the suggestion, HUD believes it would be impractical and infeasible for HUD to monitor requirements under individual state and local programs to assure consistency with federal statutory and regulatory requirements. HUD, therefore, is not adopting that comment. Site and neighborhood, site selection standards, environmental reviews, and subsidy layering requirements continue to apply.

Comment: Proposed § 983.51(e) prohibits PHAs from using PBV assistance with public housing units. A number of commenters suggested that this language was overbroad and should be clarified. Two commenters stated that the language ‘‘could be read too broadly to include non-public housing units in a HOPE VI or public housing mixed finance project that contains both public housing units and non-public housing units.’’ Three commenters stated that the definition of ‘‘public housing’’ in the U.S. Housing Act includes units receiving both capital and operating assistance. Therefore, under this rule, PHAs could not use



PBVs in HOPE VI developments. The commenters object to this result. One commenter stated that using PBV assistance in conjunction with HOPE VI and replacement housing factor (RHF) funds is especially important in areas where there has been a significant amount of public housing demolition. Therefore, more replacement housing could be produced. In many markets, PBVs alone do not provide enough of an incentive to develop affordable housing. This commenter and another commenter stated that pairing PBV with capital funds would provide enough operating and capital subsidy to develop long-term affordable housing, and suggests that the first sentence of proposed § 983.51(e) be revised to read: ‘‘Under no circumstances may PBV assistance be used with a unit receiving public housing operating funds.’’ Another commenter agreed and stated that ‘‘Congress made substantial changes to the PBV program in Section 232 of the 2001 HUD Appropriations Act, with the intent of making the program more flexible and workable. One of the important changes Congress made was to repeal a former statutory prohibition of project-based assistance for units to be constructed or rehabilitated with funds under the United States Housing Act of 1937.’’ Proposed § 983.51(e) could be read to reinstate the bar on providing PBV assistance for units to be constructed or rehabilitated with U.S. Housing Act funds notwithstanding Congress’ repeal of that bar.

HUD Response: The Department believes that Congress’ adoption of disparate or parallel statutory provisions for the public housing and voucher programs affirms that public housing and voucher programs are intended to operate as separate, and mutually exclusive, subsidy systems under the U.S. Housing Act of 1937. It is not permissible by law to combine voucher funds with public housing funds. For HOPE VI funds that predate FY 2000, it is generally permissible to combine these funds in accordance with the terms of the relevant HOPE VI appropriations act if the HOPE VI funds were not used to develop or operate public housing units. It is not permissible in any case to combine HOPE VI funds appropriated on and after FY 2000 (Section 24 funds), because Section 24 funds are public housing funds. If Capital Funds or Section 24 funds are used in the development of affordable housing, pro- ration must occur. For example, if a project receives $2,000 in non-public housing HOPE VI funds and $1,000 in

Capital Funds and there are 60 units in the development, 20 of the units (one- third) are being funded with capital funds and, therefore, cannot be combined with project-based vouchers. Provided that the remaining 40 units (two-thirds) are not receiving any Public Housing funds, the units may be assisted under the PBV program.

Comment: Proposed § 983.53 provides that certain types of housing are ineligible for PBV assistance. A number of commenters commented on this section. One commenter stated that there may be situations where location of a facility, especially supportive housing, on the grounds of a medical or mental institution is appropriate (see proposed § 983.53(a)(2)). If the intent of the rule is to prevent subsidizing of hospital rooms, that can be accomplished another way.

HUD Response: HUD has considered this comment and is not adopting it for the following reasons. To allow project- based assistance units on the grounds of medical or mental institutions would be inappropriate since the residency requirements for such housing facilities are usually limited to patients of the medical or mental institution. Housing for medical and mental institutions is generally funded privately or by local or state governments. The PBV program is not intended to be used to substitute for financing of housing that already exists for individuals who are residents of mental or medical facilities with federal funds appropriated to assist low-income families.

Comment: Five commenters stated that the PHA, not HUD, should determine when there is no practical alternative for a high-rise elevator project that may be occupied by families with children (see proposed § 983.53(b)). This could be particularly important where a PHA has a better understanding of the preservation needs of the community. Another commenter stated that the term ‘‘high-rise’’ should be defined because even two, three, or four story buildings that provide excellent family housing may have elevators. Another commenter stated that some existing high-rise developments provide good housing and should be preserved. The limitation on high-rise buildings with elevators should apply only to new construction. Another commenter stated that in Baltimore, high-rise buildings with elevators may be a significant source of housing. ‘‘We believe that that high-rise elevator buildings with one and two bedroom apartments * * * should be eligible.’’

HUD Response: While the statute gives the authority to make the

determination about high-rise elevator projects to the Secretary, HUD is also mindful of the commenters’ concerns. Therefore, this final rule revises the rule so that PHAs may make an initial determination, but HUD must approve a PHA’s finding that there is no practical alternative.

Comment: Proposed § 983.58(c)(2) makes the release of PBV funds contingent on an environmental review being performed. A number of commenters stated that it is unclear what ‘‘release of funds’’ means because the funds will have already been allocated to the PHA.

HUD Response: Under part 58, HUD may allocate funds to the PHA, but the PHA may not commit or expend these funds until an environmental finding is completed by the responsible entity (RE). If the finding is that of an exempt activity (§ 58.34) or a finding of activity that is categorically excluded and not subject to § 58.5, then the PHA does not have to submit a request for release of funds (RROF) and certification, and no further approval from HUD is needed by the PHA for the draw down of funds to carry out exempt activities and projects. However, the RE must document in writing its determination that each activity or project is exempt and meets the conditions specified for such exemption.

In those cases where the RE determines that an environmental review is required, the RE will perform such review and execute the certification portion of the RROF by completing only Parts 1 and 2 of HUD form 7015.15 and by forwarding the form to the PHA, which must complete Part 3 before providing the form to HUD for approval. The PHA must await HUD approval from the Field Office Public Housing Director as the HUD Authorizing Officer; the approval is obtained either on HUD form 7015.16— Authority to Use Grant Funds or by a letter dispatched to the PHA. Once received, the PHA may then draw down funds under the voucher annual contributions contract for the project- based voucher project.

Comment: One commenter commented on proposed § 983.53(d), which prohibits PHAs from attaching PBV assistance to units occupied by ineligible families. This commenter stated that the PHA should be given the flexibility, between the time the Agreement and HAP contract are executed, to move the family to another unit and free the unit for an eligible family.

HUD Response: It is HUD’s policy to minimize displacement and what the commenter proposes is unnecessary.



Section 983.206 allows PHAs to add units to the HAP contract when an ineligible family moves out.

Comment: Proposed § 983.54 prohibits PBV assistance from being attached to units that have other forms of Section 8 and other types of federal assistance. Two commenters stated that the rule should make clear that in mixed-finance projects, this prohibition applies only to the same units that are receiving subsidies.

HUD Response: This final rule clarifies that the use of PBV assistance in mixed-finance projects that are not classified as ineligible housing is authorized. Section 983.54 discusses prohibited types of housing under the project-based voucher program. Since the type of units the commenter mentions is not listed, the unit type is not an ineligible housing type.

Comment: Two commenters stated that § 983.54(a), for clarification, should add the word ‘‘unit’’ after ‘‘public housing.’’

HUD Response: The comment is accepted. The final rule is revised to include this clarification and also to specify that the unit is a ‘‘dwelling unit.’’

Comment: A commenter stated that an exception to the general rule should be made for holders of enhanced vouchers who received those vouchers when a mortgage on an older, assisted 236 project, which may have had a high tenant rent contribution, was prepaid. PHAs should have the flexibility to replace these enhanced vouchers with PBVs to reduce these tenants’ rent contribution to 30 percent of adjusted income.

HUD Response: The comment relates to an issue that is beyond the scope of this rule. Section 8(t) of the United States Housing Act of 1937 explicitly limits enhanced voucher assistance to tenant-based assistance under section 8(o) of the Act.

Comment: One commenter stated that proposed § 983.54(a), barring a PHA from attaching project-based assistance to ‘‘public housing units,’’ is a carry- over of current § 983.7(c)(1) that predates the QHWRA. In QHWRA, Congress authorized PHAs to provide capital funds only and changed the definition of public housing to include units in a mixed-finance project that receive capital or operating assistance. Section 983.7(c)(1) was intended to bar project-based assistance from being attached to units that were receiving operating assistance. It was not intended to bar using project-based assistance with units that were constructed or rehabilitated with capital funds under the 1937 Act. HUD should clarify that

§ 983.54(a) and the last sentence of § 983.54(e) apply only to public housing units receiving operating subsidies under section 9(e) of the 1937 Act, 42 U.S.C. 1437(g)(e). Two other commenters agreed, stating that the rule should clarify that project-based assistance can be used with HOPE VI or capital funds.

HUD Response: HUD has considered these comments with the result that this final rule retains the proposed rule language, but clarifies when project- based voucher assistance may be combined with HOPE VI funds. The Department believes that Congress’ adoption of disparate or parallel statutory provisions for the public housing and voucher programs affirms that the public housing and voucher programs are intended to operate as separate, and mutually exclusive, subsidy systems under the U.S. Housing Act of 1937. It is impermissible to combine voucher funds with public housing funds. For HOPE VI funds that predate FY 2000, it is generally permissible to combine these funds in accordance with the terms of the relevant HOPE VI appropriations act if the HOPE VI funds were not used to develop or operate public housing units. It is not permissible in any case to combine PBV and HOPE VI funds appropriated on and after FY 2000 (Section 24 funds), because Section 24 funds are public housing funds. If Capital Funds or Section 24 funds are used in the development of affordable housing, pro-ration must occur. For example, if a project receives $2,000 in HOPE VI funds and $1,000 in Capital Funds and there are 60 units in the development, 20 of the units (one-third) are being funded with capital funds and, therefore, cannot be combined with project-based vouchers. Provided that the remaining 40 units (two-thirds) are not receiving any public housing funds, the units may be assisted under the PBV program.

Comment: One commenter asked that HUD not make projects that receive ‘‘operating support’’ ineligible for PBV. ‘‘Sometimes projects need additional operating cash flows due to unexpected increases in operating costs and expenses.’’ Another commenter stated that, as part of a plan to end long-term homelessness, ‘‘we urge that the rule be amended to permit replacement of temporary subsidy with PBVs, or to clarify that such replacement is permissible.’’ This commenter also stated that there may be situations, especially in supportive housing, where operating cost subsidy is required, despite rent subsidy, to ensure affordable rents and achieve project rent

payment standards. This commenter suggested that HUD delete § 983.54(d) or revise it to permit operating subsidy where other governmental operating cost subsidy is required and demonstrated through the subsidy layering review to be necessary to the project. This commenter recommended that a new § 983.54(m) be added to read:

‘‘For purposes of paragraphs (c), (d), and (l), rental or operating costs subsidies intended to terminate upon implementation of a HAP contract shall not be considered ‘‘governmental rent subsidy,’’ ‘‘governmental subsidy,’’ or ‘‘housing subsidy.’’

HUD Response: HUD considered these comments, but did not adopt them. With respect to the public housing program, it is statutorily impermissible to combine Public Housing Operating funds with PBV funds. Supportive housing programs that receive operating funds are also ineligible under the PBV program since rent is generally included as an operating expense.

Comment: A number of commenters objected to § 983.55, which requires a subsidy layering review to be conducted by HUD or an approved entity before a PHA may enter into a HAP contract. Commenters objected both to the overall requirement of a subsidy layering review and to the conduct of the review by HUD.

One commenter stated that subsidy layering should not be required as rent caps and other guidance should suffice. If subsidy layering is to be required, the rule should be amended to allow the PHA to conduct the review and receive just compensation. One commenter stated that there should be an exception for projects that provide extensive support services, such as projects that serve the homeless. Another commenter stated that if the PHA determines that there is no other government subsidy involved, no subsidy layering review should be required. Another commenter stated that the rule should permit additional governmental subsidy when necessary for the success of the project. One commenter questioned whether subsidy layering analysis applies to every application that shows public capital investments in the form of loans or grants, and stated that such an analysis should not be required where the bulk of public financing is through loans and there is no tax-credit financing.

HUD Response: Because prevention of excessive subsidy is statutorily required, this final rule retains the requirement for subsidy layering reviews.

Comment: One commenter stated that HUD should not be involved in subsidy



layering reviews. Other commenters stated that section 911 of the Housing and Community Development Act of 1992 (42 U.S.C. 3545 note) requires that, where low-income housing tax credits are involved, the state tax credit allocating agency must do the review. Still another commenter stated that while use of PBV must be consistent with subsidy layering, the rule ‘‘could be misconstrued to create additional bureaucratic barriers’’ and that the rule should clarify that it does not supersede authority of Housing Credit Agencies (HCAs) and Housing Finance Agencies (HFAs) to conduct the review when they are involved because of tax credits. When there is such an agency already involved, HUD should not have to determine individually whether it is an appropriate independent agency to do the review. Two commenters stated that a subsidy layering review for this program should not be required when another office or agency is authorized to perform a subsidy layering review or has recently performed such a review in connection with other assistance. One commenter stated that the rule should clarify what are approved entities and what entities may conduct a layering review. This should include entities already approved or required to perform such reviews in HUD programs.

HUD Response: The issue of entities that can perform subsidy layering reviews is addressed in statute and guidance published as Federal Register notices, and, hence, is not appropriate for treatment in this rule. Pursuant to Section 911 of the Housing and Community Development Act of 1992, as amended, 42 U.S.C. 3545 note, HUD has issued guidelines in the form of Federal Register notices on February 25, 1994 (59 FR 9332), and December 15, 1994 (59 FR 64748). Under these notices, the Office of Public and Indian Housing performs subsidy layering reviews for programs under its jurisdiction with input from field offices. HUD may invite HCAs to perform subsidy layering reviews in connection with projects receiving low- income housing tax credits, by publishing a Federal Register notice along with the guidelines that HCAs must follow in conducting subsidy layering reviews. PIH may publish revised guidelines as a Federal Register notice in the near future.

Comment: A number of commenters commented on the Family Self- Sufficiency (FSS) program exemption to the 25 percent cap on project-basing, with most commenters stating that the exemption is too narrowly limited to statutory FSS programs under section 23 of the 1937 Act, 42 U.S.C. 1437u. Many

commenters expressed the view that there should be a broader definition of services that qualify for the exemption to the cap. Commenters stated that ‘‘other tools are available than FSS, such as local self-sufficiency programs * * *,’’ and that a broader definition of qualifying services is a better alternative than the FSS program alone. Some of these commenters cited specific local programs as ones that should qualify for the exception to the cap. Along these lines, three commenters suggested that the term ‘‘families receiving supportive services’’ be defined as ‘‘families receiving services essential for maintaining or achieving independent living, such as, but not limited to, counseling, education, job training, health care, mental health services, alcohol or other substance abuse services, child care services, or service coordination and case management services.’’ One commenter stated, in addition, that HUD should remove § 983.56(b)(2)(ii) and replace it with the phrase ‘‘Families receiving supportive services.’’ Another commenter stated that the limitation of supportive services to the FSS program is arbitrary and impractical. First, families in self- sufficiency programs other than FSS in many cases receive services that are as comprehensive or more comprehensive than FSS. Second, funding for FSS coordinators has been shrinking in real terms in recent years. One commenter stated that ‘‘* * * service programs run by many of the faith-based organizations we are partnering with would not qualify for this exception.’’ Two commenters stated that it is inconsistent with statute to limit ‘‘families receiving supportive services’’ to ‘‘FSS families,’’ because the statute refers to the broader concept of ‘‘supportive services.’’

HUD Response: HUD has considered these comments and adopted the suggestion to allow for services other than those services associated with the statutory FSS program under 42 U.S.C. 1437u. Under the Final Rule, PHAs are authorized to establish the type of services and the extent to which services will be provided to allow exceptions to the 25 percent limit. PHAs must state in their administrative plans what these services are. The final rule also clarifies that PHAs are responsible for determining that units are made available to families that are receiving the services in order for the unit to be and to remain excepted from the cap (see § 983.56(b)(2)(ii)(C)) and ensuring that assistance is terminated if families living in exempted units fail without good cause to complete their FSS or supportive services obligation.

Comment: One commenter stated that the narrow definition of social services that qualify for the exception to the cap ‘‘will exclude many chronically homeless individuals and families— who may neither participate in the FSS program nor qualify as ‘disabled’ under the Section 8 statute due to a primary diagnosis of alcoholism or substance abuse. Such a result would be clearly contrary to the Administration’s commitment to prioritize this vulnerable population within all HUD programs.’’

HUD Response: See response above. Comment: Two commenters stated

that HUD should provide more flexibility with respect to the FSS exception to the 25 percent cap on project basing and make clear that the PHA can make its own determination what constitutes adequate supportive services.

HUD Response: See response above. Comment: Two commenters stated

that the proposed rule improperly imposes a work requirement by allowing PHAs to terminate assistance to a family not in compliance with its FSS contract of participation. ‘‘The statute is silent about any such condition of continued occupancy.’’

HUD Response: Since the family is receiving PBV assistance for a unit outside the statutory 25 percent cap because of its participation in supportive services, the family necessarily loses that right if it fails with respect to its FSS contract or its supportive services program. Therefore, this final rule provides that assistance to such a family can be terminated. However, as long as the unit continues to be made available to qualifying families, the unit can continue to receive assistance and benefit another family participating in supportive services.

Comment: A number of commenters stated that other forms of project-based subsidy should not count toward the 25 percent limit, because the statute applies only the 25 percent limit to project-based vouchers. Other commenters stated that this limitation would impede the preservation of affordable housing and constrain the development of supportive housing units. Two commenters stated that if HUD continues to include ‘‘other federal project-based assistance’’ as counting against the 25 percent cap on assisted units, the rule should make it clear that the term does not include units receiving only mortgage or production subsidies (such as § 236, § 221(d)(3), LIHTCs, or HOME funds).

HUD Response: HUD has considered these comments and adopts them in this



final rule. This final rule limits the number of project-based units in a building to 25 percent of the total units in the building and not to 25 percent of the unassisted units.

Comment: One commenter stated that limiting the size of a multifamily building to no more than a specified number of units is another alternative to the 25 percent cap.

HUD Response: The 25 percent cap is provided for by a clear and unambiguous statute, 42 U.S.C. 1437f(o)(13)(D)(i), and cannot be changed by this rule.

Comment: Two commenters stated that they support the exception to the 25 percent per building cap on project- based units for elderly and disabled families. One commenter stated that ‘‘we would encourage HUD to also provide an exception to developments for units that provide families with service-enhanced housing which includes families who were previously homeless.’’ Another commenter similarly stated that ‘‘We suggest including in the list of examples of ‘‘excepted units’’ housing developments created through HUD’s initiatives to provide permanent supportive housing to address the needs of chronically homeless individuals.’’

HUD Response: HUD has considered these comments, but has not adopted them. The statute explicitly provides for certain exceptions to the limitation on the number of dwelling units that may be assisted in any one building. The commenters’ suggestion is not included in the statutorily permissible exceptions because inclusion of the type of developments suggested would expand the exceptions allowed under the law. Nonetheless, the final rule expands the definition of supportive services to include services other than those under the FSS program.

Comment: Two commenters stated that if HUD follows the recommendation to expand the definition of ‘‘supportive services’’ that qualify for the exception to the 25 percent cap on project-based units in a building, the rule should make it clear that when an owner has entered into a contract with a public agency other than a PHA to provide supportive services, it is that public agency which has the primary responsibility for monitoring the delivery of those services. As with the competition for project-based vouchers in § 983.51(b)(2), the rule should permit PHAs to rely on the established selection procedures and monitoring expertise of other agencies.

HUD Response: HUD has considered this comment, but is not adopting it. Under the Project-Based Voucher

program, HUD’s contractual relationship is with public housing agencies. The Department can neither impose nor enforce requirements on entities with which the Department has no legally enforceable agreement.

Comment: One commenter suggested that the rule add additional language to three sections. The additions are as follows:

A new § 983.56(b)(4): ‘‘(4) Monitoring of supportive services. (i) The PHA may determine that the monitoring and reporting requirements specified in § 983.203(d)(ii) and certified by the owner in § 983.209(b)(i) suffice to establish the units as ‘‘excepted units’’ for purposes of this section.

‘‘(ii) Where the owner has not entered into contracts with public agencies to deliver supportive services or where the PHA has reasonably determined that the monitoring and reporting requirements specified in § 983.203(d)(ii) and certified by the owner in § 983.209(b)(i) do not suffice to establish units as ‘excepted units’ for purposes of § 983.56(b)(2)(B), the PHA may require the owner to submit such documentation as is reasonably required to establish the units as excepted units for purposes of this section.’’

New §§ 983.283(d)(i) and (ii), to be added at the end (before the semicolon) of § 983.203(d): ‘‘including (i) the public agencies other than the PHA, if any, with whom the owner and/or its affiliates and/or its subcontractors intends to contract to provide funding for or direct supportive services for any units receiving PBV assistance; and (ii) a description of the monitoring and reporting requirements regarding the delivery and efficacy of the supportive services under any contracts identified under (i).’’

The following, to be added at the end (before the period) of § 983.209(b): ‘‘* * * and the owner and/or its affiliates and/or its subcontractors are in compliance with any existing contracts with public agencies to provide funding for or direct supportive services for any units receiving PBV assistance.’’

HUD Response: HUD has considered these comments and has determined that, because of the variety of local circumstances and supportive services that may be provided, it is preferable for PHAs, which know the local area and the needs of residents, to administer the details of this aspect of the statute and regulations.

Comment: The site selection standards in proposed § 983.57 would require that project-based assistance ‘‘be consistent with the goal of expanding housing opportunities’’ and that projects using PBV be sited to ‘‘promote greater

choice of housing opportunities and avoid undue concentration of assisted persons in areas containing a high proportion of low-income persons.’’ One commenter stated that this standard would prevent affordable housing from being developed in areas previously dominated by urban blight, thus attracting residents. Properties outside areas with a high concentration of low- income persons are mostly unaffordable or unwilling to accept government subsidy. Conversely, another commenter stated an objection to the proposed rule’s elimination of any standard for deconcentration and expansion of housing and economic opportunity, and suggested that HUD adopt an alternative standard, based on waiver requests, that allows PBV units in mixed-income projects and neighborhoods undergoing ‘‘gentrification’’ while ensuring that the PHA also creates PBV units in non-poor neighborhoods. Another commenter stated that the rule should allow projects to be sited in areas of poverty concentration where it would allow access to supportive services. ‘‘It is the supportive services that will ultimately help lift a family out of poverty rather than the location of the housing outside an area of concentrated poverty.’’

HUD Response: The requirement that project-based voucher contracts be consistent with the goal of deconcentrating poverty and expanding housing and economic opportunities is a clear statutory mandate and, therefore, cannot be changed as suggested by these commenters. In addition, these are factors under SEMAP scoring. This final rule provides guidelines that PHAs must consider in selecting project-based voucher proposals to ensure that, in selecting projects under the program, the statutory goal of deconcentrating poverty and expanding housing and economic opportunities is satisfied.

Comment: Two commenters questioned whether the site and neighborhood standards in proposed § 983.57(d) should apply to the PBV program. Four commenters stated that some of the site and neighborhood standards do not seem meant to apply to existing buildings. One commenter stated that the PHA should determine whether in the context of its affordable housing goals it makes sense to provide PBVs to the project. Also, the rule should be clearer on whether the PHA or HUD makes the determination that site and neighborhood standards are met. Two commenters stated that the PHA should make the determination. One commenter stated that the proposed rule is unclear about the process for satisfying site and neighborhood



standards, and that units may be lost because landlords in low poverty areas will not wait to rent their units on the private market while a review process is underway.

HUD Response: HUD has considered the comments, but does not adopt them. The standard for existing housing is reasonable and not as stringent as the standard for New Construction. The requirements of proposed § 983.57(d) (§ 983.58(d) of this final rule) are applicable to existing housing under the PBV program. The rule details the requirements that must be considered in determining whether site and neighborhood standards are satisfied.

Comment: Several commenters questioned proposed § 983.58 on environmental reviews. Commenters stated that environmental review requirements should not apply to existing units because actions such as demolition, rehabilitation, and construction are not taking place. A commenter stated that properties for which an environmental review was previously done under another program should be exempt from environmental reviews in the PBV program. Another commenter stated that the section is overbroad as drafted, because it appears to prohibit PBV contracts being executed with owners who have purchased properties prior to HUD completing its environmental review. A commenter stated that where a PBV contract is for existing units and will have an initial HAP term of 5 years or less, parts 50 and 58 should not apply. A commenter stated that ‘‘to apply these requirements to existing public accommodations will make it even more difficult for landlords in strong markets to participate in the Special Mobility Program * * *.’’ Moreover, the delays in waiting for approvals will result in lost units.

HUD Response: Existing housing as used in the PBV regulation is normally categorically excluded from the requirements for an environmental assessment and finding of no significant impact under the National Environmental Policy Act (NEPA). However, existing housing is subject to the applicable federal environmental laws and authorities listed at 24 CFR 58.5.

The responsible entity will conduct the environmental review in accordance with 24 CFR part 58 (or HUD will complete an environmental review under 24 CFR part 50 where HUD has determined to do the environmental review). In the case of existing housing that is reviewed under part 58, the responsible entity must determine whether or not PBV assistance is

categorically excluded from review under NEPA and whether or not the assistance is subject to review under the laws and authorities listed in 24 CFR 58.5.

Assistance to a project previously approved under another HUD program for which an environmental review was completed under 24 CFR part 58 is considered supplemental assistance and is categorically excluded and not subject to further review under the related laws in 24 CFR 58.5, if the approval is made by the same responsible entity that conducted the environmental review on the original project and re-evaluation of the environmental findings is not required under 24 CFR 58.47. This exemption is limited to contracts for the same units that previously had an environmental review completed under part 58.

In accordance with the NEPA and the Council on Environmental Quality’s implementing regulations, the Department does place limitations on actions before completion of the environmental review. The final rule is clear at § 983.58(d) that the PHA may not enter an Agreement or a HAP contract with an owner, and its contractors may not acquire, rehabilitate, convert, lease, repair, dispose of, demolish, or construct real property or commit or expend program or local funds for PBV activities under part 983, until an environmental review is complete. However, there is no intent to prohibit an owner from acquiring a property before the owner enters the PHA’s property selection process under the PBV program.

Comment: A commenter stated that in proposed § 983.59 and elsewhere, there are provisions regarding the selection of PHA-owned units that are problematic, because the rule establishes up-front procedural hurdles that could be addressed in a less burdensome way by monitoring PHA performance. For example, initial rents must be based on an appraisal by a licensed and certified appraiser. Also, HUD has to approve in advance an independent entity that will perform rent reasonableness and housing quality standards (HQS) determinations. Another commenter stated that the PHA should be allowed to attach PBVs to PHA-owned units without a request for proposals or review by another entity. Similarly, a commenter stated it supported removing the requirement for independent appraisal of PHA-owned units, and stated that PHAs should have the option of allowing an owner to submit an independent appraisal of the requested rents as part of the project selection process.

Similarly, a commenter stated that ‘‘in a variety of ways, the proposed rule makes it extremely difficult for PHAs to expand the supply of publicly-owned affordable housing through use of project-based vouchers.’’ This commenter cites language primarily from the proposed § 983.59, as well as from proposed language concerning the competitive selection of units. A commenter stated that ‘‘* * * the best way to protect tenants and the public is not through front-end procedural barriers * * * but rather through subsequent monitoring of the outcomes. PHAs * * * should be trusted to comply with the law unless they are shown to have violated the trust.’’ This commenter suggested changes to §§ 983.51(e) and 983.59. The change to 983.51(e) would exempt units owned by the PHA from the review of the selection process, and would provide that the ‘‘selection of PHA-owned units will be deemed approved by the HUD field office if the field office fails to act within 30 days of receipt of the required information concerning the selection process.’’ The changes to § 983.59 would be to permit agencies of local government (in cases where the PHA is not part of the local government) to determine rent reasonableness and HQS compliance without HUD approval, and to permit PHAs to select an independent entity other than a unit of local government to perform the same function, also without HUD approval.

HUD Response: HUD has considered these comments, but does not adopt them. The proposed regulation governing PHA-owned units is not intended to reject the use of performance standards nor to impose a more administratively burdensome process than necessary, but rather to protect, to the extent possible, taxpayer dollars by ensuring that such dollars are appropriated fairly and without undue influence and favoritism. It should also be noted that the law requires that an independent agency inspect units and determine the reasonableness of rents in the case of PHA-owned housing under the tenant-based program. The law establishes these same requirements for the project-based component of the voucher program.

Subpart C (§§ 983.101–983.103) Comment: Proposed § 983.101

requires units to comply with HQS and lead-based paint regulations at 24 CFR part 35. A commenter stated, as to proposed § 983.101(c), that lead paint requirements at 24 CFR part 35, particularly at 24 CFR 35.720(c) and 35.730, which involve reporting by local health officials, could be problematic in



the PBV program. This commenter stated that the rule should be revised to require PHAs to give the local health department the addresses of all PBV units, and to require the PHA to notify each unit owner of their obligations. Also, unit owners need to be informed of their obligation to verify with the health department when they learn the information (about elevated lead levels) from a source other than local health officials.

HUD Response: These comments relate to matters beyond the scope of this rulemaking. Since the proposed rule did not involve the lead paint regulations, those regulations were not made available for public comment. A separate public rulemaking procedure would be required to address lead paint issues.

Comment: One commenter stated that HUD needs to define what qualifies as a unit generally complying with HQS. Two commenters stated that instead of requiring PHAs to inspect all units for HQS compliance prior to unit selection and again prior to HAP execution, the rule should give PHAs discretion to do only one inspection. One commenter also stated that if a project has a Real Estate Assessment Center (REAC) score higher than 60, it should not be necessary to do an inspection after each turnover. One commenter stated that it is unclear what steps a PHA must take to ensure that existing units comply with § 504 of the Rehabilitation Act of 1973 and the Fair Housing Act. One commenter stated that the requirement for inspection of a sample of units at least annually seems to conflict with the SEMAP requirement of inspecting each unit under contract at least annually.

HUD Response: HUD disagrees with the comments relating to a definition of general compliance with HQS, and with the comment relating to Public Housing Assessment System (PHAS) scores. Only in the case of selecting existing units, and for the purpose of defining them as existing units, must the PHA ensure that all of the units substantially comply with HQS. HUD has elected not to define what qualifies as a unit substantially complying with HQS since the units must comply fully with HQS prior to HAP execution. The law also requires that units be inspected for compliance with HQS, regardless of PHAS score. Furthermore, compliance of existing units under Section 504 of the Rehabilitation Act of 1973 and the Fair Housing Act is defined in 24 CFR Section 8 subpart C. HUD agrees with the comment regarding SEMAP. SEMAP scoring for inspections will be adjusted to remove all PBV units as reflected in the Public Housing Information Center

(PIC) from the annual inspection indicator.

Comment: Proposed § 983.103(d) requires an annual inspection of a random sample of 20 percent of all PBV units in each building of a project. Some commenters stated that inspections should be of a random sample of units in a project, rather than units in a building. One commenter stated that the section should be revised to require inspection of at least two units or 20 percent of the units, whichever is more. Alternatively, this section should restrict the random sample method to multifamily buildings. An inspection of only one unit in a small building does not provide enough of a sample. One commenter supported this section as proposed.

HUD Response: HUD considered the comments regarding random inspections of a project rather than a building, but is not adopting them. The statute requires annual compliance with inspection requirements except that the agency shall not be required to make annual inspections of each assisted unit in the development. HUD believes that the sample should be drawn on a building basis in order to get a good cross-section of the condition of the units in a project. HUD has interpreted the law by requiring at least 20 percent of the units in a building be inspected annually. A development or project could consist of several buildings and a random sample of the project or development would not necessarily ensure an inspection in each building. In response to the issue of sample size, HUD believes that the inspection of at least one unit in buildings where five or fewer PBV units are located is, due to the small number of units involved, an adequate sample.

Subpart D—Requirements for Rehabilitated and Newly Constructed Units (§§ 983.151–983.156)

Comment: Proposed § 983.152(c)(1)(ii) requires that the location of contract units be described in the agreement to enter into a HAP contract. One commenter stated that because units can float, it seeks confirmation that this provision requires identification of the building, not the exact unit.

HUD Response: The ‘‘location of the contract units on site’’ does refer to the location of the contract units in a building in which PBV units will be located and must be described in the HAP contract. Floating units are addressed in § 983.206.

Comment: Proposed §§ 983.153(a) and 983.55 require a subsidy layering review prior to execution of the Agreement by the owner and the PHA. Commenters

stated that subsidy layering analysis should be done prior to the Agreement only when some kind of governmental assistance is being provided to the project. ‘‘For instance, we do not think subsidy layering would apply where a PHA chose to use PBVs in a project that already has an FHA insured mortgage’’ and no new assistance. A commenter stated that subsidy layering requirements should be clarified and explained with a ‘‘clear road map’’ so as not to ‘‘chill’’ PHAs and developers.

HUD Response: The Final Rule retains the requirement for subsidy layering reviews because it is statutory. Section 102(d) of the Department of Housing and Urban Development Reform Act of 1989 (codified at 42 U.S.C. 3545) requires that the Secretary certify that ‘‘assistance within the jurisdiction of the Department’’ to any housing project shall not be more than is necessary to provide affordable housing after taking into account ‘‘other government assistance.’’

Comment: Proposed § 983.154(b)(3) requires the owner and the owner’s contractors and subcontractors to comply with applicable federal labor standards, and requires the PHA to monitor that compliance. One commenter stated that the rule should allow PHAs to work with other agencies that have an interest in the project to monitor compliance with the Davis- Bacon Act.

HUD Response: HUD considered this comment but did not adopt it because, although a PHA can subcontract any of its functions, the PHA is still ultimately responsible for monitoring to ensure that the owner and owner’s contractors and subcontractors comply with applicable federal labor standards (see HUD handbook 1344.1, Federal Labor Standards Compliance in Housing and Community Development Programs).

Comment: Two commenters stated that the conflict-of-interest provision in § 983.154(e) is too vague and needs additional definition.

HUD Response: The provisions of 24 CFR Section 982 subpart D apply to the project-based voucher program in accordance with Section 983.2(a). Specifically, Section 982.161 details conflict of interest provisions.

Comment: Proposed § 983.155(a) states that the Agreement must state the completion deadline and that the owner must provide evidence of completion. Three commenters stated that the completion deadline should be between the owner and PHA, not HUD. If the project is not completed, the owner will not get the PBVs. HUD should leave the completion determinations to the PHA.



HUD Response: HUD agrees with commenters that the completion deadline should be arranged between the owner and the PHA. Although HUD may specify additional documentation that must be submitted by the owner to evidence completion of the housing, the additional documentation must be submitted to the PHA, not to HUD.

Subpart E—Housing Assistance Payments Contract (§§ 983.201– 983.209)

Comment: One commenter stated that in the Special Mobility Program, landlords commit to a number of Section 8 units, but they may not know which specific units will be available. The requirement in proposed § 983.203(c) to identify the location of each contract unit may be difficult to meet. This commenter stated that the rule should be modified to allow HQS inspection and HAP amendment to occur as units become available, with adjustments to lease terms as needed.

HUD Response: The regulation as proposed resolves this issue, since it allows floating units. In § 983.206(a), at the discretion of the PHA, the HAP contract may be amended to substitute a different unit with the same number of bedrooms in the same building for a previously covered contract unit. HQS and rent reasonableness must be determined for the new units. Section 983.206(b), allows for amendment of the contract within 3 years of initial execution to add additional units in a building. Leases and HAP contracts do not run concurrently as in the tenant- based program.

Comment: A number of commenters disagreed with the provision for one- year extensions of HAP contracts in proposed § 983.205(b). These commenters stated that the length of extensions should be up to the PHA, and should be for up to the length of the initial term. Commenters stated that the statute allows longer extensions, and that the one-year limitation violates the statute. One commenter suggested that § 983.205(b) should be revised as follows:

In the initial contract, the PHA and owner may agree that, subject to appropriations, they will extend the term of the HAP contract prior to its expiration for a duration agreed upon by the parties if the PHA determines an extension is appropriate to continue providing affordable housing for low-income families and the owner has complied with the contract during the initial term. Subsequent extensions are subject to the same limitations.

Two commenters stated that annual extensions are too administratively burdensome. One commenter also stated

that contractors need an assurance of a longer term. Some commenters stated that one-year extensions could impede the ability of owners to obtain financing, and that the minimum extension should be five years. One commenter stated that the limitation increases the risk to investors who are risk-averse. Three commenters stated that the limitation may also interfere with using LIHTCs. One commenter also suggested that § 983.305(b) be revised to be extendable ‘‘for up to an additional 10 years.’’

One commenter stated that (as of the time of the comment) annual contributions contracts (ACCs) are only being extended for 3 months. This places the PHA in an awkward position to enter even into a one-year HAP with an owner.

HUD Response: HUD has considered all of the comments and agrees that renewal terms should be more than one year. Accordingly, PHAs will be allowed to approve extensions after the initial term on a five-year or shorter basis as determined by the PHA.

Comment: Proposed § 983.205(d) allows the owner to terminate a contract if the rent falls below the initial rent. In this case, families are given tenant- based assistance. A number of commenters disagreed with this provision.

Five commenters stated that instead of allowing the owner to terminate the contract if rent falls below initial rent, as provided in proposed § 983.205(d), the rule should not allow PHAs to reduce rents below initial rents. Two of these commenters stated also that the proposed rule is contrary to the statutory provision on rent adjustment and will discourage participation in the program. The statute delegates the determination of rent to PHA and owner, outside of HUD’s rulemaking power. Two commenters stated that the initial guidance provided by HUD requires rent adjustments only at the request of owner, and that an arbitrary reduction in rent based on a change in payment standard can create financial stress for the property. One commenter stated that the rule should clarify whether, if the HAP contract is terminated under § 983.205(d), the tenants are eligible to receive enhanced or regular vouchers. Two commenters stated that although the rule protects tenants if rents are reduced and the owner opts out, it may endanger the project because converting the assistance to tenant-based removes a unit and would limit the units available for the intended population and threaten the viability of the project. The rule should remove disincentives for the owner to participate and protect funders

by modifying § 983.301(a)(3) to provide that rents are redetermined at the request of the owner, and deleting §§ 983.205(d) and 983.302(c).

HUD Response: HUD has considered all of the comments and has addressed changes to rent adjustments in § 983.302. However, HUD believes that the law is very specific for setting rents and that HUD lacks the ability to limit rent reductions. Should the owner terminate the HAP contract in accordance with § 983.205(d), families are eligible to receive the same regular (not enhanced) tenant-based vouchers for which they are eligible, at their request, after living in a project-based unit for 12 months.

Comment: One commenter stated that the proposed rule provides that units do not float. PBV units should be permitted to float within a building or development so long as the PHA meets HUD requirements. This commenter suggests new language for 983.206(a):

At the discretion of the PHA and subject to all PBV requirements, the HAP contract may permit PBV units to float within a building or development. The owner must maintain the same number of units and the same number of bedrooms. Prior to attaching PBV subsidy to a unit within a building or development, all PBV requirements must be met, including an inspection confirming that the unit meets HQS standards and a rent reasonableness determination.

One commenter supported a provision to amend the HAP contract by allowing units to ‘‘float.’’ It should be made clear that this should only be done at turnover or where families lose assistance due to being over income to prevent displacement, and there should be safeguards against replacement of accessible units with non-accessible ones. One commenter stated that the rule should not require HAP contract amendments when, because of administrative burden, units are added or substituted. Another commenter stated that allowing units to be substituted ‘‘is a great enhancement.’’ However, the commenter stated that the restriction of substitutions to 3 years after HAP execution (§ 983.206(b)) should be removed, to allow the PHA to help an additional family in cases where the assistance drops to zero but the family prefers to stay in the unit and pay market rent.

HUD Response: HUD believes the flexibility sought by the commenters already exists and therefore is not adopting the proposed change to § 983.206(a). In § 983.206(a), at the discretion of the PHA, the HAP contract may be amended to substitute a different unit with the same number of bedrooms in the same building for a



previously covered contract unit. Further restrictions regarding ‘‘floating’’ units is not necessary since substituting units must be in compliance with all PBV requirements. HUD believes that units cannot be assisted without a contractual agreement obligating the assistance necessitating a revision to the HAP contract. Section 983.206(a) does not restrict the substitution of units to three years. The three-year limit applies only to adding new units to the original PBV contract.

Comment: Proposed § 983.206(c) states that even if contract units are placed under the HAP contract in stages commencing on different dates, there is a single annual anniversary for all contract units under the HAP contract. Five commenters stated that in order to protect against displacement and transition to lower-income families over time, HUD should change its position that there is a single anniversary date for all units under HAP contract within the full term of the contract. One of these commenters stated that some proposals may require a complex transition of units into the program over time. The PHA and owner should be able to structure the admission requirements in the PHA’s administrative plan in a manner to best serve both current residents and those on the PHA waiting list.

HUD Response: HUD does not accept that in order to protect against displacement and transition to lower- income families over time, HUD must change its position on a single anniversary date for all units under one HAP contract. The commenter did not elaborate on how the same anniversary date for all units under the same contract would displace and transition lower-income families. Once units are accepted into the program, they are placed under a HAP contract. Eligible current residents are given priority for admission in accordance with 983.251(b).

Comment: Proposed § 983.209 requires the owner to certify to certain matters. Three commenters stated that the owner may not be able to certify that each unit receiving assistance is occupied by a family referred by the PHA because some families receiving assistance due to displacement provisions will not have been referred by the PHA.

HUD Response: In response to these comments, HUD will clarify that only families referred by the PHA may be assisted. Section 983.251(b) protects in- place families by providing a priority for admission to the PBV program. However, these families must also be

determined eligible by the PHA and referred to the owner by the PHA.

Comment: One commenter stated that the prohibition on renting to the owner’s relatives in proposed § 983.209(e) should be subject to an exception when necessary to make a reasonable accommodation, as in current 24 CFR 982.306(d).

HUD Response: The comment was not adopted. HUD intentionally differentiates in this case between the tenant-based voucher and project-based voucher programs. To allow an owner of a project-based voucher development to rent to close family relatives (whether disabled or not) creates a systematic incentive to owners to misuse the program. Persons requesting a reasonable accommodation in policies in order to effectively participate in the housing choice voucher program are not harmed by restricting the exception to renting to relatives to the tenant-based program.

Subpart F—Occupancy (§§ 983.251– 983.261)

Comment: Proposed § 983.251 regulates how families are selected for the PBV program. Commenters stated that the PHA and the owner should be able to structure the admission requirements to best serve both current residents and those on the waiting list. While generally supporting the anti- displacement provision (§ 983.251(b)(2)), the commenters stated that this provision should be revised in the final rule to allow discretion in providing current families with PBV assistance. A commenter also stated that owners and PHAs should be given the flexibility to lease units on a rolling basis in compliance with the PHA’s waiting list policy. Owners should be able to contract for the maximum number of units needed to accommodate the greatest number of eligible households in a way that can be financially supported over time.

HUD Response: HUD does not agree with these comments. Eligible in-place families should not be penalized if units in the building are selected to receive project-based assistance. However, project-based assistance is limited to 25 percent of the units in a building which means that not all of the eligible families in the building can receive project-based voucher assistance. However, eligible in-place families must be given an absolute preference on the waiting list for units that become available.

Comment: Regarding proposed 983.251(a)(1), one commenter stated that public housing families should have the choice to move to PBV units

without having to put themselves on a separate Section 8 waiting list.

HUD Response: The comment was not accepted because the statute governing the project-based voucher program requires that PHAs select families to receive project-based assistance from its waiting list.

Comment: A number of commenters stated that they support protection for in-place families provided in § 983.251(b). One of these commenters stated that this provision would help prevent families from becoming homeless. Another commenter stated that an eligible family should have a choice between a voucher or relocation benefits. Another commenter stated that eligibility should be determined at the HAP execution stage, so that a family could become eligible during construction, and that HUD should consider making the residency determination at the proposal acceptance stage. Since the units can float, any ineligible units can be switched at the time of execution of the HAP contract. This commenter also stated that HUD should disregard in- place families when assessing a PHA’s compliance with income-targeting requirements since these tenants are already in occupancy and constitute a continuing tenancy. Another commenter stated that it supports the minimizing displacement provision; however, because existing units will now be eligible for PBV, the ‘‘inclusion of minimizing displacement should be available to the families of existing units selected for PBV.’’ Another commenter, while expressing general support, also stated that some in-place families might not be appropriate for the project. For example, the in-place family may be a single individual and the project may be for chronically mentally ill homeless individuals. Another commenter stated that it supports approving existing housing with tenants in place. Otherwise, the supply of housing would be limited, and issues of preference usually get resolved on turnover. ‘‘The benefits outweigh the slowing down of assistance to those on the waiting list.’’

HUD Response: The suggestion regarding a choice between a voucher and relocation benefits was not adopted. This is because relocating an in-place family in these circumstances would be inconsistent with HUD’s policy to minimize displacement. An in-place family cannot otherwise be placed ahead of others on a PHA’s waiting list unless a PHA develops such a preference. The comment regarding establishing eligibility at the time of HAP execution would not be consistent with HUD policy to minimize



displacement and protect in-place tenants. Providing such protection is appropriate only when a decision is made to provide PBV assistance. It is for this reason that HUD determined that an in-place family must be eligible on the proposal selection date. The suggestion involving choosing appropriate in-place families cannot be considered because it would be inconsistent with civil rights laws. Specifically, the PHA’s administrative plan cannot provide for a selection preference for the program based on a specific disability.

Comment: Two commenters stated that priority for in-place families for assistance needs to be balanced against the needs of the families on the waiting list, and suggests limiting the number of prioritized in-place families to 20 to 30 percent of the total. One commenter advocated ‘‘allowing owners some discretion in determining which families are eligible for PBV assistance, consistent with administrative plan and waiting list policies.’’ Another commenter stated that the section clarifying that PHAs must offer assistance to eligible in-place tenants who occupy proposed contract units will facilitate the use of PBVs to preserve existing housing. However, the rule should give PHAs the flexibility, between the time the Agreement and HAP are executed, to substitute new tenants as the in-place tenants. Also, PHAs should be allowed to select units with ineligible tenants and move the tenants to appropriate units. A commenter stated that the PHA should have flexibility to offer tenant-based vouchers to in-place families. Also, the rule should clarify whether in-place families have priority for the program or the particular project they occupy. A commenter stated that from a practical perspective, it will not ordinarily be necessary to use occupied units in partially assisted developments because of turnover. While there may be meritorious cases for using an occupied unit, a PHA could use this provision to steer assistance toward favored sites and tenants.

HUD Response: The suggestion to provide priority for only 20 to 30 percent of in-place families is contrary to HUD policy to minimize displacement. The law requires that PHAs determine eligibility of families under the project-based voucher program and PHA selection of families from the waiting list. The PHA must give in-place families that are eligible for assistance a selection preference to minimize displacement. When such families move out of the PBV unit, the unit will then become available for a waiting list family.

Comment: Proposed § 983.251(c) governs the selection of families from the PBV waiting list. One commenter stated that the rule should allow for preferences for persons with disabilities for units in which disabled individuals will be receiving specialized services if the persons are recognized by Congress as a protected class because of their disabilities. Placing preferences for these recognized classes would minimize the need for waivers. Another commenter stated that HUD, in supportive housing with ‘‘wraparound services,’’ should allow PHAs and owners to select the applicants who need the services and allow preferences based on eligibility for services offered at specific complexes. Another commenter stated that ‘‘in some circumstances, supportive housing projects that serve people with disabilities that grant preference to applicants who are eligible for the supportive services offered may be entirely appropriate * * *’’

HUD Response: HUD agrees with the commenters. HUD is revising this final rule to allow a selection preference for disabled persons in need of the services offered at a particular PBV project.

Comment: Proposed § 983.251(c)(3) provides for project or building-specific waiting lists. Three commenters stated that they support project-specific waiting lists. One commenter stated that it supported selection criteria for individual projects. Two commenters stated that ‘‘we applaud the proposed rule’s clear statement that a PHA may maintain project-specific waiting lists, a policy that is essential for permanent supportive housing to operate efficiently.’’ Another commenter stated that it supports separate waiting lists for PBV units.

HUD Response: HUD agrees with the commenters. The rule gives PHAs the ability to establish project-specific waiting lists.

Comment: Two commenters objected to the income-targeting provision in proposed § 983.251(c)(6). One stated that the PBV program will create disincentives for PHAs because this section would require that 75 percent of families be extremely low-income. This will result in higher assistance payments and fewer families being served. Another commenter stated that income targeting should be removed entirely. It is not in line with upcoming budget reductions and does not allow PHAs to make decisions on how to spend their funding.

HUD Response: HUD has considered these comments but declines to adopt them for the following reason. Section 8(o)(13)(J) makes the statutory

requirements governing income targeting applicable to the project-based voucher program. The income targeting requirements are program-wide requirements. PHAs need not apply the requirements on a project-by-project basis.

Comment: Commenters stated that § 983.251(c) should be revised to allow for preferences based on eligibility for supportive services being offered, while at the same time preserving, for persons with disabilities, the principle that participation in supportive services is voluntary. Two commenters agreed with preferences based on eligibility for supportive services and stated that the civil rights concepts embodied in Section 504 and part 982 regulations should be preserved in this rule.

These commenters recommended an additional paragraph be added to proposed § 983.251(c) providing that ‘‘in appropriate circumstances to be determined by the PHA in its PHA plan * * * the PHA may adopt preferences on its project-specific lists for families who are eligible for the services to be offered in conjunction with an individual project, building, or set of units. However, the owner must permit occupancy by any qualified person with a disability who could benefit from the housing or services provided, regardless of the person’s disability.’’

HUD Response: HUD agrees. The final rule allows a selection preference for disabled persons in need of the services offered at the PBV project.

Comment: Proposed § 983.251(c)(5) provides that ‘‘the PHA may place families referred by the PBV owner on its PBV waiting list.’’ One commenter stated that this section should clarify that the PHA may not provide owner- referred families with any admission rights not enjoyed by other families. Otherwise, the owners would become the gatekeepers for the PBV program. This, the commenter argued, would be inappropriate. Another commenter stated that this section and proposed § 981.251(c)(3) (providing for separate project or building waiting lists) essentially negate (c)(1) (providing for selection from the PHA waiting list), and allow landlords to make referrals to a site-based list that can have its own preferences. This appears inconsistent with the statute and would allow individuals referred by the landlord to jump over the community-wide waiting list. Unlike public housing, there is no provision for civil rights monitoring of these lists. This commenter recommended certain revisions:

In proposed § 983.251(c)(3), strike the last sentence reading, ‘‘In either case, the waiting list may establish criteria or



preferences for occupancy of particular units.’’

Revise proposed § 983.251(c)(5) to read, ‘‘Subject to its waiting list policies and selection preferences specified in the PHA administrative plan, the PHA may place families referred by the PBV owner on its PBV waiting list.’’

HUD Response: HUD has considered these comments and believes that the commenters misunderstood HUD’s intent. The PHA must administer its waiting list in accordance with its administrative plan that governs admission policies. The PHA may establish preferences for selecting families from its waiting list. The law governing the PBV program requires that families be selected from the PHA’s waiting list and allows the PHA to place on its waiting list families referred by an owner. The statute further provides that a PHA may maintain a separate waiting list for a particular project.

Comment: Proposed § 983.251(c)(7) provides that in selecting families to occupy PBV units with special accessibility features for persons with disabilities, the PHA must first refer to the owner those families that require such features (see 24 CFR 8.26 and 100.202). A commenter stated that this section should also include material regarding the owner’s duties in connection with families that require accessibility features.

HUD Response: This commenter’s suggestion was not adopted since a requirement to provide materials regarding owner’s duties in connection with families that require accessibility features is beyond the scope of this rulemaking.

Comment: A commenter stated that the waiting list system should allow owner referrals during times of under- utilization and PHA referrals to owners during times of over-utilization. Another commenter stated that the rule should remove the requirement to use the PHA’s waiting list when the project serves homeless or special needs populations, as such populations are not well-served by using PHA waiting lists.

HUD Response: The rule retains the proposed rule language. The statute requires that the PHA maintain waiting lists for project-based units. However, the PHA may use separate waiting lists for PBV units in individual projects or buildings or may use a single waiting list for the PHA’s whole PBV program. PHAs may also give a selection preference for homeless individuals and homeless families.

Comment: Commenters stated that there is nothing in the rule to cover tenants who become over-income. This commenter states that there should be a

6-month grace period as in the tenant- based program, citing § 982.455 (which provides that the HAP contract terminates 180 days after the last housing assistance payment to the owner). Income changes may be temporary, or the family could relocate to a unit with higher gross rent for which they are eligible. One commenter states that a sentence should be added to proposed § 983.259 that reads ‘‘if a family is over-income, subsidy shall be suspended for six months.’’

HUD Response: HUD disagrees that there should be a 6-month grace period for families that no longer require housing assistance in a PBV unit. The provisions of Section 982.455 do not apply to the PBV program. If a unit is occupied by a family for which housing assistance is no longer required, the PHA has the option of removing this unit from the HAP contract or substituting the unit with a comparable unit in the building for occupancy by another eligible family in need rather than hold off on the use of the assistance for six months.

Comment: Proposed § 983.254(b) provides that if any contract units have been vacant for a period of 120 or more days since owner notice of vacancy, the PHA may give notice to the owner amending the HAP contract to reduce the number of contract units by subtracting the number of contract units (by number of bedrooms) that have been vacant for such a period. One commenter stated that HUD should clarify that this reduction is not the same as termination of the HAP, but merely an adjustment to the payment. In addition, HUD should make clear that the PHA would still have the duty to fully utilize its Section 8 funding in some manner, such as in the tenant- based program. The commenter based this argument on 42 U.S.C. 1439(a) and 42 U.S.C. 1437f(o)(K). One commenter stated that it should be more clearly stated that the PHA may not reduce the units under HAP contract if the units have been vacant 120 days or more due to the PHA’s failure to refer a sufficient number of families to owner.

HUD Response: HUD has considered the comment, but is not adopting it for the following reasons. HUD believes that the regulation is clear upon scrutiny. A reduction in the number of units under the PBV HAP contract is not synonymous with termination of the HAP contract. Funding utilization is the responsibility of the PHA regardless of whether the vouchers are project-based or tenant-based. Since the owner can refer families to the PHA’s waiting list for PBV, HUD disagrees that units should not be removed from the HAP

contract if the units have been vacant 120 days or more due to the PHA’s failure to refer a sufficient number of families to the owner. Additionally, subject to a PHA’s policy on vacancy payments, an owner is not receiving subsidy on units that remain unoccupied and the PHA can remove such units from the HAP contract.

Comment: Proposed § 983.256(c)(3) states that the lease must state ‘‘the term of the lease (initial term and any provision for renewal).’’ One commenter stated that this section should be revised to require a renewal provision in the lease or tenancy addendum.

HUD Response: The lease used in the PBV program is comparable to lease requirements in the tenant-based program. HUD does not require specific renewal provisions in the lease or tenancy addendum since this is a matter of local rental practice and is up to the owner.

Comment: Proposed § 983.257 states that ‘‘Section 982.310 of this chapter applies with the exception that § 982.310(d)(1)(iii) and (iv) does not apply to the PBV program. (In the PBV program, ‘‘good cause’’ does not include a business or economic reason or desire to use the unit for personal, family, or a non-residential rental purpose.)’’ Two commenters stated that ‘‘we do not understand why in the PBV program it would not be good cause to terminate a tenancy for business or economic reasons similar to the voucher program.’’

HUD Response: In the tenant-based program, each HAP contract is for a specific unit. In the project-based program, most HAP contracts will be for more than one unit. Since HAP contracts under the PBV program will be for multiple units, the owner cannot claim a business or economic reason to terminate a tenancy since the unit is obligated, under any HAP contract, to be an assisted unit for the term of the contract. The regulation provides, however, that if the owner terminates a lease without good cause, the unit must be removed from the housing assistance payments contract.

Comment: Two commenters stated that HUD should use 24 CFR part 247 (which applies to section 221(d)(3) and (d)(5) below market interest rate projects; projects under section 236 of the National Housing Act; and projects under section 202 of the Housing Act of 1959) as the rule for termination. Part 247 requires good cause for termination, and the proposed section does not. Under the proposal, an owner can in effect capriciously remove a tenant from the PBV program and force the tenant into the tenant-based program. One



commenter also stated that as an alternative, if HUD does not adopt the standard in 24 CFR part 247, HUD should add a clause in § 983.256 of this final rule that would require owners to offer lease renewal unless they have good cause to do otherwise. One commenter also stated that good cause should be required for termination of tenancy.

HUD Response: The final rule clarifies provisions on lease termination in response to comments. As a general matter, 24 CFR 982.310 (other than paragraphs (d)(1)(iii) and (iv)) applies and describes the events that constitute good cause for lease termination. Final § 983.257(b) describes the owner’s options upon lease expiration: To renew the lease; refuse to renew for ‘‘good cause’’ as defined; or refuse to renew without good cause, in which case the PHA would provide the family with a tenant-based voucher and remove the unit from the HAP contract. In this latter case, the unit would be removed from the PBV HAP contract. HUD believes that these changes clarify the issue.

Comment: Proposed § 983.259 provides that if the PHA determines that a family is occupying a wrong-size unit, the PHA must offer the family the opportunity to receive continued housing assistance in another unit. This assistance may be in the form of another Section 8 project-based unit, tenant- based voucher assistance, or other comparable project-based or tenant- based assistance.

Two commenters stated that wrong- size unit termination provision is unfair to the project when the fault is with the family and not the owner. The owner should be able to evict the family under these circumstances. The same should apply when the PHA offers the family other comparable assistance and the family fails to act on the offer.

Referring to relocation from a wrong- size unit, a commenter stated that tenants should have more choice of the replacement assistance to be provided and the right to reject a unit for good cause, and that the rule should require the PHA to offer an appropriately sized affordable unit. Also, if an appropriate alternate unit is identified, the tenant should have an opportunity to reject the unit for good cause. This commenter asks that current § 983.205(b), which provides many of these features, be retained in this rule.

HUD Response: HUD considered but did not adopt these comments for the following reasons. Although the owner may evict a family in accordance with the lease, the PHA must terminate assistance for any unit occupied by an ineligible family once sufficient time is

provided on a tenant-based voucher, or another form of comparable assistance is offered to the family and then refused. HUD disagrees that a family should have the right to reject the offer of another PBV or comparable unit for cause, as that would prolong the time until the unit could be made available to another needy family. However, the regulation in Section 983.259(c)(2) does not preclude the PHA from establishing a policy on unit offers when offering another form of continued housing assistance.

Comment: Proposed § 983.260 gives the family a right to move with tenant- based assistance after one year in the project-based unit. One commenter stated that the occupancy period before the option to move should be extended to two years, because many project- based programs have a supportive services option that goes beyond one year. In addition, other project-based units should be given as a moving option. Finally, the rule should include tenant protection so that tenants don’t pay more rent than they would in the voucher program. Another commenter stated that this provision should be changed in the case of transitional supportive housing so that the tenant is encouraged to complete the tenant’s services plan before moving. Also, the PHA should be able to substitute other comparable housing. Another commenter stated that it supported the option to move after 12 months, however, there should be stronger language requiring owners to fulfill their PBV commitments before issuing vouchers to families that wish to move, and the PHA must have sufficient funding to fill the vacated unit. One commenter stated that it supports the ability of a family to leave with a tenant- based voucher because it will be an incentive to participate in transitional housing programs.

HUD Response: The right of tenants to move after one year is statutory and cannot be revised in the manner suggested. Transitional housing is not a factor because, as noted above, transitional housing often has requirements incompatible with this aspect of the PBV program, and hence is not eligible for assistance under this program.

Comment: Three commenters stated that the provision allowing families to move after 12 months should be eliminated. It will complicate waiting lists, contradict PHA preferences, and restrict capacity for assistance. Owners may be reluctant to participate knowing they could lose their tenants in a year, and families could circumvent the tenant-based waiting list. It adversely

impacts the PHA and allows applicants to jump the waiting list.

HUD Response: Tenant mobility after 12 months is a statutory requirement and cannot be eliminated. However, when the family moves out of a unit with project-based assistance, the PHA is required to refer other families to the owner to be selected to occupy vacated units.

Comment: Proposed § 983.260(a) would have provided that ‘‘if the family terminates the assisted lease before the end of one year, the family relinquishes the opportunity for continued tenant- based assistance.’’ A commenter stated that there should be good cause exceptions allowing family to move within the first year.

HUD Response: The comment is not adopted. The statute provides only for continued assistance under the tenant- based voucher program or other comparable assistance after the family has occupied the dwelling unit under a PBV HAP contract for 12 months. This final rule places this statement in a new § 983.260(d).

Comment: Commenters stated that, to follow § 504 and HUD’s ADA regulations and avoid unnecessary concentration and isolation of persons with disabilities, the rule should adopt project size limits for persons with disabilities similar to the 811 program Notice of Funding Availability (NOFA). These commenters suggested a new § 983.263 be added setting size limits for buildings serving disabled persons. Independent living projects would be capped at 24 PBV units serving persons with disabilities. Group homes serving persons with disabilities would be capped at six PBV units. The language would also include criteria for the HUD field office to grant exceptions to these limits.

HUD Response: HUD disagrees with comments that would unduly restrict the PBV program by limiting the size of buildings or group homes occupied by persons with disabilities.

Comment: Proposed § 983.261(c) provides that a family residing in an excepted unit that no longer meets the criteria for a ‘‘qualifying family’’ in connection with the 25 percent per building cap exception must vacate the unit within a reasonable period of time established by the PHA. Four commenters stated that the rule should also state that a family in an excepted unit (that is, a unit excepted from the 25 percent cap on project basing) not in compliance with its FSS obligations can be evicted.

HUD Response: The law requires that excepted units must be made available to families that receive services. If the



family no longer qualifies for the excepted unit because it is in noncompliance with its obligations to receive supportive services, the PHA may terminate assistance on that basis. (See final § 983.261(c)). If a family at the time of initial tenancy is receiving, and while the resident of an excepted unit has received, FSS supportive services or any other supportive services as defined in the PHA administrative plan, and successfully completes the FSS contract of participation or the supportive services requirement, the unit continues to count as an excepted unit for as long as the family resides in the unit. (See final § 983.261(d)).

Subpart G—Rent to Owner (§§ 983.301– 983.305)

Comment: A commenter stated that ‘‘we do not favor the proposed rent limits,’’ that is, the higher of 110 percent FMR or the HUD-approved exception rent. These limits are too restrictive, and will limit project basing to the lower end of the market and interfere with income mixing. Another commenter agreed and stated that while there are sharp reductions in payment standards due to budgetary concerns, FMRs are not falling. The program will not attract quality developers and favorable financing. Two commenters stated that the statute allows for a different payment standard, as well as a higher payment standard, as long as the rent reasonableness test is met. Two other commenters stated that they object to § 983.301(b)(1) as unjustifiably eliminating flexibility to use a higher range of payment standard in particular cases. Such a rule will reduce the willingness of landlords to enter the program and thus have the opposite effect of encouraging PHAs to set higher payment standards across the board, potentially increasing overall costs. One of these commenters stated that §§ 983.205(d) and 983.302(c) should be deleted, and §§ 983.301(a)(3) and 983.301(b) should be revised to read as follows (new material is in italics):

§ 983.301(a)(3): The rent to owner is redetermined at the request of the owner and not more frequently than the annual contract anniversary in accordance with this section and § 983.302.

§ 983.301(b): ‘‘Amount of rent to owner. Except for certain tax credit units as provided in paragraph (c) of this section, the rent to owner must not exceed the lowest of:

(1) 110 percent of the fair market rent for the unit bedroom size minus any utility allowance;

(2) The reasonable rent; or

(3) The rent requested by the owner; except that the rent to owner never is required to be less than the initial approved rent to owner.

Another commenter also stated that the rents should be required to be redetermined only at the request of the owner and that the requirement to annually redetermine rent be removed.

HUD Response: The final rule provides that the rent to owner may be established in accordance with the statutory maximum. Thus, the final rule provides at Section 983.301(b):

Amount of rent to owner. Except for certain tax credit units as provided in paragraph (c) of this section, the rent to owner must not exceed the lowest of:

(1) An amount determined by the PHA, not to exceed 110 percent of the applicable fair market rent (or any exception payment standard approved by the Secretary) for the unit bedroom size minus any utility allowance;

(2) The reasonable rent; or (3) The rent requested by the owner. Comment: One commenter stated that

the rent provisions take away the PHA’s flexibility to set rents by limiting the rents to the existing tenant-based payment standard. By statute, PHAs have authority to raise the rent to the higher of 110 percent of FMR or the PHA’s payment standard. Two commenters stated that in economically robust areas the maximum rent of 110 percent of FMR is more appropriate, and rent reasonableness checks will keep a PHA from overpaying. Three other commenters made similar comments.

HUD Response: The commenters’ concerns have been addressed in the HUD response immediately above.

Comment: One commenter stated that proposed § 983.301(a)(3) should be rewritten to state: ‘‘The rent to owner is determined at the request of the owner and not more frequently than the annual contract anniversary in accordance with this section and § 983.302.’’

HUD Response: The final rule addresses the commenter’s concern. It provides that the rent to owner shall be redetermined when the owner requests an increase in the rent to owner at the annual anniversary of the HAP contract or when there is a 5 percent decrease in the published FMR.

Comment: Two commenters stated that limiting rents to the PHA payment standard means that if the payment standard is reduced, rents must be reduced. This provision of the rule seems contrary to the statutory provision on rent adjustments (8)(o)(13)(I)). If this provision remains it would likely discourage owner willingness to accept PBV contracts. In addition, lack of rent stability would

make it hard to leverage additional financing.

A number of commenters stated that § 983.301(b) should state that the PHA may establish a separate payment standard for a PBV project.

HUD Response: HUD agrees and is adopting an FMR-based standard as described in the above responses.

Comment: Proposed § 983.301(c) provides for a different rent-to-owner calculation for certain LIHTC units. Three commenters stated that the higher rent for LIHTC units appears to apply only when there are LIHTC units not receiving PBV assistance. This appears to prohibit the higher tax credit rent for buildings that are 100 percent PBV. These commenters stated that for projects for the elderly, persons with disabilities, and families receiving supportive services, HUD should determine what the maximum tax credit rent would be and set the rent accordingly. One commenter stated that the rule runs counter to the Department’s existing treatment of Section 8 assistance in conjunction with LIHTCs. As currently proposed, the rule would lead to concentration in qualified census tracts. Low-income families need services and those services must be supported by project rents. This commenter recommends that HUD adhere to its existing treatment of Section 8 assistance with LIHTCs in PIH notices 2003–32 and 2002–22.

HUD Response: HUD has determined that it is inappropriate to allow owners to collect higher rents from voucher families than they are allowed to collect from tax credit families. HUD has determined that allowing higher rents would result in a duplicative subsidy. Accordingly, LIHTC projects under 24 CFR 983.304(c)(1)(v) will be treated in the same manner as Section 236 and Section 221(d)(3) below-market interest rate (BMIR) projects. HUD believes that the rule text, as drafted, accurately reflects the language of § 8(o)(13)(H) of the 1937 Act (42 U.S.C. 1437f(o)(13)(H)).

Comment: One commenter stated that proposed § 983.301(f)(2) (providing that the PHA may not apply different payment standard and utility allowance amounts in the project-based and tenant-based programs) is inconsistent with the statute.

HUD Response: HUD considered the comment regarding utility allowance schedules, but is not adopting it. The final rule provides that the PHAs may not establish rents under the PBV program that differ from the PHAs’ tenant-based payment standards. The statute governing the PBV program is silent on utility allowance schedules. Utility allowance schedules are



determined based on community rates and average consumption. It is therefore not necessary to establish separate utility allowance schedules for the PBV program.

Comment: Proposed § 983.302 provides for an annual redetermination of the rent to owner prior to the annual anniversary of the HAP contract. A number of commenters stated that § 982.302(c) should be deleted from the rule because it is contrary to statute and would discourage owners, lenders, and investors from program participation. This section states that if the annual redetermination shows that the rent to the owner has decreased, the actual rent to the owner must be decreased regardless of whether the owner has requested an adjustment.

HUD Response: HUD disagrees with the interpretation that the proposed § 983.302(c) is contrary to the statute. HUD believes that any rent adjustments under the statute may not exceed the maximum permitted under the law (i.e., an amount determined by the PHA, not to exceed 110 percent of the applicable FMR (or any exception payment standard approved by the Secretary)) and that the statute does not limit adjustments to upward adjustments. Nonetheless, to accommodate the commenter’s concerns, the final rule provides that upon an owners request for a rent adjustment or when there is a 5 percent or greater decrease in the published FMR, rents shall be redetermined.

Comment: In proposed § 983.301(c)(3) on LIHTC rents, the word ‘‘chargeable’’ would be better than the word ‘‘charged’’ in the phrase ‘‘the ‘tax credit rent’ is the rent charged for comparable units of the same bedroom size* * *’’ HUD Response: The comment was considered but not adopted. The use of the word ‘‘charged’’ appropriately conveys the definition of tax credit rent that the owner is collecting for the unit.

Comment: Proposed § 983.303 provides that the rent to owner must not exceed the reasonable rent as determined by the PHA. Three commenters, while agreeing that rents are subject to the rent reasonableness test, stated that the rule establishes numerous times at which the PHA must determine rent reasonableness. This, the three commenters argued, is unduly burdensome and will inhibit participation in the program by lenders and investors. HUD should require only an annual determination, they argued. Another commenter stated that a rent comparability study should be conducted initially and then once every 5 years, except where an upward rent adjustment is proposed. No statutory

section requires annual redeterminations of rent during a contract unless rents are increased. One commenter stated that PHAs should be required only once a year to determine rent reasonableness and at the time a new PBV contract is executed. Another commenter stated that two comparables, rather than three, should be required. Another commenter stated that rent, once determined to be reasonable, should not be redetermined at no less than 3-year intervals. Another commenter stated that the requirement that rents be redetermined annually will result in reduced rent to the owner if the payment standard is reduced. This is contrary to section 8(o)(13)(I) of the 1937 Act, which delegates rent determinations to the PHA and to the owner. Furthermore, this provision will make it difficult to use PBV with HOME funds because it is inconsistent with HOME regulations.

HUD Response: The final rule retains the requirements concerning rent reasonableness determinations. Section 8(o)(10)(A) of the United States Housing Act of 1937 requires that rents under the program be reasonable. The implication is that rents must be reasonable at all times. The circumstances under which a PHA is required to redetermine rent reasonableness under the PBV program are not overly burdensome. The final rule also retains the requirement that three comparables must be used. Three comparables, as opposed to two, will more accurately reflect market rental conditions.

Comment: Proposed § 983.304 provides that in the case of projects with HOME funds or other subsidies, the PBV rent may not exceed the rent permitted under the other subsidy program. Four commenters stated objections to this section. This section would appear to authorize PHAs to continue an ongoing subsidy layering review that would create uncertainty with respect to rent levels and discourage participation by private lenders and investors. Two commenters stated that an owner interested in preservation should be able to seek a waiver to allow a Section 236 subsidy in a partially assisted Section 8 project to be allocated to the units with no Section 8 assistance. These commenters state that in § 983.304(b)(2) the words ‘‘subsidized’’ and ‘‘(basic rent)’’ should be deleted. One commenter stated that § 983.304(d) lacks clarity and suggests a revision to § 983.304(d)(the new material is in italics):

‘‘At its discretion, a PHA may reduce the initial rent to owner to reflect the assumptions used in the award of other subsidy, including tax credit or tax

exemption, grants, or other subsidized financing.’’

HUD Response: Rents at projects receiving other forms of subsidy (e.g. Section 236) combined with project- based voucher assistance are restricted to the rent restrictions of the applicable subsidized program. Thus, the PBV rent may not exceed the subsidized rent established under the procedures for other subsidized programs.


Comment: Proposed § 983.351(b) provides for monthly payments to the owner for each unit that complies with HQS and is leased to and occupied by an eligible family. Four commenters stated that this provision should also indicate that the PHA will include any vacancy payments that it has previously agreed to provide in its monthly assistance payment to the owner.

HUD Response: HUD has considered this comment and is not adopting it. Section 983.351 is titled ‘‘PHA payment to owner for occupied unit (emphasis added).’’ Units for which an owner is receiving vacancy payments are not occupied and are discussed in Section 983.352.

Comment: Proposed § 983.352(b) provides for vacancy payments at the discretion of the PHA. One commenter stated that vacancy payments should be mandatory for all PHAs.

HUD Reponse: The statute governing the PBV program requires that if the HAP contract allows for vacancy payments, that such payments may be made at a PHA’s discretion.

Findings and Certifications

Executive Order 12866, Regulatory Planning and Review

The Office of Management and Budget (OMB) reviewed this rule under Executive Order 12866 (entitled ‘‘Regulatory Planning and Review’’). OMB determined that this rule is a ‘‘significant regulatory action,’’ as defined in section 3(f) of the Order (although not economically significant, as provided in section 3(f)(1) of the Order). Any changes made to the rule subsequent to its submission to OMB are identified in the docket file, which is available for public inspection between the hours of 8 a.m. and 5 p.m. in the Office of Regulations, Room 10276, Department of Housing and Urban Development, 451 Seventh Street, SW., Washington, DC 20410.

Regulatory Flexibility Act

The undersigned, in accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 605(b)), has reviewed and



approved this rule, and in so doing certifies that this rule will not have a significant economic impact on a substantial number of small entities. This final rule is exclusively concerned with PHAs that administer tenant-based housing assistance under section 8 of the United States Housing Act of 1937. Specifically, the rule would give PHAs the option of project-basing up to 20 percent of their annual budget authority under the tenant-based program. Under the definition of ‘‘Small governmental jurisdiction’’ in section 601(5) of the RFA, the provisions of the RFA are applicable only to those few PHAs that are part of a political jurisdiction with a population of under 50,000 persons. The number of entities potentially affected by this rule is therefore not substantial.

Environmental Impact A Finding of No Significant Impact

with respect to the environment was made at the proposed rule stage in accordance with HUD regulations at 24 CFR part 50, which implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332). This Finding of No Significant Impact remains applicable and is available for public inspection between the hours of 8 a.m. and 5 p.m. weekdays in the Office of Regulations, Office of General Counsel, Room 10276, Department of Housing and Urban Development, 451 Seventh Street, SW., Washington, DC 20410. Due to security measures at the HUD Headquarters building, please schedule an appointment to review the public comments by calling the Regulations Division at (202) 708–3055 (this is not a toll-free number).

Executive Order 13132, Federalism Executive Order 13132 (entitled

‘‘Federalism’’) prohibits, to the extent practicable and permitted by law, an agency from promulgating a regulation that has federalism implications and either imposes substantial direct compliance costs on state and local governments and is not required by statute, or preempts state law, unless the relevant requirements of section 6 of the Executive Order are met. This final rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the Executive Order.

Unfunded Mandates Reform Act Title II of the Unfunded Mandates

Reform Act of 1995 (Pub. L. 104–4; approved March 22, 1995) (UMRA) establishes requirements for federal

agencies to assess the effects of their regulatory actions on state, local, and tribal governments, and on the private sector. This final rule would not impose any federal mandates on any state, local, or tribal governments, or on the private sector, within the meaning of the UMRA.

Catalog of Federal Domestic Assistance The Catalog of Federal Domestic

Assistance number applicable to the program affected by this rule is 14.871.

List of Subjects in 24 CFR Part 983 Grant programs—housing and

community development, Low- and moderate-income housing, Public housing, Rent subsidies, Reporting and recordkeeping requirements. ■ For the reasons stated in the preamble, HUD amends 24 CFR part 983 to read as follows: ■ 1. Revise 24 CFR part 983 to read as follows:

PART 983—PROJECT–BASED VOUCHER (PBV) PROGRAM

Subpart A—General Sec. 983.1 When the PBV rule (24 CFR part 983)

applies. 983.2 When the tenant-based voucher rule

(24 CFR part 982) applies. 983.3 PBV definitions. 983.4 Cross-reference to other Federal

requirements. 983.5 Description of the PBV program. 983.6 Maximum amount of PBV assistance. 983.7 Uniform Relocation Act. 983.8 Equal opportunity requirements. 983.9 Special housing types. 983.10 Project-based certificate (PBC)

program.


983.51 Owner proposal selection procedures.

983.52 Housing type. 983.53 Prohibition of assistance for

ineligible units. 983.54 Prohibition of assistance for units in

subsidized housing. 983.55 Prohibition of excess public

assistance. 983.56 Cap on number of PBV units in each

building. 983.57 Site selection standards. 983.58 Environmental review. 983.59 PHA-owned units.

Subpart C—Dwelling Units

983.101 Housing quality standards. 983.102 Housing accessibility for persons

with disabilities. 983.103 Inspecting units.


983.151 Applicability. 983.152 Purpose and content of the

Agreement to enter into HAP contract.

983.153 When Agreement is executed. 983.154 Conduct of development work. 983.155 Completion of housing. 983.156 PHA acceptance of completed

units.


983.201 Applicability. 983.202 Purpose of HAP contract. 983.203 HAP contract information. 983.204 When HAP contract is executed. 983.205 Term of HAP contract. 983.206 HAP contract amendments (to add

or substitute contract units). 983.207 Condition of contract units. 983.208 Owner responsibilities. 983.209 Owner certification.


983.251 How participants are selected. 982.252 PHA information for accepted

family. 983.253 Leasing of contract units. 983.254 Vacancies. 983.255 Tenant screening. 983.256 Lease. 983.257 Owner termination of tenancy and

eviction. 983.258 Security deposit: amounts owed by

tenant. 983.259 Overcrowded, under-occupied, and

accessible units. 983.260 Family right to move. 983.261 When occupancy may exceed 25

percent cap on the number of PBV units in each building.

Subpart G—Rent to owner

983.301 Determining the rent to owner. 983.302 Redetermination of rent to owner. 983.303 Reasonable rent. 983.304 Other subsidy: effect on rent to

owner. 983.305 Rent to owner: effect of rent control

and other rent limits.


983.351 PHA payment to owner for occupied unit.

983.352 Vacancy payment. 983.353 Tenant rent; payment to owner. 983.354 Other fees and charges.


Subpart A—General

§ 983.1 When the PBV rule (24 CFR part 983) applies.

Part 983 applies to the project-based voucher (PBV) program. The PBV program is authorized by section 8(o)(13) of the U.S. Housing Act of 1937 (42 U.S.C. 1437f(o)(13)).

§ 983.2 When the tenant-based voucher rule (24 CFR part 982) applies.

(a) 24 CFR Part 982. Part 982 is the basic regulation for the tenant-based voucher program. Paragraphs (b) and (c) of this section describe the provisions of part 982 that do not apply to the PBV program. The rest of part 982 applies to the PBV program. For use and



applicability of voucher program definitions at § 982.4, see § 983.3.

(b) Types of 24 CFR part 982 provisions that do not apply to PBV. The following types of provisions in 24 CFR part 982 do not apply to PBV assistance under part 983.

(1) Provisions on issuance or use of a voucher;

(2) Provisions on portability; (3) Provisions on the following special

housing types: shared housing, cooperative housing, manufactured home space rental, and the homeownership option.

(c) Specific 24 CFR part 982 provisions that do not apply to PBV assistance. Except as specified in this paragraph, the following specific provisions in 24 CFR part 982 do not apply to PBV assistance under part 983.

(1) In subpart E of part 982: paragraph (b)(2) of § 982.202 and paragraph (d) of § 982.204;

(2) Subpart G of part 982 does not apply, with the following exceptions:

(i) Section 982.10 (owner temination of tenancy) applies to the PBV Program, but to the extent that those provisions differ from § 983.257, the provisions of § 983.257 govern; and

(ii) Section 982.312 (absence from unit) applies to the PBV Program, but to the extent that those provisions differ from § 983.256(g), the provisions of § 983.256(g) govern; and

(iii) Section 982.316 (live-in aide) applies to the PBV Program;

(3) Subpart H of part 982; (4) In subpart I of part 982:

§ 982.401(j); paragraphs (a)(3), (c), and (d) of § 982.402; § 982.403; § 982.405(a); and § 982.406;

(5) In subpart J of part 982: § 982.455; (6) Subpart K of Part 982: subpart K

does not apply, except that the following provisions apply to the PBV Program:

(i) Section 982.503 (for determination of the payment standard amount and schedule for a Fair Market Rent (FMR) area or for a designated part of an FMR area). However, provisions authorizing approval of a higher payment standard as a reasonable accommodation for a particular family that includes a person with disabilities do not apply (since the payment standard amount does not affect availability of a PBV unit for occupancy by a family or the amount paid by the family);

(ii) Section 982.516 (family income and composition; regular and interim examinations);

(iii) Section 982.517 (utility allowance schedule);

(7) In subpart M of part 982: (i) Sections 982.603, 982.607, 982.611,

982.613(c)(2); and

(ii) Provisions concerning shared housing (§ 982.615 through § 982.618), cooperative housing (§ 982.619), manufactured home space rental (§ 982.622 through § 982.624), and the homeownership option (§ 982.625 through § 982.641).

§ 983.3 PBV definitions. (a) Use of PBV definitions. (1) PBV

terms (defined in this section). This section defines PBV terms that are used in this part 983. For PBV assistance, the definitions in this section apply to use of the defined terms in part 983 and in applicable provisions of 24 CFR part 982. (Section 983.2 specifies which provisions in part 982 apply to PBV assistance under part 983.)

(2) Other voucher terms (terms defined in 24 CFR 982.4). (i) The definitions in this section apply instead of definitions of the same terms in 24 CFR 982.4.

(ii) Other voucher terms are defined in § 982.4, but are not defined in this section. Those § 982.4 definitions apply to use of the defined terms in this part 983 and in provisions of part 982 that apply to part 983.

(b) PBV definitions. 1937 Act. The United States Housing Act of 1937 (42 U.S.C. 1437 et seq.).

Activities of daily living. Eating, bathing, grooming, dressing, and home management activities.

Admission. The point when the family becomes a participant in the PHA’s tenant-based or project-based voucher program (initial receipt of tenant-based or project-based assistance). After admission, and so long as the family is continuously assisted with tenant-based or project-based voucher assistance from the PHA, a shift from tenant-based or project-based assistance to the other form of voucher assistance is not a new admission.

Agreement to enter into HAP contract (Agreement). The Agreement is a written contract between the PHA and the owner in the form prescribed by HUD. The Agreement defines requirements for development of housing to be assisted under this section. When development is completed by the owner in accordance with the Agreement, the PHA enters into a HAP contract with the owner. The Agreement is not used for existing housing assisted under this section. HUD will keep the public informed about changes to the Agreement and other forms and contracts related to this program through appropriate means.

Assisted living facility. A residence facility (including a facility located in a larger multifamily property) that meets all the following criteria:

(1) The facility is licensed and regulated as an assisted living facility by the state, municipality, or other political subdivision;

(2) The facility makes available supportive services to assist residents in carrying out activities of daily living; and

(3) The facility provides separate dwelling units for residents and includes common rooms and other facilities appropriate and actually available to provide supportive services for the residents.

Comparable rental assistance. A subsidy or other means to enable a family to obtain decent housing in the PHA jurisdiction renting at a gross rent that is not more than 40 percent of the family’s adjusted monthly gross income.

Contract units. The housing units covered by a HAP contract.

Development. Construction or rehabilitation of PBV housing after the proposal selection date.

Excepted units (units in a multifamily building not counted against the 25 percent per-building cap). See § 983.56(b)(2)(i).

Existing housing. Housing units that already exist on the proposal selection date and that substantially comply with the HQS on that date. (The units must fully comply with the HQS before execution of the HAP contract.)

Household. The family and any PHA- approved live-in aide.

Housing assistance payment. The monthly assistance payment for a PBV unit by a PHA, which includes:

(1) A payment to the owner for rent to owner under the family’s lease minus the tenant rent; and

(2) An additional payment to or on behalf of the family, if the utility allowance exceeds the total tenant payment, in the amount of such excess.

Housing quality standards (HQS). The HUD minimum quality standards for housing assisted under the program. See 24 CFR 982.401.

Lease. A written agreement between an owner and a tenant for the leasing of a PBV dwelling unit by the owner to the tenant. The lease establishes the conditions for occupancy of the dwelling unit by a family with housing assistance payments under a HAP contract between the owner and the PHA.

Multifamily building. A building with five or more dwelling units (assisted or unassisted).

Newly constructed housing. Housing units that do not exist on the proposal selection date and are developed after the date of selection pursuant to an Agreement between the PHA and owner for use under the PBV program.



Partially assisted building. A building in which there are fewer contract units than residential units.

PHA-owned unit. A dwelling unit owned by the PHA that administers the voucher program. PHA-owned means that the PHA or its officers, employees, or agents hold a direct or indirect interest in the building in which the unit is located, including an interest as titleholder or lessee, or as a stockholder, member or general or limited partner, or member of a limited liability corporation, or an entity that holds any such direct or indirect interest.

Premises. The building or complex in which the contract unit is located, including common areas and grounds.

Program. The voucher program under section 8 of the 1937 Act, including tenant-based or project-based assistance.

Proposal selection date. The date the PHA gives written notice of PBV proposal selection to an owner whose proposal is selected in accordance with the criteria established in the PHA’s administrative plan.

Qualifying families (for purpose of exception to 25 percent per-building cap). See § 983.56(b)(2)(ii).

Rehabilitated housing. Housing units that exist on the proposal selection date, but do not substantially comply with the HQS on that date, and are developed, pursuant to an Agreement between the PHA and owner, for use under the PBV program.

Rent to owner. The total monthly rent payable by the family and the PHA to the owner under the lease for a contract unit. Rent to owner includes payment for any housing services, maintenance, and utilities to be provided by the owner in accordance with the lease. (Rent to owner must not include charges for non-housing services including payment for food, furniture, or supportive services provided in accordance with the lease.)

Responsible entity (RE) (for environmental review). The unit of general local government within which the project is located that exercises land use responsibility or, if HUD determines this infeasible, the county or, if HUD determines that infeasible, the state.

Single-family building. A building with no more than four dwelling units (assisted or unassisted).

Site. The grounds where the contract units are located, or will be located after development pursuant to the Agreement.

Special housing type. Subpart M of 24 CFR part 982 states the special regulatory requirements for single-room occupancy (SRO) housing, congregate housing, group homes, and manufactured homes. Subpart M

provisions on shared housing, cooperative housing, manufactured home space rental, and the homeownership option do not apply to PBV assistance under this part.

State-certified appraiser. Any individual who satisfies the requirements for certification as a certified general appraiser in a state that has adopted criteria that currently meet or exceed the minimum certification criteria issued by the Appraiser Qualifications Board of the Appraisal Foundation. The state’s criteria must include a requirement that the individual has achieved a satisfactory grade upon a state-administered examination consistent with and equivalent to the Uniform State Certification Examination issued or endorsed by the Appraiser Qualifications Board of the Appraisal Foundation. Furthermore, if the Appraisal Foundation has issued a finding that the policies, practices, or procedures of the state are inconsistent with Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3331–3352), the individual must comply with any additional standards for state-certified appraisers imposed by HUD.

Tenant-paid utilities. Utility service that is not included in the tenant rent (as defined in 24 CFR 982.4), and which is the responsibility of the assisted family.

Total tenant payment. The amount described in 24 CFR 5.628.

Utility allowance. See 24 CFR 5.603. Utility reimbursement. See 24 CFR

5.603. Wrong-size unit. A unit occupied by

a family that does not conform to the PHA’s subsidy guideline for family size, by being is too large or too small compared to the guideline.

§ 983.4 Cross-reference to other Federal requirements.

The following provisions apply to assistance under the PBV program.

Civil money penalty. Penalty for owner breach of HAP contract. See 24 CFR 30.68.

Debarment. Prohibition on use of debarred, suspended, or ineligible contractors. See 24 CFR 5.105(c) and 24 CFR part 24.

Definitions. See 24 CFR part 5, subpart D.

Disclosure and verification of income information. See 24 CFR part 5, subpart B.

Environmental review. See 24 CFR parts 50 and 58 (see also provisions on PBV environmental review at § 983.58).

Fair housing. Nondiscrimination and equal opportunity. See 24 CFR 5.105(a)

and section 504 of the Rehabilitation Act.

Fair market rents. See 24 CFR part 888, subpart A.

Fraud. See 24 CFR part 792. PHA retention of recovered funds.

Funds. See 24 CFR part 791. HUD allocation of voucher funds.

Income and family payment. See 24 CFR part 5, subpart F (especially § 5.603 (definitions), § 5.609 (annual income), § 5.611 (adjusted income), § 5.628 (total tenant payment), § 5.630 (minimum rent), § 5.603 (utility allowance), § 5.603 (utility reimbursements), and § 5.661 (section 8 project-based assistance programs: approval for police or other security personnel to live in project).

Labor standards. Regulations implementing the Davis-Bacon Act, Contract Work Hours and Safety Standards Act (40 U.S.C. 3701–3708), 29 CFR part 5, and other federal laws and regulations pertaining to labor standards applicable to an Agreement covering nine or more assisted units.

Lead-based paint. Regulations implementing the Lead-based Paint Poisoning Prevention Act (42 U.S.C. 4821–4846) and the Residential Lead- based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851–4856). See 24 CFR part 35, subparts A, B, H, and R.

Lobbying restriction. Restrictions on use of funds for lobbying. See 24 CFR 5.105(b).

Noncitizens. Restrictions on assistance. See 24 CFR part 5, subpart E.

Program accessibility. Regulations implementing Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794). See 24 CFR parts 8 and 9.

Relocation assistance. Regulations implementing the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4201–4655). See 49 CFR part 24.

Section 3—Training, employment, and contracting opportunities in development. Regulations implementing Section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701u). See 24 CFR part 135.

Uniform financial reporting standards. See 24 CFR part 5, subpart H.

Waiver of HUD rules. See 24 CFR 5.110.

§ 983.5 Description of the PBV program. (a) How PBV works. (1) The PBV

program is administered by a PHA that already administers the tenant-based voucher program under an annual contributions contract (ACC) with HUD. In the PBV program, the assistance is ‘‘attached to the structure.’’ (See description of the difference between ‘‘project-based’’ and ‘‘tenant-based’’ rental assistance at 24 CFR 982.1(b).)



(2) The PHA enters into a HAP contract with an owner for units in existing housing or in newly constructed or rehabilitated housing.

(3) In the case of newly constructed or rehabilitated housing, the housing is developed under an Agreement between the owner and the PHA. In the Agreement, the PHA agrees to execute a HAP contract after the owner completes the construction or rehabilitation of the units.

(4) During the term of the HAP contract, the PHA makes housing assistance payments to the owner for units leased and occupied by eligible families.

(b) How PBV is funded. (1) If a PHA decides to operate a PBV program, the PHA’s PBV program is funded with a portion of appropriated funding (budget authority) available under the PHA’s voucher ACC. This pool of funding is used to pay housing assistance for both tenant-based and project-based voucher units and to pay PHA administrative fees for administration of tenant-based and project-based voucher assistance.

(2) There is no special or additional funding for project-based vouchers. HUD does not reserve additional units for project-based vouchers and does not provide any additional funding for this purpose.

(c) PHA discretion to operate PBV program. A PHA has discretion whether to operate a project-based voucher program. HUD approval is not required.

§ 983.6 Maximum amount of PBV assistance.

(a) The PHA may select owner proposals to provide project-based assistance for up to 20 percent of the amount of budget authority allocated to the PHA by HUD in the PHA voucher program. PHAs are not required to reduce the number of PBV units selected under an Agreement or HAP contract if the amount of budget authority is subsequently reduced.

(b) All PBC and project-based voucher units for which the PHA has issued a notice of proposal selection or which are under an Agreement or HAP contract for PBC or project-based voucher assistance count against the 20 percent maximum.

(c) The PHA is responsible for determining the amount of budget authority that is available for project- based vouchers and for ensuring that the amount of assistance that is attached to units is within the amounts available under the ACC.

§ 983.7 Uniform Relocation Act. (a) Relocation assistance for displaced

person. (1) A displaced person must be

provided relocation assistance at the levels described in and in accordance with the requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4201–4655) and implementing regulations at 49 CFR part 24.

(2) The cost of required relocation assistance may be paid with funds provided by the owner, or with local public funds, or with funds available from other sources. Relocation costs may not be paid from voucher program funds; however, provided payment of relocation benefits is consistent with state and local law, PHAs may use their administrative fee reserve to pay for relocation assistance after all other program administrative expenses are satisfied. Use of the administrative fee reserve in this manner must be consistent with legal and regulatory requirements, including the requirements of 24 CFR 982.155 and other official HUD issuances.

(b) Real property acquisition requirements. The acquisition of real property for a PBV project is subject to the URA and 49 CFR part 24, subpart B.

(c) Responsibility of PHA. The PHA must require the owner to comply with the URA and 49 CFR part 24.

(d) Definition of initiation of negotiations. In computing a replacement housing payment to a residential tenant displaced as a direct result of privately undertaken rehabilitation or demolition of the real property, the term ‘‘initiation of negotiations’’ means the execution of the Agreement between the owner and the PHA.

§ 983.8 Equal opportunity requirements. (a) The PBV program requires

compliance with all equal opportunity requirements under federal law and regulation, including the authorities cited at 24 CFR 5.105(a).

(b) The PHA must comply with the PHA Plan civil rights and affirmatively furthering fair housing certification submitted by the PHA in accordance with 24 CFR 903.7(o).

§ 983.9 Special housing types. (a) Applicability. (1) For applicability

of rules on special housing types at 24 CFR part 982, subpart M, see § 983.2.

(2) In the PBV program, the PHA may not provide assistance for shared housing, cooperative housing, manufactured home space rental, or the homeownership option.

(b) Group homes. A group home may include one or more group home units. A separate lease is executed for each elderly person or person with

disabilities who resides in a group home.

§ 983.10 Project-based certificate (PBC) program.

(a) What is it? ‘‘PBC program’’ means project-based assistance attached to units pursuant to an Agreement executed by a PHA and owner before January 16, 2001, and in accordance with:

(1) The regulations for the PBC program at 24 CFR part 983, codified as of May 1, 2001 and contained in 24 CFR part 983 revised as of April 1, 2002; and

(2) Section 8(d)(2) of the 1937 Act, as in effect before October 21, 1998 (the date of enactment of Title V of Public Law 105–276, the Quality Housing and Work Responsibility Act of 1998, codified at 42 U.S.C. 1437 et seq.).

(b) What rules apply? Units under the PBC program are subject to the provisions of 24 CFR part 983 codified as of May 1, 2001, except that 24 CFR 983.151(c) on renewals does not apply. Consistent with the PBC HAP, at the sole option of the PHA, HAP contracts may be renewed for terms for an aggregate total (including the initial and any renewal terms) of 15 years, subject to the availability of appropriated funds.


§ 983.51 Owner proposal selection procedures.

(a) Procedures for selecting PBV proposals. The PHA administrative plan must describe the procedures for owner submission of PBV proposals and for PHA selection of PBV proposals. Before selecting a PBV proposal, the PHA must determine that the PBV proposal complies with HUD program regulations and requirements, including a determination that the property is eligible housing (§§ 983.53 and 983.54), complies with the cap on the number of PBV units per building (§ 983.56), and meets the site selection standards (§ 983.57).

(b) Selection of PBV proposals. The PHA must select PBV proposals in accordance with the selection procedures in the PHA administrative plan. The PHA must select PBV proposals by either of the following two methods.

(1) PHA request for PBV Proposals. The PHA may not limit proposals to a single site or impose restrictions that explicitly or practically preclude owner submission of proposals for PBV housing on different sites.

(2) Selection of a proposal for housing assisted under a federal, state, or local government housing assistance,



community development, or supportive services program that requires competitive selection of proposals (e.g., HOME, and units for which competitively awarded LIHTCs have been provided), where the proposal has been selected in accordance with such program’s competitive selection requirements within three years of the PBV proposal selection date, and the earlier competitive selection proposal did not involve any consideration that the project would receive PBV assistance.

(c) Public notice of PHA request for PBV proposals. If the PHA will be selecting proposals under paragraph (b)(1) of this section, PHA procedures for selecting PBV proposals must be designed and actually operated to provide broad public notice of the opportunity to offer PBV proposals for consideration by the PHA. The public notice procedures may include publication of the public notice in a local newspaper of general circulation and other means designed and actually operated to provide broad public notice. The public notice of the PHA request for PBV proposals must specify the submission deadline. Detailed application and selection information must be provided at the request of interested parties.

(d) PHA notice of owner selection. The PHA must give prompt written notice to the party that submitted a selected proposal and must also give prompt public notice of such selection. Public notice procedures may include publication of public notice in a local newspaper of general circulation and other means designed and actually operated to provide broad public notice.

(e) PHA-owned units. A PHA-owned unit may be assisted under the PBV program only if the HUD field office or HUD-approved independent entity reviews the selection process and determines that the PHA-owned units were appropriately selected based on the selection procedures specified in the PHA administrative plan. Under no circumstances may PBV assistance be used with a public housing unit.

(f) Public review of PHA selection decision documentation. The PHA must make documentation available for public inspection regarding the basis for the PHA selection of a PBV proposal.

§ 983.52 Housing type. The PHA may attach PBV assistance

for units in existing housing or for newly constructed or rehabilitated housing developed under and in accordance with an Agreement.

(a) Existing housing—A housing unit is considered an existing unit for

purposes of the PBV program, if at the time of notice of PHA selection, the units substantially comply with HQS. Units for which new construction or rehabilitation was started in accordance with Subpart D of this part do not qualify as existing housing.

(b) Subpart D of this part applies to newly constructed and rehabilitated housing.

§ 983.53 Prohibition of assistance for ineligible units.

(a) Ineligible unit. The PHA may not attach or pay PBV assistance for units in the following types of housing:

(1) Shared housing; (2) Units on the grounds of a penal,

reformatory, medical, mental, or similar public or private institution;

(3) Nursing homes or facilities providing continuous psychiatric, medical, nursing services, board and care, or intermediate care. However, the PHA may attach PBV assistance for a dwelling unit in an assisted living facility that provides home health care services such as nursing and therapy for residents of the housing;

(4) Units that are owned or controlled by an educational institution or its affiliate and are designated for occupancy by students of the institution;

(5) Manufactured homes; (6) Cooperative housing; and (7) Transitional Housing. (b) High-rise elevator project for

families with children. The PHA may not attach or pay PBV assistance to a high-rise elevator project that may be occupied by families with children unless the PHA initially determines there is no practical alternative, and HUD approves such finding. The PHA may make this initial determination for its project-based voucher program, in whole or in part, and need not review each project on a case-by-case basis, and HUD may approve on the same basis.

(c) Prohibition against assistance for owner-occupied unit. The PHA may not attach or pay PBV assistance for a unit occupied by an owner of the housing.

(d) Prohibition against selecting unit occupied by an ineligible family. Before a PHA selects a specific unit to which assistance is to be attached, the PHA must determine whether the unit is occupied and, if occupied, whether the unit’s occupants are eligible for assistance. The PHA must not select or enter into an Agreement or HAP contract for a unit occupied by a family ineligible for participation in the PBV program.

§ 983.54 Prohibition of assistance for units in subsidized housing.

A PHA may not attach or pay PBV assistance to units in any of the following types of subsidized housing:

(a) A public housing dwelling unit; (b) A unit subsidized with any other

form of Section 8 assistance (tenant- based or project-based);

(c) A unit subsidized with any governmental rent subsidy (a subsidy that pays all or any part of the rent);

(d) A unit subsidized with any governmental subsidy that covers all or any part of the operating costs of the housing;

(e) A unit subsidized with Section 236 rental assistance payments (12 U.S.C. 1715z–1). However, the PHA may attach assistance to a unit subsidized with Section 236 interest reduction payments;

(f) A unit subsidized with rental assistance payments under Section 521 of the Housing Act of 1949, 42 U.S.C. 1490a (a Rural Housing Service Program). However, the PHA may attach assistance for a unit subsidized with Section 515 interest reduction payments (42 U.S.C. 1485);

(g) A Section 202 project for nonelderly persons with disabilities (assistance under Section 162 of the Housing and Community Development Act of 1987, 12 U.S.C. 1701q note);

(h) Section 811 project-based supportive housing for persons with disabilities (42 U.S.C. 8013);

(i) Section 202 supportive housing for the elderly (12 U.S.C. 1701q);

(j) A Section 101 rent supplement project (12 U.S.C. 1701s);

(k) A unit subsidized with any form of tenant-based rental assistance (as defined at 24 CFR 982.1(b)(2)) (e.g., a unit subsidized with tenant-based rental assistance under the HOME program, 42 U.S.C. 12701 et seq.);

(l) A unit with any other duplicative federal, state, or local housing subsidy, as determined by HUD or by the PHA in accordance with HUD requirements. For this purpose, ‘‘housing subsidy’’ does not include the housing component of a welfare payment; a social security payment; or a federal, state, or local tax concession (such as relief from local real property taxes).

§ 983.55 Prohibition of excess public assistance.

(a) Subsidy layering requirements. The PHA may provide PBV assistance only in accordance with HUD subsidy layering regulations (24 CFR 4.13) and other requirements. The subsidy layering review is intended to prevent excessive public assistance for the housing by combining (layering)



housing assistance payment subsidy under the PBV program with other governmental housing assistance from federal, state, or local agencies, including assistance such as tax concessions or tax credits.

(b) When subsidy layering review is conducted. The PHA may not enter an Agreement or HAP contract until HUD or an independent entity approved by HUD has conducted any required subsidy layering review and determined that the PBV assistance is in accordance with HUD subsidy layering requirements.

(c) Owner certification. The HAP contract must contain the owner’s certification that the project has not received and will not receive (before or during the term of the HAP contract) any public assistance for acquisition, development, or operation of the housing other than assistance disclosed in the subsidy layering review in accordance with HUD requirements.

§ 983.56 Cap on number of PBV units in each building.

(a) 25 percent per building cap. Except as provided in paragraph (b) of this section, the PHA may not select a proposal to provide PBV assistance for units in a building or enter into an Agreement or HAP contract to provide PBV assistance for units in a building, if the total number of dwelling units in the building that will receive PBV assistance during the term of the PBV HAP is more than 25 percent of the number of dwelling units (assisted or unassisted) in the building.

(b) Exception to 25 percent per building cap. (1) When PBV units are not counted against cap. In the following cases, PBV units are not counted against the 25 percent per building cap:

(i) Units in a single-family building; (ii) Excepted units in a multifamily

building. (2) Terms (i) ‘‘Excepted units’’ means

units in a multifamily building that are specifically made available for qualifying families.

(ii) ‘‘Qualifying families’’ means: (A) Elderly or disabled families; or (B) Families receiving supportive

services. PHAs must include in the PHA administrative plan the type of services offered to families for a project to qualify for the exception and the extent to which such services will be provided. It is not necessary that the services be provided at or by the project, if they are approved services. To qualify, a family must have at least one member receiving at least one qualifying supportive service. A PHA may not require participation in medical or disability-

related services other than drug and alcohol treatment in the case of current abusers as a condition of living in an excepted unit, although such services may be offered. If a family at the time of initial tenancy is receiving, and while the resident of an excepted unit has received, FSS supportive services or any other supportive services as defined in the PHA administrative plan, and successfully completes the FSS contract of participation or the supportive services requirement, the unit continues to count as an excepted unit for as long as the family resides in the unit. If a family in an excepted unit fails without good cause to complete its FSS contract of participation or if the family fails to complete the supportive services requirement as outlined in the PHA administrative plan, the PHA will take the actions provided under § 983.261(d), and the owner may terminate the lease in accordance with § 983.257(c). Also, at the time of initial lease execution between the family and the owner, the family and the PHA must sign a statement of family responsibility. The statement of family responsibility must contain all family obligations including the family’s participation in a service program under this section. Failure by the family without good cause to fulfill its service obligation will require the PHA to terminate assistance. If the unit at the time of such termination is an excepted unit, the exception continues to apply to the unit as long as the unit is made available to another qualifying family.

(C) The PHA must monitor the excepted family’s continued receipt of supportive services and take appropriate action regarding those families that fail without good cause to complete their supportive services requirement. The PHA administrative plan must state the form and frequency of such monitoring.

(3) Set-aside for qualifying families. (i) In leasing units in a multifamily building pursuant to the PBV HAP, the owner must set aside the number of excepted units made available for occupancy by qualifying families.

(ii) The PHA may refer only qualifying families for occupancy of excepted units.

(c) Additional, local requirements promoting partially assisted buildings. A PHA may establish local requirements designed to promote PBV assistance in partially assisted buildings. For example, a PHA may:

(1) Establish a per-building cap on the number of units that will receive PBV assistance or other project-based assistance in a multifamily building containing excepted units or in a single- family building,

(2) Determine not to provide PBV assistance for excepted units, or

(3) Establish a per-building cap of less than 25 percent.

§ 983.57 Site selection standards. (a) Applicability. The site selection

requirements in paragraph (d) of this section apply only to site selection for existing housing and rehabilitated PBV housing. The site selection requirements in paragraph (e) of this section apply only to site selection for newly constructed PBV housing. Other provisions of this section apply to selection of a site for any form of PBV housing, including existing housing, newly constructed housing, and rehabilitated housing.

(b) Compliance with PBV goals, civil rights requirements, and HQS. The PHA may not select a proposal for existing, newly constructed, or rehabilitated PBV housing on a site or enter into an Agreement or HAP contract for units on the site, unless the PHA has determined that:

(1) Project-based assistance for housing at the selected site is consistent with the goal of deconcentrating poverty and expanding housing and economic opportunities. The standard for deconcentrating poverty and expanding housing and economic opportunities must be consistent with the PHA Plan under 24 CFR part 903 and the PHA Administrative Plan. In developing the standards to apply in determining whether a proposed PBV development will be selected, a PHA must consider the following:

(i) Whether the census tract in which the proposed PBV development will be located is in a HUD-designated Enterprise Zone, Economic Community, or Renewal Community;

(ii) Whether a PBV development will be located in a census tract where the concentration of assisted units will be or has decreased as a result of public housing demolition;

(iii) Whether the census tract in which the proposed PBV development will be located is undergoing significant revitalization;

(iv) Whether state, local, or federal dollars have been invested in the area that has assisted in the achievement of the statutory requirement;

(v) Whether new market rate units are being developed in the same census tract where the proposed PBV development will be located and the likelihood that such market rate units will positively impact the poverty rate in the area;

(vi) If the poverty rate in the area where the proposed PBV development will be located is greater than 20



percent, the PHA should consider whether in the past five years there has been an overall decline in the poverty rate;

(vii) Whether there are meaningful opportunities for educational and economic advancement in the census tract where the proposed PBV development will be located.

(2) The site is suitable from the standpoint of facilitating and furthering full compliance with the applicable provisions of Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d–2000d(4)) and HUD’s implementing regulations at 24 CFR part 1; Title VIII of the Civil Rights Act of 1968 (42 U.S.C. 3601– 3629); and HUD’s implementing regulations at 24 CFR parts 100 through 199; Executive Order 11063 (27 FR 11527; 3 CFR, 1959–1963 Comp., p. 652) and HUD’s implementing regulations at 24 CFR part 107. The site must meet the section 504 site selection requirements described in 24 CFR 8.4(b)(5).

(3) The site meets the HQS site standards at 24 CFR 982.401(l).

(c) PHA PBV site selection policy. (1) The PHA administrative plan must establish the PHA’s policy for selection of PBV sites in accordance with this section.

(2) The site selection policy must explain how the PHA’s site selection procedures promote the PBV goals.

(3) The PHA must select PBV sites in accordance with the PHA’s site selection policy in the PHA administrative plan.

(d) Existing and rehabilitated housing site and neighborhood standards. A site for existing or rehabilitated housing must meet the following site and neighborhood standards. The site must:

(1) Be adequate in size, exposure, and contour to accommodate the number and type of units proposed, and adequate utilities and streets must be available to service the site. (The existence of a private disposal system and private sanitary water supply for the site, approved in accordance with law, may be considered adequate utilities.)

(2) Promote greater choice of housing opportunities and avoid undue concentration of assisted persons in areas containing a high proportion of low-income persons.

(3) Be accessible to social, recreational, educational, commercial, and health facilities and services and other municipal facilities and services that are at least equivalent to those typically found in neighborhoods consisting largely of unassisted, standard housing of similar market rents.

(4) Be so located that travel time and cost via public transportation or private automobile from the neighborhood to places of employment providing a range of jobs for lower-income workers is not excessive. While it is important that housing for the elderly not be totally isolated from employment opportunities, this requirement need not be adhered to rigidly for such projects.

(e) New construction site and neighborhood standards. A site for newly constructed housing must meet the following site and neighborhood standards:

(1) The site must be adequate in size, exposure, and contour to accommodate the number and type of units proposed, and adequate utilities (water, sewer, gas, and electricity) and streets must be available to service the site.

(2) The site must not be located in an area of minority concentration, except as permitted under paragraph (e)(3) of this section, and must not be located in a racially mixed area if the project will cause a significant increase in the proportion of minority to non-minority residents in the area.

(3) A project may be located in an area of minority concentration only if:

(i) Sufficient, comparable opportunities exist for housing for minority families in the income range to be served by the proposed project outside areas of minority concentration (see paragraph (e)(3)(iii), (iv), and (v) of this section for further guidance on this criterion); or

(ii) The project is necessary to meet overriding housing needs that cannot be met in that housing market area (see paragraph (e) (3)(vi)) of this section for further guidance on this criterion).

(iii) As used in paragraph (e)(3)(i) of this section, ‘‘sufficient’’ does not require that in every locality there be an equal number of assisted units within and outside of areas of minority concentration. Rather, application of this standard should produce a reasonable distribution of assisted units each year, that, over a period of several years, will approach an appropriate balance of housing choices within and outside areas of minority concentration. An appropriate balance in any jurisdiction must be determined in light of local conditions affecting the range of housing choices available for low- income minority families and in relation to the racial mix of the locality’s population.

(iv) Units may be considered ‘‘comparable opportunities,’’ as used in paragraph (e)(3)(i) of this section, if they have the same household type (elderly, disabled, family, large family) and tenure type (owner/renter); require

approximately the same tenant contribution towards rent; serve the same income group; are located in the same housing market; and are in standard condition.

(v) Application of this sufficient, comparable opportunities standard involves assessing the overall impact of HUD-assisted housing on the availability of housing choices for low- income minority families in and outside areas of minority concentration, and must take into account the extent to which the following factors are present, along with other factors relevant to housing choice:

(A) A significant number of assisted housing units are available outside areas of minority concentration.

(B) There is significant integration of assisted housing projects constructed or rehabilitated in the past 10 years, relative to the racial mix of the eligible population.

(C) There are racially integrated neighborhoods in the locality.

(D) Programs are operated by the locality to assist minority families that wish to find housing outside areas of minority concentration.

(E) Minority families have benefited from local activities (e.g., acquisition and write-down of sites, tax relief programs for homeowners, acquisitions of units for use as assisted housing units) undertaken to expand choice for minority families outside of areas of minority concentration.

(F) A significant proportion of minority households has been successful in finding units in non- minority areas under the tenant-based assistance programs.

(G) Comparable housing opportunities have been made available outside areas of minority concentration through other programs.

(vi) Application of the ‘‘overriding housing needs’’ criterion, for example, permits approval of sites that are an integral part of an overall local strategy for the preservation or restoration of the immediate neighborhood and of sites in a neighborhood experiencing significant private investment that is demonstrably improving the economic character of the area (a ‘‘revitalizing area’’). An ‘‘overriding housing need,’’ however, may not serve as the basis for determining that a site is acceptable, if the only reason the need cannot otherwise be feasibly met is that discrimination on the basis of race, color, religion, sex, national origin, age, familial status, or disability renders sites outside areas of minority concentration unavailable or if the use of this standard in recent years has had the effect of



circumventing the obligation to provide housing choice.

(4) The site must promote greater choice of housing opportunities and avoid undue concentration of assisted persons in areas containing a high proportion of low-income persons.

(5) The neighborhood must not be one that is seriously detrimental to family life or in which substandard dwellings or other undesirable conditions predominate, unless there is actively in progress a concerted program to remedy the undesirable conditions.

(6) The housing must be accessible to social, recreational, educational, commercial, and health facilities and services and other municipal facilities and services that are at least equivalent to those typically found in neighborhoods consisting largely of unassisted, standard housing of similar market rents.

(7) Except for new construction, housing designed for elderly persons, travel time, and cost via public transportation or private automobile from the neighborhood to places of employment providing a range of jobs for lower-income workers, must not be excessive.

§ 983.58 Environmental review. (a) HUD environmental regulations.

Activities under the PBV program are subject to HUD environmental regulations in 24 CFR parts 50 and 58.

(b) Who performs the environmental review? (1) Under 24 CFR part 58, a unit of general local government, a county or a state (the ‘‘responsible entity’’ or ‘‘RE’’) is responsible for the federal environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and related applicable federal laws and authorities in accordance with 24 CFR 58.5 and 58.6.

(2) If a PHA objects in writing to having the RE perform the federal environmental review, or if the RE declines to perform it, then HUD may perform the review itself (24 CFR 58.11). 24 CFR part 50 governs HUD performance of the review.

(c) Existing housing. In the case of existing housing under this part 983, the RE that is responsible for the environmental review under 24 CFR part 58 must determine whether or not PBV assistance is categorically excluded from review under the National Environmental Policy Act and whether or not the assistance is subject to review under the laws and authorities listed in 24 CFR 58.5.

(d) Limitations on actions before completion of the environmental review. (1) The PHA may not enter into an

Agreement or HAP contract with an owner, and the PHA, the owner, and its contractors may not acquire, rehabilitate, convert, lease, repair, dispose of, demolish, or construct real property or commit or expend program or local funds for PBV activities under this part, until one of the following occurs:

(i) The responsible entity has completed the environmental review procedures required by 24 CFR part 58, and HUD has approved the environmental certification and request for release of funds;

(ii) The responsible entity has determined that the project to be assisted is exempt under 24 CFR 58.34 or is categorically excluded and not subject to compliance with environmental laws under 24 CFR 58.35(b); or

(iii) HUD has performed an environmental review under 24 CFR part 50 and has notified the PHA in writing of environmental approval of the site.

(2) HUD will not approve the release of funds for PBV assistance under this part if the PHA, the owner, or any other party commits funds (i.e., enters an Agreement or HAP contract or otherwise incurs any costs or expenditures to be paid or reimbursed with such funds) before the PHA submits and HUD approves its request for release of funds (where such submission is required).

(e) PHA duty to supply information. The PHA must supply all available, relevant information necessary for the RE (or HUD, if applicable) to perform any required environmental review for any site.

(f) Mitigating measures. The PHA must require the owner to carry out mitigating measures required by the RE (or HUD, if applicable) as a result of the environmental review.

§ 983.59 PHA-owned units.

(a) Selection of PHA-owned units. The selection of PHA-owned units must be done in accordance with § 983.51(e).

(b) Inspection and determination of reasonable rent by independent entity. In the case of PHA-owned units, the following program services may not be performed by the PHA, but must be performed instead by an independent entity approved by HUD.

(1) Determination of rent to owner for the PHA-owned units. Rent to owner for PHA-owned units is determined pursuant to §§ 983.301 through 983.305 in accordance with the same requirements as for other units, except that the independent entity approved by HUD must establish the initial contract

rents based on an appraisal by a licensed, state-certified appraiser; and

(2) Inspection of PHA-owned units as required by § 983.103(f).

(c) Nature of independent entity. The independent entity that performs these program services may be the unit of general local government for the PHA jurisdiction (unless the PHA is itself the unit of general local government or an agency of such government) or another HUD-approved public or private independent entity.

(d) Payment to independent entity and appraiser. (1) The PHA may only compensate the independent entity and appraiser from PHA ongoing administrative fee income (including amounts credited to the administrative fee reserve). The PHA may not use other program receipts to compensate the independent entity and appraiser for their services.

(2) The PHA, independent entity, and appraiser may not charge the family any fee for the appraisal or the services provided by the independent entity.

Subpart C—Dwelling Units

§ 983.101 Housing quality standards. (a) HQS applicability. Except as

otherwise provided in this section, 24 CFR 982.401 (housing quality standards) applies to the PBV program. The physical condition standards at 24 CFR 5.703 do not apply to the PBV program.

(b) HQS for special housing types. For special housing types assisted under the PBV program, housing quality standards in 24 CFR part 982 apply to the PBV program. (Shared housing, cooperative housing, manufactured home space rental, and the homeownership option are not assisted under the PBV program.)

(c) Lead-based paint requirements. (1) The lead-based paint requirements at § 982.401(j) of this chapter do not apply to the PBV program.

(2) The Lead-based Paint Poisoning Prevention Act (42 U.S.C. 4821–4846), the Residential Lead-based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851– 4856), and implementing regulations at 24 CFR part 35, subparts A, B, H, and R, apply to the PBV program.

(d) HQS enforcement. Parts 982 and 983 of this chapter do not create any right of the family or any party, other than HUD or the PHA, to require enforcement of the HQS requirements or to assert any claim against HUD or the PHA for damages, injunction, or other relief for alleged failure to enforce the HQS.

(e) Additional PHA quality and design requirements. This section establishes the minimum federal housing quality



standards for PBV housing. However, the PHA may elect to establish additional requirements for quality, architecture, or design of PBV housing, and any such additional requirements must be specified in the Agreement.

§ 983.102 Housing accessibility for persons with disabilities.

(a) Program accessibility. The housing must comply with program accessibility requirements of section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations at 24 CFR part 8. The PHA shall ensure that the percentage of accessible dwelling units complies with the requirements of section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), as implemented by HUD’s regulations at 24 CFR part 8, subpart C.

(b) Design and construction. Housing first occupied after March 13, 1991, must comply with design and construction requirements of the Fair Housing Amendments Act of 1988 and implementing regulations at 24 CFR 100.205, as applicable.

§ 983.103 Inspecting units.

(a) Pre-selection inspection. (1) Inspection of site. The PHA must examine the proposed site before the proposal selection date.

(2) Inspection of existing units. If the units to be assisted already exist, the PHA must inspect all the units before the proposal selection date, and must determine whether the units substantially comply with the HQS. To qualify as existing housing, units must substantially comply with the HQS on the proposal selection date. However, the PHA may not execute the HAP contract until the units fully comply with the HQS.

(b) Pre-HAP contract inspections. The PHA must inspect each contract unit before execution of the HAP contract. The PHA may not enter into a HAP contract covering a unit until the unit fully complies with the HQS.

(c) Turnover inspections. Before providing assistance to a new family in a contract unit, the PHA must inspect the unit. The PHA may not provide assistance on behalf of the family until the unit fully complies with the HQS.

(d) Annual inspections. (1) At least annually during the term of the HAP contract, the PHA must inspect a random sample, consisting of at least 20 percent of the contract units in each building to determine if the contract units and the premises are maintained in accordance with the HQS. Turnover inspections pursuant to paragraph (c) of this section are not counted toward

meeting this annual inspection requirement.

(2) If more than 20 percent of the annual sample of inspected contract units in a building fail the initial inspection, the PHA must reinspect 100 percent of the contract units in the building.

(e) Other inspections. (1) The PHA must inspect contract units whenever needed to determine that the contract units comply with the HQS and that the owner is providing maintenance, utilities, and other services in accordance with the HAP contract. The PHA must take into account complaints and any other information coming to its attention in scheduling inspections.

(2) The PHA must conduct follow-up inspections needed to determine if the owner (or, if applicable, the family) has corrected an HQS violation, and must conduct inspections to determine the basis for exercise of contractual and other remedies for owner or family violation of the HQS. (Family HQS obligations are specified in 24 CFR 982.404(b).)

(3) In conducting PHA supervisory quality control HQS inspections, the PHA should include a representative sample of both tenant-based and project- based units.

(f) Inspecting PHA-owned units. (1) In the case of PHA-owned units, the inspections required under this section must be performed by an independent agency designated in accordance with § 983.59, rather than by the PHA.

(2) The independent entity must furnish a copy of each inspection report to the PHA and to the HUD field office where the project is located.

(3) The PHA must take all necessary actions in response to inspection reports from the independent agency, including exercise of contractual remedies for violation of the HAP contract by the PHA owner.


§ 983.151 Applicability.

This Subpart D applies to PBV assistance for newly constructed or rehabilitated housing. This Subpart D does not apply to PBV assistance for existing housing. Housing selected under this subpart cannot be selected as existing housing, as defined in § 983.52, at a later date.

§ 983.152 Purpose and content of the Agreement to enter into HAP contract.

(a) Requirement. The PHA must enter into an Agreement with the owner. The Agreement must be in the form required

by HUD headquarters (see § 982.162 of this chapter).

(b) Purpose of Agreement. In the Agreement the owner agrees to develop the contract units to comply with the HQS, and the PHA agrees that, upon timely completion of such development in accordance with the terms of the Agreement, the PHA will enter into a HAP contract with the owner for the contract units.

(c) Description of housing. (1) At a minimum, the Agreement must describe the following features of the housing to be developed (newly constructed or rehabilitated) and assisted under the PBV program:

(i) Site; (ii) Location of contract units on site; (iii) Number of contract units by area

(size) and number of bedrooms and bathrooms;

(iv) Services, maintenance, or equipment to be supplied by the owner without charges in addition to the rent to owner;

(v) Utilities available to the contract units, including a specification of utility services to be paid by owner (without charges in addition to rent) and utility services to be paid by the tenant;

(vi) Indication of whether or not the design and construction requirements of the Fair Housing Act and implementing regulations at 24 CFR 100.205 and the accessibility requirements of section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations at 24 CFR 8.22 and 8.23 apply to units under the Agreement. If these requirements are applicable, any required work item resulting from these requirements must be included in the description of work to be performed under the Agreement, as specified in paragraph (c)(i)(viii) of this section.

(vii) Estimated initial rents to owner for the contract units;

(viii) Description of the work to be performed under the Agreement. If the Agreement is for rehabilitation of units, the work description must include the rehabilitation work write up and, where determined necessary by the PHA, specifications, and plans. If the Agreement is for new construction, the work description must include the working drawings and specifications.

(2) At a minimum, the housing must comply with the HQS. The PHA may elect to establish additional requirements for quality, architecture, or design of PBV housing, over and above the HQS, and any such additional requirement must be specified in the Agreement.



§ 983.153 When Agreement is executed. (a) Prohibition of excess subsidy. The

PHA may not enter the Agreement with the owner until the subsidy layering review is completed (see § 983.55).

(b) Environmental approval. The PHA may not enter the Agreement with the owner until the environmental review is completed and the PHA has received the environmental approval (see § 983.58).

(c) Prompt execution of Agreement. The Agreement must be executed promptly after PHA notice of proposal selection to the selected owner.

§ 983.154 Conduct of development work. (a) Development requirements. The

owner must carry out development work in accordance with the Agreement and the requirements of this section.

(b) Labor standards. (1) In the case of an Agreement for development of nine or more contract units (whether or not completed in stages), the owner and the owner’s contractors and subcontractors must pay Davis-Bacon wages to laborers and mechanics employed in development of the housing.

(2) The HUD prescribed form of Agreement shall include the labor standards clauses required by HUD, such as those involving Davis-Bacon wage rates.

(3) The owner and the owner’s contractors and subcontractors must comply with the Contract Work Hours and Safety Standards Act, Department of Labor regulations in 29 CFR part 5, and other applicable federal labor relations laws and regulations. The PHA must monitor compliance with labor standards.

(c) Equal opportunity. (1) Section 3— Training, employment, and contracting opportunities. The owner must comply with Section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701u) and the implementing regulations at 24 CFR part 135.

(2) Equal employment opportunity. The owner must comply with federal equal employment opportunity requirements of Executive Orders 11246 as amended (3 CFR, 1964–1965 Comp., p. 339), 11625 (3 CFR, 1971–1975 Comp., p. 616), 12432 (3 CFR, 1983 Comp., p. 198) and 12138 (3 CFR, 1977 Comp., p. 393).

(d) Eligibility to participate in federal programs and activities. The Agreement and HAP contract shall include a certification by the owner that the owner and other project principals (including the officers and principal members, shareholders, investors, and other parties having a substantial interest in the project) are not on the U.S. General Services Administration

list of parties excluded from federal procurement and nonprocurement programs.

(e) Disclosure of conflict of interest. The owner must disclose any possible conflict of interest that would be a violation of the Agreement, the HAP contract, or HUD regulations.

§ 983.155 Completion of housing.

(a) Completion deadline. The owner must develop and complete the housing in accordance with the Agreement. The Agreement must specify the deadlines for completion of the housing and for submission by the owner of the required evidence of completion.

(b) Required evidence of completion. (1) Minimum submission. At a minimum, the owner must submit the following evidence of completion to the PHA in the form and manner required by the PHA:

(i) Owner certification that the work has been completed in accordance with the HQS and all requirements of the Agreement; and

(ii) Owner certification that the owner has complied with labor standards and equal opportunity requirements in development of the housing.

(2) Additional documentation. At the discretion of the PHA, the Agreement may specify additional documentation that must be submitted by the owner as evidence of housing completion. For example, such documentation may include:

(i) A certificate of occupancy or other evidence that the units comply with local requirements (such as code and zoning requirements); and

(ii) An architect’s certification that the housing complies with:

(A) HUD housing quality standards; (B) State, local, or other building

codes; (C) Zoning; (D) The rehabilitation work write-up

(for rehabilitated housing) or the work description (for newly constructed housing); or

(E) Any additional design or quality requirements pursuant to the Agreement.

§ 983.156 PHA acceptance of completed units.

(a) PHA determination of completion. When the PHA has received owner notice that the housing is completed:

(1) The PHA must inspect to determine if the housing has been completed in accordance with the Agreement, including compliance with the HQS and any additional requirement imposed by the PHA under the Agreement.

(2) The PHA must determine if the owner has submitted all required evidence of completion.

(3) If the work has not been completed in accordance with the Agreement, the PHA must not enter into the HAP contract.

(b) Execution of HAP contract. If the PHA determines that the housing has been completed in accordance with the Agreement and that the owner has submitted all required evidence of completion, the PHA must submit the HAP contract for execution by the owner and must then execute the HAP contract.


§ 983.201 Applicability. Subpart E applies to all PBV

assistance under part 983 (including assistance for existing, newly constructed, or rehabilitated housing).

§ 983.202 Purpose of HAP contract. (a) Requirement. The PHA must enter

into a HAP contract with the owner. The HAP contract must be in the form required by HUD headquarters (see 24 CFR 982.162).

(b) Purpose of HAP contract. (1) The purpose of the HAP contract is to provide housing assistance payments for eligible families.

(2) The PHA makes housing assistance payments to the owner in accordance with the HAP contract. Housing assistance is paid for contract units leased and occupied by eligible families during the HAP contract term.

§ 983.203 HAP contract information. The HAP contract must specify: (a) The total number of contract units

by number of bedrooms; (b) Information needed to identify the

site and the building or buildings where the contract units are located. The information must include the project’s name, street address, city or county, state and zip code, block and lot number (if known), and any other information necessary to clearly identify the site and the building;

(c) Information needed to identity the specific contract units in each building. The information must include the number of contract units in the building, the location of each contract unit, the area of each contract unit, and the number of bedrooms and bathrooms in each contract unit;

(d) Services, maintenance, and equipment to be supplied by the owner without charges in addition to the rent to owner;

(e) Utilities available to the contract units, including a specification of utility



services to be paid by the owner (without charges in addition to rent) and utility services to be paid by the tenant;

(f) Features provided to comply with program accessibility requirements of Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations at 24 CFR part 8;

(g) The HAP contract term; (h) The number of units in any

building that will exceed the 25 percent per building cap (as described in § 983.56), which will be set-aside for occupancy by qualifying families (elderly or disabled families and families receiving supportive services); and

(i) The initial rent to owner (for the first 12 months of the HAP contract term).

§ 983.204 When HAP contract is executed. (a) PHA inspection of housing. (1)

Before execution of the HAP contract, the PHA must inspect each contract unit in accordance with § 983.103(b).

(2) The PHA may not enter into a HAP contract for any contract unit until the PHA has determined that the unit complies with the HQS.

(b) Existing housing. In the case of existing housing, the HAP contract must be executed promptly after PHA selection of the owner proposal and PHA inspection of the housing.

(c) Newly constructed or rehabilitated housing. (1) In the case of newly constructed or rehabilitated housing the HAP contract must be executed after the PHA has inspected the completed units and has determined that the units have been completed in accordance with the Agreement and the owner has furnished all required evidence of completion (see §§ 983.155 and 983.156).

(2) In the HAP contract, the owner certifies that the units have been completed in accordance with the Agreement. Completion of the units by the owner and acceptance of units by the PHA is subject to the provisions of the Agreement.

§ 983.205 Term of HAP contract. (a) Ten-year initial term. The PHA

may enter into a HAP contract with an owner for an initial term of up to ten years for each contract unit. The length of the term of the HAP contract for any contract unit may not be less than one year, nor more than ten years.

(b) Extension of term. Within one year before expiration, the PHA may agree to extend the term of the HAP contract for an additional term of up to five years if the PHA determines an extension is appropriate to continue providing affordable housing for low-income families. Subsequent extensions are

subject to the same limitations. Any extension of the term must be on the form and subject to the conditions prescribed by HUD at the time of the extension.

(c) Termination by PHA—insufficient funding. (1) The HAP contract must provide that the term of the PHA’s contractual commitment is subject to the availability of sufficient appropriated funding (budget authority) as determined by HUD or by the PHA in accordance with HUD instructions. For purposes of this section, ‘‘sufficient funding’’ means the availability of appropriations, and of funding under the ACC from such appropriations, to make full payment of housing assistance payments payable to the owner for any contract year in accordance with the terms of the HAP contract.

(2) The availability of sufficient funding must be determined by HUD or by the PHA in accordance with HUD instructions. If it is determined that there may not be sufficient funding to continue housing assistance payments for all contract units and for the full term of the HAP contract, the PHA has the right to terminate the HAP contract by notice to the owner for all or any of the contract units. Such action by the PHA shall be implemented in accordance with HUD instructions.

(d) Termination by owner—reduction below initial rent. The owner may terminate the HAP contract, upon notice to the PHA, if the amount of the rent to owner for any contract unit, as adjusted in accordance with § 983.302, is reduced below the amount of the initial rent to owner (rent to owner at the beginning of the HAP contract term). In this case, the assisted families residing in the contract units will be offered tenant-based voucher assistance.

§ 983.206 HAP contract amendments (to add or substitute contract units).

(a) Amendment to substitute contract units. At the discretion of the PHA and subject to all PBV requirements, the HAP contract may be amended to substitute a different unit with the same number of bedrooms in the same building for a previously covered contract unit. Prior to such substitution, the PHA must inspect the proposed substitute unit and must determine the reasonable rent for such unit.

(b) Amendment to add contract units. At the discretion of the PHA, and provided that the total number of units in a building that will receive PBV assistance or other project-based assistance will not exceed 25 percent of the number of dwelling units (assisted or unassisted) in the building or the 20 percent of authorized budget authority

as provided in § 983.6, a HAP contract may be amended during the three-year period immediately following the execution date of the HAP contract to add additional PBV contract units in the same building. An amendment to the HAP contract is subject to all PBV requirements (e.g., rents are reasonable), except that a new PBV request for proposals is not required. The anniversary and expiration dates of the HAP contract for the additional units must be the same as the anniversary and expiration dates of the HAP contract term for the PBV units originally placed under HAP contract.

(c) Staged completion of contract units. Even if contract units are placed under the HAP contract in stages commencing on different dates, there is a single annual anniversary for all contract units under the HAP contract. The annual anniversary for all contract units is the annual anniversary date for the first contract units placed under the HAP contract. The expiration of the HAP contract for all the contract units completed in stages must be concurrent with the end of the HAP contract term for the units originally placed under HAP contract.

§ 983.207 Condition of contract units. (a) Owner maintenance and

operation. (1) The owner must maintain and operate the contract units and premises in accordance with the HQS, including performance of ordinary and extraordinary maintenance.

(2) The owner must provide all the services, maintenance, equipment, and utilities specified in the HAP contract with the PHA and in the lease with each assisted family.

(3) At the discretion of the PHA, the HAP contract may also require continuing owner compliance during the HAP term with additional housing quality requirements specified by the PHA (in addition to, but not in place of, compliance with the HUD-prescribed HQS). Such additional requirements may be designed to assure continued compliance with any design, architecture, or quality requirement specified in the Agreement.

(b) Remedies for HQS violation. (1) The PHA must vigorously enforce the owner’s obligation to maintain contract units in accordance with the HQS. The PHA may not make any HAP payment to the owner for a contract unit covering any period during which the contract unit does not comply with the HQS.

(2) If the PHA determines that a contract unit is not in accordance with the housing quality standards (or other HAP contract requirement), the PHA may exercise any of its remedies under



the HAP contract for all or any contract units. Such remedies include termination of housing assistance payments, abatement or reduction of housing assistance payments, reduction of contract units, and termination of the HAP contract.

(c) Maintenance and replacement— Owner’s standard practice. Maintenance and replacement (including redecoration) must be in accordance with the standard practice for the building concerned as established by the owner.

§ 983.208 Owner responsibilities. The owner is responsible for

performing all of the owner responsibilities under the Agreement and the HAP contract. 24 CFR 982.452 (Owner responsibilities) applies.

§ 983.209 Owner certification. By execution of the HAP contract, the

owner certifies that at such execution and at all times during the term of the HAP contract:

(a) All contract units are in good and tenantable condition. The owner is maintaining the premises and all contract units in accordance with the HQS.

(b) The owner is providing all the services, maintenance, equipment, and utilities as agreed to under the HAP contract and the leases with assisted families.

(c) Each contract unit for which the owner is receiving housing assistance payments is leased to an eligible family referred by the PHA, and the lease is in accordance with the HAP contract and HUD requirements.

(d) To the best of the owner’s knowledge, the members of the family reside in each contract unit for which the owner is receiving housing assistance payments, and the unit is the family’s only residence.

(e) The owner (including a principal or other interested party) is not the spouse, parent, child, grandparent, grandchild, sister, or brother of any member of a family residing in a contract unit.

(f) The amount of the housing assistance payment is the correct amount due under the HAP contract.

(g) The rent to owner for each contract unit does not exceed rents charged by the owner for other comparable unassisted units.

(h) Except for the housing assistance payment and the tenant rent as provided under the HAP contract, the owner has not received and will not receive any payment or other consideration (from the family, the PHA, HUD, or any other public or private source) for rental of the contract unit.

(i) The family does not own or have any interest in the contract unit.


§ 983.251 How participants are selected. (a) Who may receive PBV assistance?

(1) The PHA may select families who are participants in the PHA’s tenant- based voucher program and families who have applied for admission to the voucher program.

(2) Except for voucher participants (determined eligible at original admission to the voucher program), the PHA may only select families determined eligible for admission at commencement of PBV assistance.

(b) Protection of in-place families. (1) The term ‘‘in-place family’’ means an eligible family residing in a proposed contract unit on the proposal selection date.

(2) In order to minimize displacement of in-place families, if a unit to be placed under contract that is either an existing unit or one requiring rehabilitation is occupied by an eligible family on the proposal selection date, the in-place family must be placed on the PHA’s waiting list (if the family is not already on the list) and, once its continued eligibility is determined, given an absolute selection preference and referred to the project owner for an appropriately sized PBV unit in the project. (However, the PHA may deny assistance for the grounds specified in 24 CFR 982.552 and 982.553.) Admission of such families is not subject to income-targeting under 24 CFR 982.201(b)(2)(i), and such families must be referred to the owner from the PHA’s waiting list. A PHA shall give such families priority for admission to the PBV program. This protection does not apply to families that are not eligible to participate in the program on the proposal selection date.

(c) Selection from PHA waiting list. (1) Applicants who will occupy PBV units must be selected by the PHA from the PHA waiting list. The PHA must select applicants from the waiting list in accordance with the policies in the PHA administrative plan.

(2) The PHA may use a separate waiting list for admission to PBV units or may use the same waiting list for both tenant-based assistance and PBV assistance. If the PHA chooses to use a separate waiting list for admission to PBV units, the PHA must offer to place applicants who are listed on the waiting list for tenant-based assistance on the waiting list for PBV assistance.

(3) The PHA may use separate waiting lists for PBV units in individual projects or buildings (or for sets of such units)

or may use a single waiting list for the PHA’s whole PBV program. In either case, the waiting list may establish criteria or preferences for occupancy of particular units.

(4) The PHA may merge the waiting list for PBV assistance with the PHA waiting list for admission to another assisted housing program.

(5) The PHA may place families referred by the PBV owner on its PBV waiting list.

(6) Not less than 75 percent of the families admitted to a PHA’s tenant- based and project-based voucher programs during the PHA fiscal year from the PHA waiting list shall be extremely low-income families. The income-targeting requirements at 24 CFR 982.201(b)(2) apply to the total of admissions to the PHA’s project-based voucher program and tenant-based voucher program during the PHA fiscal year from the PHA waiting list for such programs.

(7) In selecting families to occupy PBV units with special accessibility features for persons with disabilities, the PHA must first refer families who require such accessibility features to the owner (see 24 CFR 8.26 and 100.202).

(d) Preference for services offered. In selecting families, PHAs may give preference to disabled families who need services offered at a particular project in accordance with the limits under this paragraph. The prohibition on granting preferences to persons with a specific disability at 24 CFR 982.207(b)(3) continues to apply.

(1) Preference limits. (i) The preference is limited to the population of families (including individuals) with disabilities that significantly interfere with their ability to obtain and maintain themselves in housing;

(ii) Who, without appropriate supportive services, will not be able to obtain or maintain themselves in housing; and

(iii) For whom such services cannot be provided in a nonsegregated setting.

(2) Disabled residents shall not be required to accept the particular services offered at the project.

(3) In advertising the project, the owner may advertise the project as offering services for a particular type of disability; however, the project must be open to all otherwise eligible persons with disabilities who may benefit from services provided in the project.

(e) Offer of PBV assistance. (1) If a family refuses the PHA’s offer of PBV assistance, such refusal does not affect the family’s position on the PHA waiting list for tenant-based assistance.

(2) If a PBV owner rejects a family for admission to the owner’s PBV units,



such rejection by the owner does not affect the family’s position on the PHA waiting list for tenant-based assistance.

(3) The PHA may not take any of the following actions against an applicant who has applied for, received, or refused an offer of PBV assistance:

(i) Refuse to list the applicant on the PHA waiting list for tenant-based assistance;

(ii) Deny any admission preference for which the applicant is currently qualified;

(iii) Change the applicant’s place on the waiting list based on preference, date, and time of application, or other factors affecting selection under the PHA selection policy;

(iv) Remove the applicant from the waiting list for tenant-based voucher assistance.

§ 983.252 PHA information for accepted family.

(a) Oral briefing. When a family accepts an offer of PBV assistance, the PHA must give the family an oral briefing. The briefing must include information on the following subjects:

(1) A description of how the program works; and

(2) Family and owner responsibilities. (b) Information packet. The PHA must

give the family a packet that includes information on the following subjects:

(1) How the PHA determines the total tenant payment for a family;

(2) Family obligations under the program; and

(3) Applicable fair housing information.

(c) Providing information for persons with disabilities. (1) If the family head or spouse is a disabled person, the PHA must take appropriate steps to assure effective communication, in accordance with 24 CFR 8.6, in conducting the oral briefing and in providing the written information packet, including in alternative formats.

(2) The PHA shall have some mechanism for referring to accessible PBV units a family that includes a person with mobility impairment.

(d) Providing information for persons with limited English proficiency. The PHA should take reasonable steps to assure meaningful access by persons with limited English proficiency in accordance with obligations contained in Title VI of the Civil Rights Act of 1964 and Executive Order 13166.

§ 983.253 Leasing of contract units. (a) Owner selection of tenants. (1)

During the term of the HAP contract, the owner must lease contract units only to eligible families selected and referred by the PHA from the PHA waiting list.

(2) The owner is responsible for adopting written tenant selection procedures that are consistent with the purpose of improving housing opportunities for very low-income families and reasonably related to program eligibility and an applicant’s ability to perform the lease obligations.

(3) An owner must promptly notify in writing any rejected applicant of the grounds for any rejection.

(b) Size of unit. The contract unit leased to each family must be appropriate for the size of the family under the PHA’s subsidy standards.

§ 983.254 Vacancies. (a) Filling vacant units. (1) The owner

must promptly notify the PHA of any vacancy or expected vacancy in a contract unit. After receiving the owner notice, the PHA must make every reasonable effort to refer promptly a sufficient number of families for the owner to fill such vacancies.

(2) The owner must lease vacant contract units only to eligible families on the PHA waiting list referred by the PHA.

(3) The PHA and the owner must make reasonable good faith efforts to minimize the likelihood and length of any vacancy.

(b) Reducing number of contract units. If any contract units have been vacant for a period of 120 or more days since owner notice of vacancy (and notwithstanding the reasonable good faith efforts of the PHA to fill such vacancies), the PHA may give notice to the owner amending the HAP contract to reduce the number of contract units by subtracting the number of contract units (by number of bedrooms) that have been vacant for such period.

§ 983.255 Tenant screening. (a) PHA option. (1) The PHA has no

responsibility or liability to the owner or any other person for the family’s behavior or suitability for tenancy. However, the PHA may opt to screen applicants for family behavior or suitability for tenancy and may deny admission to an applicant based on such screening.

(2) The PHA must conduct any such screening of applicants in accordance with policies stated in the PHA administrative plan.

(b) Owner responsibility. (1) The owner is responsible for screening and selection of the family to occupy the owner’s unit.

(2) The owner is responsible for screening of families on the basis of their tenancy histories. An owner may consider a family’s background with respect to such factors as:

(i) Payment of rent and utility bills; (ii) Caring for a unit and premises; (iii) Respecting the rights of other

residents to the peaceful enjoyment of their housing;

(iv) Drug-related criminal activity or other criminal activity that is a threat to the health, safety, or property of others; and

(v) Compliance with other essential conditions of tenancy;

(c) Providing tenant information to owner. (1) The PHA must give the owner:

(i) The family’s current and prior address (as shown in the PHA records); and

(ii) The name and address (if known to the PHA) of the landlord at the family’s current and any prior address.

(2) When a family wants to lease a dwelling unit, the PHA may offer the owner other information in the PHA possession about the family, including information about the tenancy history of family members or about drug trafficking and criminal activity by family members.

(3) The PHA must give the family a description of the PHA policy on providing information to owners.

(4) The PHA policy must provide that the PHA will give the same types of information to all owners.

§ 983.256 Lease. (a) Tenant’s legal capacity. The tenant

must have legal capacity to enter a lease under state and local law. ‘‘Legal capacity’’ means that the tenant is bound by the terms of the lease and may enforce the terms of the lease against the owner.

(b) Form of lease. (1) The tenant and the owner must enter a written lease for the unit. The lease must be executed by the owner and the tenant.

(2) If the owner uses a standard lease form for rental to unassisted tenants in the locality or the premises, the lease must be in such standard form, except as provided in paragraph (b)(4) of this section. If the owner does not use a standard lease form for rental to unassisted tenants, the owner may use another form of lease, such as a PHA model lease.

(3) In all cases, the lease must include a HUD-required tenancy addendum. The tenancy addendum must include, word-for-word, all provisions required by HUD.

(4) The PHA may review the owner’s lease form to determine if the lease complies with state and local law. The PHA may decline to approve the tenancy if the PHA determines that the lease does not comply with state or local law.



(c) Required information. The lease must specify all of the following:

(1) The names of the owner and the tenant;

(2) The unit rented (address, apartment number, if any, and any other information needed to identify the leased contract unit);

(3) The term of the lease (initial term and any provision for renewal);

(4) The amount of the tenant rent to owner. The tenant rent to owner is subject to change during the term of the lease in accordance with HUD requirements;

(5) A specification of what services, maintenance, equipment, and utilities are to be provided by the owner; and

(6) The amount of any charges for food, furniture, or supportive services.

(d) Tenancy addendum. (1) The tenancy addendum in the lease shall state:

(i) The program tenancy requirements (as specified in this part);

(ii) The composition of the household as approved by the PHA (names of family members and any PHA-approved live-in aide).

(2) All provisions in the HUD- required tenancy addendum must be included in the lease. The terms of the tenancy addendum shall prevail over other provisions of the lease.

(e) Changes in lease. (1) If the tenant and the owner agree to any change in the lease, such change must be in writing, and the owner must immediately give the PHA a copy of all such changes.

(2) The owner must notify the PHA in advance of any proposed change in lease requirements governing the allocation of tenant and owner responsibilities for utilities. Such changes may be made only if approved by the PHA and in accordance with the terms of the lease relating to its amendment. The PHA must redetermine reasonable rent, in accordance with § 983.303(c), based on any change in the allocation of responsibility for utilities between the owner and the tenant, and the redetermined reasonable rent shall be used in calculation of rent to owner from the effective date of the change.

(f) Initial term of lease. The initial lease term must be for at least one year.

(g) Lease provisions governing tenant absence from the unit. The lease may specify a maximum period of tenant absence from the unit that may be shorter than the maximum period permitted by PHA policy. (PHA termination of assistance actions due to family absence from the unit is subject to 24 CFR 982.312, except that the HAP contract is not terminated if the family

is absent for longer than the maximum period permitted.)

§ 983.257 Owner termination of tenancy and eviction.

(a) In general. 24 CFR 982.310 applies with the exception that § 982.310(d)(1)(iii) and (iv) do not apply to the PBV program. (In the PBV program, ‘‘good cause’’ does not include a business or economic reason or desire to use the unit for an individual, family, or non-residential rental purpose.) 24 CFR 5.858 through 5.861 on eviction for drug and alcohol abuse apply to this part.

(b) Upon lease expiration, an owner may:

(1) Renew the lease; (2) Refuse to renew the lease for good

cause as stated in paragraph (a) of this section;

(3) Refuse to renew the lease without good cause, in which case the PHA would provide the family with a tenant- based voucher and the unit would be removed from the PBV HAP contract.

(c) If a family resides in a project- based unit excepted from the 25 percent per-building cap on project-basing because of participation in an FSS or other supportive services program, and the family fails without good cause to complete its FSS contract of participation or supportive services requirement, such failure is grounds for lease termination by the owner.

§ 983.258 Security deposit: amounts owed by tenant.

(a) The owner may collect a security deposit from the tenant.

(b) The PHA may prohibit security deposits in excess of private market practice, or in excess of amounts charged by the owner to unassisted tenants.

(c) When the tenant moves out of the contract unit, the owner, subject to state and local law, may use the security deposit, including any interest on the deposit, in accordance with the lease, as reimbursement for any unpaid tenant rent, damages to the unit, or other amounts which the tenant owes under the lease.

(d) The owner must give the tenant a written list of all items charged against the security deposit and the amount of each item. After deducting the amount used to reimburse the owner, the owner must promptly refund the full amount of the balance to the tenant.

(e) If the security deposit is not sufficient to cover amounts the tenant owes under the lease, the owner may seek to collect the balance from the tenant. However, the PHA has no liability or responsibility for payment of

any amount owed by the family to the owner.

§ 983.259 Overcrowded, under-occupied, and accessible units.

(a) Family occupancy of wrong-size or accessible unit. The PHA subsidy standards determine the appropriate unit size for the family size and composition. If the PHA determines that a family is occupying a:

(1) Wrong-size unit, or (2) Unit with accessibility features

that the family does not require, and the unit is needed by a family that requires the accessibility features, the PHA must promptly notify the family and the owner of this determination, and of the PHA’s offer of continued assistance in another unit pursuant to paragraph (b) of this section.

(b) PHA offer of continued assistance. (1) If a family is occupying a:

(i) Wrong-size unit, or (ii) Unit with accessibility features

that the family does not require, and the unit is needed by a family that requires the accessibility features, the PHA must offer the family the opportunity to receive continued housing assistance in another unit.

(2) The PHA policy on such continued housing assistance must be stated in the administrative plan and may be in the form of:

(i) Project-based voucher assistance in an appropriate-size unit (in the same building or in another building);

(ii) Other project-based housing assistance (e.g., by occupancy of a public housing unit);

(iii) Tenant-based rental assistance under the voucher program; or

(iv) Other comparable public or private tenant-based assistance (e.g., under the HOME program).

(c) PHA termination of housing assistance payments. (1) If the PHA offers the family the opportunity to receive tenant-based rental assistance under the voucher program, the PHA must terminate the housing assistance payments for a wrong-sized or accessible unit at expiration of the term of the family’s voucher (including any extension granted by the PHA).

(2) If the PHA offers the family the opportunity for another form of continued housing assistance in accordance with paragraph (b)(2) of this section (not in the tenant-based voucher program), and the family does not accept the offer, does not move out of the PBV unit within a reasonable time as determined by the PHA, or both, the PHA must terminate the housing assistance payments for the wrong-sized or accessible unit, at the expiration of a reasonable period as determined by the PHA.



§ 983.260 Family right to move. (a) The family may terminate the

assisted lease at any time after the first year of occupancy. The family must give the owner advance written notice of intent to vacate (with a copy to the PHA) in accordance with the lease.

(b) If the family has elected to terminate the lease in this manner, the PHA must offer the family the opportunity for continued tenant-based rental assistance, in the form of either assistance under the voucher program or other comparable tenant-based rental assistance.

(c) Before providing notice to terminate the lease under paragraph (a) of this section, a family must contact the PHA to request comparable tenant-based rental assistance if the family wishes to move with continued assistance. If voucher or other comparable tenant- based rental assistance is not immediately available upon termination of the family’s lease of a PBV unit, the PHA must give the family priority to receive the next available opportunity for continued tenant-based rental assistance.

(d) If the family terminates the assisted lease before the end of one year, the family relinquishes the opportunity for continued tenant-based assistance.

§ 983.261 When occupancy may exceed 25 percent cap on the number of PBV units in each building.

(a) Except as provided in § 983.56(b), the PHA may not pay housing assistance under the HAP contract for contract units in excess of the 25 percent cap pursuant to § 983.56(a).

(b) In referring families to the owner for admission to excepted units, the PHA must give preference to elderly or disabled families; or to families receiving supportive services.

(c) If a family at the time of initial tenancy is receiving and while the resident of an excepted unit has received FSS supportive services or any other service as defined in the PHA administrative plan, and successfully completes the FSS contract of participation or the supportive services requirement, the unit continues to count as an excepted unit for as long as the family resides in the unit.

(d) A family (or the remaining members of the family) residing in an excepted unit that no longer meets the criteria for a ‘‘qualifying family’’ in connection with the 25 percent per building cap exception (e.g., a family that does not successfully complete its FSS contract of participation or the supportive services requirement as defined in the PHA administrative plan or the remaining members of a family

that no longer qualifies for elderly or disabled family status) must vacate the unit within a reasonable period of time established by the PHA, and the PHA shall cease paying housing assistance payments on behalf of the non- qualifying family. If the family fails to vacate the unit within the established time, the unit must be removed from the HAP contract unless the project is partially assisted, and it is possible for the HAP contract to be amended to substitute a different unit in the building in accordance with § 983.206(a); or the owner terminates the lease and evicts the family. The housing assistance payments for a family residing in an excepted unit that is not in compliance with its family obligations (e.g., a family fails, without good cause, to successfully complete its FSS contract of participation or supportive services requirement) shall be terminated by the PHA.

Subpart G—Rent to Owner

§ 983.301 Determining the rent to owner.

(a) Initial and redetermined rents. (1) The amount of the initial and redetermined rent to owner is determined in accordance with this section and § 983.302.

(2) The amount of the initial rent to owner is established at the beginning of the HAP contract term. For rehabilitated or newly constructed housing, the Agreement states the estimated amount of the initial rent to owner, but the actual amount of the initial rent to owner is established at the beginning of the HAP contract term.

(3) The rent to owner is redetermined at the owner’s request for a rent increase in accordance with this section and § 983.302. The rent to owner is also redetermined at such time when there is a five percent or greater decrease in the published FMR in accordance with § 983.302.

(b) Amount of rent to owner. Except for certain tax credit units as provided in paragraph (c) of this section, the rent to owner must not exceed the lowest of:

(1) An amount determined by the PHA, not to exceed 110 percent of the applicable fair market rent (or any exception payment standard approved by the Secretary) for the unit bedroom size minus any utility allowance;

(2) The reasonable rent; or (3) The rent requested by the owner. (c) Rent to owner for certain tax credit

units. (1) This paragraph (c) applies if: (i) A contract unit receives a low-

income housing tax credit under the Internal Revenue Code of 1986 (see 26 U.S.C. 42);

(ii) The contract unit is not located in a qualified census tract;

(iii) In the same building, there are comparable tax credit units of the same unit bedroom size as the contract unit and the comparable tax credit units do not have any form of rental assistance other than the tax credit; and

(iv) The tax credit rent exceeds the applicable fair market rental (or any exception payment standard) as determined in accordance with paragraph (b) of this section.

(2) In the case of a contract unit described in paragraph (c)(1) of this section, the rent to owner must not exceed the lowest of:

(i) The tax credit rent minus any utility allowance;

(ii) The reasonable rent; or (iii) The rent requested by the owner. (3) The ‘‘tax credit rent’’ is the rent

charged for comparable units of the same bedroom size in the building that also receive the low-income housing tax credit but do not have any additional rental assistance (e.g., additional assistance such as tenant-based voucher assistance).

(4) A ‘‘qualified census tract’’ is any census tract (or equivalent geographic area defined by the Bureau of the Census) in which:

(i) At least 50 percent of households have an income of less than 60 percent of Area Median Gross Income (AMGI); or

(ii) Where the poverty rate is at least 25 percent and where the census tract is designated as a qualified census tract by HUD.

(d) Rent to owner for other tax credit units. Except in the case of a tax credit unit described in paragraph (c)(1) of this section, the rent to owner for all other tax credit units is determined pursuant to paragraph (b) of this section.

(e) Reasonable rent. The PHA shall determine reasonable rent in accordance with § 983.303. The rent to owner for each contract unit may at no time exceed the reasonable rent.

(f) Use of FMRs and utility allowance schedule in determining the amount of rent to owner. (1) Amounts used. (i) Determination of initial rent (at beginning of HAP contract term). When determining the initial rent to owner, the PHA shall use the most recently published FMR in effect and the utility allowance schedule in effect at execution of the HAP contract. At its discretion, the PHA may use the amounts in effect at any time during the 30-day period immediately before the beginning date of the HAP contract.

(ii) Redetermination of rent to owner. When redetermining the rent to owner, the PHA shall use the most recently



published FMR and the PHA utility allowance schedule in effect at the time of redetermination. At its discretion, the PHA may use the amounts in effect at any time during the 30-day period immediately before the redetermination date.

(2) Exception payment standard and PHA utility allowance schedule. (i) Any HUD-approved exception payment standard amount under 24 CFR 982.503(c) applies to both the tenant- based and project-based voucher programs. HUD will not approve a different exception payment standard amount for use in the PBV program.

(ii) The PHA may not establish or apply different utility allowance amounts for the PBV program. The same PHA utility allowance schedule applies to both the tenant-based and PBV programs.

(g) PHA-owned units. For PHA-owned PBV units, the initial rent to owner and the annual redetermination of rent at the annual anniversary of the HAP contract are determined by the independent entity approved by HUD in accordance with § 983.59. The PHA must use the rent to owner established by the independent entity.

§ 983.302 Redetermination of rent to owner.

(a) The PHA must redetermine the rent to owner:

(1) Upon the owner’s request; or (2) When there is a five percent or

greater decrease in the published FMR in accordance with § 983.301.

(b) Rent increase. (1) The PHA may not make any rent increase other than an increase in the rent to owner as determined pursuant to § 983.301. (Provisions for special adjustments of contract rent pursuant to 42 U.S.C. 1437f(b)(2)(B) do not apply to the voucher program.)

(2) The owner must request an increase in the rent to owner at the annual anniversary of the HAP contract by written notice to the PHA. The length of the required notice period of the owner request for a rent increase at the annual anniversary may be established by the PHA. The request must be submitted in the form and manner required by the PHA.

(3) The PHA may not approve and the owner may not receive any increase of rent to owner until and unless the owner has complied with all requirements of the HAP contract, including compliance with the HQS. The owner may not receive any retroactive increase of rent for any period of noncompliance.

(c) Rent decrease. If there is a decrease in the rent to owner, as

established in accordance with § 983.301, the rent to owner must be decreased, regardless of whether the owner requested a rent adjustment.

(d) Notice of rent redetermination. Rent to owner is redetermined by written notice by the PHA to the owner specifying the amount of the redetermined rent (as determined in accordance with §§ 983.301 and 983.302). The PHA notice of the rent adjustment constitutes an amendment of the rent to owner specified in the HAP contract.

(e) Contract year and annual anniversary of the HAP contract. (1) The contract year is the period of 12 calendar months preceding each annual anniversary of the HAP contract during the HAP contract term. The initial contract year is calculated from the first day of the first calendar month of the HAP contract term.

(2) The annual anniversary of the HAP contract is the first day of the first calendar month after the end of the preceding contract year. The adjusted rent to owner amount applies for the period of 12 calendar months from the annual anniversary of the HAP contract.

(3) See § 983.206(c) for information on the annual anniversary of the HAP contract for contract units completed in stages.

§ 983.303 Reasonable rent. (a) Comparability requirement. At all

times during the term of the HAP contract, the rent to owner for a contract unit may not exceed the reasonable rent as determined by the PHA.

(b) Redetermination. The PHA must redetermine the reasonable rent:

(1) Whenever there is a five percent or greater decrease in the published FMR in effect 60 days before the contract anniversary (for the unit sizes specified in the HAP contract) as compared with the FMR in effect one year before the contract anniversary;

(2) Whenever the PHA approves a change in the allocation of responsibility for utilities between the owner and the tenant;

(3) Whenever the HAP contract is amended to substitute a different contract unit in the same building; and

(4) Whenever there is any other change that may substantially affect the reasonable rent.

(c) How to determine reasonable rent. (1) The reasonable rent of a contract unit must be determined by comparison to rent for other comparable unassisted units.

(2) In determining the reasonable rent, the PHA must consider factors that affect market rent, such as:

(i) The location, quality, size, unit type, and age of the contract unit; and

(ii) Amenities, housing services, maintenance, and utilities to be provided by the owner.

(d) Comparability analysis. (1) For each unit, the PHA comparability analysis must use at least three comparable units in the private unassisted market, which may include comparable unassisted units in the premises or project.

(2) The PHA must retain a comparability analysis that shows how the reasonable rent was determined, including major differences between the contract units and comparable unassisted units.

(3) The comparability analysis may be performed by PHA staff or by another qualified person or entity. A person or entity that conducts the comparability analysis and any PHA staff or contractor engaged in determining the housing assistance payment based on the comparability analysis may not have any direct or indirect interest in the property.

(e) Owner certification of comparability. By accepting each monthly housing assistance payment from the PHA, the owner certifies that the rent to owner is not more than rent charged by the owner for comparable unassisted units in the premises. The owner must give the PHA information requested by the PHA on rents charged by the owner for other units in the premises or elsewhere.

(f) Determining reasonable rent for PHA-owned units. (1) For PHA-owned units, the amount of the reasonable rent must be determined by an independent agency approved by HUD in accordance with § 983.58, rather than by the PHA. Reasonable rent must be determined in accordance with this section.

(2) The independent entity must furnish a copy of the independent entity determination of reasonable rent for PHA-owned units to the PHA and to the HUD field office where the project is located.

§ 983.304 Other subsidy: effect on rent to owner.

(a) General. In addition to the rent limits established in accordance with § 983.301 and 24 CFR 982.302, the following restrictions apply to certain units.

(b) HOME. For units assisted under the HOME program, rents may not exceed rent limits as required by the HOME program (24 CFR 92.252).

(c) Subsidized projects. (1) This paragraph (c) applies to any contract units in any of the following types of federally subsidized project:

(i) An insured or non-insured Section 236 project;



(ii) A formerly insured or non-insured Section 236 project that continues to receive Interest Reduction Payment following a decoupling action;

(iii) A Section 221(d)(3) below market interest rate (BMIR) project;

(iv) A Section 515 project of the Rural Housing Service;

(v) A project receiving low-income housing tax credits;

(vi) Any other type of federally subsidized project specified by HUD.

(2) The rent to owner may not exceed the subsidized rent (basic rent) or tax credit rent as determined in accordance with requirements for the applicable federal program listed in paragraph (c)(1) of this section.

(d) Combining subsidy. Rent to owner may not exceed any limitation required to comply with HUD subsidy layering requirements. See § 983.55.

(e) Other subsidy: PHA discretion to reduce rent. At its discretion, a PHA may reduce the initial rent to owner because of other governmental subsidies, including tax credit or tax exemption, grants, or other subsidized financing.

(f) Prohibition of other subsidy. For provisions that prohibit PBV assistance to units in certain types of subsidized housing, see § 983.54.

§ 983.305 Rent to owner: effect of rent control and other rent limits.

In addition to the limitation to 110 percent of the FMR in § 983.301(b)(1), the rent reasonableness limit under §§ 983.301(b)(2) and 983.303, the rental determination provisions of § 983.301(f), the special limitations for tax credit units under § 983.301(c), and other rent limits under this part, the amount of rent to owner also may be subject to rent control or other limits under local, state, or federal law.


§ 983.351 PHA payment to owner for occupied unit.

(a) When payments are made. (1) During the term of the HAP contract, the PHA shall make housing assistance payments to the owner in accordance with the terms of the HAP contract. The payments shall be made for the months during which a contract unit is leased to and actually occupied by an eligible family.

(2) Except for discretionary vacancy payments in accordance with § 983.352, the PHA may not make any housing assistance payment to the owner for any month after the month when the family moves out of the unit (even if household goods or property are left in the unit).

(b) Monthly payment. Each month, the PHA shall make a housing assistance

payment to the owner for each contract unit that complies with the HQS and is leased to and occupied by an eligible family in accordance with the HAP contract.

(c) Calculating amount of payment. The monthly housing assistance payment by the PHA to the owner for a contract unit leased to a family is the rent to owner minus the tenant rent (total tenant payment minus the utility allowance).

(d) Prompt payment. The housing assistance payment by the PHA to the owner under the HAP contract must be paid to the owner on or about the first day of the month for which payment is due, unless the owner and the PHA agree on a later date.

(e) Owner compliance with contract. To receive housing assistance payments in accordance with the HAP contract, the owner must comply with all the provisions of the HAP contract. Unless the owner complies with all the provisions of the HAP contract, the owner does not have a right to receive housing assistance payments.

§ 983.352 Vacancy payment.

(a) Payment for move-out month. If an assisted family moves out of the unit, the owner may keep the housing assistance payment payable for the calendar month when the family moves out (‘‘move-out month’’). However, the owner may not keep the payment if the PHA determines that the vacancy is the owner’s fault.

(b) Vacancy payment at PHA discretion. (1) At the discretion of the PHA, the HAP contract may provide for vacancy payments to the owner (in the amounts determined in accordance with paragraph (b)(2) of this section) for a PHA-determined period of vacancy extending from the beginning of the first calendar month after the move-out month for a period not exceeding two full months following the move-out month.

(2) The vacancy payment to the owner for each month of the maximum two- month period will be determined by the PHA, and cannot exceed the monthly rent to owner under the assisted lease, minus any portion of the rental payment received by the owner (including amounts available from the tenant’s security deposit). Any vacancy payment may cover only the period the unit remains vacant.

(3) The PHA may make vacancy payments to the owner only if:

(i) The owner gives the PHA prompt, written notice certifying that the family has vacated the unit and containing the date when the family moved out (to the

best of the owner’s knowledge and belief);

(ii) The owner certifies that the vacancy is not the fault of the owner and that the unit was vacant during the period for which payment is claimed;

(iii) The owner certifies that it has taken every reasonable action to minimize the likelihood and length of vacancy; and

(iv) The owner provides any additional information required and requested by the PHA to verify that the owner is entitled to the vacancy payment.

(4) The owner must submit a request for vacancy payments in the form and manner required by the PHA and must provide any information or substantiation required by the PHA to determine the amount of any vacancy payment.

§ 983.353 Tenant rent; payment to owner. (a) PHA determination. (1) The tenant

rent is the portion of the rent to owner paid by the family. The PHA determines the tenant rent in accordance with HUD requirements.

(2) Any changes in the amount of the tenant rent will be effective on the date stated in a notice by the PHA to the family and the owner.

(b) Tenant payment to owner. (1) The family is responsible for paying the tenant rent (total tenant payment minus the utility allowance).

(2) The amount of the tenant rent as determined by the PHA is the maximum amount the owner may charge the family for rent of a contract unit. The tenant rent is payment for all housing services, maintenance, equipment, and utilities to be provided by the owner without additional charge to the tenant, in accordance with the HAP contract and lease.

(3) The owner may not demand or accept any rent payment from the tenant in excess of the tenant rent as determined by the PHA. The owner must immediately return any excess payment to the tenant.

(4) The family is not responsible for payment of the portion of the rent to owner covered by the housing assistance payment under the HAP contract. The owner may not terminate the tenancy of an assisted family for nonpayment of the PHA housing assistance payment.

(c) Limit of PHA responsibility. (1) The PHA is responsible only for making housing assistance payments to the owner on behalf of a family in accordance with the HAP contract. The PHA is not responsible for paying the tenant rent, or for paying any other claim by the owner.



(2) The PHA may not use housing assistance payments or other program funds (including any administrative fee reserve) to pay any part of the tenant rent or to pay any other claim by the owner. The PHA may not make any payment to the owner for any damage to the unit, or for any other amount owed by a family under the family’s lease or otherwise.

(d) Utility reimbursement. (1) If the amount of the utility allowance exceeds the total tenant payment, the PHA shall pay the amount of such excess as a reimbursement for tenant-paid utilities (‘‘utility reimbursement’’) and the tenant rent to the owner shall be zero.

(2) The PHA either may pay the utility reimbursement to the family or may pay

the utility bill directly to the utility supplier on behalf of the family.

(3) If the PHA chooses to pay the utility supplier directly, the PHA must notify the family of the amount paid to the utility supplier.

§ 983.354 Other fees and charges. (a) Meals and supportive services. (1)

Except as provided in paragraph (a)(2) of this section, the owner may not require the tenant or family members to pay charges for meals or supportive services. Non-payment of such charges is not grounds for termination of tenancy.

(2) In assisted living developments receiving project-based assistance, owners may charge tenants, family members, or both for meals or supportive services. These charges may

not be included in the rent to owner, nor may the value of meals and supportive services be included in the calculation of reasonable rent. Non- payment of such charges is grounds for termination of the lease by the owner in an assisted living development.

(b) Other charges by owner. The owner may not charge the tenant or family members extra amounts for items customarily included in rent in the locality or provided at no additional cost to unsubsidized tenants in the premises.

Dated: September 29, 2005. Paula O. Blunt, General Deputy Assistant Secretary for Public and Indian Housing. [FR Doc. 05–20035 Filed 10–12–05; 8:45 am] BILLING CODE 4210–33–P


Previous editions are obsolete Page 1 of 12 form HUD-52641 (8/2009) ref Handbook 7420.8

Housing Assistance Payments Contract U.S. Department of Housing(HAP Contract) and Urban DevelopmentSection 8 Tenant-BasedAssistance Office of Public and IndianHousingHousing Choice Voucher Program OMBApproval 2577-0169 (Exp. 04/30/2014) Privacy Act Statement. The Department of Housing and Urban Development (HUD) is authorized to collect the information required on this form bySection 8 of the U.S. Housing Act of 1937 (42 U.S.C. 1437f). Collection of family members’ names and unit address, and owner’s name and paymentaddress is mandatory. The information is used to provide Section 8 tenant-based assistance under the Housing Choice Voucher program in the formof housing assistance payments. The information also specifies what utilities and appliances are to be supplied by the owner, and what utilities andappliances are to be supplied by the tenant. HUD may disclose this information to Federal, State and local agencies when relevant to civil, criminal, orregulatory investigations and prosecutions. It will not be otherwise disclosed or released outside of HUD, except as permitted or required by law.Failure to provide any of the information may result in delay or rejection of family or owner participation in the program.

Instructions for use of HAPContractThis form of Housing Assistance Payments Contract (HAP contract)is used to provide Section 8 tenant-based assistance under thehousing choice voucher program (voucher program) of the U.S.Department of Housing and Urban Development (HUD). The mainregulation for this program is 24 Code of Federal Regulations Part982.

The local voucher program is administered by a public housingagency (PHA) . The HAP contract is an agreement between the PHAand the owner of a unit occupied by an assisted family. The HAPcontract has three parts:

Part A Contract information (fill-ins). Seesection by section instructions. Part BBody of contractPart C Tenancy addendum

Use of this formUse of this HAP contract is required by HUD. Modification of theHAP contract is not permitted. The HAP contract must be word-for-word in the form prescribed by HUD.

However, the PHA may choose to add the following:

Language that prohibits the owner from collecting a securitydeposit in excess of private market practice, or in excess ofamounts charged by the owner to unassisted tenants. Such aprohibition must be added to Part A of the HAP contract.

Language that defines when the housing assistance payment bythe PHA is deemed received by the owner (e.g., upon mailingby the PHA or actual receipt by the owner). Such languagemust be added to Part A of the HAP contract.

To prepare the HAP contract, fill in all contract information in PartA of the contract. Part A must then be executed by the owner and thePHA.

Use for special housing typesIn addition to use for the basic Section 8 voucher program, this formmust also be used for the following “special housing types” which arevoucher program variants for special needs (see 24 CFR Part 982,Subpart M): (1) single room occupancy (SRO) housing; (2)congregate housing; (3) group home; (4) shared housing; and (5)manufactured home rental by a family that leases the manufacturedhome and space. When this form is used for a special housing type,the special housing type shall be specified in Part A of the HAPcontract, as follows: “This HAP contract is used for the followingspecial housing type under HUD regulations for the Section 8voucher program: (Insert Name of Special Housing type).”

However, this form may not be used for the following specialhousing types: (1) manufactured home space rental by a family thatowns the manufactured home and leases only the space; (2)cooperative housing; and (3) the homeownership option underSection 8(y) of the United States Housing Act of 1937 (42 U.S.C.1437f(y)).

How to fill in Part ASection by Section Instructions

Section 2: TenantEnter full name of tenant.

Section 3. Contract UnitEnter address of unit, including apartment number, if any.

Section 4. HouseholdMembersEnter full names of all PHA-approved household members. Specify ifany such person is a live-in aide, which is a person approved by thePHA to reside in the unit to provide supportive services for a familymember who is a person with disabilities.

Section 5. Initial Lease TermEnter first date and last date of initial lease term.

The initial lease term must be for at least one year. However, thePHA may approve a shorter initial lease term if the PHAdetermines that:

Such shorter term would improvehousing

opportunities for the tenant, and

Such shorter term is the prevailing local market

practice.

Section 6. Initial Rent toOwnerEnter the amount of the monthly rent to owner during the

initial lease term. The PHA must determine that the rent to owner isreasonable in comparison to rent for other comparable unassisted units.During the initial lease term, the owner may not raise the rent toowner.

Section 7.HousingAssistancePaymentEnter the initial amount of the monthly housingassistance

payment.

Section 8.Utilities andAppliances.The lease and the HAPcontractmust specifywhatutilities andappliances are to be supplied by the owner, and whatutilities and appliances are to be supplied by the tenant. Fill insection 8 to show who is responsible to provide or pay for utilitiesand appliances.

form HUD-52641 (8/2009)Previous editions are obsolete Page 2 of 12 ref Handbook 7420.8

Housing Assistance Payments Contract U.S. Department of Housingand Urban Development

(HAP Contract) Office of Public and Indian Housing

Section 8 Tenant-Based AssistanceHousing Choice Voucher Program

Part A of the HAP Contract: Contract Information(To prepare the contract, fill out all contract information in Part A.)

1. Contents of Contract ThisHAP contract has three parts:

Part A: Contract Information

Part B: Body of Contract Part

C: Tenancy Addendum

2. Tenant

3. Contract Unit

4. Household

The following persons may reside in the unit. Other persons may not be added to the household without prior written approval ofthe owner and the PHA.

5. Initial Lease Term

The initial lease term begins on (mm/dd/yyyy): __________________

The initial lease term ends on (mm/dd/yyyy):____________________

6. Initial Rent to OwnerThe initial rent to owner is: $ ________________________During the initial lease term, the owner may not raise the rent to owner.

7. Initial Housing Assistance Payment

The HAP contract term commences on the first day of the initial lease term. At the beginning of the HAP contract term, the amountof the housing assistance payment by the PHA to the owner is $__________________ per month.The amount of the monthly housing assistance payment by the PHA to the owner is subject to change during the HAP contract termin accordance with HUD requirements.


8. Utilities and AppliancesThe owner shall provide or pay for the utilities and appliances indicated below by an “ O”. The tenant shall provide or pay for the utilities and appliances indicatedbelow by a “T”. Unless otherwise specified below, the owner shall pay for all utilities and appliances provided by the owner.

Item Specify fuel type Provided by Paid by

Heating Natural gas Bottle gas Oil or Electric Coal or Other

Cooking Natural gas Bottle gas Oil or Electric Coal or Other

Water Heating Natural gas Bottle gas Oil or Electric Coal or Other

Other Electric

Water

Sewer

Trash Collection

Air Conditioning

Refrigerator

Range/Microwave

Other (specify)

Signatures:PublicHousingAgency Owner

Print or Type Name of PHA Print or Type Name of Owner

Signature Signature

Print or Type Name and Title of Signatory Print or Type Name and Title of Signatory

Date (mm/dd/yyyy) Date (mm/dd/yyyy)

Mail Payments to:Name

Address (street, city, State, Zip)


Housing Assistance Payments Contract(HAP Contract)Section 8 Tenant-Based AssistanceHousing Choice Voucher Program

U.S. Department of Housingand Urban DevelopmentOffice of Public and Indian Housing

Part B of HAPContract: Body of Contract

1. Purposea. This is a HAP contract between the PHA and the

owner. The HAP contract is entered to provideassistance for the family under the Section 8 voucherprogram (see HUD program regulations at

24 Code of Federal Regulations Part 982).b. The HAP contract only applies to the household and

contract unit specified in Part A of the HAPcontract.

c. During the HAP contract term, the PHA will payhousing assistance payments to the owner inaccordance with the HAP contract.

d. The family will reside in the contract unit withassistance under the Section 8 voucher program. Thehousing assistance payments by the PHA assist thetenant to lease the contract unit from the owner foroccupancy by the family.

2. Lease of Contract Unita. The owner has leased the contract unit to the tenant

for occupancy by the family with assistance underthe Section 8 voucher program.

b. The PHA has approved leasing of the unit inaccordance with requirements of the Section 8voucher program.

c. The lease for the contract unit must include word-for-word all provisions of the tenancy addendumrequired by HUD (Part C of the HAP contract).

d. The owner certifies that:(1) The owner and the tenant have entered into a

lease of the contract unit that includes allprovisions of the tenancy addendum.

(2) The lease is in a standard form that is used inthe locality by the owner and that is generallyused for other unassisted tenants in thepremises.

(3) The lease is consistent with State and local

law.

e. The owner is responsible for screening the family’sbehavior or suitability for tenancy. The PHA is notresponsible for such screening. The PHA has noliability or responsibility to the owner or otherpersons for the family’s behavior or the family’sconduct in tenancy.

3. Maintenance, Utilities, and Other Servicesa. The owner must maintain the contract unit and

premises in accordance with the housing qualitystandards (HQS).

b. The owner must provide all utilities needed tocomply with the HQS.

c. If the owner does not maintain the contract unit inaccordance with the HQS, or fails to provide allutilities needed to comply with the HQS, the PHAmay exercise any available remedies. PHA remedies

for such breach include recovery of overpayments,suspension of housing assistance payments,abatement or other reduction of housing assistancepayments, termination of housing assistancepayments, and termination of the HAP contract. ThePHA may not exercise such remedies against theowner because of an HQS breach for which thefamily is responsible, and that is not caused by theowner.

d. The PHA shall not make any housing assistancepayments if the contract unit does not meet the HQS,unless the owner corrects the defect within theperiod specified by the PHA and the PHA verifiesthe correction. If a defect is life threatening, theowner must correct the defect within no more than24 hours. For other defects, the owner must correctthe defect within the period specified by the PHA.

e. The PHA may inspect the contract unit and premisesat such times as the PHA determines necessary, toensure that the unit is in accordance with the HQS.

f. The PHA must notify the ownerof anyHQS defectsshown by the inspection.

g. The owner must provide all housing services as

agreed to in the lease.

4. Term of HAP Contracta. Relation to lease term. The term of the HAP

contract begins on the first day of the initial term ofthe lease, and terminates on the last day of the termof the lease (including the initial lease term and anyextensions).

b. When HAP contract terminates.(1) The HAP contract terminates automatically if

the lease is terminated by the owner or thetenant.

(2) The PHA may terminate program assistancefor the family for any grounds authorized inaccordance with HUD requirements. If thePHA terminates program assistance for thefamily, the HAP contract terminatesautomatically.

(3) If the family moves from the contract unit, the

HAP contract terminates automatically.

(4) The HAP contract terminates automatically 180calendar days after the last housing assistancepayment to the owner.

(5) The PHA may terminate the HAP contract ifthe PHA determines, in accordance with HUDrequirements, that available program funding isnot sufficient to support continued assistancefor families in the program.

(6) The HAP contract terminates automatically upon thedeath of a single member household, including singlemember households with a live-in aide.


(7) The PHA may terminate the HAP contract if thePHA determines that the contract unit does notprovide adequate space in accordance with theHQS because of an increase in family size or achange in family composition.

(8) If the family breaks up, the PHA may terminatethe HAP contract, or may continue housingassistance payments on behalf of family memberswho remain in the contract unit.

(9) The PHA may terminate the HAP contract if thePHA determines that the unit does not meet allrequirements of the HQS, or determines that theowner has otherwise breached the HAP contract.

5. Provision and Payment for Utilities and Appliancesa. The lease must specify what utilities are to be provided

or paid by the owner or the tenant.b. The lease must specify what appliances are to be pro-

vided or paid by the owner or the tenant.c. Part A of the HAP contract specifies what utilities and

appliances are to be provided or paid by the owner orthe tenant. The lease shall be consistent with the HAPcontract.

6. Rent to Owner: Reasonable Renta. During the HAP contract term, the rent to owner may at

no time exceed the reasonable rent for the contractunit as most recently determined or redetermined bythe PHA in accordance with HUD requirements.

b. The PHA must determine whether the rent to owner isreasonable in comparison to rent for other comparableunassisted units. To make this determination, the PHAmust consider:(1) The location, quality, size, unit type, and age of

the contract unit; and

(2) Any amenities, housing services, maintenance

and utilities provided and paid by the owner.

c. The PHA must redetermine the reasonable rent whenrequired in accordance with HUD requirements. ThePHA may redetermine the reasonable rent at any time.

d. During the HAP contract term, the rent to owner maynot exceed rent charged by the owner for comparableunassisted units in the premises. The owner must givethe PHA any information requested by the PHA onrents charged by the owner for other units in thepremises or elsewhere.

7. PHA Payment to Ownera. When paid

(1) During the term of the HAP contract, the PHAmust make monthly housing assistance paymentsto the owner on behalf of the family at thebeginning of each month.

(2) The PHA must pay housingassistance payments

promptly when due to the owner.

(3) If housing assistance payments are not paidpromptly when due after the first two calendarmonths of the HAP contract term, the PHA shallpay the owner penalties if all of the followingcircumstances apply: (i) Such penalties are inaccordance with generally accepted practices andlaw, as applicable in the local housing market,

governing penalties for late payment of rent by a

tenant; (ii) It is the owner’s practice to chargesuch penalties for assisted and unassisted tenants;and (iii) The owner also charges such penaltiesagainst the tenant for late payment of family rentto owner. However, the PHA shall not beobligated to pay any late payment penalty if HUDdetermines that late payment by the PHA is dueto factors beyond the PHA’s control. Moreover,the PHA shall not be obligated to pay any latepayment penalty if housing assistance paymentsby the PHA are delayed or denied as a remedy forowner breach of the HAP contract (including anyof the following PHA remedies: recovery ofoverpayments, suspension of housing assistancepayments, abatement or reduction of housingassistance payments, termination of housingassistance payments and termination of thecontract).

(4) Housing assistance payments shall only be paidto the owner while the family is residing in thecontract unit during the term of the HAP contract.The PHA shall not pay a housing assistancepayment to the owner for any month after themonth when the family moves out.

b. Owner compliance with HAP contract. Unless theowner has complied with all provisions of the HAPcontract, the owner does not have a right to receivehousing assistance payments under the HAP contract.

c. Amount of PHA payment to owner(1) The amount of the monthly PHA housing

assistance payment to the owner shall bedetermined by the PHA in accordance with HUDrequirements for a tenancy under the voucherprogram.

(2) The amount of the PHA housing assistancepayment is subject to change during the HAPcontract term in accordance with HUDrequirements. The PHA must notify the familyand the owner of any changes in the amount ofthe housing assistance payment.

(3) The housing assistance payment for the firstmonth of the HAP contract term shall be pro-rated for a partial month.

d. Application of payment. The monthly housingassistance payment shall be credited against themonthly rent to owner for the contract unit.

e. Limit of PHA responsibility.(1) The PHA is only responsible for making housing

assistance payments to the owner in accordancewith the HAP contract and HUD requirements fora tenancy under the voucher program.

(2) The PHA shall not pay any portion of the rent toowner in excess of the housing assistancepayment. The PHA shall not pay any other claimby the owner against the family.

f. Overpayment to owner. If the PHA determines thatthe owner is not entitled to the housing assistancepayment or any part of it, the PHA, in addition to otherremedies, may deduct the amount of the overpaymentfrom any amounts due the owner (including amountsdue under any other Section 8 assistance contract).

8. Owner Certification


During the term of this contract, the owner certifies that:a. Theowner ismaintaining the contractunitandpremises in

accordance with the HQS.b. The contract unit is leased to the tenant. The lease includes

the tenancy addendum (Part C of the HAP contract),and is in accordance with the HAP contract andprogram requirements. The owner has provided thelease to the PHA, including any revisions of the lease.

c. The rent to owner does not exceed rents charged by theowner for rental of comparable unassisted units in thepremises.

d. Except for the rent to owner, the owner has notreceived and will not receive any payments or otherconsideration (from the family, the PHA, HUD, or anyother public or private source) for rental of the contractunit during the HAP contract term.

e. The family does not own or have any interest in thecontract unit.

f. To the best of the owner’s knowledge, the members ofthe family reside in the contract unit, and the unit is thefamily’s only residence.

g. The owner (including a principal or other interestedparty) is not the parent, child, grandparent, grandchild,sister, or brother of any member of the family, unlessthe PHA has determined (and has notified the ownerand the family of such determination) that approvingrental of the unit, notwithstanding such relationship,would provide reasonable accommodation for a familymember who is a person with disabilities.

9. Prohibition of Discrimination . In accordance withapplicable equal opportunity statutes, Executive Orders,and regulations:

a. The owner must not discriminate against any personbecause of race, color, religion, sex, national origin,age, familial status, or disability in connection with theHAP contract.

b. The owner must cooperate with the PHA and HUD inconducting equal opportunity compliance reviews andcomplaint investigations in connection with the HAPcontract.

10. Owner’s Breach of HAP Contracta. Any of the following actions by the owner (including a

principal or other interested party) is a breach of theHAP contract by the owner:(1) If the owner has violated any obligation under the

HAP contract, including the owner’s obligationto maintain the unit in accordance with the HQS.

(2) If the owner has violated any obligation underany other housing assistance payments contractunder Section 8.

(3) If the owner has committed fraud, bribery or anyother corrupt or criminal act in connection withany Federal housing assistance program.

(4) For projects with mortgages insured by HUD orloans made by HUD, if the owner has failed tocomply with the regulations for the applicablemortgage insurance or loan program, with themortgage or mortgage note, or with theregulatory agreement; or if the owner hascommitted fraud, bribery or any other corrupt orcriminal act in connection with the mortgage orloan.

(5) If the owner has engaged in any drug-related

criminal activity or any violent criminal activity.

b. If the PHA determines that a breach has occurred, thePHA may exercise any of its rights and remedies underthe HAP contract, or any other available rights andremedies for such breach. The PHA shall notify theowner of such determination, including a briefstatement of the reasons for the determination. Thenotice by the PHA to the owner may require the ownerto take corrective action, as verified or determined bythe PHA, by a deadline prescribed in the notice.

c. The PHA’s rights and remedies for owner breach of theHAP contract include recovery of overpayments,suspension of housing assistance payments, abatementor other reduction of housing assistance payments,termination of housing assistance payments, andtermination of the HAP contract.

d. The PHA may seek and obtain additional relief byjudicial order or action, including specific performance,other injunctive relief or order for damages.

e. Even if the family continues to live in the contract unit,the PHA may exercise any rights and remedies forowner breach of the HAP contract.

f. The PHA’s exercise or non-exercise of any right orremedy for owner breach of the HAP contract is not awaiver of the right to exercise that or any other right orremedy at any time.

11. PHA and HUD Access to Premises and Owner’s Recordsa. The owner must provide any information pertinent to

the HAP contract that the PHA or HUD mayreasonably require.

b. The PHA, HUD and the Comptroller General of theUnited States shall have full and free access to thecontract unit and the premises, and to all accounts andother records of the owner that are relevant to the HAPcontract, including the right to examine or audit therecords and to make copies.

c. The owner must grant such access to computerized orother electronic records, and to any computers, equip-ment or facilities containing such records, and mustprovide any information or assistance needed to accessthe records.

12. Exclusion of Third Party Rightsa. The family is not a party to or third party beneficiary of

Part B of the HAP contract. The family may notenforce any provision of Part B, and may not exerciseany right or remedy against the owner or PHA underPart B.

b. The tenant or the PHA may enforce the tenancyaddendum (Part C of the HAP contract) against theowner, and may exercise any right or remedy againstthe owner under the tenancy addendum.

c. The PHA does not assume any responsibility for injuryto, or any liability to, any person injured as a result ofthe owner’s action or failure to act in connection withmanagement of the contract unit or the premises or withimplementation of the HAP contract, or as a result ofany other action or failure to act by the owner.

d. The owner is not the agent of the PHA, and the HAPcontract does not create or affect any relationshipbetween the PHA and any lender to the owner or anysuppliers, employees, contractors or subcontractorsused by the owner in connection with management of


the contract unit or the premises or withimplementation of the HAP contract.

13. Conflict of Interesta. “Covered individual” means a person or entity who is a

member of any of the following classes:(1) Any present or former member or officer of the

PHA (except a PHA commissioner who is aparticipant in the program);

(2) Any employee of the PHA, or any contractor,sub-contractor or agent of the PHA, whoformulates policy or who influences decisionswith respect to the program;

(3) Any public official, member of a governing body,or State or local legislator, who exercisesfunctions or responsibilities with respect to theprogram; or

(4) Any member of the Congress of the United

States.

b. A covered individual may not have any direct orindirect interest in the HAP contract or in any benefitsor payments under the contract (including the interestof an immediate family member of such coveredindividual) while such person is a covered individual orduring one year thereafter.

c. “Immediate family member” means the spouse, parent(including a stepparent), child (including a stepchild),grandparent, grandchild, sister or brother (including astepsister or stepbrother) of any covered individual.

d. The owner certifies and is responsible for assuring thatno person or entity has or will have a prohibitedinterest, at execution of the HAP contract, or at anytime during the HAP contract term.

e. If a prohibited interest occurs, the owner shall promptlyand fully disclose such interest to the PHA and HUD.

f. The conflict of interest prohibition under this sectionmay be waived by the HUD field office for good cause.

g. No member of or delegate to the Congress of theUnited States or resident commissioner shall beadmitted to any share or part of the HAP contract or toany benefits which may arise from it.

14. Assignment of the HAP Contracta. The owner may not assign the HAP contract to a new

owner without the prior written consent of the PHA.b. If the owner requests PHA consent to assign the HAP

contract to a new owner, the owner shall supply anyinformation as required by the PHA pertinent to theproposed assignment.

c. The HAP contract may not be assigned to a new ownerthat is debarred, suspended or subject to a limiteddenial of participation under HUD regulations (see 24Code of Federal Regulations Part 24).

d. The HAP contract may not be assigned to a new ownerif HUD has prohibited such assignment because:(1) The Federal government has instituted an

administrative or judicial action against theowner or proposed new owner for violation of theFair Housing Act or other Federal equalopportunity requirements, and such action ispending; or

(2) A court or administrative agency has determined

that the owner or proposed new owner violated

the Fair HousingAct or other Federal equal

opportunity requirements.

e. The HAP contract may not be assigned to a new ownerif the new owner (including a principal or otherinterested party) is the parent, child, grandparent,grandchild, sister or brother of any member of thefamily, unless the PHA has determined (and hasnotified the family of such determination) thatapproving the assignment, notwithstanding suchrelationship, would provide reasonable accommodationfor a family member who is a person with disabilities.

f. The PHA may deny approval to assign the HAPcontract if the owner or proposed new owner (includinga principal or other interested party):(1) Has violated obligations under a housing assistance

payments contract under Section 8;

(2) Has committed fraud, bribery or any other corruptor criminal act in connection with any Federalhousing program;

(3) Has engaged in any drug-related criminal activity

or any violent criminal activity;

(4) Has a history or practice of non-compliance withthe HQS for units leased under the Section 8tenant-based programs, or non-compliance withapplicable housing standards for units leased withproject-based Section 8 assistance or for unitsleased under any other Federal housing program;

(5) Has a history or practice of failing to terminatetenancy of tenants assisted under any Federallyassisted housing program for activity engaged inby the tenant, any member of the household, aguest or another person under the control of anymember of the household that:

(a) Threatens the right to peaceful enjoyment

of the premises by other residents;

(b) Threatens the health or safety of otherresidents, of employees of the PHA, or ofowner employees or other persons engaged inmanagement of the housing;

(c) Threatens the health or safety of, or theright to peaceful enjoyment of their residentsby, persons residing in the immediate vicinity ofthe premises; or(d) Is drug-related criminal activity or

violent criminal activity;

(6) Has a history or practice of renting units that fail to

meet State or local housing codes; or

(7) Has not paid State or local real estate taxes, fines or

assessments.

g. The new owner must agree to be bound by and complywith the HAP contract. The agreement must be inwriting, and in a form acceptable to the PHA. The newowner must give the PHA a copy of the executedagreement.

15. Foreclosure. In the case of any foreclosure, the immediatesuccessor in interest in the property pursuant to the foreclosureshall assume such interest subject to the lease between the priorowner and the tenant and to the HAP contract between the priorowner and the PHA for the occupied unit. This provision does notaffect any State or local law that provides longer time periods orother additional protections for tenants. This provision will sunsetonDecember 31, 2012 unless extended by law.


16. Written Notices. Any notice by the PHA or the ownerin connection with this contract must be in writing.

17. Entire Agreement: Interpretationa. The HAP contract contains the entire agreement between

the owner and the PHA.b The HAP contract shall be interpreted and implemented

in accordance with all statutory requirements, and withall HUD requirements, including the HUD programregulations at 24 Code of Federal Regulations Part 982.

Housing Assistance Payments ContractU.S. Department of Housing

(HAP Contract)and Urban Development

Section 8 Tenant-Based Assistance Office of Public and Indian Housing

Housing Choice Voucher Program

Part C of HAP Contract: Tenancy Addendum

1. Section 8 Voucher Programa. The owner is leasing the contract unit to the tenant

for occupancy by the tenant’s family with assistancefor a tenancy under the Section 8 housing choicevoucher program (voucher program) of the UnitedStates Department of Housing and UrbanDevelopment (HUD).

b. The owner has entered into a Housing AssistancePayments Contract (HAP contract) with the PHAunder the voucher program. Under the HAPcontract, the PHA will make housing assistancepayments to the owner to assist the tenant in leasingthe unit from the owner.

2. Leasea. The owner has given the PHA a copy of the lease,

including any revisions agreed by the owner and thetenant. The owner certifies that the terms of the leaseare in accordance with all provisions of the HAPcontract and that the lease includes the tenancyaddendum.

b. The tenant shall have the right to enforce thetenancy addendum against the owner. If there is anyconflict between the tenancy addendum and anyother provisions of the lease, the language of thetenancy addendum shall control.

3. Use of Contract Unita. During the lease term, the family will reside in the

contract unit with assistance under the voucherprogram.

b. The composition of the household must be approvedby the PHA. The family must promptly inform thePHA of the birth, adoption or court-awarded custodyof a child. Other persons may not be added to thehousehold without prior written approval of theowner and the PHA.

c. The contract unit may only be used for residence bythe PHA-approved household members. The unitmust be the family’s only residence. Members of thehousehold may engage in legal profit makingactivities incidental to primary use of the unit forresidence by members of the family.

d. The tenant may not sublease or let the unit.e. The tenant may not assign the lease or transfer the

unit.

4. Rent to Ownera. The initial rent to owner may not exceed the amount

approved by the PHA in accordance with HUDrequirements.

b. Changes in the rent to owner shall be determined bythe provisions of the lease. However, the owner maynot raise the rent during the initial term of the lease.

c. During the term of the lease (including the initial

term of the lease and any extension term), the rent toowner may at no time exceed:(1) The reasonable rent for the unit as most

recently determined or redetermined by thePHA in accordance with HUD requirements,or

(2) Rent charged by the owner for comparable

unassisted units in the premises.

5. Family Payment to Ownera. The family is responsible for paying the owner any

portion of the rent to owner that is not covered bythe PHA housing assistance payment.

b. Each month, the PHA will make a housingassistance payment to the owner on behalf of thefamily in accordance with the HAP contract. Theamount of the monthly housing assistance paymentwill be determined by the PHA in accordance withHUD requirements for a tenancy under the Section 8voucher program.

c. The monthly housing assistance payment shall becredited against the monthly rent to owner for thecontract unit.

d. The tenant is not responsible for paying the portionof rent to owner covered by the PHA housingassistance payment under the HAP contract betweenthe owner and the PHA. A PHA failure to pay thehousing assistance payment to the owner is not aviolation of the lease. The owner may not terminatethe tenancy for nonpayment of the PHA housingassistance payment.

e. The owner may not charge or accept, from thefamily or from any other source, any payment forrent of the unit in addition to the rent to owner. Rentto owner includes all housing services, maintenance,utilities and appliances to be provided and paid bythe owner in accordance with the lease.

f. The owner must immediately return any excess rent

payment to the tenant.

6. Other Fees and Chargesa. Rent to owner does not include cost of any meals or

supportive services or furniture which may beprovided by the owner.

b. The owner may not require the tenant or familymembers to pay charges for any meals or supportiveservices or furniture which may be provided by theowner. Nonpayment of any such charges is notgrounds for termination of tenancy.

c. The owner may not charge the tenant extra amountsfor items customarily included in rent to owner inthe locality, or provided at no additional cost tounsubsidized tenants in the premises.

7. Maintenance, Utilities, and Other Servicesa. Maintenance


(2) The owner may terminate the tenancy duringthe term of the lease if any member of thehousehold is:

(a) Fleeing to avoid prosecution, or custodyor confinement after conviction, for acrime, or attempt to commit a crime, thatis a felony under the laws of the placefrom which the individual flees, or that,in the case of the State of New Jersey, isa high misdemeanor; or

(b) Violating a condition of probation or

parole under Federal or State law.

(3) The owner may terminate the tenancy forcriminal activity by a household member inaccordance with this section if the ownerdetermines that the household member hascommitted the criminal activity, regardless ofwhether the household member has beenarrested or convicted for such activity.

(4) The owner may terminate the tenancy duringthe term of the lease if any member of thehousehold has engaged in abuse of alcoholthat threatens the health, safety or right topeaceful enjoyment of the premises by otherresidents.

d. Other good cause for termination of tenancy(1) During the initial lease term, other good cause

for termination of tenancy must be somethingthe family did or failed to do.

(2) During the initial lease term or during any

extension term, other good cause may include:

(a) Disturbance of neighbors,

(b) Destruction of property, or

(c) Living or housekeeping habits that cause

damage to the unit or premises.

(3) After the initial lease term, such good cause

may include:

(a) The tenant’s failure to accept the owner’s

offer of a new lease or revision;

(b) The owner’s desire to use the unit forpersonal or family use or for a purposeother than use as a residential rental unit;or

(c) A business or economic reason fortermination of the tenancy (such as sale ofthe property, renovation of the unit, theowner’s desire to rent the unit for a higherrent).

(5) The examples of other good cause in thisparagraph do not preempt any State or locallaws to the contrary.

(6) In the case of an owner who is an immediatesuccessor in interest pursuant to foreclosure

during the term of the lease, requiring thetenant to vacate the property prior to sale shallnot constitute other good cause, except that theowner may terminate the tenancy effective onthe date of transfer of the unit to the owner ifthe owner: (a) will occupy the unit as aprimary residence; and (b) has provided thetenant a notice to vacate at least 90 days beforethe effective date of such notice. This

(1) The owner must maintain the unit and premises

in accordance with the HQS.

(2) Maintenance and replacement (includingredecoration) must be in accordance with thestandard practice for the building concerned asestablished by the owner.

b. Utilities and appliances(1) The owner must provide all utilitiesneeded to

comply with the HQS.

(2) The owner is not responsible for a breach of

the HQS caused by the tenant’s failure to:

(a) Pay for any utilities that are to be paid by

the tenant.

(b) Provide and maintain any appliances

that are to be provided by the tenant.

c. Family damage. The owner is not responsible for abreach of the HQS because of damages beyondnormal wear and tear caused by any member of thehousehold or by a guest.

d. Housing services. The owner must provide all

housing services as agreed to in the lease.

8. Termination of Tenancy by Ownera. Requirements. The owner may only terminate the

tenancy in accordance with the lease and HUDrequirements.

b. Grounds. During the term of the lease (the initial

term of the lease or any extension term), the ownermay only terminate the tenancy because of:(1) Serious or repeated violation of the lease;

(2) Violation of Federal, State, or local law thatimposes obligations on the tenant inconnection with the occupancy or use of theunit and the premises;

(3) Criminal activity or alcohol abuse (as

provided in paragraph c); or

(4) Other good cause (as provided in paragraph

d).c. Criminal activity or alcohol abuse.

(1) The owner may terminate the tenancy duringthe term of the lease if any member of thehousehold, a guest or another person under aresident’s control commits any of thefollowing types of criminal activity:

(a) Any criminalactivity that threatens thehealth or safety of, or the right topeacefulenjoymentof the premisesby,other residents (including propertymanagement staff residing on thepremises);

(b) Any criminalactivity that threatens thehealth or safety of, or the right topeaceful enjoyment of their residencesby, persons residing in the immediatevicinity of the premises;

(c) Any violent criminal activity on or near

the premises; or

(d) Any drug-relatedcriminal activity on or

near the premises.


provision shall not affect any State or local lawthat provides for longer time periods oraddition protections for tenants. Thisprovision will sunset onDecember 31, 2012unless extended by law.

e. Protections for Victims of Abuse.

(1) An incident or incidents of actual or threateneddomestic violence, dating violence, or stalking willnot be construed as serious or repeated violations ofthe lease or other “good cause” for termination ofthe assistance, tenancy, or occupancy rights ofsuch a victim.

(2) Criminal activity directly relating to abuse,engaged in by a member of a tenant’s household orany guest or other person under the tenant’scontrol, shall not be cause for termination ofassistance, tenancy, or occupancy rights if thetenant or an immediate member of the tenant’sfamily is the victim or threatened victim ofdomestic violence, dating violence, or stalking.

(3) Notwithstanding any restrictions on admission,occupancy, or terminations of occupancy orassistance, or any Federal, State or local law to thecontrary, a PHA, owner or manager may“bifurcate” a lease, or otherwise remove ahousehold member from a lease, without regard towhether a household member is a signatory to thelease, in order to evict, remove, terminateoccupancy rights, or terminate assistance to anyindividual who is a tenant or lawful occupant andwho engages in criminal acts of physical violenceagainst family members or others. This action maybe taken without evicting, removing, terminatingassistance to, or otherwise penalizing the victim ofthe violence who is also a tenant or lawfuloccupant. Such eviction, removal, termination ofoccupancy rights, or termination of assistance shallbe effected in accordance with the proceduresprescribed by Federal, State, and local law for thetermination of leases or assistance under thehousing choice voucher program.

(4) Nothing in this section may be construed to limitthe authority of a public housing agency, owner, ormanager, when notified, to honor court ordersaddressing rights of access or control of theproperty, including civil protection orders issued toprotect the victim and issued to address thedistribution or possession of property among thehousehold members in cases where a family breaksup.

(5) Nothing in this section limits any otherwiseavailable authority of an owner or manager to evictor the public housing agency to terminateassistance to a tenant for any violation of a leasenot premised on the act or acts of violence inquestion against the tenant or a member of thetenant’s household, provided that the owner,manager, or public housing agency does not subjectan individual who is or has been a victim ofdomestic violence, dating violence, or stalking to a

more demandingstandard than other tenants indetermining whether to evict or terminate.

(6) Nothing in this section may be construed to limitthe authority of an owner or manager to evict, orthe public housing agency to terminate assistance,to any tenant if the owner, manager, or publichousing agency can demonstrate an actual andimminent threat to other tenants or those employedat or providing service to the property if the tenantis not evicted or terminated from assistance.

(7) Nothing in this section shall be construed tosupersede any provision of any Federal, State, orlocal law that provides greater protection than thissection for victims of domestic violence, datingviolence, or stalking.

f. Eviction by court action. The owner may only evict the

tenant by a court action.

g. Owner notice of grounds(1) At or before the beginning of a court action to

evict the tenant, the owner must give thetenant a notice that specifies the grounds fortermination of tenancy. The notice may beincluded in or combined with any ownereviction notice.

(2) The owner must give the PHA a copy of anyowner eviction notice at the same time theowner notifies the tenant.

(3) Eviction notice means a notice to vacate, or acomplaint or other initial pleading used tobegin an eviction action under State or locallaw.

9. Lease: Relation to HAP ContractIf the HAP contract terminates for any reason, the lease terminatesautomatically.

10. PHA Termination of AssistanceThe PHA may terminate program assistance for the family for anygrounds authorized in accordance with HUD requirements. If the PHAterminates program assistance for the family, the lease terminatesautomatically.

11. Family Move OutThe tenant must notify the PHA and the owner before the family movesout of the unit.

12. Security Deposita. The owner may collect a security deposit from the

tenant. (However, the PHA may prohibit the ownerfrom collecting a security deposit in excess ofprivate market practice, or in excess of amountscharged by the owner to unassisted tenants. Anysuch PHA-required restriction must be specified inthe HAP contract.)

b. When the family moves out of the contract unit, theowner, subject to State and local law, may use thesecurity deposit, including any interest on thedeposit, as reimbursement for any unpaid rentpayable by the tenant, any damages to the unit orany other amounts that the tenant owes under thelease.


c. The owner must give the tenant a list of all itemscharged against the security deposit, and the amountof each item. After deducting the amount, if any,used to reimburse the owner, the owner mustpromptly refund the full amount of the unusedbalance to the tenant.

d. If the security deposit is not sufficient to coveramounts the tenant owes under the lease, the ownermay collect the balance from the tenant.

13. Prohibition of DiscriminationIn accordance with applicable equal opportunity statutes, ExecutiveOrders, and regulations, the owner must not discriminate against anyperson because of race, color, religion, sex, national origin, age,familial status or disability in connection with the lease.

14. Conflict with Other Provisions of Lease

a. The terms of the tenancy addendum are prescribedby HUD in accordance with Federal law andregulation, as a condition for Federal assistance tothe tenant and tenant’s family under the Section 8voucher program.

b. In case of any conflict between the provisions of thetenancy addendum as required by HUD, and anyother provisions of the lease or any other agreementbetween the owner and the tenant, the requirementsof the HUD-required tenancy addendum shallcontrol.

15. Changes in Lease or Renta. The tenant and the owner may not make any

change in the tenancy addendum. However, if thetenant and the owner agree to any other changes inthe lease, such changes must be in writing, and theowner must immediately give the PHA a copy ofsuch changes. The lease, including any changes,must be in accordance with the requirements ofthe tenancy addendum.

b. In the following cases, tenant-based assistance shallnot be continued unless the PHA has approved anew tenancy in accordance with programrequirements and has executed a new HAP contractwith the owner:

(1) If there are any changes in lease requirementsgoverning tenant or owner responsibilities forutilities or appliances;

(2) If there are any changes in lease provisions

governing the term of the lease;

(3) If the family moves to a new unit, even if the

unit is in the same building or complex.

c. PHA approval of the tenancy, and execution of anew HAP contract, are not required for agreedchanges in the lease other than as specified inparagraph b.

d. The owner must notify the PHA of any changes inthe amount of the rent to owner at least sixty daysbefore any such changes go into effect, and theamount of the rent to owner following any suchagreed change may not exceed the reasonable rentfor the unit as most recently determined orredetermined by the PHA in accordance with HUDrequirements.

Any notice under the lease by the tenant to the owner or by the ownerto the tenant must be in writing.

17. DefinitionsContract unit. The housing unit rented by the tenant with

assistance under the program.

Family. The persons who may reside in the unit with assistance

under the program.

HAP contract. The housing assistance payments contract between thePHA and the owner. The PHA pays housing assistance payments to theowner in accordance with the HAP contract.

Household. The persons who may reside in the contract unit. Thehousehold consists of the family and any PHA-approved live-in aide.(A live-in aide is a person who resides in the unit to providenecessary supportive services for a member of the family who is aperson with disabilities.)Housing quality standards (HQS). The HUD minimumquality standards for housing assisted under the Section 8tenant-based programs.HUD. The U.S. Department of Housing and Urban Development.HUDrequirements. HUD requirements for the Section 8 program.HUD requirements are issued by HUD headquarters, as regulations,Federal Register notices or other binding program directives.Lease. The written agreement between the owner and the tenant for thelease of the contract unit to the tenant. The lease includes the tenancyaddendum prescribed by HUD.PHA. Public Housing Agency.Premises. The building or complex in which the contract unit islocated, including common areas and grounds.Program. The Section 8 housing choice voucher program.Rent to owner. The total monthly rent payable to the owner for thecontract unit. The rent to owner is the sum of the portion of rentpayable by the tenant plus the PHA housing assistance payment tothe owner.Section 8. Section 8 of the United States Housing Act of 1937 (42United States Code 1437f).Tenant. The family member (or members) who leases the unit fromthe owner.Voucher program. The Section 8 housing choice voucher program.Under this program, HUD provides funds to a PHA for rent subsidyon behalf of eligible families. The tenancy under the lease will beassisted with rent subsidy for a tenancy under the voucher program.

16. Notices

form HUD-52521-B (11/89)ref. Handbook 4571.1

Retain this record for three years.Previous edition is obsolete

Part I of theAgreement to Enter into aHousing Assistance Payments ContractSection 8 Housing Assistance Payments Program

U.S. Department of Housingand Urban DevelopmentOffice of HousingFederal Housing Commissioner

Type of Project:

Private-Owner/HUD Small Project New Construction; Part 880 Part 885

PHA-Owner/HUD Partially-Assisted Project

Other Substantial Rehabilitation; Part 881 Part 885

Type of Financing: (For example: subject to Part 811, HUD-insured; GNMA tandem; State agency tax exempt loan, not HUD-insured.)

ACC / HAP Contract List No. Date Section 8 Project No. FHA Project No. (if applicable)

This Agreement to Enter into Housing Assistance Payments Contract (Agreement) is entered into between the United States of Americaacting through the Department of Housing and Urban Development (HUD) and________________________________________________________________________________________________________ (Owner).

The Owner proposes to complete a housing project, as described in the approved Final Proposal. Upon the acceptable completion ofthe project, the Owner and HUD will enter into a Housing Assistance Payments Contract (Contract) for the purpose of making housingassistance payments to enable eligible Lower-Income Families (Families) to occupy units in the project.

1.1 Significant Dates; Contents and Scope of Agreement.

(a) Effective Date of Agreement: ___________________________________________, 19______.

(b) Date for Commencement of Work. The date for commencement of work (see section 2.1(a)) is not later than _________________

calendar days after the effective date of this Agreement.

(c) Date for Commencement of Advance Marketing. The date for commencement of advance marketing under section 2.2(d)(2)is not later than ______________________ calendar days prior to marketing to other prospective tenants.

(d) Time for Completion of Project. The date for completion of the project (see section 2.1(b)) is not later than _______________

calendar days after the date for commencement of work.

(e) Contents of Agreement.This Agreement consists of Part I, Part II (except as indicated in section 1.4), and the following exhibits:

Exhibit A: An agreement by the parties to incorporate the Final Proposal by reference, specifying the location of the FinalProposal, and identifying each part of the Final Proposal, including any amendments.

Exhibit B: The Housing Assistance Payments Contract (Contract) to be executed upon acceptable completion of the project,complete in all respects except for execution, effective date, and Exhibit 2 showing daily debt service.

Exhibit C: The schedule of completion in stages, if applicable. (This exhibit should identify the units in each stage.)

Exhibit D: The schedule of Davis Bacon wage rates, if applicable:

Decision No. ________________________________________________ , dated ___________________________________________________ , 19____, asamended:_______________________________________________________________________________________________________________________________________________________________

_______________________________________________________________________________________________________________________________________________________________

_______________________________________________________________________________________________________________________________________________________________

_______________________________________________________________________________________________________________________________________________________________

Exhibit E: The approved architect’s certification, if required.

Additional Exhibits: (Specify additional exhibits, if any. If none, insert “None”)

(f) Scope of Agreement. This Agreement, including the exhibits, whether attached or incorporated by reference, comprises theentire agreement between the Owner and HUD with respect to the matters contained in it. Neither party is bound by anyrepresentations or agreements of any kind except as contained in this Agreement, any applicable regulations, and agreementsentered into in writing by the parties which are consistent with this Agreement. Nothing contained in this Agreement shallcreate or affect any relationship between HUD and the lender or any contractors or subcontractors employed by the Ownerin the completion of the project.

form HUD-52521-B (11/89)ref. Handbook 4571.1

Retain this record for three years.Previous edition is obsolete

1.2 HUD Assurance. The approval of this Agreement by HUD is an assurance by HUD to the Owner that:(a) The faith of the United States is solemnly pledged to the payment of housing assistance payments pursuant to the Contract;and(b) HUD has obligated funds for these payments.

1.3 Relocation Requirements. (Indicate applicable provisions.)The Owner hereby certifies that the site of the project was without occupants eligible for relocation assistance under 24 CFR880.209 or 881.209 or Part 885.

orThe Owner hereby certifies that the project is on a site where there are occupants eligible for assistance:

Under the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (Uniform Act) as providedin 24 CFR 880.209(a) or 881.209(a), or

Under the regulations in 24 CFR 880.209(b) or 881.209(b).

The Owner agrees to comply with the:

Provisions of the Uniform Act and implementing regulations in 49 CFR Part 24, or

Provisions of 24 CFR 880.209(b) or 881.209(b).

or

Applic. Not Applic.

United States of AmericaSecretary of Housing and Urban Development Owner:

By:* ________________________________________________________ By:* _______________________________________________________

___________________________________________________________________ ___________________________________________________________________

Official Title: ________________________________________________________ Official Title: ________________________________________________________

Date: ___________________________________, 19 ______ Date: ___________________________________, 19 ______

* Type name of signatory under signature.

Warning: HUD will prosecute false claims and statements. Conviction may result in criminal and/or civil penalties. (18 U.S.C. 1001, 1010, 1012; 31 U.S.C. 3729, 3802)

The Owner agrees to provide any relocation benefits required under Part 885 and other HUD issuances.

1.4 Applicability of Certain Provisions of This Agreement.

(a) 2.3(b)(4). Architect’s Certification . Applicability: All projects except those where HUD constructioninspections are required, and except those substantial rehabilitation projects where a registered architectwas not required.

(b) 2.3(b)(3)(v) and 2.10. Labor Standards. Applicability: All projects with 9 or more assisted units.

(c) (1) 2.4(f). Adjustment of Contract Rents Based on Cost Certification for Projects Not Subject to Part811. Applicability: All projects unless (1) the project is subject to Part 811; or (2) the Contract Rents donot exceed comparable rents; or (3) the Contract Rents do not exceed comparable rents by more than 10percent for Small and Partially-Assisted Projects. If cost certification occurs after execution of theContract, the comparable provision in the Contract shall apply instead.

(2) 2.4(g). Adjustment of Contract Rents to Reflect Actual Cost of Tax Exempt Obligations Issuedby a Participating State Agency Not Subject to Part 811. Applicability: All projects wherefinancing is by tax exempt obligations not subject to Part 811 because the issuer is a participatingagency under 24 CFR Part 883. If the project is permanently financed after construction of the project,the comparable provision of the Contract shall apply instead.

(3) 2.4(h). Adjustment of Contract Rents: Part 811. Applicability: All non-HUD-insured projectssubject to Part 811. For all HUD-insured projects subject to Part 811, the comparable provision in theContract shall apply instead.

(d) 2.6. Training, Employment and Contracting Opportunities. Applicability: All projects for which thetotal initial Contract Rents over the term of the Contract exceed $500,000.

(e) 2.8. Flood Insurance. Applicability: All projects in special flood hazard areas.

(f) 2.9. Clean Air and Federal Water Pollution Control Acts. Applicability: All projects for which the totalinitial Contract Rents over the term of the Contract exceed $100,000.

form HUD-52521-D (3/95)ref handbook 4571.1Page 1 of 14

By and between_____________________________________________________________________________________________(CA)

and ___________________________________________________________________________________________________(Owner).

Type of Project: Private-Owner / HUD or PHA-Owner / HUD(HUD is the Contract Administrator or “CA.”)

or Private-Owner / PHA(The PHA is the CA.)

New Construction or Substantial Rehabilitatiion or Previously HUD-OwnedPart 880 Part 881 Part 886, Subpart CPart 885 Part 885

2.1 Schedule of Completion.(a) Timely Performance of Work. The Owner agrees to begin

work no later than by the time indicated in section 1.1. TheOwner shall report to the CA the date work has commenced andshall thereafter furnish the CA with periodic progress reports(quarterly unless more frequent reporting is required by theCA). In the event the work is not commenced, diligentlycontinued, or completed as required under this Agreement, theCA, subject to HUD approval or direction where the CA is thePHA, reserves the right to rescind this Agreement or take otherappropriate action in accordance with section 2.16.

(b) Time for Completion. The project shall be completed inaccordance with section 2.3 no later than the end of the periodindicated in section 1.1, or in stages as provided for in ExhibitC. Where the Agreement provides for completion in stages, allreferences to project completion shall be considered to refer toproject completion or completion of any stage, as appropriate.

(c) Delays. In the event there is delay in the completion due tostrikes, lockouts, labor union disputes, fire, unusual delays intransportation, unavoidable casualties, weather, acts of God, orany other causes beyond the Owner’s control, or by delayauthorized by the CA, the time for completion shall be ex-tended to the extent that the CA determines that completion isdelayed due to one or more of these causes. No increase in therents set forth in the Contract attached as Exhibit B (“ContractRents”) may be granted except in accordance with section 2.2(c).

2.2 Construction or Rehabilitation Period.(a) Inspections. HUD will inspect project records periodically to

determine compliance with Davis-Bacon Act requirements, ifapplicable. Projects which involve HUD mortgage insurance,or other financing requiring HUD inspection during construc-tion or rehabilitation, are subject to the applicable inspectionrequirements. HUD may conduct a review to determine contractorcompliance with equal opportunity requirements at any time.

(b) Changes. The Owner shall submit for approval, and for PHAapproval where the CA is a PHA, any changes from Exhibit Aand Exhibit C which would materially reduce or alter itsobligations, or any changes which would alter the design of theproject or materially reduce the quality or amenities of theproject. Approval of changes may be conditioned on a reduc-tion of Contract Rents. If the Owner makes any changes withoutthe prior approval of HUD, and the PHA, if appropriate, theOwner may be required to reduce Contract Rents or to remedythe defects or deficiencies as a condition for acceptance of theproject.

(c) Increases in Contract Rents or Utility Allowances. Increasesin contract rents or utility allowances during the constructionor rehabilitation period are permitted only with HUD approvalconsistent with HUD regulations.

(d) Marketing.

(1) The Owner shall commence and diligently continue mar-keting as soon as possible, but in any event no later than 90 daysprior to the anticipated date of availability for occupancy of thefirst unit in the project, or 60 days prior to the estimatedcompletion date for previously HUD-owned projects. TheOwner must notify the CA of the date of commencement ofmarketing. Marketing and leasing must be done in accordancewith the HUD-approved Affirmative Fair Housing MarketingPlan (if required), all Fair Housing and Equal Opportunityrequirements, Exhibit A and the applicable provisions ofExhibit B, the proposed Contract.

(2) Except in the case of previously HUD-owned projects, theOwner must undertake marketing activities for nonelderlyfamily units in advance of marketing to other prospectivetenants to provide opportunities to reside in the project to:

(i) Nonelderly families who are least likely to apply asdetermined in the Affirmative Fair Housing Marketing Plan,and

Section 8 Project Number : HUD Project Number (if applicable) :

U.S. Department of Housingand Urban DevelopmentOffice of HousingFederal Housing Commissioner

Section 8 Housing Assistance Payments Program

Part II of theAgreement to Enter into aHousing AssistancePayments Contract


(ii ) Nonelderly families expected to reside in the commu-nity by reason of current or planned employment.

(3) At the time of Contract execution, the Owner must submita list of leased and unleased units, with justification for theunleased units, to qualify for vacancy payments for the un-leased units in accordance with the Contract.

(4) In the case of previously HUD-owned projects requiringsubstantial or moderate rehabilitation after purchase, in orderto be eligible for payments for units vacant at the time theContract is executed, the Owner also shall notify the PHA(s) inthe area of any units which the Owner anticipates will be vacanton the anticipated effective date of the Contract. The Ownershall provide this notification to PHA(s) 60 days prior tocompletion of the rehabilitation or the effective date of thisAgreement, whichever is later. The Owner shall also havetaken all feasible actions to fill the vacancies, including but notlimited to: contacting applicants on the Owner’s waiting list, ifany, requesting the PHA, and other appropriate sources to refereligible applicants, and advertising the availability of units ina manner specifically designed to reach low income families.The Owner also shall not have rejected any eligible applicantexcept for good cause acceptable to HUD.

2.3 Project Completion. (If the project is completed in stages,the procedures of this section apply to each stage.)

(a) Conformance to Final Proposal. The completed project shallbe in accordance with Exhibit A. The Owner shall be solelyresponsible for completion of the project.

(b) Notification and Evidence of Completion. The Owner shallnotify HUD and the PHA, where the CA is the PHA, when thework is completed and provide HUD with:

(1) A set of as-built drawings (except where not required forcertain substantial rehabilitation projects, for previously HUD-owned projects, and for projects with HUD-insured mort-gages).

(2) A certificate of occupancy and/or other official approvalsnecessary for occupancy.

(3) A certification by the Owner, which will be supported bythe Owner’s warranty in the Contract, that:

(i) The project has been completed in accordance withthe requirements of this Agreement, including all managementand equal opportunity requirements;

(ii) The project is in good and tenantable condition;

(iii) There are no defects or deficiencies in the project,except for items of delayed completion which are minor itemsor which are incomplete because of weather conditions, and inany case do not preclude or unacceptably affect occupancy; anyexcepted items shall be specified (see section 2.3(e));

(iv) There has been no change in the evidence of manage-ment capability or in the proposed management program (if onewas required) specified in Exhibit A other than changes ap-proved in writing by HUD and the PHA, if the CA is the PHA,in accordance with section 2.2(b);

(v) (See section 1.4 for applicability of this paragraph.) Ithas complied with the provisions of section 2.10 of thisAgreement, and that to the best of its knowledge and beliefthere are no claims of underpayment to laborers or mechanicsin alleged violation of said provisions of the Agreement. In theevent there are any such pending claims to the knowledge of theOwner or HUD or the PHA, if the CA is the PHA, the Ownershall be required to place a sufficient amount in escrow, asdirected by HUD (in accordance with section 2.10), to assurepayments of such claims;

(vi) In the case of substantial rehabilitation and previouslyHUD-owned projects, the project has been rehabilitated inaccordance with applicable zoning, building, housing andother codes, ordinances or regulations, as modified by anywaivers obtained from the appropriate officials; and

(vii) In the case of substantial rehabilitation and previouslyHUD-owned projects, the project was treated and is in compli-ance with applicable HUD Lead Based Paint regulations (24CFR, Part 35) and that if the property was constructed prior to1950, each Family prior to rental will receive the noticerequired by HUD Lead Based Paint regulations and proceduresregarding the hazards of lead based paint poisoning, the symp-toms and treatment of lead poisoning and precautions to betaken against lead poisoning and that records showing receiptof such notice by each tenant will be maintained.

(4) (See section 1.4(a) for applicability of this paragraph(b)(4).) A Certification by the registered architect responsiblefor inspection of the work that such inspection was performedby him or under his supervision with the frequency and thor-oughness required by the generally accepted standards ofprofessional care and judgment, and that to the best of hisknowledge, belief, and professional judgment;

(i) The project has been completed in conformance with thecertified working drawings and specifications for the project orapproved changes (such changes to be listed) and with the HUDMinimum Property Standards (4910.1) or Minimum Design Stan-dards for Rehabilitation for Residential Properties (4940.4);

(ii) The project is in good and tenantable condition;

(iii) There are no defects or deficiencies in the project,except for items of delayed completion which are minor itemsor which are incomplete because of weather conditions, and inany case do not preclude or unacceptably affect occupancy.Any excepted items shall be specified. See section 2.3(e).

(iv) The project has been constructed or rehabilitated inaccordance with applicable zoning, building, housing, andother codes, ordinances or regulations, as modified by anywaivers obtained from the appropriate officials.

(5) (This paragraph applies to projects subject to Part 811which are not PHA-Owner/HUD projects.) Prior to executionof the Contract or, for HUD-insured projects, prior to finalendorsement, the Owner agrees to submit the certified state-ments required by Part 811 as to amounts actually expended orto be expended for the financing of the project. Recordsdocumenting this cost data shall be available to HUD forinspection upon request.


(6) (This paragraph applies only to PHA-Owner/HUD Projectssubject to Part 811.)

(i) Prior to execution of the Contract or, for HUD-insuredprojects, prior to final endorsement, the PHA-Owner agrees tosubmit or to require the Agency or Instrumentality PHA tosubmit to HUD the certified statements required by Part 811 asto amounts actually expended or to be expended for thefinancing and other costs of the project, including use of excessfunds and the other terms of the financing. Records of this costdata shall be available to HUD for inspection upon request.

(ii) The PHA-Owner agrees:

(a) That disbursements from the escrow of the pro-ceeds of the permanent obligations shall be for the purpose andin the amounts approved by HUD in accordance with Part 811;

(b) That if the PHA or the Agency or InstrumentalityPHA receives any compensation in connection with the financ-ing in excess of its expenses as approved by HUD, the excessshall be applied in accordance with the trust indenture; and

(c) That if the obligations are resold within 60 daysof the issuance, the PHA shall report to HUD the terms andconditions of such resale. This requirement is applicable onlyto the initial resale.

(7) In the case of previously HUD-owned projects to besubstantially or moderately rehabilitated by the Owner, theOwner shall submit certified statements of the actual costs,including interest rate incurred for the rehabilitation loan,Contract Rent shortfalls and HUD-approved relocation. HUDshall review and approve the costs subject to post audit.

(c) Review and Inspection.

(1) Within 10 working days of the receipt of the notificationand the evidence of completion, HUD shall review the evi-dence of completion for adequacy. For previously HUD-ownedprojects, HUD shall have 15 working days.

(2) Within the same time period, a HUD representative shallinspect the project in a manner sufficient to enable the inspectorto report that he or she has inspected the observable elementsand features of the project in accordance with professionalstandards of care and judgment and that, on the basis of theinspection,

(i) the project has been completed in accordance with theAgreement and that

(ii) there are no observable conditions inconsistent withthe evidence of completion, including the certifications of theOwner and the design or inspecting architects, where appropri-ate. If the inspection discloses defects or deficiencies, theinspector shall report these with sufficient detail and informa-tion for purposes of paragraphs (e) and (f) of this section. In thecase of projects with HUD-insured mortgages or loans, a priorHUD inspection establishing substantial completion shall beacceptable.

(3) At the time of the HUD inspection, the Owner shall furnishevidence satisfactory to HUD of correction of all deficienciesincluded in any HUD notifications to the Owner during the

course of construction. The Owner and lender (in the case ofPart 811 financing) shall not be relieved of their obligation tocomplete the project in accordance with the Agreement be-cause of failure by HUD or any other party to inspect during thecourse of construction or rehabilitation.

(d) Unconditional Acceptance. If HUD determines from thereview and inspection that the project has been completed inaccordance with the Agreement, the project shall be acceptedand the Contract executed.

(e) Acceptance Where Defects or Deficiencies Are Items ofDelayed Completion. (See sections 2.3(b)(3)(iii) and (4)(iii)).If the only defects or deficiencies with regard to the physicalcompletion of the project are items of delayed completionwhich are minor items or which are incomplete because ofweather conditions, and in any case which do not preclude orunacceptably affect occupancy, and if the Owner has met allother requirements of the Agreement, the Project will beaccepted and the Contract executed, subject to the following:

(1) The Owner will establish an escrow fund in an amountapproved by HUD to be sufficient to assure completion of anyitems of delayed completion.

(2) The Owner and the CA will enter into a written agreement,to be included as an exhibit to the Contract, specifying theschedule for completion. If the Owner does not complete theitems specified in the agreement within the agreed time period,the CA may use the escrow fund to complete the project, or theCA may terminate the Contract or exercise other rights underthe Contract.

(f) Acceptance Where Other Defects or Deficiencies Reported.If the defects or deficiencies with regard to the physicalcompletion of the project are other than items of delayedcompletion under paragraph (e), HUD will determine whetherand to what extent the defects and deficiencies are correctableand whether the Contract Rents should be reduced. HUD willnotify the Owner of its decision, with a copy to the PHA whereit is the CA. If the Parties agree, HUD, the Owner, and the PHA,where it is the CA, will enter into a written agreement for thecorrection of the deficiencies specifying the schedule for comple-tion. If the deficiencies are corrected within the agreed time period,HUD will accept the project and the Contract will be executed.

(g) Acceptance with Regard to Physical Completion of the Projectand Execution of Contract.

(1) If HUD finds that the evidence of completion under section2.3 is acceptable (including acceptance under section 2.3(e))with respect to the physical completion of the project, includ-ing the certificate of occupancy and other official approvalsrequired for occupancy, but the evidence of completion in otherrespects is not acceptable, HUD will, upon request by theOwner, execute or approve the execution of the Contract.

(2) Until the remaining evidence of completion is submitted toand found acceptable by the HUD Field Office:

(i) The Contract Rents for the purpose of computinghousing assistance payment with respect to any unit will be themonthly amount of the debt service on the amount of perma-nent obligations attributable to the unit; and


(ii) Rent-up and occupancy of the project will be subjectto such conditions as HUD may require in an exhibit to theContract setting forth the rents and conditions.

(h) Notification of Nonacceptance. If HUD determines that,based on the review of the evidence of completion and inspec-tion, the project cannot be accepted, the Owner (and the PHAwhere it is the CA) shall be promptly notified of this decisionwith a statement of the reasons.

(i) Arbitration. In the event the Owner disputes the HUD deter-minations, it may submit the controversy to a mutually accept-able third-party arbitrator at its expense, provided that thearbitration is advisory only.

2.4 Execution of Housing Assistance PaymentsContract.

(a) Time of Execution. Upon acceptance of the project by HUDpursuant to sections 2.2 and 2.3 the Contract shall be executedfirst by the Owner and then by the CA (and then be approvedby HUD, where the CA is the PHA).

(b) Completion in Stages. If completion is in stages, the Contractand the signature block for the first stage shall be executed uponcompletion of the first stage, and the number and types ofcompleted units and their Contract Rents shall be shown inExhibit 1 of the Contract. Thereafter, upon completion of eachsuccessive stage, the signature block provided in the Contractfor that stage shall be executed, and additional Exhibits 1a, 1b,etc., covering the additional units, shall become part of theContract.

(c) Unleased Units at Time of Execution. At the time of executionof the Contract, the CA shall examine the lists of dwelling unitsleased and not leased, referred to in section 2.2(d), and shalldetermine whether or not the Owner has met its obligationsunder that section with respect to any unleased units. The CAshall state in writing its determination with respect to theunleased units and for which of those units it will make housingassistance payments pursuant to the Contract. The Owner shallindicate in writing concurrence or nonconcurrence with thisdetermination, reserving its right to claim housing assistancepayments for the unleased units under the Contract, withoutprejudice by reason of signing the Contract.

(d) Contract Rents. The Contract Rents by unit size, amounts ofhousing assistance payments, and all other applicable termsand conditions shall be as specified in the proposed HousingAssistance Payments Contract, except as provided in section2.2(c) and in paragraphs (f) - (i) of this section (where appli-cable).

(e) No Changes in Contract. Each party has read or is presumedto have read the proposed Contract. It is expressly agreed thatthere shall be no change in the terms and conditions of theContract other than as provided in this Agreement.

(f) Adjustment of Contract Rents Based on Cost Certificationfor Projects Not Subject to Part 811. (See section 1.4 forapplicability of this paragraph.)

(1) Submission by Owner. Within 60 days after HUD acceptsthe project (or accepts the last stage, where applicable), or any

extension approved by HUD for good cause, the Owner willcertify the actual costs of the replacement cost, operatingexpenses, income, and debt service, and submit a cost certifi-cation including the certificate of an Independent Public Ac-countant to HUD in the manner and form prescribed by HUD,based on the following guidelines:

(i) Projects which involve HUD mortgage insurance or aHUD loan will be subject to the cost certification requirementsof the applicable insurance or loan program.

(ii) For projects not insured by HUD, a simplified form ofcost certification prescribed by HUD will be completed andsubmitted.

(iii) For previously HUD-owned projects, in accordancewith HUD requirements.

(2) HUD Review. Cost certifications will be subject to reviewby HUD. As part of this review, the Owner and/or contractormay be required to submit additional documentation.

(3) Reduction of Contract Rents. If the Owner’s certifiedcosts provided in accordance with paragraph (f)(1) of thissection, as approved by HUD, are less than the HUD-approvedcost estimates in the final Proposal, the Contract Rents will bereduced commensurately.

(4) Reduction of Maximum Annual Commitment. If theContract Rents are reduced pursuant to paragraph (f)(3) of thissection, the maximum Contract commitment (and the maxi-mum ACC commitment, in the case of Private-Owner/PHAprojects) will be reduced. If Contract Rents are reduced basedon certification after Contract execution, any overpaymentsince the effective date of the Contract will be recovered fromthe Owner by the CA.

(g) Adjustment of Contract Rents to Reflect Actual Cost of TaxExempt Obligations Issued by a Participating State AgencyNot Subject to Part 811. After the project is permanentlyfinanced, the financing agency shall submit a HUD-prescribedcertification to HUD specifying the actual financing terms. Ifthe actual debt service to the Owner under the permanentfinancing is lower than the anticipated debt service on whichthe Contract Rents were based, the initial Contract Rents or theContract Rents then in effect shall be reduced commensurately,and the amount of the savings credited to the project account.The maximum annual Contract commitment (and the maxi-mum ACC commitment, in the case of Private-Owner/PHAprojects) will not be reduced.

(h) Adjustment to Reflect Actual Cost for Projects Subject toPart 811. (See section 1.4 for applicability.)

(1) The Owner and the financing agency shall submit certifiedstatements as to the financing and other costs. Based on thecertified statements, HUD will determine whether any reduc-tion in initial Contract Rents is required under 24 CFR Part 811.Promptly after HUD notification, the Owner and the financingagency agree to amend the Contract to reduce the initialContract Rents to the extent required by HUD. See sections2.3(b)(5) and (6), as appropriate.


(2) Reduction of Maximum Annual Commitment. If theContract Rents are reduced pursuant to paragraph (h)(1) of thissection, the maximum annual Contract commitment (and themaximum ACC commitment, in the case of Private-Owner/PHA projects) will be reduced. If Contract Rents are reducedbased on certification after Contract execution, any overpay-ments since the effective date of the Contract will be recoveredfrom the Owner by the CA.

(i) Adjustment of Contract Rents in Previously HUD-OwnedProjects.

(1) For previously HUD-owned projects requiring substantialor moderate rehabilitation, the Contract Rents will be theamount established by HUD at sales closing except:

(i) When, during rehabilitation, work items are discov-ered which:

(a) could not reasonably have been anticipated or arenecessitated by a change in local codes or ordinances,

(b) were not listed in the work write-up prepared byHUD and

(c) will require additional expenditures which wouldmake the rehabilitation infeasible at the Contract Rents estab-lished in this Agreement.

(ii) When the actual cost of the rehabilitation performedis less than that specified in the Purchase and Use Plan.

(iii) When the actual certified relocation payments madeby the Owner to temporarily displaced Families varies from thecost estimated by HUD.

(2) If the change is due to circumstances set out in paragraph(i)(1) of this section, HUD will:

(i) Approve a change order to the rehabilitation contract,or amend the work write-up if there is no rehabilitation con-tract, specifying the additional work to be accomplished andadditional cost for this work.

(ii) Recompute the Contract Rents within the limits setout in (i)(4) of this section based upon the revised cost estimate.

(iii) Execute an amendment to this Agreement and theappropriate exhibits stating the additional work required andthe revised Contract Rents and maximum annual Contractcommitment.

(3) If the change is due to circumstances set out in paragraph(i)(1)(ii) or (i)(1)(iii) (either an increase or decrease), HUDmay recalculate the Contract Rents and amend this Agreementas appropriate to reflect the revised rents. The Contract Rentsshall not be recalculated based on increased costs to maintainrents to tenants at the level required under section 8 of the Actduring the rehabilitation period.

(4) In establishing the revised Contract Rents, HUD shalldetermine that the Contract Rents shall not exceed rents whichare reasonable for the location, quality, amenities, facilitiesand management and maintenance services in relation to therents paid for comparable units, nor shall the Contract Rentsexceed the rents charged by the Owner to unassisted families

for comparable units. Also, the sum of the Contract Rent plusan Allowance for Utilities and Other Services (where utilitiesand other services are not included in the Contract Rent) shallnot exceed the published section 8 Fair Market Rents or theexception rents in effect at the time of the execution of theAgreement.

2.5 Cooperation in Equal Opportunity ComplianceReviews: Nondiscrimination.

(a) The Owner and the PHA, where it is the CA, agree to cooperatewith HUD in the conducting of the compliance reviews andcomplaint investigations pursuant to all applicable civil rightsstatues, Executive Orders, and rules and regulations.

(b) (1) In carrying out the obligations under this Agreement, theOwner will not discriminate against any employee or applicantfor employment because of race, color, creed, religion, sex,handicap or national origin. The Owner will take affirmativeaction to insure that applicants are employed, and that employ-ees are treated during employment, without regard to their race,color, creed, religion, sex, handicap or national origin. Suchaction shall include, but not be limited to the following:employment, upgrading, demotion, or transfer; recruitment orrecruitment advertising; layoff or termination; rates of pay orother forms of compensation; and selection for training, includ-ing apprenticeship.

(2) The Owner agrees to post in conspicuous places, availableto employees and applicants for employment, notices to beprovided by HUD setting forth the provisions of this nondis-crimination clause. The Owner will in all solicitations oradvertisements for employees placed by or on behalf of theOwner state that all qualified applicants will receive consider-ation for employment without regard to race, color, creed,religion, sex, handicap or national origin. The Owner willincorporate the foregoing requirements of this paragraph in allof its contracts for project work except contracts for standardcommercial supplies or raw materials and contracts for con-struction work or modification of it covered under section 2.7,and will require all of its contractors for such work to incorpo-rate such requirements in all subcontracts for project work.

(c) The Owner shall comply with any rules and regulations issuedor adopted by HUD under the Age Discrimination Act of 1975,as amended, 42 U.S.C. 6101, et seq., which prohibits discrimi-nation on the basis of age in programs and activities receivingFederal financial assistance.

2.6 Training, Employment and ContractingOpportunities for Businesses and Lower IncomePersons.(See section 1.4 for applicability of this section.)

(a) The project assisted under this Agreement is subject to therequirements of section 3 of the Housing and Urban Develop-ment Act of 1968, as amended, 12 U.S.C. 1701u. Section 3requires that, to the greatest extent feasible, opportunities fortraining and employment be given lower-income residents ofthe project area and contracts for work in connection with theproject be awarded to business concerns which are located in,or owned in substantial part by persons residing in, the area ofthe project.


(b) Notwithstanding any other provision of this Agreement, theOwner shall carry out the provisions of section 3 and theregulations issued by HUD as set forth in 24 CFR, Part 135, andall applicable rules and orders of HUD issued thereunder priorto the execution of this Agreement. The requirements of theregulations include, but are not limited to, making a good faitheffort, as defined by the regulations, to provide training,employment, and business opportunities required by section 3;and incorporation of the “section 3 clause” specified by section135.38 of the regulations and paragraph (d) of this section in allcontracts for work in connection with the project. The Ownercertifies and agrees that it is under no contractual or otherdisability which would prevent it from complying with theserequirements.

(c) Compliance with the provisions of section 3, the regulations setforth in 24 CFR, Part 135, and all applicable rules and ordersissued by HUD thereunder prior to execution of this Agree-ment, shall be a condition of the Federal financial assistanceprovided to the project, binding upon the Owner, its contractorsand subcontractors, its successors and assigns. Failure to fulfillthese requirements shall subject the Owner, its contractors andsubcontractors, its successors, and assigns to the sanctionsspecified by this Agreement, and to such sanctions as arespecified by 24 CFR, section 135.135.

(d) The Owner shall incorporate or cause to be incorporated intoany contract or subcontract for work pursuant to this Agree-ment in excess of $100,000 cost, the following clause:

"Employment of Project Area Residents and Contractors

(1) The work to be performed under this contract is subject tothe requirements of section 3 of the Housing and UrbanDevelopment Act of 1968, as amended, 12 U.S.C. 1701u(section 3). The purpose of section 3 is to ensure that employ-ment and other economic opportunities generated by HUDassistance or HUD-assisted projects covered by section 3, shall,to the greatest extent feasible, be directed to low- and very low-income persons, particularly persons who are recipients ofHUD assistance for housing.

(2) The parties to this contract agree to comply with HUD’sregulations in 24 CFR part 135, which implement section 3. Asevidenced by their execution of this contract, the parties to thiscontract certify that they are under no contractual or otherimpediment that would prevent them from complying with thepart 135 regulations.

(3) The contractor agrees to send to each labor organization orrepresentative of workers with which the contractor has acollective bargaining agreement or other understanding, if any,a notice advising the labor organization or workers’ represen-tative of the contractor’s commitments under this section 3clause, and will post copies of the notice in conspicuous placesat the work site where both employees and applicants fortraining and employment positions can see the notice. Thenotice shall describe the section 3 preference, shall set forthminimum number and job titles subject to hire, availability ofapprenticeship and training positions, the qualifications foreach; and the name and location of the person(s) takingapplications for each of the positions; and the anticipated datethe work shall begin.

(4) The contractor agrees to include this section 3 clause inevery subcontract subject to compliance with regulations in 24CFR part 135, and agrees to take appropriate action, as pro-vided in an applicable provision of the subcontract or in thissection 3 clause, upon a finding that the subcontractor is inviolation of the regulations in 24 CFR part 135. The contractorwill not subcontract with any subcontractor where the contrac-tor has notice or knowledge that the subcontractor has beenfound in violation of the regulations in 24 CFR part 135.

(5) The contractor will certify that any vacant employmentpositions, including training positions, that are filled (1) afterthe contractor is selected but before the contract is executed,and (2) with persons other than those to whom the regulationsof 24 CFR part 135 require employment opportunities to bedirected, were not filled to circumvent the contractor’s obliga-tions under 24 CFR part 135.

(6) Noncompliance with HUD’s regulations in 24 CFR part135 may result in sanctions, termination of this contract fordefault, and debarment or suspension from future HUD assistedcontracts.

(7) With respect to work performed in connection with section3 covered Indian housing assistance, section 7(b) of the IndianSelf-Determination and Education Assistance Act (25 U.S.C.450e) also applies to the work to be performed under thiscontract. Section 7(b) requires that to the greatest extentfeasible (i) preference and opportunities for training and em-ployment shall be given to Indians, and (ii) preference in theaward of contracts and subcontracts shall be given to Indianorganizations and Indian-owned Economic Enterprises. Par-ties to this contract that are subject to the provisions of section3 and section 7(b) agree to comply with section 3 to themaximum extent feasible, but not in derogation of compliancewith section 7(b)."

(e) The Owner agrees that it will be bound by the above section 3clause with respect to its own employment practices when itparticipates in federally assisted work.

2.7 Equal Employment Opportunity.(a) The Owner shall incorporate or cause to be incorporated into

any contract for construction work, or modification thereof, asdefined in the regulations of the Secretary of Labor at 41 CFR,Chapter 60, which is to be performed pursuant to this Agree-ment, the following Equal Opportunity clause:

“Equal Employment Opportunity

“ During the performance of this contract, the contractor agreesas follows:

“(1) The contractor will not discriminate against any employeeor applicant for employment because of race, color, religion,sex, or national origin. The contractor will take affirmativeaction to ensure that applicants are employed, and that employ-ees are treated during employment, without regard to their race,color, religion, sex, or national origin. Such action shallinclude, but not be limited to, the following: employment,upgrading, demotion, or transfer; recruitment or recruitmentadvertising; layoff or termination; rates of pay or other formsof compensation; and selection for training, including appren-


ticeship. The contractor agrees to post in conspicuous places,available to employees and applicants for employment, noticessetting forth the provisions of this Equal Opportunity clause.

“(2) The contractor will, in all solicitations or advertisementsfor employees placed by or on behalf of the contractor, statethat all qualified applicants will receive consideration foremployment without regard to race, color, religion, sex, ornational origin.

“(3) The contractor will send to each labor union or represen-tative of workers with which he has a collective bargainingagreement or other contract or understanding, a notice to beprovided by or at the direction of the Government advising thesaid labor union or workers representative of the contractor’scommitments under this section, and shall post copies of thenotice in conspicuous places available to employees and appli-cants for employment.

“(4) The contractor will comply with all provisions of Execu-tive Order No. 11246 of September 24, 1965, and of the rules,regulations, and relevant orders of the Secretary of Labor.

"(5) The contractor will furnish all information and reportsrequired by Executive Order No. 11246 of September 24, 1965,and by the rules, regulations, and orders of the Secretary ofLabor, or pursuant thereto, and will permit access to its books,records, and accounts by HUD and the Secretary of Labor forpurposes of investigation to ascertain compliance with suchrules, regulations and orders.

“(6) In the event of the contractor’s noncompliance with thenondiscrimination clauses of this contract or with any of suchrules, regulations, or orders, the contract may be cancelled,terminated, or suspended in whole or in part and the contractormay be declared ineligible for further Government contracts orfederally assisted construction contracts in accordance withprocedures authorized in Executive Order No. 11246 of Sep-tember 24, 1965, and such other sanctions as may be imposedand remedies invoked as provided in Executive Order No.11246 of September 24, 1965, or by rule, regulation, or orderof the Secretary of Labor or as otherwise provided by law.

“(7) The contractor will include the portion of the sentenceimmediately preceding Paragraph (1) and the provisions ofParagraphs (1) through (7) in every subcontract or purchaseorder unless exempted by the rules, regulations, or orders of theSecretary of Labor issued pursuant to Section 204 of ExecutiveOrder No. 11246 of September 24, 1965, so that such provisionswill be binding upon each subcontractor or vendor. The con-tractor will take such action with respect to any subcontract orpurchase order as the Secretary of Labor may direct as a meansof enforcing such provisions including sanctions for non-compliance; provided, however, that in the event the contractorbecomes involved in, or is threatened with, litigation with asubcontractor or vendor as a result of such direction, thecontractor may request the United States to enter into suchlitigation to protect the interest of the United States.”

(b) The Owner agrees that it will be bound by the above EqualOpportunity clause with respect to its own employment prac-tices when it participates in federally assisted constructionwork.

(c) The Owner agrees that it will assist and cooperate actively withHUD and the Secretary of Labor in obtaining the complianceof contractors and subcontractors with the Equal Opportunityclause and the rules, regulations, and relevant orders of theSecretary of Labor, that it will furnish HUD and the Secretaryof Labor such information as they may require for the supervi-sion of such compliance, and that it will otherwise assist HUDin the discharge of HUD’s primary responsibility for securingcompliance.

(d) The Owner further agrees that it will refrain from entering intoany contract or contract modification subject to ExecutiveOrder No. 11246 of September 24, 1965, with a contractordebarred from, or who has not demonstrated eligibility for,Government contracts and federally assisted construction con-tracts pursuant to the Executive Order and will carry out suchsanctions and penalties for violation of the Equal Opportunityclause as may be imposed upon contractors and subcontractorsby HUD or the Secretary of Labor pursuant to Part II, SubpartD of the Executive Order. In addition, the Owner agrees that ifit fails or refuses to comply with these undertakings, HUD maytake any or all of the following actions: Cancel, terminate, orsuspend in whole or in part this Agreement; refrain fromextending any further assistance to the Owner under the pro-gram with respect to which the failure or refusal occurred untilsatisfactory assurance of future compliance has been receivedfrom such applicant; and refer the case to the Department ofJustice for appropriate legal proceedings.

2.8 Flood Insurance. (See section 1.4 for applicability.)

The Owner agrees that the project will be covered, during itsanticipated economic or useful life, by flood insurance in anamount at least equal to its development or project cost (lessestimated land cost) or to the maximum limit of coverage madeavailable with respect to the particular type of property underthe National Flood Insurance Act of 1968, whichever is less.

2.9 Clean Air Act and Federal Water Pollution ControlAct. (See section 1.4 for applicability of this section.)

In compliance with regulations issued by the EnvironmentalProtection Agency (“EPA”), 40 CFR, Part 15, pursuant to theClean Air Act, as amended (“Air Act”), 42 U.S.C. 7401, et seq.,the Federal Water Pollution Control Act, as amended (“WaterAct”), 33 U.S.C. 1251, et seq., and Executive Order 11738, theOwner agrees:

(a) Not to utilize any facility in the performance of this Agreementor any nonexempt subcontractor which is listed on the EPA Listof Violating Facilities pursuant to section 15.20 of the regulations;

(b) Promptly to notify the CA of the receipt of any communicationfrom the EPA indicating that a facility to be utilized for theAgreement is under consideration to be listed on the EPA Listof Violating Facilities;

(c) To comply with all the requirements of Section 114 of the AirAct and section 308 of the Water Act relating to inspection,monitoring, entry, reports, and information, as well as all otherrequirements specified in section 114 of the Air Act and section308 of the Water Act, and all regulations and guidelines issuedthereunder; and


(d) To include or cause to be included the provisions of this sectionin every nonexempt subcontract and take such action as HUDmay direct as a means of enforcing such provisions.

2.10 Prevailing Wage Rates.(Sections 2.10 applies to projects with 9 or more assisted units.See Section 1.4. Other programs require coverage for projectswith fewer than 9 units.)

(a) (1) (i) Minimum Wages. All laborers and mechanics em-ployed or working upon the site of the work (or under the UnitedStates Housing Act of 1937 or under the Housing Act of 1949in the construction or development of the project), will be paidunconditionally and not less often than once a week, andwithout subsequent deduction or rebate on any account (exceptsuch payroll deductions as are permitted by regulation issuedby the Secretary of Labor under the Copeland Act (29 CFR Part3), the full amount of wages and bona fide fringe benefits (orcash equivalents thereof) due at time of payment computed atrates not less than those contained in the wage determination ofthe Secretary of Labor which is attached hereto and made a parthereof, regardless of any contractual relationship which may bealleged to exist between the contractor and such laborers andmechanics. Contributions made or costs reasonably antici-pated for bona fide fringe benefits under Section 1 (b)(2) of theDavis-Bacon Act on behalf of laborers or mechanics areconsidered wages paid to such laborers or mechanics, subjectto the provisions of 29 CFR 5.5(a)(l)(iv); also, regular contri-butions made or costs incurred for more than a weekly period(but not less often than quarterly) under plans, funds, orprograms, which cover the particular weekly period, are deemedto be constructively made or incurred during such weeklyperiod.

Such laborers and mechanics shall be paid the appropriate wagerate and fringe benefits on the wage determination for theclassification of work actually performed, without regard toskill, except as provided in 29 CFR Part 5.5(a) (4). Laborers ormechanics performing work in more than one classificationmay be compensated at the rate specified for each classificationfor the time actually worked therein: Provided, that theemployer’s payroll records accurately set forth the time spentin each classification in which work is performed. The wagedetermination (including any additional classification and wagerates conformed under 29 CFR Part 5.5(a)(l)(ii) and the Davis-Bacon poster (WH-1321) shall be posted at all times by thecontractor and its subcontractors at the site of the work in aprominent and accessible place where it can be easily seen bythe workers.

(ii) (a) Any class of laborers or mechanics which is notlisted in the wage determination and which is to be employedunder the contract shall be classified in conformance with thewage determination. HUD shall approve an additional classi-fication and wage rate and fringe benefits therefore only whenthe following criteria have been met:

1 The work to be performed by the classifica-tion requested is not performed by a classification in the wagedetermination; and

2 The classification is utilized in the area bythe construction industry; and

3 The proposed wage rate, including any bonafide fringe benefits, bears a reasonable relationship to the wagerates contained in the wage determination.

(b) If the contractor and the laborers and mechanicsto be employed in the classification (if known), or theirrepresentatives, and HUD or its designee agree on the classifi-cation and wage rate (including the amount designated forfringe benefits where appropriate), a report of the action takenshall be sent by HUD or its designee to the Administrator of theWage and Hour Division, Employment Standards Administra-tion, U.S. Department of Labor, Washington, D.C. 20210. TheAdministrator, or an authorized representative, will approve,modify, or disapprove every additional classification actionwithin 30 days of receipt and so advise HUD or its designee orwill notify HUD or its designee within the 30-day period thatadditional time is necessary. (Approved by the Office of Manage-ment and Budget under OMB Control Number 1215-0140.)

(c) In the event the contractor, the laborers or me-chanics to be employed in the classification or their represen-tatives, and HUD or its designee do not agree on the proposedclassification and wage rate (including the amount designatedfor fringe benefits, where appropriate), HUD or its designeeshall refer the questions, including the views of all interestedparties and the recommendation of HUD or its designee, to theAdministrator for determination. The Administrator, or anauthorized representative, will issue a determination within 30days of receipt and so advise HUD or its designee or will notifyHUD or its designee within the 30-day period that additionaltime is necessary. (Approved by the Office of Management andBudget under OMB Control Number 1215-0140.)

(d) The wage rate (including fringe benefits whereappropriate) determined pursuant to subparagraphs (l)(B) or(C) of this paragraph, shall be paid to all workers performingwork in the classification under this contract from the first dayon which work is performed in the classification.

(iii) Whenever the minimum wage rate prescribed in thecontract for a class of laborers or mechanics includes a fringebenefit which is not expressed as an hourly rate, the contractorshall either pay the benefit as stated in the wage determinationor shall pay another bona fide fringe benefit or an hourly cashequivalent thereof.

(iv) If the contractor does not make payments to a trusteeor other third person, the contractor may consider as part of thewages of any laborer or mechanic the amount of any costsreasonably anticipated in providing bona fide fringe benefitsunder a plan or program, Provided, That the Secretary of Laborhas found, upon the written request of the contractor, that theapplicable standards of the Davis-Bacon Act have been met.The Secretary of Labor may require the contractor to set asidein a separate account assets for the meeting of obligations underthe plan or program. (Approved by the Office of Managementand Budget under OMB Control Number 1215-0140.)


(2) Withholding. HUD or its designee shall upon its ownaction or upon written request of an authorized representativeof the Department of Labor withhold or cause to be withheldfrom the contractor under this contract or any other Federalcontract with the same prime contractor, or any other Feder-ally-assisted contract subject to Davis-Bacon prevailing wagerequirements, which is held by the same prime contractor somuch of the accrued payments or advances as may be consid-ered necessary to pay laborers and mechanics, including ap-prentices, trainees and helpers, employed by the contractor orany subcontractor the full amount of wages required by thecontract. In the event of failure to pay any laborer or mechanic,including any apprentice, trainee or helper, employed or work-ing on the site of the work (or under the United States HousingAct of 1937 or under the Housing Act of 1949 in the construc-tion or development of the project), all or part of the wagesrequired by the contract, HUD or its designee may, after writtennotice to the contractor, sponsor, applicant, or owner, take suchaction as may be necessary to cause the suspension of anyfurther payment, advance, or guarantee of funds until suchviolations have ceased. HUD or its designee may, after writtennotice to the contractor, disburse such amounts withheld forand on account of the contractor or subcontractor to therespective employees to whom they are due. The ComptrollerGeneral shall make such disbursements in the case of directDavis-Bacon Act contracts.

(3) (i) Payrolls and basic records. Payrolls and basic recordsrelating thereto shall be maintained by the contractor during thecourse of the work and preserved for a period of three yearsthereafter for all laborers and mechanics working at the site ofthe work (or under the United States Housing Act of 1937, orunder the Housing Act of 1949, in the construction or develop-ment of the project). Such records shall contain the name,address, and social security number of each such worker, his orher correct classification, hourly rates of wages paid (includingrates of contributions or costs anticipated for bona fide fringebenefits or cash equivalents thereof of the types described inSection 1(b) (2)(B) of the Davis-Bacon Act), daily and weeklynumber of hours worked, deductions made and actual wagespaid. Whenever the Secretary of Labor has found under 29 CFR5.5 (a) (1) (iv) that the wages of any laborer or mechanic includethe amount of any costs reasonably anticipated in providingbenefits under a plan or program described in Section l(b)(2)(B)of the Davis-Bacon Act, the contractor shall maintain recordswhich show that the commitment to provide such benefits isenforceable, that the plan or program is financially responsible,and that the plan or program has been communicated in writingto the laborers or mechanics affected, and records which showthe costs anticipated or the actual cost incurred in providingsuch benefits. Contractors employing apprentices or traineesunder approved programs shall maintain written evidence ofthe registration of apprenticeship programs and certification oftrainee programs, the registration of the apprentices and train-ees, and the ratios and wage rates prescribed in the applicableprograms. (Approved by the Office of Management and Budgetunder OMB Control Numbers 1215-0140 and 1215-0017.)

(ii) (a) The contractor shall submit weekly for each weekin which any contract work is performed a copy of all payrollsto HUD or its designee if the agency is a party to the contract,but if the agency is not such a party, the contractor will submitthe payrolls to the applicant, sponsor, or owner, as the case maybe, for transmission to HUD or its designee. The payrollssubmitted shall set out accurately and completely all of theinformation required to be maintained under 29 CFR Part5.5(a)(3)(i). This information may be submitted in any formdesired. Optional Form WH-347 is available for this purposeand may be purchased from the Superintendent of Documents(Federal Stock Number 029-005-00014-1), U.S. GovernmentPrinting Office, Washington, D.C. 20402. The prime contrac-tor is responsible for the submission of copies of payrolls, by allsubcontractors. (Approved by the Office of Management andBudget under OMB Control Number 1215-0149).

(b) Each payroll submitted shall be accompanied by“Statement of Compliance,” signed by the contractor or sub-contractor or his or her agent who pays or supervises thepayment of the persons employed under the contract and shallcertify the following:

1 That the payroll for the payroll period con-tains the information required to be maintained under 29 CFRPart 5.5 (a)(3)(i) and that such information is correct andcomplete;

2 That each laborer or mechanic (includingeach helper, apprentice, and trainee) employed on the contractduring the payroll period has been paid the full weekly wagesearned, without rebate, either directly or indirectly, and that nodeductions have been made either directly or indirectly fromthe full wages earned, other than permissible deductions as setforth in 29 CFR Part 3;

3 That each laborer or mechanic has been paidnot less than the applicable wage rates and fringe benefits orcash equivalents for the classification of work performed, asspecified in the applicable wage determination incorporatedinto the contract.

(c) The weekly submission of a properly executedcertification set forth on the reverse side of Optional Form WH-347 shall satisfy the requirement for submission of the “State-ment of Compliance” required by paragraph (a)(3)(ii)(B) ofthis section.

(d) The falsification of any of the above certificationsmay subject the contractor or subcontractor to civil or criminalprosecution under Section 1001 of Title 18 and Section 231 ofTitle 31 of the United States Code.

(iii) The contractor or subcontractor shall make the recordsrequired under paragraph (a)(3)(i) of this section available forinspection, copying, or transcription by authorized representa-tives of HUD or its designee or the Department of Labor, andshall permit such representatives to interview employees dur-ing working hours on the job. If the contractor or subcontractorfails to submit the required records or to make them available,HUD or its designee may, after written notice to the contractor,sponsor, applicant, or owner, take such action as may be


necessary to cause the suspension of any further payment,advance, or guarantee of funds. Furthermore, failure to submitthe required records upon request or to make such recordsavailable may be grounds for debarment action pursuant to 29CFR Part 5.12.

(4) Apprentices and Trainees.

(i) Apprentices. Apprentices will be permitted to wordat less than the predetermined rate for the work they performedwhen they are employed pursuant to and individually regis-tered in a bona fide apprenticeship program registered with theU.S. Department of Labor, Employment and Training Admini-stration, Bureau of Apprenticeship and Training, or with a StateApprenticeship Agency recognized by the Bureau, or if aperson is employed in his or her first 90 days of probationaryemployment as an apprentice in such an apprenticeship pro-gram, who is not individually registered in the program, butwho has been certified by the Bureau of Apprenticeship andTraining or a State Apprenticeship Agency (where appropriate)to be eligible for probationary employment as an apprentice.The allowable ratio of apprentices to journeymen on the job sitein any craft classification shall not be greater than the ratiopermitted to the contractor as to the entire work force under theregistered program. Any worker listed on a payroll at anapprentice wage rate, who is not registered or otherwise em-ployed as stated above, shall be paid not less than the applicablewage rate on the wage determination for the classification ofwork actually performed. In addition, any apprentice perform-ing work on the job site in excess of the ratio permitted underthe registered program shall be paid not less than the applicablewage rate on the wage determination for the work actuallyperformed. Where a contractor is performing construction ona project in a locality other than that in which its program isregistered, the ratios and wage rates (expressed in percentagesof the journeyman’s hourly rate) specified in the contractor’s orsubcontractor’s registered program shall be observed. Everyapprentice must be paid at not less than the rate specified in theregistered program for the apprentice’s level of progress,expressed as a percentage of the journeymen hourly ratespecified in the applicable wage determination. Apprenticesshall be paid fringe benefits in accordance with the provisionsof the apprenticeship program. If the apprenticeship programdoes not specify fringe benefits, apprentices must be paid thefull amount of fringe benefits listed on the wage determinationfor the applicable classification. If the Administrator deter-mines that a different practice prevails for the applicableapprentice classification, fringes shall be paid in accordancewith that determination. In the event the Bureau of Apprentice-ship and Training, or a State Apprenticeship Agency recog-nized by the Bureau, withdraws approval of an apprenticeshipprogram, the contractor will no longer be permitted to utilizeapprentices at less than the applicable predetermined rate forthe work performed until an acceptable program is approved.

(ii) Trainees. Except as provided in 29 CFR 5.16, train-ees will not be permitted to work at less than the predeterminedrate for the work performed unless they are employed pursuantto and individually registered in a program which has receivedprior approval, evidenced by formal certification by the U.S.

Department of Labor, Employment and Training Administra-tion. The ratio of trainees to journeymen on the job site shallnot be greater than permitted under the plan approved by theEmployment and Training Administration. Every trainee mustbe paid at not less than the rate specified in the approvedprogram for the trainee’s level of progress, expressed as apercentage of the journeyman hourly rate specified in theapplicable wage determination. Trainees shall be paid fringebenefits in accordance with the provisions of the traineeprogram. If the trainee program does not mention fringebenefits, trainees shall be paid the full amount of fringe benefitslisted on the wage determination unless the Administrator ofthe Wage and Hour Division determines that there is anapprenticeship program associated with the correspondingjourneyman wage rate on the wage determination which pro-vides for less than full fringe benefits for apprentices. Anyemployee listed on the payroll at a trainee rate who is notregistered and participating in a training plan approved by theEmployment and Training Administration shall be paid not lessthan the applicable wage rate on the wage determination for theclassification of work actually performed. In addition, anytrainee performing work on the job site in excess of the ratiopermitted under the registered program shall be paid not lessthan the applicable wage rate on the wage determination for thework actually performed. In the event the Employment andTraining Administration withdraws approval of a trainingprogram, the contractor will no longer be permitted to utilizetrainees at less than the applicable predetermined rate for thework performed until an acceptable program is approved.

(iii) Equal employment opportunity. The utilization ofapprentices, trainees and journeymen under this part shall be inconformity with the equal employment opportunity requirementsof Executive Order 11246, as amended, and 29 CFR Part 30.

(5) Compliance with Copeland Act requirements. Thecontractor shall comply with the requirements of 29 CFR Part3 which are incorporated by reference in this contract.

(6) Subcontracts. The contractor or subcontractor will insertin any subcontracts the clauses contained in 29 CFR Part5.5(a)(1) through (10) and such other clauses as HUD or itsdesignee may by appropriate instructions require, and also aclause requiring the subcontractors to include these clauses inany lower tier subcontracts. The prime contractor shall beresponsible for the compliance by any subcontractor or lowertier subcontractor with all the contract clauses in 29 CFR Part 5.5.

(7) Contract Termination; Debarment. A breach of thecontract clauses in 29 CFR 5.5 may be grounds for terminationof the contract, and for debarment as a subcontractor asprovided in 29 CFR 5.12.

(8) Compliance with Davis-Bacon and Related Act Re-quirements. All rulings and interpretations of the Davis-Bacon and Related Acts contained in 29 CFR Parts 1, 3, and 5are herein incorporated by reference in this contract.

(9) Disputes concerning labor standards. Disputes arisingout of the labor standards provisions of this contract shall notbe subject to the general disputes clause of this contract. Suchdisputes shall be resolved in accordance with the procedures of


the Department of Labor set forth in 29 CFR Parts 5, 6, and 7.Disputes within the meaning of this clause include disputesbetween the contractor (or any of its subcontractors) and HUDor its designee, the U.S. Department of Labor, or the employeesor their representatives.

(10)(i) Certification of Eligibility. By entering into thiscontract, the contractor certifies that neither it (nor he or she)nor any person or firm who has an interest in the contractor’sfirm is a person or firm ineligible to be awarded Governmentcontracts by virtue of Section 3(a) of the Davis-Bacon Act or29 CFR 5.12(a)(l) or to be awarded HUD contracts or partici-pate in HUD programs pursuant to 24 CFR Part 24.

(ii) No part of this contract shall be subcontracted to anyperson or firm ineligible for award of a Government contract byvirtue of Section 3(a) of the Davis-Bacon Act or 29 CFR5.12(a)(1) or to be awarded HUD contracts or participate inHUD programs pursuant to 24 CFR Part 24.

(iii) The penalty for making false statements is prescribedin the U.S. Criminal Code, 18 U.S C. 1001. Additionally, U.S.Criminal Code, Section 1010, Title 18, U.S.C., “Federal Hous-ing Administration transaction”, provides in part: “Whoever,for the purpose of...influencing in any way the action of suchAdministration...makes, utters or publishes any statement,knowing the same to be false... shall be fined not more than$5,000 or imprisoned not more than two years, or both.”

(b) Contract Work Hours and Safety Standards Act. As used inthis paragraph, the terms “laborers” and “mechanics" includewatchmen and guards.

(1) Overtime requirements. No contractor or subcontractorcontracting for any part of the contract work which may requireor involve the employment of laborers or mechanics shallrequire or permit any such laborer or mechanic in any work-week in which he or she is employed on such work to work inexcess of forty hours in such workweek unless such laborer ormechanic receives compensation at a rate not less than one andone-half times the basic rate of pay for all hours worked inexcess of forty hours in such workweek.

(2) Violation; liability for unpaid wages; liquidated damages.In the event of any violation of the clause set forth in subpara-graph (1) of this paragraph, the contractor and any subcontrac-tor responsible therefor shall be liable for the unpaid wages. Inaddition, such contractor and subcontractor shall be liable tothe United States (in the case of work done under contract forthe District of Columbia or a territory, to such District or to suchterritory), for liquidated damages. Such liquidated damagesshall be computed with respect to each individual laborer ormechanic, including watchmen and guards, employed in viola-tion of the clause set forth in subparagraph (1) of this paragraph,in the sum of $10 for each calendar day on which suchindividual was required or permitted to work in excess of thestandard workweek of forty hours without payment of theovertime wages required by the clause set forth in subparagraph(1) of this paragraph.

(3) Withholding for unpaid wages and liquidated damages.HUD or its designee shall upon its own action or upon written

request of an authorized representative of the Department ofLabor withhold or cause to be withheld, from any moneyspayable on account of work performed by the contractor orsubcontractor under any such contract or any other Federalcontract with the same prime contractor, or any other Feder-ally-assisted contract subject to the Contract Work Hours andSafety Standards Act, which is held by the same prime contrac-tor such sums as may be determined to be necessary to satisfyany liabilities of such contractor or subcontractor for unpaidwages and liquidated damages as provided in the clause setforth in subparagraph (2) of this paragraph.

(4) Subcontracts. The contractor or any subcontractor shallinsert in any subcontracts the clauses set forth in subparagraphs(1) through (4) of this paragraph and also a clause requiring thesubcontractors to include these clauses in any lower tier sub-contracts. The prime contractor shall be responsible forcompliance by any subcontractor or lower tier subcontractorwith the clauses set forth in subparagraphs (1) through (4) ofthis paragraph.

2.11 Reserved2.12 Reserved2.13 Reserved2.14 Wage Claims and Adjustments.(a) The Owner shall be responsible for the correction of all

violations under section 2.10, including violations committedby other contractors. In cases where there is evidence ofunderpayment of salaries or wages to any laborers or mechanics(including apprentices and trainees) by the Owner or othercontractor or a failure by the Owner or other contractor tosubmit payrolls and related reports, the Owner shall be requiredto place an amount in escrow, as determined by HUD, sufficientto pay persons employed on the work covered by the Agree-ment the difference between the salaries or wages actually paidsuch employees for the total number of hours worked and thefull amount of wages required under this Agreement, as well asan amount determined by HUD to be sufficient to satisfy anyliability of the Owner or other contractor for liquidated dam-ages pursuant to section 2.10. The amounts withheld may bedisbursed by HUD for and on account of the Owner or othercontractor to the respective employees to whom they are due,and to the Federal Government in satisfaction of liquidateddamages under section 2.10.

(b) The escrow required by paragraph (a) shall be paid to HUD, asescrowee, or to an escrowee designated by HUD, and theconditions and manner of releasing such escrows shall bedesignated and approved by HUD.

2.15 Reserved.2.16 Defaults by PHA and/or Owner.(a) Rights of Owner if PHA Defaults under Agreement (for Pri-

vate-Owner/PHA Projects).

(1) Events of Default. The occurrence of any of thefollowing events, if the Owner is not in default, is defined asdefault under the ACC.


(i) If the PHA fails to perform or observe any term orcondition of this Agreement;

(ii) If the Agreement is held to be void, voidable, or ultravires;

(iii) If the power or right of the PHA to enter into theAgreement is drawn into question in any legal proceeding; or

(iv) If the PHA asserts or claims that the Agreement is notbinding upon the PHA for any such reason.

(2) Owner Request for HUD Determination of Default. Ifthe Owner believes that an event as specified in paragraph(a)(1) has occurred, and the Owner is not in default, the Ownermay, within 30 days of the initial occurrence of the event:

(i) Notify HUD of the occurrence of the event;

(ii) Provide supporting evidence of the default and of thefact that the Owner is not in default; and

(iii) Request HUD to determine whether there has been adefault.

(3) HUD Determination of Default and Curing of Default.HUD, after notice to the PHA giving it a reasonable opportunityto take corrective action, or to demonstrate that it is not indefault, shall make a determination whether the PHA is indefault and whether the Owner is not in default. If HUDdetermines that the PHA is in default and that the Owner is not,HUD shall take appropriate action to cure the default. Ifnecessary for the prompt continuation of the project, HUD shallassume the PHA’s rights and obligations under the Agreement,including any funds and including the obligation to enter intothe Contract and to pay annual contributions with respect to theunits covered by the Contract in accordance with the ACC andthe Contract until reassigned to the PHA. All rights andobligations of the PHA assumed by HUD will be returned asconstituted at the time of the return:

(i) When HUD is satisfied that all defaults have beencured and that the project will thereafter be administered inaccordance with all applicable requirements, or

(ii) When the Contract is at an end, whichever occurssooner.

(4) Enforcement by Owner. The provisions of this paragraph(a) are made for the benefit of the Owner, the lender, the PHAwhere it is the lender and then only in its capacity as lender, andthe Owner’s other assignees, if any, who have been specificallyapproved by HUD prior to the assignment. These provisionsshall be enforceable by these parties against HUD by suit at lawor in equity.

(b) Rights of PHA and HUD if Owner Defaults under Agree-ment.

(1) Events of Default. A default by the Owner under thisAgreement shall result if:

(i) The Owner has violated or failed to comply with anyprovision of, or obligation under, this Agreement; or

(ii) The Owner has asserted or demonstrated an intentionnot to perform some or all of its obligations under this Agree-ment; or

(iii) For projects with mortgages insured by HUD or loansmade by HUD, the Owner has violated or failed to comply withthe regulations for the applicable insurance or loan program,with the insured mortgage, or with the regulatory agreement; orthe Owner has filed any false statement or misrepresentationwith HUD in connection with the mortgage insurance or loan.

(2) CA Determination of Default. Upon a determination bythe CA that a default has occurred, the CA shall notify theOwner and the lender, with a copy to HUD where the CA is aPHA, of:

(i) The nature of the default,

(ii) The actions required to be taken and the remedies tobe applied on account of the default (including actions by theOwner and/or the lender to cure the default),

(iii) The time within which the Owner and/or the lendershall respond with a showing that all the required actions havebeen taken.

If the Owner and/or the lender fail to respond or take actionto the satisfaction of the CA (and HUD where the CA is a PHA),the CA shall have the right to take corrective action to achievecompliance, in accordance with paragraph (b)(3), or to termi-nate this Agreement with HUD approval, in whole or in part, orto take other corrective action to achieve compliance, in itsdiscretion, or as directed by HUD (where CA is a PHA).

(3) Corrective Actions. Pursuant to paragraph (b)(2) of thissection the CA, in its discretion or as directed by HUD (wherethe CA is a PHA), may take the following corrective actionseither directly or in conjunction with or acting through a PHA:

(i) Take possession of the project, bring any action nec-essary to enforce any rights of the Owner, complete the projectin accordance with the terms of this Agreement, execute theContract on behalf of the Owner, and operate the project inaccordance with the terms of the Contract until such time asHUD determines that the Owner is again in a position tocomplete or operate the project, as appropriate, in accordancewith the Agreement or Contract.

(ii) Apply to ant court, State or Federal, for specificperformance of this Agreement, for an injunction against anyviolation of the Agreement, for the appointment of a receiverto take over and complete the project in accordance with thisAgreement and to execute the Contract and operate the projectin accordance with the Contract, or for such other relief as maybe appropriate. These remedies are appropriate since the injuryto the PHA and/or HUD arising from a default under any of theterms of this Agreement could be irreparable and the amount ofdamage would be difficult to ascertain.

(4) HUD Rights. (For Private-Owner/PHA projects where thePHA is the lender.)

(i) Not withstanding any other provisions of this Con-tract, in the event HUD determines that the Owner is in default


(ii) any other employee of the PHA (where it is the CA orthe Owner), except where his or her interest is as a tenant;

(3) any member of the governing body or the executive officerof the locality (city or county) in which the project is situated;

(4) any member of the governing body or executive officer ofthe locality (city or county) in which the PHA (where it is theCA or the Owner) was activated;

(5) any other State or local public official (including Statelegislators), who exercises any functions or responsibilitieswith respect to the section 8 project;

(6) any PHA (which is not the CA), where any of its members,officers, or employees has a personal interest in the project,including an interest by reason of membership on the board ofthe PHA which is the CA (except an employee who does notformulate policy or influence decisions with respect to thesection 8 project may have an interest as a tenant).

(b) Members of the classes described in paragraph (a) who invol-untarily acquire an interest in the section 8 program or in asection 8 project, or who had acquired prior to the beginning oftheir tenure any such interest, must disclose any interest orprospective interest to the PHA (where it is the CA or theOwner) and the HUD Field Office, and may, with appropriatejustification, if consistent with State law, apply to the HUDField Office (through the PHA where it is the CA) for a waiver.Any other requests for waivers of paragraph (a) must bereferred to the HUD Headquarters, with appropriate recom-mendations from the Field Office, for determination of whethera waiver will be granted.

(c) No person to whom a waiver is granted shall be permitted (inhis or her capacity as member of a class described in paragraph(a)) to exercise responsibilities or functions with respect to anAgreement or a Contract executed, or to be executed, on his orher behalf, or with respect to an Agreement or a Contract towhich this person is a party.

(d) The Owner shall insert in all contracts, subcontracts, andarrangements entered into in connection with the project or anyproperty included or planned to be included in the project, andshall require its contractors and subcontractors to insert in eachof the subcontracts, the provisions of paragraphs (a) through (d).

(e) The provisions of paragraph (a) through (d) of this section shallnot apply to a utility service if the rates are fixed or controlledby a governmental agency or applicable to the DepositoryAgreement.

2.19 Interest of Member of or Delegate to Congress.No member of or delegate to the Congress of the United Statedof America or resident commissioner shall be admitted to anyshare or part of this Agreement or to any benefits which mayarise from it.

2.20 Assignment, Sale or Foreclosure.(a) The Owner agrees that it has not made and will not make any

sale, assignment, or conveyance or transfer in any fashion, ofthis Agreement, the Contract, the ACC (if applicable), or the

of its obligations under this Contract, HUD shall have the right,after notice to the Owner, the trustee, if any, and the PHA givingthem a reasonable opportunity to take corrective action, toproceed in accordance with paragraph (b)(3).

(ii) In the event HUD takes any action under this section,the Owner and the PHA hereby expressly agree to recognize therights of HUD to the same extent as if the action were taken bythe PHA. HUD shall not have the right to terminate theContract except by proceeding in accordance with paragraphs(b)(1), (2), and (3) of this section and with the ACC.

(c) Remedies not Exclusive and Non-Waiver of Remedies. Theavailability of any remedy under this Agreement or the ACC,where applicable, shall not preclude the exercise of any otherremedy under this Agreement or the ACC or under any provi-sions of law, nor shall any action taken in the exercise of anyremedy be considered a waiver of any of other rights orremedies. Failure to exercise any right or remedy shall notconstitute a waiver of the right to exercise that or any other rightor remedy at any time.

2.17 Disputes.(a) For Private-Owner/PHA Projects:

(1) Any dispute concerning a question of fact arising underthis Agreement which cannot be resolved by the PHA and theOwner may be submitted by either party to the HUD FieldOffice which will promptly make a decision and furnish awritten copy to the Owner and the PHA.

(2) The decision of the Field Office will not be reviewable unless,within 30 calendar days from the date of receipt of the FieldOffice’s determination, either party mails or otherwise fur-nishes to HUD a written appeal with written justificationaddressed to the Secretary of Housing and Urban Development.Both parties shall proceed diligently with the performance ofthe Agreement and in accordance with the decision of the FieldOffice, pending resolution of the appeal.

(b) For Private-Owner/HUD or PHA-Owner/HUD Projects:Any dispute concerning a question of fact arising under thisAgreement which cannot be resolved by agreement betweenthe HUD Field Office and the Owner may be submitted by theOwner to the Secretary of Housing and Urban Development.Both parties shall proceed diligently with the performance ofthe Agreement and in accordance with the decision of the FieldOffice, pending resolution of the appeal.

2.18 Interest of Members, Officers, or Employees ofPHA, Members of Local Governing Body, or OtherPublic Officials.

(a) No person or entity in the following classes shall have aninterest, direct or indirect, in this Agreement or in any proceedsor benefits arising from it, during his or her tenure or for oneyear thereafter.

(1) any member or officer of the PHA (where it is the CA orthe Owner), except where his or her interest is as a tenant;

(2) (i) any employee of the PHA (where it is the CA or theOwner), who formulates policy or influences decisions withrespect to the section 8 project;


project or any part of them or any of its interest in them, withoutthe prior written consent of HUD (and the PHA where it is theCA). However, in the case of an assignment as security for thepurpose of obtaining financing of the project, HUD (and thePHA where it is the CA) shall consent in writing if HUD hasapproved the terms of such financing.

(b) The Owner agrees that it will not change to a different contrac-tor from the one named in the Final Proposal or Purchase andUse Plan in the case of previously HUD-owned projects, exceptwith the prior written consent of HUD (and the PHA where itis the CA).

(c) The Owner agrees that the approved contractor has not madeand will not make, except with the prior written consent ofHUD (and the PHA where it is the CA), any assignment ortransfer in any form of the contractor’s contract to construct orrehabilitate the project, or of any part of it, or any of thecontractor’s interests in it.

(d) The Owner agrees to notify HUD (and the PHA where it is theCA) promptly of any proposed action covered by paragraph (a),(b), or (c) of this section. The Owner further agrees to requestthe prior written consent of HUD (and the PHA where it is the CA).

(e) (1) For purposes of this section, a sale, assignment, convey-ance, or transfer includes but is not limited to one or more of thefollowing:

(i) A transfer by the Owner, in whole or in part,

(ii) A transfer by a party having a substantial interest in theOwner.

(iii) Transfers by more than one party of interests aggre-gating a substantial interest in the Owner,

(iv) Any other similarly significant change in the owner-ship of interests in the Owner, or in the relative distribution ofinterests, by any other method or means, and

(v) Any refinancing by the Owner of the project.

(2) An assignment by the Owner to a limited partnership, inwhich no limited partner has a 25 percent or more interest andof which the Owner is the sole general partner, shall not beconsidered an assignment, conveyance, or transfer. An assign-ment by one or more general or limited partners of a limitedpartnership interest to a limited partner, who will have no morethan a 25 percent interest, shall not be considered an assign-ment, conveyance, or transfer.

(3) The term “substantial interest” means the interest of anygeneral partner, any limited partner having a 25 percent or moreinterest in the organization, any corporate officer or director,and any stockholder having a 10 percent or more interest in theorganization.

(f) The Owner, and the party signing this Agreement on behalf ofthe Owner, represent that they have the authority of all of theparties having ownership interests in the Owner to agree to thisprovision on their behalf and to bind them with respect to it.

(g) The provisions of this section shall also apply to transfers ofinterest by the contractor and by persons having interests in thecontractor.

(h) Except where otherwise approved by HUD, this Agreement,the Contract, and the ACC (if applicable) shall continue ineffect in the event:

(1) Of assignment, sale, or other disposition of the project orthis Agreement, the Contract, or the ACC,

(2) Of foreclosure, including foreclosure by HUD,

(3) Of assignment of the mortgage or deed in lieu of foreclo-sure,

(4) The PHA or HUD takes over possession, operation orownership, or

(5) The Owner Prepays the mortgage.

Section I - Page 1 of 6 form HUD-5370-C (10/2006)

General Conditions for Non-Construction Contracts Section I – (With or without Maintenance Work)

U.S. Department of Housing and Urban Development Office of Public and Indian Housing Office of Labor Relations OMB Approval No. 2577-0157 (exp. 01/31/2014)

Public Reporting Burden for this collection of information is estimated to average 0.08 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to the Reports Management Officer, Office of Information Policies and Systems, U.S. Department of Housing and Urban Development, Washington, D.C. 20410-3600; and to the Office of Management and Budget, Paperwork Reduction Project (2577-0157), Washington, D.C. 20503. Do not send this completed form to either of these addressees.

Applicability. This form HUD-5370-C has 2 Sections. These Sections must be inserted into non-construction contracts as described below:

1) Non-construction contracts (without maintenance) greater than $100,000 - use Section I;

2) Maintenance contracts (including nonroutine maintenance as defined at 24 CFR 968.105) greater than $2,000 but not more than $100,000 - use Section II; and

3) Maintenance contracts (including nonroutine maintenance), greater than $100,000 – use Sections I and II.

Section I - Clauses for All Non-Construction Contracts greater than $100,000

1. Definitions

The following definitions are applicable to this contract: (a) 'Authority or Housing Authority (HA)' means the

Housing Authority. (b) 'Contract' means the contract entered into between the

Authority and the Contractor. It includes the contract form, the Certifications and Representations, these contract clauses, and the scope of work. It includes all formal changes to any of those documents by addendum, Change Order, or other modification.

(c) 'Contractor' means the person or other entity entering into the contract with the Authority to perform all of the work required under the contract.

(d) 'Day' means calendar days, unless otherwise stated. (e) 'HUD' means the Secretary of Housing and Urban

development, his delegates, successors, and assigns, and the officers and employees of the United States Department of Housing and Urban Development acting for and on behalf of the Secretary.

2. Changes

(a) The HA may at any time, by written order, and without notice to the sureties, if any, make changes within the general scope of this contract in the services to be performed or supplies to be delivered.

(b) If any such change causes an increase or decrease in the hourly rate, the not-to-exceed amount of the contract, or the time required for performance of any part of the work under this contract, whether or not changed by the order, or otherwise affects the conditions of this contract, the HA shall make an equitable adjustment in the not-to-exceed amount, the hourly rate, the delivery schedule, or other affected terms, and shall modify the contract accordingly.

(c) The Contractor must assert its right to an equitable adjustment under this clause within 30 days from the date of receipt of the written order. However, if the HA decides that the facts justify it, the HA may receive and act upon a

proposal submitted before final payment of the contract.

(d) Failure to agree to any adjustment shall be a dispute under clause Disputes, herein. However, nothing in this clause shall excuse the Contractor from proceeding with the contract as changed.

(e) No services for which an additional cost or fee will be charged by the Contractor shall be furnished without the prior written consent of the HA.

3. Termination for Convenience and Default

(a) The HA may terminate this contract in whole, or from time to time in part, for the HA's convenience or the failure of the Contractor to fulfill the contract obligations (default). The HA shall terminate by delivering to the Contractor a written Notice of Termination specifying the nature, extent, and effective date of the termination. Upon receipt of the notice, the Contractor shall: (i) immediately discontinue all services affected (unless the notice directs otherwise); and (ii) deliver to the HA all information, reports, papers, and other materials accumulated or generated in performing this contract, whether completed or in process.

(b) If the termination is for the convenience of the HA, the HA shall be liable only for payment for services rendered before the effective date of the termination.

(c) If the termination is due to the failure of the Contractor to fulfill its obligations under the contract (default), the HA may (i) require the Contractor to deliver to it, in the manner and to the extent directed by the HA, any work as described in subparagraph (a)(ii) above, and compensation be determined in accordance with the Changes clause, paragraph 2, above; (ii) take over the work and prosecute the same to completion by contract or otherwise, and the Contractor shall be liable for any additional cost incurred by the HA; (iii) withhold any payments to the Contractor, for the purpose of off-set or partial payment, as the case may be, of amounts owed to the HA by the Contractor.

(d) If, after termination for failure to fulfill contract obligations (default), it is determined that the Contractor had not failed, the termination shall be deemed to have been effected for the convenience of the HA, and the Contractor shall been titled to payment as described in paragraph (b) above.

(e) Any disputes with regard to this clause are expressly made subject to the terms of clause titled Disputes herein.

4. Examination and Retention of Contractor's Records

(a) The HA, HUD, or Comptroller General of the United States, or any of their duly authorized representatives shall, until 3 years after final payment under this contract, have access to and the right to examine any of the Contractor's directly pertinent books, documents, papers, or other records involving transactions related to this contract for the purpose of making audit, examination, excerpts, and transcriptions.

Section I - Page 2 of 6 Form HUD-5370-C (10/2006)

(b) The Contractor agrees to include in first-tier subcontracts under this contract a clause substantially the same as paragraph (a) above. "Subcontract," as used in this clause, excludes purchase orders not exceeding $10,000.

(c) The periods of access and examination in paragraphs (a) and (b) above for records relating to: (i) appeals under the clause titled Disputes; (ii) litigation or settlement of claims arising from

the performance of this contract; or, (iii) costs and expenses of this contract to which the

HA, HUD, or Comptroller General or any of their duly authorized representatives has taken exception shall continue until disposition of such appeals, litigation, claims, or exceptions.

5. Rights in Data (Ownership and Proprietary Interest)

The HA shall have exclusive ownership of, all proprietary interest in, and the right to full and exclusive possession of all information, materials and documents discovered or produced by Contractor pursuant to the terms of this Contract, including but not limited to reports, memoranda or letters concerning the research and reporting tasks of this Contract.

6. Energy Efficiency

The contractor shall comply with all mandatory standards and policies relating to energy efficiency which are contained in the energy conservation plan issued in compliance with the Energy Policy and Conservation Act (Pub.L. 94-163) for the State in which the work under this contract is performed.

7. Disputes

(a) All disputes arising under or relating to this contract, except for disputes arising under clauses contained in Section III, Labor Standards Provisions, including any claims for damages for the alleged breach there of which are not disposed of by agreement, shall be resolved under this clause.

(b) All claims by the Contractor shall be made in writing and submitted to the HA. A claim by the HA against the Contractor shall be subject to a written decision by the HA.

(c) The HA shall, with reasonable promptness, but in no event in no more than 60 days, render a decision concerning any claim hereunder. Unless the Contractor, within 30 days after receipt of the HA's decision, shall notify the HA in writing that it takes exception to such decision, the decision shall be final and conclusive.

(d) Provided the Contractor has (i) given the notice within the time stated in paragraph (c) above, and (ii) excepted its claim relating to such decision from the final release, and (iii) brought suit against the HA not later than one year after receipt of final payment, or if final payment has not been made, not later than one year after the Contractor has had a reasonable time to respond to a written request by the HA that it submit a final voucher and release, whichever is earlier, then the HA's decision shall not be final or conclusive, but the dispute shall be determined on the merits by a court of competent jurisdiction.

(e) The Contractor shall proceed diligently with performance of this contract, pending final resolution of any request for relief, claim, appeal, or action arising under the contract, and comply with any decision of the HA.

8. Contract Termination; Debarment

A breach of these Contract clauses may be grounds for termination of the Contract and for debarment or denial of participation in HUD programs as a Contractor and a subcontractor as provided in 24 CFR Part 24.

9. Assignment of Contract

The Contractor shall not assign or transfer any interest in this contract; except that claims for monies due or to become due from the HA under the contract may be assigned to a bank, trust company, or other financial institution. If the Contractor is a partnership, this contract shall inure to the benefit of the surviving or remaining member(s) of such partnership approved by the HA.

10. Certificate and Release

Prior to final payment under this contract, or prior to settlement upon termination of this contract, and as a condition precedent thereto, the Contractor shall execute and deliver to the HA a certificate and release, in a form acceptable to the HA, of all claims against the HA by the Contractor under and by virtue of this contract, other than such claims, if any, as may be specifically excepted by the Contractor in stated amounts set forth therein.

11. Organizational Conflicts of Interest

(a) The Contractor warrants that to the best of its knowledge and belief and except as otherwise disclosed, it does not have any organizational conflict of interest which is defined as a situation in which the nature of work under this contract and a contractor's organizational, financial, contractual or other interests are such that: (i) Award of the contract may result in an unfair

competitive advantage; or (ii) The Contractor's objectivity in performing the contract

work may be impaired. (b) The Contractor agrees that if after award it discovers an

organizational conflict of interest with respect to this contract or any task/delivery order under the contract, he or she shall make an immediate and full disclosure in writing to the Contracting Officer which shall include a description of the action which the Contractor has taken or intends to take to eliminate or neutralize the conflict. The HA may, however, terminate the contract or task/delivery order for the convenience of the HA if it would be in the best interest of the HA.

(c) In the event the Contractor was aware of an organizational conflict of interest before the award of this contract and intentionally did not disclose the conflict to the Contracting Officer, the HA may terminate the contract for default.

(d) The terms of this clause shall be included in all subcontracts and consulting agreements wherein the work to be performed is similar to the service provided by the prime Contractor. The Contractor shall include in such subcontracts and consulting agreements any necessary provisions to eliminate or neutralize conflicts of interest.

12. Inspection and Acceptance

(a) The HA has the right to review, require correction, if necessary, and accept the work products produced by the Contractor. Such review(s) shall be carried out within 30 days so as to not impede the work of the Contractor. Any


product of work shall be deemed accepted as submitted if the HA does not issue written comments and/or required corrections within 30 days from the date of receipt of such product from the Contractor.

(b) The Contractor shall make any required corrections promptly at no additional charge and return a revised copy of the product to the HA within 7 days of notification or a later date if extended by the HA.

(c) Failure by the Contractor to proceed with reasonable promptness to make necessary corrections shall be a default. If the Contractor's submission of corrected work remains unacceptable, the HA may terminate this contract (or the task order involved) or reduce the contract price or cost to reflect the reduced value of services received.

13. Interest of Members of Congress

No member of or delegate to the Congress of the United States of America or Resident Commissioner shall be admitted to any share or part of this contract or to any benefit to arise there from, but this provision shall not be construed to extend to this contract if made with a corporation for its general benefit.

14. Interest of Members, Officers, or Employees and Former Members, Officers, or Employees

No member, officer, or employee of the HA, no member of the governing body of the locality in which the project is situated, no member of the governing body in which the HA was activated, and no other pubic official of such locality or localities who exercises any functions or responsibilities with respect to the project, shall, during his or her tenure, or for one year thereafter, have any interest, direct or indirect, in this contract or the proceeds thereof.

15. Limitation on Payments to Influence Certain Federal Transactions

(a) Definitions. As used in this clause: "Agency", as defined in 5 U.S.C. 552(f), includes Federal

executive departments and agencies as well as independent regulatory commissions and Government corporations, as defined in 31 U.S.C. 9101(1).

"Covered Federal Action" means any of the following Federal actions:

(i) The awarding of any Federal contract; (ii) The making of any Federal grant; (iii) The making of any Federal loan; (iv) The entering into of any cooperative agreement; and, (v) The extension, continuation, renewal, amendment, or

modification of any Federal contract, grant, loan, or cooperative agreement.

Covered Federal action does not include receiving from an agency a commitment providing for the United States to insure or guarantee a loan.

"Indian tribe" and "tribal organization" have the meaning provided in section 4 of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450B). Alaskan Natives are included under the definitions of Indian tribes in that Act.

"Influencing or attempting to influence" means making, with the intent to influence, any communication to or appearance before an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with any covered Federal action.

"Local government" means a unit of government in a State and, if chartered, established, or otherwise recognized by a State for the performance of a governmental duty, including a local public authority, a special district, an intrastate district, a council of governments, a sponsor group representative organization, and any other instrumentality of a local government.

"Officer or employee of an agency" includes the following individuals who are employed by an agency:

(i) An individual who is appointed to a position in the Government under title 5, U.S.C., including a position under a temporary appointment;

(ii) A member of the uniformed services as defined in section 202, title 18, U.S.C.;

(iii) A special Government employee as defined in section 202, title 18, U.S.C.; and,

(iv) An individual who is a member of a Federal advisory committee, as defined by the Federal Advisory Committee Act, title 5, appendix 2.

“Person" means an individual, corporation, company, association, authority, firm, partnership, society, State, and local government, regardless of whether such entity is operated for profit or not for profit. This term excludes an Indian tribe, tribal organization, or other Indian organization with respect to expenditures specifically permitted by other Federal law.

"Recipient" includes all contractors, subcontractors at any tier, and subgrantees at any tier of the recipient of funds received in connection with a Federal contract, grant, loan, or cooperative agreement. The term excludes an Indian tribe, tribal organization, or any other Indian organization with respect to expenditures specifically permitted by other Federal law.

"Regularly employed means, with respect to an officer or employee of a person requesting or receiving a Federal contract, grant, loan, or cooperative agreement, an officer or employee who is employed by such person for at least 130 working days within one year immediately preceding the date of the submission that initiates agency consideration of such person for receipt of such contract, grant, loan, or cooperative agreement. An officer or employee who is employed by such person for less than 130 working days within one year immediately preceding the date of submission that initiates agency consideration of such person shall be considered to be regularly employed as soon as he or she is employed by such person for 130 working days.

"State" means a State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, a territory or possession of the United States, an agency or instrumentality of a State, and a multi-State, regional, or interstate entity having governmental duties and powers. (b) Prohibition.

(i) Section 1352 of title 31, U.S.C. provides in part that no appropriated funds may be expended by the recipient of a Federal contract, grant, loan, or cooperative agreement to pay any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with any of the following covered Federal actions: the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement.

(ii) The prohibition does not apply as follows:


(1) Agency and legislative liaison by Own Employees.

(a) The prohibition on the use of appropriated funds, in paragraph (i) of this section, does not apply in the case of a payment of reasonable compensation made to an officer or employee of a person requesting or receiving a Federal contract, grant, loan, or cooperative agreement, if the payment is for agency and legislative activities not directly related to a covered Federal action.

(b) For purposes of paragraph (b)(i)(1)(a) of this clause, providing any information specifically requested by an agency or Congress is permitted at any time.

(c) The following agency and legislative liaison activities are permitted at any time only where they are not related to a specific solicitation for any covered Federal action:

(1) Discussing with an agency (including individual demonstrations) the qualities and characteristics of the person's products or services, conditions or terms of sale, and service capabilities; and,

(2) Technical discussions and other activities regarding the application or adaptation of the person's products or services for an agency's use.

(d) The following agency and legislative liaison activities are permitted where they are prior to formal solicitation of any covered Federal action:

(1) Providing any information not specifically requested but necessary for an agency to make an informed decision about initiation of a covered Federal action;

(2) Technical discussions regarding the preparation of an unsolicited proposal prior to its official submission; and

(3) Capability presentations by persons seeking awards from an agency pursuant to the provisions of the Small Business Act, as amended by Public Law 95-507 and other subsequent amendments.

(e) Only those activities expressly authorized by subdivision (b)(ii)(1)(a) of this clause are permitted under this clause.

(2) Professional and technical services. (a) The prohibition on the use of appropriated

funds, in subparagraph (b)(i) of this clause, does not apply in the case of-

(i) A payment of reasonable compensation made to an officer or employee of a person requesting or receiving a covered Federal action or an extension, continuation, renewal, amendment, or modification of a covered Federal action, if payment is for professional or technical services rendered directly in the preparation, submission, or negotiation of any bid, proposal, or application for that Federal action or for meeting requirements imposed by or pursuant to law as a condition for receiving that Federal action.

(ii) Any reasonable payment to a person, other than an officer or employee of a

person requesting or receiving a covered Federal action or an extension, continuation, renewal, amendment, or modification of a covered Federal action if the payment is for professional or technical services rendered directly in the preparation, submission, or negotiation of any bid, proposal, or application for that Federal action or for meeting requirements imposed by or pursuant to law as a condition for receiving that Federal action. Persons other than officers or employees of a person requesting or receiving a covered Federal action include consultants and trade associations.

(b) For purposes of subdivision (b)(ii)(2)(a) of clause, "professional and technical services" shall be limited to advice and analysis directly applying any professional or technical discipline.

(c) Requirements imposed by or pursuant to law as a condition for receiving a covered Federal award include those required by law or regulation, or reasonably expected to be required by law or regulation, and any other requirements in the actual award

documents. (d) Only those services expressly authorized by

subdivisions (b)(ii)(2)(a)(i) and (ii) of this section are permitted under this clause.

(iii) Selling activities by independent sales representatives.

(c) The prohibition on the use of appropriated funds, in subparagraph (b)(i) of this clause, does not apply to the following selling activities before an agency by independent sales representatives, provided such activities are prior to formal solicitation by an agency and are specifically limited to the merits of the matter: (i) Discussing with an agency (including individual

demonstration) the qualities and characteristics of the person's products or services, conditions or terms of sale, and service capabilities; and

(ii) Technical discussions and other activities regarding the application or adaptation of the person's products or services for an agency's use.

(d) Agreement. In accepting any contract, grant, cooperative agreement, or loan resulting from this solicitation, the person submitting the offer agrees not to make any payment prohibited by this clause.

(e) Penalties. Any person who makes an expenditure prohibited under paragraph (b) of this clause shall be subject to civil penalties as provided for by 31 U.S.C. 1352. An imposition of a civil penalty does not prevent the Government from seeking any other remedy that may be applicable.

(f) Cost Allowability. Nothing in this clause is to be interpreted to make allowable or reasonable any costs which would be unallowable or unreasonable in accordance with Part 31 of the Federal Acquisition Regulation (FAR), or OMB Circulars dealing with cost allowability for recipients of assistance agreements. Conversely, costs made specifically unallowable by the requirements in this clause will not be made allowable under any of the provisions of FAR Part 31 or the relevant OMB Circulars.


16. Equal Employment Opportunity

During the performance of this contract, the Contractor agrees as follows: (a) The Contractor shall not discriminate against any employee

or applicant for employment because of race, color, religion, sex, or national origin.

(b) The Contractor shall take affirmative action to ensure that applicants are employed, and that employees are treated during employment without regard to their race, color, religion, sex, or national origin. Such action shall include, but not be limited to (1) employment; (2) upgrading; (3) demotion; (4) transfer; (5) recruitment or recruitment advertising; (6) layoff or termination; (7) rates of pay or other forms of compensation; and (8) selection for training, including apprenticeship.

(c) The Contractor shall post in conspicuous places available to employees and applicants for employment the notices to be provided by the Contracting Officer that explain this clause.

(d) The Contractor shall, in all solicitations or advertisements for employees placed by or on behalf of the Contractor, state that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, or national origin.

(e) The Contractor shall send, to each labor union or representative of workers with which it has a collective bargaining agreement or other contract or understanding, the notice to be provided by the Contracting Officer advising the labor union or workers' representative of the Contractor's commitments under this clause, and post copies of the notice in conspicuous places available to employees and applicants for employment.

(f) The Contractor shall comply with Executive Order 11246, as amended, and the rules, regulations, and orders of the Secretary of Labor.

(g) The Contractor shall furnish all information and reports required by Executive Order 11246, as amended and by rules, regulations, and orders of the Secretary of Labor, or pursuant thereto. The Contractor shall permit access to its books, records, and accounts by the Secretary of Labor for purposes of investigation to ascertain compliance with such rules, regulations, and orders.

(h) In the event of a determination that the Contractor is not in compliance with this clause or any rule, regulation, or order of the Secretary of Labor, this contract may be canceled, terminated, or suspended in whole or in part, and the Contractor may be declared ineligible for further Government contracts, or federally assisted construction contracts under the procedures authorized in Executive Order 11246, as amended. In addition, sanctions may be imposed and remedies invoked against the Contractor as provided in Executive Order 11246, as amended, the rules, regulations, and orders of the Secretary of Labor, or as otherwise provided by law.

(i) The Contractor shall include the terms and conditions of this clause in every subcontract or purchase order unless exempted by the rules, regulations, or orders of the Secretary of Labor issued under Executive Order 11246, as amended, so that these terms and conditions will be binding upon each subcontractor or vendor. The Contractor shall take such action with respect to any subcontractor or purchase order as the Secretary of Housing and Urban Development or the Secretary of Labor may direct as a means of enforcing such provisions, including sanctions for noncompliance; provided that if the

Contractor becomes involved in, or is threatened with, litigation with a subcontractor or vendor as a result of such direction, the Contractor may request the United States to enter into the litigation to protect the interests of the United States.

17. Dissemination or Disclosure of Information

No information or material shall be disseminated or disclosed to the general public, the news media, or any person or organization without prior express written approval by the HA.

18. Contractor's Status

It is understood that the Contractor is an independent contractor and is not to be considered an employee of the HA, or assume any right, privilege or duties of an employee, and shall save harmless the HA and its employees from claims suits, actions and costs of every description resulting from the Contractor's activities on behalf of the HA in connection with this Agreement.

19. Other Contractors

HA may undertake or award other contracts for additional work at or near the site(s) of the work under this contract. The contractor shall fully cooperate with the other contractors and with HA and HUD employees and shall carefully adapt scheduling and performing the work under this contract to accommodate the additional work, heeding any direction that may be provided by the Contracting Officer. The contractor shall not commit or permit any act that will interfere with the performance of work by any other contractor or HA employee.

20. L i e n s

The Contractor is prohibited from placing a lien on HA's property. This prohibition shall apply to all subcontractors.

21. Training and Employment Opportunities for Residents in the Project Area (Section 3, HUD Act of 1968; 24 CFR 135)

(a) The work to be performed under this contract is subject to the requirements of section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701u (section 3). The purpose of section 3 is to ensure that employment and other economic opportunities generated by HUD assistance or HUD-assisted projects covered by section 3, shall, to the greatest extent feasible, be directed to low- and very low-income persons, particularly persons who are recipients of HUD assistance for housing.

(b) The parties to this contract agree to comply with HUD's regulations in 24 CFR Part 135, which implement section 3. As evidenced by their execution of this contract, the parties to this contract certify that they are under no contractual or other impediment that would prevent them from complying with the Part 135 regulations.

(c) The contractor agrees to send to each labor organization or representative of workers with which the contractor has a collective bargaining agreement or other understanding, if any, a notice advising the labor organization or workers' representative of the contractor's commitments under this section 3 clause, and will post copies of the notice in conspicuous places at the work site where both employees and applicants for training and employment positions can see the notice. The notice shall describe the section 3 preference, shall set forth minimum number and job titles subject to hire, availability of


apprenticeship and training positions, the qualifications for each; and the name and location of the person(s) taking applications for each of the positions; and the anticipated date the work shall begin.

(d) The contractor agrees to include this section 3 clause in every subcontract subject to compliance with regulations in 24 CFR Part 135, and agrees to take appropriate action, as provided in an applicable provision of the subcontract or in this section 3 clause, upon a finding that the subcontractor is in violation of the regulations in 24 CFR Part 135. The contractor will not subcontract with any subcontractor where the contractor has notice or knowledge that the subcontractor has been found in violation of the regulations in 24 CFR Part 135.

(e) The contractor will certify that any vacant employment positions, including training positions, that are filled (1) after the contractor is selected but before the contract is executed, and (2) with persons other than those to whom the regulations of 24 CFR Part 135 require employment opportunities to be directed, were not filled to circumvent the contractor's obligations under 24 CFR Part 135.

(f) Noncompliance with HUD's regulations in 24 CFR Part 135 may result in sanctions, termination of this contract for default, and debarment or suspension from future HUD assisted contracts.

22. Procurement of Recovered Materials

(a) In accordance with Section 6002 of the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, the Contractor shall procure items designated in guidelines of the Environmental Protection Agency (EPA) at 40 CFR Part 247 that contain the highest percentage of recovered materials practicable, consistent with maintaining a satisfactory level of competition. The Contractor shall procure items designated in the EPA guidelines that contain the highest percentage of recovered materials practicable unless the Contractor determines that such items: (1) are not reasonably available in a reasonable period of time; (2) fail to meet reasonable

performance standards, which shall be determined on the basis of the guidelines of the National Institute of Standards and Technology, if applicable to the item; or (3) are only available at an unreasonable price.

(b) Paragraph (a) of this clause shall apply to items purchased under this contract where: (1) the Contractor purchases in excess of $10,000 of the item under this contract; or (2) during the preceding Federal fiscal year, the Contractor: (i) purchased any amount of the items for use under a contract that was funded with Federal appropriations and was with a Federal agency or a State agency or agency of a political subdivision of a State; and (ii) purchased a total of in excess of $10,000 of the item both under and outside that contract.

WORKER STATUS AFFIDAVIT _________________________________________________________________________ AFFIDAVIT OF __________________________________ (Name) _________________________________________________________________________ STATE OF ) ) ss. COUNTY OF ) I, , first being duly sworn, state as follows: I am over the age of 18 years. 1. I am the ____________________________________________________(Title) of,

______________________________________________________ (Complete legal name of Company), which is located at __________________________________ _________________________________________________________________ _________________________________(Street Address, City, State, Zip Code).

2. ______________________________________________________(Name of

Company) is a _____________________________________________(Type of Business i.e. corporation, partnership, sole proprietorship, joint venture, limited liability company).

3. On behalf of the Company, I certify the following:

A. At present, the Company does not knowingly employ or contract with an illegal alien who will perform work under this contract.

B. The Company shall not, hereafter, knowingly employ or contract with an illegal alien to perform work under this contract.

C. The Company shall not, hereafter, enter into a contract with a subcontractor that fails to certify to the Company that the subcontractor shall not knowingly employ or contract with an illegal alien to perform work under this contract.

D. The Company will participate in the E-Verify Program, as defined in C.R.S. § 8-17.5-101(3.7), or the Colorado Department of Labor and Employment Program (“Department Program”), as defined in C.R.S. § 8-17.5-101(3.3), in order to confirm the employment eligibility of all employees who are newly hired for employment to perform work under this contract.

E. The Company has confirmed the employment eligibility of all employees who are newly hired for employment to perform work under this contract.

F:\LEGAL\FORMS\Worker Status Affidavit clean 3-22-11.doc 3/22/2011 1:46 PM

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F. The Company shall not use the E-Verify Program or the Department Program to undertake preemployment screening of job applicants while this contract is being performed.

G. If the Company obtains actual knowledge that a subcontractor performing work under this contract knowingly employs or contracts with an illegal alien, the Company shall be required to:

1. Notify the subcontractor and DHA within three (3) days of such

actual knowledge; and 2. Terminate the subcontract with the subcontractor if within three (3)

days of receiving the required notice the subcontractor does not stop employing or contracting with the illegal alien. The Company shall not terminate the contract with the subcontractor if during such three (3) days the subcontractor provides information to establish that the subcontractor has not knowingly employed or contracted with an illegal alien.

H. The Company will notify DHA, in writing, of its participation in the Department Program.

I. The Company will, within twenty (20) days after hiring an employee who is newly hired for employment to perform work under this contract, provide a written, notarized affirmation to DHA that it has examined the legal work status of such employee, retained file copies of the documents required by 8 U.S.C. § 1324a, and not altered or falsified the identification documents for such employee.

J. The Company will comply with any reasonable request by the Department of Labor and Employment made in the course of an investigation undertaken by it to determine compliance with the requirements of C.R.S. § 8-17.5-101 et seq.

4. I have read and understand the certifications contained herein. 5. The Company hereby agrees to provide within thirty (30) days, upon request, any

documents DHA requires to verify the information provided herein. 6. I understand and acknowledge that the following penalties will apply if DHA

determines that the Company has submitted a false Worker Status Affidavit:

A. If discovered prior to any contract being awarded, the Company will be ineligible for award of the contract, and will be permanently placed on the DHA debarment list; or

B. If discovered during the term of the contract, the contract will immediately be terminated, and the Company will be permanently placed on the DHA debarment list; or

C. If discovered after the completion of the contract, the Company will be permanently placed on the DHA debarment list.


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7. I am the ____________________________________________________(Title) of the Company, and I am authorized to execute this affidavit on its behalf, and to bind the Company regarding the matters contained herein. I have personal knowledge of the statements made in this affidavit and state that the same are true.

FURTHER Affiant sayeth naught. Signature Subscribed and sworn to before me this ___ day of ______________, 20___ by _______________________________________. WITNESS my hand and official seal. My commission expires: _________________________________________ _________________________________________ [SEAL]

Form W-9(Rev. December 2011)Department of the Treasury Internal Revenue Service

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Requester’s name and address (optional)

List account number(s) here (optional)

Part I Taxpayer Identification Number (TIN)Enter your TIN in the appropriate box. The TIN provided must match the name given on the “Name” line to avoid backup withholding. For individuals, this is your social security number (SSN). However, for a resident alien, sole proprietor, or disregarded entity, see the Part I instructions on page 3. For other entities, it is your employer identification number (EIN). If you do not have a number, see How to get a TIN on page 3.

Note. If the account is in more than one name, see the chart on page 4 for guidelines on whose number to enter.

Social security number

– –

Employer identification number

–

Part II CertificationUnder penalties of perjury, I certify that:

1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and

2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and

3. I am a U.S. citizen or other U.S. person (defined below).

Certification instructions. You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return. For real estate transactions, item 2 does not apply. For mortgage interest paid, acquisition or abandonment of secured property, cancellation of debt, contributions to an individual retirement arrangement (IRA), and generally, payments other than interest and dividends, you are not required to sign the certification, but you must provide your correct TIN. See the instructions on page 4.

Sign Here

Signature of U.S. person ▶ Date ▶

General InstructionsSection references are to the Internal Revenue Code unless otherwise noted.

Purpose of FormA person who is required to file an information return with the IRS must obtain your correct taxpayer identification number (TIN) to report, for example, income paid to you, real estate transactions, mortgage interest you paid, acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA.

Use Form W-9 only if you are a U.S. person (including a resident alien), to provide your correct TIN to the person requesting it (the requester) and, when applicable, to:

1. Certify that the TIN you are giving is correct (or you are waiting for a number to be issued),

2. Certify that you are not subject to backup withholding, or

3. Claim exemption from backup withholding if you are a U.S. exempt payee. If applicable, you are also certifying that as a U.S. person, your allocable share of any partnership income from a U.S. trade or business is not subject to the withholding tax on foreign partners’ share of effectively connected income.

Note. If a requester gives you a form other than Form W-9 to request your TIN, you must use the requester’s form if it is substantially similar to this Form W-9.

Definition of a U.S. person. For federal tax purposes, you are considered a U.S. person if you are:

• An individual who is a U.S. citizen or U.S. resident alien,

• A partnership, corporation, company, or association created or organized in the United States or under the laws of the United States,

• An estate (other than a foreign estate), or

• A domestic trust (as defined in Regulations section 301.7701-7).

Special rules for partnerships. Partnerships that conduct a trade or business in the United States are generally required to pay a withholding tax on any foreign partners’ share of income from such business. Further, in certain cases where a Form W-9 has not been received, a partnership is required to presume that a partner is a foreign person, and pay the withholding tax. Therefore, if you are a U.S. person that is a partner in a partnership conducting a trade or business in the United States, provide Form W-9 to the partnership to establish your U.S. status and avoid withholding on your share of partnership income.

Cat. No. 10231X Form W-9 (Rev. 12-2011)

Form W-9 (Rev. 12-2011) Page 2

The person who gives Form W-9 to the partnership for purposes of establishing its U.S. status and avoiding withholding on its allocable share of net income from the partnership conducting a trade or business in the United States is in the following cases:

• The U.S. owner of a disregarded entity and not the entity,

• The U.S. grantor or other owner of a grantor trust and not the trust, and

• The U.S. trust (other than a grantor trust) and not the beneficiaries of the trust.

Foreign person. If you are a foreign person, do not use Form W-9. Instead, use the appropriate Form W-8 (see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities).

Nonresident alien who becomes a resident alien. Generally, only a nonresident alien individual may use the terms of a tax treaty to reduce or eliminate U.S. tax on certain types of income. However, most tax treaties contain a provision known as a “saving clause.” Exceptions specified in the saving clause may permit an exemption from tax to continue for certain types of income even after the payee has otherwise become a U.S. resident alien for tax purposes.

If you are a U.S. resident alien who is relying on an exception contained in the saving clause of a tax treaty to claim an exemption from U.S. tax on certain types of income, you must attach a statement to Form W-9 that specifies the following five items:

1. The treaty country. Generally, this must be the same treaty under which you claimed exemption from tax as a nonresident alien.

2. The treaty article addressing the income.

3. The article number (or location) in the tax treaty that contains the saving clause and its exceptions.

4. The type and amount of income that qualifies for the exemption from tax.

5. Sufficient facts to justify the exemption from tax under the terms of the treaty article.

Example. Article 20 of the U.S.-China income tax treaty allows an exemption from tax for scholarship income received by a Chinese student temporarily present in the United States. Under U.S. law, this student will become a resident alien for tax purposes if his or her stay in the United States exceeds 5 calendar years. However, paragraph 2 of the first Protocol to the U.S.-China treaty (dated April 30, 1984) allows the provisions of Article 20 to continue to apply even after the Chinese student becomes a resident alien of the United States. A Chinese student who qualifies for this exception (under paragraph 2 of the first protocol) and is relying on this exception to claim an exemption from tax on his or her scholarship or fellowship income would attach to Form W-9 a statement that includes the information described above to support that exemption.

If you are a nonresident alien or a foreign entity not subject to backup withholding, give the requester the appropriate completed Form W-8.

What is backup withholding? Persons making certain payments to you must under certain conditions withhold and pay to the IRS a percentage of such payments. This is called “backup withholding.” Payments that may be subject to backup withholding include interest, tax-exempt interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee pay, and certain payments from fishing boat operators. Real estate transactions are not subject to backup withholding.

You will not be subject to backup withholding on payments you receive if you give the requester your correct TIN, make the proper certifications, and report all your taxable interest and dividends on your tax return.

Payments you receive will be subject to backup withholding if:

1. You do not furnish your TIN to the requester,

2. You do not certify your TIN when required (see the Part II instructions on page 3 for details),

3. The IRS tells the requester that you furnished an incorrect TIN,

4. The IRS tells you that you are subject to backup withholding because you did not report all your interest and dividends on your tax return (for reportable interest and dividends only), or

5. You do not certify to the requester that you are not subject to backup withholding under 4 above (for reportable interest and dividend accounts opened after 1983 only).

Certain payees and payments are exempt from backup withholding. See the instructions below and the separate Instructions for the Requester of Form W-9.

Also see Special rules for partnerships on page 1.

Updating Your InformationYou must provide updated information to any person to whom you claimed to be an exempt payee if you are no longer an exempt payee and anticipate receiving reportable payments in the future from this person. For example, you may need to provide updated information if you are a C corporation that elects to be an S corporation, or if you no longer are tax exempt. In addition, you must furnish a new Form W-9 if the name or TIN changes for the account, for example, if the grantor of a grantor trust dies.

PenaltiesFailure to furnish TIN. If you fail to furnish your correct TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.

Civil penalty for false information with respect to withholding. If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty.

Criminal penalty for falsifying information. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.

Misuse of TINs. If the requester discloses or uses TINs in violation of federal law, the requester may be subject to civil and criminal penalties.

Specific InstructionsNameIf you are an individual, you must generally enter the name shown on your income tax return. However, if you have changed your last name, for instance, due to marriage without informing the Social Security Administration of the name change, enter your first name, the last name shown on your social security card, and your new last name.

If the account is in joint names, list first, and then circle, the name of the person or entity whose number you entered in Part I of the form.

Sole proprietor. Enter your individual name as shown on your income tax return on the “Name” line. You may enter your business, trade, or “doing business as (DBA)” name on the “Business name/disregarded entity name” line.

Partnership, C Corporation, or S Corporation. Enter the entity's name on the “Name” line and any business, trade, or “doing business as (DBA) name” on the “Business name/disregarded entity name” line.

Disregarded entity. Enter the owner's name on the “Name” line. The name of the entity entered on the “Name” line should never be a disregarded entity. The name on the “Name” line must be the name shown on the income tax return on which the income will be reported. For example, if a foreign LLC that is treated as a disregarded entity for U.S. federal tax purposes has a domestic owner, the domestic owner's name is required to be provided on the “Name” line. If the direct owner of the entity is also a disregarded entity, enter the first owner that is not disregarded for federal tax purposes. Enter the disregarded entity's name on the “Business name/disregarded entity name” line. If the owner of the disregarded entity is a foreign person, you must complete an appropriate Form W-8.

Note. Check the appropriate box for the federal tax classification of the person whose name is entered on the “Name” line (Individual/sole proprietor, Partnership, C Corporation, S Corporation, Trust/estate).

Limited Liability Company (LLC). If the person identified on the “Name” line is an LLC, check the “Limited liability company” box only and enter the appropriate code for the tax classification in the space provided. If you are an LLC that is treated as a partnership for federal tax purposes, enter “P” for partnership. If you are an LLC that has filed a Form 8832 or a Form 2553 to be taxed as a corporation, enter “C” for C corporation or “S” for S corporation. If you are an LLC that is disregarded as an entity separate from its owner under Regulation section 301.7701-3 (except for employment and excise tax), do not check the LLC box unless the owner of the LLC (required to be identified on the “Name” line) is another LLC that is not disregarded for federal tax purposes. If the LLC is disregarded as an entity separate from its owner, enter the appropriate tax classification of the owner identified on the “Name” line.


Other entities. Enter your business name as shown on required federal tax documents on the “Name” line. This name should match the name shown on the charter or other legal document creating the entity. You may enter any business, trade, or DBA name on the “Business name/disregarded entity name” line.

Exempt Payee If you are exempt from backup withholding, enter your name as described above and check the appropriate box for your status, then check the “Exempt payee” box in the line following the “Business name/disregarded entity name,” sign and date the form.

Generally, individuals (including sole proprietors) are not exempt from backup withholding. Corporations are exempt from backup withholding for certain payments, such as interest and dividends.

Note. If you are exempt from backup withholding, you should still complete this form to avoid possible erroneous backup withholding.

The following payees are exempt from backup withholding:

1. An organization exempt from tax under section 501(a), any IRA, or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2),

2. The United States or any of its agencies or instrumentalities,

3. A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities,

4. A foreign government or any of its political subdivisions, agencies, or instrumentalities, or

5. An international organization or any of its agencies or instrumentalities.

Other payees that may be exempt from backup withholding include:

6. A corporation,

7. A foreign central bank of issue,

8. A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States,

9. A futures commission merchant registered with the Commodity Futures Trading Commission,

10. A real estate investment trust,

11. An entity registered at all times during the tax year under the Investment Company Act of 1940,

12. A common trust fund operated by a bank under section 584(a),

13. A financial institution,

14. A middleman known in the investment community as a nominee or custodian, or

15. A trust exempt from tax under section 664 or described in section 4947.

The following chart shows types of payments that may be exempt from backup withholding. The chart applies to the exempt payees listed above, 1 through 15.

IF the payment is for . . . THEN the payment is exempt for . . .

Interest and dividend payments All exempt payees except for 9

Broker transactions Exempt payees 1 through 5 and 7 through 13. Also, C corporations.

Barter exchange transactions and patronage dividends

Exempt payees 1 through 5

Payments over $600 required to be reported and direct sales over $5,000 1

Generally, exempt payees 1 through 7 2

1 See Form 1099-MISC, Miscellaneous Income, and its instructions.2 However, the following payments made to a corporation and reportable on Form

1099-MISC are not exempt from backup withholding: medical and health care payments, attorneys' fees, gross proceeds paid to an attorney, and payments for services paid by a federal executive agency.

Part I. Taxpayer Identification Number (TIN)Enter your TIN in the appropriate box. If you are a resident alien and you do not have and are not eligible to get an SSN, your TIN is your IRS individual taxpayer identification number (ITIN). Enter it in the social security number box. If you do not have an ITIN, see How to get a TIN below.

If you are a sole proprietor and you have an EIN, you may enter either your SSN or EIN. However, the IRS prefers that you use your SSN.

If you are a single-member LLC that is disregarded as an entity separate from its owner (see Limited Liability Company (LLC) on page 2), enter the owner’s SSN (or EIN, if the owner has one). Do not enter the disregarded entity’s EIN. If the LLC is classified as a corporation or partnership, enter the entity’s EIN.

Note. See the chart on page 4 for further clarification of name and TIN combinations.

How to get a TIN. If you do not have a TIN, apply for one immediately. To apply for an SSN, get Form SS-5, Application for a Social Security Card, from your local Social Security Administration office or get this form online at www.ssa.gov. You may also get this form by calling 1-800-772-1213. Use Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN, or Form SS-4, Application for Employer Identification Number, to apply for an EIN. You can apply for an EIN online by accessing the IRS website at www.irs.gov/businesses and clicking on Employer Identification Number (EIN) under Starting a Business. You can get Forms W-7 and SS-4 from the IRS by visiting IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676).

If you are asked to complete Form W-9 but do not have a TIN, write “Applied For” in the space for the TIN, sign and date the form, and give it to the requester. For interest and dividend payments, and certain payments made with respect to readily tradable instruments, generally you will have 60 days to get a TIN and give it to the requester before you are subject to backup withholding on payments. The 60-day rule does not apply to other types of payments. You will be subject to backup withholding on all such payments until you provide your TIN to the requester.

Note. Entering “Applied For” means that you have already applied for a TIN or that you intend to apply for one soon.

Caution: A disregarded domestic entity that has a foreign owner must use the appropriate Form W-8.

Part II. CertificationTo establish to the withholding agent that you are a U.S. person, or resident alien, sign Form W-9. You may be requested to sign by the withholding agent even if item 1, below, and items 4 and 5 on page 4 indicate otherwise.

For a joint account, only the person whose TIN is shown in Part I should sign (when required). In the case of a disregarded entity, the person identified on the “Name” line must sign. Exempt payees, see Exempt Payee on page 3.

Signature requirements. Complete the certification as indicated in items 1 through 3, below, and items 4 and 5 on page 4.

1. Interest, dividend, and barter exchange accounts opened before 1984 and broker accounts considered active during 1983. You must give your correct TIN, but you do not have to sign the certification.

2. Interest, dividend, broker, and barter exchange accounts opened after 1983 and broker accounts considered inactive during 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item 2 in the certification before signing the form.

3. Real estate transactions. You must sign the certification. You may cross out item 2 of the certification.


4. Other payments. You must give your correct TIN, but you do not have to sign the certification unless you have been notified that you have previously given an incorrect TIN. “Other payments” include payments made in the course of the requester’s trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services (including payments to corporations), payments to a nonemployee for services, payments to certain fishing boat crew members and fishermen, and gross proceeds paid to attorneys (including payments to corporations).

5. Mortgage interest paid by you, acquisition or abandonment of secured property, cancellation of debt, qualified tuition program payments (under section 529), IRA, Coverdell ESA, Archer MSA or HSA contributions or distributions, and pension distributions. You must give your correct TIN, but you do not have to sign the certification.

What Name and Number To Give the RequesterFor this type of account: Give name and SSN of:

1. Individual The individual2. Two or more individuals (joint

account)The actual owner of the account or, if combined funds, the first individual on the account 1

3. Custodian account of a minor (Uniform Gift to Minors Act)

The minor 2

4. a. The usual revocable savings trust (grantor is also trustee) b. So-called trust account that is not a legal or valid trust under state law

The grantor-trustee 1

The actual owner 1

5. Sole proprietorship or disregarded entity owned by an individual

The owner 3

6. Grantor trust filing under Optional Form 1099 Filing Method 1 (see Regulation section 1.671-4(b)(2)(i)(A))

The grantor*

For this type of account: Give name and EIN of:

7. Disregarded entity not owned by an individual

The owner

8. A valid trust, estate, or pension trust Legal entity 4

9. Corporation or LLC electing corporate status on Form 8832 or Form 2553

The corporation

10. Association, club, religious, charitable, educational, or other tax-exempt organization

The organization

11. Partnership or multi-member LLC The partnership12. A broker or registered nominee The broker or nominee

13. Account with the Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments

The public entity

14. Grantor trust filing under the Form 1041 Filing Method or the Optional Form 1099 Filing Method 2 (see Regulation section 1.671-4(b)(2)(i)(B))

The trust

1 List first and circle the name of the person whose number you furnish. If only one person on a joint account has an SSN, that person’s number must be furnished.

2 Circle the minor’s name and furnish the minor’s SSN.

3 You must show your individual name and you may also enter your business or “DBA” name on the “Business name/disregarded entity” name line. You may use either your SSN or EIN (if you have one), but the IRS encourages you to use your SSN.

4 List first and circle the name of the trust, estate, or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title.) Also see Special rules for partnerships on page 1.

*Note. Grantor also must provide a Form W-9 to trustee of trust.

Note. If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed.

Secure Your Tax Records from Identity TheftIdentity theft occurs when someone uses your personal information such as your name, social security number (SSN), or other identifying information, without your permission, to commit fraud or other crimes. An identity thief may use your SSN to get a job or may file a tax return using your SSN to receive a refund.

To reduce your risk:

• Protect your SSN,

• Ensure your employer is protecting your SSN, and

• Be careful when choosing a tax preparer.

If your tax records are affected by identity theft and you receive a notice from the IRS, respond right away to the name and phone number printed on the IRS notice or letter.

If your tax records are not currently affected by identity theft but you think you are at risk due to a lost or stolen purse or wallet, questionable credit card activity or credit report, contact the IRS Identity Theft Hotline at 1-800-908-4490 or submit Form 14039.

For more information, see Publication 4535, Identity Theft Prevention and Victim Assistance.

Victims of identity theft who are experiencing economic harm or a system problem, or are seeking help in resolving tax problems that have not been resolved through normal channels, may be eligible for Taxpayer Advocate Service (TAS) assistance. You can reach TAS by calling the TAS toll-free case intake line at 1-877-777-4778 or TTY/TDD 1-800-829-4059.

Protect yourself from suspicious emails or phishing schemes. Phishing is the creation and use of email and websites designed to mimic legitimate business emails and websites. The most common act is sending an email to a user falsely claiming to be an established legitimate enterprise in an attempt to scam the user into surrendering private information that will be used for identity theft.

The IRS does not initiate contacts with taxpayers via emails. Also, the IRS does not request personal detailed information through email or ask taxpayers for the PIN numbers, passwords, or similar secret access information for their credit card, bank, or other financial accounts.

If you receive an unsolicited email claiming to be from the IRS, forward this message to [email protected]. You may also report misuse of the IRS name, logo, or other IRS property to the Treasury Inspector General for Tax Administration at 1-800-366-4484. You can forward suspicious emails to the Federal Trade Commission at: [email protected] or contact them at www.ftc.gov/idtheft or 1-877-IDTHEFT (1-877-438-4338).

Visit IRS.gov to learn more about identity theft and how to reduce your risk.

Privacy Act NoticeSection 6109 of the Internal Revenue Code requires you to provide your correct TIN to persons (including federal agencies) who are required to file information returns with the IRS to report interest, dividends, or certain other income paid to you; mortgage interest you paid; the acquisition or abandonment of secured property; the cancellation of debt; or contributions you made to an IRA, Archer MSA, or HSA. The person collecting this form uses the information on the form to file information returns with the IRS, reporting the above information. Routine uses of this information include giving it to the Department of Justice for civil and criminal litigation and to cities, states, the District of Columbia, and U.S. possessions for use in administering their laws. The information also may be disclosed to other countries under a treaty, to federal and state agencies to enforce civil and criminal laws, or to federal law enforcement and intelligence agencies to combat terrorism. You must provide your TIN whether or not you are required to file a tax return. Under section 3406, payers must generally withhold a percentage of taxable interest, dividend, and certain other payments to a payee who does not give a TIN to the payer. Certain penalties may also apply for providing false or fraudulent information.

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