[Federal Register Volume 76, Number 139 (Wednesday, July 20, 2011)]
[Proposed Rules]
[Pages 43219-43225]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-18046]
[[Page 43219]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 905
[Docket No. FR-5361-P-01]
RIN-2577-AC81
Public Housing: Physical Needs Assessment
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Proposed rule.
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SUMMARY: This rule proposes to revise HUD's existing regulations
governing a physical needs assessment (PNA) undertaken by a public
housing agency (PHA). A PNA identifies all of the work that a PHA would
need to undertake to bring each of its projects up to the applicable
modernization and energy conservation standards. This rule would
require PHAs to project the current modernization and life-cycle
replacement repair needs of its projects over a 20-year period, rather
than a 5-year period, because the 20-year period coincides better with
the useful life of individual properties and their building components
and systems to ensure the long-term viability of the property.
Additionally, this rule proposes to integrate the performance of the
PNA with the performance of an energy audit.
DATES: Comments Due Date: September 19, 2011.
ADDRESSES: Interested persons are invited to submit comments regarding
this proposed rule to the Regulations Division, Office of General
Counsel, Department of Housing and Urban Development, 451 7th Street,
SW., Room 10276, 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
http://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
http://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.
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 202-402-3055 (this is
not a toll-free number). Individuals with speech or hearing impairments
may access this number via TTY by calling the Federal Relay Service,
toll free, at 800-877-8339. Copies of all comments submitted are
available for inspection and downloading at http://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Kevin Gallagher, Capital Program
Division, Office of Public and Indian Housing, Department of Housing
and Urban Development, 451 7th Street, SW., Room 4116, Washington, DC
20410-8000; telephone number 202-402-4192 (this is not a toll-free
number). Hearing- or speech-impaired individuals may access this number
through TTY by calling the toll-free Federal Relay Service at 800-877-
8339.
SUPPLEMENTARY INFORMATION:
I. Background
A PNA provides PHAs with critical information on the physical
condition of each project in its inventory and assists PHAs with
identifying and prioritizing work items that require repair and
modernization. The requirement to conduct a PNA has long been part of
the regulations for HUD's Public Housing Modernization program, found
in 24 CFR part 968. HUD's proposed rule on the Public Housing Capital
Fund, published on February 7, 2011, at 76 FR 6654, proposes to remove
part 968 and incorporate public housing modernization requirements in
the regulations governing the Public Housing Capital Fund program in 24
CFR part 905.
Although the requirement to conduct a PNA has long been part of the
regulations for HUD's Public Housing Modernization program, HUD, on
July 21, 2009; September 29, 2010; October 14, 2010; and December 2,
2010, hosted meetings with PHAs and their representatives to discuss
how repair and modernization needs should be assessed, and the costs
and benefits of obtaining that information to PHAs and to HUD. At these
meetings, PHAs raised a number of issues regarding costs, the content
of the PNAs, and the methodologies that would be involved. Information
about these meetings is available at http://portal.hud.gov/huddoc/report-on-pna.pdf.
This rule proposes to revise the regulations governing the
completion and submission of a PNA, currently found in 24 CFR part 968,
based on consideration of issues raised at the above meetings,
experience with funding for public housing capital expenditures under
the American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5,
approved February 13, 2009 (Recovery Act)), the PNA requirement imposed
on PHAs receiving Recovery Act capital funds, and HUD's further
consideration of how a PNA should be undertaken, completed, and
submitted by a PHA.
The existing requirements of 24 CFR part 968, subpart C
(Comprehensive Grant Program), provide that PHAs with 250 or more units
are required to periodically complete a PNA in conjunction with their
Comprehensive Plan (see Sec. 968.315(e)(2)). There is currently no
requirement for PHAs with fewer than 250 units to conduct a PNA.
Throughout this preamble where ``small'' PHAs are referenced, it is in
the context of 24 CFR part 968, subpart B, which applies to PHAs with
fewer than 250 public housing units. Section 5A of the United States
Housing Act of 1937 (1937 Act) (42 U.S.C. 1437c-1(a)(1)), which
establishes the PHA 5-year Plan, requires each PHA to submit to HUD,
not less than once every 5 years, a plan that includes a statement of
the mission of the PHA for serving the needs of low-income and very
low-income families, and ``a statement of the goals and objectives * *
* that will enable the housing authority to serve the needs
identified.'' These needs are, in turn, reflected by PHAs in their
Annual Statement/Performance and Evaluation Report (form HUD-50075.1)
and Capital Fund Program--Five-Year Action Plan (form HUD-50075.2) and
are funded under the capital fund formula authorized at section 9(d)(2)
of the 1937
[[Page 43220]]
Act (42 U.S.C. 1437g(d)(2)) and established by regulation at 24 CFR
905.10. In accordance with these requirements, PHAs are expected to
reflect their capital improvement and spending priorities in their
Annual Statements and 5-year action plans, which should be based on
PNAs that are prepared in accordance with the requirements of 24 CFR
part 968.
The current PNA regulation at 24 CFR 968.315(e)(2) requires: A
brief summary of the physical improvements needed to bring each
development to HUD standards for modernization, energy conservation
life-cycle cost effective performance standards, and lead-based paint
testing and abatement standards; the replacement needs of equipment and
structural elements during the period covered; a preliminary estimate
of cost; any physical disparities between buildings occupied
predominantly by one racial or ethnic group and the physical
improvements required to correct the disparity; and the number of units
the PHA is proposing for substantial rehabilitation and subsequent
sale, if any (see 24 CFR 968.315(e)(2)). As to energy audits, HUD
requires PHAs to complete an energy audit for each PHA-owned project
under management, not less than once every 5 years (see 24 CFR
965.302).
II. This Proposed Rule
The need for PHAs to engage in strategic planning has increased
considerably over the past decade as PHAs have transitioned to an
asset-based accounting and management model more closely aligned to
industry-standard real estate management procedures. A focus on the
individual project, rather than on the macro level of the entirety of a
PHA's public housing portfolio, further highlights the need for
strategic planning over a longer term period. As the public housing
portfolio ages, the need to strategically plan impacts all PHAs
regardless of size. The opportunities for PHAs to take advantage of a
variety of financing vehicles to modernize and develop public housing
have also increased over the past decade. Thus, in managing their
public housing portfolios, PHAs are increasingly called upon to make
long-term reinvestment and portfolio management decisions that may
entail demolition, disposition, conversion, financing, redevelopment,
or repositioning of real estate assets. A key tool to accomplishing
such strategic planning is a PNA.
This rule proposes to supplement the Public Housing Capital Fund
Program regulation, published on February 7, 2011, at 76 FR 6654, to
include new PNA regulations. This proposed rule would add a new
paragraph (b)(9) to proposed new section Sec. 905.300 in the rule of
February 7, 2011 (see 76 FR 6665), which would require all PHAs,
including small PHAs and Moving to Work PHAs, to complete PNAs and
provide them to HUD so that PHAs may properly administer their Capital
Fund programs, and so that HUD may effectuate its implementation and
oversight functions in regard to the Capital Fund. In addition, because
the rule refers to Moving to Work PHAs, the rule would add a definition
of such PHAs in new proposed Sec. 905.108, entitled ``Definitions.''
(See 76 FR 6661)
Section 9(d)(1)(L) of the 1937 Act, 42 U.S.C. 1437g(d)(1)(L)),
includes in the list of eligible activities related to the Capital Fund
``integrated utility management and capital planning to maximize energy
conservation and efficiency measures.'' While energy audits are already
required, HUD is proposing to provide for the most cost-effective,
useful, and efficient performance of activities funded under 42 U.S.C.
1437g(d)(1)(L) by requiring PHAs to complete their PNAs in conjunction
with energy audits, and adopt or consider the findings of an energy
audit, identify work items that correspond to energy conservation
measures (ECMs), and incorporate cost-effective data from energy audits
and PNAs into their assessment.
The integration of the energy audit and PNA is considered to be
most effective when both activities are coordinated. In addition,
coordination between an energy auditor and PNA provider is considered
to be important for energy efficiency and capital upgrade decision-
making. As the consulting industry that services PHAs and the public
housing program is introduced to conducting coordinated or integrated
PNAs and energy audits, the costs associated with performing both of
these assessments may be reduced. HUD invites comment on the potential
benefits and challenges of preparing energy audits in conjunction with
PNAs. HUD is also interested in comment on the effect of aging on
energy audit information as related to its usefulness for cost
projection and strategic planning in a PNA.
This rule proposes to require PHAs to project the current
modernization and life-cycle replacement repair needs over a 20-year
period, rather than a 5-year period, in accordance with the useful life
of individual properties and their building components and systems, to
ensure the long-term viability of the property. This 20-year period is
more closely related to the life cycle of buildings and major physical
components than the current 5-year period. This proposed life-cycle-
based, project-level PNA will enhance capital planning,
recapitalization, and portfolio management practices by PHAs.
In addition, PNAs covering 20 years or more of projected capital
needs are standard in real estate management. PNAs are standard
requirements for refinancing, purchase of existing real estate, and
property management. It is recognized that PNAs, especially in the
later years of the 20-year period, will provide an estimate of future
costs, not a statement of actual cost. These projections will be
revised and become more accurate as time passes. The value of this
order-of- magnitude estimate is the identification that there will be
future obligations that must be planned and budgeted for in advance.
Actual cost will be established by a contract for performance of the
work; a PNA represents an informed estimate of future cost.
There currently exists no guidance as to the qualifications for the
PNA provider. In addition, there exists no professional industry
certification standard for providers of PNAs. Providers of such
services range from architects and engineers to experienced
practitioners from the building and inspection trades. Some PHAs
directly employ staff people that perform physical needs assessment for
their property. The proposed rule would establish minimum
qualifications for the PNA provider, which standards would include
experiential qualifications in property inspection and evaluation, cost
estimating, energy efficiency and green capital upgrade and
construction practices, and working knowledge of common information
technology software. The rule would continue to permit the PHA to have
its staff perform PNAs, but would give PHAs better guidance as to
qualifications staff should have to perform this function. Although
this is intended to minimize the compliance burden on PHAs, HUD
understands that PHAs must weigh the decreased cost of the in-house
assessment against the possibly greater objectivity, and hence
validity, of third-party assessments. PHAs that plan to use PNAs to
directly support a financial or funding transaction are advised to
consider contracting with a third-party provider to the extent they are
financially able. HUD invites public comment regarding appropriate
qualifications for PNA providers and the appropriateness of PHA staff
performing PNAs used for internal strategic planning purposes, PNAs
used to directly support a funding
[[Page 43221]]
or financial transaction, or both. HUD also seeks comment on the
implications of adopting a requirement that PHAs use independent third-
party providers to conduct their PNAs and the extent to which such a
requirement would affect the compliance burden on PHAs and the validity
of the PNA data.
This rule would require that the PNA and energy audit be completed
in conjunction with each other once every 5 years to promote
coordination of capital planning involving the selection of building
materials and supplies, as well as capital expenditures that address
life-cycle replacement repairs and energy efficiency improvements. The
new PNA regulation and PNA form being developed by HUD will record
energy conservation measures as identified in an energy audit. This
rule proposes that, using information from the energy audit, the PHA
shall identify specific work items and their associated costs in the
PNA that match energy conservation measures (ECMs) identified in the
energy audit.
While HUD proposes to require PHAs to update the PNA annually (and
wholly revise it once every 5 years), HUD proposes to minimize any
burden associated with the updates by having the PNA submitted
electronically via a mechanism that will allow HUD to both aggregate
and analyze the PNA data. Moreover, the annual update of the PNA, as
proposed to be required by this rule, will provide HUD with the
information it needs to effectively monitor PHA performance with
respect to the manner in which the PHA addresses capital repair needs
and administers the Capital Fund. PNA updates will be used to show how
PHAs reduce capital repair backlog in their inventory and will enable
HUD to assess the impact on the physical needs of the entire public
housing portfolio.
Annual Update. The specific procedures for annual PNA updates will
be determined as the new PNA tool is developed, but HUD plans for these
updates to be a simple process performed by PHA staff in an automated
format. The PHA, at the conclusion of the fiscal year, would review the
PNA that it had prepared and would eliminate capital costs for the year
that just ended by eliminating estimated costs for capital improvements
actually completed. For capital improvements that were not completed
during the year that just ended, the costs for those incomplete
improvements would be moved to a future year. The PHA would continue in
this manner for each year until the next comprehensive PNA is performed
to refresh the data. This is the standard process used in the
management of multifamily real estate portfolios. In this way, the PHA
and HUD will have continuous visibility of the effectiveness of Capital
Funds for long- term capital and financial planning.
Initial Submission and Transition. HUD plans to require that the
PNAs, as proposed, be required only after the appropriate submission
and evaluation systems are developed. Additionally, for the first two
PNAs and first two energy audits, HUD may establish different dates for
the submission of this information, recognizing that the initial effort
to aggregate PNA and energy audit data may not allow for integration of
the information into the 5-year reporting format as contemplated. For
example, the 5-year planning cycle places many PHAs in a timeframe to
submit their 5-year plans in Fiscal Year (FY) 2011. The new HUD PNA
format is not anticipated to be available for use before FY 2012. HUD
has provided initial guidance to PHAs to extend their existing PNAs and
delay performance of a wholly new PNA until availability of the new PNA
tool. It is envisioned that PHAs will report on their 5-year plan in FY
2011 on the basis of their existing PNA, as extended. The PHA will then
perform the new PNA when the PNA tool becomes available in 2012. Since
the new PNA will provide a 20-year schedule and would be updated
annually by the PHA, adequate information from the 2012 PNA would exist
for the PHA to use as the basis for its 5-year plan of 2016. The next
PNA would be performed in 2020, in advance of the PHA's 5-year plan for
2021. Thereafter, the timing of completion of new PNAs shall be aligned
to support more directly the 5-year PHA plan cycle.
The current PNA regulation assesses the needs and costs to ensure
long-term physical viability, while the proposed rule would require the
PNA to include all projected capital costs needed to keep the projects
decent, safe, in good repair, and in compliance with all public housing
requirements. When preparing capital repair and life-cycle repair cost
estimates for modernization purposes, PHAs will continue their current
practice of complying with local building and construction codes, as
well as with all applicable public housing requirements, including
uniform physical conditions standards, section 504 of the
Rehabilitation Act (see 29 U.S.C. 794), and Uniform Federal
Accessibility Standards (UFAS) (see 24 CFR part 40) requirements.
HUD believes that the amendments to the PNA regulations as proposed
to be provided in new Sec. 905.300(b)(9) of this rule will make the
PNA tool a more effective tool and therefore better address the
modernization and life-cycle replacement repair needs of a PHA's
projects. The PNA existing regulation in 24 CFR 968.315(e)(2) was
already proposed to be removed by the February 7, 2011, proposed rule.
(See 76 FR 6661)
III. Findings and Certifications
Paperwork Reduction Act
The information collection requirements contained in this proposed
rule have been submitted to the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). 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.
The burden of the information collections in this proposed rule is
estimated as follows:
Reporting and Recordkeeping Burden
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Estimated
Number of average time Estimated
Section reference Number of responses per for annual burden
respondents respondent requirement (in hours)
(in hours)
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Sec. 905.300(b)(9)--PNA performed every 5 620 1 \1\ 130 80,600
years including data collection and site
inspection.....................................
Sec. 905.300(b)(9)--PNA data analysis and 620 1 \2\ 45 27,900
reporting......................................
Sec. 905.300(b)(9)(vii)--annual update........ 2,480 1 \3\8 19,840
[[Page 43222]]
Quality Assurance............................... 104 1 \4\ 16 1664
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Total Paperwork Burden for the New Rule 130,004
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Total Burden from current OMB ICR 2577-0157\5\ 47,740
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Total Additional Burden as a result of this rule 82,264
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In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments
from members of the public and affected agencies concerning this
collection of information to:
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\1\ PHAs are only required to complete PNAs once every 5 years.
This entry reflects the data collection and inspections. Therefore,
to reflect the annual burden, a weighted average was derived by
taking \1/5\ of the total burden required of PHAs once every 5
years.
\2\ This entry reflects the time to analyze the collected data,
prepare a report, and upload the data to HUD.
\3\ Per the new rule, PHAs will be required to complete an
annual update in the years that they are not required to do a full
PNA (thus annual updates will be required 4 out of every 5 years).
Therefore, to reflect an annual burden, a weighted average was
derived by taking \4/5\ of the burden for PHAs to fulfill the annual
update requirement.
\4\ Quality Assurance will be performed by HUD on a sample of
approximately 521 PNAs after each 5-year PNA cycle. Since all of the
sampled PHAs would already have collected the basic quantity,
component age, and other data into a PNA, the additional burden on
the sampled PHAs is expected to be minimal.
\5\ In the currently effective Information Collection Request
(ICR), the burden is 15.4 hours annually for 3,100 PHAs.
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(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.
Interested persons are invited to submit comments regarding the
information collection requirements in this rule. Under the provisions
of 5 CFR part 1320, OMB is required to make a decision concerning this
collection of information between 30 and 60 days after today's
publication date. Therefore, a comment on the information collection
requirements is best assured of having its full effect if OMB receives
the comment within 30 days of today's publication date. This time frame
does not affect the deadline for comments to the agency on the proposed
rule, however. Comments must refer to the proposal by name and docket
number (FR-5361-P-01) and must be sent to:
HUD Desk Officer, Office of Management and Budget, New Executive Office
Building, Washington, DC 20503, Fax number: 202-395-6947;
and one of the two options below:
Colette Pollard, HUD Reports Liaison Officer, Office of the Chief
Information Officer, Department of Housing and Urban Development, 451
7th Street, SW., Room 2204, Washington, DC 20410; or
Interested persons may submit comments regarding the information
collection requirements electronically through the Federal eRulemaking
Portal at http://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 http://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.
Regulatory Planning and Review
OMB reviewed this proposed rule under Executive Order 12866
(entitled ``Regulatory Planning and Review''). This rule is a
``significant regulatory action'' as defined in 3(f) of the order
(although not an economically significant regulatory action, as
provided under section 3(f)(1) of the order).
The rule is not expected to have a significant economic impact. It
is estimated that full compliance with the rule as proposed would cost
PHAs, collectively, up to $29 million once every 5 years or an average
of $5.9 million annually. The rule would not have any budgetary impact
to the Federal Government, as costs to implement the PNA would be
accommodated within HUD's existing budget authority. However, the
additional expenses to expand PNA activities would generate some
transfers from PHAs to those entities performing PNAs. These changes,
however, are necessary for the transition to asset management and to
accommodate the growing flexibility of financing granted to PHAs.
This proposed rule would require all PHAs to project the current
modernization life-cycle replacement repair needs over a 20-year
period.\6\ This rule would coordinate the performance of the PNA with
the performance of an energy audit and would expand the PNA
requirements to apply to PHAs with fewer than 250 units.
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\6\ The current PNA regulation assesses the needs and costs to
ensure long-term physical and social viability over a 5-year period.
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The cost to perform PNAs can be approximated using existing
examples and HUD's own experience.
HUD is using the PNA format of HUD's Green Retrofit Program (GRP),
a Recovery Act program, as a source for the development of the PNA to
be used in public housing and the new HUD PNA will be comparable in
complexity/comprehensiveness.\7\ HUD's Office of
[[Page 43223]]
Affordable Housing Programs (OAHP), in the Office of Housing, has
shared a summary of its costs to perform PNAs during 2009/10 using its
format for a set of 66 projects nationwide. These projects averaged 96
units per project, making them very comparable to the average project
size of small PHAs of 84 units.
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\7\ HUD's Office of Affordable Housing Programs, in the Office
of Housing, manages the GRP, which involves direct engagement of
providers to perform Physical Needs Assessment and Energy Audits for
affordable housing projects. The GRP PNA is a baseline PNA including
all of the components generally understood to be found in a PNA. It
should be noted that the GRP includes an energy audit portion and an
integrated pest management portion, in addition to the PNA portion.
Energy audits are already required to be performed every 5 years for
every PHA regardless of size; integrated pest management is not a
requirement in public housing and is not required by the new PNA.
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The average cost for the PNA portion of the GRP for these projects
was $6,220 per project or $65.22 per unit.
During 2010, HUD staff in the Office of Public Housing visited a
number of PHAs nationwide in an effort to familiarize itself with PNA
procedures, forms, and formats used by PHAs, as well as to evaluate the
burden of performance. These visits yielded some cost data that can be
used as illustrative of the costs to perform PNAs to generally accepted
industry standards for a baseline PNA. Notably, a large housing
authority provided a copy of a proposal for its completed PNA
indicating a cost of $63 per unit in 2007 from a nationally recognized
high quality third-party provider. Two other PHAs, each of which had
previously engaged third-party PNA providers to complete PNAs, are
currently preparing to solicit proposals for new PNAs. Each indicated
that their respective budget for the effort was $50 per unit in the
context of having contracted for similar work previously and having
baseline data from those prior assessments.
The $50 per-unit cost is used in this analysis as the cost to PHAs
that are currently performing PNAs.
Assuming that PHAs are currently spending $50 per unit to perform
PNAs and that it would cost $65.22 per unit under this rule, Exhibit-1
shows that compliance with the PNA requirements as proposed would cost
about $79 million once every 5 years. However, the additional cost
beyond what PHAs are already doing would be only $29 million. Small
PHAs will be required to perform PNAs where no requirement previously
existed. For these authorities, the cost would be estimated based upon
the GRP cost data for similarly sized projects. This cost would be
estimated at between $13,286,423 (203,717 units at $65.22 per unit) and
$15,077,280 (2,424 projects at $6,220 per project) for the first
performance of the PNA.
Exhibit--1
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Universe \1\ PNA current regulation PNA proposed regulation Estimate
-------------------------------------------------------------------------------------------------------------------- regulatory
PHAs % PHAs Projects % Projects Total % Units $/Unit \2\ $Total $/Unit \3\ $Total cost
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Under 250 Units................................................ 2,424 74.95 2,312 31.67 203,717 16.79 (PNA not required) 65.22 13,286,423 13,286,423
--------------------------
Over 250 Units................................................. 810 25.05 4,988 68.33 1,009,436 83.21 50.00 50,471,800 65.22 65,835,416 15,363,616
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Totals..................................................... 3,234 100.00 7,300 100.00 1,213,153 100.00 ........... 50,471,800 ........... 79,121,839 28,650,039
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\1\ The number of PIH units is from the PUD records.
\2\ This is the average for Baltimore and Boston, each of which has previously hired third-party PNA contractors.
\3\ HUD is using the Green Retrofit Physical Condition Assessment (GRPCA) as a source for the development of the PNA to be used in public housing and the new HUD PNA will be comparable
complexity and comprehensiveness. The average cost of the PNA portion of the GRPCA for these assessments was $65.22 per unit.
Large PHAs that already are required to perform PNAs with 5-year
terms will now be required to perform PNAs with 20-year terms and to
potentially higher standards than the current PNA requirement.
Regardless of the term of the PNA, it is assumed that an assessor would
still be required to examine virtually every component of a project in
order to determine its remaining useful life and whether that life
falls within the term of the PNA. The difference in performance,
therefore, is primarily the entry of data over a 20-year term rather
than a 5-year term. The cost of greater standards of performance for
large PHAs could be estimated at $15,363,616, representing the
difference between the cost to perform a PNA to the GRP standard
($65.22 per unit) and the cost to perform a PNA to the PHAs standards
in the absence of a new standard from HUD ($50 per unit) multiplied by
the number of units (1,009,436) within larger authorities.
These estimates are probably high since it is known that some
proportion of small PHAs (with fewer than 250 units) perform a PNA as a
capital planning and strategic planning tool. Also, many larger PHAs
(with 250 units or more) already perform PNAs to generally similar or
higher standards than the baseline PNA required by the PNA rule and
many PHAs perform, and will continue to perform, PNAs with in-house
staff.
The rule also has significant benefits. Planning is a hallmark of a
well-managed property. A Physical Needs Assessment (PNA) is a key
planning tool. HUD distributes several billion dollars in capital and
operating funds annually to PHAs. The quality and efficiency of
property management directly impacts the effective use of these funds.
While it is self-evident that efficiently managed real estate costs
less to operate, it is not feasible to quantify a dollar cost savings
owing to efficient management applicable to all properties, since the
implementation of planning varies over a very broad spectrum. It is
certainly feasible to assume that such savings would exceed the costs
for performing PNAs on an aggregate basis. The following is a list (not
exhaustive) of possible benefits of the rule.
1. The identification of capital expenditures far enough in advance
of their required implementation to allow for consideration of the most
efficient method of paying for the improvement, whether by the
application of grant funds, borrowing, or other mechanisms, including
repositioning of the property.
2. The identification of synergies in the timing and intensity of
capital improvements, and the avoidance of duplicative or wasteful
capital expenditures that might be lost in the subsequent comprehensive
modernization or obsolescence of a property.
3. Informing a preventative maintenance strategy that most
efficiently employs maintenance resources to maximize the useful life
of property components and to potentially extend useful lives beyond
their expected duration.
4. Minimizing unexpected component failures and the potential for
additional costs for tenant relocation, emergency services, premium
time, liability exposure, and insurance costs, etc.
5. Promoting the implementation of energy efficiency measures and
the utility savings that accrue.
6. Increased occupancy and enhanced health and safety as a result
of more habitable units.
[[Page 43224]]
This analysis also considers transfers. The proposed rule has the
potential to generate about $29 million in additional PNA work every 5
years. These additional expenses would constitute a transfer from PHAs
to those entities performing PNAs. There exists an active industry
engaged in providing PNAs to PHAs.
HUD's economic analysis can be found at http://www.regulations.gov
and in the docket file, which is available for public inspection
between the hours of 8 a.m. and 5 p.m., weekdays, 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, an
advance appointment to review the docket file must be scheduled by
calling the Regulations Division at 202-708-3055 (this is not a toll-
free number). Hearing- or speech-impaired individuals may access this
number through TTY by calling the toll-free Federal Relay Service at
800-877-8339.
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 proposed rule does not
impose any federal mandate on any state, local, or tribal government or
the private sector within the meaning of UMRA.
Environmental Impact
This proposed rule that does not direct, provide for assistance or
loan and mortgage insurance for, or otherwise govern, or regulate, real
property acquisition, disposition, leasing, rehabilitation, alteration,
demolition, or new construction, or establish, revise or provide for
standards for construction or construction materials, manufactured
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this
proposed rule is categorically excluded from environmental review under
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).
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 proposed rule expands the PNA requirements to apply to PHAs that
have fewer than 250 units. However, all PHAs, including small PHAs,
have been required to complete energy audits, which essentially review
building systems for the purpose of assessing whether the project would
benefit from energy conservation measures.
With respect to small PHAs that would have to complete PNAs under
this rule, while there is some burden, it is not considered a
significant economic impact nor is it considered significant in the
context of standard operating procedures for real estate management.
The burden entails assembling existing physical data for the property
and organizing a brief site survey of a sample of the physical
property. It is generally acknowledged that the burden is greater the
first time a PNA is completed, since a completed PNA becomes a data
repository that is largely reusable. There are a total of approximately
3,100 PHAs. Of these, approximately 2,300 are small entities that have
previously not been required to complete a PNA. While these 2,300 PHAs
represent approximately 74 percent of all PHAs, they only represent
approximately 20 percent of the units in the public housing portfolio,
or 200,000 of the 1,200,000 units. The total additional paperwork
burden imposed by the rule for small entities is 95,220 hours per year
for 2,300 parties, or 41.4 hours per small PHA. HUD assumes for the
purpose of this analysis that, in most cases, staff at small PHAs would
complete the paperwork, thus requiring no additional expenditure beyond
salaries. Even were the small PHAs to hire third parties to complete a
PNA, the costs for completing a PNA once every 5 years are expected to
be minimal when compared to the amount of Capital Funds the PHA will
receive during that same 5-year period, and enable the PHA to more
effectively expend those funds. Hence, this rule does not have
significant economic impact on small PHAs.
Notwithstanding the determination that this rule would not have a
significant economic impact on a substantial number of small entities,
HUD specifically invites any comments regarding any less burdensome
alternatives to this rule that will meet HUD's objectives as described
in this preamble.
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 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.
Catalog of Federal Domestic Assistance Number
The Catalog of Federal Domestic Assistance number for 24 CFR part
905 is 14.872.
List of Subjects in 24 CFR Part 905
Grant programs--housing and community development, Public housing,
Reporting and recordkeeping requirements.
Accordingly, for the reasons stated in the preamble, HUD proposes
to amend 24 CFR part 905, as proposed to be revised at 76 FR 6661,
February 7, 2011, as follows:
PART 905--THE PUBLIC HOUSING CAPITAL FUND PROGRAM
1. The authority citation for part 905 continues to read as
follows:
Authority: 42 U.S.C. 1437g and 3535(d).
2. In Sec. 905.108, add the definition of ``Moving to Work PHA''
in proper alphabetical order to read as follows:
Sec. 905.108 Definitions.
* * * * *
Moving to Work PHA means a PHA that participates in the Moving to
Work (MTW) demonstration program, which provides PHAs the opportunity
to design and test innovative, locally designed strategies that use
federal dollars more efficiently, help residents find employment and
become self-sufficient, and increase housing choices for low-income
families. MTW is funded through annual appropriations acts.
* * * * *
3. In Sec. 905.300, add a new paragraph (b)(9) to read as follows:
Sec. 905.300 Capital Fund Submission Requirements.
* * * * *
(b) * * *
(9) Physical needs assessment (PNA). Each PHA, including Moving to
Work PHAs, shall complete and submit a comprehensive PNA at a time and
in a form and manner prescribed by HUD that incorporates the life-cycle
repair
[[Page 43225]]
and replacement costs of project systems and components for a 20-year
period, for each public housing project in its inventory. The PNA will
provide summary level information for the PHA's overall public housing
portfolio, as well as information from the energy audit completed in
conjunction with the PNA.
(i) The PNA and the associated estimates shall be completed without
regard to whether funds are available at the time the PNA is completed
to do the repair and replacement work projected by the PNA.
(ii) The PNA shall capture all capital costs needed to comply with
public housing requirements, including section 504 of the
Rehabilitation Act (see 29 U.S.C. 794), Uniform Federal Accessibility
Standards (UFAS) requirements (see 24 CFR part 40), and Lead Safe
Housing Rule (LSHR) requirements (see 24 CFR part 35).
(iii) The PNA shall account for the impact of any projected or
actual removal of units from the inventory by the corresponding removal
of cost associated with physical needs of those removed units.
(iv) The first two PNAs pursuant to this part and first two energy
audits completed after [effective date of final rule to be inserted at
final rule stage] shall be completed in accordance with a timeframe
delineated by HUD in order to better enable PHAs, after the completion
of the first PNA pursuant to this part, to better utilize the PNA in
support of their 5-year planning cycle. After the completion of the
first two PNAs and first two energy audits, the PHA shall completely
update the PNA and energy audit no less often than once every 5 years.
(v) The PNA provider shall be experienced in the performance of
residential building assessment including building systems, health and
safety conditions, physical and structural conditions, cost estimating,
and building modernization. The PNA provider shall have knowledge of
energy efficiency and green capital upgrade and construction practices.
The PNA submission shall identify the PNA provider(s). Additional
qualifications shall include:
(A) Five (5) years or more of direct experience in physical
facility inspection and/or assessment;
(B) Five (5) years or more of direct experience in cost estimating;
(C) Knowledge of applicable building standards and codes, including
federal, state, and local requirements as demonstrated by experience,
training, or certifications;
(D) Knowledge of energy conservation and energy efficiency and
green capital upgrade and construction practices, as demonstrated by
experience, training, or certifications;
(E) Working knowledge of commonly used computer technology and
software.
(vi) The PNA shall be performed in conjunction with an energy audit
and the energy audit findings shall be integrated into the PNA. PHAs
that will have completed an energy audit within 2 years of the date
that the PHA will complete its first PNA, pursuant to this part, shall
not be required to complete a new energy audit concurrent with its
first PNA if the existing energy audit contains the cost-effectiveness
data required by HUD. Using information from the energy audit, the PHA
shall identify specific work items and their associated costs in the
PNA that match energy conservation measures (ECMs) identified in the
energy audit. For each ECM reviewed as part of an energy audit, unless
otherwise directed by HUD, the PNA shall incorporate the pay back data
from the energy audit in a form and manner prescribed by HUD.
(vii) As modernization and repairs of public housing developments
are completed, the PHA shall make revisions to its PNA to indicate that
repairs to individual buildings have been addressed. These PNA
revisions shall be completed on an annual basis.
(viii) The PHA shall submit its PNAs and annual updates to HUD in a
time, manner, and format determined by HUD. HUD may evaluate the
quality and accuracy of PNAs. HUD may require a PHA to revise its PNA
to correct errors or inaccuracies, or elements of the PNA that do not
comply with HUD requirements, all as determined by HUD. In addition,
HUD may directly revise a PHA's PNA to make such corrections. To the
extent such revisions are made, the PHA shall update the corrected PNA
in its annual update submission.
(ix) A PHA shall not obligate or expend Capital Funds for
administration, for transfers to operations, or for management
improvements unless:
(A) A PNA has been submitted in a time, manner, and format
determined by HUD in accordance with this subpart; and
(B) Corrections to the PNA required in accordance with paragraph
(b)(9)(viii) of this section have been completed by the PHA within 3
months of having been notified of the need for correction by HUD.
Dated: June 10, 2011.
Sandra B. Henriquez,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 2011-18046 Filed 7-19-11; 8:45 am]
BILLING CODE 4210-67-P