[Federal Register Volume 77, Number 94 (Tuesday, May 15, 2012)]
[Proposed Rules]
[Pages 28741-28755]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-11638]



[[Page 28741]]

Vol. 77

Tuesday,

No. 94

May 15, 2012

Part IV





Department of Housing and Urban Development





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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; Proposed Rule

Federal Register / Vol. 77 , No. 94 / Tuesday, May 15, 2012 / 
Proposed Rules

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 5, 982, and 983

[Docket No. FR-5242-P-01]


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: Proposed rule.

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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: (1) 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 (2) 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.
    This proposed rule follows the November 24, 2008, notice for the 
purpose of establishing, in regulation, the reforms made to HERA as 
discussed in that notice, and to make other related regulatory changes. 
This proposed rule would make conforming changes to the regulations of 
the Section 8 Tenant-Based Voucher and Section 8 Project-Based Voucher 
programs to reflect the self-executing provisions of HERA, and would 
also amend the regulations required to implement those statutory 
provisions of HERA that are not self-implementing. Additionally, this 
rule would make such 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. While the conforming and clarifying changes are not 
implementing new policy, HUD nevertheless welcomes comment on the 
clarity and comprehensibility of the language proposed to be codified. 
This rule also takes into consideration the two public comments 
received in response to issuance of the November 2008 notice, and 
solicits additional public comment.
    HERA changes affecting the public housing program are being 
addressed by separate rulemaking.

DATES: Comment Due Date: July 16, 2012.

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.

    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 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 Danielle Bastarache, Director, 
Office of Voucher Programs, Office of Public and Indian Housing, Room 
4226, telephone number 202-401-3882. 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

    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.
    HUD published a notice in the Federal Register on November 24, 
2008, at 72 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. 
This proposed rule follows the November 24, 2008, notice 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 notice, taking into consideration 
public comment received on the notice, and (2) making other related 
regulatory changes, as discussed below.
    Whether the HERA program changes are self-executing or not self-
executing, a rule is necessary to ensure that the

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codified regulations for the programs affected 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 some discretionary 
authority to determine how the statutory change should be implemented.
    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. However, any regulatory change to the statutory language 
should not be interpreted as any reversal in HUD's position that the 
statutory language is self-executing. Nevertheless, once promulgated in 
final, the regulatory language, with any precision given to the 
statutory language, will govern implementation of these statutory 
provisions by PHAs.
    In discussing the regulatory changes proposed to be made by this 
rule, the preamble to this rule follows the HERA overview provided in 
the November 24, 2008, notice, which, as noted earlier, identified the 
HERA provisions that would require conforming rule changes and those 
that would require implementing regulations.

II. This Proposed Rule

Income Regulations in 24 CFR Part 5

    Annual Income (24 CFR 5.609(c)(14))--Conforming Change. 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, from 
the definition of income, any deferred Department of Veterans Affairs 
(VA) disability benefits that are received in a lump-sum amount or in 
prospective monthly amounts. The November 24, 2008, notice advised that 
this provision was self-executing; that is, 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 made by HERA 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 the 
amounts that constitute annual income in 24 CFR 5.609(b)(4), the 
deferred amount resulting from the delayed start of the periodic 
payment is not included in annual income. Accordingly, the full amount 
of periodic VA disability benefit payments continues to be included in 
amounts that constitute annual income in 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.
    The November 24, 2008, notice advised that 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 who is the beneficiary of the award would qualify as a person 
with disabilities under HUD's regulations. The November 24, 2008, 
notice also advised that 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 reexamination of income, or at the 
time of interim reexamination of income.
    This rule makes a conforming change to 24 CFR 5.609 to include the 
VA disability benefits with the exclusion from income for deferred 
Social Security benefits in Sec.  5.609(c)(14).

Section 8 Tenant-Based Assistance: Housing Choice Voucher Program 
Regulations

    Rent to Owner: Reasonable Rent (24 CFR 982.507)--Conforming and 
Correcting Change. Subtitle B of Title VIII of HERA (sections 2831 
through 2835) makes several 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 Partnerships (HOME) program is streamlined by section 
2835(a)(2) of HERA, which adds section 8(o)(10)(F) to the 1937 Act.
    Under this new section of 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 is to 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, and (2) the payment standard established by a PHA for 
a unit of the size involved.
    Because HUD is undertaking separate rulemaking for the HOME 
program, Sec.  982.507 makes only a conforming change to the 
regulations with respect to LIHTC-assisted units. Following the 
addressing of this issue through a HOME program rulemaking, namely, 
HOME rents for nonvoucher families in the HOME program regulations, 
Sec.  982.507(c) will be amended accordingly. With this rule, Sec.  
982.507(c) provides that if the rent requested by the owner exceeds the 
LIHTC rents for nonvoucher families, the PHA must perform a rent 
comparability study in accordance with program regulations, and the 
rent shall not exceed the lesser of the: (1) Reasonable rent as 
determined pursuant to a rent comparability study, and (2) the payment 
standard established by the PHA for the unit size involved.

Section 8 Project-Based Voucher Program Regulations

    Section 2835(a)(1) of HERA makes several changes to the section 8 
project-based voucher (PBV) program established by section 8(o)(13) of 
the 1937 Act (42 U.S.C. 1437f(o)(13)) and for which the regulations are 
found at 24 CFR part 983. The changes are as follows:
    Applicability of the Tenant-Based Voucher Rule (24 CFR 983.2)--
Conforming Change. This proposed rule would remove the reference to 
cooperative housing from Sec.  983.2. Section 983.2(b) lists regulatory 
provisions under the tenant-based rule at 24 CFR part 982 that do not 
apply to the PBV program, including special housing types. Since, 
pursuant to section 2835(a)(1)(F) of HERA, cooperative housing is an 
eligible housing type under the PBV program, the inclusion of 
cooperative housing under Sec.  983.2(b) and Sec.  983.2(c)(7)(ii) is 
outdated. Additionally, this proposed rule would correct a citation 
error in Sec.  983.2(c)(2)(i): The reference to owner termination of 
tenancy, should be Sec.  982.310, not Sec.  982.10. The proposed rule 
would include additional references to regulations in 24 CFR part 982, 
subpart M, that are not applicable to PBV assistance in Sec.  
983.2(c)(7)(i).
    PBV Definitions (24 CFR 983.3)--Proposed New Definitions and 
Clarifying Changes. This proposed rule would add definitions for the 
following terms: ``housing credit agency'', ``project'', ``project-
based certificate program'', and ``release of funds''. The proposed 
rule would revise the

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definitions of ``excepted units (units in a multifamily building not 
counted against the 25 percent cap)'', ``existing housing'', 
``partially assisted building'', ``premises'', and ``qualifying 
families (for purposes of exception to the 25 percent per building 
cap)''. The reasons for revising the definition of ``existing housing'' 
are discussed below. The other terms are revised in order to reflect 
HERA's amendment to section 8(o) of the 1937 Act to substitute the term 
``project'' for ``building''. The definition of ``special housing 
type'' is also proposed to be revised, for the same reasons provided 
concerning the conforming change made to Sec.  983.2; namely, in order 
to remove reference to cooperative housing from the applicability of 
the regulations of 24 CFR part 982, subpart M.
    The definition of ``existing housing'' is proposed to be revised 
for the purpose of establishing clear and measurable standards in 
determining whether a proposed project is eligible for selection as 
existing housing. The definition is 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. This rule proposes to revise the definition of 
``existing housing'' to read as follows:

    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 unit:
    (1) Will comply with HQS within 60 days of the date of such 
selection, and the total amount of work that must be performed to 
cause the unit to comply with HQS does not exceed $1,000 per 
assisted unit (including the unit's prorated share of any work to be 
accomplished on common areas or systems); and
    (2) There is no plan to perform rehabilitation work on the unit 
within one year after HAP contract execution that would cause the 
unit to be in noncompliance with HQS and that would total more than 
$1,000 per assisted unit (including the unit's prorated share of any 
work to be accomplished on common areas or systems).

    This rule proposes to remove the definition of ``state-certified 
appraiser''. As discussed later in this preamble under the discussion 
of proposed changes to Sec.  983.59, HUD determined that a formal 
appraisal of the property is no longer necessary.
    Description of the PBV Program (24 CFR 983.5)--Transparency and 
Information Collection Change. This rule amends Sec.  983.5(c) to 
provide that although a PHA has the discretion to decide whether to 
operate a PBV program (and this rule does not remove that authority), 
the PHA must notify HUD of its intent to project-base its vouchers. The 
notification requirement is added to Sec.  983.6, as discussed 
immediately below. The advance notification is consistent with the 
transparency/notification requirements found in Sec.  983.6(c) and 
Sec.  983.51 (Owner Proposal Selections Procedures).
    Maximum Amount of PBV Assistance (24 CFR 983.6)--Transparency and 
Information Collection Change. As noted above, Sec.  983.6 is amended 
to require the PHA to provide advance notification to HUD of the PHA's 
intent to project-base its vouchers. The purposes of this proposed 
amendment is to ensure that PHAs do not exceed the 20 percent 
limitation on project-basing vouchers that is imposed by statute.
    Special Housing Types (24 CFR 983.9)--Conforming Change. Consistent 
with the regulatory changes to Sec.  983.3 described above, the 
proposed rule makes a conforming amendment to Sec.  983.9 to clarify 
that cooperative housing is an eligible special housing type under the 
PBV program in accordance with 24 CFR part 982, subpart M. Section 
983.9 is also amended to clarify which regulatory provisions in part 
982, subpart M, are not applicable to cooperative housing under the PBV 
program.
    Project-Based Certificate (PBC) Program (24 CFR 983.10)--Conforming 
Change. 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 (hereafter, collectively referred to as renew) PBC HAP contracts 
as PBV HAP contracts, under certain conditions. Specifically, such 
renewals are permitted provided that the initial PBV HAP contract is 
for a term of up to 15 years \1\ and that the rents for the renewed 
contract are calculated in accordance with section 8(o)(13)(H) of the 
1937 Act and HUD's regulations at 24 CFR 983.301 through 983.305. In 
addition, section 8(o)(13(C) of the 1937 Act (entitled ``Consistency 
with PHA Plan and Other Goals) and section 8(o)(13)(D) of the 1937 Act 
(entitled ``Income Mixing Requirements'') do not apply to renewal of 
PBC contracts as PBV contracts, and this proposed rule would make this 
conforming change.\2\
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    \1\ Section 8(o)(13)(F), entitled ``Contract Term,'' was amended 
by section 2835(a)(1)(B) of HERA, which extended the contract term 
eligible for renewal from up to 10 years to up to 15 years. (See 42 
U.S.C. 1473(o)(13)(F).)
    \2\ HUD issued PIH Notices 2008-14 and 2010-08 implementing the 
provisions of Public Law 110-28. PHAs are currently renewing PBC HAP 
contracts in accordance with the HUD directives. Therefore, the 
regulatory change is conforming in nature, reflecting practices 
already in effect.
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    Owner Proposal Selection Procedures (24 CFR 983.51)--Conforming 
Change. This proposed rule would revise paragraph (a) of this section 
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 rewords paragraph (b)(2) of 
this section 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.
    HUD notes that Sec.  983.51(e) provides, in relevant part, that 
``under no circumstances may PBV assistance be used with a public 
housing unit.'' HUD makes no changes to this section but finds that it 
is important to reiterate the basis for this requirement as provided by 
HUD in the PBV program final rule published on October 13, 2005, at 70 
FR 59892. HUD stated in relevant part as follows:

    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. * * * If 
Capital Funds (including Replacement Housing Factor Fund Grants) 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. (See 70 FR 59900.)

    Housing Type (24 CFR 983.52)--Proposed Change. This regulatory 
section provides standards by which a unit will be considered an 
existing unit for purposes of the PBV program. This section, as 
proposed to be revised, would provide that a unit must satisfy Housing 
Quality Standards (HQS) requirements within 60 days of the date of 
selection by a PHA. This section would also limit the total amount of 
work that must be performed to

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facilitate compliance with HQS to $1,000 per assisted unit. 
Additionally, the proposed rule provides 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. The 
reason for the proposed change to Sec.  983.52 is to provide a clear 
and measurable standard as to what constitutes ``existing housing'' as 
discussed above under the changes to the PBV Definitions (24 CFR 
983.3).
    Prohibition of Assistance for Ineligible Units (24 CFR 983.53)--
Conforming Change. Section 2835(a)(1)(F) of HERA added a new section 
8(o)(13)(L) to the 1937 Act 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. The November 24, 2008, notice advised that the provision is self-
implementing. This proposed rule would make conforming changes to Sec.  
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)--Conforming 
Change. Section 2835(a)(1)(F) of HERA 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. The November 24, 2008, notice advised that the provision is 
self-implementing for existing housing, but not for newly constructed 
or rehabilitated housing.
    This proposed rule would make a conforming change to Sec.  983.55 
to clarify that the subsidy layering requirements are not applicable to 
existing housing. The November 24, 2008, notice further advised that 
HUD would be issuing guidance on how such reviews must be conducted for 
newly constructed or rehabilitated housing. The Office of Public and 
Indian Housing (PIH) has issued guidelines on subsidy layering 
requirements for the PBV program. (See HUD's notice published in the 
Federal Register on July 9, 2010, at 75 FR 39561.)
    Applicability of 25 Percent Cap on Number of PBV Units (24 CFR 
983.56)--Conforming Change. 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,'' which is 
defined to mean a single building, multiple contiguous buildings, or 
multiple buildings on contiguous parcels of land. The November 24, 
2008, notice advised that this substitution in terminology was self-
implementing and that HUD would make a conforming change to its 
regulations at 24 CFR 983.56 to reflect the new terminology.
    This proposed rule would make a conforming change to Sec.  983.56, 
and HUD is also adding the statutory definition of ``project'' to the 
definitions in 24 CFR 983.3, as discussed earlier in this preamble. 
Additionally, this proposed rule would clarify that the exception to 
the 25 percent cap on the number of PBV units in a project includes 
units for the elderly and/or persons with disabilities; that is, a 
project for the elderly, a project for persons with disabilities, or a 
project that serves both categories of tenants.
    With respect to the definition of ``project'', HUD specifically 
requested comment in the November 24, 2008, notice on the impact on 
deconcentration efforts concerning the change in terms from 
``building'' to ``project''. One of the commenters requested that HUD's 
conforming rule clarify that a PHA has the discretion to apply the 
definition of ``project'' to mean a single building, multiple 
contiguous buildings, or multiple buildings on contiguous parcels of 
land. HUD interprets ``project'' to apply to all of these structures, 
and a PHA must consider the entire definition and apply this definition 
to the proposed PBV units. HUD also interprets the term ``contiguous'' 
in the statutory definition of ``project'' to include ``adjacent to'', 
as well as touching along a boundary or a point.
    Another commenter expressed concern that the change in definition 
to ``project'' would allow PBV owners to set aside separate floors of 
mixed-occupancy buildings solely for PBV residents with disabilities. 
The commenter noted that the civil rights authorities prohibit unlawful 
segregation, not only of race but of disability as well. The commenter 
requested that HUD issue regulations directing PHAs to adopt written 
policies to forbid segregation in PBV projects.
    It is HUD's view that nothing in HERA or in this proposed rule 
would alter a PHA's responsibility to adhere to nondiscrimination 
requirements. Given that PHAs already have the responsibility to adhere 
to civil rights and nondiscrimination requirements, including, but not 
limited to, the express integration mandate set forth at 24 CFR 8.4(d), 
HUD determined that further regulation is not necessary in this area. 
However, HUD will remain diligent in its oversight responsibilities 
regarding compliance with civil rights requirements.
    In addition to the foregoing changes, the proposed rule would add a 
new paragraph (b)(3) to make explicit that exception categories in a 
multifamily housing project may be combined. The exception categories 
in a multifamily housing project refers to those units that are 
occupied by elderly families and/or families with disabilities and/or 
families receiving supportive services and that are exempt from the 
overall 25 percent cap. New paragraph (b)(3) is intended to remove any 
ambiguity that the exception categories can be combined in determining 
the number of units that are exempt from the 25 percent cap.
    Environmental Review (24 CFR 983.58)--Informational Change. As 
stated in the November 24, 2008, notice, in addition to removal of the 
requirement for a subsidy layering review for existing housing, section 
8(o)(13)(M)(ii) of the 1937 Act relieves a PHA from undertaking an 
environmental review for an existing structure, except to the extent 
that such a review is otherwise required by law or regulation. HUD 
specifically solicited comment on this HERA amendment in the November 
2008 notice, but did not receive any public comment on this issue.
    HUD notes that any federally required environmental review is 
``required by law or regulation.'' Given this, there do not appear to 
be any federally required environmental reviews that would be 
eliminated by this provision. HUD also notes that under its regulations 
in 24 CFR part 58, federal environmental reviews are undertaken by 
responsible entities (usually units of general local governments), and 
not by PHAs.
    Accordingly, no changes are proposed to Sec.  983.58, except to 
make a minor change to paragraph (d) of Sec.  983.58 to note that the 
term ``release of funds'' is defined in the definition section, Sec.  
983.3, as discussed earlier in this preamble.
    PHA-Owned Units (24 CFR 983.59)--Clarifying Change. In this 
regulatory section, a paragraph is proposed to be added to clarify the 
term of the initial and renewal HAP contract. This proposed revision is 
consistent with

[[Page 28746]]

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, this rule proposes to remove 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. This requirement was not statutory but has been 
administratively imposed by HUD. HUD has now determined that the 
requirement is no longer practical or necessary. Rent reasonableness is 
based on rent comparability and, given the method by which rent 
reasonableness is now determined, such determination does not require a 
state-certified appraiser. Additionally, in practice, HUD has 
determined that the state-certified appraiser requirement has resulted 
in increased delays in the execution of ``agreements to enter into a 
housing assistance payment'' (AHAPs), due to lack of availability of 
state-certified appraisers. PHAs have also experienced significant 
increased expense in order to acquire state-certified appraisers. The 
1937 Act requires that an independent entity establish rents based on 
program requirements, and the independence of such entity, which is an 
entity approved by HUD, sufficiently ensure that rents are set 
appropriately.
    Housing Quality Standards (24 CFR 983.101)--Conforming and 
Clarifying Change. This proposed rule would revise the regulatory 
section to exclude cooperative housing from the list of special housing 
types that are inapplicable to the PBV program, for the reasons 
previously discussed in this preamble.
    Purpose and Content of the Agreement to Enter into a HAP Contract 
(24 CFR 983.152)--Clarifying Change. The preamble to the proposed rule 
for the Section 8 Project-Based Voucher program published on March 18, 
2004 (69 FR 12949), states, at 69 FR 12951, that an ``agreement is 
executed for units to be constructed or rehabilitated before the 
beginning of construction or rehabilitation.'' The fact that the 
existing regulation speaks in terms of the owner agreeing, in the 
agreement, to ``develop'' (defined as construction or rehabilitation of 
project-based voucher housing after the proposal selection date) ``the 
contract units'' supports the fact that execution of the agreement is 
required prior to the start of construction or rehabilitation. This 
proposed rule would clarify the existing regulation 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. This section, as proposed 
to be revised, would provide that construction commences when 
excavation or site preparation (including clearing of the land) begins 
for the housing. The preamble to the March 18, 2004, proposed rule also 
describes construction in this manner. Therefore, the new rule would 
simply clarify HUD's policy regarding when construction commences. In 
addition, this proposed rule would clarify that rehabilitation begins 
with the physical commencement of rehabilitation activity on the 
housing.
    This proposed rule seeks comment on the applicability of this 
requirement to projects receiving other federal funds, including 
LIHTCs, on which construction has already started. Other federal 
programs may require commencement of construction before the AHAP can 
be formalized by HUD. HUD is exploring other means of establishing 
compliance with AHAP requirements through other federal programs.
    When Agreement Is Executed (24 CFR 983.153)--Clarifying Change. 
Similar to the change made to Sec.  983.152, the proposed change to 
Sec.  983.153 would clarify when the Agreement, referenced in Sec.  
983.153, must be executed.
    Purpose of HAP contract (24 CFR 983.202)--Clarifying Change. The 
proposed revision to this section would make explicit the existing 
practice authorized by regulation, 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 
covered by a separate HAP contract under the proposed clarification.
    HAP Contract Information (24 CFR 983.203)--Conforming Change. This 
proposed rule would revise Sec.  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))--Conforming Change. 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. In the November 24, 
2008, notice, HUD advised that the provision could be implemented, 
commencing with the date of enactment of HERA, July 30, 2008. This 
proposed rule would make a conforming change to 24 CFR 983.205 to 
reflect the new HAP term.
    Extension of Initial Term (24 CFR 983.205)--Conforming Change. This 
proposed rule would make a conforming change to 24 CFR 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. A PHA may provide for multiple extensions; 
however, under no circumstances may extensions exceed 15 years 
cumulatively. The November 24, 2008, notice advised that this provision 
was self-implementing and could be utilized, commencing with the date 
of enactment of HERA, July 30, 2008, but also advised that a contract 
extension may not exceed 15 years cumulatively. Additionally, the 
November 2008 notice advised that 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. One of 
the commenters found HUD's direction that the contract extension ``may 
not exceed 15 years cumulatively'' to be ambiguous and requested that 
the conforming rule clarify that the initial contract may be up to 15 
years and that one or more extensions may be up to 15 years. The 
proposed rule makes the additional clarifying change requested by the 
commenter. For further clarity, HUD adds a cross-reference to Sec.  
983.59 to address the initial term of the HAP for PHA-owned housing.
    This proposed rule would make a clarifying change to 24 CFR 
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). This proposed rule would add 
a new Sec.  983.206 to assist PHAs in addressing the notification 
requirements established by section 8(c)(8)(A) of the 1937 Act that the 
owner must meet. Accordingly, the regulatory sections following Sec.  
983.206 are redesignated accordingly.
    HAP Contract Amendments (To Add or Substitute Units) (Redesignated 
24 CFR 983.207)--Conforming Change. Section 983.207 (formerly Sec.  
983.206) is proposed to be revised to substitute the term ``project'' 
for ``building'', consistent with the statutory change made by HERA.

[[Page 28747]]

    Owner Certification (Redesignated 24 CFR 983.210)--Conforming 
Change. Consistent with the change to Sec.  983.53 (Prohibition of 
Assistance for Ineligible Units), discussed earlier, the proposed 
change to paragraph (i) in Sec.  983.210 (formerly Sec.  983.209) would 
clarify that the owner's certification does not apply in the case of an 
assisted family's membership in a cooperative.
    This proposed rule would add a new paragraph (j) to Sec.  983.210, 
consistent with the revised definition of ``existing housing'', to 
reflect what constitutes existing PBV housing. This revision requires 
the owner of PBV property to certify that there are no plans to perform 
rehabilitation work on the existing units within one year after 
execution of the HAP contract.
    Removal of Unit from HAP Contract (24 CFR 983.211)--Clarifying 
Change. This proposed rule would add a new section, Sec.  983.211, to 
clarify for PHAs when units are to be removed from the HAP contract. 
This requirement has always existed, but it was referenced only in the 
owner certification section of the regulations in part 983. The 
inclusion of this requirement in 24 CFR 983.211 will eliminate any 
possible ambiguity about the application of this requirement.
    How Participants Are Selected (983.251(a) and (d))--Clarifying 
Change. In Sec.  983.251(a), this proposed rule would clarify the pre-
existing policy that restricts owners from leasing to family members or 
relatives. Specifically, this section is proposed to be 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. In 
this regard, this proposed rule would also provide that the owner 
certification, already required under Sec.  983.209, would include 
language that makes explicit that the unit will not be rented to the 
enumerated list of relatives.
    With respect to accommodating a family member who is a person with 
disability, this rule proposes to amend Sec.  983.251(d) by removing 
the third preference limit, which restricted the preference to 
individuals with disabilities interfering with daily activities so 
severely that adequate services were available only in a segregated 
setting. The amendment is intended to give, to persons qualifying for a 
preference for services, the option of receiving community-based 
services that may be offered outside of the particular project.
    The Lease: Provisions Governing Term of Lease and Governing Absence 
From Unit (24 CFR 983.256)--Clarifying Change. The proposed rule would 
revise Sec.  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. For example, revised paragraph (f) provides that the 
lease must allow for automatic renewal after the initial term of the 
lease and the conditions under which the lease terminates. The effect 
of this change 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.
    In Sec.  983.256, this proposed rule would substitute the term 
``family'' for ``tenant'' in Sec.  983.256(g). The substitution of 
``family'' for ``tenant'' is for consistency purposes, since the 
regulation more frequently refers to ``family'' rather than tenant. The 
proposed rule would also clarify that it is the HAP contract ``for the 
unit'' that is being referred to in the parenthetical sentence in 
paragraph (g).
    Owner Termination of Tenancy and Eviction (24 CFR 983.257)--
Conforming Change and Proposed Change. With respect to the conforming 
change, this proposed rule would revise Sec.  983.257 to substitute the 
term ``project'' for ``building'', consistent with the statutory 
change. With respect to the proposed change, this rule proposes to 
remove paragraph (b)(3) from Sec.  983.257, which allows an owner to 
refuse to renew a lease without good cause upon lease expiration. This 
change is made for the same reasons the change is made in Sec.  
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. This change is 
consistent with the purposes of the PBV program. In the project-based 
context, the owner, in executing the project-based voucher HAP 
contract, makes a long-term commitment to providing affordable housing. 
This provision will preclude an owner from effectively reneging on this 
commitment for the term of the contract by terminating tenant leases at 
the end of the initial term without good cause.
    Continuation of Housing Assistance Payments (24 CFR 983.258)--
Clarifying Change. This proposed rule would add a new Sec.  983.258 
that would clarify that housing assistance payments will 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 will be removed 
from the HAP contract pursuant to Sec.  983.211.
    Redesignated Regulatory Sections. With the addition of a new Sec.  
983.258, existing Sec.  983.258 (Security deposit; amounts owed by 
tenant) would be redesignated as Sec.  983.259, and no changes are 
proposed to be made to Sec.  983.258 as redesignated. Existing 
Sec. Sec.  983.259, 983.260, and 983.261 would be redesignated, 
respectively, as Sec. Sec.  983.260, 983.261, and 983.262.
    Overcrowded, Under-Occupied, and Accessible Units (Redesignated 24 
CFR 983.260)--Conforming Change. This proposed rule would revise Sec.  
983.260 (formerly Sec.  983.259) to include the term ``project'' in 
paragraph (b)(2)(i) of this section.
    Clarifying Change. This proposed rule would revise Sec.  983.260 to 
clarify 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.
    When Occupancy May Exceed 25 Percent Cap on the Number of PBV Units 
in Each Project (Redesignated 24 CFR 983.262)--Conforming Change. 
Section 983.262 (formerly Sec.  983.261) would revise paragraph (d) to 
substitute the term ``project'' for ``building'', consistent with the 
HERA change in terminology, and to correct an incorrect regulatory 
reference. Section 983.262 allows for the HAP contract to be amended to 
substitute a different unit in the project, in accordance with Sec.  
983.206(a). The correct reference is Sec.  983.207(a). Paragraph (b) of 
this section would also be revised to clarify existing policy 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.
    Determination of Rent to Owner (24 CFR 983.301)--Clarifying 
Changes. 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 to Sec.  
983.301(d) reflects this discretion granted to PHAs. The November 24, 
2008, notice advised that this statutory provision could be utilized 
commencing with the date of enactment of HERA, July 30, 2008. The

[[Page 28748]]

statute, however, did not alter the rent reasonableness requirements of 
section 8(o)(10)(A). These requirements must continue to be met. In 
addition, this proposed rule would revise Sec.  983.301(e) to provide 
that the rent to owner shall not be reduced below the initial rent, 
with certain limitations, in accordance with Sec.  983.302(c)(2).
    Redetermination of Rent to Owner (24 CFR 983.302)--Implementing 
Change. This proposed rule would add a new paragraph (2) to Sec.  
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 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)--Conforming Changes. Paragraph (a) 
of this section would be revised 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 will 
provide 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 Sec.  
983.302(c)(2). Paragraph (b)(2) of this section would be revised to 
include the term ``project''. Also, in paragraph (f), an incorrect 
reference to Sec.  983.58 is corrected to refer to Sec.  983.59.
    Other Subsidy: Effect on Rent to Owner (24 CFR 983.304)--Clarifying 
Change. This proposed rule would revise paragraph (e) of this section 
to clarify that rent reduction is mandatory when the results of a 
subsidy layering review disclose the need for rent reduction.

III. Regulatory Review

Executive Order 13563--Improving Regulations and Regulatory Review

    The President's Executive Order (EO) 13563, entitled ``Improving 
Regulation and Regulatory Review,'' was signed by the President on 
January 18, 2011, and published on January 21, 2011 (76 FR 3821). This 
EO requires executive agencies to analyze regulations that are 
``outmoded, ineffective, insufficient, or excessively burdensome, and 
to modify, streamline, expand, or repeal them in accordance with what 
has been learned.'' Section 4 of the EO, entitled ``Flexible 
Approaches,'' provides, in relevant part, that where relevant, 
feasible, and consistent with regulatory objectives, and to the extent 
permitted by law, each agency shall identify and consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public.
    As noted earlier in this preamble, this proposed rule would make 
conforming changes to the regulations of the Section 8 Tenant-Based 
Voucher and Section 8 Project-Based Voucher programs to reflect the 
self-executing provisions of HERA, and would also amend the regulations 
required to implement those statutory provisions of HERA that are not 
self-implementing. Additionally, the rule would make such 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. The amendments to be 
made by this rule bring the Section 8 Tenant-Based Voucher and Section 
8 Project-Based Voucher programs up-to-date with statutory requirements 
and existing policies and practices.

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 proposed 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 conforming regulatory amendments. 
This proposed 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 proposed rule would make such 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.
    Notwithstanding HUD's view that this rule will not have a 
significant effect on a substantial number of small entities, HUD 
specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment was made 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). The FONSI 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 submitted to the Office

[[Page 28749]]

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
----------------------------------------------------------------------------------------------------------------
                                                     Response
     Information collection          Number of       frequency     Total annual    Burden  hours   Total annual
                                    respondents      (average)       responses     per  response       hours
----------------------------------------------------------------------------------------------------------------
24 CFR 983.6(d)--the requirement             218               1             218            0.5              109
 that a PHA must notify HUD of
 intent to project-base its
 vouchers.......................
24 CFR 983.205(d)--requirement                15               1              15            1.0               15
 that HUD approval must be
 obtained when an owner seeks to
 terminate a HAP contract when
 rent is adjusted below the
 initial rent...................
24 CFR 983.206(b)--the                        20              30             600            0.25             150
 requirement that not less than
 one year before termination of
 a PBV or PBC contact, the owner
 must notify the PHA and
 assisted tenants of the
 termination....................
                                 -------------------------------------------------------------------------------
    Total.......................  ..............  ..............  ..............  ..............             274
----------------------------------------------------------------------------------------------------------------

    Total estimated burden hours:
    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:
    (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. Comments must refer 
to the proposal by name and docket number (FR-5242-P-01) and must be 
sent to:

HUD Desk Officer, Office of Management and Budget, New Executive Office 
Building, Washington, DC 20503, Fax: (202) 395-6947,
and

Collette Pollard, Reports Liaison Officer, Office of the Assistant 
Secretary for Public and Indian Housing, Department of Housing and 
Urban Development, Room 4160, 451 Seventh Street SW., Washington, DC 
20410-4000.

    As an alternative to the above, 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.

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 propose to 
amend 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, Public Law 109-115, 119 Stat. 2936, and Sec. 607, 
Pub. L. 109-162, 119 Stat. 3051.

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


Sec.  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.
* * * * *

[[Page 28750]]

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

    3. The authority citation for part 982 continues to read as 
follows:

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

    4. In Sec.  982.507, paragraph (a)(1) and the introductory text to 
paragraph (b) are revised, a new paragraph (c) is added, and existing 
paragraph (c) is redesignated as paragraph (d).


Sec.  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) 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) If the rent requested by the owner exceeds the LIHTC rents for 
nonvoucher 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.
* * * * *

PART 983--PROJECT-BASED VOUCHER (PBV) PROGRAM

    5. The authority citation for part 983 continues to read as 
follows:

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

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


Sec.  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 Sec.  
983.257, the provisions of Sec.  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 (Sec.  982.615 through 
Sec.  982.618), manufactured home space rental (Sec.  982.622 through 
Sec.  982.624), and the homeownership option (Sec.  982.625 through 
Sec.  982.641).
    7. In Sec.  983.3(b):
    a. Definitions for ``housing credit agency'', ``project'', 
``project-based certificate (PBC) program'', and ``release of funds 
(for purposes of environmental review)'' are added; and
    b. The following definitions are revised: ``excepted units (units 
in a multifamily building not counted against the 25 percent cap),'' 
``existing housing'', ``partially assisted building,'' ``premises,'' 
``qualifying families (for purposes of exception to 25 percent building 
cap),'' ``special housing type,'' and ``wrong-size unit''.
    c. The definition for ``state certified appraiser'' is removed.


Sec.  983.3  PBV definitions.

* * * * *
    (b) * * *
    Excepted units (units in a multifamily project not counted against 
the 25 percent per-project cap). See Sec.  983.56(b)(2)(i).
    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:
    (1) Will comply with HQS within 60 days of the date of such 
selection, and the total amount of work that must be performed to cause 
the units to comply with HQS does not exceed $1,000 per assisted unit 
(including the unit's prorated share of any work to be accomplished on 
common areas or systems); and
    (2) There is no 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 (including the unit's prorated share of any work to 
be accomplished on common areas or systems).
    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 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 Sec.  983.10).
* * * * *
    Qualifying families (for purpose of exception to 25 percent per-
project cap). See Sec.  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 Sec.  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'' (AHAP) contract or, for existing housing, to directly enter 
into a HAP with an owner of units selected under the PBV program.
* * * * *
    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 Sec.  983.5, paragraph (c) is revised to read as follows:


Sec.  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

[[Page 28751]]

PHA must notify HUD of its intent to project-base its vouchers, in 
accordance with Sec.  983.6(d).
    9. In Sec.  983.6, a new paragraph (d) is added to read as follows:


Sec.  983.6  Maximum amount of PBV assistance.

* * * * *
    (d) Before implementing a PBV program, 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 under this part and the number of units that such 
budget authority will support.
    10. In Sec.  983.9, paragraph (a)(2) is revised and a new paragraph 
(c) is added to read as follows:


Sec.  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. Assistance 
under this housing type is subject to the requirements of part 983, 
except that following, Sec. Sec.  983.256(b) and (c) 983.258, and 
983.259 of part 983, subpart F, 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. The regulations under 24 CFR 
982.619 that are applicable to rental assistance for a family that 
leases a cooperative housing unit under the PBV program from the 
cooperative. All requirements of 24 CFR 983, subpart F, apply where a 
family leases a cooperative unit under the PBV program from a 
cooperative.
    (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 
Sec.  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.
    11. In Sec.  983.10, paragraph (b) is revised and a new paragraph 
(c) is added to read as follows:


Sec.  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 Sec. Sec.  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 Sec.  983.205 of this PBV 
regulation.
    (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 PBV program.
    (B) The Lead-based Paint Poisoning Prevention Act (42 U.S.C. 
48214846), the Residential Lead-based Paint Hazard Reduction Act of 
1992 (42 U.S.C. 48514856), 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, Sec.  983.206 of this part 
applies to the PBC program.
    12. In Sec.  983.51:
    a. Paragraph (a) is revised by substituting the term ``project'' 
for ``building'' in the last sentence; and
    b. Paragraph (b)(2) is revised to read as follows:


Sec.  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.
* * * * *
    13. In Sec.  983.52, paragraph (a) is revised to read as follows.


Sec.  983.52  Housing type.

* * * * *
    (a) Existing housing. (1) 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:
    (i) Will comply with HQS within 60 days of such selection, and the 
total amount of work that must be performed to cause the units to 
comply with HQS does not exceed $1,000 per assisted unit (including the 
unit's prorated share of any work to be accomplished on common areas or 
systems); and
    (ii) There is no plan to perform rehabilitation work on the units 
within

[[Page 28752]]

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 (including the unit's prorated share of any work to be 
accomplished on common areas or systems).
    (2) Units for which rehabilitation or new construction was started, 
prior to the PHA's notice of selection, in accordance with subpart D of 
this part, do not qualify as existing housing.
* * * * *
    14. In Sec.  983.53:
    a. The word ``and'' is inserted after paragraph (a)(5);
    b. Paragraph (a)(6) is removed;
    c. Paragraph (a)(7) is redesignated as paragraph (a)(6);
    d. Paragraph (b) is removed;
    e. Paragraph (c) is redesignated as paragraph (b), and is revised 
to read as follows; and
    f. Paragraph (d) is redesignated as paragraph (c).


Sec.  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.
* * * * *
    15. In Sec.  983.55, paragraphs (a) and (b) are revised to read as 
follows:


Sec.  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. The subsidy layering requirements are not applicable to 
existing housing, nor applicable to housing selected as new 
construction or rehabilitation of housing, if HUD's designee has 
conducted a review, including 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.
* * * * *
    16. In Sec.  983.56:
    a. In the heading of Sec.  983.56, the word ``project'' is 
substituted for ``building.''
    b. The word ``project'' is substituted for ``building'' everywhere 
``building'' appears in paragraph (a), including the heading of 
paragraph (a), and in paragraph (b), including the heading of paragraph 
(b);
    c. Paragraph (b)(2)(A) is revised to read as follows;
    d. The reference to Sec.  983.261(d) in paragraph (b)(2)(B) is 
changed to Sec.  962.262(d);
    e. A new paragraph (b)(3) is added to read as follows, and existing 
paragraph (b)(3) becomes paragraph (b)(4);
    f. The word ``projects'' is substituted for the word ``building'' 
in the introductory text to paragraph (c), including the heading of 
paragraph (c); and
    g. The word ``project'' is substituted for the word ``building'' 
everywhere ``building'' appears in paragraphs (c)(1) and (c)(3).


Sec.  983.56  Cap on number of PBV units in each project.

* * * * *
    (b)(2)
* * * * *
    Elderly and/or disabled families; and/or
* * * * *
    (3) Combining exception categories. Exception categories in a 
multifamily housing project may be combined.
* * * * *
    17. In Sec.  983.58, paragraph (d)(1)(i) is revised to read as 
follows:


Sec.  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 Sec.  983.3(b);
* * * * *
    18. In Sec.  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. The heading of paragraph (d) and paragraph (d) are revised to 
read as follows:


Sec.  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 Sec. Sec.  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
    (3) Inspection of PHA-owned units as required by Sec.  983.103(f).
* * * * *
    (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.
    19. In Sec.  983.101, paragraph (b) is revised to read as follows:


Sec.  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 Sec.  983.2 are also inapplicable to special 
housing types under the PBV program.
* * * * *
    20. In Sec.  983.152, paragraph (a) is revised, a new paragraph (b) 
is added, and existing paragraphs (b) and (c) are redesignated as 
paragraphs (c) and (d), respectively:


Sec.  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 prior to the start of construction or rehabilitation. The 
Agreement must be in the form required by HUD headquarters (see 24 CFR 
982.162).

[[Page 28753]]

    (b) Commencement of construction or rehabilitation.
    (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.
* * * * *
    21. In Sec.  983.153, paragraph (c) is revised to read as follows:


Sec.  983.153  When Agreement is executed.

* * * * *
    (c) Prompt execution of Agreement. The Agreement must be executed 
as promptly as possible after the subsidy layering review is completed 
(see Sec.  983.55) and the environmental review has been completed and 
the PHA has received the environmental approval (see Sec.  983.58).
    22. In Sec.  983.202, paragraph (a) is revised to read as follows:


Sec.  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.
* * * * *
    23. In Sec.  983.203, paragraph (h) is revised to read as follows:


Sec.  983.203  HAP contract information.

* * * * *
    (h) The number of units in any project that will exceed the 25 
percent per-project cap (as described in Sec.  983.56), which will be 
set-aside for occupancy by qualifying families (elderly and/or disabled 
families and families receiving supportive services); and
* * * * *
    24. In Sec.  983.205, paragraphs (a), (b), and (d) are revised to 
read as follows:


Sec.  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 Sec.  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. 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. In 
the case of PHA-owned units, any extension of the initial term of the 
HAP contract shall be determined in accordance with Sec.  983.59.
* * * * *
    (d) Termination by owner--reduction below initial rent. The owner 
may terminate the HAP contract, upon notice to the PHA and HUD and 
approval by HUD, if the amount of the rent to owner for any contract 
unit, as adjusted in accordance with Sec.  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.
    25. A new Sec.  983.206 is added to read as follows, and Sec. Sec.  
983.206, 983.207, 983.208, and 983.209 are redesignated, respectively, 
as Sec. Sec.  983.207, 983.208, 983.209, and 983.210.


Sec.  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.


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

    26. In redesignated Sec.  983.207, paragraph (b) is revised by 
substituting the word ``project'' for ``building'' everywhere the word 
``building'' appears:
    27. In redesignated Sec.  983.210, paragraph (i) is revised and a 
new paragraph (j) is added to read as follows:


Sec.  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) The owner of a PBV project selected as an existing project does 
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 (including the unit's prorated share of any work to be 
accomplished on common areas or systems).
    28. A new Sec.  983.211 is added to read as follows:


Sec.  983.211  Removal of unit from HAP contract.

    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 HAP. 
If the project is partially assisted, and it is possible for the HAP 
contract to be amended to substitute a different unit in the project, 
the PHA may substitute a different unit for the unit removed from the 
Contract, in accordance with Sec.  983.207.
    29. In Sec.  983.251, a new paragraph (a)(4) is added, paragraph 
(d)(1)(iii) is removed and the introductory text of paragraph (d) is 
revised to read as follows:


Sec.  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.
* * * * *
    (d) Preference for services offered. In selecting families, PHAs 
may give preference to disabled families who

[[Page 28754]]

qualify for services offered at a particular project or in conjunction 
with specific unit(s), 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.
* * * * *
    30. In Sec.  983.256, paragraphs (f) and (g) are revised to read as 
follows:


Sec.  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;
    (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.)


Sec.  983.257  Owner termination of tenancy and eviction.

    31. In Sec.  983.257, paragraph (b) is removed and paragraph (c) is 
redesignated as paragraph (b) and revised by substituting the word 
``project'' for ``building''.
    32. A new Sec.  983.258 is added, and existing Sec. Sec.  983.258, 
983.259, 983.260, and 983.261 are redesignated as Sec. Sec.  983.259, 
983.260, 983.261, and 983.262, respectively.


Sec.  983.258  Continuation of housing assistance payments.

    HAPs shall continue until the tenant rent equals the rent to owner. 
The cessation of HAPs 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 HAP by the PHA. After the 180-day period, the unit 
shall be removed from the HAP contract pursuant to Sec.  983.211.
    33. In redesignated Sec.  983.260:
    a. The word ``project'' is substituted for ``building'' everywhere 
the word ``building'' appears in paragraph (b)(2)(i), and paragraph (c) 
is revised to read as follows:


Sec.  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 HAP 
contract 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.
* * * * *
    34. In redesignated Sec.  983.262, paragraph (b) is revised to read 
as follows, and the word ``project'' is substituted for ``building'' 
everywhere the word ``building'' appears in paragraph (d), and the 
reference to Sec.  983.206(a) in paragraph (d) is changed to Sec.  
983.207(a).


Sec.  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.
* * * * *
    35. In Sec.  983.301, paragraphs (d) and (e) are revised to read as 
follows:


Sec.  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 Sec.  983.303. 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.
* * * * *
    36. In Sec.  983.302, paragraph (c) is revised to read as follows, 
and the reference to Sec.  983.206(c) is changed toSec.  983.207(c):


Sec.  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 Sec.  983.301, the rent to owner must 
be decreased, regardless of whether the owner requested a rent 
adjustment.
    (2) 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 Sec.  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.
* * * * *
    37. In Sec.  983.303, paragraphs (a), (b)(3), and (f)(1) are 
revised to read as follows:


Sec.  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 the rent to 
owner shall not be reduced below the initial rent in accordance with 
Sec.  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 Sec.  983.59, 
rather than by the PHA. The reasonable rent must be determined in 
accordance with this section.
* * * * *
    38. In Sec.  983.304, paragraph (e) is revised to read as follows:


Sec.  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

[[Page 28755]]

to owner because of other governmental subsidies, including tax credits 
or tax exemptions, grants, or other subsidized financing.

    Dated: April 12, 2012.
Sandra B. Henriquez,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 2012-11638 Filed 5-14-12; 8:45 am]
BILLING CODE 4210-67-P