[Federal Register Volume 83, Number 144 (Thursday, July 26, 2018)]
[Notices]
[Pages 35490-35494]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-15941]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-5976-N-07]
Housing Opportunity Through Modernization Act of 2016: Final
Implementation of Public Housing Income Limit
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: The Housing Opportunity Through Modernization Act of 2016
(HOTMA) was signed into law on July 29, 2016. One of the statutory
amendments made by HOTMA adds an income limit to the Public Housing
program. This notice informs the public of how HUD is setting that
income limit and makes the income limit effective, while providing
information to public
[[Page 35491]]
housing agencies on how to start the process for tracking over-income
families.
DATES: Applicable Date: September 24, 2018.
FOR FURTHER INFORMATION CONTACT: If you have any questions, please
contact Todd Thomas, Program Analyst, Office of Public Housing
Programs, at 202-402-4542, or send an email to [email protected].
SUPPLEMENTARY INFORMATION:
I. Background
HOTMA was signed into law on July 29, 2016 (Pub. L. 114-201, 130
Stat. 782). Section 103 of HOTMA amends section 16(a) of the United
States Housing Act of 1937 (42 U.S.C. 1437n(a)) (1937 Act) to place an
income limitation on a public housing tenancy for families. The law
requires that after a family's income has exceeded 120 percent of the
area median income (AMI) (or a different limitation established by the
Secretary) for two consecutive years, a public housing agency (PHA)
must terminate the family's tenancy within 6 months of the second
income determination or charge the family a monthly rent equal to the
greater of (1) the applicable Fair Market Rent (FMR); or (2) the amount
of monthly subsidy for the unit including amounts from the operating
and capital fund, as determined by regulations. For purposes of this
notice, the income limit established by HOTMA will be referred to as
the ``over-income limit''. A PHA must notify a family of the potential
changes to monthly rent after one year of the family's income exceeding
the over-income limit. Pursuant to section 3(a)(5) of the 1937 Act, the
over-income limit does not apply to PHAs operating fewer than 250
public housing units that are renting to families with income exceeding
the over-income limit, if the PHAs are renting to those families
because there are no income-eligible families on the PHA's waiting
list. Each PHA must submit a report annually to HUD about the number of
families residing in public housing with incomes exceeding the over-
income limit and the number of families on the waiting lists for
admission to public housing projects. Such reports must be publicly
available.
The new language in section 16(a)(5) of the 1937 Act sets the over-
income limit at 120 percent of the AMI. However, HUD has the ability to
adjust the over-income limit if the Secretary determines that it is
necessary due to prevailing levels of construction costs or unusually
high or low family incomes, vacancy rates, or rental costs.
On November 29, 2016, at 81 FR 85996, HUD published a notice
soliciting public input on a proposal to determine the over-income
limit by using the very low-income (VLI) level for the applicable area
as the baseline and multiplying it by 2.4. Because VLI is preliminarily
calculated as 50 percent of the estimated AMI for the family, in most
cases this would result in a figure matching 120 percent AMI. However,
in areas where the VLI has been adjusted to account for high or low
housing costs or to prevent it from being lower than 50 percent of the
State non-metro median family income, the final amount would result in
an adjusted eligibility income limit, as well.
HUD's income limits were developed by HUD's Office of Policy
Development and Research and are updated annually. Information about
HUD's income limits and HUD's methodology for adjusting income limits
as part of the income limit calculation can be found at https://www.huduser.gov/portal/datasets/il/il16/index_il2016.html.
This notice finalizes how the over-income limit is determined and
informs PHAs how to begin implementing the statutory income limit for
public housing. However, this notice does not address how a PHA is to
determine the monthly subsidy to use in setting rents for over-income
families that the PHA has allowed to remain in public housing. Section
103 of HOTMA requires HUD to issue a regulation on that determination,
and HUD will follow this notice with a proposed rule, which will also
include guidelines for how PHAs are to set their policies for
addressing over-income families after the 2-year grace period has
ended. Additionally, this notice does not make effective the
requirement to submit the annual report on the number of over-income
families and the number of families on the public housing waiting
lists. HUD intends to make this reporting requirement effective through
a forthcoming notice.
The regulations at 24 CFR 960.261 provide discretion to PHAs to
evict or terminate assistance to families whose income exceeds the
local low-income limit, except for families with a valid Family Self-
Sufficiency (FSS) contract, or families where at least one family
member is receiving the Earned Income Disregard benefit. The statutory
changes in section 103 of HOTMA do not address the treatment of
families whose income exceeds the local low-income limit but is below
the applicable over-income limit established in HOTMA. As such, the
requirements and flexibilities provided through the regulations at 24
CFR 960.216 continue to apply for families with incomes above the local
low-income limit but below the over-income limit established in this
notice.
II. Summary of Comments
In response to the November 29, 2017, notice, HUD received 11
comments.
Adjustments
1. Commenters stated that HUD should never adjust the over-income
limit downward (below 120 percent AMI), but rather use it as a floor
for all areas and only adjust upward for high-cost areas. Others stated
that it is necessary to keep as many higher-income families in public
housing as possible to subsidize the lower-income families,
particularly in light of reduced public housing funding.
HUD Response: HUD disagrees with the suggestion that 120 percent of
AMI should be a floor for over-income families. Section 16(a)(5) of the
1937 Act provides discretion to HUD to establish income limits higher
or lower than 120 percent of AMI to account for several factors
including construction costs, family incomes, vacancy rates, or rental
costs. HUD's methodology considers several of these factors and makes
proportional adjustments. Were HUD to establish a floor of 120 percent,
residents in localities with higher housing costs would receive
disproportionate treatment than those in lower housing cost areas. HUD
believes its methodology adequately makes proportional adjustments--
both upward and downward--to reflect the factors required by the
statute.
HUD also recognizes the concern that higher-income families allow
PHAs to more deeply subsidize lower-income families. The statute allows
PHAs to continue to house over-income families without providing them
subsidy, if the PHA opts to do so. HUD will issue further guidance to
PHAs on how to set their over-income policies.
2. Commenters asked that HUD include adjustments based on
construction costs and vacancy rates, as those are two cost categories
included in the statute but not contemplated in HUD's proposal. Some
stated that HUD should include local vacancy rates in adjusting the
income limit. Others also asked that HUD should include factors for
increasing the limit for larger families and should consider family
composition so as not to penalize families with an adult child
beginning to work who will soon leave the household.
HUD Response: HUD's methodology takes into account local housing
market factors such as construction costs and vacancy rates by using
the metropolitan-
[[Page 35492]]
wide FMR to make adjustments for high and low housing costs.
Specifically, HUD develops its FMRs annually using survey data of local
gross rents paid, which are based on local housing market factors,
including vacancy rates. Therefore, HUD will not make separate
adjustments to the over-income limit because the FMR used to adjust
income limits where necessary has already factored in such costs in its
current methodology.
HUD's program income limits are also adjusted by household size
such that a 1-person family has a different income limit value than the
value for a 4-person or 8-person family. HUD will annually publish the
over-income limits for each locality, specifying over-income limits for
each family size. However, HUD has no discretion to consider family
composition related to the over-income limit.
3. Commenters stated that using income definitions used for
admissions limits may be inappropriate for determining the over-income
limit, as factors that are important at very low-income levels may not
be important at 120 percent AMI, and vice versa.
HUD Response: HUD disagrees that the factors used to make
adjustments to very low-income limits are inappropriate for determining
an over-income limit. The factors HUD uses for the very low-income
limits consider local family incomes and local housing costs. HUD
adjusts the very low-income limits upward and downward based on changes
to family incomes, changes in housing costs, and to account for large
spikes in changes to family incomes at the local level. HUD believes
that these adjustments are precisely the types of adjustments included
in section 16(a)(5) of the 1937 Act and therefore respectfully declines
to amend its methodology.
Annual Reviews
Commenters stated that some PHAs use forms for annual
reexaminations instead of forms for a unit change when program
participants move units. The commenters asked if whether the two
consecutive income reviews specified by HOTMA to judge whether a family
has been over the income limit means two subsequent Annual 50058s or 24
months of 50058s reporting that the family is over the income
threshold.
HUD Response: HUD intends to provide guidance on how to notify
families, track over-income families, and report into HUD systems.
However, to this specific question, the statute requires that a
household must have maintained an income above the limit for two
consecutive years before a PHA may terminate or raise rents on that
household. If a PHA becomes aware, through an annual reexamination or
an interim reexamination for an increase in income, that a family has
reached the over-income limit, that will be the point in time for which
the two-year clock will start.
Caps on Changes
Commenters asked if HUD was going to impose a 5 percent cap on
changes to the over-income limit that would be on top of caps on
changes already in place related to program income limits and, if so,
asked HUD to provide additional justification for and examples of this
policy. Others stated that HUD should eliminate the 5 percent ceiling
for increase in the very low-income limit to account for expensive
rental markets, but only for the purpose of determining the over-income
limits.
HUD Response: HUD does not intend to impose additional adjustments
beyond those adjustments made by HUD to the very low-income limits,
which includes a 5 percent cap on annual changes to such income limits.
Specifically, HUD's current cap on income limit increases is the
greater of 5 percent or twice the increase in national median income
growth. Because there is a two-year process to declare a family
ineligible for public housing subsidy under section 16(a)(5) of the
1937 Act, large increases to the over-income limit for higher rental
markets may result in families who are over-income in one year not
being considered over-income in the second year as the over-income
limit is adjusted upward in subsequent years.
Exemptions
1. Commenters pointed out that the notice states that PHAs housing
families with incomes over 120 percent AMI under section 3(a)(5) of the
1937 Act are exempt from the income limit in HOTMA, but that the
statutory provision was directed at individual families and did not
seem to encompass the entire PHA.
HUD Response: Section 3(a)(5) of the 1937 Act permits PHAs
operating fewer than 250 units to admit families that are not low-
income at the time of admission into the program under certain
circumstances as included in 24 CFR 960.503. HOTMA reiterates that
families admitted by such PHAs under the circumstances included in
section 3(a)(5) are not subject to the over-income limit. The
requirements, including those governing rental payments for such
families, will continue as established in 24 CFR 960.503. However,
families served by PHAs operating fewer than 250 units that were not
admitted under the circumstances included in section 3(a)(5) will be
subject to the over-income limit established in HOTMA and made
effective by this notice.
2. Commenters recommended that HUD include exemptions from the
over-income limit for vulnerable populations, including seniors and
disabled individuals and those that face specific financial constraints
(e.g., large families). Some stated that HUD should provide an explicit
exemption to over-income limits for families participating in self-
sufficiency programs. Commenters also stated that PHAs should be
required to consider whether evicting a family for having an income
that exceeds the over-income limit would create a hardship (such as for
a household member caring for a relative close to the home or if a
household member is ill). Others asked that HUD allow PHAs the ability
to apply for an exception to the over-income limit entirely, based on
the local market and conditions.
HUD Response: HUD does not have the authority under HOTMA to permit
PHAs to exempt any public housing family from the over-income
limitation established by HOTMA. However, PHAs are required to
establish policies for continued occupancy in public housing. Through
the development of those policies, a PHA is able to consider specific
circumstances in which they would provide for flexibility in the
administration of over-income requirements, provided such policies are
in compliance with the 1937 Act and all applicable fair housing
requirements. PHAs are subject to, among other fair housing and civil
rights authorities, Section 504 of the Rehabilitation Act (Section
504), the Fair Housing Act, and Title II of the Americans with
Disabilities Act (ADA), which include, among other requirements, the
obligation to grant reasonable accommodations that may be necessary for
persons with disabilities.
Fair Market Rents (FMRs)
1. Commenters stated that new guidance on small area fair market
rents (SAFMRs) might make calculation of income thresholds
administratively cumbersome for PHAs.
HUD Response: For each locality, HUD will publish over-income
limits annually. Therefore, there is no associated burden on PHAs to
calculate the over-income limits.
2. Commenters stated that FMRs do not accurately reflect rental
market prices and that they are too volatile year-to-year, and are
therefore
[[Page 35493]]
inappropriate to use when determining very low-incomes.
HUD Response: FMRs are HUD's best estimates of gross rents paid in
each locality for which FMRs are published. Therefore, FMRs represent
the best known, consistently calculated measurement of housing costs
across the country. Furthermore, as required by section 107 of HOTMA,
HUD will publish annual notices of proposed material changes in the
methodology for estimating FMRs for public comment. The Federal
Register notice announcing proposed material changes in the methodology
for estimating FY 2018 FMRs, published June 26, 2017, at 82 FR 24377,
contains specific proposals to limit the year-to-year volatility in FMR
estimates that are concerning to the commenters.
3. Commenters stated that HUD should consider additional changes to
the VLI FMR determination only for the purpose of determining the
income limit. The commenters asked that HUD increase the annualized
two-bedroom FMR from 85 percent to 100 percent to follow the
expectation that FMRs allow access to 40-50 percent of the rental
market in any given area. The commenters also suggested that HUD change
the VLI limit from 35 percent to 30 percent.
HUD Response: The current high housing cost adjustment is that the
4-person very low-income limit is increased if the limit would
otherwise be less than the amount at which 35 percent of it equals 85
percent of the annualized two-bedroom 40th percentile rent in the area.
This adjusts income limits upward for areas where rental housing costs
are unusually high in relation to the median income. The high housing
cost adjustment is not meant to mimic programmatic requirements but to
increase income limits in areas where the housing cost relative to
incomes are extreme high.
Mixed Income Developments
1. Commenters stated that a barrier to implementing the income
limit is that many public housing developments use Low-Income Housing
Tax Credits, and the tax credit program does not allow PHAs to
terminate households from affordable housing programs when household
income increases over time. They asked that HUD and the Department of
Treasury more closely align their policies.
HUD Response: HUD's and Treasury's policies are aligned when it
comes to the treatment of over-income families. HUD regulations protect
initially qualifying households from being displaced as their income
rises, provided that their income remains below 80 percent AMI, which
is a statutorily mandated public housing income limit. Similarly, under
Treasury's regulations, the fact that a family is over-income under the
Tax Credit program (which generally has a lower income limit than the
public housing program) does not by itself amount to good cause for
lease termination, although the over-income designation may affect the
tax credits.
2. Commenters urged HUD to consider implementing a mechanism where
public housing tenants in a mixed-finance building can switch to a
market unit if the family's income exceeds the applicable over-income
limit (freeing up an ACC unit), but allowing them to easily access a
subsidized unit again should the family's income drop again.
HUD Response: HUD appreciates the comment and will take it in
consideration during the rulemaking stage, which will address how a PHA
determines its policies on dealing with over-income families after the
2-year grace period.
Over-Income Tenants
1. Commenters asked whether the decision to require an over-income
family to vacate the unit or charge them the greater of FMR or the
subsidy amount is a decision that a PHA can make on a unit-by-unit
basis or whether it must be an agency-wide policy decision.
HUD Response: As with any other discretion provided to PHAs, PHAs
are required to develop policies in their Admissions and Continued
Occupancy Policies (ACOP) regarding when families will be permitted to
remain in the unit and pay an alternative rent or be terminated. All
such decisions must be consistent with applicable non-discrimination
and other fair housing requirements. HUD will further address this
issue in the rulemaking stage.
2. Commenters stated that the assumption in HOTMA that families
with incomes exceeding the applicable over-income limit will be able to
find housing in the private market is unrealistic in cities with very
expensive housing markets.
HUD Response: HUD recognizes the concern expressed by this
commenter, which is the reason that HUD chose to exercise its authority
to establish higher over-income limits for such cities.
Utility Allowance
Commenters asked whether, when charging over-income families FMR,
the PHA would be allowed to reduce the FMR rent for the utility
allowance.
HUD Response: This question is outside of the scope of this notice.
In a forthcoming rulemaking, HUD will address the alternative rent
options. HUD will specifically address the implications of utility
allowances in that rulemaking.
Reports to HUD
Commenters asked for additional guidance on what the report on
over-income families (required by HOTMA) would look like.
HUD Response: Under the new requirements in the 1937 Act, PHAs will
need to report annually on the number of over-income families residing
in public housing and the number of families on the admissions waiting
lists for public housing at the end of that year. The report will be in
a format specified by HUD in the future.
Temporary Income Decreases
Commenters asked if the two-year over-income clock is restarted if
a family has a temporary decrease in income.
HUD Response: If a family requests an interim reexamination, which
then demonstrates that a family's income has dropped below the over-
income limit, the family is no longer considered over-income. If a PHA
becomes aware, through a subsequent annual reexamination or an interim
reexamination that the family's income has increased to an amount that
exceeds the over-income limit, the family would begin a new two-year
clock.
Other Questions
1. Commenters asked for additional clarity on how HUD will
determine rent structures for over-income families that the PHA allows
to stay in their unit.
HUD Response: This question is outside of the scope of this notice.
In a forthcoming rulemaking, HUD will address the alternative rent
options.
2. Commenters stated that HUD should explicitly require compliance
with fair housing and civil rights laws in its implementing
regulations.
HUD Response: HUD appreciates the concerns regarding fair housing
and civil rights laws. PHAs, in the administration of their public
housing program, are always required to comply with fair housing and
civil rights laws and their implementing regulations. HUD will consider
whether any reference to fair housing and civil rights laws and
regulations in forthcoming program regulations would be particularly
helpful during the rulemaking stage.
[[Page 35494]]
3. Commenters stated that HUD should try to streamline its over-
income policies across multiple HUD programs.
HUD Response: HUD appreciates the suggestion. However, this comment
is outside of the scope of this notice. In many cases, over-income
policies vary by program due to program design and funding structures,
so HUD is limited in its ability to align such requirements.
III. Implementation
Through this notice, HUD is announcing that as of the date this
notice is effective, HUD will be following the provisions of section
16(a)(5) of the 1937 Act, as added by section 103 of HOTMA, using the
method of determining the over-income limit as described in the
November 29, 2016, notice. PHAs must update their Admissions and
Continued Occupancy Policies (ACOP) to implement these changes. Such
policies must include the imposition of an over-income limit in the
program, all instances of when the two-year timeframe begins, and
notification requirements. If the implementation of this provision
requires a significant amendment to a PHA's annual plan, a PHA should
immediately take steps to complete the significant amendment process in
order to effectuate the policy change. PHAs must complete all relevant
policy and PHA plan changes no later than 6 months after the effective
date of this notice.
Once a PHA has completed updates to its ACOP and, if necessary, its
PHA plan, when the PHA becomes aware, through an annual reexamination
or an interim reexamination for an increase in income, that a family's
income exceeds the applicable income limit, the PHA must, per section
16(a)(5) of the 1937 Act, document that the family exceeds the
threshold to compare with the family's income a year later.
If, one year after the initial determination by the PHA that a
family's income exceeds the over-income limit, the family's income
continues to exceed the over-income limit, the PHA must, as required by
section 16(a)(5) of the 1937 Act, provide written notification to the
family that their income has exceeded the over-income limit for one
year, and that if the family's income continues to exceed the over-
income limit for the next 12 consecutive months, the family will be
subject to either a higher rent or termination based on the PHA's
policies. If, however, a PHA discovers through an annual or interim
reexamination that a previously over-income family has income that is
now below the over-income limit, the family is no longer subject to
these provisions. The family is entitled to a new 2-year grace period
if the family's income once again exceeds the over-income limit.
HUD will provide additional information on where to locate
applicable income limits, guidelines for PHAs to set alternative rents
for over-income families, and any other guidance regarding this
provision in a forthcoming notice.
IV. Environmental Impact Certification
This notice involves statutorily required income limits and
exclusions with regard to eligibility for or calculation of HUD housing
assistance or rental assistance which does not constitute a development
decision affecting the physical condition of specific project areas or
building sites. Accordingly, under 24 CFR 50.19(c)(6), this notice is
categorically excluded from environmental review under the National
Environmental Policy Act of 1969 (42 U.S.C. 4321).
Dated: July 9, 2018.
Danielle Bastarache,
Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 2018-15941 Filed 7-25-18; 8:45 am]
BILLING CODE 4210-67-P