U.S. Department of Housing and Urban Development

Community Planning and Development

Special Attention of: Notice CPD 96-07

All Secretary\'s Representatives

All State/Area Coordinators Issued: November 1, 1996

Regional Directors for CPD Expires: November 1, 1997

CPD Division Directors

All HOME Coordinators

All HOME Participating Jurisdictions Cross References: 24 CFR 92.209

Subject: Guidance on Tenant-Based Rental Assistance under the HOME

Program.

TABLE OF CONTENTS

I. PURPOSE 2

II\. BACKGROUND 2

III\. SUSPENSION OF FEDERAL PREFERENCES 3

IV\. ELIGIBLE ACTIVITIES 4

V. PROGRAM ADMINISTRATION 5

VI\. TENANT SELECTION 7

VII\. PROGRAM REQUIREMENTS 12

VIII\. SECURITY DEPOSIT PROGRAM 19

APP. SECTION 8 INCOME DEFINITION \--

ADDITIONAL EXCLUSIONS 21

DGHP: Distribution: W-3-1

1\. PURPOSE

This notice outlines the basic requirements for using HOME funds

for a tenant-based rental assistance (TBRA) program. The Department

will also issue a model program that expands upon this notice. The

purpose of the model will be to assist State and local participating

jurisdictions (PJs) with basic decisions regarding TBRA program design

and operation.

The Department has exercised its discretion based on the statute

to make the TBRA program, as described in recent regulations and this

notice, flexible and responsive to local market conditions and housing

needs. The current regulations may not address all the design or

operational considerations. As a result, some PJs may wish to

structure TBRA programs in a manner that is not entirely consistent

with HOME regulations. In some instances, it may be possible to waive

certain regulatory requirements, if statutory flexibility exists and

the PJ can demonstrate good cause for the request.

II\. BACKGROUND

TBRA was first authorized under section 212 of the Cranston-Gonzalez
National Affordable Housing Act (NAHA). HUD implemented the

basic requirements for using HOME funds for TBRA through publication

of interim regulations at [24 CFR Part
92](http://www.hud.gov/offices/cpd/affordablehousing/lawsandregs/regs/home/index.cfm)
on December 16, 1991. TBRA

programs directly assist individual low-income families by making up

the difference between actual housing costs and what a family can

afford to pay. Tenants are free to select any standard unit, whether

or not it is HOME-assisted.

In October, 1992, the initial TBRA provisions were amended by

section 220 of the Housing and Community Development Act (HCDA) of

1992\. HCDA made two significant amendments. First, it eliminated the

provision that required PJs to use the local Section 8 waiting list to

determine who would receive assistance. Instead, PJs were permitted

to select tenants in accordance with written tenant selection policies

and criteria that provide housing to low and very low-income families

and were reasonably related to the Federal preferences. Second, it

permitted PJs to administer programs that provide only security

deposit assistance, rather than requiring that security deposits only

be provided in the context of an ongoing rental assistance program.

These statutory revisions have been incorporated by interim rules

published in the Federal Register on December 22, 1992 and June 23,

1993\.

HUD also implemented regulatory changes to provide PJs greater

flexibility in administering TBRA programs. Publication of a rule on

April 19, 1994 made it possible for a PJ to establish its own payment

standard based on local market conditions and a determination of rent

reasonableness. The rule further clarified the term \"reasonably

related to Federal preferences\" and permitted a PJ\'s non-Federal

contributions to a TBRA program that is not HOME-funded, other than

contributions for administrative costs, to count as match for the HOME

2

Program. A rule published on July 12, 1995 provided information on

using HOME TBRA to assist special needs populations.

On January 26, 1996, the Balanced Budget Downpayment Act, I,

suspended the Federal preferences applicable to public housing

admissions and the Section 8 voucher and certificate programs for

Fiscal Year 1996 (which ended on September 30, 1996). HUD\'s FY 1997

appropriation act extended this suspension through Fiscal Year 1997,

which ends on September 30, 1997. During Fiscal Year 1997, public

housing authorities are authorized to establish their own preferences.

These local preferences may be established after opportunity for

public notice and comment and must be consistent with the

jurisdiction\'s Consolidated Plan. The temporary suspension of the

Federal preferences extends to the selection criteria for TBRA

programs funded by HOME.

III\. SUSPENSION OF FEDERAL PREFERENCES

As described in the previous section of this notice, the Federal

preference requirements applicable to HOME-funded TBRA programs have

been suspended for the remainder of Fiscal Year 1997. The effect of

this suspension is to permit a PJ to establish and provide TBRA based

entirely on a locally-established system of written tenant selection

criteria that is consistent with its Consolidated Plan. During this

time period, the preferences established by the PJ must be consistent

with the purposes of providing assistance to very low- and low-income

families. However, locally-established preferences will not be

required to be reasonably related to the Federal preferences.

For a PJ that is currently administering a TBRA program, the

effect of this suspension may be simply to permit it to alter the

order in which families on the waiting list are selected, based upon

its system of preferences. Alternately, a PJ may wish to

fundamentally change its TBRA program by establishing a preference

system very different than the one it currently administers. For a PJ

that is in the process of designing a TBRA program, this suspension

may affect its program design and tenant selection system.

The current suspension is temporary. Legislative action will be

necessary to extend the suspension beyond September 30, 1997 or to

make it permanent. Before making any changes to an existing or

proposed TBRA program, a PJ should consider whether it could easily

bring its program back into conformance with the law if the suspension

terminates.

This notice assumes that the Federal preference suspension will

continue on a provisional basis. However, because the suspension may

not be in effect beyond September 30, 1997, it also outlines the

requirements that would apply to HOME TBRA programs should the

suspension not be extended or made permanent. At the time that this

Notice was published, the Congress was considering rescinding the

Housing Act of 1937 which contains the Federal preference requirements.

3

Should Congress take such action, it would eliminate the need for the
PJ\'s written tenant selection criteria to be reasonably related to
Federal preferences. Each PJ would be free to establish tenant selection
criteria based solely on the needs identified in its Consolidated Plan.

IV\. ELIGIBLE ACTIVITIES

A. Eligible Uses

HOME TBRA can be used to undertake one or a combination of the

following activities:

Free-standing rental assistance. A PJ may administer a rental

assistance program to assist low- and very low-income families.

These freestanding programs are similar to the Section 8

certificate and voucher programs in that tenants choose their

housing within guidelines established by the PJ.

Special purpose programs. Within limitations described in

Section VII, E of this notice, PJs can use TBRA to support a

variety of local goals including self-sufficiency and

homeownership initiatives and assistance to special populations.

o Self-sufficiency programs. PJs may require HOME TBRA

recipients to participate in self-sufficiency programs as a

condition of assistance. However, such conditions may not

be placed on tenants living in a HOME-assisted project who

receive TBRA as relocation assistance.

o Homebuyer programs. HOME TBRA may assist a tenant, who has

been identified as a potential low-income homebuyer through

a lease-purchase agreement, with monthly rental payments for

a period up to 36 months. ^1^ While the HOME TBRA payment

cannot be used to create equity, all or a portion of the

homebuyer\'s monthly contribution toward housing expenses may

be set aside for this purpose. If a PJ determines that a

tenant has met the lease-purchase criteria and is ready to

assume ownership, HOME funds may be provided for downpayment

assistance.

o Targeted Populations. PJs may establish local preferences

for special needs groups in a broad, community-wide TBRA

program or may design a program that exclusively serves one

or more special needs groups.

Anti-displacement assistance. TBRA can be used to minimize

displacement associated with HOME-funded activities. TBRA can be

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

^1^ HOME TBRA may not exceed 24 months but may be renewed at the PJ\'s

discretion.

4

provided to income-eligible tenants who live in units that will

be acquired, demolished or rehabilitated with HOME funds.

Existing tenants in HOME-assisted projects who receive TBRA may

remain in the project or move to another suitable unit. These

tenants may be assisted with TBRA regardless of whether the PJ

administers a broader TBRA program and are not required to meet

written tenant selection policies and criteria. ^2^

Security and utility deposit assistance. PJs may provide

security deposit assistance to tenants regardless of whether the

PJ is providing ongoing tenant-based rental assistance. Utility

deposit assistance may be provided only in conjunction with a

TBRA program or a security deposit program.

B. Ineligible Uses

HOME TBRA funds cannot be used for the following:

o to assist resident owners of cooperative housing that

qualifies as homeownership housing (cooperative and mutual

housing may qualify as either rental or owner-occupied

housing under the HOME Program, depending upon the

provisions of the agreement applying to the unit). TBRA

may, however, be used by a tenant who is renting from a

cooperative unit owner;

o to prevent the displacement of tenants from projects

assisted with Rental Rehabilitation Program funds under 24

CFR 511. (See [24 CFR
92.214](http://www.hud.gov/offices/cpd/affordablehousing/lawsandregs/regs/home/sube/92214.cfm));

o to provide TBRA vouchers to homeless persons for overnight

or temporary shelter. The HOME TBRA subsidy must be

sufficient to enable the homeless person to rent a

transitional or permanent housing unit that meets Housing

Quality Standards (HQS).

V. PROGRAM ADMINISTRATION

Certification - To establish a TBRA program, a PJ must certify in its

Consolidated Plan that TBRA is an essential part of its approved

housing strategy and that market conditions in the locality make TBRA

a viable option. This means that an assessment of market factors has

been

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

^2^ The 1992 HCDA amendments require the PJ to certify in its

Consolidated Plan that it has a Residential Anti-displacement and

Relocation Plan for the HOME Program equivalent to the Plan required

for the Community Development Block Grant (CDBG) Program.

5

undertaken and, because there is an ample supply of housing, a TBRA

program is an effective way to expand affordable housing opportunities

in the community.

Program Operation - A PJ may administer its TBRA program or contract

administrative functions out to another entity, such as a local public

housing agency (PHA), another public or private agency, or a nonprofit

organization. In deciding whether to administer its program or

contract out, the PJ should consider its TBRA program design. If its

TBRA program will be modeled after the Section 8 certificate or

voucher programs or uses the Section 8 waiting list, it may be

administratively simpler to contract with the PHA. Alternately, if

the program will use an independent waiting list or target special

populations, it may be preferable for the PJ or another entity to

administer the TBRA program.

A PJ that is an urban county or consortium may establish a TBRA

program that is limited to a single or multiple jurisdictions, but

does not encompass the entire PJ. For instance, one local government

participating in a consortium may administer a TBRA program in its

jurisdiction.

It should be noted that the provision of TBRA is not an eligible

Community Housing Development Organization (CHDO) set-aside activity.

If a PJ selects a CHDO to administer its TBRA program, the CHDO is

acting as a subrecipient and general HOME program funds (not CHDO

set-aside funds) must be used.

Administrative Costs - HOME funds may be used to pay for reasonable

planning and administrative expenses associated with operating a TBRA

program, regardless of what entity operates the program. Such

expenses are limited by the ten percent cap on administrative costs.

TBRA administrative costs are not considered \"project soft costs\"

under [24 CFR
92.206](http://www.hud.gov/offices/cpd/affordablehousing/lawsandregs/regs/home/sube/92206.cfm)(b).

Match - As with all HOME activities, TBRA program expenditures require

a 25% local match. A PJ may count non-Federal funds that it

contributes to its HOME TBRA program as a matching contribution. It

may also count as match any funds it contributes to a TBRA program

which does not use HOME funds but meets the HOME Program requirements

(see [24 CFR
92.219](http://www.hud.gov/offices/cpd/affordablehousing/lawsandregs/regs/home/sube/92219.cfm)(b)(1)).
HOME funds expended for TBRA may be matched

with funds from any eligible match source, not just TBRA-related

contributions. Payment of costs associated with administration of a

TBRA program does not count as match.

TBRA Project Set-Up - To access funds, information concerning the

project must first be provided through the HOME Cash and Management

Information System (C/MI), or the Integrated Data and Information

System (IDIS), which is replacing the C/MI. Until a PJ has been

converted to IDIS, all TBRA projects set up through the C/MI system

should be reported on Form HUD-40095. Each TBRA project may include

several hundred individual households. Once a TBRA project has been

6

set up, the PJ may add families to the project for up to 6 months.

The TBRA set-up form requires each tenant\'s Social Security number and

certain demographic information.

The set-up of TBRA projects in IDIS is similar to the set-up in the

HOME C/Ml. However, there is neither a limitation on the number of

households that can be included in a single project (referred to as an

activity in IDIS) nor a time limit for adding families to the project.

Drawing Down Funds - As with all HOME funds, TBRA funds drawn from the

U.S. Treasury must be expended within 15 days. Thus, draws may not be

made for TBRA on a quarterly basis.

VI\. TENANT SELECTION

A. Income Eligibility/Verification

HOME funds can only be used to assist low-income families with incomes

at or below 80% of area median income as determined by HUD. In

addition, for each fiscal year\'s HOME allocation, 90% of the families

assisted with HOME funds for TBRA and other rental activities must

have incomes which are at or below 60% of area median income (see 24

[CFR
92.216](http://www.hud.gov/offices/cpd/affordablehousing/lawsandregs/regs/home/sube/92216.cfm)).

The PJ must determine the income and eligibility of all proposed

beneficiaries before the TBRA contract is signed. The HOME final

rule, which was published on September 16, 1996, amended the income

definition to permit PJs to choose from among three definitions of

income (the Section 8 definition, the U.S. Census long form

definition, and the IRS definition of adjusted gross income). A PJ

that chooses the Section 8 definition of income for its TBRA program

should follow the procedures outlined in the Technical Guide for

Determining Income and Allowances for the HOME Program, which HUD

issued in May, 1994. In addition, PJs should note that a rule

published on April 5, 1996 added nine exclusions to the definition of

income applicable to HOME TBRA programs. That definition was

subsequently moved to 24 CFR 5.609 by a regulation published on

October 18, 1996. (See the Appendix to this notice for a list of the

nine additional exclusions). PJs opting for the IRS or Census

definitions must adhere to the instructions developed by those

agencies for calculating income.

In accordance with the Section 8 program rule at 24 CFR 982.352(c)(6),

Section 8 rental assistance voucher and certificate holders cannot

also receive TBRA under the HOME Program because the two programs

would provide duplicative subsidies. HOME TBRA recipients who are

offered a Section 8 voucher or certificate must relinquish HOME

assistance, if they wish to accept the Section 8 assistance.

Similarly, a family currently receiving Section 8 rental assistance

may not accept HOME TBRA without relinquishing

7

the Section 8 assistance. However, a Section 8 rental assistance

recipient \@a receive HOME-funded security deposit and utility deposit

assistance.

Similarly, a family cannot receive HOME TBRA if they are receiving

rental assistance under another Federal program (e.g., Section 521 of

the Housing Act of 1949 provided through the Rural Housing Service) or

a State or local rental assistance program, if the HOME subsidy would

result in duplicative subsidies to the family. \[NOTE: Some State and

local rental assistance programs do not provide assistance in amounts

sufficient to lower a tenant\'s rental payment to 30 percent of income.

In such cases, HOME TBRA could be provided as supplemental assistance

to further reduce the tenant\'s rent payment to 30 percent of income.\]

In addition, HOME TBRA should not be provided to a family who proposes

to rent a unit that receives project-based rental assistance through

Federal, State or local programs, if the HOME assistance would provide

a duplicative subsidy.

Income and eligibility determinations for a newly-participating tenant

remain valid for up to six months. Income eligibility criteria must

be met, regardless of the type of TBRA program the PJ will administer

(i.e., anti-displacement, security deposit, or freestanding). Special

needs populations are not presumed to be low-income.

The PJ (or TBRA administrator) must reexamine family income, size, and

composition at least annually. The family\'s contribution toward rent

may need to be adjusted as a result of the annual income

reexamination. Although not required by the HOME regulations, the PJ

may require families to report changes in income that occur between

annual income examinations.

Because HOME funds may only be used to assist families with incomes at

or below 80% of area median income, assistance to tenants whose

incomes rise above 80% of area median income must be terminated after

the PJ gives reasonable notice to tenant and owner. Since the PJ

normally would make any required payment adjustment or contract

termination at the end of the rental lease period, it should time the

income recertification process so that tenants whose assistance will

be terminated or whose required contributions toward rent will be

increased can be given reasonable notice of the change. In

determining what period constitutes reasonable notice, the PJ should

consult both State law and common practice in the area.

B. Tenant Selection Criteria

Scenario 1: Under the Federal Preference Suspension

The HOME Program rule requires that PJs select tenants in accordance

with written tenant selection policies and criteria. These policies

and criteria must be consistent with the purpose of providing housing

to very low- and low-income families. Under the temporary suspension

of the Federal preferences in effect until September 30, 1997, PJs may

establish their own preference systems for selecting families for

rental assistance.

8

The locally-established preference system must be consistent with the

priorities established in the Consolidated Plan.

The Federal preference suspension applies to PHAs administering

Section 8 rental assistance, as well as to PJs administering HOME

TBRA. A PHA and a PJ administering rental assistance in the same

jurisdiction are not required to use the same preference system.

However, HUD encourages entities providing assistance to families

within the same jurisdiction to coordinate their efforts to the

greatest extent possible.

Scenario 2: Elimination of the Housing Act of 1937

Should Congress rescind the Housing Act of 1937, there would no

longer be any Federal preferences for admission to public housing and

Section 8 assistance. Consequently, PJs would no longer be required

to establish preferences for their TBRA programs that are reasonably

related to the Federal preferences. Each PJ administering a TBRA

program would establish a written tenant selection system consistent

with the needs identified in its Consolidated Plan.

Scenario 3: Federal Preference Requirements In Effect (suspended

through 9/30/97)

PJs that operate TBRA programs must select tenants in accordance with

written tenant selection policies and criteria. The policies and

criteria must be consistent with the purpose of providing housing to

very low- and low-income families and be reasonably related to

preference rules established under section 6(c)(4)(A) of the U.S.

Housing Act of 1937.

The term \"reasonably related to Federal preference rules\" means that

at least 50% of the families assisted must qualify for one of the

three Federal preferences. Those Federal preferences are:

o families living in substandard housing, including families

that are homeless or living in a shelter for homeless

families;

o families paying more than 50% of family income (gross) for

rent; or

o families involuntarily displaced at the time they are

seeking TBRA assistance.

PJs may rank the Federal preferences to serve those families they deem

most in need. For instance, a PJ may give preference to families who

are involuntarily displaced over those living in substandard housing.

In addition, the PJ may rank the definitional elements of each Federal

preference to reflect its own priorities.

Section 6(c)(4)(A) of the Housing Act of 1937 requires that PHA\'s

prohibit any individual or family evicted from public housing or

assisted under

9

Section 8 because of drug-related criminal activity from having a

preference for three years, unless the evicted tenant successfully

completes a rehabilitation program approved by the agency. Each PJ

should determine whether this or a similar policy is appropriate for

its HOME TBRA program.

The PJ may establish local preferences for assisting the 50% of

families who are not required to qualify for a Federal preference.

Local preferences must be established in writing and respond to local

housing needs and priorities.

Examples of local preferences that might be provided include

preferences for families who:

o have veteran\'s status;

o lack adequate housing and whose children eventually may be

proposed for placement in foster care as a result. (These

families are usually identified by local agencies that are

involved in providing for children\'s welfare);

o are members of special needs populations, such as battered

spouses, persons with AIDS, senior citizens or those with

disabilities.

In establishing local preferences, PJs must consider how specific

preferences will impact fair housing efforts in its community. The

local preferences must not result in discrimination against any person

on the basis of race, color, religion, sex, national origin, handicap

or familial status. In monitoring a PJ\'s fair housing efforts, HUD\'s

Office of Fair Housing and Equal Opportunity will consider both the

intent and the effect of local preference rules.

C. Waiting Lists

To implement its tenant selection policies for an ongoing TBRA program

in a fair and orderly manner, a PJ must use a waiting list for

families applying for TBRA. The PJ may choose to use a Section 8

waiting list that covers the jurisdiction or may establish a separate

waiting list for HOME TBRA applicants. In determining which list to

use, the PJ will need to consider the following factors:

o The preferences established by the PHA and how those

preferences compare with the Pj\'s priorities for assistance.

If the PHA has adopted its own preferences as permitted

under the temporary suspension of Federal preferences, the

PJ should examine those preferences. If the suspension is

terminated or the PHA has chosen not to establish its own

preference system, the PJ should examine both the local

preferences established by the PHA and the manner in which

it prioritizes the Federal preferences. If the

10

PHA\'s preference system will not result in assistance being

provided to the subpopulations that the PJ deems most in

need, the PJ should consider establishing a separate HOME

TBRA waiting list.

o The length of the PHA\'s Section 8 waiting list and the

turnover rate of vouchers and certificates. In communities

where the existing Section 8 waiting list is very long and

the unavailability of new or turnover resources results in

long periods on the waiting list, a PJ\'s priority may be to

provide interim assistance to families who are currently on

the Section 8 waiting list. In these instances, the PJ will

adopt the Section 8 waiting list and use HOME TBRA to

supplement the existing Section 8 program.

o The PJs preferred program design. If the PJ wishes to

administer a TBRA program that closely resembles the Section

8 voucher or certificate program and finds the PHA\'s

preference system acceptable, it may wish to adopt the

Section 8 waiting list (and, perhaps, to contract with the

PHA as the administering agent) for simplicity\'s sake.

However, if the PJ wishes to implement a program that is

very different from the Section 8 programs, there may be no

advantage in adopting the Section 8 waiting list.

o The Pj\'s capacity and preference with respect to an

administering agent. If the PJ plans to administer the TBRA

program itself or to contract out with a capable nonprofit

organization, it will have flexibility with respect to

choosing a waiting list for its program. However, if the PJ

lacks capacity to administer the program and chooses to

contract with a PHA, it may have little choice but to adopt

the PHA waiting list. The PHA may be reluctant to take on

the added responsibility of establishing and maintaining a

separate waiting list and administering selection criteria

that are very different from its existing program.

D. Section 8 Availability

The HOME statute requires that families who receive HOME TBRA and are

also on the Section 8 waiting list continue to qualify for Section 8

assistance to the same extent as they did before they received the

HOME TBRA. Consequently, when the Federal preferences are in force,

the PHA must carefully document how an applicant for HOME assistance

who is also on the Section 8 waiting list meets Federal preference

requirements at the time HOME assistance is provided to preserve the

applicant\'s qualification to receive future Section 8 assistance. If

a Section 8 voucher or certificate becomes available through turnover

or additional budget authority and the next eligible family on the

Section 8 waiting list is a HOME TBRA recipient, that family must be

offered a Section 8 voucher or certificate. The PJ and PHA should

develop a procedure for offering Section 8 assistance to HOME TBRA

recipients who become eligible for a voucher or certificate at regular

intervals (e.g., monthly, quarterly, or less frequently, depending on

average turnover of vouchers and certificates).

11

Under the current suspension of Federal preferences, the PJ should

document how the HOME TBRA recipient meets Federal preference

requirements and, if the PHA has adopted a local preference system,

the local preference requirements. This will permit the PJ to

determine a HOME TBRA recipient\'s initial eligibility for Section 8

under the Federal preference system if the suspension lapses.

Should legislation permanently eliminate the Federal preferences, the

HOME Program requirement that HOME TBRA recipients maintain their

place and status on the Section 8 waiting list would also be

eliminated. However, HOME TBRA is often a temporary resource for a

low-income family. Consequently, the PJ should coordinate with the

local PHA so that the PHA\'s policies do not disqualify applicants who

come to the top of Section 8 waiting list because they are currently

receiving HOME TBRA.

E. Assisting Special Needs Populations

HOME TBRA may be used to assist special needs populations

regardless of whether the Federal preference suspension is in effect.

This can be done in one of two ways:

o General TBRA Program. A PJ administering a community-wide TBRA

program may establish a local preference for persons with special

needs (e.g., persons with disabilities) or for a specific

category of individuals with special needs (e.g., chronically

mentally ill individuals). A preference may be provided for

persons with a particular type of special need, if the specific

category of need is identified in the PJ\'s consolidated plan as

having unmet need and the preference is needed to narrow the gap

in benefits and services received by such persons.

In conjunction with the TBRA, the PJ may offer non-mandatory

services appropriate for persons with a particular disability.

The nature of these services should be identified in consultation

with persons with special needs residing in the community.

Generally, TBRA and related services should be made available to

all persons with disabilities who can benefit from such services.

o TBRA Program for Persons with Special Needs. A PJ may establish a

TBRA category of special needs or disabilities. The PJ may

accomplish this simply by limiting eligibility for assistance to

special needs groups it wishes to target. If the Federal

preference rules are in effect, then 50% of the individuals

assisted must qualify or would qualify in the near future for a

Federal preference. As with a general TBRA program, the PJ may

provide appropriate, non-mandatory social services in conjunction

with the TBRA. TBRA may be provided exclusively to persons with

a particular type of special need, if the specific category of

need is identified in the PJ\'s consolidated plan as having unmet

need and the preference is needed to narrow the gap in benefits

and services received by such persons.

12

VII\. PROGRAM REQUIREMENTS

A. Rent Requirements

Payment Standards

Each PJ administering a TBRA program must establish a payment standard

for units of each available bedroom size. This standard is intended

to represent the rent and utility costs of moderately priced units

that meet the Section 8 Housing Quality Standards (HQS) in the

jurisdiction. It is important that the PJ establish its payment

standard carefully. A standard that is set too low in comparison to

the market will result in assisted families experiencing difficulty in

finding housing. A payment standard that is set too high will result

in excessive subsidies and fewer families being assisted.

A PJ may determine its HOME payment standard in one of two ways:

1\) The PJ may develop a standard based on documented local market

conditions.

2\) To conform more closely to PHA rent standards, the PJ may adhere

to the following:

o For each unit size, the rent standard may not be less than

80% of the published Section 8 Existing Housing fair market

rent (FMR) in effect when the PJ adopts its rent standard

amount.

o For each unit size, the rent standard may not be more than

the FMR or HUD-approved community-wide exception rent

(discussed below) in effect when the PJ adopts its rent

standard amount.

o For not more than 20% of the total number of units assisted

in their TBRA program, a PJ may approve, on a unit-by-unit

basis, a subsidy based on a rent standard that exceeds the

applicable FMR by up to ten percent.

NOTE: The PJ must disapprove a lease if the rent is not reasonable,

based on rents that are charged for comparable unassisted

rental units.

13

Community-wide Exception Rents

Under certain circumstances, HUD approves maximum gross rents for the

Section 8 Certificate Program for units in a designated municipality,

county or similar locality that are higher than the FMR (see 24 CFR,

882.106(a)(3)). These rents, generally referred to as community-wide

exception rents, may equal up to 120% of the FMR applicable to the

entire jurisdiction.

The PJ may use HUD-approved exception rents in lieu of the FMR to

establish the rent standard for HOME TBRA. HOME does not require that

a PJ provide additional rationale for adopting exception rents.

TBRA in HOME-Assisted Units

Rents in HOME-assisted units must meet the requirements of 24 CFR

92.252. When a family that receives HOME TBRA resides in a HOME-assisted
unit, the maximum rental assistance subsidy is the difference

between the HOME rent and 30% of the family\'s adjusted monthly income.

PJ and Tenant Rent Contributions

The maximum amount of subsidy the PJ may provide to a family is \' the

difference between 30% of the family\'s monthly adjusted income and the

payment standard established by the PJ for the size of unit the family

will occupy. The PJ\'s contribution toward rent may vary each year

because the family moves, the rent on the unit increases or decreases,

or the family\'s income changes.

The PJ also must establish a minimum tenant rent contribution. If the

PJ is assisting a tenant with a very low-income, that contribution may

be minimal.

If a PJ contracts with a PHA to operate its program, it may wish to

adopt the Section 8 housing certificate or voucher program rules.

Under the certificate program, families pay a specified percentage of

their income for housing, usually 30%, and a limit is set on what the

owner can charge for rent. Housing vouchers assume that the family

will pay 30% of adjusted income, but do not limit the amount an owner

can charge for rent. Vouchers limit only the subsidy amount and,

therefore, a family may pay more than 30% of its income for rent. A

tenant\'s contribution to rent may change each year as a result of

changes in adjusted family income. HUD generally publishes area

median incomes in January.

Rent Increases and Decreases

The owner may adjust the rent levels as leases are renewed. They must

be reviewed and approved by the PJ. HUD generally publishes FMRs in

late September.

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B. Terms of Assistance

Unlike the Section 8 programs which make payments to the landlord,

HOME TBRA payments may be made either to the unit owner or the tenant.

The term of the rental assistance contract must begin on the first day

of the lease. For a rental assistance contract between the PJ and an

owner, the term of the contract must end upon termination of the

lease. If a PJ makes payments directly to the family, that agreement

need not end upon termination of the lease, but no payments may be

made after termination of the lease until the family enters into a new

lease.

TBRA agreements may not exceed 24 months. However, the PJ, at its

discretion, may renew a TBRA agreement.

C. Lease Requirements

The term of the lease between a tenant and the owner must be for not

less than one year, unless another term is mutually agreed upon by the

tenant and the owner.

The lease may not contain any of the following terms (see 24 CFR

92.253(b)):

o agreement by the tenant to be sued, to admit guilt, or to a

judgment in favor of the owner in a lawsuit brought in

connection with the lease.

o agreement by the tenant that the owner may take, hold or

sell personal property of household members without notice

to the tenant and a court decision on the rights of the

parties. This prohibition, however, does not apply to an

agreement by the tenant concerning disposition of personal

property remaining in the housing unit after the tenant has

moved out of the unit. In that case, the owner may dispose

of this personal property in accordance with state law.

o agreement by the tenant not to hold the owner or the owner\'s

agents legally responsible for any action or the failure to

act, whether intentional or negligent.

o agreement of the tenant that the owner may institute a

lawsuit without notice to the tenant.

o agreement by the tenant that the owner may evict the tenant

or household members without instituting a civil court

proceeding in which the tenant has the opportunity to

present a defense or before a court decision on the rights

of the parties.

o agreement by the tenant to waive any right to a trial by

jury.

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o agreement by the tenant to waive the tenant\'s right to

appeal or to otherwise challenge in court a decision in

connection with the lease.

o agreement by the tenant to pay attorney fees or other legal

costs even if the tenant wins in a court proceeding by the

owner against the tenant. The tenant, however, may be

obligated to pay costs if the tenant loses.

D. Termination of Tenancy

The PJ must develop standards outlining when unit owners may terminate

tenancy or refuse to renew a lease in its TBRA program. These

standards must be established in writing and be included in the lease

between the owner and the TBRA recipient and/or, if appropriate, the

TBRA agreement between the PJ and tenant. The PJ should address the

permissible grounds for termination or tenancy/refusal to renew and

establish notification requirements for these actions. Please note

that the requirement for 30 days notice for termination of

tenancy/refusal to renew in HOME-assisted units does not apply to

owners of units occupied by HOME TBRA recipients.

E. Portability

The PJ may require tenants to use their TBRA within the PJ or may

establish a portability policy, allowing use of TBRA outside of the

jurisdiction. The experience of many PHAs using portable housing

vouchers has been that most tenants move to nearby jurisdictions,

usually only across city or county lines.

If a PJ permits portability, it must develop procedures to satisfy

HOME TBRA requirements at a distance. Unless it limits portability to

contiguous jurisdictions, it may be impractical for the PJ to attempt

to oversee the program itself. Thus, it may wish to make arrangements

with a government agency or PHA in the jurisdiction to which the

family is moving to administer the TBRA or to use a subrecipient or

contractor to do so. Requirements that the PJ should consider in

establishing a portability policy include the need to:

o initially and annually inspect units occupied by TBRA

families;

o execute necessary documents with the family and the owner;

and

o make monthly rent payments and/or security deposit payments

on behalf of the PJ to the owner and/or utility companies.

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F. Eligible Units

The PJ must establish occupancy standards that will be used to

determine the unit size (i.e., number of bedrooms) that TBRA families

of various sizes and composition will be permitted to occupy. The

PJ\'s standards for occupancy must be at least as stringent as those

set out in the Section 8 Housing Quality Standards (HQS). At the time

that it is approved for TBRA, the family should be counseled regarding

the size of the unit for which it is approved, whether it will be

permitted to select a unit that is larger or smaller than the approved

unit size and what the consequences of such a decision will be with

respect to the family\'s monthly contribution toward rent. The PJ may

refer the TBRA family to suitable units. However, the PJ must inform

the family that it is not obligated to select a referral unit.

Rental units are selected by the tenant, and:

o may be owned by the PJ, a PHA or another public entity or be

privately owned housing;

o may include units developed or rehabilitated with HOME

assistance;

o may be transitional housing units, if the lease terms meet

the minimum lease requirements;

o must not be units receiving public or Indian housing

assistance, any Section 8 rent subsidies, or any other

Federal, State or local subsidy that provides a duplicative

subsidy to the HOME TBRA recipient or the unit which they

propose to rent; and

o if part of a cooperative, must be rented from the owner of

the cooperative unit. HOME TBRA cannot be used to pay

cooperative shares if the cooperative membership is

considered ownership under HOME.

In conjunction with the annual reexamination of income, the PJ must

reexamine the TBRA family\'s size and composition to determine whether

its circumstances have changed. Depending upon the occupancy

requirements established by the PJ, a family whose size or composition

has changed may be required to find a unit that is suitable to its

current circumstances.

Housing occupied by a family receiving TBRA must meet Section 8 HQS.

The housing must meet both the performance and acceptability

requirements outlined at 24 CFR 982.401. PJs may request waivers to

permit specific variations on HQS. Examples that may justify

deviations include local climatic or geological conditions or local

codes. The PJ must inspect units selected by families receiving TBRA

to determine whether they

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meet HQS before authorizing their initial rental and, thereafter, must

inspect the units annually. The owner must maintain the premises in

compliance with all applicable housing quality standards and local

code requirements throughout the period of the TBRA family\'s

occupancy.

G. Self-Sufficiency Programs

PJs administering a freestanding TBRA program may require HOME TBRA

recipients to participate in self-sufficiency programs as a condition

of assistance. All terms and conditions of participation should be

clearly spelled out in the written agreement between the tenant and

the PJ.

During the term of the TBRA contract, the PJ may not withdraw rental

assistance based on the tenant\'s failure to continue participation in

the program without providing proper notice in accordance with the

standards the PJ established in the TBRA agreement. Because it may

prove administratively simpler, PJs considering conditioning rental

assistance on participation in such programs may wish to limit the

term of assistance to a short period of time (e.g., 6 or 12 months)

rather than attempting to terminate assistance for noncompliance

during the contract term. In such instances, TBRA participants should

be assured that the assistance will be renewed if the conditions

established by the PJ are met.

H. Making the Payments

Unlike the Section 8 program, which requires that subsidy payments be

made directly to the owner, a PJ using HOME TBRA funds may provide

monthly payments to the tenant directly or to the owner on behalf of

the tenant.

Paying tenants directly may eliminate paperwork and save staff time

because no contract between the PJ and owner is necessary. The PJ

must, however, examine the lease to make certain it does not contain

prohibited lease terms and inspect the unit. A \"real-world\"
tenant-owner

market relationship, in which tenants pay owners, results. If

the PJ makes payments directly to tenants, the contract should include

provisions to recoup HOME funds for nonpayment of rent.

If the PJ decides to pay owners directly, the PJ has the advantage of

negotiating the rent. Also, paying the owner directly may encourage

private owners to participate because they will receive at least a

partial rent payment from the PJ each month. If a PHA administers the

program for the PJ, this procedure may be preferable because Section 8

payments are made only to owners. Consequently, the HOME TBRA

payments can be easily integrated into the PHA\'s financial management

system, resulting in lower front-end and processing costs.

The PJ also may choose to reimburse tenants for rent paid to the

owner. However, this may not be practical because families may not

have the money up-front to make their entire rent payment.

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I. Utility Deposits

The PJ may pay utility deposits for tenants who are also participating

in a TBRA program or a security deposit program. Deposits may be made

for utilities authorized under the Section 8 utility allowance (such

as electric, gas, water and trash). Deposits for services incidental

to housing, such as telephone service and cable television, cannot be

paid with HOME funds.

The PJ may make the utility deposit available to the family as a loan

or grant or may make payment directly to the utility company. If

offered as a grant, the tenant may keep any remaining funds when the

family departs from the unit. If offered as a loan, the PJ must make

arrangements with the tenant or utility company to return any

remaining funds to it. Returned funds are treated as program income

and must be reinvested in other HOME-eligible activities (see 24 CFR

92.503(b)). In determining whether to grant or loan these funds, the

PJ should consider the time and effort involved in collecting any

remaining funds from the tenant or utility company.

VIII\. SECURITY DEPOSIT PROGRAM

TBRA may be used for security deposits, regardless of whether the

tenant is receiving ongoing rental assistance. For a security deposit

program:

o the relevant state or, local definition of \"security

deposit\" in the jurisdiction where the unit is located

applies.

o the maximum amount of HOME funds that may be provided for a

security deposit is the equivalent of two months rent for

the unit.

o only the prospective tenant, not the unit owner, may apply

for HOME security deposit assistance.

o all of the above TBRA requirements apply except for the term

of assistance and maximum subsidy amount.

o the lease associated with the security deposit may not

contain the prohibited lease provisions outlined in Section

VII, C, of this notice and must be in effect for at least

one year unless there is mutual agreement between landlord

and tenant.

o payment may be made to the tenant or the landlord.

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The PJ may provide security deposits as either a grant or a loan. If

offered as a grant, the tenant may keep any remaining funds when the

family leaves the unit. If the PJ lends the funds, it must arrange

for the tenant or owner to return the funds. If the unit owner

subtracts funds from the security deposit to cover damages, the PJ may

accept the remaining balance as repayment or require the tenant to

repay the entire amount. This requirement should be set out in the

written agreement between the PJ and the tenant. In determining

whether to grant or loan these funds, the PJ should consider the time

and effort involved in collecting any remaining security deposit funds

from the tenant or owner after the tenant leaves the unit. Returned

security deposit funds are treated as program income and must be

reinvested in HOME-eligible activities (see [24 CFR
92.503](http://www.hud.gov/offices/cpd/affordablehousing/lawsandregs/regs/home/subk/92503.cfm)(b)).

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APPENDIX: Exclusions from Income Under Section 8 Income Definition

Annual income does not include the following:

1\) Resident service stipends of less than \$200 per month (e.g., fire
patrol, hall monitoring, lawn maintenance, resident initiatives
coordination, and resident management).

2\) Adoption assistance payments.

3\) The full amount of student financial assistance paid directly to the
student or to the educational institution.

4\) Earned income of full-time students age 18 years or older.

5\) Payments received for the care of foster adults (usually persons
with disabilities, unrelated to the tenant family, who are unable to
live alone).

6\) State or local employment training programs and training of resident
management staff.

7\) State tax rent credits and rebates for property taxes paid on a
dwelling unit.

8\) Homecare payments made by a State agency to families that have
developmentally disabled children or adult family members living at
home.

9\) Deferred periodic payments of Social Security. Supplemental Income
payments and Social Security payments received in a lump sum.

Source: 24 CFR 5.609(c).

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