U.S. Department of Housing and Urban Development

Office of Public and Indian Housing

Special Attention: Notice PIH 98-19 (HA)

Directors, Offices of Public Housing; Issued: April 3, 1998

Administrators, Offices of Native Expires: April 30, 1999

American Programs; Directors,

Offices of Housing; and Section 8 Cross References:

Public Housing Agencies

Subject: Tenant-Based Rental Vouchers or Certificates for Eligible
Residents of Preservation Eligible Projects Approved for Prepayment of
the Mortgage or Voluntary Termination of the Mortgage Insurance in
Federal FY 1998

1\. [Purpose.]{.underline} This notice alerts public housing agencies
(HAs) that the Department of Housing and Urban Development (HUD) will
provide funds for Section 8 tenant-based assistance to assist certain
residents of preservation eligible projects where the owner elects to
prepay the mortgage or is approved for voluntary termination of a
mortgage insurance contract in Fiscal Year 1998. The notice also
provides information on the unique statutory requirements governing
these special preservation rental vouchers and certificates.

This notice covers projects where the owner prepays or voluntarily
terminates the mortgage insurance contract on eligible low-income
housing in FY 1998. [Except for section 11, this notice does not apply
to prepayments or voluntary terminations that occurred in FY 1996 or FY
1997 and does not supersede HUD Notice PIH 96-61 or HUD Notice PIH
97-29.]{.underline} The policies and procedures outlined by those
notices remain in effect for projects that prepaid or voluntarily
terminated the mortgage insurance in FY 1996 or FY 1997.

2.  [Background.]{.underline} The Department of Housing and Urban
    Development\'s FY 1998 Appropriations Act (Public Law 105-65,
    enacted on October 27, 1997) makes funding available for
    \"enhanced\" vouchers as provided under the \'Preserving Existing
    Housing Investment\' account in the Department\'s FY 1997
    Appropriations Act. This means that subject to the availability of
    appropriated funds, certain families residing in an eligible
    preservation project on the date of the owner\'s prepayment or
    voluntary termination will be offered tenant-based assistance under
    Section 8 if, as the result of a rent increase no later than one
    year after the date of the owner\'s prepayment or voluntary
    termination, the family\'s rent exceeds 30 percent of adjusted
    income.

The law establishes special requirements concerning the minimum amount
of the family\'s contribution towards rent. The law also provides a
special voucher payment standard or certificate Fair Market Rent (FMR)
for families that choose to stay in their current units.

Tenant-based assistance will be offered to eligible residents of
projects covered by the Emergency Low-Income Housing Preservation Act of
1987 (ELIHPA) and the Low Income Housing Preservation and Resident
Homeownership Act of 1990 (LIHPRHA). HUD\'s Office of Housing will
identify eligible projects for assistance under these provisions. To be
considered an eligible project, the project must have reached its 20th
year from final endorsement and meet one of the following criteria:

\(a\) Section 221(d)(3) market rate limited distribution owners
receiving Section 8 payments coverted from Rent Supplement whose project
number series is 35001-36599;

\(b\) all Section 221(d)(3) below market interest rate owners whose
project number series are 55001-55999 and 57501-57999, unless a Rent
Supplement Contract remains in effect between HUD and the mortgagor;

\(c\) all Section 236 project owners whose project number series are
44001-44799; 44801-44899; 45001-45999; and 58501-58999, unless a Rent
Supplement Contract remains in effect between HUD and the mortgagor;

\(d\) a purchase money mortgage formerly insured under Section 221(d)(3)
or 236 and now held by HUD; or

\(e\) a mortgage held by a state agency as a result of a sale by HUD
without insurance, which immediately before the sale would have been
eligible low-income housing under LIHPRHA; which mortgage (1) for
LIHPRHA projects is, or is within 2 years of being, eligible for
prepayment by contract or regulation in effect before February 5, 1988
without HUD\'s prior approval; or (2) for ELIHPA projects is, or is
within 1 year of being, eligible for prepayment under regulation or
contract in effect before February 5, 1988.

3\. [HUD State and Area Offices will Contact HAs.]{.underline} HUD\'s
Office of Public and Indian Housing and the Office of Housing will issue
guidance covering the specific procedures for the processing of the
Section 8 preservation tenant-based assistance in the near future. In
the interim, HAs and HUD field offices should continue to follow the
procedures in Preservation Letter 97-4.

The HUD State or Area Office of Public Housing will contact an
appropriate HA with jurisdiction in the area where each eligible project
is located to determine if the HA is willing to administer the
tenant-based voucher or certificate assistance for the eligible families
living in each affected development. The HUD State or Area Office
decides which HA is the appropriate agency to administer the
tenant-based rental assistance.

4\. [Family Eligibility for the Special Rental Vouchers or
Certificates]{.underline}.

\(A\) [Income Eligibility]{.underline}. In order to be eligible for one
of the special rental vouchers or certificates, the resident must be
either:

\(1\) a low-income family (including very low-income families);

\(2\) a moderate-income elderly or disabled family; or

\(3\) a moderate-income family residing in a low-vacancy area (3 percent
or less vacancy rate). HUD is responsible for determining whether the
project where the owner is prepaying or voluntarily terminating the
mortgage insurance is located in a low-vacancy area.

A [low-income]{.underline} family is a family whose annual income does
not exceed 80 percent of the median income for the area, as determined
by HUD, with adjustments for smaller and larger families.

A [moderate-income]{.underline} family is a family whose annual income
is above 80 percent but does not exceed 95 percent of the area median
income.

A resident family is only eligible for one of the special certificates
and vouchers made available due to the owner\'s prepayment or voluntary
termination if the family qualifies under one of the categories above
[on the effective date of the prepayment or voluntary
termination]{.underline}. A resident family that does not fall into one
of those categories on the effective date of the prepayment or voluntary
termination is not eligible for one of these special preservation
certificates and vouchers, regardless of whether the family\'s situation
changes during the following year.

\(B\) [Unassisted and Assisted Families]{.underline}. Both unassisted
and assisted families may be eligible for the special certificate and
voucher assistance made available for prepayments or voluntary
terminations that occur in FY 1998.

\(1\) [Families with Section 8 tenant-based certificate and voucher
assistance at the time of prepayment or voluntary
termination]{.underline}. A Section 8 certificate or voucher participant
who is residing in the project at the time of the prepayment may be
covered by the special provisions of the preservation certificates and
vouchers if the family chooses to remain in the unit. The applicability
of the special conditions for residents who are already assisted under
the Section 8 tenant-based programs at the date of the prepayment or
voluntary termination are discussed in [section 9]{.underline} of this
notice.

\(2\) [Families assisted under a Section 8 LMSA contract.]{.underline}
Any family receiving LMSA assistance will continue to receive this
assistance until the LMSA contract expires. Subject to the availability
of appropriated funds and provided the owner gave the six month opt-out
notice, the family may receive a special preservation rental voucher if
the owner prepays in FY 1998 and the LMSA contract expires no later than
one year after the date of the prepayment/voluntary termination.

If the owner prepaid in FY 1998 and the LMSA contract does not expire
within one year of the date of the prepayment, the family is not
eligible for a special certificate or voucher. Upon expiration of the
LMSA contract, the family will receive a regular voucher or certificate
and the special provisions regarding the FMR/payment standard and the
minimum rent will not apply.

5\. [HUD identifies potentially eligible families.]{.underline} Upon
owner notification of intent to prepay the mortgage or terminate the
insurance, and confirmation from the appropriate HA that it will
administer the Section 8 assistance, the HUD State or Area Office of
Housing is responsible for ensuring that each potentially eligible
family in the affected project receives a letter identifying the
administering HA and describing the circumstances under which the family
may qualify for one of these special rental vouchers or certificates.
The letter will provide information to the family about contacting the
HA. If the owner has not yet notified the family of a rent increase, the
potentially eligible family will be directed to also contact the HA once
the owner notifies the family of a rent increase effective within one
year from the effective date of the prepayment/voluntary termination.

The HUD State or Area Office will promptly send the administering HA a
list identifying all potentially eligible families, a copy of the most
recent HUD

Form 50059 for each of the families, and the rents for the eligible
project on the date of the prepayment or voluntary termination. If
possible, the HUD State or Area Office will also send the owner\'s
proposed new rents and the effective date of the rent increase for each
family to the HA. However, the family is ultimately responsible for
contacting the administering HA when the owner informs the family of the
proposed rent increase.

The HA must determine if the family meets the definition of a low-income
family, a moderate income elderly or disabled family, or a moderate
income family in a low vacancy area (provided HUD has informed the
administering HA that the low vacancy area category is applicable due to
the location of the project) on the effective date of the prepayment.

The HA may deny an applicant a preservation voucher or certificate under
any of the grounds listed for denial of rental assistance at §982.552.
The HA must provide an applicant that is denied assistance under those
grounds with an opportunity for an informal review as required by
§982.554. In accordance with the program regulations at §982.201(e), the
HA must receive information verifying that an applicant is eligible
within the period of 60 days before the HA issues a certificate or
voucher to the applicant.

6\. [Rent Increase Effective No Later Than One Year After the Date of
Prepayment or Voluntary Termination that Results in Family Paying More
than 30 Percent of Adjusted Income for Rent]{.underline}. An owner may
not increase the rent for at least sixty days after the effective date
of the prepayment/voluntary termination. In addition, the prepayment of
the mortgage or the approval of the voluntary termination of a mortgage
insurance contract or a preservation eligible project does not in itself
terminate or modify the terms and conditions of the existing leases
between the owner and the current residents of the project. An owner may
only legally increase the rent or terminate the lease as provided under
the terms of the lease and in accordance with state and local law.

Regardless of whether the family has met the income eligibility
requirements described in section 4 of this notice, the family may only
receive a preservation rental voucher or certificate if:

\(a\) The family lived in the project on the effective date of the
prepayment,

\(b\) A rent increase will take effect no later than one year after the
effective date of the prepayment or voluntary termination, and

\(c\) The amount the family pays for gross rent would exceed 30 percent
of the family\'s adjusted monthly income as a result of the owner\'s
rent increase.

A family already paying more than 30 percent of adjusted monthly income
for gross rent on the effective date of the prepayment or termination
may still qualify for the preservation certificate or voucher. Provided
the owner proposes to increase the rent in the year following the
prepayment or termination and the new rent paid by the family exceeds 30
percent of the family\'s adjusted monthly income, the family is eligible
for preservation tenant-based assistance.

To qualify for issuance of special preservation tenant-based assistance,
the rent increase must be effective no later than one year after the
effective date of the prepayment or voluntary termination. A family does
not qualify for preservation tenant-based assistance on the basis of a
rent increase that becomes effective after the one year anniversary date
of the prepayment or voluntary termination.

Gross rent is the sum of the rent payable to the owner and any utility
allowance. (If the proposed contract rent does not include all the
utilities, the utility allowance schedule of the administering HA is
used to calculate the new gross rent of the unit.) The family must
present documentation confirming that the owner intends to increase the
rent, and the amount the family must pay for rent after the increase
(e.g., the owner\'s rent increase notice or a letter from the owner
indicating the owner intends to increase the rent, the amount of the
rent demanded by the owner, and the effective date of the rent
increase).

When the family contacts the administering HA, the HA must determine if
the family would be paying more than

30 percent of adjusted monthly income for gross rent after the owner\'s
rent increase takes effect. If the family would not have to pay more
than 30 percent of adjusted monthly income for gross rent after the rent
increase, the family is [not]{.underline} eligible to receive the
preservation rental voucher or certificate assistance, regardless of
whether they met the income requirement.

7\. [Issuance of Certificate or Voucher.]{.underline} (This section does
not apply to residents currently assisted under the regular certificate
or voucher program at the time of the prepayment/voluntary termination.)
[In general, eligible families will receive preservation voucher
assistance as the result of a prepayment or voluntary termination in FY
1998]{.underline}.

The HA issues the preservation voucher or certificate to the eligible
family. The HA should make every effort to issue a family that wishes to
move the voucher or certificate 60 days prior to the effective date of
the owner\'s rent increase. However, it is recognized that in many cases
this will not be possible.

If an eligible family chooses to stay in the family\'s present unit, the
HA may not enter into a HAP contract that commences prior to the
effective date of the owner\'s rent increase.

8\. [Special Conditions of Preservation Tenant-based
Assistance]{.underline}.

There are several special requirements for the preservation certificates
and vouchers. In all other respects the certificates and vouchers are
subject to normal program rules. For example, the HA may not make
payments to the owner until after execution of the housing assistance
payments (HAP) contract, and the HAP contract may not be effective prior
to the date the HA determines that the unit meets the housing quality
standards of the program.

\(A\) [Payment Standard/FMR Where the Family Chooses to Stay in the Same
Unit]{.underline}.

\(1\) [Staying in same unit: Voucher program.]{.underline}

For a family staying in the same unit who receives preservation
assistance under the voucher program, the payment standard used to
calculate the voucher housing assistance payment is the gross rent of
the family\'s unit, provided the proposed gross rent is reasonable and
exceeds the applicable HA payment standard. (Note, however, the effect
of the family unit size limitation discussed below.) If the new gross
rent is less than the HA payment standard, the regular payment standard
applies.

\(2\) [Staying in same unit: Certificate program.]{.underline}

For a family staying in the same unit who receives preservation
assistance under the certificate program, the HA generally approves the
proposed gross rent if the proposed gross rent (rent to owner plus any
utility allowance) of the unit is reasonable in comparison with gross
rents for comparable unassisted units in the market area, [even if the
proposed gross rent exceeds the otherwise applicable FMR/exception rent
limit for the unit rented by the family]{.underline}. This means that
the proposed rent may even exceed 120% of the FMR provided the rent is
reasonable. (Note, however, the effect of the family unit size
limitation discussed below.)

\(3\) [Rent reasonableness documentation]{.underline}. Regardless of
whether a family wishing to stay in its present unit receives a
preservation voucher or certificate, the HA must ensure that the
proposed rent of the family\'s unit is reasonable. The HA must document
the rent reasonableness of the unit by including the rents and addresses
of the comparable units in the family file. If the proposed rent is not
reasonable, the family must move in order to receive the preservation
voucher or certificate assistance.

\(4\) [Effect of family unit size limitation.]{.underline}

The HA issues the eligible family the certificate or voucher based on
the HA subsidy standards, not on the actual size of the unit the family
is presently occupying. If a family wishes to stay in the project but
(1) qualifies under the HA subsidy standards for a smaller family unit
size than the actual size of their current unit and (2) the gross rent
exceeds the applicable FMR or HA payment standard for the bedroom size
on the family certificate or voucher, the family must move to an
available unit within the project that is the appropriate size as
determined by the HA subsidy standards. In such a case, the new gross
rent for the smaller size unit in the project is considered to be the
applicable FMR or payment standard, provided the new gross rent exceeds
the applicable HA payment standard. (In this case only, the preservation
minimum rent discussed below is the rent the family would have been
paying on the date of the prepayment/voluntary termination for the
smaller size unit in the project to which the family moves.)

If there is no appropriate size unit available in the project, the
family must then make a good faith attempt to find a unit outside of the
project. In order to determine whether the family has made a good faith
effort, the HA may require the family to submit a list of potential
units the family visited. The HA should also take its knowledge of the
market area into consideration, as well as the number of referrals to
potential appropriate sized units it may have provided to the family
over the course of the family\'s search.

If the family has not located an eligible unit at the end of the term of
the certificate or voucher (including any extension granted by the HA in
accordance with its administrative policy) despite making a good faith
effort, the HA should execute a housing assistance contract for the
family\'s current unit, provided the unit complies with housing quality
standards and the proposed rent is determined to be reasonable. The
effective date of the housing assistance contract for the oversized unit
may not be earlier than the expiration date of the term of the family
certificate or voucher. The family is responsible for the full rent of
the unit prior to the effective date of the housing assistance contract.

The FMR or payment standard is the gross rent of the oversized unit. The
HA and the owner must execute the attached addendum to the housing
assistance payments contract, which automatically terminates the
contract after one year. The HA must advise the family that the subsidy
based on the oversized unit\'s rent will only be paid for one year.
After the initial year of assistance, the HAP contract will terminate
and the family will be assisted under the regular rental voucher or
certificate rules (normal payment standard or FMR). If the family wishes
to remain in the unit and can do so under the regular program rules, the
family will have to pay the additional cost for the oversized unit
out-of-pocket.

\(5\) [Family Move: Normal PS or FMR Applicable.]{.underline}

In all cases where the family decides to move out of the project, the
regular HA payment standard or the FMR/exception rent limit is
applicable. This includes cases where the proposed new rent for the
family\'s current unit in the preservation project is not reasonable in
relation to comparable units, which requires the family to move in order
to receive tenant-based assistance.

\(B\) [Preservation Minimum Rent Requirement]{.underline}.

\(1\) [Old gross rent for unassisted residents]{.underline}.

Regardless of whether a previously unassisted family stays or moves, the
law requires that a family must pay for rent no less than the rent the
family was paying on the date of the prepayment or the voluntary
termination. The family must continue to pay this amount even if family
income decreases after the effective date of the prepayment/voluntary
termination or housing assistance contract execution.

Unassisted residents must pay at least the [gross]{.underline} rent the
family was paying on the date of the prepayment or voluntary
termination. The HA utility allowance is used to calculate the gross
rent if all utilities were not included in the rent the family paid to
the owner.

\(2\) [Old total tenant payment (TTP) or total family contribution for
previously assisted residents.]{.underline}

Regardless of whether a resident previously assisted under the LMSA
program stays or moves, the family must pay no less than the total
tenant payment the family was paying on the date of the prepayment or
the voluntary termination. The family must continue to pay this amount
even if family income decreases after the prepayment/voluntary
termination or housing assistance contract execution.

For residents assisted under the regular certificate or voucher programs
at the time of the prepayment or voluntary termination, the \"rent at
prepayment\" provision only applies if the family chooses to remain in
its present unit and receive the \"enhanced\" subsidy. In those cases,
the certificate family must always pay at least the total tenant payment
and the voucher family must always pay at least the total family
contribution they were paying on the date of the prepayment or voluntary
termination.

\(3\) [Calculating HAP \-- Preservation Voucher Assistance]{.underline}.

Where the new gross rent exceeds the applicable payment standard, the
housing assistance payment for a resident receiving preservation voucher
assistance who stays in their present unit (or moves to an appropriate
size unit within the project) will equal the new gross rent for the unit
minus the greatest of:

\(a\) 30 percent of the adjusted family income;

\(b\) 10 percent of the family monthly income (gross monthly income);

\(c\) the applicable \"rent\" that the family was paying on the date of
the prepayment or voluntary termination; or

\(d\) such other minimum rent established by the HA as authorized by
Federal law.

If a resident assisted with a preservation voucher decides not to stay
but moves from the unit (except in cases where a family is moving to an
appropriate size unit within the project) or stays in the unit but the
applicable HA payment standard exceeds the new gross rent, the housing
assistance payment equals the lesser of:

\(a\) The HA payment standard minus 30 percent of the adjusted family
income; or

\(b\) The gross rent of the family\'s unit minus the greatest of:

\(1\) 10 percent of the family monthly income (gross monthly income);

\(2\) the applicable \"rent\" the family was paying on the date of the
prepayment or voluntary termination; or

\(3\) such other minimum rent established by the HA as authorized by
Federal law.

\(4\) [Determining TTP \-- Preservation Certificate
Assistance]{.underline}.

The total tenant payment for a resident receiving preservation
certificate assistance, regardless of whether the family stays in the
unit or moves, is the greatest of:

\(a\) 30 percent of family monthly adjusted income;

\(b\) 10 percent of family monthly income (gross monthly income);

\(c\) welfare rent in as-paid states;

\(d\) the applicable \"rent\" the family was paying on the date of
prepayment or voluntary termination; or

\(e\) such other minimum rent established by the HA as authorized by
Federal law.

Examples demonstrating how these special conditions affect the rent
calculations for a previously unassisted certificate family and a
previously unassisted voucher family are attached to this notice.

In calculating the housing assistance payment and the family share, the
HA may find that some of the moderate income families who immediately
move from the unit will not receive any housing subsidy due to the
amount of the family\'s income. If the HA determines the initial housing
assistance payment is \$0, the HA does not enter into a housing
assistance contract on behalf of that family. However, if within one
year of the effective date of the owner\'s prepayment/voluntary
termination the family income or composition changes, and as a result
the family would qualify for a housing assistance payment, the HA may
then execute a housing assistance contract for the family (assuming the
family leases an eligible unit). Note that this situation only applies
if the family [initially qualified]{.underline} under the law for the
special preservation assistance on the effective date of the prepayment
(the owner\'s rent increase would have required the family to pay more
than 30% of adjusted monthly income for rent). Furthermore, the family
must still pay no less than the rent the family was paying on the
effective date of the prepayment or voluntary termination, regardless of
any decrease in family income.

9\. [Applicability of the Special Conditions for Stayers for Families
Currently Assisted under the Section 8 Tenant-based
Programs]{.underline}. As noted above, a resident who is currently
assisted under the Section 8 tenant-based programs on the date of the
prepayment or voluntary termination in FY 1998 may also be covered by
the special conditions afforded to stayers through the preservation
vouchers and certificates.

All of the following conditions must be met in order for a resident
assisted through the regular certificate or voucher program on the
effective date of the prepayment to be covered by the special
preservation provisions:

\(A\) the family must meet one of the three income eligibility
categories described in section 3 of this notice;

\(B\) the termination of the existing lease under the certificate
program or the rent increase under the voucher program must be in
accordance with the lease agreement and program regulations and may not
be earlier than sixty days after the effective date of the
prepayment/voluntary termination;

\(C\) the new lease under the certificate program or the rent increase
under the voucher program must be effective no later than one year from
the effective date of the prepayment/voluntary termination;

\(D\) the proposed new rent must be reasonable;

\(E\) the new rent would result in the family paying more than 30% of
adjusted income for rent; and

\(F\) the family must decide to stay in the unit instead of moving.

If a currently assisted certificate or voucher family decides they do
not want to stay in the unit after the owner\'s prepayment or voluntary
termination but will move prior to the effective date of the new rent,
the family is [not]{.underline} covered by these special provisions.
Unlike the unassisted residents or the project-based residents who
receive special preservation certificates or vouchers, the minimum rent
requirement (i.e., family must pay at least the amount of rent the
family was paying on date of prepayment) does not apply if the regular
certificate or voucher family moves rather than stays in the unit.
However, if the family stays in the unit and receives the benefit of the
additional \"preservation\" subsidy, the minimum rent requirement
applies. It will continue to apply if the family subsequently moves from
the unit.

An owner may only receive the special \"preservation\" subsidy for
residents already receiving Section 8 tenant-based
[certificate]{.underline} assistance by terminating the existing lease
and housing assistance payments contract. HAs are reminded that the HA
may not give approval for a family to lease a unit and that the HA may
not execute a HAP contract until certain requirements are met (see
§982.305). These requirements apply regardless of whether the family
already occupies the unit and apply even if the family has previously
received assistance in the same unit. Therefore, the HA must inspect the
unit to ensure it complies with HQS before the new lease term may
commence. An HQS inspection that was conducted under the previous HAP
contract [does not]{.underline} fulfill this requirement.

Under the voucher program, an owner may increase the rent in accordance
with the terms of the existing lease and local and state law. The owner
is not required to terminate the existing lease and HAP contract to
receive the special \"preservation\" subsidy.

[Certificate Program]{.underline}. Assuming the above conditions are
met, the HA must approve the rent under the new lease to allow the
family to stay in the unit even if the new rent exceeds the Fair Market
Rent. The minimum rent requirement described in section 8(C) above
applies, which means the family\'s TTP will be at least the TTP the
family was paying on the date of the prepayment/voluntary termination.

[Voucher Program]{.underline}. Assuming the above conditions are met,
the payment standard used to calculate the voucher housing assistance
payment is the new gross rent of the family\'s unit. The minimum rent
requirement described in section 8(C) above applies.

[HUD amends the existing ACC]{.underline}. In cases where the special
conditions apply to residents who were currently assisted under the
tenant-based programs at the time of the prepayment or the voluntary
termination, the HA should immediately contact the HUD State or Area
Office of Public Housing. HUD will use funds appropriated for
preservation assistance to amend the existing ACC with the HA to cover
the additional cost of the subsidy. Note that no new \"preservation\"
certificates or vouchers are provided to the HA to assist these
certificate and voucher families.

10\. [Normal Program Requirements]{.underline}. Except for the special
conditions outlined by this notice, the normal program requirements
apply to the preservation rental vouchers and certificates. For example,
the HA is responsible for conducting income verifications to ensure
families are eligible for the assistance. The HA must conduct an initial
and annual HQS inspections and must not make any housing assistance
payment prior to the date that the unit passes HQS. The HA should
clearly explain to the family that the preservation certificate or
voucher is tenant-based assistance and the family is under no obligation
to remain in the project. The family has the same portability rights as
any other family assisted under the certificate and voucher programs.

Preservation rental vouchers and certificates do [not]{.underline}
increase the administering HA\'s Family Self-Sufficiency (FSS) minimum
size. HAs earn the same ongoing fee for these certificates and vouchers
as they do under the regular program rules. Note that the HA no longer
receives any preliminary fee for new certificates or vouchers if the HA
is already administering a Section 8 tenant-based program.

If the preservation certificate or voucher turns over (i.e., a
preservation assisted family leaves the program), the funding may be
used for the HA\'s regular tenant-based program and will be subject to
the normal program rules.

11\. [Applicability of the Special Conditions after the First Year of
Assistance]{.underline}. For prepayments that occurred in FY96, PIH
Notice 96-61 states that after the first year of assistance, the normal
program rules apply. For prepayments that occurred in FY97 and that
occur in FY98, the special conditions continue after the first year of
assistance. In reality, the only distinction between FY96 families and
the FY97/FY98 families concerns the continuation of the preservation
minimum rent.

\(A\) [\"Preservation\" minimum rent]{.underline}. Families who received
preservation certificates or vouchers as a result of a prepayment or
voluntary termination that occurred in FY 1996 are not covered by the
preservation minimum rent after the first year of assistance. In
determining the family\'s share of the rent or total tenant payment
after the first year of assistance, the HA drops the preservation
minimum rent from the calculation. The preservation minimum rent does
not apply for the FY96 prepayment/voluntary termination families after
the initial year of the housing assistance payments contract, regardless
of whether the family stayed or moved from the unit.

The preservation minimum rent [continues]{.underline} after the initial
year of assistance for all families who received preservation
tenant-based assistance as the result of prepayment/voluntary
terminations that were effective in FY97 and in FY98. These families,
whether they stayed or moved from the unit, must continue to pay at
minimum the applicable \"rent\" the family was paying on the effective
date of the prepayment/voluntary termination, even if the family income
decreases after the initial year of assistance. This includes residents
already assisted under the Section 8 certificate or voucher program on
the date of the prepayment/voluntary termination whose subsidy was
increased under

the special conditions for preservation tenant-based assistance. The
minimum rent remains applicable whether the family continues to reside
in the unit or subsequently moves. If the family moves under the
portability procedures, the HA must indicate to the receiving HA that
the family is covered by the preservation minimum rent.

\(B\) [Special FMR or Payment Standard]{.underline}. The law provides
the special FMR and payment standard to cover the owner\'s rent increase
after the prepayment/voluntary termination, which must be effective
within one year of the date of the prepayment/voluntary termination.
Regardless of the year of the prepayment/voluntary termination, the
special FMR and payment standard rules do [not]{.underline} apply to any
subsequent rent increases.

In the case of the rental certificate program, any subsequent rent
increase is restricted by the normal annual adjustment and rent
reasonableness requirements of the program. If the owner\'s rent
increase is higher than the rent adjustment allowed under the normal
program rules, the family will have to move to continue to receive
rental certificate assistance.

Under the rental voucher program, the payment standard is not adjusted
to cover an owner\'s rent increase. The family must decide whether to
move to a less expensive unit or pay for the increase in rent out of
pocket. However, in accordance with §887.353, the family\'s payment
standard is not decreased at the annual recertification unless there is
a change in the family\'s size or composition that requires the HA to
use the payment standard for the now appropriate bedroom size, or a
change in the HA\'s occupancy standards results in the family qualifying
for a smaller bedroom size voucher. Otherwise, the special payment
standard set at the owner\'s initial rent increase after the
prepayment/voluntary termination remains in effect for the family until
the HA\'s regular payment standard for that bedroom size surpasses it or
the family moves from the unit. The HA always applies the regular
payment standard if the family subsequently moves from the unit.

12\. [Further Information]{.underline}. Any questions regarding this
notice should be addressed to the Office of Real Estate and Housing
Performance in the Office of Public and Assisted Housing Delivery, at
(202) 708-0477.

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Deborah Vincent

Acting Assistant Secretary for

Public and Indian Housing

**Examples of Rent Calculations for Preservation Vouchers and
Certificates for Stayers (Previously Unassisted Families)**

[Certificate Program]{.underline}

The Smith family is in a 2 bedroom unit and is issued a

2-bedroom certificate under the HA subsidy standards.

Contract Rent at Prepayment = \$370

Utility Allowance = \$50

Gross Rent paid by Family at Prepayment = \$420

2BR FMR/exception rent limit = \$525

Proposed Contract Rent = \$580

Utility Allowance = \$50

Proposed Gross Rent (is reasonable) = \$630

PHA minimum rent = \$25

30% of monthly adjusted income = \$290

10% of total monthly income = \$110

[A. Rent Limitation]{.underline}

The owner\'s proposed new rent is reasonable and the Smith family wishes
to stay in their current unit. Since the proposed gross rent is
reasonable, the HA approves the rent, even though it exceeds the
applicable FMR/exception rent limit.

[B. Total Tenant Payment]{.underline}

TTP = \$420 Since the previously unassisted family must pay at least the
gross rent it was paying on the date of prepayment, the TTP for the
Smith family is \$420, even though 30% of monthly adjusted income is
only \$290.

[C. Rent Calculation]{.underline}

Contract Rent to Owner = \$580

Utility Allowance= \$50

Gross Rent (CR + UA)= \$630

TTP (greater of gross rent family was

paying at prepayment, 30% adjusted

monthly income, 10% gross monthly

income, welfare rent in as-paid states,

HA minimum rent) = \$420

Tenant Rent (TTP - UA) = \$370

HAP (CR - TR) = \$210

[Voucher Program]{.underline}

The Jones family is in a 2 bedroom unit and is issued a 2 bedroom
voucher under the HA subsidy standards. The Jones family will stay in
its current unit.

Contract Rent at Prepayment = \$370

Utility Allowance = \$50

Gross Rent Paid by Family

at Prepayment = \$420

2BR Payment Standard = \$495

Proposed Contract Rent = \$580

Utility Allowance = \$50

Proposed Gross Rent = \$630 (is reasonable)

30% of adjusted monthly income = \$290

10% of gross monthly income = \$110

HA minimum rent = \$25

[Payment Standard]{.underline}

The proposed gross rent must be reasonable.

[Short-Cut Voucher Subsidy Calculation for Stayers.]{.underline}

a\. Proposed Gross Rent = \$630

b\. minus greatest of 30% adjusted monthly income

(\$290); 10% gross monthly income (\$110) or

rent paid by family at prepayment (\$420) = \$420

c\. Housing Assistance Payment = \$210

[Voucher Subsidy Calculation (Long Form)]{.underline}

A. Payment Standard = \$630

B. 30% of Adjusted Monthly Income = \$290

C. Maximum Subsidy (A-B) = \$340

D. HA Utility Allowance = \$50

E. Rent to Owner = \$580

F. Gross Rent (D+E)= \$630

G. Gross Rent less Maximum Subsidy (F-C) = \$290

H. 10% of Total Monthly Income = \$110

I. Gross Rent at Prepayment = \$420

J. Minimum Family Contribution (higher of H or I)\* = \$420

K. Total Family Contribution (higher of G or J) = \$420

L. Gross Rent less Family Contribution (F-K)= \$210

M. Total Voucher Subsidy (lower of C or L) = \$210

N. HAP to Owner (lower of E or M) = \$210

O. Family Rent to Owner (E-N) = \$370

P. Utility Reimbursement to Family (M-N) = 0

\* Regardless of whether the family stays or moves, the minimum family
contribution is the greatest of 10% of total monthly income, HA minimum
rent, or the applicable rent the family was paying on the date of
prepayment/termination.

**U.S. Department of Housing and Urban Development**

**Office of Public and Indian Housing**

**Housing Assistance Payments Contract, ADDENDUM**

**Section 8 Tenant-Based Assistance**

**Rental Voucher and Certificate Program**

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**Purpose and Use:** This addendum to the housing assistance payments
contract is only used under the following circumstances.

The family is a resident of a preservation eligible project that prepays
the mortgage or voluntarily terminates the mortgage insurance in FY
1998, and the family qualifies under the public housing agency (HA)
subsidy standards for a smaller family unit size than the actual size of
the family\'s current unit. The family was not receiving Section 8
tenant-based assistance on the effective date of the prepayment or
voluntary termination.

There is no appropriate size unit available in the project and the
family has made a good faith attempt to find a unit outside of the
project but has not located an eligible unit by the end of the term
(including extensions) of the certificate or voucher. Therefore, the HA
and owner are executing this housing assistance contract to assist the
family in the family\'s present oversized unit for a period not to
exceed twelve months. The HA has advised the family that the subsidy
based on the oversized unit\'s rent will only be paid for twelve months.

This addendum must be attached to Part A and Part B of the Housing
Assistance Payments Contract (form HUD-52647 or form HUD-52535).

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Fill in all contract information below.

**1. Contract Unit** (enter address of unit, including apartment number,
if any.)

**2. Tenant** (Enter full name of tenant)

**3. Beginning of Term** The term of the HAP contract begins on (Enter
the first day of the lease term. The lease term may not begin before the
term (including any extensions) of the certificate or voucher expires):

**4. HAP Contract Termination Date**

The HAP contract terminates on (one year minus one day from the
beginning of the term):

The automatic termination of the HAP contract terminates the lease
agreement between the family and the owner (see lease addendum).

**5. Signatures and Date** (must be the same signature and date as found
on Part A of the HAP contract)

**Housing Agency Owner**

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