U.S. Department of Housing and Urban Development

H O U S I N G

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Special Attention of:

Notice H 94-19 (HUD)

Regional Housing Directors;

Labor Relations Specialists;

Field Office Managers; Directors, Issued: 3/29/94

Economic and Market Analysis; Expires: 3/31/95

Directors of Housing Development;
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Directors of Housing Management; Cross References:

Directors of Fair Housing and Equal Opportunity

Directors, Regional Accounting Divisions;

Regional and Field Office Counsel

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Subject: Implementation of Section 6 of the HUD Demonstration

Act of 1993: Section 8 Community Investment

Demonstration Program

1-1. PURPOSE

This Notice provides guidance to program applicants,

participants and Department of Housing and Urban

Development (HUD) staff for implementing the Section 8

Community Investment Demonstration Program.

1-2. BACKGROUND

Section 6 of the HUD Demonstration Act of 1993 authorized

the Section 8 Community Investment Demonstration Program.

Its purpose is to demonstrate how the availability and

leveraging of limited HUD resources can encourage Pension

Funds to invest in the production or preservation of

affordable housing for lower-income families. To fulfill

this objective, Congress has authorized \$100 million

dollars in Section 8 project-based rental assistance.

Under this demonstration, participating Pension Funds will

make or purchase loans to finance the construction or

rehabilitation of affordable multifamily rental housing for

lower-income families. Each participating Fund will

receive a set-aside of Section 8 budget authority which

will be used for rental assistance payments. These rental

assistance payments will help support the rents for the

units occupied by lower-income families. The Section 8

authority, thus, ameliorates much of the risk traditionally

associated with financing this kind of housing and should

encourage greater Pension Fund investment.

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HMIP : Distribution: W-3-1,W-2(H)(FHEO)(ZAS)(OGC)(PD&R),W-4(H),R-1,R-2,

R-3-1(H)(RC),R-3-2,R-3-3,R-6,R-6-2,R-7,R-7-2,R-8

Previous Editions Are Obsolete HUD 21B(3-80)

GPO 871 902

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Various types of multifamily projects, both New

Construction and Substantial Rehabilitation, may be

developed under this demonstration. However, the following

restrictions apply:

\-- not less than 50 percent of the Section 8 funds

appropriated for this demonstration may be used for

properties owned by HUD or for properties with

mortgages held by HUD;

\-- no more than 50 percent of the units in any project

(except HUD-owned properties or properties with

mortgages held by HUD) may be assisted (unless HUD

grants an exception for special circumstances);

\-- HUD\'s multifamily mortgage insurance programs, the

Risk-Sharing programs under Section 542 of the Housing

and Community Development Act of 1992, and Farmers Home

Administration loan and loan guarantee programs, may

not be used for housing developed or assisted under

this demonstration;

\-- a Pension Fund may not have an ownership interest in a

project for which a project-specific proposal is

submitted to HUD or for which assistance is provided

under this demonstration; and

\-- initially, no single Pension Fund may be awarded more

than 50 percent of the total Section 8 authority.

1-3. APPLICABILITY OF SECTION 8 STATUTE AND REGULATIONS

The use of Section 8 assistance under this demonstration is

subject to the statutory provisions of Section 8 of the

United States Housing Act of 1937, as amended, and to the

regulatory requirements of 24 CFR 886, Subpart C, except as

modified by this Notice.

A. Section 886.302: Definitions

1\. The following definitions are modified by this

Notice:

a\. Decent, safe and sanitary. Construction or

substantial rehabilitation of housing to the

standards of paragraph 1-23 and maintenance of

the housing in substantially the same

condition.

b\. Eligible project or projects. See paragraph

1-11C.

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c\. Fair Market Rent. See paragraph 1-16.

d\. Owner. An entity, including a cooperative,

having the legal right to lease or sublease

newly constructed or substantially

rehabilitated rental housing.

2\. The following definitions do not apply:

a\. Minimum Design Standards for Rehabilitation for

Residential Properties.

b\. Moderate rehabilitation.

B. The following Sections do not apply:

886.301 Purpose

886.303 Allocation and reservation of Section 8

contract and budget authority

886.304 Project eligibility criteria

886.306 Notices

886.307 Housing quality standards

886.310 Initial contract rents

886.311 Term of Contract

886.312 Rent Adjustments

886.314 Financial Default

886.319 Responsibility for contract administration

886.330 Work write-ups and cost estimates

886.331 Agreement to Enter Into Housing Assistance

Payments Contract

886.332 Rehabilitation Period

886.333 Completion of rehabilitation

886.334 Execution of Housing Assistance Payments

Contract

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C. The following Section apply in their entirety:

886.305 Disclosure and verification of Social

Security and Employer Identification Numbers

by Owners

886.311a Notice upon contract expiration

886.315 Security and utility deposits

886.320 Default under the contract

886.323 Maintenance, operation and inspections

886.324 Reexamination of family income and

composition

886.325 Overcrowded and underoccupied units

886.326 Adjustments of utility allowances

886.327 Lease requirements

886.328 Termination of tenancy

886.329 Leasing to eligible families

886.335 HUD review of agreement and contract

compliance

886.336 Audit

886.337 Federal selection preferences

C. The following Sections apply except as provided below:

886.308 Maximum total annual contract commitment,

Subpart (a) does not apply

886.309 Housing assistance payment to owners - See

paragraph 1-15

886.318 Responsibilities of the owner, Except (11)

\- See paragraph 2-2

886.321 Marketing, except first sentence in (b)(1)

and reference in second sentence to \"tenancy

after sale\" - See paragraph 2-3

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D. The following Section is modified in this Notice

886.313 Other Federal requirements - See 1-17

1-4. HOW IT WILL WORK

HUD will select Pension Funds and award Section 8 set-aside

through a competitive process. HUD will select the Pension

Funds in accordance with stated criteria and set aside a

specific amount of Section 8 authority for each of the

Funds selected. Selected Funds will fall into one of two

categories:

Category A: A Category A Pension Fund may be awarded an

initial set-aside of not more than \$50 million. To be

eligible for this funding level, the application must

identify specific projects that can use the total set-aside

requested by the applicant and that can move to

project-specific proposals within 120 days of selection. A

Category A Fund will have 10 months from the date of

selection to close on construction financing.

Category B: A Category B Pension Fund i.e., a Fund whose

application does not demonstrate the presence of the kinds

of projects required to qualify as a Category A Fund, may

receive an initial set-aside of not more than \$10 million.

A Category B Fund will have 8 months from the date of

selection to submit project specific proposals to use its

total set-aside and 12 months to go to closing on

construction financing on those projects.

The demonstration will initially be Headquarters based.

However, Headquarters will ask HUD Field Offices to perform

certain required reviews of proposed projects, including

site and neighborhood, environmental and Affirmative Fair

Housing Marketing. In addition, Headquarters will perform

certain other functions, including previous participation

reviews, subsidy layering reviews (unless performed by a

Housing Credit Agency), verification of compliance with

maximum rent limitations and obtaining and issuing

appropriate Davis Bacon wage rate determinations and

construction contract labor standard provisions.

If all reviews result in an approvable proposal, HUD will

execute an Agreement to Enter into Housing Assistance

Payments Contract (Agreement) with the owner. After the

Agreement is executed and architectural plans are

finalized, construction or rehabilitation may begin. Upon

satisfactory completion of construction or rehabilitation

of the project, HUD will enter into a Housing Assistance

Payments Contract (Contract) with the owner.

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The Contract will be for not less than 5 years nor more

than 15 years. Pursuant to the Contract, project owners

will be responsible for all management and maintenance

activities, including selecting and admitting eligible

low-income families (and application of Federal selection

preferences) within guidelines established by this Notice.

HUD is responsible for administration of the Housing

Assistance Payments Contract. However, until the

demonstration is delegated to its Field Offices,

Headquarters will contract with a State or local housing

finance agency or local public housing agency to carry out

these functions on HUD\'s behalf. Consequently, references

to HUD may include the agency administering the contract on

behalf of HUD.

1-5. PROGRAM WAIVERS

Until administration of this demonstration is delegated to

HUD Field Offices, authority for waiving provisions of this

Notice will remain with the Assistant Secretary for Housing

\- Federal Housing Commissioner.

1-6. ELIGIBLE APPLICANTS

A. Applicants meeting one of the following criteria are

eligible to be considered for participation in the

demonstration program: The applicant must be:

1\. A trust, fund, plan or other program established or

maintained by any employer or other person for the

purpose of providing income or benefits to

employees after the termination of employment or

deferring income by employees until the termination

of employment; or

2\. An entity that engages principally in the

investment of funds of such a trust, fund, plan, or

other program; or

3\. A partnership or organization established to invest

pension funds in affordable multifamily housing.

B. The applicant must have adequate staff capacity to

perform the functions required under this demonstration

or it may contract or enter into a partnership for such

services. In either case, the applicant is responsible

for all program administration and decisions.

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1-7. SECTION 8 SET-ASIDE

A. Initial Funding Levels

1\. A Category A participant may receive an initial

set-aside of not more than \$50 million.

A Category A participant is any applicant that

identifies and documents in its application for

participation in the demonstration the presence of

a pipeline of projects for which project-specific

proposals sufficient to use the total amount of the

set-aside requested by it can be submitted to HUD

within 120 days after HUD selects the Fund for

participation (also see paragraph 1-9B.6).

2\. A Category B participant may receive an initial

set-aside of not more than \$10 million.

A Category B participant is any applicant that does

not demonstrate the presence of the type of

pipeline described above.

3\. No applicant may receive an initial allocation of

more than \$50 million.

B. Subsequent Funding

1\. The statutory limitation that no Pension Fund may

receive an allocation of more than \$50 million will

cease to apply if, after the end of the 6-month

period beginning on the date the NOFA was published

in the Federal Register, HUD:

a\. determines there are no expressions of interest

that are likely to result in approvable

applications in the reasonably foreseeable

future; or

b\. determines that such expressions of interest

are not likely to use all of the available

Section 8 authority, and

c\. informs the appropriate Congressional

Committees as required by statute.

2\. After the 6-month period, and subject to the above

conditions, HUD may consider applications from, and

reserve funding for, Pension Funds requesting a

set-aside in excess of \$50 million.

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3\. Any request by a Pension Fund for an increase in

its initial (or subsequent) allocation of Section 8

authority will be based on the performance of the

Fund in utilizing its previous allocation(s).

C. Use of Funding Authority

1\. Each Pension Fund must commit at least 50 percent

of its Section 8 set-aside to units in projects

owned by HUD-owned or in properties with mortgages

held by HUD unless HUD determines that due to minor

variations in specific projects, the statutory

requirement to this effect will otherwise be met

and provides an exception.

2\. Except under special circumstances approved by HUD

such as assistance for the homeless, displaced or

disabled persons, no more than 50 percent of the

units in any one project may be assisted.

3\. In the case of HUD-owned properties, the number of

units required to be assisted will be based on the

final disposition plan developed in accordance with

24 CFR 290. The Pension Fund must use its set-aside

to provide assistance for one-half of the

number of units required to be assisted; HUD will

provide the other one-half from its property

disposition set-aside.

4\. Applicants should be aware that the number of units

that can be assisted from any set-aside will depend

upon the level of gross rents (i.e., contract rents

plus allowance for utilities and other services,

see paragraph 1-16), the term (number of years) of

the Housing Assistance Payments Contract (see

paragraph 1-30.B), and amount of the contract

administration fee (see paragraph 1-24).

Consequently, the higher the gross rents, and/or

the longer the contract term, the fewer the number

of units that can be assisted.

1-8. NOTICE OF FUND AVAILABILITY

A. Any applicant meeting the criteria of paragraph 1-6 of

this Notice may be considered for a set-aside of

Section 8 project-based budget authority by submitting

an application in accordance with the requirements of

the Notice of Fund Availability (NOFA) published in the

Federal Register on April 26, 1994, and this Notice.

(A copy of the NOFA is attached as Attachment I.)

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B. The NOFA will remain open until all Section 8 authority

is allocated or reallocated. Processing of

applications will commence in the order they are

received. Applications received during each 15

calendar-day period, beginning on the 30th day after

publication of the NOFA, will be evaluated against each

other.

C. Only those applicants able to provide the pipeline

information required in Criterion 6 below will be

eligible for an initial set-aside of not more that \$50

million. Any applicant not able to provide the

pipeline information will be eligible for an initial

set-aside of not more than \$10 million.

1-9. PENSION FUND APPLICATIONS

A. All applications for participation in this

demonstration must contain the following information:

1\. Name of applicant, address, name of principal

contact, address and phone number;

2\. Number of projects and units (assisted and

unassisted) expected to be financed;

3\. Localities in which the applicant expects projects

are likely to be located;

4\. Anticipated sources of financing from other than

the Pension Fund itself, e.g., loans or grants from

other public or private sources, participations,

etc.;

5\. Number of units and percent of set-aside (not less

than 50 percent) that will be used for HUD-owned

properties or properties with mortgages held by

HUD;

6\. Contract terms anticipated (not less than 5 years

nor more than 15 years);

7\. Anticipated initial contract rents (see paragraph

1-16);

8\. Total Section 8 contract and budget authority

requested;

9\. Number of units to be newly constructed and number

to be substantially rehabilitated; and

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10\. Types of families (e.g., elderly, large, or

families/individuals with special needs such as

disabled, displaced or homeless) and the number of

each expected to be assisted.

B. All applications also must contain sufficient

information, in narrative or numerical form, as

appropriate, for HUD to evaluate the applicant on the

basis of the following criteria:

1\. Criterion 1: Past involvement in and capacity to

finance multifamily housing.

Supporting Information:

a\. Experience in financing multifamily housing

including the number of multifamily projects/

units financed over the past 10 years;

b\. Location of projects identified by locality,

number of units in each project, production

method (new construction or substantial

rehabilitation);

c\. Types of loans in which the applicant has

participated (e.g., permanent first mortgage,

second mortgage, construction); and

d\. Makeup of current multifamily portfolio

\(1\) original mortgage amounts

\(2\) outstanding balances

\(3\) status of each (current, default, workout,

foreclosure).

2\. Criterion 2: Capability to make overall program and

mortgage finance decisions.

Supporting Information:

a\. Describe capacity of Fund to underwrite multifamily

projects and to make mortgage finance decisions.

b\. If the Fund does not possess these capabilities,

address how it will assure that projects are

feasible and meet program objectives prior to

funding/purchasing the project loan.

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3\. Criterion 3: Use of Resources.

Supporting Information:

a\. Describe how the Fund will maximize use of any

set-aside awarded to it, i.e., by limiting gross rents

to less than the Fair Market Limitations of

paragraph 1-16 and Contract terms to less than 15

years.

b\. Describe the financial and other resources the

Pension Fund will dedicate to this demonstration.

c\. Describe the Fund\'s relationship to, and its

efforts to secure other State and local, public and

private financing resources.

d\. Describe how the Fund intends to accomplish the

goal of providing affordable housing for large, low

income families while developing and maintaining

feasible projects with less than 50 percent

Section 8 assistance.

\(1\) Describe how the Fund will ensure rentability

of units not receiving Section 8 assistance

including methods for attracting unassisted

families.

\(2\) Describe how the Fund will ensure that the

project developer/owner provides outreach to

and serves people with special needs such as

displaced, disabled and homeless.

4\. Criterion 4: Use of HUD-owned properties or properties

with mortgages held by HUD in a variety of geographic

locations.

Supporting Information:

a\. Indicate the number of units and percent of the

set-aside requested that will be used for HUD-owned

properties or properties with mortgages held by HUD

(not less than 50 percent).

b\. Describe how the Fund will select and secure HUD-owned

properties and properties with mortgages held

by HUD and indicate the location of the projects

and the type of families to be served.

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c\. Describe how the Fund will ensure that at least 50

percent of its set-aside will be used for

assistance to HUD-owned properties or properties

with mortgages held by HUD.

5\. Criterion 5: Efforts to promote economic or neighborhood

development and/or employment opportunities for

project area residents.

Supporting Information:

a\. Describe efforts of the Fund to encourage

fulfillment of proposed plans to accomplish

economic or neighborhood development and/or

employment opportunities for project area

residents.

b\. Describe the efforts of the Fund and any outside

sources to foster economic and social integration

and diversity in areas where the Fund intends to

operate.

6\. Criterion 6: If a Pension Fund wants to be Considered

as a Category A applicant, i.e., eligible for a

set-aside of not more than \$50 million, it must provide

information on its ability to move product to

construction/rehab start in short time frame.

Supporting Information:

a\. Identify and document specific projects currently

in the Fund\'s pipeline that can move to

project-specific proposals within 120 days after

selection by HUD to participate in the Demonstration

program.

b\. Describe how each of the projects identified comply

with the proposal selection criteria in paragraph

1-11 below.

1-10. HUD SELECTION OF PENSION FUNDS

A. HUD will process and evaluate applications in the order

received. HUD will determine whether the application

was submitted by an eligible applicant, whether it is a

complete application, and evaluate the degree to which

the applicant meets the criteria in this paragraph.

B. Applications received during each 15 calendar-day

period, beginning on the 30th day after publication of

the NOFA, will be evaluated against each other.

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C. Applications will be selected on the basis of numerical

ratings assigned to the criteria identified in

paragraph 1-9 and in accordance with the following:

1\. Each application will be assigned a numerical

rating on the basis of its merits relative to the

merits of other applications received during each

15 calendar-day period.

a\. Numerical ratings will be assigned to each of

the 6 criterion identified in paragraph 1-9.

The numerical ratings to be assigned are:

Excellent = 5

Good = 3

Fair = 1

Poor = 0

b\. In assigning a numerical rating for criterion

6, \"ability to move product to construction/

rehabilitation start in a short time frame,\"

HUD will assign the highest rating on this

criterion to applications that best identify

and document the presence of a pipeline per

paragraph 1-7A.1. Applications not able to

identify and document such a pipeline will

receive a lower numerical rating on this

criterion.

c\. In assigning a numerical rating for

Criterion 3, HUD will assign the highest rating

on this criterion to applications that best

describe how the Fund will maximize the use of

any set-aside awarded to it.

d\. After numerical ratings are assigned,

adjustments will be made to reflect the relative

degree of importance of each of the 6

criterion. This will be done by assigning

specific weight factors to each criterion in

accordance with the following:

Criterion 1: Past involvement in and

capability to finance multifamily housing

\- Weight Factor = 2

Criterion 2: Capability to make overall

program and mortgage finance decisions - Weight

Factor = 3

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Criterion 3: Use of resources - Weight

Factor = 3

Criterion 4: Use of HUD-owned properties or

properties with mortgages held by HUD - Weight

Factor = 1

Criterion 5: Efforts to promote economic or

neighborhood development, etc. - Weight

Factor = 1

Criterion 6: Ability to move product to

construction/rehab start in short time frame

\- Weight Factor = 1

2\. HUD may at its discretion, select the

application(s) which received the highest total

score or select applications with lower total

scores, in order of ranking, in order to meet the

provisions of paragraph 1-10D and to ensure the

most effective use and distribution of available

budget authority.

D. If an application is selected, HUD will determine the

amount of the Section 8 set-aside to be awarded. The

award will be based on the number units to be assisted,

levels of contract rents, terms of the Contract, and

contract administration fee. The amount of the

set-aside may be adjusted in order to comply with the

requirements that:

1\. At least 50 percent of the funds appropriated for

the demonstration be used for HUD-owned properties

or properties with mortgages held by HUD, and

2\. no more than 50 percent of the funds appropriated

go to one Pension Fund (except as provided in

paragraph 1-7B above).

E. HUD will notify each applicant of its selection or

rejection and, if appropriate, the amount of Section 8

authority set aside for use by the Pension Fund. The

Letter of Notification will authorize the applicant to

submit project-specific proposals to Headquarters.

1\. A Category A participant will have 120 days from

the date of HUD notification to submit project-specific

proposals using the total amount of its

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Section 8 set-aside. It will have 10 months from

the date of selection to commit the total amount of

its set-aside to specific projects, i.e., closing

of construction financing (\"closing\").

2\. A Category B participant will have 12 months to

reach closing. However, it must submit project-specific

proposals sufficient to use its Section 8

set-aside no later than 120 days prior to the end

of the 12-month period.

3\. The Pension Fund will submit a report every 30 days

to Headquarters, Office of Insured Multifamily

Housing Development, as to the number of projects

and units in processing, the amount of Section 8

budget authority expected to be required for those

projects and estimated dates for submission of

project-specific proposals and for closing of

construction financing.

4\. If it appears that, based on reports submitted and

HUD\'s analysis of those reports, project-specific

proposals will not be submitted or budget authority

will not be committed, or if it is not committed,

to specific projects by the end of the periods

indicated in paragraphs E1 and E2 above, it may be

withdrawn by HUD and reallocated to another

Fund(s). HUD, at its discretion, may extend these

time limits.

5\. If the Pension Fund and HUD mutually agree that the

Fund will not use all of the Section 8 authority in

the Fund\'s set-aside, the unused portion will be

returned to HUD for reallocation.

6\. Any reallocation will be based upon the performance

of the receiving Fund in utilizing its previous

allocation(s) or to a Fund not previously selected

by HUD due to the lack of available set-aside

authority.

1-11. SELECTION OF PROJECT SPECIFIC PROPOSALS

A. Pension Funds may establish their own criteria for

selecting projects for use in the demonstration. These

criteria must reflect the public purposes cited in

paragraph B below. These criteria must be in writing

and be available for distribution to HUD and any other

interested parties, including project owners, upon

request.

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B. The criteria used by the Fund must, at a minimum,

include site, design, feasibility (including

marketability) and reflect the following public

purposes:

1\. Achieving economic mix;

2\. increasing housing choices and fostering

neighborhood diversity;

3\. providing affordable housing for large, low-income

families and providing access to necessary

supportive facilities and services;

4\. involving other State, local, public and private

resources to achieve these objectives and to limit

Section 8 assistance to less than 50 percent of the

units in any project (except in HUD-owned properties

or properties with mortgages held by HUD and

under limited special circumstances, such as

assistance for the homeless, displaced or disabled

persons, approved by HUD);

5\. achieving maximum use of available Section 8 budget

authority by limiting gross rents to less than the

Fair Marker Rent limitations and Contract terms to

less than 15 years;

6\. facilitating geographic/locality diversity of

project sites and complying with any applicable

court orders;

7\. using the HUD-owned properties and properties with

mortgages held by HUD in a variety of geographic

locations; and

8\. meeting special needs of homeless, displaced or

disabled persons, etc.

C. Eligible Projects.

1\. New Construction projects are eligible projects

under this demonstration. In addition, the

following types of multifamily projects are

eligible for substantial rehabilitation:

a\. Projects owned by HUD or subject to a mortgage

held by HUD that is delinquent, under a workout

agreement or being foreclosed upon by the

Secretary (see, however, paragraph F for

limitations in properties with prepayment

restrictions).

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b\. Projects eligible for assistance as troubled

projects under Section 201 of the Housing and

Community Development Amendments of 1978;

c\. Projects located in empowerment zones or

enterprise communities designated by Federal

law; or

d\. any other multifamily project, including

projects to be occupied by homeless persons or

homeless families as defined in Section 103 of

the McKinney Act.

2\. High-rise elevator projects for families with

children are not eligible under this demonstration

unless HUD determines there is no practical

alternative.

D. HUD-owned properties or properties with mortgages held

by HUD.

1\. Each Pension Fund must use at least 50 percent of

its set-aside to provide assistance to units in

HUD-owned properties or properties with mortgages

held by HUD.

2\. In the case of HUD-owned properties, the number of

units required to be assisted will be based on the

disposition plan developed in accordance with 24

CFR 290. The Pension Fund will provide assistance

from its set-aside for one-half of the units

required to be assisted under the disposition plan;

HUD will provide the other one-half from its

property disposition set-aside.

E. HUD-owned properties. In selecting HUD-owned

properties, Pension Funds should focus on properties

with the following characteristics:

1\. Projects which were formerly subsidized under

Sections 236, 221(d)(3)BMIR or 312;

2\. projects where nonprofit purchasers or limited

partnerships controlled by nonprofit general

partners are formed to take advantage of tax credit

opportunities; and

3\. projects for which targeted negotiated sales are in

process, or opportunities for negotiated sales are

identified in the disposition plan and have passed

the first right of refusal stage.

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F. Properties with Mortgages Held by HUD. Certain

projects are not eligible for participation in this

demonstration. These include projects that are subject

to mortgage prepayment restrictions, including projects

meeting the definition of \"eligible low income housing\"

under the Low Income Housing Preservation and Resident

Homeownership Act of 1990 (LIHPRHA) and projects that

are subject to Section 250(a) of the National Housing

Act.

In selecting properties with mortgages held by HUD,

Pension Funds should focus on properties with the

following characteristics:

1\. Projects with mortgages that are delinquent, under

a workout agreement, or being foreclosed;

2\. projects subject to a plan for lead-based paint

abatement that complies with Federal, State and

local regulations; and

3\. projects with units that are vacant or occupied by

very low income families that need assistance to

refinance and operate on a sound financial basis.

NOTE: The financing and subsidy package must pay

off the HUD-held loan under terms acceptable to

HUD, provide for needed repairs, and establish

necessary reserves to keep property sound.

G. Property Listings.

1\. A list of HUD-owned properties is available from

HUD Headquarters, Office of Preservation and

Property Disposition, phone (202) 708-3343.

2\. Information on properties with mortgages held by

HUD is available from HUD Headquarters, Office of

Multifamily Housing Management, phone (202) 708-3730.

3\. Prospective purchasers of properties that are HUD-owned

or have mortgages held by HUD may be referred

by HUD to the Pension Fund to see if their

properties meet the Fund\'s proposal selection

criteria. These purchasers can be existing

entities with currently pending purchases or new

purchasing entities with strong ownership

potential.

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1-12. PROJECT-SPECIFIC PROPOSALS

A. All project-specific proposals submitted for HUD review

by a Pension Fund must include a Form HUD-92013,

Application for Multifamily Housing Project (see

Attachment II), completed as follows:

1\. Section A, number 1 and, if applicable number 2;

2\. Section C, in its entirety;

3\. Section E, numbers 1-4; also indicate in \"Unit

Type\" whether the units are for families, large

families, elderly, disabled or displaced;

4\. Sections F and F1, in their entirety;

5\. Section G, line 47;

6\. Section K, in its entirety;

7\. Section N, numbers 1, 3, 4, 5, 7, 9 and 12.

B. The following information must also be submitted:

1\. Estimated dates for commencement of construction/

rehabilitation and for completion of the

improvements after the Agreement is signed (by

stage if improvements are to be completed in

stages);

2\. Total Section 8 requested and proposed Contract

term;

3\. Name of the State or local Housing Finance Agency

(HFA) or Public Housing Agency (PHA) with

jurisdiction and an expression of interest from

that agency of its willingness to contract with HUD

to perform contract administration services under

the Agreement and contract with the private owner;

4\. Disclosure of other Federal, State or local

government financial assistance such as tax

abatement, tax credits, HOME, CDBG, tax exempt

bonds, or other local sources;

5\. A statement as to whether any CDBG or HONE funding

is involved and if the grant recipient (i.e., the

eligible unit of State or local government) has

been requested to conduct environmental reviews

pursuant to 24 CFR, Part 58; and

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6\. Evidence of a preliminary financing commitment from

the Pension Fund and a description of the terms of

such financing.

1-13. MARKET REVIEWS

A. Field Office Review.

The Pension Fund is responsible for determining that a

market exists for the project. However, before it

completes its processing of the owner\'s application,

the Pension Fund must request, and the Field Office

with jurisdiction will provide, comments as to the

impact of the project on any existing or proposed

Federally-insured or assisted projects in the area.

B. Field Office Response.

The Field Office will respond directly to the Pension

Fund with a copy to Headquarters, Office of Insured

Multifamily Development.

1-14. MAXIMUM TOTAL ANNUAL CONTRACT COMMITMENT

A. Maximum assistance.

The maximum total annual housing assistance payments

that may be committed under the contract shall be the

total of the gross rents for all contract units in the

project (see 24 CFR 886.308(b)).

B. Changes in Contract Amounts.

In order to assure that housing assistance payments

will be increased in a timely manner to cover increases

in contract rents, changes in family composition, or

decreases in family incomes, the provisions of 24 CFR

886.308(c)(1) and (2) will apply.

1-15. HOUSING ASSISTANCE PAYMENTS TO OWNERS.

See 24 CFR 886.309 for guidance. References in that

Section to substantial rehabilitation should be considered

as references to New Construction as well. References to

\"PHA\" should be considered as references to HUD the HFA or

PHA administering the contract on behalf of HUD (see

paragraph 1-24). The reference to Section 244 of the

National Housing Act is not applicable.

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1-16. FAIR MARKET RENTS AND INITIAL CONTRACT RENTS

A. The Fair Market Rent Schedule for this demonstration is

120 percent of the Existing Housing Fair Market Rent

Schedule most recently published in the Federal

Register.

1\. Initial gross rents (contract rents plus any

allowance for utilities and other services) for any

new construction project, and any substantial

rehabilitation project with per unit rehabilitation

costs of \$5000 or more, may not exceed the rents in

the Fair Market Rent Schedule applicable to this

demonstration.

2\. Initial gross rents for any substantial rehabilitation

project with per unit rehabilitation costs of

less than \$5000 may not exceed 100 percent of the

published Existing Housing Fair Market Rent

Schedule.

B. Contract rents must be reasonable on the basis of

comparison with rents for unsubsidized units of similar

age, design and location which include comparable

amenities and services and may exceed such comparable

rents by no more than 20 percent.

C. In older, declining urban areas where there is an

overriding need for new or substantially rehabilitated

housing, but where sufficient data on market rents is

not obtainable due to the overall physical and economic

condition of the neighborhood, the Pension Fund may

base its estimate of rental values on comparables from

the nearest neighborhood or neighborhoods, where

private industry has provided recently constructed or

substantially rehabilitated rental housing of modest,

non-luxury design without adjustment for the

differences between the physical and economic

conditions of the subject and comparable neighborhoods

except for differences attributable to tax and utility

rates.

D. Contract rents must also be supported by the owner\'s

cost certification as provided in paragraph 1-28.

1-17. OTHER FEDERAL REQUIREMENTS

A. Participation in this Demonstration requires compliance

with the Fair Housing Act, Title VI of the Civil Rights

Act of 1964; Title VIII of the Civil Rights Act of

1968; Executive Orders 11063 and 11246; Section 504 of

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the Rehabilitation Act of 1973; the Age Discrimination

Act of 1975; Section 3 of the HUD Act of 1968 and all

regulations issued pursuant to these authorities.

B. In addition, in selecting project-specific proposals,

the Pension Fund must take into consideration

compliance with the following:

1\. Environmental regulations in 24 CFR Parts 50 and

51;

2\. Clean Air and Federal Water Pollution Control Act;

3\. Flood Disaster protection Act of 1973;

4\. Federal labor standards provisions including

payment of prevailing wages as determined by the

Secretary of Labor in accordance with the Davis-Bacon

Act (for projects of 9 or more units); and

5\. The Uniform Relocation Assistance and Real Property

Acquisition Policies Act of 1970, as amended,

implementing regulations and Handbook requirements,

to persons displaced from the project site.

C. The Agreement and Contract, as appropriate, will

contain certifications as to compliance with these

requirements

1-18. SITE AND NEIGHBORHOOD ACCEPTABILITY CRITERIA

A. Prior Review.

The Pension Fund may ask Headquarters to request the

Field Office to review the project site for compliance

with site and neighborhood acceptability criteria

before the Fund completes processing of the owner\'s

application. Observations as to any environmental

problems noted during the course of this review will be

included in the report to Headquarters.

B. Proposed sites for new construction projects must meet

the following acceptability criteria standards:

1\. The site must be adequate in size, exposure and

contour to accommodate the number and type of units

proposed and adequate utilities (water, sewer, gas

and electricity) and streets must be available to

service the site.

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2\. The site and neighborhood are suitable from the

standpoint of facilitating and furthering full

compliance with the applicable provisions of

Title VI of the Civil Rights Act of 1964, Fair

Housing Act, Executive Order 11063, and

implementing HUD regulations.

3\. The neighborhood must not be one which is seriously

detrimental to family life or in which substandard

dwellings or other undesirable conditions

predominate, unless there is actively in progress a

concerted program to remedy the undesirable

conditions.

4\. The housing must be accessible to social,

recreational, educational, commercial and health

facilities and services and other municipal

facilities and services that are at least

equivalent to those typically found in

neighborhoods consisting largely of unassisted,

standard housing with similar market rents.

5\. The housing must be so located that travel time and

cost via public transportation or private

automobile, from the neighborhood to places

providing a range of jobs for lower-income workers,

is not excessive. (This standard need not be

rigidly adhered to for housing for the elderly.)

6\. Minority Concentration.

a\. The site must not be located in an area of

minority concentration except as permitted

under paragraph b, and must not be located in

a racially mixed area if the project will cause

a significant increase in the proportion of

minority to non-minority residents in the area.

b\. A project may be located in an area of minority

concentration only if:

\(1\) Sufficient, comparable opportunities exist

for housing for minority families in the

same income range to be served by the

proposed project, outside areas of

minority concentration (see paragraph 7

for further guidance), or

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\(2\) the project is necessary to meet

overriding housing needs that cannot be

met in that housing market (see paragraph

8 for further guidance).

7\. Sufficient Comparable Opportunities

a\. \"Sufficient\" does not require that in every

locality there be an equal number of assisted

units within and outside of areas of minority

concentration. Rather, application of this

standard should contribute to a reasonable

distribution of assisted units each year which,

over a period of several years, will approach

an appropriate balance of housing choices

within and outside areas of minority

concentration. An appropriate balance in any

jurisdiction must be determined in light of

local conditions affecting the range of housing

choices available for lower income minority

families and in relation to the racial mix of

the locality\'s population.

b\. Units may be considered \"comparable

opportunities\" if they have the same household

type (elderly, handicapped, family, large

family) and tenure type (owner/renter); require

approximately the same tenant contribution

towards rent; serve the same income group; are

located in the same housing market; and are in

standard condition.

c\. Application of this \"sufficient comparable

opportunities\" standard involves assessing the

overall impact of HUD-assisted housing on the

availability of housing choices for lower

income minority families in and outside areas

of minority concentration, and must take into

account the extent to which the following

factors are present, along with other factors

relevant to housing choices:

\(1\) A significant number of assisted housing

units are available outside areas of

minority concentration.

\(2\) There is significant integration of

assisted housing projects constructed or

rehabilitated in the past 10 years,

relative to the racial mix of the eligible

population.

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\(3\) There are racially integrated neighborhoods

in the locality.

\(4\) Programs are operated by the locality to

assist minority families that wish to find

housing choices outside areas of minority

concentration.

\(5\) Minority families have benefited from

local activities (e.g., acquisition and

write-down of sites, tax relief programs

for homeowners, acquisition of units for

use as assisted housing units) undertaken

to expand choices for minority families

outside areas of minority concentration.

\(6\) A significant proportion of minority

households have been successful in finding

units in non-minority areas under the

Section 8 Certificate and Housing Voucher

programs.

\(7\) Comparable housing opportunities have been

made available outside areas of minority

concentration through other programs.

8\. Overriding Housing Needs

a\. Application of the \"overriding housing needs\"

criterion permits approval of sites that are an

integral part of an overall local strategy for

the preservation or restoration of the

immediate neighborhood and of sites in a

neighborhood experiencing significant private

investment that is demonstrably changing the

economic character of the area (a \"revitalizing

area\").

b\. An \"overriding housing need,\" however, may not

serve as the basis for determining that a site

is acceptable if the only reason the need

cannot otherwise be feasibly met is that

discrimination on the basis of race, color,

creed, sex, or national origin renders sites

outside areas of minority concentration

unavailable or if the use of this standard in

recent years has had the effect of circumventing

the obligation to provide housing

choice.

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B. Sites for proposed substantial rehabilitation projects

(for other than HUD-held and HUD-owned) must meet the

following acceptability criteria:

1\. The site must be adequate in size, exposure and

contour to accommodate the number and type of units

proposed and adequate utilities (water, sewer, gas

and electricity) and streets must be available to

service the site.

2\. The site must be suitable from the standpoint of

facilitating and furthering full compliance with

the applicable provisions of Title VI of the Civil

Rights Act of 1964, Title VIII of the Civil Rights

Act of 1968, Executive Order 11063, and implementing

HUD regulations.

3\. The housing must be accessible to social,

recreational, educational, commercial and health

facilities and services and other municipal

facilities and services that are at least

equivalent to those typically found in neighborhoods

consisting largely of unassisted, standard

housing with similar market rents.

4\. The housing must be so located that travel time and

cost via public transportation or private

automobile, from the neighborhood to places of

employment providing a range of jobs for lower-income

workers, is not excessive. (This standard

need not be rigidly adhered to for housing for the

elderly.)

5\. The site and neighborhood must be reasonably free

from disturbing noises and reverberations and other

hazards to the health, safety and general welfare

of the occupants.

6\. The site and neighborhood are not subject to

serious adverse environmental conditions, natural

or manmade, such as dangerous walks, steps,

instability, flooding, poor drainage, septic tank

back-ups, sewage hazards or mud slides; abnormal

air pollution, smoke or dust; excessive noise,

vibration or vehicular traffic; excess accumulation

of trash; vermin or rodent infestation; or fire

hazards.

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C. The site and neighborhood in which properties that are

HUD-owned or have mortgages held by HUD are located

must:

1\. Be reasonably free from disturbing noises and

reverberations and other hazards to the health,

safety and general welfare of the occupants.

2\. Not be subject to serious adverse environmental

conditions, natural or manmade, such as dangerous

walks, steps, instability, flooding, poor drainage,

septic tank back-ups, sewage hazards or mud slides;

abnormal air pollution, smoke or dust; excessive

noise, vibration or vehicular traffic; excess

accumulation of trash; vermin or rodent

infestation; or fire hazards.

1-19. PENSION FUND SUBMISSION OF PROJECT-SPECIFIC PROPOSALS TO

HUD.

A. The Pension Fund must determine that the proposed

project is an eligible project as defined in paragraph

1-11C and that it meets the aggregate intent of the

public purposes identified in paragraph 1-11B of this

Notice. It must also determine that the project, along

with other projects the Fund will consider, will result

in at least 50 percent of the Pension Fund\'s

Section 8 set-aside being used for HUD-owned properties

or properties with mortgages held by HUD.

B. The Pension Fund\'s submission to HUD must include the

information required in paragraph 1-12 along with

certifications from the Pension Fund that:

1\. It will make a loan or purchase the loan to finance

the project;

2\. it has or will have no ownership interest of any

kind in the project;

3\. contract rents (see paragraphs 1-16 and 1-28 for

guidance):

a\. compare reasonably to or are less than the

rents for unassisted units of similar age,

design and location which provide comparable

amenities or services; or

b\. that exceed those determined to compare

reasonably do so by no more than 20 percent and

are warranted by cost and expense estimates

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acceptable to the Pension Fund and are

supportable by cost certification at

completion.

4\. It consulted with the Field Office with jurisdiction

relative to the impact of the proposed project

on any existing or proposed Federally-assisted

projects in the area and that:

a\. the Field Office comments were addressed in

underwriting the project, or

b\. the Field Office did not comment.

1-20. FORMAL PROPOSAL REVIEWS OF PROJECT SPECIFIC PROPOSALS

A. After receipt of a project-specific proposal,

Headquarters will assign a project number and request

the Field Office with jurisdiction to perform reviews

for compliance with site and neighborhood acceptability

criteria, environmental and Affirmative Fair Housing

Marketing requirements.

B. If the review for compliance with site and neighborhood

acceptability criteria was not performed by HUD before

the Pension Fund completes its processing of the owners

application it will be completed by HUD after receipt

of the project specific proposal from the Pension Fund.

C. Proposals will be reviewed for compliance with HUD\'s

environmental requirements for addressing the

Environmental Policy Act of 1969 (NEPA) and related

laws and authorities. HUD staff will conduct an

environmental review for all project-specific proposals

except those involving HOME or CDBG funding.

1\. Proposals involving HOME or CDBG Funding.

HUD may accept and adopt the environmental

assessment performed by the grant recipient (i.e.,

the eligible unit of State or local government) for

those proposals that involve HOME or CDBG funding

activities and for which an environmental review is

performed pursuant to 24 CFR Part 58.

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2\. HUD-Owned Properties and Properties with Mortgages

Held by HUD.

a\. HUD will perform an environmental compliance

review (Form HUD-4128.1, Format for

Categorically Excluded Projects) as part of the

property disposition transaction.

b\. If that review determines that the project is

within the 100 year floodplain, the transfer

will require that the owner take all feasible

action to minimize the impact of flooding on

the mechanical systems within the project.

c\. The property must be covered by flood

insurance. All occupants of the project must

be informed that it is within a flood plain and

that flood insurance is available for personal

possessions.

d\. If the project is listed on the National

Register for Historic Places or in a district

listed on the National Register, there must be

a deed restriction that any alteration to the

property must be submitted to the State

Historic Preservation Officer for review and

comment.

3\. Other Projects

a\. New Construction: All new construction

projects require preparation of an

environmental assessment pursuant to 24 CFR

Part 50, using Form HUD-4128, Format for

Environmental Assessment for HUD Projects.

b\. Existing, With or Without Substantial

Rehabilitation:

\(1\) Existing projects are categorically

excluded from NEPA.

\(2\) An environmental assessment is not

required for existing projects when HUD

completes Form HUD 4128.1 and determines

that rehabilitation of the project does

not:

o increase the number of dwelling units

by more than 20 percent; or

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o result in a change of land use from

nonresidential to residential; or

o involve rehabilitation costs above 75

percent of the post rehabilitation

replacement cost of the project; or

o involve demolition of one or more

buildings containing the primary use

served by the project.

\(3\) Projects not meeting the above criteria

are subject to a full environmental

assessment using Form HUD-4128.

\(4\) All projects must comply with other

non-NEPA environmental requirements (24 CFR

50.4) such as floodplain management,

noise, historic preservation and hazards.

This entails a limited environmental

compliance review by HUD using Form

HUD-4128.1.

4\. Pension Funds are encouraged to include in each

project-specific application submitted to HUD

copies of environmental reports, audits, or

assessments prepared by others that the Fund

believes will assist HUD in conducting its

environmental review.

5\. Details on environmental requirements are in

Handbooks 1390.2 and 1390.4 and 24 CFR, Parts 50

and 51.

E. Affirmative Fair Housing Marketing Plan. The Field

Office will review and approve the Affirmative Fair

Housing Marketing Plan following the procedures and

requirements of HUD Handbook 8025.1 REV-2,

Implementation of Affirmative Fair Housing Marketing

Requirements.

1-21. HEADQUARTERS EVALUATION OF PROJECT-SPECIFIC PROPOSALS.

Headquarters will perform the following additional

functions:

A. Conduct previous participation review of project

principals and determine whether project participants

are debarred, suspended or ineligible to perform work

on Federally-assisted projects.

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B. Obtain and issue the appropriate Davis-Bacon wage rate

determinations and construction contract labor

standards provisions.

C. Unless the Housing Credit Agency has agreed to perform

subsidy layering reviews for projects receiving Low

Income Housing Tax Credits, review projects receiving

tax credits and/or other governmental assistance for

any excess subsidy and reduce subsidy sources in accord

with outstanding subsidy layering guidelines.

D. Negotiate a contract with an HFA or PHA to perform

contract administration functions on behalf of HUD.

E. Verify that proposed contract rents are within the Fair

Market Rent Schedule for this demonstration (see

paragraph 1-16A).

1-22. HUD APPROVAL OF PROJECT-SPECIFIC PROPOSALS

A. Section 6(b) of the authorizing legislation requires

that not less than 50 percent of the funds appropriated

for the demonstration be used for properties owned by

HUD or for properties with mortgages held by HUD. To

ensure compliance with this statutory requirement, each

Pension Fund must use at least 50 percent of its

Section 8 set-aside for HUD-owned properties or for

properties with mortgages held by HUD unless HUD

determines that the overall statutory requirement will

otherwise be met and provides an exception.

Consequently:

1\. Budget authority for the first project-specific

proposal submitted by the Pension Fund, if it is

for a non-HUD project, cannot exceed 50 percent of

the Pension Fund\'s total set-aside.

2\. HUD will not accept for review any additional

non-HUD proposals until proposals for HUD-projects

using an equal or greater amount of budget

authority are submitted.

3\. A Pension Fund may substitute a non-HUD proposal

for a HUD proposal only with HUD approval, or only

if the substitute proposal will not result in a

reduction in budget authority for HUD-proposals

below the 50 percent requirement.

4\. Should any approved proposal for a HUD-project fail

to go to closing and an acceptable substitution is

not made by the same or different Pension Fund, HUD

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will determine whether any additional non-HUD

proposals may be approved and/or proceed to

Agreement.

5\. If a Fund fails to submit project-specific

proposals, or fails to proceed to closing of

approved proposals within the time frames specified

in paragraph 1-10E.1 and E.2, HUD may withdraw the

Pension Fund\'s uncommitted set-aside and reallocate

it elsewhere.

B. Upon conclusion of Headquarters review, HUD will advise

the Pension Fund:

1\. Whether the proposal is approved; approvable only

if specified changes are made and if Headquarters

receives those changes within the time limit

specified; or not approvable with an explanation as

to why.

2\. Of the number of assisted and unassisted units

approved, the amount of Section 8 budget authority

that will be reserved for the project when the

Agreement is signed and the balance remaining in

the Fund\'s set-aside. If the proposal is for a

HUD-owned project, the Pension Fund will provide

assistance from its set-aside for one-half of the

units; the other half will be provided by HUD from

its property disposition set-aside.

3\. That HUD will reserve Section 8 budget authority

for the project and enter into a Agreement to Enter

into Housing Assistance Payments Contract

(Agreement) provided the owner submits, through the

Pension Fund, a permanent financing commitment for

the project including a statement of the source of

the financing, terms, interest rate, discounts,

extension provisions, and any conditions that are

in, will be in, or will affect the permanent

financing arrangements.

4\. That the Pension Fund must submit an acceptable

certification regarding the working drawings and

specifications by the date specified in the

Approval Letter (see paragraph 1-23).

5\. Of the dates by which the Pension Fund is expected

to close on the construction financing and by which

construction/rehabilitation is expected to begin;

and

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6\. That if either of these requirements are not met,

HUD may withdraw the Section 8 authority for the

project and reallocate it elsewhere.

1-23. CERTIFICATION OF WORKING DRAWINGS AND SPECIFICATIONS

A. Before HUD will execute an Agreement with the owner,

the Pension Fund must submit a certification to HUD,

based on an analysis and report by a review architect

employed or engaged by the Fund that:

1\. the working drawings and specifications and work

write-up are in compliance with the following

standards:

a\. New Construction and Substantial

Rehabilitation. The following standards apply

to both new construction and substantial

rehabilitation:

\- State and local building codes, ordinances

and regulations.

\- Handicapped Accessibility Guidelines, 24

CFR 890.210(c).

b\. Substantial Rehabilitation. The following

additional standards apply to substantial

rehabilitation projects:

\- Lead-Based Paint requirements of 24 CFR

882.109(i).

c\. New Construction. The following additional

standards apply to new construction projects:

\- Fair Housing Accessibility Guidelines

\- Federal Register Volume 56, No. 44,

March 6, 1991.

2\. The proposed construction or rehabilitation is

permissible under the applicable zoning, building,

housing and other codes, ordinances or regulations

as modified by any waivers obtained from the

appropriate officials.

B. The owner must retain one set of the working drawings

and specifications, or work write-up, for examination

by HUD for so long as the HAP contract is in effect or

such shorter period as HUD may approve.

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1-24. ADMINISTRATION CONTRACT

HUD will enter into an contract with a HFA or PHA (i.e., a

Contract Administrator) to perform certain administration

and ministerial functions on behalf of HUD. Any fee for

this service will not exceed 5 percent of the published

2-bedroom Fair Market Rent for Existing Housing for the area

and will be payable out of the total Section 8 authority

reserved for the project. The contract will be executed by

HUD and the HFA or PHA and will become effective upon

execution of the HAP Agreement between HUD and the private

owner.

1-25. EXECUTION OF HAP AGREEMENT.

After receipt of assurance of a permanent financing

commitment and acceptable certifications regarding working

drawings and specifications, and prior to commencement of

construction or rehabilitation, HUD will enter into an

Agreement with the owner, which among other things, will

contain the following:

A. A statement that the owner agrees to construct or

rehabilitate the project according to the standards

identified in paragraph 1-23;

B. The date by which construction or rehabilitation will

commence, and the date by which construction or

rehabilitation will be completed and the project ready

for occupancy;

C. Contract rents to be paid to the owner once the project

is completed and the Contract executed;

D. The date for final inspection of the completed project;

and

E. The term of the Housing Assistance Payments Contract.

1-26. CONSTRUCTION/REHABILITATION PERIOD

A. Timely performance of work.

Once the Agreement is signed, the owner must promptly

proceed with construction or rehabilitation of the

project as provided in the Agreement. If the work is

not commenced, diligently continued and/or completed

according to the Agreement, HUD may rescind the

Agreement or take other appropriate action. Extensions

of time will be granted and contract rents will be

increased only for reasons specified in the Agreement.

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B. Inspections During Construction.

The Pension Fund must ensure that construction

inspections are performed at least once per month. The

purpose of these inspections is to ensure that work is

proceeding on schedule and is being completed according

to the Agreement. Inspections must also ensure that

the construction or repair work uses materials

specified in the work write-up or working drawings and

specifications and is being performed in a workman-like

manner.

C. Changes During Construction.

The owner must obtain prior approval of the Pension

Fund and HUD for any changes from the work specified in

the Agreement that would materially alter the design of

the project, quality of the Construction or rehabilitation

work. Approval of any changes may condition upon

a reduction in contract rents.

1-27. PROJECT COMPLETION

A. The Pension Fund will notify HUD of project completion

by submitting to HUD:

1\. A certificate of occupancy and/or other local

approvals necessary for occupancy;

2\. a certificate by the owner and inspecting architect

that there were no changes in the work that would

result in a reduction in contract rents;

3\. a certification by the owner and inspecting

architect that the project was constructed or

rehabilitated in compliance with the standards set

forth in paragraph 1-23 and with the requirements

of the Agreement;.

4\. a certification by the owner and inspecting

architect that there are no defects or deficiencies

in the work except for ordinary punch list items or

items of delayed completion which are minor in

nature or which are incomplete because of weather

conditions and, in any case, do not preclude or

affect occupancy; and

5\. an owner\'s certification as to compliance with

Davis Bacon and other Federal labor standards.

If there are pending claims relating to payment of

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prevailing wage rates, the owner must place a

sufficient amount in escrow to assure such

payments. The escrow may be disbursed only with

HUD approval.

B. Project Inspection.

Prior to submission of the evidence of completion

required by paragraph 1-27 the Pension Fund, or an

architect employed or engaged by the Pension Fund, must

inspect the project for acceptable completion. The

inspection must be sufficient to enable the inspector

to report that he/she has inspected the observable

elements and features of the project (both assisted and

unassisted units) in accordance with professional

standards of care and judgment and that, on the basis

of the inspection, the project has been completed in

accordance with the agreement and that there are no

observable conditions inconsistent with the evidence of

completion required in paragraph 1-27.

HUD may perform an inspection of its own prior to

accepting the project.

C. Project Acceptance.

1\. If it is determined by HUD that the project has

been completed according to the Agreement, HUD may

accept the project.

2\. If there are minor punch list items or items of

delayed completion awaiting seasonal opportunity

which do not preclude or affect occupancy, and all

other requirements of the Agreement have been met,

the project may be accepted and the Contract

executed. However, an escrow will be required,

along with a written agreement between the owner

and HUD specifying a schedule for completion. If

the owner fails to complete the items within the

agreed upon time, HUD may terminate the Contract

and/or exercise its other rights thereunder.

3\. If other defects or deficiencies exist, HUD will

determine whether and to what extent the defects or

deficiencies are correctable, what corrective

action are necessary to permit acceptance of the

project and whether and to what extent contract

rents should be reduced as a condition of

acceptance. If the owner is unwilling to correct

such defects or deficiencies, HUD need not accept

the project.

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4\. If HUD determines that the project cannot be

accepted, the Owner and Pension Fund will be

notified of this decision, and the reasons hereof.

1-28. COST CERTIFICATION

A. Prior to execution of the Housing Assistance Payments

Contract, the Pension Fund must review and submit to

HUD an owner\'s certification of actual costs and a

certification that the certified costs support the

contract rents. A simplified form of cost

certification using Form HUD-2205A, Mortgagor\'s

Certificate of Actual Cost, may be used for this

purpose.

B. In the event certified costs are less than the

estimated replacement cost (see paragraph 1-12A.5) and

do not support the contract rents, HUD may reduce the

contract rents to an amount determined by HUD to be

supportable.

1-29. FINANCIAL INFORMATION

The Pension Fund must submit financial information,

including sources and uses of funds data, sufficient to

document the leverage affect of the Section 8 assistance,

i.e., the direct and indirect project costs and benefits.

This information must be submitted simultaneously with the

cost certification required under paragraph 1-28 above.

1-30. HOUSING ASSISTANCE PAYMENTS CONTRACT

A. Required Form. The form of Contract will be in a form

prescribed by HUD.

B. Contract Term. The term of the Contract will be for a

minimum of 5 years and a maximum of 15 years.

C. Execution. Once the requirements of paragraphs 1-27,

1-28 and 1-29 have been satisfied, the Contract may be

executed. No assistance payments will be made until

the contract is fully signed and executed.

D. Unleased Units. At the time the Contract is executed,

HUD will determine whether the owner has met its

obligations with respect to any unleased units (see 24

CFR 886.309(c)) and for which of those units vacancy

payments will be made by HUD. The owner must indicate,

in writing, its agreement or disagreement with the

37

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determination while reserving all rights to claim

vacancy payments for the unleased units in accordance

with the Contract, without prejudice by reason of

signing the Contact.

E. Contract Provisions. The Contract will contain

provisions relative to:

1\. Prohibition on use of Other Federal Programs.

HUD\'s multifamily mortgage insurance programs, the

risk sharing programs under Section 542 of the

Housing and Community Development Act of 1992 and

loan or loan guarantee programs of the Farmers Home

Administration may not be used in connection with

housing developed or assisted under this demonstration

so long as a HAP Contract is in effect.

2\. Limitation on Assistance.

HUD assistance for projects developed under this

demonstration is limited only to the housing

assistance payments available under the Contact and

by paragraphs 1-14 and 2-1B of this Notice.

3\. Reduction in Contract Rents at Refinancing.

The owner must notify HUD in the event the project

is refinanced to lower the interest rate and/or

debt service payments. HUD may reduce the contract

rents to reflect the lower debt service payments.

4\. Termination for Cause.

If the owner fails to perform in accordance with

the terms and conditions of the Contract, including

maintaining the facilities in decent, safe and

sanitary condition, providing facilities and

services required under the Contract, and admitting

and leasing to eligible families, HUD will have the

right to terminate the Contract for cause. In the

event of termination, HUD will make every effort to

provide other forms of rental assistance, including

Section 8 vouchers, to families eligible for such

assistance at the time of contract termination.

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2-1. PROJECT MANAGEMENT AND OPERATIONS

A. Responsibility for Contract Administration. HUD is

responsible for contract administration. However, it

will contract with a State or local housing finance

agency or local public housing agency to carry out the

contract administration functions. The fee from this

service will be derived from the Section 8 contract

authority reserved for the project and may not exceed

5 percent of the published 2-bedroom Fair Market Rent

for Existing Housing for the area.

B. Rent Adjustments.

1\. Housing assistance payments may be adjusted

periodically up to the maximum amount of payments

specified in the Contract (see paragraph 1-14) and

according to the provisions of the Contract.

2\. Adjustments will be made on the basis of a formula

currently being developed by the Department which

takes into consideration increases in taxes and

other operating and maintenance expenses, exclusive

of debt service. Once that formula is developed,

it will become effective for all projects receiving

assistance under this demonstration.

3\. Rents may be adjusted upward or downward, but the

adjusted rents will not be less than the contract

rents in effect at Contract execution, except in

the event the project is refinanced (see paragraph

1-30E3) and absent fraud or misrepresentation in

determining the initial rents.

4\. Adjustments may not cause material differences

between the rents charged for assisted and

comparable unassisted units.

2-2. RESPONSIBILITIES OF THE OWNER

A. See 24 CFR 886.318.

B. The owner may contract with a private or public entity

(other than the agency responsible to HUD for contract

administration functions) to carry out any or all of

these functions. However, such an arrangement may not

relieve the owner of its responsibilities for these

services and functions.

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C. The owner must permit HUD to review and audit the

management and maintenance operations of the project at

any time.

2-3. MARKETING AND LEASING OF UNITS.

Marketing of units and selection of families by the owner

must be in accordance with the owner\'s approved Affirmative

Fair Housing Marketing Plan and other requirements of

24 CFR 886.321. (Note that any references to sales closings

or \"for tenancy after sale\" in that section are

inapplicable.)

2-4. MAINTENANCE. OPERATION AND INSPECTIONS.

See 24 CFR 886.323.

2-5. REEXAMINATION OF FAMILY INCOME.

See 24 CFR 886.324.

2-6. OVERCROWDED AND UNDEROCCUPIED UNITS.

See 24 CFR 886.326.

2-7. SECURITY AND UTILITY DEPOSITS.

See 24 CFR 886.315.

2-8. ADJUSTMENT OF UTILITY ALLOWANCES.

An owner\'s request for an adjustment in contract rents

under 2-1B must include an analysis of project utility

allowances. Data on changes in utility rates and other

factors affecting utility consumption should be provided as

part of the analysis. When an approved utility rate change

would result in a cumulative increase of 10 percent or more

in the most recently approved utility allowance, the owner

should request a approval of new utility allowances.

2-9. LEASE REQUIREMENTS.

The term of lease and required lease provisions must be

consistent with 24 CFR 886.327.

2-10. LEASING TO ELIGIBLE FAMILIES

The provisions of 24 CFR 886.329 apply to leasing of units

to eligible families.

40

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2-11. FEDERAL SELECTION PREFERENCES.

A. In selecting applicants for assistance under this

Demonstration, owners must give preference to

applicants who are otherwise eligible for assistance

and who, at the time they apply for assistance, are

involuntarily displaced, living in substandard

conditions or paying more than 50 percent of family

income for rent.

B. The requirements of 24 CFR, Part 886.337 are

applicable.

2-12. TERMINATION OF TENANCY.

24 CFR 886.328 applies to the termination of tenancy and

eviction of a family assisted under this demonstration.

2-13. NOTICE OF CONTRACT EXPIRATION.

See 24 CFR 886.311a.

2-14. REVIEWS DURING MANAGEMENT PERIOD.

A. HUD, or the agency administering the Contract for HUD,

will inspect the project operations at such intervals

as it deems necessary to ensure that the owner is in

full compliance with the terms and conditions of the

Contract. This shall include a determination as to

whether the assisted units are in decent, safe and

sanitary condition.

B. Equal opportunity reviews may be conducted with the

above review or at any time deemed appropriate by HUD.

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

Assistant Secretary for Housing

\- Federal Housing Commissioner

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ATTACHMENT I

THE FEDERAL REGISTER ATTACHMENT CAN BE FOUND IN THE FEDERAL REGISTER

DATABASE OF DAS.

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ATTACHMENT II

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Applicationf for Multifamily

Housing Project

[[HUD-92013 Applicationf for
Multifamily]{.underline}](http://www.hudclips.org/sub_nonhud/html/pdfforms/92013.pdf)

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Page 1 of 8 form HUD-92013 (10/92)

ref. Handbook 4420.1

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ATTACHMENT II

(Continued)

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Page 2 of 8 form HUD-92013

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ATTACHMENT II

(Continued)

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Page 3 of 8 form HUD-92013

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ATTACHMENT II

(Continued)

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Page 4 of 8 form HUD-92013

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ATTACHMENT II

(Continued)

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Page 5 of 8 form HUD-92013

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ATTACHMENT II

(Continued)

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Page 6 of 8 form HUD-92013

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ATTACHMENT II

(Continued)

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Page 7 of 8 form HUD-92013

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ATTACHMENT II

(Continued)

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Page 8 of 8 form HUD-92013