[Federal Register Volume 69, Number 240 (Wednesday, December 15, 2004)]
[Proposed Rules]
[Pages 75188-75201]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-27206]



[[Page 75187]]

-----------------------------------------------------------------------

Part III





Department of Housing and Urban Development





-----------------------------------------------------------------------



24 CFR Part 970



Demolition or Disposition of Public Housing Projects; Proposed Rule

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / 
Proposed Rules

[[Page 75188]]


-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 970

[Docket No. FR-4598-P-01; HUD-2004-0013]
RIN 2577-AC20


Demolition or Disposition of Public Housing Projects

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule revises HUD's regulations governing 
demolition or disposition of public housing projects. This rule 
establishes the general and specific requirements for HUD approval of 
demolition or disposition applications, relocation of residents, 
resident participation in the form of consultation and opportunity to 
purchase a public housing project, the replacement of units, and a new 
authority for a public housing agency (PHA) to demolish a small number 
of its units without a formal application under certain circumstances, 
referred to as ``de minimis'' demolition. This proposed rule seeks 
comments on these provisions as well as any other provision of this 
proposed rule.

DATES: Comment Due Date: February 14, 2005.

ADDRESSES: Interested persons are invited to submit written comments 
regarding this proposed rule to the Regulations Division, Office of 
General Counsel, Room 10276, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Washington, DC 20410-0500. 
Interested persons may also submit comments electronically through 
either:
    <bullet> The Federal eRulemaking Portal at: http://www.regulations.gov; or
    <bullet> The HUD electronic Web site at: http://www.epa.gov/feddocket. Follow the link entitled, ``View Open HUD Dockets''. 
Commenters should follow the instructions provided on that site to 
electronically submit their comments.
    Facsimile (FAX) comments are not acceptable. In all cases, 
communications must refer to the above docket number and title. All 
comments and communications submitted will be available, without 
revision, for public inspection and copying between 8 a.m. and 5 p.m. 
weekdays at the above address. Copies are also available for inspection 
and downloading at http://www.epa.gov/feddocket. Comments that are 
submitted electronically to the above Web sites, or that are submitted 
to the HUD Regulations Division at the above address, during the 60-day 
opportunity for notice and comment, are placed in the public rules 
docket and are available to the public for inspection and copying. As a 
result, these comments are in the public domain and will be treated by 
the Department as public comments.

FOR FURTHER INFORMATION CONTACT: For further information about this 
rule, contact Ainars Rodins, Director, Public and Indian Housing 
Special Application Center, Department of Housing and Urban 
Development, Ralph H. Metcalfe Federal Building, 77 West Jackson 
Boulevard, Room 2401, Chicago, IL 60604-3507; telephone: (312) 353-6236 
(this is not a toll-free number). Persons with hearing or speech 
impairments may access that number toll-free through TTY by calling the 
Federal Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background--Changes to Demolition or Disposition Requirements Under 
the Quality Housing and Work Responsibility Act of 1998

    Section 531 of the Quality Housing and Work Responsibility Act of 
1998 (Pub. L. 105-276, approved October 21, 1998) (QHWRA) amended the 
provisions on public housing demolition or disposition found in Section 
18 of the United States Housing Act of 1937, 42 U.S.C. 1437p (Section 
18). QHWRA changed both the general standard for approval of 
applications for demolition or disposition of public housing stock, and 
many of the specific procedures for these actions. During the interim 
period between the effective date of QHWRA revisions, October 21, 1998, 
and the publication of a final rule, PIH Notice 99-19, extended by PIH 
notices 2000-16, 2001-38, 2002-23, and most recently, 2003-9, 
implements Section 18 as amended. The notices are available from HUD's 
Web site at http://www.hud.gov, or through HUDclips, http://www.hudclips.org. In addition, a copy of the notice can be obtained by 
calling 800-767-7468 and asking for PIH Notice 99-19, as extended.
    Prior to QHWRA, HUD could not approve a demolition or disposition 
of a public housing project or portion of the project unless HUD 
determined that, in the case of an application for demolition, the 
project was obsolete and unusable for public housing, and that no 
reasonable program of modifications would be feasible to return the 
project to useful life. For a disposition application, the PHA, prior 
to QHWRA, had to determine that retention of the property was not in 
the best interests of the tenants or the PHA because (1) developmental 
changes in the area surrounding the project adversely affected the 
health or safety of the tenants or the feasible operation of the 
project by the PHA; (2) the disposition would have allowed the 
acquisition of better housing stock that would have been more 
effectively and efficiently operated as low-income housing available in 
the community; or (3) the Secretary determined other factors were 
consistent with the best interests of the tenants and PHA and not 
inconsistent with the U.S. Housing Act of 1937 (1937 Act).
    Section 18 as amended alters these standards so that HUD is 
required to approve the demolition or disposition application if the 
PHA certifies to the existence of specified factors supporting those 
actions. HUD is not required to approve an application if HUD has 
information clearly inconsistent with the certification, or has 
information that the PHA has failed to comply with the consultation 
requirements. For demolition, the PHA has to certify that the project 
is ``unsuitable'' (rather than ``unusable'') for public housing, and 
that no reasonable program of modifications is ``cost-effective'' 
(rather than ``feasible'') to return the project to useful life. For 
disposition, the PHA must certify that retention of the project is not 
in the best interest of the residents or the PHA, for reasons specified 
in the statute. This procedure is similar to the procedure under prior 
law, except that the factors previously used have been revised to 
eliminate the requirement that disposition allow for the acquisition of 
replacement housing that will preserve the same total amount of low-
income housing stock in the community, and to no longer require as a 
prerequisite ``developmental changes'' in the area surrounding the 
project. Under the current law, disposition is justified if the PHA can 
certify that conditions in the area surrounding the project adversely 
affect the health or safety of the residents or the feasible operation 
of the project, or disposition allows for the acquisition, development, 
or rehabilitation of other properties that will be more efficiently or 
effectively operated as low-income housing. In addition to these 
changes, QHWRA alters other procedures related to demolition and 
disposition, removes some former requirements, and adds new 
requirements as further discussed below.
    QHWRA eliminates the one-for-one replacement requirement. One-for-
one replacement of demolished units or those removed from a PHA's 
inventory

[[Page 75189]]

through disposition was first eliminated in Section 1002 of the 1995 
Rescissions Act (Pub. L. 104-19, approved July 27, 1995), and that 
change was reenacted on a year-to-year basis until 1998.\1\ As a result 
of the elimination of one-for-one replacement, a replacement housing 
plan is no longer required as part of a demolition or disposition 
application.
---------------------------------------------------------------------------

    \1\ See Sections 201(b) of the Omnibus Consolidated Rescissions 
and Appropriations Act of 1996 (Pub. L. 104-134, approved April 26, 
1996); 201(b) of the Departments of Veterans Affairs and Housing and 
Urban Development, and Independent Agencies Appropriations Act, 1997 
(Pub. L. 104-204, approved September 26, 1996); and 201(a) of the 
Departments of Veterans Affairs and Housing and Urban Development, 
and Independent Agencies Appropriations Act, 1998 (Pub. L. 105-65, 
approved October 27, 1997).
---------------------------------------------------------------------------

    QHWRA does contain very specific provisions regarding the 
notification and relocation of any residents living in a building that 
the PHA plans to demolish or remove from its inventory through 
disposition, while providing that the Uniform Relocation Act does not 
apply to demolition or disposition under Section 18. Except for when 
there is an imminent threat to health and safety, the PHA must notify 
each family living in a building that is subject to demolition or 
disposition 90 days prior to the displacement date of the impending 
action. The notice must state that the PHA will not commence demolition 
or complete disposition until all families have been relocated, and 
that each family will be offered ``comparable housing.'' The notice 
must also state that the PHA will pay for the actual and reasonable 
relocation expenses of each resident to be displaced, and provide any 
necessary relocation counseling for residents who are displaced.
    ``Comparable Housing'' consists of housing that meets housing 
quality standards and that is located in an area that is generally not 
less desirable than the location of the housing of the person to be 
displaced. The housing may consist of tenant-based assistance, project-
based assistance, or another public housing unit, so long as the rental 
rate is comparable to the rental rate of the unit from which the family 
is being displaced.
    Section 18 provides that, prior to a disposition of all or a 
portion of a public housing project, ``in appropriate circumstances'' 
as determined by HUD, the PHA shall initially offer the property to any 
eligible resident organization, eligible resident management 
corporation, or nonprofit organization acting on behalf of the 
residents. In order to be eligible for such an offer, which would be to 
purchase the property for continued use as low-income housing, the 
resident organization or other resident nonprofit entity must express 
an interest within 30 days after the PHA notifies the entity of the 
proposed disposition. If the entity expresses an interest in writing, 
the disposition cannot occur for 60 days, beginning on the date of 
receipt of the written notice, to give the entity time to obtain a firm 
commitment for financing the purchase. Formerly, the statute required 
the PHA to offer the property to residents in the case of both a 
proposed demolition or disposition.
    Section 18 requires the number of units developed on the former 
site of a public housing project that was demolished pursuant to 
Section 18 to be ``significantly fewer'' than the number of units on 
the site prior to the demolition. (See 42 U.S.C. 1437p(d).) This 
requirement was actually first instituted in 1995. (See Section 1002(f) 
of the 1995 Rescissions Act (Pub. L. 104-19, approved July 27, 1995).) 
The statute does not specifically define what proportion or percentage 
constitutes ``significantly fewer.''
    Section 18 also allows for consolidation of occupancy within a 
building, among buildings, or between a project and other housing. The 
purpose of such consolidation must be to improve the living conditions 
of residents or to provide greater efficiency in serving the residents. 
(See 42 U.S.C. 1437p(e).)
    Section 18 contains a so-called ``de minimis'' exception from the 
statute's requirements. This provision allows a PHA to demolish the 
lesser of five units or five percent of the total number of dwelling 
units owned by the PHA in any five-year period, if the space occupied 
by the demolished unit or units is used for meeting the service or 
other needs of the residents or if the unit or units are beyond repair. 
The statute does not define what condition constitutes ``beyond 
repair.''
    In the case of disposition only, the law prior to QHWRA required 
that the net proceeds of the disposition be used to pay the development 
cost for the project or to retire any outstanding obligations issued to 
finance the project's development or modernization. Section 18 now 
requires that the net proceeds of disposition be used to retire 
outstanding obligations issued to finance the original development or 
modernization. Section 18 also gives the Secretary the discretion to 
waive that repayment requirement. Any proceeds of disposition not used 
for debt are permitted to be used for broadly defined purposes: to 
provide low-income housing, to benefit the residents of the PHA, or to 
leverage amounts to secure commercial enterprises, on site in public 
housing projects, appropriate to serve the needs of the PHA's 
residents.

II. This Proposed Rule

A. Purpose, Applicability, and Definitions

    This proposed rule would retain the following sections from the 
existing regulations with some adjustments and clarifications.
    Proposed Sec.  970.3(b), which sets forth transactions and 
situations to which this rule would not apply, would revise current 
Sec.  970.2(a) (which discusses applicability) to address changes made 
by QHWRA as well as to clarify areas where questions about 
applicability have been raised in the past. For clarification purposes, 
a new Sec.  970.3(b)(5) has been added and subsequent paragraphs 
redesignated, making clear that this rule does not apply to provision 
of space within a project for Family Self Sufficiency program purposes 
under 42 U.S.C. 1437u(j).
    Another point of clarification would be made in proposed Sec.  
970.3(b)(8), which states that condemnations and eminent domain takings 
by state and local authorities are not covered. In order to qualify as 
an exempt taking or exercise of eminent domain authority, the taking 
body must be authorized to acquire real property by eminent domain 
under state law, and must show its intent to use its power of eminent 
domain by taking the first step necessary under state law for an 
eminent domain taking. HUD must be a party to any condemnation 
proceeding because of its interest under the ACC (Annual Contributions 
Contract, defined at 24 CFR 5.403) and Declaration of Trust. HUD 
approval is required of any out-of-court settlement for the transfer of 
PHA-owned property under eminent domain due to the federal interest in 
the property under the ACC, and as specified in the Declaration of 
Trust. Additional adjustments would be made to account for changes in 
law.
    A reference to one-for-one replacement housing would be eliminated 
from Sec.  970.2(a)(7) (this material is found in proposed Sec.  
970.3(b)(8)), because one-for-one replacement of units demolished or 
disposed of is no longer required.
    The list of transactions to which the rule does not apply would be 
revised to include the new provision for de minimis demolitions under 
42 U.S.C. 1437p(f) as well as demolitions of severely distressed public 
housing units as part of a HOPE VI revitalization plan approved after 
the effective date of

[[Page 75190]]

QHWRA, and demolition of public housing developments removed from a 
PHA's inventory under Section 33 of the 1937 Act, 42 U.S.C. 1437z-5. 
These matters are included in proposed Sec. Sec.  970.3(b)(13), (14), 
and (15).
    A definition would be added for housing construction cost (HCC) by 
cross-reference to reflect that this rule proposes using the concept of 
HCC to help PHAs determine whether there are any modifications that 
would be cost-effective to return a building to useful life under 42 
U.S.C. 1437p(a)(1)(A)(ii). Section 970.15 of this proposed rule 
expresses cost-effectiveness as a percentage of HCC. The definition of 
HCC is found in 24 CFR 941.103 (67 FR 76102) and is cross-referenced in 
this proposed rule at Sec.  970.5.

B. Section 970.7 General Requirements for a Demolition or Disposition 
Application

    This proposed section clarifies that HUD funds may not be used to 
reimburse the PHA for the costs of a demolition or disposition 
undertaken without the necessary written approval from HUD. Proposed 
Sec.  970.7(a)(1) states that HUD will not approve an application 
unless it contains a certification that the PHA's approved annual plan 
under 24 CFR part 903 includes a description of and the timetable for 
any demolition or disposition for which the PHA has applied or will 
apply for approval under Section 18 and these regulations (except in 
the case of small- or high-performing PHAs eligible for streamlined 
annual plan treatment). This description and timetable must be the same 
in the annual plan and the application, and otherwise comply with 
Section 18 of the 1937 Act and these regulations. The remainder of 
proposed 24 CFR 970.7(a) states various application requirements, 
including a description of the property to be demolished or disposed; a 
description of the specific action proposed, such as demolition, 
disposition, or a combination; a proposed timetable for the action; a 
statement supporting the proposed action under the regulatory criteria; 
a plan for the relocation of any tenants who would be displaced by the 
action; and other such information demonstrating that the proposed 
action is legally supportable and financially viable.
    Approvals for the demolition or disposition of public housing units 
are for specific units, which cannot be substituted for other units. 
Furthermore, since the PHA is required to certify that specified 
conditions justify demolition or disposition, HUD must be able to rely 
on the PHA certification as being consistent with available information 
or data. Since HUD will not approve a certification that it determines 
to be incorrect, or that is clearly inconsistent with information 
available to or requested by HUD, the PHA cannot substitute or add 
other units not covered by the application or approval. Rather, in such 
a case, proposed Sec.  970.7(b)(3) states that the PHA must submit a 
new application. Under proposed Sec.  970.7(b)(1), a PHA must complete 
its action within two years of the date of HUD approval. If a PHA 
decides it no longer wants to demolish or dispose of units that have 
been approved for demolition or disposition, it must submit a 
resolution of its Board of Commissioners and show that the conditions 
originally requiring demolition or disposition have changed (see 
proposed Sec.  970.7(b)(2)).

C. Section 970.9 Resident Participation Consultation and Opportunity To 
Purchase

    Consultation is an extremely important part of the process of 
applying for demolition or disposition of public housing. QHWRA 
requires (1) that the demolition or disposition application be 
developed in consultation with affected residents, any resident 
advisory board and resident council of the development that will be 
affected by the proposed demolition or disposition, and appropriate 
government officials, and (2), in the case of a proposed disposition, 
that eligible resident organizations must be given an opportunity for 
30 days to indicate an interest in purchasing the development after 
they are notified of the sale.
    This proposed rule would implement these consultation and 
participation requirements in 24 CFR 970.9. Elements of these 
requirements were found in the existing regulation at 24 CFR 970.4, 
970.8, and 970.13. Proposed Sec.  970.9, similar to Sec.  970.8(e) of 
the existing regulation, requires that the PHA submit with the 
application a description of the consultations with the residents 
affected by the proposed demolition or disposition, each resident 
advisory board, and any resident councils of the project that will be 
affected by the proposed demolition or disposition. Like Sec.  970.8(e) 
of the existing regulation, Sec.  970.9 would also require that the PHA 
submit to HUD copies of any written comments submitted to the PHA and 
any evaluation the PHA has made of those comments.
    At Sec.  970.9(b), this rule proposes to implement the statutory 
requirement that a PHA seeking to dispose of a public housing 
development, in appropriate circumstances, offer it first to a resident 
organization, resident management corporation, or nonprofit corporation 
acting on behalf of residents at the development involved in the 
action. Notably, since the statute now applies only the resident offer 
requirements to proposed disposition, and not demolition, the portions 
of current Sec.  970.13(a) that involve offering to-be-demolished 
properties to the residents are not implemented in the proposed rule.
    This proposed rule also varies from the existing regulation in that 
it would omit the provision at Sec.  970.13(b) that, in cases where 
there is no resident organization, the PHA must inform the residents 
and give them a chance to organize. The reason for this change is two-
fold. First of all, by this time most residents have had an opportunity 
to form resident organizations. Secondly, the procedure has proven 
overly time-consuming and unworkable in those few situations where 
there is not yet a resident organization.
    As in the existing regulations, the proposed rule would provide for 
HUD discretion as to the circumstances in which such a resident offer 
is made, in that it is only required ``in appropriate circumstances.'' 
(See proposed Sec.  970.9(b)(1).) HUD would define the ``appropriate 
circumstances.'' The cases that would not present appropriate 
circumstances for the offer include the same ones listed in current 
Sec.  970.13(a)(2)(v) and (vi). (See proposed Sec.  970.9(b)(3).) Other 
subsections defining ``appropriate circumstances'' in the current rule 
relate to demolitions, and so are omitted from the proposed rule. New 
circumstances in which a PHA will not make an offering to residents 
have been added at proposed Sec.  970.9(b)(3) to take into account HOPE 
VI revitalization (see 42 U.S.C. 1437v), mandatory removal from 
inventory of distressed units for which there is no potential to 
revitalize under 24 CFR part 971 (authorized by the 1996 Omnibus 
Consolidated Rescissions and Appropriations Act, Pub. Law 104-134, 
approved April 26, 1996), and the required conversion of distressed 
housing to tenant-based assistance under 42 U.S.C. 1437z-5.
    If an offer is made, the proposed rule would require, in accordance 
with the statute, that the resident organization or entity express its 
interest within 30 days after receiving the notice from the PHA of the 
upcoming sale, and be given 60 days from the date the PHA receives the 
residents' expression of interest to submit a formal proposal to the 
PHA and to obtain firm commitments for the necessary financing. (See 
proposed

[[Page 75191]]

Sec. Sec.  970.11(a)-(c).) Proposed Sec.  970.11(d) contains the 
required contents of the initial written notice of sale. Proposed Sec.  
970.11(i) would detail the minimum contents of the tenant 
organization's formal purchase proposal, if any. Proposed Sec.  
970.11(g) would provide that the PHA has 60 days to review the resident 
purchase proposal, and, if the PHA determines that it meets the terms 
of sale, 14 days to notify the resident organization that the proposal 
has been accepted. If the PHA determines that the purchase offer 
differs from the terms of sale, the PHA has discretion to accept or 
reject the offer.
    Proposed Sec.  970.11(h) would provide for an appeal to HUD in 
cases where the resident organization's proposal to purchase is 
rejected. The proposed rule would revise the appeals process for 
disputes arising from the PHA's decision on residents' offers to 
purchase. The current appeals process has been workable because it has 
been rarely utilized. HUD believes that it may be inadequate if it 
becomes frequently used, and so proposes two major changes for public 
comment. One such change is that HUD will be able to extend the time to 
provide an initial decision from 30 days to 120 days, in 30-day 
increments. If there are few cases, HUD should have no problem meeting 
the 30-day time frame; however, this time frame could be unrealistic if 
HUD becomes overburdened with appeals. Secondly, the rule explicitly 
provides for administrative finality. HUD hopes that this will result 
in more efficient resolution of disputes at the administrative level, 
avoiding time-consuming and resource-intensive court litigation.

D. Criteria for Approval and Disapproval of Demolition or Disposition 
Applications (Sec. Sec.  970.15, 970.17, and 970.29)

    This proposed rule, in accordance with the statute, would place in 
the hands of PHAs much of the responsibility for determining whether a 
project is suitable for demolition or disposition. This rule at Sec.  
970.15(a) and Sec.  970.17 proposes to implement the statutory standard 
by requiring HUD to approve the request based on the PHA's 
certification, unless HUD has information that the PHA's certification 
is incorrect. In the case of requested demolition, the PHA must certify 
that the development is physically obsolete and no reasonable program 
of modifications will be cost-effective to return the development to 
useful life. Section 970.15(b) indicates major problems that HUD would 
consider to indicate obsolescence. In the case of requested 
disposition, the rule proposes that the PHA must certify either that 
(1) conditions in the area adversely affect the health or safety of the 
residents or the feasible operation of the project, (2) disposition 
will allow the development, rehabilitation, or acquisition of other 
property that will be more efficiently or effectively operated as 
public housing, or (3) that disposition is otherwise in the best 
interests of the residents and the PHA, consistent with the goals of 
the PHA and the PHA Plan, and otherwise consistent with the statute. 
Section 970.17(d) would also implement the statutory provision on 
disposition of non-dwelling facilities and vacant land.
    The proposed rule would also indicate the permissible bases for HUD 
to disapprove an application for demolition or disposition. (See 
proposed Sec.  970.29.) HUD would disapprove such an application if the 
information to which the PHA certifies is clearly inconsistent with 
information available to HUD. HUD's information for this purpose can, 
by statute, include information that HUD requests. (See 42 U.S.C. 
1437p(b)(1).) As this statutory provision implies, HUD has discretion 
to request information. (See proposed 24 CFR 970.7, ``general 
requirements for PHA demolition/disposition application for HUD 
approval.'') The other statutory reason for disapproval is failure of 
the applicant to follow the statutory consultation process. (See 42 
U.S.C. 1437p(b)(2).) (See proposed Sec.  970.29(b).)

E. Environmental Review

    The proposed environmental review requirements for demolition or 
disposition have been placed in a stand-alone section in this proposed 
rule, Sec.  970.13. Environmental review requirements apply to all 
demolitions or dispositions under this part, including de minimis 
demolitions pursuant to Sec.  970.27. The environmental review shall 
assess the impacts of known future site reuse. Factors that indicate 
that the future site reuse can reasonably be considered to be known 
include the following: (1) Private, federal, state, or local funding 
for the site reuse has been committed; (2) a grant application 
involving the site has been filed with the federal government or a 
state or local unit of government; (3) the federal government or a 
state or unit of local government has made a commitment to take an 
action, including a physical action, that will facilitate a particular 
reuse of the site; and (4) architectural, engineering or design plans 
for the reuse exist that go beyond preliminary stages.
    On the other hand, potential reuse of the site would not be 
considered to be known, and thus no environmental review of the reuse 
would be required before the time of demolition or disposition, if the 
reuse is a use: (1) For which no private, federal, state, or local 
funds have been committed; and (2) which is not the subject of any 
grant application to the federal government or a state or a unit of 
local government; (3) which neither the federal government nor a state 
or a unit of local government has made a commitment to take an action 
to facilitate, including a physical action; and (4) which has not been 
delineated in any architectural, engineering, or design plans that go 
beyond a preliminary stage. Information about the reuse of the site 
should be sought from the transferee or other sources. In addition, in 
the case of a demolition or disposition made necessary by a declared 
natural disaster, this proposed rule references certain available 
expedited review procedures.

F. Relocation of Tenants

    Proposed Sec. Sec.  970.21 and 970.23 would implement the statutory 
provisions regarding relocation of residents of public housing who will 
be displaced by demolition or disposition. By statute, such residents 
must be offered comparable housing that meets housing quality standards 
(HQS) and is located in an area generally no less desirable than the 
location of the displaced person's housing. (See 42 U.S.C. 
1437p(a)(4)(A)(iii)). If the relocated residents are persons with 
disabilities being displaced from units with reasonable accommodations, 
comparable housing includes housing with reasonable accommodations. 
Relocation housing may be in the form of tenant- or project-based 
Section 8 vouchers, or occupancy in another of the PHA's units at a 
rental rate that is comparable to the rental rate of the unit from 
which the resident was moved.
    The statute provides that the PHA will pay for the actual and 
reasonable costs of relocation of each resident. (See 42 U.S.C. 
1437p(a)(4)(B).) ``Actual and reasonable costs of relocation'' includes 
the costs of transporting and moving persons with disabilities, 
including any reasonable accommodations to their disabilities. This 
rule proposes that the PHA may pay those costs from a variety of 
sources, including HUD funds. (See proposed Sec.  970.23.) Also, as 
required by the statute, the rule would require the PHA, except in 
emergency situations, to give notice to residents 90 days before the 
date of displacement, to provide relocation counseling, and to refrain 
from taking any action until all the residents of the affected building 
or buildings have been relocated. (See 42

[[Page 75192]]

U.S.C. 1437p(a)(4)(A), proposed 24 CFR 970.21(e).) In addition, the PHA 
must have a relocation plan indicating the number of residents to be 
displaced, the type of counseling services that the PHA will provide, 
the housing resources expected to be available for the residents, and 
the estimated costs of the relocation expenses and the counseling 
services, and the source of funds to pay those costs.

G. De minimis Exception

    By statute, in any five-year period a PHA may demolish the lesser 
of five percent of its dwelling units or five of its dwelling units, if 
the space occupied by the units is used for meeting service or other 
needs of the public housing residents or the units are beyond repair. 
This statutory provision is proposed to be implemented in Sec.  970.27. 
The rule would make clear that the five years are counted backward from 
the date of the new proposed demolition under this section, and that 
demolitions prior to the effective date of QHWRA will not be counted in 
the calculation. Environmental review provisions apply to demolitions 
pursuant to this section.


H. Actions With Respect to Units To Be Demolished or Sold, Prior to 
Application Approval

    Where a PHA plans to demolish or sell units, but has either applied 
and not yet received approval or has not yet applied, an issue arises 
regarding the PHA's obligation to maintain those units in operating 
condition. Since the PHA continues to receive subsidy to operate those 
units, the PHA has an obligation to maintain and operate the units as 
housing for low-income families. This proposed rule codifies this 
obligation at Sec.  970.25. The PHA may conduct planning activities 
including studies and consultation regarding demolition, but must 
continue to provide full housing services to residents in place. While 
HUD is actually considering the application, if there is unit turnover, 
the PHA should not re-rent the units from which residents have moved. 
After approval of a PHA's demolition or disposition application, a PHA 
is required to operate all units as public housing and will receive 
operating subsidy in accordance with HUD's operating subsidy 
regulations at 24 CFR part 990.

I. Consolidation of Occupancy

    A PHA may consolidate occupancy within or among buildings of a 
development in order to more efficiently serve the residents, without 
filing a demolition or disposition application. (See proposed Sec.  
970.25(b).)

J. Use of Proceeds of Disposition

    This proposed rule would amend 24 CFR 970.19 to reflect the fact 
that QHWRA provides more flexibility than previously existed for use of 
the proceeds from disposition. After disposing of the property, either 
at fair market value by public solicitation or by another method 
approved by HUD, and paying approved costs of the disposition, the PHA 
may apply for a waiver by HUD of the obligation to use the proceeds 
from disposition for the retirement of debt obligations used to finance 
the original construction or for the subsequent modernization of the 
public housing development. To the extent that proceeds not used to pay 
off obligations remain, they can be used either to provide low-income 
housing to benefit the residents of the public housing agency or to 
leverage funds to secure on-site commercial enterprises appropriate to 
serve the needs of the residents. (42 U.S.C. 1437p(a)(5)(B).)

III. Supplementary Information

Paperwork Reduction Act

    This rule contains collection of information requirements, which 
have been submitted to OMB for review under Section 3507(d) of the 
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). These new 
collection of information requirements are not effective until such 
time that OMB grants its approval. The approval numbers will be 
published in the Federal Register through separate notice. Information 
on these requirements is provided as follows:
    Estimates of the total reporting and recordkeeping burden that will 
result from the collection of information are as follows:
    For demolition or disposition, the total estimated paperwork burden 
is 1321.25 hours. The information required in 24 CFR 970.7(a)(2), a 
description of the existing project, in each case is already contained 
in the electronic system into which the required information will be 
submitted, and so is not expected to impose any additional paperwork 
burden. Therefore, even though it is a regulatory requirement, that 
section is not listed herein.
    The burden of information collection in this proposed rule is 
estimated as follows:

----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Number of
                    Section No. and procedure                         persons       minutes per    Burden hours
                                                                     affected        procedure
----------------------------------------------------------------------------------------------------------------
970.7(a)(1) HA plan certification...............................             243              10           40.50
970.7(a)(2) Description of property.............................             243           \1\ 0               0
970.7(a)(3) Description of proposed action......................             243              15           60.75
970.7(a)(4) Timetable...........................................             243               5           20.25
970.7(a)(5) Justification.......................................             243              45          182.25
970.7(a)(6) Relocation plan, if needed..........................             243              45          182.25
970.7(a)(7) Description of resident consultation................             243              30          121.50
970.7(a)(10) Appraisal in the case of disposition...............             171               5           14.25
970.7(a)(11) Estimate of proceeds, use of proceeds in the case               171              30           85.50
 of disposition.................................................
970.7(a)(12) Estimate of costs for any required relocation                   243              30          121.50
 housing, moving costs, and counseling..........................
970.7(a)(13) Request to waive debt..............................             171               5           14.25
970.7(a)(14) Board resolution...................................             243               5           20.25
970.7(a)(15) Evidence of government consultation................             243               5           20.25
970.7(a)(16) Environmental review...............................             243               5           20.25
970.7(a)(17) FH&EO certification................................             243               5           20.25
970.9(a) Evidence of resident consultation & evaluation.........             243              60          243.00
970.9(b)(4) Evidence of nonapplicability to make the offer to                171              10           28.50
 sell to RO.....................................................
970.11 (same information as 970.7(a)(8) Offer to sell (less than              43              60           43.00
 25% of disposition applications do not take the exception).....
970.27(e) De minimis recordkeeping submission...................               7              15            1.75

[[Page 75193]]

 
970.35 Required reports.........................................             243              20           81.00
                                                                 -----------------
      Total Reporting and Recordkeeping Burden (hours)..........  ..............  ..............         1321.25
----------------------------------------------------------------------------------------------------------------
\1\ From PIC.

    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning this 
collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected;
    (4) Minimize the burden of the collection of information on those 
who are to respond including through the use of appropriate automated 
collection techniques or other forms of information technology, e.g., 
permitting electronic submission of responses.
    Interested persons are invited to submit comments regarding the 
information collection requirements in this proposal. Comments must be 
received within 30 days from the date of this proposal. Comments must 
refer to the proposal by name and docket number (FR-4598-P-01) and must 
be sent to:

Mark D. Menchik, HUD Desk Officer, Office of Management and Budget, New 
Executive Office Building, Washington, DC 20503, Fax number: (202) 395-
6947, e-mail: <a href="/cdn-cgi/l/email-protection#ca87abb8a1958ee49587afa4a9a2a3a18aa5a7a8e4afa5bae4ada5bc"><span class="__cf_email__" data-cfemail="9cd1fdeef7c3d8b2c3d1f9f2fff4f5f7dcf3f1feb2f9f3ecb2fbf3ea">[email protected]</span></a>;
 and
Sherry Fobear-McCown, Reports Liaison Officer, Office of the Assistant 
Secretary for Public and Indian Housing, Department of Housing and 
Urban Development, 451 Seventh Street SW., Room 9116, Washington, DC 
20410.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments and the private sector. This proposed rule does not 
impose any federal mandates on any state, local, or tribal government 
or the private sector within the meaning of UMRA.

Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment has been made in accordance with HUD regulations in 24 CFR 
part 50 that implement Section 102(2)(C) of the National Environmental 
Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The finding of no 
significant impact is available for public inspection between 8 a.m. 
and 5 p.m. weekdays in the Regulations Division, Office of General 
Counsel, Room 10276, U.S. Department of Housing and Urban Development, 
451 Seventh Street, SW., Washington, DC 20410-0500.

Impact on Small Entities

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.), 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities.
    This rule is concerned solely with the requirements for PHAs to 
apply for demolition or disposition of the public housing developments 
that they administer. However, many of the requirements of this rule 
were already present under the existing regulations regarding public 
housing demolition or disposition. To the extent that this rule would 
alter the previous requirements, it would do so in ways that are likely 
to either leave the economic impact unchanged or lower such impact. For 
example, because of a statutory change, the rule would no longer 
require PHAs to have a replacement housing plan. The rule would provide 
greater flexibility than before in how PHAs can use the proceeds from 
disposition of a property. The rule would provide for demolition of a 
minimal number of units without submitting an application. Thus, the 
rule certainly would not impose a greater administrative burden on 
entities than previously, and in some ways would lower the 
administrative requirements for demolishing or disposing of public 
housing units. Therefore, the undersigned certifies that this proposed 
rule will not have a significant economic impact on a substantial 
number of small entities, and an initial regulatory flexibility 
analysis is not required.
    Notwithstanding the determination that this rule would not have a 
significant economic impact on a substantial number of small entities, 
HUD specifically invites comments regarding less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Federalism Impact

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts state law, unless the relevant 
requirements of Section 6 of the executive order are met. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on state and local governments or preempt state 
law within the meaning of the executive order.

Executive Order 12866, Regulatory Planning and Review

    OMB reviewed this proposed rule under Executive Order 12866 
(entitled ``Regulatory Planning and Review''). OMB determined that this 
proposed rule is a ``significant regulatory action,'' as defined in 
Section 3(f) of the order (although not economically significant, as 
provided in Section 3(f)(1) of the order). Any changes made to the 
proposed rule subsequent to its submission to OMB are identified in the 
docket file, which is available for public inspection in the 
Regulations Division, Office of General Counsel Room 10276, U.S. 
Department of Housing and Urban Development, 451 Seventh Street, SW., 
Washington, DC 20410-0500.

List of Subjects in 24 CFR Part 970

    Grant programs--housing and community development, Public housing, 
Reporting and recordkeeping requirements.

[[Page 75194]]

    The Catalog of Federal Domestic Assistance program number for the 
program affected by this proposed rule is 14.850.
    For the reasons stated in the preamble, HUD proposes to amend 24 
CFR part 970 as follows:
    1. 24 CFR part 970 is revised to read as follows:

PART 970--PUBLIC HOUSING PROGRAM--DEMOLITION OR DISPOSITION OF 
PUBLIC HOUSING PROJECTS

Sec.
970.1 Purpose.
970.3 Applicability.
970.5 Definitions.
970.7 General requirements for HUD approval of a PHA demolition/
disposition application.
970.9 Resident participation--consultation and opportunity to 
purchase.
970.11 Procedures for the offer of sale to established eligible 
organizations.
970.13 Environmental review requirements.
970.15 Specific criteria for HUD approval of demolition requests.
970.17 Specific criteria for HUD approval of disposition requests.
970.19 Disposition of property; use of proceeds.
970.21 Relocation of residents.
970.23 Costs of demolition and relocation of displaced tenants.
970.25 Required and permitted actions prior to approval.
970.27 De minimis exception to demolition requirements.
970.29 Criteria for disapproval of demolition or disposition 
applications.
970.31 Replacement units.
970.33 Effect on Operating Fund Program and Capital Fund Program.
970.35 Reports and records.

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


Sec.  970.1  Purpose.

    This part states requirements for HUD approval of a public housing 
agency's application for demolition or disposition (in whole or in 
part) of public housing developments assisted under Title I of the U.S. 
Housing Act of 1937 (Act). The rules and procedures in 24 CFR part 85 
are not applicable to this part.


Sec.  970.3  Applicability.

    (a) This part applies to public housing developments that are owned 
by public housing agencies (PHAs) and that are subject to Annual 
Contributions Contracts (ACCs) under the Act.
    (b) This part does not apply to the following:
    (1) PHA-owned Section 8 housing, or housing leased under former 
Sections 10(c) or 23 of the Act;
    (2) Demolition or disposition before the end of the initial 
operating period (EIOP), as determined under the ACC, of property 
acquired incident to the development of a public housing project 
(however, this exception shall not apply to dwelling units under ACC);
    (3) The conveyance of public housing for the purpose of providing 
homeownership opportunities for lower income families under Sections 21 
and 32 of the Act, the homeownership program under former Section 5(h) 
of the Act, or other predecessor homeownership programs;
    (4) The leasing of dwelling or non-dwelling space incident to the 
normal operation of the project for public housing purposes, as 
permitted by the ACC;
    (5) Making available common areas and unoccupied dwelling units in 
public housing projects to provide supportive services incident to an 
approved local Family Self Sufficiency program under 24 CFR part 984;
    (6) The reconfiguration of the interior space of buildings (e.g., 
moving or removing interior walls to change the design, sizes, or 
number of units) without ``demolition,'' as defined in Sec.  970.5. 
(This includes the conversion of bedroom size, occupancy type, changing 
the status of unit from dwelling to non-dwelling.);
    (7) Easements, rights-of-way, and transfers of utility systems 
incident to the normal operation of the development for public housing 
purposes, as permitted by the ACC;
    (8) A whole or partial taking by a public or quasi-public entity 
(taking agency) authorized to take real property by its use of police 
power or exercise of its power of eminent domain under state law. A 
taking does not qualify for the exception under this paragraph unless:
    (i) The taking agency has been authorized to acquire real property 
by use of its police power or power of eminent domain under its state 
law;
    (ii) The taking agency has taken at least the first step in formal 
proceedings under its state law; and
    (iii) If the taking is for a federally assisted project, the 
Uniform Relocation Act (URA) applies to any resulting displacement of 
residents and it is the responsibility of the taking agency to comply 
with applicable URA requirements.
    (9) Demolition after conveyance of a public housing project to a 
non-PHA entity in accordance with an approved homeownership program 
under Title III of the Cranston-Gonzalez National Affordable Housing 
Act (HOPE I), 42 U.S.C. 1437aaa note;
    (10) Units leased for non-dwelling purposes for one year or less;
    (11) A public housing development that is conveyed by a PHA prior 
to date of funding availability (DOFA) to enable an owner entity to 
develop the property using the mixed-finance development method;
    (12) Disposition of public housing units after DOFA for development 
pursuant to the mixed-finance development method at 24 CFR part 941, 
subpart F;
    (13) Demolition under the de minimis exception in Sec.  970.27, 
except that the environmental review provisions apply, including the 
provisions at Sec. Sec.  970.7(a)(16) and 970.13(b) of this part;
    (14) Demolition (but not disposition) of severely distressed units 
as part of a revitalization plan under Section 24 of the Act, 42 U.S.C. 
1437v (HOPE VI) approved after October 21, 1998;
    (15) Demolition (but not disposition) of public housing 
developments removed from a PHA's inventory under Section 33 of the 
Act, 42 U.S.C. 1437z-5.


Sec.  970.5  Definitions.

    ACC, or Annual Contributions Contract, is defined in 24 CFR 5.403.
    Act means the United States Housing Act of 1937, 42 U.S.C. 1437 et 
seq.
    Appropriate government officials mean the Chief Executive Officer 
or officers of a unit of general local government.
    Assistant Secretary means the Assistant Secretary for Public and 
Indian Housing at HUD.
    Chief Executive Officer of a unit of general local government means 
the elected official or the legally designated official, who has the 
primary responsibility for the conduct of that entity's governmental 
affairs. Examples of the ``chief executive officer of a unit of general 
local government'' are: the elected mayor of a municipality; the 
elected county executive of a county; the chairperson of a county 
commission or board in a county that has no elected county executive; 
and the official designated pursuant to law by the governing body of a 
unit of general local government.
    Demolition means the removal by razing or other means, in whole or 
in part, of one or more permanent buildings of a public housing 
development. A demolition involves any four or more of the following:
    (1) Envelope removal (roof, windows, exterior walls);
    (2) Kitchen removal;
    (3) Bathroom removal;
    (4) Electrical system removal (unit service panels and distribution 
circuits); or

[[Page 75195]]

    (5) Plumbing system removal (e.g., either the hot water heater or 
distribution piping in the unit, or both).
    Disposition means the conveyance or other transfer by the PHA, by 
sale or other transaction, of any interest in the real estate of a 
public housing development, subject to the exceptions stated in Sec.  
970.3.
    DOFA, or date of full availability, means the last day of the month 
in which substantially all (95 percent or more) of the units in a 
housing development are available for occupancy.
    EIOP means the end of the initial operating period. If 95 percent 
or more of the units in a development are occupied, EIOP is the last 
day of the first calendar quarter after DOFA. If the development does 
not achieve 95 percent occupancy by this date, EIOP is the last day of 
the second calendar quarter after DOFA.
    Firm financial commitment means a commitment that obligates a 
creditable source, lender, or equity provider, to the lending or equity 
investment of a specific sum of funds to be made on or before a 
specific date(s) and may contain contingencies or conditions which must 
be satisfied by the borrower (or entity receiving equity investments) 
before the closing of the transaction. The condition of a firm 
commitment must be that it is enforceable by the borrower (or entity 
receiving the equity investment) upon the satisfaction of all 
contingencies or conditions.
    Housing Construction Cost (HCC) has the same meaning as in Sec.  
941.103 of this title.
    PHA Plan--Means the PHA's initial, annual, and five-year 
submissions under section 5A of the U.S. Housing Act of 1937, 42 U.S.C. 
1437c-1.
    Resident Advisory Board (RAB) has the same meaning as in Sec.  
903.13(a) of this title.
    Resident Council means a resident organization, the role and 
requirements of which are as described in 24 CFR part 964.


Sec.  970.7  General requirements for HUD approval of a PHA demolition/
disposition application.

    (a) Application for HUD Approval. A PHA must obtain written 
approval from HUD before undertaking any transaction involving 
demolition or disposition of PHA-owned property under the ACC. Where a 
PHA demolishes or disposes of public housing property without HUD 
approval, no HUD funds may be used to fund the costs of demolition or 
disposition or reimburse the PHA for those costs. HUD will approve an 
application for demolition or disposition upon the PHA's submission of 
an application with the required certifications and the supporting 
information required by this section and Sec. Sec.  970.15 or 970.17. 
Section 970.29 specifies criteria for disapproval of an application. 
Approval of the application under this part does not imply approval of 
a request for additional funding, which the PHA must make separately 
under a program that makes available funding for this purpose. The PHA 
shall submit the application for demolition or disposition and the 
timetable in a time and manner and in a form prescribed by HUD. The 
supporting information shall include:
    (1) A certification that the PHA has described the demolition or 
disposition in the approved PHA Annual Plan and timetable under 24 CFR 
part 903 (except in the case of small or high-performing PHAs eligible 
for streamlined annual plan treatment), and that the description in the 
approved PHA Annual Plan is identical to the application submitted 
pursuant to this part and otherwise complies with Section 18 of the 
Act, 42 U.S.C. 1437p, and this part;
    (2) A description of all identifiable property, by development, 
including land, dwelling units, and other improvements, involved in the 
proposed demolition or disposition;
    (3) A description of the specific action proposed, such as:
    (i) Demolition, disposition, or demolition with disposition;
    (ii) If disposition is involved, the method of sale;
    (4) A general timetable for the proposed action(s) including the 
initial contract for demolition, the actual demolition, and, if 
applicable, the closing of sale or other form of disposition;
    (5) A statement justifying the proposed demolition or disposition 
under the applicable criteria of Sec. Sec.  970.15 or 970.17;
    (6) If applicable, a plan for the relocation of tenants who would 
be displaced by the proposed demolition or disposition (including a 
relocation timetable as prescribed in Sec.  970.21);
    (7) A description with supporting evidence of the PHA's 
consultations with residents, any resident organizations, and the 
Resident Advisory Board, as required under Sec.  903.9 of this title;
    (8) In the case of disposition only, evidence of compliance with 
the offering to resident organizations, as required under Sec.  970.9;
    (9) In the case of disposition, the estimated balance of project 
debt, under the ACC, for development and modernization;
    (10) In the case of disposition, an estimate of the fair market 
value of the property, established on the basis of one independent 
appraisal, unless otherwise determined by HUD, as described in Sec.  
970.19(c);
    (11) In the case of disposition, estimates of the gross and net 
proceeds to be realized, with an itemization of estimated costs to be 
paid out of gross proceeds and the proposed use of any net proceeds in 
accordance with Sec.  970.19;
    (12) An estimate of costs for any required relocation housing, 
moving costs, and counseling.
    (13) Where the PHA is requesting a waiver of the requirement for 
the application of proceeds for repayment of outstanding debt, the PHA 
must request such a waiver in its application, along with a description 
of the proposed use of the proceeds;
    (14) A copy of a resolution by the PHA's Board of Commissioners 
approving the specific demolition or disposition application (or, in 
the case of the report required under Sec.  970.27(e) for ``de 
minimis'' demolitions, the Board of Commissioners' resolution approving 
the ``de minimis'' action) for that development or developments or 
portions thereof. The resolution must be signed and dated after all 
resident and local government consultation has been completed;
    (15) Evidence that the application was developed in consultation 
with appropriate government officials as defined in Sec.  970.5, 
including:
    (i) A description of the process of consultation with local 
government officials, which summarizes dates, meetings, and issues 
raised by the local government officials and the PHA's responses to 
those issues;
    (ii) A signed and dated letter in support of the application from 
the Chief Executive Officer of the unit of local government which 
demonstrates that the PHA has consulted with the appropriate local 
government officials on the proposed demolition or disposition;
    (iii) Where the local government consistently fails to respond to 
the PHA's attempts at consultation including letters, requests for 
meetings, public notices, and other reasonable efforts, documentation 
of those attempts;
    (iv) Where the PHA covers multiple jurisdictions (such as a 
regional housing authority), the PHA must meet these requirements for 
each of the jurisdictions where the PHA is proposing demolition or 
disposition of PHA property;

[[Page 75196]]

    (16) An approved Environmental Review of the proposed demolition or 
disposition in accordance with 24 CFR parts 50 or 58 for any demolition 
or disposition of public housing property covered under this part, as 
required under 24 CFR 970.13;
    (17) A certification that the demolition or disposition application 
does not violate any remedial civil rights order or agreement, 
voluntary compliance agreement, final judgment, consent decree, 
settlement agreement, or other court order or agreement;
    (18) Any additional information necessary to support the 
application and assist HUD in making determinations under this part.
    (b) Completion of demolition/disposition or rescissions of 
approval. (1) A PHA must complete any approved demolition or 
disposition within two years of the date of HUD's approval.
    (2) HUD will consider a PHA's request to rescind an earlier 
approval to demolish or dispose of public housing property, where a PHA 
submits a resolution from the Board of Commissioners and documentation 
that the conditions that originally led to the request for demolition 
or disposition have significantly changed or been removed.
    (3) The Assistant Secretary will not approve any request by the PHA 
to either substitute units or add units to those originally included in 
the approved demolition or disposition application, unless the PHA 
submits a new application for those units that meet the requirements of 
this part.


Sec.  970.9  Resident participation--consultation and opportunity to 
purchase.

    (a) Resident consultation. PHAs must consult with residents who 
will be affected by the proposed action with respect to all demolition 
or disposition applications. The PHA must provide with its application 
evidence that the application was developed in consultation with 
residents who will be affected by the proposed action, any resident 
organizations for the development, PHA-wide resident organizations that 
will be affected by the demolition or disposition, and the Resident 
Advisory Board (RAB). The PHA must also submit copies of any written 
comments submitted to the PHA and any evaluation that the PHA has made 
of the comments.
    (b) Resident organization offer to sell--applicability. In the 
situation where the PHA applies to dispose of a development or portion 
of a development:
    (1) The PHA shall, in appropriate circumstances as determined by 
the Assistant Secretary, initially offer the property proposed for 
disposition to any eligible resident organization, eligible resident 
management corporation as defined in 24 CFR part 964, or to a nonprofit 
organization acting on behalf of the residents at any development 
proposed for disposition, if the resident entity has expressed an 
interest in purchasing the property for continued use as low-income 
housing. The entity must make the request in writing to the PHA, no 
later than 30 days after the resident entity has received the 
notification of sale from the PHA;
    (2) If the resident entity has expressed an interest in purchasing 
the property for continued use as low-income housing, the entity, in 
order for its purchase offer to be considered, must:
    (i) In the case of a nonprofit organization, be acting on behalf of 
the residents of the development; and
    (ii) Demonstrate that it has obtained a firm commitment for the 
necessary financing within 60 days of serving its written notice of 
interest under paragraph (b)(1) of this section.
    (3) The requirements of this section do not apply to the following 
cases, which have been determined not to present an appropriate 
opportunity for purchase by a resident organization:
    (i) A unit of state or local government requests to acquire vacant 
land that is less than two acres in order to build or expand its public 
services (a local government wishes to use the land to build or 
establish a police substation); or
    (ii) A PHA seeks disposition outside the public housing program to 
privately finance or otherwise develop a facility to benefit low-income 
families (e.g., day care center, administrative building, or other 
types of low-income housing);
    (iii) Units that have been legally vacated in accordance with 24 
CFR part 970 (HOPE VI) or 24 CFR part 971 (Section 202 Mandatory 
Conversion), excluding developments where the PHA has consolidated 
vacancies;
    (iv) Distressed units required to be converted to tenant-based 
assistance under 42 U.S.C. 1437z-5; or
    (vi) Disposition of non-dwelling properties including 
administration and community buildings, and maintenance facilities.
    (4) If the requirements of this section are not applicable, as 
provided in paragraph (b)(3) of this section, the PHA may proceed to 
submit to HUD its application under this part to dispose of the 
property, or a portion of the property, without affording an 
opportunity for purchase by a resident organization. However, PHAs must 
consult with their residents in accordance with paragraph (a) of this 
section. The PHA must submit documentation with date and signatures to 
support the applicability of one of the exceptions in paragraph (b)(3) 
of this section. Examples of appropriate documentation include but are 
not limited to: a letter from the public body that wants to acquire the 
land, copies of memoranda or letters approving the PHA's previous 
application under part 970 or mandatory conversion plan; and the HUD 
transmittal document approving the proposed revitalization plan.
    (c) Established eligible organizations. Where there are eligible 
resident organizations, eligible resident management corporations as 
defined in 24 CFR part 964, or nonprofit organizations acting on behalf 
of the residents (collectively, ``established eligible 
organizations''), that have expressed an interest, in writing, to the 
PHA within 30 days of the date of notification of the proposed sale, in 
purchasing the property for continued use a low-income housing at the 
affected development, the PHA shall follow the procedures for making 
the offer described in Sec.  970.11.


Sec.  970.11  Procedures for the offer of sale to established eligible 
organizations.

    In making an offer of sale to establish eligible organizations as 
defined in Sec.  970.9(c), in the case of proposed disposition, the PHA 
shall proceed as follows:
    (a) Initial written notification of sale of property. The PHA shall 
send an initial written notification to each established eligible 
organization (for purposes of this section, an established eligible 
organization that has been so notified is a ``notified eligible 
organization'') of the proposed sale of the property. The notice of 
sale must include, at a minimum, the information listed in paragraph 
(d) of this section;
    (b) Initial expression of interest. All notified eligible 
organizations shall have 30 days to initially express an interest, in 
writing, in the offer (``initial expression of interest''). The initial 
expression of interest need not contain details regarding financing, 
acceptance of an offer of sale, or any other terms of sale.
    (c) Opportunity to obtain firm financial commitment by interested 
entity. If a notified eligible organization expresses interest in 
writing during the 30-day period referred to in paragraph (b) of this 
section, no disposition of the property shall occur during the 60-day 
period beginning on the date of the receipt of the written notice of 
interest. During this period, the PHA must give

[[Page 75197]]

the entity expressing interest an opportunity to obtain a firm 
financial commitment as defined in Sec.  970.5 for the financing 
necessary to purchase the property;
    (d) Contents of initial written notification. The initial written 
notification to established eligible organizations under paragraph (a) 
of this section must include at a minimum the following:
    (1) An identification of the development, or portion of the 
development, involved in the proposed disposition, including the 
development number and location, the number of units and bedroom 
configuration, the amount and use of non-dwelling space, the current 
physical condition (fire damaged, friable asbestos, lead-based paint 
test results), and percent of occupancy;
    (2) A copy of the appraisal of the property and any terms of sale;
    (3) Disclosure and description of the PHA's plans for reuse of 
land, if any, after the proposed disposition;
    (4) An identification of available resources (including its own and 
HUD's) to provide technical assistance to the organization to help it 
to better understand its opportunity to purchase the development, the 
development's value, and potential use;
    (5) A statement that public housing developments sold to resident 
organizations will not continue to receive capital and operating 
subsidy after the completion of the sale;
    (6) Any and all terms of sale that the PHA will require, including 
a statement that the purchaser must use the property for low-income 
housing. If the PHA does not know all the terms of the offer of sale at 
the time of the notice of sale, the PHA shall include all the terms of 
sale of which it is aware. The PHA must supply the totality of all the 
terms of sale and all necessary materials to the residents no later 
than the day it receives the residents' initial expression of interest;
    (7) A date by which an established eligible organization must 
express its interest, in writing, in response to the PHA's offer to 
sell the property proposed for demolition or disposition, which shall 
be up to 30 days from the date of the official written offer of sale 
from the PHA;
    (8) A statement that the established eligible organization will be 
given 60 days from the date of the PHA's receipt of its letter 
expressing interest to develop and submit a proposal to the PHA to 
purchase the property and to obtain a firm financial commitment, as 
defined in Sec.  970.5. The statement shall explain that the PHA shall 
approve the proposal from an organization if the proposal meets the 
terms of sale and is supported by a firm commitment for financing. The 
statement shall also provide that the PHA can consider accepting an 
offer from the organization that differs from the terms of sale. The 
statement shall explain that if the PHA receives proposals from more 
than one organization, the PHA shall select the proposal that meets the 
terms of sale, if any. In the event that two proposals from the 
development to be sold meet the terms of sale, the PHA shall chose the 
best proposal. If no proposal meets the terms of sale, the PHA in its 
discretion may or may not select the best proposal.
    (e) Response to the notice of sale. The established eligible 
organization or organizations have up to 30 days to respond to the 
notice of sale from the PHA. The established eligible organization 
shall respond to the PHA's notice of sale by means of an initial 
expression of interest under paragraph (b) of this section.
    (f) Resident proposal. The established eligible organization has up 
to 60 days from the date the PHA receives its initial expression of 
interest and provides all necessary terms and information to prepare 
and submit a proposal to the PHA for the purchase of the property of 
which the PHA plans to dispose, and to obtain a firm commitment for 
financing. The resident's proposal shall provide all the information 
requested in paragraph (i) of this section.
    (g) PHA Review of Proposals. The PHA has up to 60 days from the 
date of receipt of the proposal or proposals to review the proposals 
and determine whether they meet the terms of sale described in the 
PHA's offer or offers. If the PHA determines that the proposal meets 
the terms of sale, within 14 days of the date of this determination, 
the PHA shall notify the organization of that fact and that the 
proposal has been accepted. If the PHA determines that the proposal 
differs from the terms of sale, the PHA may accept or reject the 
proposal in its discretion;
    (h) Appeals. The established eligible organization has the right to 
appeal the PHA's decision to the Assistant Secretary for Public and 
Indian Housing, or his designee, by sending a letter of appeal within 
30 days of the PHA's decision to the field office director. The letter 
of appeal must include copies of the proposal and any related 
correspondence, along with a statement of reasons why the organization 
believes the PHA should have decided differently. HUD shall render a 
decision within 30 days, and notify the organization and the PHA by 
letter within 14 days of such decision. If HUD cannot render a decision 
within 30 days, HUD will so notify the PHA and the established eligible 
organization in writing, in which case HUD will have an additional 30 
days in which to render a decision. HUD may continue to extend its time 
for decision in 30-day increments for a total of 120 days. Once HUD 
renders its decision, there is no further administrative appeal or 
remedy available.
    (i) Contents of the organization's proposal. The established 
eligible organization's proposal shall at a minimum include the 
following:
    (1) The length of time the organization has been in existence;
    (2) A description of current or past activities which demonstrate 
the organization's organizational and management capability, or the 
planned acquisition of such capability through a partner or other 
outside entities (in which case the proposal should state how the 
partner or outside entity meets this requirement);
    (3) To the extent not included in paragraph (i)(2) of this section, 
the organization's experience in the development of low-income housing, 
or planned arrangements with partners or outside entities with such 
experience (in which case the proposal should state how the partner or 
outside entity meets this requirement);
    (4) A statement of financial capability;
    (5) A description of involvement of any non-resident organization 
(such as non-profit, for-profit, governmental or other entities), if 
any, the proposed division of responsibilities between the non-resident 
organization and the established eligible organization, and the non-
resident organization's financial capabilities;
    (6) A plan for financing the purchase of the property and a firm 
financial commitment as stated in paragraph (c) of this section for 
funding resources necessary to purchase the property and pay for any 
necessary repairs;
    (7) A plan for using the property for low-income housing;
    (8) The proposed purchase price in relation to the appraised value;
    (9) Justification for purchase at less than the fair market value 
in accordance with Sec.  970.19(a), if appropriate;
    (10) Estimated time schedule for completing the transaction;
    (11) Any additional items necessary to respond fully to the PHA's 
terms of sale;
    (12) A resolution from the resident organization approving the 
proposal; and
    (13) A proposed date of settlement, generally not to exceed six 
months from

[[Page 75198]]

the date of PHA approval of the proposal, or such period as the PHA may 
determine to be reasonable.
    (j) PHA obligations. The PHA must:
    (1) Prepare and distribute the initial notice of sale pursuant to 
24 CFR 970.11(a), and, if any established eligible organization 
expresses an interest, any further documents necessary to enable the 
organization or organizations to make an offer to purchase;
    (2) Evaluate proposals received, make the selection based on the 
considerations set forth in paragraph (b) of this section, and issue 
letters of acceptance or rejection;
    (3) Prepare certifications, where appropriate, as provided in 
paragraph (k) of this section;
    (4) Comply with its obligations under Sec.  970.7(a) regarding 
tenant consultation and provide evidence to HUD that the PHA has met 
those obligations. The PHA shall not act in an arbitrary manner and 
shall give full and fair consideration to any offer from a qualified 
resident management corporation, resident council of the affected 
development or a nonprofit organization acting on behalf of the 
residents and accept the proposal if the proposal meets the terms of 
sale.
    (k) PHA post-offer requirements. After the resident offer, if any, 
is made, the PHA shall:
    (1) Submit its disposition application to HUD in accordance with 
Section 18 of the Act and this part. The disposition application must 
include complete documentation that the resident offer provisions of 
this part have been met. This documentation shall include:
    (i) A copy of the signed and dated PHA notification letter(s) to 
each established eligible organization informing them of the PHA's 
intention to submit an application for disposition, the organization's 
right to purchase the property to be disposed of; and
    (ii) The responses from each organization.
    (2)(i) If the PHA accepts the proposal of an established eligible 
organization, the PHA shall submit revisions to its disposition 
application to HUD in accordance with Section 18 of the Act and this 
part reflecting the arrangement with the resident organization, with 
appropriate justification for a negotiated sale and for sale at less 
than fair market value, if applicable.
    (ii) If the PHA rejects the proposal of the resident organization, 
the resident organization may appeal as provided in paragraph (h) of 
this section. Once the appeal is resolved, or, if there is no appeal, 
the 30 days allowed for appeal has passed, HUD shall proceed to approve 
or disapprove the application.
    (3) HUD will not process an application for disposition unless the 
PHA provides HUD with one of the following:
    (i) An official board resolution or its equivalent from each 
established eligible organization stating that such organization has 
received the PHA offer, and that it understands the offer and waives 
its opportunity to purchase the project, or portion of the project, 
covered by the disposition application;
    (ii) A certification from the executive director or board of 
commissioners of the PHA that the 30-day time frame to express interest 
has expired and no response was received to its offer; or
    (iii) A certification from the executive director or board of 
commissioners of the PHA with supporting documentation that the offer 
was otherwise rejected.


Sec.  970.13  Environmental review requirements.

    (a) Activities under this part (including de minimis demolition 
pursuant to Sec.  970.27) are subject to HUD environmental regulations 
in 24 CFR part 58. However, HUD may make a finding in accordance with 
Sec.  58.11(d) of this title and may itself perform the environmental 
review under the provisions of 24 CFR part 50 if a PHA objects in 
writing to the responsible entity performing the review under 24 CFR 
part 58.
    (b) The environmental review is limited to the demolition or 
disposition action and any known re-use, and is not required for any 
unknown future re-use.
    (c) In the case of a demolition or disposition made necessary by a 
disaster that the President has declared under the Robert T. Stafford 
Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121 et seq., 
or a disaster that has been declared under state law by the officer or 
entity with legal authority to make such declaration, pursuant to 24 
CFR 50.43 and 24 CFR 58.33, the provisions of 40 CFR 1506.11 will 
apply.


Sec.  970.15  Specific criteria for HUD approval of demolition 
requests.

    (a) In addition to other applicable requirements of this part, HUD 
will approve an application for demolition upon the PHA's certification 
that it meets the following statutory criteria, unless the PHA's 
certification is clearly inconsistent with information or data 
available to HUD or requested by HUD:
    (1) In the case of demolition of all or a portion of a development, 
the development, or portion of the development, is obsolete as to 
physical condition, location, or other factors, making it unsuitable 
for housing purposes; and
    (2) No reasonable program of modifications is cost-effective to 
return the development or portion of the development to useful life. 
HUD generally shall not consider a program of modifications to be cost-
effective if the costs of such program exceed the HCC in effect at the 
time the application is submitted to HUD.
    (b) Major problems indicative of obsolescence are:
    (1) As to physical condition: Structural deficiencies that cannot 
be corrected in a cost-effective manner (settlement of earth below the 
building caused by inadequate structural fills, faulty structural 
design, or settlement of floors), or other design or site problems 
(severe erosion or flooding);
    (2) As to location: physical deterioration of the neighborhood; 
change from residential to industrial or commercial development; or 
environmental conditions as determined by HUD environmental review in 
accord with 24 CFR part 50, which jeopardize the suitability of the 
site or a portion of the site and its housing structures for 
residential use;
    (3) Other factors which have seriously affected the marketability, 
usefulness, or management of the property.
    (c) In the case of demolition of only a portion of a development, 
the demolition will help to ensure the viability of the remaining 
portion of the project (to reduce development density to permit better 
access by emergency, fire, or rescue services, or to improve 
marketability by reducing the density to that of the neighborhood or 
other developments in the PHA's inventory).


Sec.  970.17  Specific criteria for HUD approval of disposition 
requests.

    In addition to other applicable requirements of this part, HUD will 
approve a request for disposition by sale or other transfer of a public 
housing project or other real property if the PHA certifies that the 
retention of the property is not in the best interests of the residents 
or the PHA for at least one of the following reasons, unless 
information available to HUD is inconsistent with the certification:
    (a) Conditions in the area surrounding the project (density, or 
industrial or commercial development) adversely affect the health or 
safety of the tenants or the feasible operation of the project by the 
PHA;
    (b) Disposition allows the acquisition, development, or 
rehabilitation of other properties that will be more efficiently

[[Page 75199]]

or effectively operated as low-income housing developments;
    (c) The PHA has otherwise determined the disposition to be 
appropriate for reasons that are consistent with the goals of the PHA 
and the PHA Plan and that are otherwise consistent with the Act;
    (d) In the case of disposition of property other than dwelling 
units (community facilities or vacant land), the PHA certifies that:
    (1) The non-dwelling facilities or land exceeds the needs of the 
development (after EIOP); or
    (2) The disposition of the property is incidental to, or does not 
interfere with, continued operation of the remaining portion of the 
development.


Sec.  970.19  Disposition of property; use of proceeds.

    (a) Where HUD approves the disposition of real property of a 
development, in whole or in part, the PHA shall dispose of the property 
promptly by public solicitation of bids for not less than fair market 
value, unless HUD authorizes negotiated sale for reasons found to be in 
the best interests of the PHA or the federal government, or sale for 
less than fair market value (where permitted by state law), based on 
commensurate public benefits to the community, the PHA, or the federal 
government justifying such an exception. General public improvements 
such as streets and bridges do not qualify as commensurate public 
benefits.
    (b) A PHA may pay the reasonable costs of disposition, and of 
relocation of displaced tenants allowable under Sec.  970.21, out of 
the gross proceeds, as approved by HUD.
    (c) To obtain an estimate of the fair market value before the 
property is advertised for bid, the PHA shall have one independent 
appraisal performed on the property proposed for disposition, unless 
HUD determines that:
    (1) More than one appraisal is warranted; or
    (2) Another method of valuation is clearly sufficient and the 
expense of an independent appraisal is unjustified because of the 
limited nature of the property interest involved or other available 
data.
    (d) To obtain an estimate of the fair market value when a property 
is not publicly advertised for bid, HUD may accept a reasonable 
valuation of the property.
    (e) A PHA shall use net proceeds, including any interest earned on 
the proceeds (after payment of HUD-approved costs of disposition and 
relocation under paragraph (a) of this section), subject to HUD 
approval as follows:
    (1) Unless waived by HUD, for the retirement of outstanding 
obligations, if any, issued to finance original development or 
modernization of the project; and
    (2) To the extent that any net proceeds remain, after the 
application of proceeds in accordance with paragraph (e)(1) of this 
section, for:
    (i) The provision of low-income housing or to benefit the residents 
of the PHA, through such measures as modernization of lower income 
housing or the acquisition, development, or rehabilitation of other 
properties to operate as lower income housing; or
    (ii) Leveraging amounts for securing commercial enterprises, on-
site in public housing developments of the PHA, appropriate to serve 
the needs of the residents.
    (f) For dispositions for the purpose stated in Sec.  970.17(b), a 
PHA must demonstrate to the satisfaction of HUD that the replacement 
units are being provided in connection with the disposition of the 
property. A PHA may use sale proceeds in accordance with paragraph (e) 
to fund the replacement units.


Sec.  970.21  Relocation of residents.

    (a) Relocation of residents on a nondiscriminatory basis and 
relocation resources. A PHA must offer each family displaced by 
demolition or disposition comparable housing that meets housing quality 
standards (HQS); and is located in an area that is generally not less 
desirable than the location of the displaced persons. The housing must 
be offered on a nondiscriminatory basis, without regard to race, color, 
religion, creed, national origin, handicap, age, familial status, or 
gender, in compliance with applicable federal and state laws. For 
persons with disabilities displaced from a unit with reasonable 
accommodations, comparable housing should include similar 
accommodations. Such housing may include:
    (1) Tenant-based assistance, such as assistance under the Housing 
Choice Voucher Program, 24 CFR part 982, except that such assistance 
will not be considered ``comparable housing'' until the family is 
actually relocated into such housing; and
    (2) Project-based assistance; or
    (3) Occupancy in a unit operated or assisted by the PHA at a rental 
rate paid by the family that is comparable to the rental rate 
applicable to the unit from which the family is vacated.
    (b) In-place tenants. A PHA may not complete disposition of a 
building until all tenants residing in the building are relocated.
    (c) Financial resources. (1) Sources of funding for relocation 
costs related to demolition or disposition may include but are not 
limited to capital funds or other federal funds currently available for 
this purpose;
    (2) If CDBG funds (see 24 CFR part 570) are used to pay any part of 
the cost of the demolition or the cost of a project for which the 
property is acquired, the transaction is subject to the Residential 
Anti-Displacement and Relocation Assistance Plan, as described in the 
applicable regulations.
    (d) Relocation timetable. For the purpose of determining operating 
subsidy eligibility under 24 CFR part 990, a PHA must provide the 
following information in the application or immediately following 
application submission:
    (1) The number of occupied units at the time of demolition/
disposition application approval;
    (2) A schedule for the relocation of those residents on a month-by-
month basis.
    (e) The PHA is responsible for the following:
    (1) Notifying each family residing in the development of the 
proposed demolition or disposition 90 days prior to the displacement 
date, except in cases of imminent threat to health and safety. The 
notification must include a statement that:
    (i) The development or portion of the development will be 
demolished or disposed of;
    (ii) The demolition of the building in which the family resides 
will not commence until each resident of the building has been 
relocated;
    (iii) Each family displaced by such action will be provided 
comparable housing, which may include housing with reasonable 
accommodations for disability, if required under section 504 of the 
Rehabilitation Act of 1973 and HUD's regulations, as described in 
paragraph (a) of this section;
    (2) Providing for the payment of the actual and reasonable 
relocation expenses of each resident to be displaced, including 
residents requiring reasonable accommodations because of disabilities;
    (3) Ensuring that each displaced resident is offered comparable 
replacement housing as described in paragraph (b) of this section; and
    (4) Providing any necessary counseling for residents that are 
displaced.

[[Page 75200]]

    (f) In addition, the PHA's plan for the relocation of residents who 
would be displaced by the proposed demolition or disposition must 
indicate:
    (1) The number of individual residents to be displaced;
    (2) The type of counseling and advisory services the PHA plans to 
provide;
    (3) What housing resources are expected to be available to provide 
housing for displaced residents; and
    (4) An estimate of the costs for counseling and advisory services 
and resident moving expenses, and the expected source for payment of 
these costs.
    (g) The Uniform Relocation Act does not apply to demolitions and 
dispositions under this part.


Sec.  970.23  Costs of demolition and relocation of displaced tenants.

    Where HUD has approved demolition of a project, or a portion of a 
project, and the proposed action is part of a program under the Capital 
Fund Program (24 CFR part 905), the costs of demolition and of 
relocation of displaced residents may be included in the budget funded 
with capital funds pursuant to Section 9(d) of the Act, 42 U.S.C. 
1437g(d), or awarded HOPE VI or other eligible HUD funds.


Sec.  970.25  Required and permitted actions prior to approval.

    (a) A PHA may not take any action to demolish or dispose of a 
public housing development or a portion of a public housing development 
without obtaining HUD approval under this part. HUD funds may not be 
used to pay for the cost to demolish or dispose of a public housing 
development or a portion of a public housing development, unless HUD 
approval has been obtained under this part. Until the PHA receives HUD 
approval, the PHA shall continue to meet its ACC obligations to 
maintain and operate the property as housing for lower income families. 
However, the PHA may engage in planning activities, analysis, or 
consultations without seeking HUD approval. Planning activities may 
include project viability studies, capital planning, or comprehensive 
occupancy planning. The PHA must continue to provide full housing 
services to all residents that remain in the development. A PHA should 
not re-rent these units at turnover while HUD is considering its 
application for demolition or disposition. However, the PHA's operating 
subsidy eligibility will continue to be calculated as stated in 24 CFR 
part 990.
    (b) A PHA may consolidate occupancy within or among buildings of a 
development, or among developments, or with other housing for the 
purposes of improving living conditions of, or providing more efficient 
services to residents, without submitting a demolition or disposition 
application.


Sec.  970.27  De minimis exception to demolition requirements.

    (a) A PHA may demolish units without submitting an application if 
the PHA is proposing to demolish not more than the lesser of:
    (1) Five dwelling units; or
    (2) Five percent of the total dwelling units owned by the PHA over 
any five-year period.
    (b) The five-year period referred to in paragraph (a)(2) of this 
section is the five years counting backwards from the date of the 
proposed de minimis demolition, except that any demolition performed 
prior to October 21, 1998, will not be counted against the five units 
or five percent of the total, as applicable. For example, if a PHA that 
owns 1,000 housing units wishes to demolish units under this de minimis 
provision on July 1, 2004, and previously demolished two units under 
this provision on September 1, 2000, and two more units on July 1, 
2001, the PHA would be able to demolish one additional unit for a total 
of five in the preceding five years. As another example, if a PHA that 
owns 60 housing units as of July 1, 2004, had demolished two units on 
September 1, 2000, and one unit on July 1, 2001, that PHA would not be 
able to demolish any further units under this ``de minimis'' provision 
until after September 1, 2005, because it would have already demolished 
five percent of its total.
    (c)(1) In order to qualify for this exemption, the space occupied 
by the demolished unit must be used for meeting the service or other 
needs of public housing residents (use of space to construct a laundry, 
community center, child care facility, office space for a general 
provider; or for use as open space, or garden); or
    (2) The unit being demolished must be beyond repair. Beyond repair 
means physical improvement or rehabilitation costs which exceed the 
computed HCC for a new development with the same structure type and 
number and size of units in the market area.
    (d) The environmental review requirements at Sec.  970.13 shall 
apply to demolitions under this section.
    (e) For recordkeeping purposes, PHAs that wish to demolish units 
under this section shall submit the information required in Sec.  
970.7(a)(1), (2), (12), (13), and (14). HUD will accept a certification 
from the PHA that one of the two conditions in paragraph (c) of this 
section apply unless HUD has independent information that requirements 
for ``de minimis'' demolition have not been met.


Sec.  970.29  Criteria for disapproval of demolition or disposition 
applications.

    HUD will disapprove of an application if HUD determines that:
    (a) Any certification made by the PHA under this part is clearly 
inconsistent with:
    (1) The approved PHA Plan;
    (2) Any information and data available to HUD related to the 
requirements of this part, such as failure to meet the requirements for 
the justification for demolition or disposition as found in Sec. Sec.  
970.15 and 970.17; or
    (3) information or data requested by HUD; or
    (b) The application was not developed in consultation with:
    (1) Residents who will be affected by the proposed demolition or 
disposition as required in Sec.  970.9; and
    (2) Each resident advisory board and resident council, if any, of 
the project (or portion thereof) that will be affected by the proposed 
demolition or disposition as required in Sec.  970.9, and appropriate 
government officials as required in Sec.  970.7.


Sec.  970.31  Replacement units.

    Replacement public housing units may be built on the original 
public housing location or in the same neighborhood as the original 
public housing location if the number of the replacement public housing 
units is significantly fewer than the number of units demolished. Such 
development must comply with 24 CFR part 905, Public Housing Capital 
Fund Program, as well as 24 CFR part 941.


Sec.  970.33  Effect on the Operating Fund Program and Capital Fund 
Program.

    The provisions of 24 CFR part 990, the Public Housing Operating 
Fund Program, and 24 CFR part 905, the Public Housing Capital Fund 
Program, apply.


Sec.  970.35  Reports and records.

    (a) After HUD approval of demolition or disposition of all or part 
of a project, the PHA shall provide information on the following:
    (1) Actual completion of each demolition contract by entering the 
appropriate information into HUD's applicable data system, or providing 
the information by another method HUD may require, within a week of 
making the final payment to the demolition contractor, or expending the 
last

[[Page 75201]]

remaining funds if funded by force account;
    (2) Execution of sales or lease contracts by entering the 
appropriate information into HUD's applicable data system, or providing 
the information by another method HUD may require, within a week of 
execution;
    (3) The PHA's use of the proceeds of sale by providing a financial 
statement showing how the funds were expended by item and dollar 
amount;
    (4) Amounts expended for closing costs and relocation expenses, by 
providing a financial statement showing this information for each 
property sold;
    (5) Such other information as HUD may from time to time require.
    (b) [Reserved]

    Dated: December 6, 2004.
Michael Liu,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 04-27206 Filed 12-14-04; 8:45 am]
BILLING CODE 4210-33-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>