Federal Register / Vol. 77, No. 60 / Wednesday, March 28, 2012 / Proposed Rules 18723 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 891 

[Docket No. FR–5167–P–01] 

RIN 2502–AI67 

Streamlining Requirements Governing 

the Use of Funding for Supportive 

Housing for the Elderly and Persons 

With Disabilities Programs 

AGENCY: Office of the Assistant 

Secretary of Housing—Federal Housing 

Commissioner, HUD. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

amend HUD’s regulations governing the 

Section 202 Supportive Housing for the 

Elderly Program (Section 202) and the 

Section 811 Supportive Housing for 

Persons with Disabilities Program 

(Section 811), by streamlining the 

requirements for mixed-finance Section 

202 and Section 811 developments. This 

rule would streamline the requirements 

for mixed-finance developments by 

removing restrictions on the portions of 

developments not funded through 

capital advances, thereby lifting barriers 

on participation in the development of 

the projects, and eliminating 

burdensome funding requirements. 

These proposed amendments would 

attract private capital and the expertise 

of the private developer community to 

create attractive and affordable 

supportive housing developments for 

the elderly and for persons with 

disabilities. HUD is also taking this 

opportunity to improve and bring up to 

date certain regulations governing all 

Section 202 and Section 811 

developments. These changes will 

permit broader flexibility in the design 

of Section 202/811 units, extend the 

duration of the availability of capital 

advance funds, and make a technical 

correction. 

This proposed rule is the first part of 

a larger regulatory effort to reform the 

Section 202 and Section 811 programs, 

which will include implementation of 

the changes made to these programs by 

the Frank Melville Supportive Housing 

Investment Act of 2010 and the Section 

202 Supportive Housing for the Elderly 

Act of 2010. A subsequent rule, which 

will focus on the statutory changes, is 

expected to be published later in 2012. 

DATES: Comment Due Date: May 29, 

2012. 

ADDRESSES: Interested persons are 

invited to submit comments regarding 

this proposed rule to the Regulations 

Division, Office of General Counsel, 451 

7th Street SW., Room 10276, 

Department of Housing and Urban 

Development, Washington, DC 20410– 

0500. Communications must refer to the 

above docket number and title. There 

are two methods for submitting public 

comments. All submissions must refer 

to the above docket number and title. 

1. Submission of Comments by Mail. 

Comments may be submitted by mail to 

the Regulations Division, Office of 

General Counsel, Department of 

Housing and Urban Development, 451 

7th Street SW., Room 10276, 

Washington, DC 20410–0001. 

2. Electronic Submission of 

Comments. Interested persons may 

submit comments electronically through 

the Federal eRulemaking Portal at 

www.regulations.gov. HUD strongly 

encourages commenters to submit 

comments electronically. Electronic 

submission of comments allows the 

commenter maximum time to prepare 

and submit a comment, ensures timely 

receipt by HUD, and enables HUD to 

make them immediately available to the 

public. Comments submitted 

electronically through the 

www.regulations.gov Web site can be 

viewed by other commenters and 

interested members of the public. 

Commenters should follow the 

instructions provided on that site to 

submit comments electronically. 

Note: To receive consideration as public 

comments, comments must be submitted 

through one of the two methods specified 

above. Again, all submissions must refer to 

the docket number and title of the rule. No 

Facsimile Comments. Facsimile (FAX) 

comments are not acceptable. 

Public Inspection of Public 

Comments. All properly submitted 

comments and communications 

submitted to HUD will be available for 

public inspection and copying between 

8 a.m. and 5 p.m. weekdays at the above 

address. Due to security measures at the 

HUD Headquarters building, an advance 

appointment to review the public 

comments must be scheduled by calling 

the Regulations Division at 202–708– 

3055 (this is not a toll-free number). 

Individuals with speech or hearing 

impairments may access this number 

via TTY by calling the Federal Relay 

Service at 1–800–877–8339. Copies of 

all comments submitted are available for 

inspection and downloading at 

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Aretha Williams, Office of Housing 

Assistance and Grant Administration, 

Office of Housing, Department of 

Housing and Urban Development, 451 

7th Street SW., Room 6136, Washington, 

DC 20410–8000; telephone number 202– 

708–3000 (this is not a toll-free 

number). Persons with hearing or 

speech impairments may access this 

number via TTY by calling the toll-free 

Federal Relay Service at 1–800–877– 

8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Section 202 and Section 811 

programs were established to allow very 

low-income elderly persons and persons 

with disabilities the opportunity to live 

with dignity by providing affordable 

rental housing offering a range of 

supportive services to meet the needs of 

these populations. By providing capital 

advance and project rental assistance to 

nonprofit developers seeking to build 

and maintain supportive housing for 

very low-income elderly persons and 

persons with disabilities, the Section 

202 and Section 811 programs have 

proven to be examples of effective 

partnerships between the Federal 

Government and nongovernmental 

entities to achieve a common mission. 

The American Homeownership and 

Economic Opportunity Act of 2000 

(Pub. L. 106–569, 114 Stat. 2944, 

approved December 27, 2000) (AHEO 

Act) amended the authorizing statutes 

for the Section 202 program (Section 

202 of the Housing Act of 1959 (12 

U.S.C. 1701q)) and the Section 811 

program (Section 811 of the CranstonGonzalez National Affordable Housing 

Act of 1990 (42 U.S.C. 8013)) to allow 

for the participation of for-profit limited 

partnerships in the ownership of 

Section 202 and Section 811 supportive 

housing, which helped facilitate the use 

of low-income housing tax credits and 

mixed-finance methods to infuse private 

capital into Section 202 and Section 811 

developments. An interim rule 

establishing the Section 202/811 mixedfinance program and implementing the 

AHEO Act, was published on December 

1, 2003 (68 FR 67316). HUD followed 

publication of the interim rule with a 

final rule, published on September 13, 

2005 (70 FR 54200), that took into 

account the comments received on the 

interim rule. 

Current economic conditions have 

reduced the availability of private 

financing for the development of 

supportive housing. In order to attract 

needed private capital, HUD has 

determined that amendments to the 

regulations governing the Section 202 

and Section 811 programs are needed to 

further streamline the mixed-finance 

development process for supportive 

housing for the elderly and persons with 

disabilities. While the existing 

regulations applicable to mixed-finance 

developments have facilitated the 


tkelley on DSK3SPTVN1PROD with PROPOSALS
18724 Federal Register / Vol. 77, No. 60 / Wednesday, March 28, 2012 / Proposed Rules 

creation of approximately 1,017 mixedfinance units, they also, in certain 

circumstances, limit project sponsors 

from accessing private sector capital and 

expertise. The changes proposed in this 

rule will provide mixed-finance owners 

with more options, better facilitate the 

use of low-income housing tax credits, 

and attract other private funding. 

Moreover, the changes will promote the 

construction of supportive housing 

developments that include additional 

non-Section 202/811-supported units 

for the elderly and persons with 

disabilities. 

The Section 202 Supportive Housing 

for the Elderly Act of 2010 (Pub. L. 111– 

372) (Section 202 Act of 2010) and the 

Frank Melville Supportive Housing 

Investment Act of 2010 (Pub. L. 111– 

374) (Melville Act) were both signed 

into law on January 4, 2011 

(collectively, the Acts), and amended 

the authorizing statutes for Section 202 

and Section 811, respectively. While 

additional regulatory changes will be 

necessary to implement these Acts, 

HUD is taking this opportunity to 

update the definitions of ‘‘private 

nonprofit organizations’’ to conform to 

the Acts, as these definitions directly 

impact the mixed-finance program. The 

Section 202 Act of 2010 and the 

Melville Act provide a much-needed 

foundation for practical improvements 

to the Section 202 and Section 811 

programs. The regulatory amendments 

proposed in this rule build upon the 

Acts from the 111th Congress to further 

modernize the operation of Section 202 

and Section 811 in the mixed-finance 

context. 

II. This Proposed Rule 

This proposed rule would amend both 

the general section of HUD’s regulations 

governing the Section 202 and Section 

811 programs that are codified in 24 

CFR part 891, and the sections in part 

891 specifically governing the mixedfinance program. This rule would allow 

broader participation by the private 

development community in the 

financing of Section 202 and Section 

811 mixed-finance developments. The 

proposed amendments to the 

regulations would also remove some of 

the financial restraints on developers in 

the mixed-finance context by allowing 

more flexibility in the drawdown of 

capital advance funds and noncapital 

advance funds. In addition, because 

mixed-finance developments have units 

that are funded via a capital advance by 

HUD and rental assistance through the 

Section 202 and Section 811 programs 

as well as units that are non-Section 

202/811 supported, the changes would 

permit mixed-finance developers to 

have more flexibility in bringing in 

private capital by eliminating 

restrictions in regard to the non-capital 

advance units. 

In terms of the regulations governing 

all Section 202 and Section 811 

developments, regardless of the source 

of the financing, this rule would alter 

the definition sections to improve the 

clarity of the regulations, permit broader 

flexibility in the design of Section 202/ 

811 units, extend the duration of the 

availability of capital advance funds, 

and make a technical correction. 

This rule would also make 

conforming changes to the definition 

sections contained in part 891 to reflect 

the amendments to the Section 202 Act 

of 2010 and the Melville Act. 

Definitions 

1. Private nonprofit organizations. 

The Section 202 Act of 2010 and the 

Melville Act altered the definition of 

‘‘private nonprofit organization.’’ This 

rule would amend the regulations found 

at §§ 891.205, 891.305, and 891.805 in 

order to conform to the statutory 

changes. Among other changes, the 

Section 202 Act of 2010 gives HUD the 

authority, in the case of a nonprofit 

organization sponsoring multiple 

developments, to determine the criteria 

for transferring the responsibilities of a 

single-entity nonprofit owner of an 

individual development to the 

governing board of the sponsor that is 

the sponsoring organization of multiple 

developments. These changes will be 

codified in § 891.205. 

An additional change made by the 

Section 202 Act of 2010 is that the 

definition will now include for-profit 

limited partnerships of which the sole 

general partner is a for-profit 

corporation or a limited liability 

company that is wholly owned and 

controlled by one or more nonprofit 

organizations. Prior to this amendment, 

the sole general partner could only be a 

nonprofit organization or a for-profit 

corporation wholly owned and 

controlled by a single nonprofit 

organization. The extension of the type 

of for-profit limited partnership that 

may participate in Section 202 

developments will be codified in 

§ 891.805. 

In the case of Section 811, the 

Melville Act changes the heading of the 

definition of ‘‘nonprofit organization’’ to 

‘‘private nonprofit organization.’’ This 

change in nomenclature will be codified 

in § 891.305. However, the substance of 

this definition in § 891.305 will not be 

changed, as the additional change made 

by the Melville Act to the definition of 

‘‘private nonprofit organization’’ will be 

codified in § 891.805. 

In addition, the Melville Act deleted 

the clause ‘‘wholly owned and’’ and 

simply requires that a corporation be 

‘‘owned and controlled’’ by a nonprofit 

organization. However, the Melville Act 

does not extend the definition to 

include limited liability companies. 

This change will be codified in the 

definition of ‘‘Private nonprofit 

organization’’ in § 891.805. 

2. Instrumentality of a public body. 

This rule also proposes amending the 

definitions of ‘‘owner’’ and ‘‘sponsor’’ in 

§ 891.205 to permit an owner or sponsor 

of a section 202 development to be an 

‘‘instrumentality of a public body.’’ A 

public body would still be prohibited 

from being an owner or sponsor, as a 

public body cannot, by definition, be 

considered a private nonprofit 

organization, but HUD has determined 

that, as long as an entity otherwise 

meets the criteria of ownership or 

sponsorship, the regulation is too 

prescriptive. By eliminating this 

restriction, HUD is expanding the 

number of private nonprofit 

organizations who will be able to 

participate in the development of 

section 202 projects. 

3. Single-purpose/single-asset. In 

addition, the definitions of ‘‘owner’’ in 

§§ 891.205, 891.305, and 891.805, as 

well as the definition of ‘‘mixed-finance 

owner’’ will be amended to add the 

qualification that the owner be a singleasset entity. The definition currently 

requires the owner to be a singlepurpose entity. HUD proposes to replace 

the term ‘‘single-purpose’’ with ‘‘singleasset.’’ The definitions of ‘‘owner’’ and 

‘‘mixed-finance owner’’ already require 

that an owner’s purpose must include 

the promotion of the elderly or persons 

with disabilities, as appropriate, and a 

strict interpretation of the term ‘‘singlepurpose’’ limits the flexibility of 

owners, especially in the mixed-finance 

context. In the past, the terms ‘‘singlepurpose’’ and ‘‘single-asset’’ have been 

used interchangeably; however, the 

proposed change in the regulations will 

more accurately reflect the type of 

ownership required for a Section 202 or 

Section 811 development. A single-asset 

entity will be defined in § 891.105 as an 

entity in which the mortgaged property 

is the only asset of the owner and that 

has no more than one owner. This 

definition will apply to the definitions 

of ‘‘owner’’ and ‘‘mixed-finance owner’’ 

in §§ 891.205, 891.305, and 891.805. 

4. Repairs and rehabilitation. HUD 

proposes to add new definitions in 

§ 891.105 in order to provide more 

targeted definitions based on the 

condition of the building being 

developed under Section 202 or Section 

811. While the current regulation groups 


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Federal Register / Vol. 77, No. 60 / Wednesday, March 28, 2012 / Proposed Rules 18725 

all types of rehabilitation into one 

category, HUD proposes to provide 

separate definitions for ‘‘repairs, 

renovations, and improvements’’ and 

‘‘substantial rehabilitation.’’ 

‘‘Substantial rehabilitation’’ will be 

defined as improvements to a property 

that is in a deteriorated or substandard 

condition that endangers the health, 

safety, or well-being of the residents. 

Substantial rehabilitation does not 

include cosmetic improvements and 

must meet one of the following criteria: 

a. The cost of repairs, replacements, 

and improvements exceeds the greater 

of 15 percent of the estimated property 

replacement cost after completion of all 

repairs, replacements, and 

improvements, or $6,500 per unit in 

repairs, replacements, and 

improvements to rehabilitate the project 

to a useful life of 55 years, or 

b. Two or more major building 

components are being substantially 

replaced. Additions are permitted in 

substantial rehabilitation projects, but 

the costs for the additions of new units 

(not building component additions) are 

not included in the eligibility test. 

‘‘Repairs, replacements, and 

improvements’’ are basically anything 

other than substantial rehabilitation and 

may include cosmetic repairs. The 

amount of investment per unit must be 

below $6,500 per unit. HUD recognizes 

that factors such as the state of the 

housing market and inflation may 

require an alteration of this amount, and 

this proposed rule provides that the 

amount may be adjusted by HUD after 

advance notice and the opportunity for 

public comment. 

Specific solicitation of comment. The 

minimum investment of $6,500 is a 

threshold amount used in almost all if 

not all of HUD’s multifamily programs 

and is an amount familiar to 

participants in these programs. HUD 

recognizes that this dollar amount and 

the minimum useful life of 55 years 

have been in place for many years, and 

seeks public comment on whether these 

thresholds remain a reasonable 

minimum investment amount in today’s 

housing market. Additionally, as 

provided in this rule and cognizant of 

the rapid changes that can occur in the 

housing market, HUD proposes for the 

rule to adjust this amount, but only after 

providing advance notice through 

Federal Register publication and the 

opportunity for comment. 

Project Design and Cost Standards/ 

Eligible Uses for Assistance 

1. Requirements applicable to all 

Section 202 and Section 811 

developments. HUD proposes to make 

several changes to the regulations in 

§ 891.120 governing project design and 

cost standards applicable to all Section 

202 and Section 811 developments. 

These changes are intended to bring 

HUD’s regulations up to date, as 

§ 891.120 contains provisions that were 

held over from the predecessor direct 

loan program from the 1980s. The first 

change updates § 891.120(a), by 

providing a reference to the Minimum 

Property Standards as codified in 

regulation. The current regulation was 

promulgated before the codification of 

the current Minimum Property 

Standards in 24 CFR part 200 subpart S, 

and this rule proposes to cross-reference 

such subpart. 

The second change updates 

§ 891.120(c) to reflect the fact that many 

items formerly thought to be ‘‘excess 

amenities’’ are now standard 

requirements in today’s housing market. 

The current regulation requires that 

Section 202 and Section 811 

developments be of ‘‘modest design’’ 

and prohibits the use of capital advance 

or project rental assistance to pay for the 

installation and continued operation of 

atriums, bowling alleys, swimming 

pools, saunas, Jacuzzis, balconies, and 

decks on individual units, and 

dishwashers, trash compactors, and 

washers and dryers in individual units. 

HUD will retain the restriction on use of 

HUD funds for atriums, bowling alleys, 

swimming pools, saunas, and jacuzzis, 

while permitting the use of capital 

advance and project assistance funds for 

balconies and decks, dishwashers, trash 

compactors, and washers and dryers for 

individual units. Lifting these 

restrictions not only brings HUD in line 

with the standards of the housing 

market, since they are no longer seen as 

‘‘excessive amenities,’’ but also 

recognizes that the quality of life can be 

increased by permitting such items. 

Lastly, HUD proposes to amend 

§ 891.120(d) regarding smoke detectors 

to bring the provision up to current 

standards, by requiring that smoke 

detectors and alarm devices be installed 

in accordance with standards and 

criteria acceptable to HUD for the 

protection of occupants in any dwelling 

or facility bedroom or other primary 

sleeping area. 

2. Mixed-finance developments. Both 

§ 891.813(c) (‘‘Eligible uses for 

assistance provided under this subpart’’) 

and § 891.848 (‘‘Project design and cost 

standards’’) provide that the restrictions 

contained in §§ 891.220 and 891.315 

regarding prohibited facilities apply to 

mixed-finance developments. Under 

current regulations, § 891.220 prohibits 

the presence of facilities for infirmaries, 

nursing stations, or spaces for overnight 

care in Section 202 developments. 

Section 891.315 prohibits the presence 

of infirmaries, nursing stations, spaces 

for medical treatment or physical 

therapy, or padded rooms, even if paid 

by sources other than the HUD capital 

advance and project rental assistance 

contract for Section 811 developments. 

HUD has determined that these 

restrictions of § 891.220 prevent the 

development of supportive housing for 

the elderly when the cost to develop 

and operate these types of facilities is 

being funded by other sources, and that 

restrictions on prohibited facilities in 

Section 202 mixed-finance 

developments should apply only to the 

capital advance-funded portion, and not 

to the entire development. The removal 

of these restrictions for Section 202 

mixed-finance developments assures 

that HUD-financed developments are 

capable of having medical facilities and 

service spaces that may be necessary for 

ongoing occupancy of frail elderly. 

Inclusion of these Section 202 facilities 

will keep these projects competitive 

with those in the private sector, and 

assure continued building occupancy 

and the financial viability of these 

projects. 

However, HUD recognizes the 

importance of maintaining the 

restrictions on prohibited facilities for 

Section 811 developments for both 

capital advance and non-capital 

advance portions of the project. HUD is 

committed to preventing the isolation of 

persons with disabilities that might 

occur should medical facilities be 

contained in Section 811 developments. 

In order to provide owners with 

needed flexibility in the design of the 

non-capital advance portion of the 

mixed-finance Section 202 

development, HUD proposes amending 

paragraph (b) of § 891.813, which 

currently applies only to amenities, to 

make the provisions of paragraph (b) of 

§ 891.813 applicable to both amenities 

and ‘‘prohibited facilities’’ in Section 

202 mixed-finance developments. This 

would permit otherwise prohibited 

Section 202 facilities, provided that: 

(1) The facilities are not financed with 

funds made available under Section 

202; (2) the facilities are not maintained 

and operated with funds made available 

under Section 202; (3) the facilities are 

designed with appropriate safeguards 

for the residents’ health and safety; and 

(4) the assisted residents are not 

required to use, participate in, or pay a 

fee for the use or maintenance of the 

facilities, although they are permitted to 

do so voluntarily. Any fee charged for 

the use of the facilities must be 

reasonable and affordable for all 

residents of the development. The 

exception on prohibited facilities in 


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18726 Federal Register / Vol. 77, No. 60 / Wednesday, March 28, 2012 / Proposed Rules 

paragraph (b) of § 891.813 would not 

extend to Section 811 mixed-finance 

developments. 

In addition, HUD proposes to amend 

paragraph (c) of § 891.813 by removing 

the references to Section 202 and the 

prohibited facilities provisions found in 

§ 891.220, while maintaining the current 

applicability of § 891.315 to Section 811 

mixed-finance developments. 

Section 891.848 regarding project 

design and cost standards would be 

amended to reflect the changes being 

made to paragraphs (b) and (c) of 

§ 891.813 by stating that the provisions 

regarding prohibited facilities contained 

in § 891.220 do not apply to mixedfinance developments, subject to the 

restrictions of paragraph (b) of 

§ 891.813. The current statement in 

§ 891.848 regarding the inclusion of 

prohibited facilities in Section 811 

mixed-finance developments, as set 

forth in § 891.315, would remain the 

same. HUD proposes to amend 

§ 891.848 further by stating that while 

mixed-finance developments must 

comply with the project design and cost 

standards contained in § 891.120, the 

requirements regarding amenities 

specified in paragraph (c) of § 891.120 

do not apply, subject to the restrictions 

in paragraph (b) of § 891.813. This 

would not be a substantive change to 

current regulations. Paragraph (b) of 

§ 891.813 already states that the 

restrictions on amenities in paragraph 

(c) of § 891.120 do not apply to mixedfinance developments, provided that 

certain conditions are met, and this 

proposed rule would make 

§§ 891.813(b) and 891.848 consistent. 

Prohibited Relationships 

HUD’s regulations at 24 CFR 891.130 

specify prohibited relationships in the 

provision of capital advances under the 

Section 202 and Section 811 programs. 

In general, officers and board members 

of either the owner or the sponsor of the 

development are prohibited from having 

any financial interest in a contract with 

the owner or any firm that has a contract 

with the owner, and which would create 

a conflict of interest. In addition, 

§ 891.130 prohibits an identity of 

interest between the sponsor or owner 

and any development team member or 

between development team members, 

for 2 years after closing. 

Management contracts, supportive 

services contracts, and developer or 

consultant contracts between the owner 

and sponsor or the sponsor’s nonprofit 

affiliate are exempted from the conflictof-interest provisions, provided that no 

more than two persons salaried by the 

sponsor or management affiliate serve as 

nonvoting directors on the owner’s 

board of directors. In order to provide 

more flexibility in the financing of 

Section 202 and Section 811 

developments, HUD proposes amending 

§ 891.130(a)(2) to include an additional 

provision to the conflict-of-interest 

section that will exempt contracts for 

the sale of land between an owner and 

the sponsor or the sponsor’s nonprofit 

affiliate. 

In addition to broadening the 

exceptions to the conflict-of-interest 

rules, HUD proposes to amend 

§ 891.832, which sets forth that mixedfinance projects are subject to the 

conflict-of-interest and identity-ofinterest provisions, by stating that the 

requirements of paragraph (b) of 

§ 891.130 regarding identity of interest 

do not apply in the mixed-finance 

context, while maintaining the 

applicability of the conflict-of-interest 

provisions in paragraph (a) of § 891.130. 

HUD has determined that the current 

identity-of-interest prohibitions limit 

the involvement of the private 

development community in the Section 

202 and Section 811 mixed-finance 

program. 

To correspond to the proposed 

amendment to § 891.832, HUD proposes 

removing paragraph (c) of § 891.130, 

which states that the provisions 

regarding prohibited relationships 

contained in § 891.130(a)–(b) apply to 

mixed-finance developments. Altering 

paragraph (c) of § 891.130 along with 

§ 891.832 would make the regulations 

consistent. 

Audit Requirements 

Section 891.160 currently states that 

nonprofit organizations receiving 

assistance under the Section 202 and 

Section 811 programs are subject to the 

audit requirements in 24 CFR part 45. In 

1996, HUD regulations were streamlined 

and some passages in the CFR, 

including 24 CFR part 45, were 

removed. Part 45 no longer exists, and 

HUD is correcting the citation in 

§ 891.160 to refer to the correct portion 

of the CFR regarding audit requirements 

(24 CFR 5.107). This is a technical 

correction and will not alter the current 

audit requirements for nonprofit 

organizations receiving assistance under 

the Section 202 and Section 811 

programs. 

Duration of Capital Advance 

Section 891.165, governing the 

duration of the availability of capital 

advance funds, currently limits the 

duration of the fund reservations for the 

capital advances to 18 months from the 

date of issuance of the fund reservation 

award with limited exceptions of up to 

24 months, as approved by HUD on a 

case-by-case basis. HUD proposes to 

extend the duration of availability to 24 

months in all cases, with the option of 

extending this period to 36 months, at 

HUD’s discretion. Currently, owners 

often request waivers of this provision, 

and by extending the fund reservation 

period, HUD will be reducing the 

burden placed on owners who must 

apply for an extension and support the 

review of the waiver. Rather than 

spending time on this administrative 

requirement, owners can focus on the 

projects to ensure that projects reach 

initial closing and start construction 

within 24 months. The intent is to also 

encourage participation in the mixedfinance program, which normally 

requires additional time to reach initial 

closing. 

Repayment of Capital Advance 

In mixed-finance transactions in 

which HUD is one of many sources of 

funding, questions have arisen regarding 

the extent of HUD’s interest in the 

supportive housing project. To address 

these questions, this rule provides that 

HUD’s requirements applicable to 

capital advance units are not applicable 

to non-202/811 supported units in the 

project. Section 891.170 states that the 

transfer of physical or financial assets of 

a Section 202 or Section 811 

development is not permitted unless 

HUD determines that the transfer is part 

of a transaction that will ensure ‘‘the 

continued operation of the project’’ for 

at least 40 years in a manner that will 

provide low-income housing for the 

elderly or persons with disabilities. This 

proposed rule will change the phrase 

‘‘the continued operation of the project’’ 

to ‘‘the continued operation of the 

capital advance units.’’ This will have 

the effect of clarifying that HUD’s 

regulatory authority over Section 202 

and Section 811 developments to ensure 

that the units will provide rental 

housing for very low-income elderly 

persons or persons with disabilities 

extends only to units funded through 

capital advances or assisted by funds 

made available under the Section 202 

and Section 811 programs. 

HUD does not require that the non202/811 supported units in a mixedfinance Section 202 or Section 811 

development be rented to very lowincome elderly persons or persons with 

disabilities. Explicitly limiting the scope 

of HUD’s regulatory oversight in mixedfinance developments to capital 

advance and supported units should 

eliminate any uncertainty among other 

lien holders with respect to the 

operation of non-202/811 supported 

units. 


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Federal Register / Vol. 77, No. 60 / Wednesday, March 28, 2012 / Proposed Rules 18727 

Drawdowns 

Section 891.830 describes the 

drawdown procedures for the capital 

advance and non-capital advance funds. 

In some instances, this regulatory 

section lacks needed flexibility. HUD 

has processed several waiver requests 

because the regulation does not include 

a procedure for the release of capital 

advance financing upon completion of a 

project. The proposed amendment will 

have the effect of permitting mixedfinance developers to use low-income 

housing tax credits more effectively. 

Following promulgation of a final rule 

after the notice and comment procedure 

for this proposed rule is completed, 

HUD will issue further processing 

instructions on the release of capital 

advance financing upon completion of a 

development as it relates to low-income 

housing tax credits. 

Rather than grant additional 

regulatory waivers, HUD proposes to 

permit the release of capital advance 

funds upon completion of the project, 

by eliminating detailed requirements 

from the drawdown regulation. In 

particular, HUD proposes to amend 

§ 891.830(b) to permit non-capital 

advance funds to be disbursed before 

the drawdown of capital advance funds 

to increase the developer’s flexibility in 

financing the project, and this 

amendment would allow this flexibility 

to be worked out between the developer 

and HUD in formulating a drawdown 

schedule. Despite the changes to this 

section, developers will still be 

prohibited from using capital advance 

funds for ineligible costs, such as debt 

service on the financing. 

Section 891.830(c)(4) currently 

prohibits the use of funds for paying off 

bridge or construction financing, or 

repaying or collateralizing bonds. HUD 

proposes to amend this provision by 

permitting the use of funds for these 

purposes, provided that the funds are 

used to pay off bridge or construction 

financing, or repaying or collateralizing 

bonds only for the portion of such 

financing or bonds that was used for 

capital advance units, permitting 

broader flexibility in a mixed-finance 

owner’s use of financing and bonds. 

Many fixed transactions rely on 4 

percent low-income housing tax credits 

paired with tax-exempt bonds. In these 

transactions, at least 51 percent of the 

qualified cost of construction must be 

bond-financed. Accordingly, the Section 

202 funds cannot be used in lieu of the 

bonds and must instead be used as a 

‘‘take-out source.’’ 

III. Findings and Certifications 

Regulatory Review—Executive Orders 

12866 and 13563 

Under Executive Order 12866 

(Regulatory Planning and Review), a 

determination must be made whether a 

regulatory action is significant and, 

therefore, subject to review by the Office 

of Management and Budget (OMB) in 

accordance with the requirements of the 

order. Executive Order 13563 

(Improving Regulations and Regulatory 

Review) directs executive agencies to 

analyze regulations that are ‘‘outmoded, 

ineffective, insufficient, or excessively 

burdensome, and to modify, streamline, 

expand, or repeal them in accordance 

with what has been learned.’’ Executive 

Order 13563 also directs that, where 

relevant, feasible, and consistent with 

regulatory objectives, and to the extent 

permitted by law, agencies are to 

identify and consider regulatory 

approaches that reduce burdens and 

maintain flexibility and freedom of 

choice for the public. This rule was 

determined to be a ‘‘significant 

regulatory action,’’ as defined in section 

3(f) of the Executive Order (although not 

an economically significant regulatory 

action, as provided under section 3(f)(1) 

of the Order). 

As noted earlier in this preamble, the 

Section 202 Act of 2010 and the 

Melville Act made several changes to 

the Sections 202 and 811 programs. The 

majority of the changes made by these 

two acts that require regulatory change 

will be implemented through separate 

rulemaking. However, this proposed 

rule begins the process of amending the 

Supportive Housing Program 

regulations to expand flexibility for 

owners and sponsors by, for example, 

broadening the definition of private 

nonprofit organizations, as well as the 

definition of eligible participants to 

include a broader range of nonprofit 

organizations. 

Only one change proposed by this 

rule represents a new requirement for 

program participants. The proposed rule 

requires owners to provide a smoke 

detector and alarm in every bedroom or 

primary sleeping area that they own. 

Though this requirement is being added 

to the program regulations, it is already 

a requirement in most local codes and, 

therefore, does not reflect a significant 

cost that would result from this 

rulemaking. 

The rule proposes to remove the 

existing prohibition on funding certain 

amenities and funding Section 202 and 

Section 811 developments that include 

health-care facilities. The removal of the 

prohibition on certain amenities allows 

for funding units that contain 

dishwashers, trash compactors, and 

washers and dryers, as well as units that 

have patios or balconies attached. With 

respect to health-care facilities, the 

existing regulations have a blanket 

prohibition against including healthcare facilities within the developments 

as a safeguard against the 

institutionalization of the elderly and 

disabled residents. This rule does not 

propose to require program participants 

to include these amenities or health-care 

facilities in the developments. Rather, 

this rule proposes only to remove the 

prohibition for funding units that have 

these amenities or developments that 

have such facilities. The proposed rule 

does not allow for health-care facilities 

to be financed by HUD funds, and use 

of the facilities must be voluntary for 

the residents of the projects. 

HUD funds can be used for units that 

contain or are attached to the previously 

prohibited amenities, but there is no 

requirement that units provide these 

amenities, and providing these 

amenities is unlikely to increase costs to 

the program. The amenities are fairly 

standard in today’s apartments and will 

benefit the residents of program units 

and make these units more attractive 

and capable of attracting and retaining 

tenants. The wider range of allowable 

amenities is likely to also have the 

benefit of combating discrimination by 

reducing the potential for program units 

and their residents to be easily singled 

out within a mixed-finance 

development. 

The voluntary nature of funding units 

with such amenities or developments 

that contain health-care facilities makes 

it difficult to predict the impact of these 

changes on future Section 202 and 811 

units, since these two programs together 

produce only a few hundred 

developments a year (193 in 2008 and 

170 in 2009). Consequently, the overall 

economic impact from these proposed 

limited changes in development and 

unit configuration is expected to be 

small. 

The proposed rule also provides 

benefits from improving government 

processes. For example, extending the 

time of availability of capital advance 

funds from 18 to 24 months should limit 

the number of waivers that HUD 

traditionally processes for these 

programs as developers regularly exceed 

the 18 month time frame. The program 

regulations providing for the 18-month 

time frame were issued in 1996, and 

these regulations no longer reflect the 

additional time often needed by 

developers to obtain the requisite 

permits and approvals from local 

authorities. In Fiscal Year 2010, HUD 

processed 49 such waivers, and, in what 


tkelley on DSK3SPTVN1PROD with PROPOSALS
18728 Federal Register / Vol. 77, No. 60 / Wednesday, March 28, 2012 / Proposed Rules 

has been described as a timeconsuming, case-specific process, 33 

percent of the waivers under the 

program were processed that year. 

The remaining changes in the 

proposed rule are definitional and offer 

participants greater flexibility and 

clarity within the program at no obvious 

cost to the program or participants. 

Although this rule, as noted earlier, 

does not propose to implement the key 

changes from the Section 202 Act of 

2010 and the Melville Act, the 

Congressional Budget Office (CBO) 

found no significant intergovernmental 

and private sector impacts in its 

analysis of the bills prior to enactment. 

The docket file is available for public 

inspection in the Regulations Division, 

Office of General Counsel, Department 

of Housing and Urban Development, 

451 7th Street SW., Room 10276, 

Washington, DC 20410–0500. Due to 

security measures at the HUD 

Headquarters building, please schedule 

an appointment to review the docket file 

by calling the Regulations Division at 

202–708–3055 (this is not a toll-free 

number). 

Regulatory Flexibility Act 

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. In the mixedfinance context, this proposed rule 

would amend HUD’s Section 202 and 

811 program regulations governing 

capital advances, for-profit limited 

partnerships, and mixed-finance 

development methods to facilitate the 

development and availability of housing 

for the elderly and persons with 

disabilities. The proposed regulatory 

amendments would not impose any 

additional regulatory burdens on 

entities participating in these programs. 

To the contrary and as more fully 

explained above in this preamble, the 

proposed amendments would 

streamline requirements, reduce 

requests for regulatory waivers, and 

increase flexibility in mixed-financed 

developments in order to attract private 

capital and expertise to the construction 

of supportive housing for the elderly 

and persons with disabilities. The 

proposed regulatory changes would also 

streamline the use of low-income tax 

credits, as well as the obtaining of 

funding from other sources. National, 

regional, and local developers utilize 

the mixed-finance program and will 

save time and gain efficiency from no 

longer having to request regulatory 

waivers. 

In the context of the applicability of 

this rule to all Section 202 and 811 

developments, this rule would reduce 

regulatory burden by extending the time 

period for the availability of capital 

advances and increase flexibility by 

permitting developers to utilize capital 

advance and project rental assistance 

funds to install and operate amenities 

that are now commonly found in 

market-rate units and that assist in 

improving the lives of the elderly and 

persons with disabilities. Accordingly, 

the undersigned certifies that this rule 

will not have a significant economic 

impact on a substantial number of small 

entities. 

Notwithstanding HUD’s 

determination that this rule will not 

have a significant effect on a substantial 

number of small entities, HUD 

specifically invites comments regarding 

any less burdensome alternatives to this 

rule that will meet HUD’s objectives as 

described in this preamble. 

Environmental Impact 

A Finding of No Significant Impact 

with respect to the environment has 

been made, in accordance with HUD 

regulations at 24 CFR part 50, which 

implement section 102(2)(C) of the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4332(2)(C)). That 

finding is available for public inspection 

between the hours of 8 a.m. and 5 p.m. 

weekdays in the Regulations Division, 

Office of General Counsel, Department 

of Housing and Urban Development, 

451 7th Street SW., Room 10276, 

Washington, DC 20410–0500. Due to 

security measures at the HUD 

Headquarters building, please schedule 

an appointment to review the finding by 

calling the Regulations Division at 202– 

708–3055 (this is not a toll-free 

number). 

Executive Order 13132, Federalism 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits an agency from 

publishing any rule that has federalism 

implications if the rule either imposes 

substantial direct compliance costs on 

state and local governments and is not 

required by statute, or the rule preempts 

state law, unless the agency meets the 

consultation and funding requirements 

of section 6 of the Executive Order. This 

rule will not have federalism 

implications and would not impose 

substantial direct compliance costs on 

state and local governments or preempt 

state law within the meaning of the 

Executive Order. 

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 on 

the private sector. This proposed rule 

does not impose any federal mandates 

on any state, local, or tribal 

governments, or on the private sector, 

within the meaning of UMRA. 

Catalogue of Federal Domestic 

Assistance 

The Catalogue of Federal Domestic 

Assistance Number for the principal 

Federal Housing Authority single-family 

mortgage insurance program is 14.117. 

List of Subjects in 24 CFR Part 891 

Aged, Grant programs—housing and 

community development, Individuals 

with disabilities, Loan programs— 

housing and community development, 

Rent subsidies, Reporting and 

recordkeeping requirements. 

Accordingly, for the reasons 

discussed in the preamble, HUD 

proposes to amend 24 CFR part 891 as 

follows: 

PART 891—SUPPORTIVE HOUSING 

FOR THE ELDERLY AND PERSONS 

WITH DISABILITIES 

1. The authority citation for part 891 

continues to read as follows: 

Authority: 12 U.S.C. 1701q; 42 U.S.C. 

1437f, 3535(d), and 8013. 

2. In § 891.105, revise the 

introductory text, remove the definition 

of ‘‘Rehabilitation,’’ and add the 

definitions of ‘‘Acquisition with or 

without repair,’’ ‘‘Repairs, replacements, 

and improvements,’’ ‘‘Single-asset 

entity,’’ and ‘‘Substantial rehabilitation’’ 

in alphabetical order to read as follows: 

§ 891.105 Definitions. 

The following definitions apply, as 

appropriate, throughout this part. Other 

terms with definitions unique to the 

particular program are defined in 

§§ 891.205, 891.305, 891.505, and 

891.805, as applicable. 

Acquisition with or without repair 

means the purchase of existing housing 

and related facilities. 

* * * * * 

Repairs, replacements, and 

improvements means the improvement 

of the condition of a property, in a 

condition acceptable to HUD. Repairs 

may vary in degree from minor 

reconstruction to the cure of 

accumulation of deferred maintenance. 

Cosmetic improvements alone may 


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qualify under this definition. Repair 

may also include renovation, alteration, 

or remodeling for the conversion or 

adaptation of structurally sound 

property to the design and condition 

required under this part, or the repair or 

replacement of major building systems 

or components in danger of failure. 

Repairs, replacements, and 

improvements of an existing structure 

may be up to $6,500 per dwelling unit 

(or such other amount to be specified by 

HUD through notice and comment) of 

the estimated development cost to 

rehabilitate the project to a useful life of 

55 years. 

* * * * * 

Single-asset entity, for the purpose of 

this subpart, means an entity in which 

the mortgaged property is the only asset 

of the owner, and there may not be more 

than one owner. 

* * * * * 

Substantial rehabilitation means the 

improvement of the condition of a 

property from deteriorated and 

substandard to a condition acceptable to 

HUD. Substandard or deteriorated 

properties are those which do not 

provide safe and adequate shelter, and 

in their present condition endanger the 

health, safety, or well-being of the 

occupants. Substantial rehabilitation 

may vary in degree from gutting and 

extensive reconstruction to the cure of 

substantial accumulation of deferred 

maintenance. Cosmetic improvements 

alone do not qualify as substantial 

rehabilitation under this definition. 

Substantial rehabilitation may also 

include renovation, alteration, or 

remodeling for the conversion or 

adaptation of structurally sound 

property to the design and condition 

required for use under this part, or the 

repair or replacement of major building 

systems or components in danger of 

failure. Substantial rehabilitation must 

meet one of the following criteria: (a) 

The cost of repairs, replacements, and 

improvements exceeds the greater of 

15% of the estimated property 

replacement cost after completion of all 

repairs, replacements, and 

improvements, or $6,500 per dwelling 

unit (or such other amount to be 

specified by HUD through notice and 

comment) to substantially rehabilitate 

the project to a useful life of 55 years; 

or (b) Two or more major building 

components are being substantially 

replaced. Additions are permitted in 

substantial rehabilitation projects, but 

the costs for the additions of new units 

(not building component additions) are 

not included in the eligibility test. 

* * * * * 

3. In § 891.120, revise paragraphs (a), 

(c), and (d) to read as follows: 

§ 891.120 Project design and cost 

standards. 

* * * * * 

(a) Property standards. Projects under 

this part must comply with HUD 

Minimum Property Standards as set 

forth in 24 CFR part 200, subpart S. 

* * * * * 

(c) Restrictions on amenities. Projects 

must be modest in design. Amenities 

not eligible for HUD funding include 

atriums, bowling alleys, swimming 

pools, saunas, and jacuzzis. Sponsors 

may include certain excess amenities, 

but they must pay for them from sources 

other than the Section 202 or 811 capital 

advance. They must also pay for the 

continuing operating costs associated 

with any excess amenities from sources 

other than the Section 202 or 811 

project rental assistance contract. 

(d) Smoke detectors. Smoke detectors 

and alarm devices must be installed in 

accordance with standards and criteria 

acceptable to HUD for the protection of 

occupants in any dwelling or facility 

bedroom or other primary sleeping area. 

* * * * * 

4. In § 891.130: 

a. Revise paragraph (a)(2)(ii) by 

removing the word ‘‘and’’ that follows 

the semicolon after paragraph (a)(2)(ii); 

b. Revise paragraph (a)(2)(iii) by 

removing the period at the end and 

replacing it with a semicolon, and 

adding the word ‘‘and’’ after the 

semicolon; 

c. Add a new paragraph (a)(2)(iv); and 

d. Remove paragraph (c) to read as 

follows: 

§ 891.130 Prohibited relationships. 

* * * * * 

(a) * * * 

(2) * * * 

(iv) Contracts for the sale of land. 

* * * * * 

5. Revise § 891.160 to read as follows: 

§ 891.160 Audit requirements. 

Nonprofit organizations receiving 

assistance under this part are subject to 

the audit requirements of 24 CFR 5.107. 

6. Revise § 891.165 to read as follows: 

§ 891.165 Duration of capital advance. 

(a) The duration of the fund 

reservation for a capital advance with 

construction advances is 24 months 

from the date of initial closing. This 

duration can be up to 36 months, as 

approved by HUD on a case-by-case 

basis. 

(b) The duration of the fund 

reservation for projects that elect not to 

receive any capital advance before 

construction completion is 24 months 

from the date of issuance of the award 

letter to the start of construction. This 

duration can be up to 36 months, as 

approved by HUD on a case-by-case 

basis. 

7. In § 891.170, revise paragraph (b) to 

read as follows: 

§ 891.170 Repayment of capital advance. 

* * * * * 

(b) Transfer of assets. The transfer of 

physical and financial assets of any 

project under this part is prohibited, 

unless HUD gives prior written 

approval. Approval for transfer will not 

be granted unless HUD determines that 

the transfer to a private nonprofit 

corporation, consumer cooperative 

(under the Section 202 Program), a 

private nonprofit organization (under 

the Section 811 Program), or an 

organization meeting the definition of 

‘‘mixed-finance owner’’ in § 891.805, is 

part of a transaction that will ensure the 

continued operation of the capital 

advance units for not less than 40 years 

(from the date of original closing) in a 

manner that will provide rental housing 

for very low-income elderly persons or 

persons with disabilities, as applicable, 

on terms at least as advantageous to 

existing and future tenants as the terms 

required by the original capital advance. 

8. In § 891.205, revise the definitions 

of ‘‘Owner,’’ ‘‘Private nonprofit 

organization,’’ and paragraph (3) of the 

definition of ‘‘Sponsor’’ to read as 

follows: 

§ 891.205 Definitions. 

* * * * * 

Owner means a single-asset private 

nonprofit organization that may be 

established by the Sponsor that will 

receive a capital advance and project 

rental assistance payments to develop 

and operate supportive housing for the 

elderly as its legal owner. Owner does 

not mean public body. The purposes of 

the Owner must include the promotion 

of the welfare of the elderly. The Owner 

may not be controlled by or be under 

the direction of persons or firms seeking 

to derive profit or gain therefrom. 

* * * * * 

Private nonprofit organization means 

any incorporated private institution or 

foundation: 

(1) No part of the net earnings of 

which inures to the benefit of any 

member, founder, contributor, or 

individual; 

(2) That has a governing board: 

(i) The membership of which is 

selected in a manner to assure that there 

is significant representation of the views 

of the community in which such 

housing is located; and 


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18730 Federal Register / Vol. 77, No. 60 / Wednesday, March 28, 2012 / Proposed Rules 

(ii) Which is responsible for the 

operation of the housing assisted under 

this section, except that, in the case of 

a nonprofit organization that is the 

sponsoring organization of multiple 

housing projects assisted under this 

section, HUD may determine the criteria 

or conditions under which financial, 

compliance, and other administrative 

responsibilities exercised by a singleentity private nonprofit organization 

that is the owner corporation of an 

individual housing project may be 

shared or transferred to the governing 

board of such sponsoring organization; 

and 

(3) Which is approved by HUD as to 

financial responsibility. 

* * * * * 

Sponsor * * * 

(3) That is approved by the Secretary 

as to administrative and financial 

capacity and responsibility. The term 

Sponsor does not mean a public body. 

* * * * * 

9. In § 891.305, revise the heading of 

the definition of ‘‘Nonprofit 

organization’’ to read ‘‘Private nonprofit 

organization’’ and relocate in correct 

alphabetical order, and revise the first 

sentence of the definition of ‘‘Owner’’ to 

read as follows: 

§ 891.305 Definitions. 

* * * * * 

Owner means a single-asset private 

nonprofit organization established by 

the Sponsor that will receive a capital 

advance and project rental assistance 

payments to develop and operate, as its 

legal owner, supportive housing for 

persons with disabilities under this part. 

* * * 

* * * * * 

10. Revise § 891.805 to read as 

follows: 

§ 891.805 Definitions. 

In addition to the definitions at 

§§ 891.105, 891.205, and 891.305, the 

following definitions apply to this 

subpart: 

Mixed-finance owner, for the purpose 

of the mixed-finance development of 

housing under this part, means a singleasset, for-profit limited partnership of 

which a private nonprofit organization 

is the sole general partner. The purpose 

of the mixed-finance owner must 

include the promotion of the welfare of 

the elderly or persons with disabilities, 

as appropriate. 

Private nonprofit organization, for the 

purpose of this subpart, means: 

(1) In the case of supportive housing 

for the elderly: 

(i) An organization that meets the 

requirements of the definition of 

‘‘private nonprofit organization’’ in 

§ 891.205; and 

(ii) A for-profit limited partnership, 

the sole general partner of which owns 

at least one-hundredth of one percent of 

the partnership assets whereby the sole 

general partner is either: An 

organization meeting the requirements 

of § 891.205; or a for-profit corporation 

wholly owned and controlled by one or 

more organizations meeting the 

requirements of § 891.205; or a limited 

liability company wholly owned and 

controlled by one or more organizations 

meeting the requirements of § 891.205. 

If the project will include units financed 

with the use of federal Low-Income 

Housing Tax Credits and the 

organization is a limited partnership, 

the requirements of section 42 of the IRS 

code, including the requirements of 

section 42(h)(5), apply. The general 

partner may also be the sponsor, so long 

as it meets the requirements of this part 

for sponsors and general partners. 

(2) In the case of supportive housing 

for persons with disabilities: 

(i) An organization that meets the 

requirements of the definition of 

‘‘private nonprofit organization’’ in 

§ 891.305; and 

(ii) A for-profit limited partnership, 

the sole general partner of which owns 

at least one-hundredth of one percent of 

the partnership assets whereby the sole 

general partner is either: An 

organization meeting the requirements 

of § 891.305 or a corporation owned and 

controlled by an organization meeting 

the requirements of § 891.305. If the 

project will include units financed with 

the use of federal Low-Income Housing 

Tax Credits and the organization is a 

limited partnership, the requirements of 

section 42 of the IRS code, including the 

requirements of section 42(h)(5), apply. 

The general partner may also be the 

sponsor, so long as it meets the 

requirements of this part for sponsors 

and general partners. 

11. In § 891.813, revise paragraphs (b) 

and (c) to read as follows: 

§ 891.813 Eligible uses for assistance 

provided under this subpart. 

* * * * * 

(b) Assistance under this subpart may 

not be used for excess amenities, as 

stated in § 891.120(c), or for Section 202 

‘‘prohibited facilities,’’ as stated in 

§ 891.220. Such amenities or Section 

202 prohibited facilities may be 

included in a mixed-finance 

development only if: 

(1) The amenities or prohibited 

facilities are not financed with funds 

provided under the Section 202 or 

Section 811 program. 

(2) The amenities or prohibited 

facilities are not maintained and 

operated with Section 202 or 811 funds; 

(3) The amenities or prohibited 

facilities are designed with appropriate 

safeguards for the residents’ health and 

safety; and 

(4) The assisted residents are not 

required to use, participate in, or pay a 

fee for the use or maintenance of the 

amenities or prohibited facilities, 

although they are permitted to do so 

voluntarily. Any fee charged for the use, 

maintenance, or access to amenities or 

prohibited facilities by residents must 

be reasonable and affordable for all 

residents of the development. 

(c) Notwithstanding any other 

provision of this section, § 891.315 on 

‘‘prohibited facilities’’ shall apply to 

mixed-finance developments containing 

units assisted under section 811. 

12. In § 891.830, revise paragraphs (b) 

and (c)(4) to read as follows: 

§ 891.830 Drawdown. 

* * * * * 

(b) Non-capital advance funds may be 

disbursed before capital advance 

proceeds or the capital advance funds 

may be drawn down in an approved 

ratio to other funds, in accordance with 

a drawdown schedule approved by 

HUD. 

(c) * * * 

(4) The capital advance funds drawn 

down will be used only for eligible costs 

actually incurred in accordance with the 

provisions of this subpart and the 

approved mixed-finance project, which 

include costs stated in 12 U.S.C. 

1701q(h) and 42 U.S.C. 8013(h). Capital 

advance funds may be used for paying 

off bridge or construction financing, or 

repaying or collateralizing bonds, but 

only for the portion of such financing or 

bonds that was used for capital advance 

units; 

* * * * * 

13. Revise § 891.832 to read as 

follows: 

§ 891.832 Prohibited relationships. 

(a) Paragraph (a) of § 891.130, 

describing conflicts of interest, applies 

to mixed finance developments. 

(b) Paragraph (b) of § 891.130, 

describing identity of interest, does not 

apply to mixed-finance developments. 

14. Revise § 891.848 to read as 

follows: 

§ 891.848 Project design and cost 

standards. 

(a) The project design and cost 

standards at § 891.120 apply to mixedfinance developments under this 

subpart, with the exception of 

§ 891.120(c), subject to the provisions of 

§ 891.813(b). 


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Federal Register / Vol. 77, No. 60 / Wednesday, March 28, 2012 / Proposed Rules 18731 

(b) For Section 202 mixed-finance 

developments, the prohibited facilities 

requirements described at § 891.220 

shall apply to only the capital advancefunded portion of the Section 202 

mixed-finance developments under this 

subpart, subject to the provisions of 

§ 891.813(b). 

(c) For Section 811 mixed-finance 

developments, the prohibited facilities 

requirements described at § 891.315 

shall apply to the entire mixed-finance 

development. 

Dated: March 2, 2012. 

Carol J. Galante, 

Acting Assistant Secretary for Housing— 

Federal Housing Commissioner. 

[FR Doc. 2012–7316 Filed 3–27–12; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 982 

[Docket No. FR–5453–P–01] 

RIN 2577–AC86 

Public Housing and Section 8 

Programs: Housing Choice Voucher 

Program: Streamlining the Portability 

Process 

AGENCY: Office of the Assistant 

Secretary for Public and Indian 

Housing, HUD. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

amend HUD’s regulations governing 

portability in the Housing Choice 

Voucher (HCV) program. Portability is a 

feature of the HCV program that allows 

an eligible family with a housing choice 

voucher to use that voucher to lease a 

unit anywhere in the United States 

where there is a public housing agency 

(PHA) operating an HCV program. The 

purpose of HUD’s proposed changes to 

the portability regulations is to clarify 

requirements already established in the 

existing regulations and improve the 

process involved with processing 

portability requests to enable PHAs to 

better serve families and expand 

housing opportunities. It is HUD’s 

intent to increase administrative 

efficiencies by eliminating confusing 

and obscure regulatory language in areas 

that are known to be troublesome. This 

proposed rule attempts to balances the 

needs and interests of PHAs while 

increasing family choice. 

DATES: Comment Due Date: May 29, 

2012. 

ADDRESSES: Interested persons are 

invited to submit comments regarding 

this proposed rule to the Regulations 

Division, Office of General Counsel, 

Department of Housing and Urban 

Development, 451 7th Street SW., Room 

10276, Washington, DC 20410–0500. 

Communications must refer to the above 

docket number and title. There are two 

methods for submitting public 

comments. All submissions must refer 

to the above docket number and title. 

1. Submission of Comments by Mail. 

Comments may be submitted by mail to 

the Regulations Division, Office of 

General Counsel, Department of 

Housing and Urban Development, 451 

7th Street SW., Room 10276, 

Washington, DC 20410–0500. 

2. Electronic Submission of 

Comments. Interested persons may 

submit comments electronically through 

the Federal eRulemaking Portal at 

www.regulations.gov. HUD strongly 

encourages commenters to submit 

comments electronically. Electronic 

submission of comments allows the 

commenter maximum time to prepare 

and submit a comment, ensures timely 

receipt by HUD, and enables HUD to 

make them immediately available to the 

public. Comments submitted 

electronically through the 

www.regulations.gov Web site can be 

viewed by other commenters and 

interested members of the public. 

Commenters should follow the 

instructions provided on that site to 

submit comments electronically. 

Note: To receive consideration as public 

comments, comments must be submitted 

through one of the two methods specified 

above. Again, all submissions must refer to 

the docket number and title of the rule. No 

Facsimile Comments. Facsimile (Fax) 

comments are not acceptable. 

Public Inspection of Public 

Comments. All properly submitted 

comments and communications 

submitted to HUD will be available for 

public inspection and copying between 

8 a.m. and 5 p.m. weekdays at the above 

address. Due to security measures at the 

HUD Headquarters building, an advance 

appointment to review the public 

comments must be scheduled by calling 

the Regulations Division at 202–708– 

3055 (this is not a toll-free number). 

Individuals with speech or hearing 

impairments may access this number 

via TTY by calling the toll-free Federal 

Relay Service at 800–877–8339. Copies 

of all comments submitted are available 

for inspection and downloading at 

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Laure Rawson, Director, Housing 

Voucher and Management Operations 

Division, Office of Housing Choice 

Vouchers, Department of Housing and 

Urban Development, 451 7th Street SW., 

Room 4216, Washington, DC 20410– 

8000, telephone number 202–708–0477 

(this is not a toll-free number). 

Individuals with speech or hearing 

impairments may access this number 

through TTY by calling the toll-free 

Federal Relay Service at 800–877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The HCV program is the Federal 

Government’s largest program for 

assisting very low-income families, the 

elderly, and the disabled to afford 

decent, safe, and sanitary housing in the 

private market. The HCV program is 

authorized by section 8(o) of the United 

States Housing Act of 1937 (42 U.S.C. 

1473f(o)) (1937 Act), and the HCV 

program regulations are found in 

24 CFR part 982. 

Housing choice vouchers are 

administered locally by PHAs. PHAs 

receive federal funds from HUD to 

administer the HCV program. A family 

that is issued a housing choice voucher 

is responsible for finding a suitable 

housing unit of the family’s choice 

where the owner agrees to rent under 

the program. This unit may include the 

family’s current residence. Rental units 

must meet minimum standards of health 

and safety, as determined by the PHA 

and must also meet a reasonable rent 

determination based on similar 

unassisted units. The maximum amount 

the PHA can pay toward a unit is 

determined by the payment standard set 

using the annual Fair Market Rents 

published by HUD. The PHA 

determines the family’s annual income 

to determine the amount that the family 

will contribute toward rent, which is 

generally 30 percent of its adjusted 

annual income. A housing subsidy is 

paid to the landlord directly by the PHA 

on behalf of the participating family to 

pay the difference between the payment 

standard and the tenant rent 

contribution. A key feature of the HCV 

program is the mobility of the voucher 

assistance or ‘‘portability.’’ Section 8(r) 

of the 1937 Act provides that HCV 

participants may choose a unit that 

meets program requirements anywhere 

in the United States, provided that a 

PHA administering the tenant-based 

program has jurisdiction over the area in 

which the unit is located. The term 

‘‘portability’’ refers to the process of 

leasing a dwelling unit with tenantbased housing voucher assistance 

outside of the jurisdiction of the PHA 

that initially issued the family its 

voucher (the initial PHA). Currently, 

program regulations, found at 24 CFR 

982.353 through 982.355, detail where a 


tkelley on DSK3SPTVN1PROD with PROPOSALS