This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

87518 

Vol. 89, No. 213 

Monday, November 4, 2024 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Parts 5 and 902 

[Docket No. FR–6356–P–01] 

RIN 2577–AD17 

Public Housing Evaluation and 

Oversight: Changes to the Public 

Housing Assessment System (PHAS) 

and Determining and Remedying 

Performance Deficiencies 

AGENCY: Office of the Assistant 

Secretary for Public and Indian 

Housing, HUD. 

ACTION: Proposed rule. 

SUMMARY: The Public Housing 

Assessment System (PHAS) governs the 

assessments, evaluation, and oversight 

of public housing agencies (PHAs) 

administering public housing. This 

proposed rule would revise the weight 

of PHAS performance indicators to 

emphasize the importance of 

occupancy, financial condition, and 

physical assessments. To the greatest 

extent possible, scoring indicators 

would be based on measurable program 

outcomes and data that is already 

available to HUD. Additionally, the 

proposed revisions would allow HUD to 

respond more quickly and effectively to 

performance deficiencies when they are 

first identified, to intervene based on 

trending performance data, and to delay 

scoring or assessments when 

appropriate. 

DATES: Comment Due Date: January 3, 

2025. 

ADDRESSES: There are two methods for 

submitting public comments. All 

submissions must refer to the above 

docket number and title. 

1. Electronic Submission of 

Comments. Comments may be 

submitted 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 comments immediately available 

to the public. Comments submitted 

electronically through 

www.regulations.gov can be viewed by 

other commenters and interested 

members of the public. Commenters 

should follow the instructions provided 

on that website to submit comments 

electronically. 

2. 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. 

Note: To receive consideration as a public 

comment, comments must be submitted 

through one of the two methods specified 

above. 

Public Inspection of Public 

Comments. HUD will make all properly 

submitted comments and 

communications available for public 

inspection and copying during regular 

business hours at the above address. 

Due to security measures at the HUD 

Headquarters building, you must 

schedule an appointment in advance to 

review the public comments by calling 

the Regulations Division at 202–708– 

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

HUD welcomes and is prepared to 

receive calls from individuals who are 

deaf or hard of hearing, as well as 

individuals with speech or 

communication disabilities. To learn 

more about how to make an accessible 

telephone call, please visit https://

www.fcc.gov/consumers/guides/ 

telecommunications-relay-service-trs. 

Copies of all comments submitted are 

available for inspection and 

downloading at www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Daniel Threet, Policy Advisor, 

Department of Housing and Urban 

Development, 451 7th Street SW, 

Washington, DC 20410–0500, telephone 

(202) 402–7513 (this is not a toll-free 

number). HUD welcomes and is 

prepared to receive calls from 

individuals who are deaf or hard of 

hearing, as well as individuals with 

speech or communication disabilities. 

To learn more about how to make an 

accessible telephone call, please visit 

https://www.fcc.gov/consumers/guides/ 

telecommunications-relay-service-trs. 

In accordance with 5 U.S.C. 553(b)(4), 

a summary of this proposed rule may be 

found at www.regulations.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Last updated in February 2011, 24 

CFR part 902 describes how HUD 

assesses and scores the performance of 

PHAs in essential public housing 

operations, on a program-wide and 

individual-project basis. PHAS assesses 

PHA performance based on indicators 

and subindicators described in part 902, 

which HUD then uses to determine a 

score or designation for each PHA. The 

four key indicators, described in 24 CFR 

902 subparts B through E, are the 

physical condition indicator, the 

financial condition indicator, the 

management operations indicator, and 

the Capital Fund program indicator. 

The current regulations define the 

purpose and applicability of the system, 

the general types of indicators used in 

assessment, the frequency of 

assessments, incentives for high 

performers, and how HUD will respond 

to PHAs with deficiencies or that are 

identified as Troubled performers. 

In current regulations, the physical 

condition indicator measures the extent 

to which a PHA is ensuring that projects 

meet acceptable basic housing 

conditions. It draws on independent 

physical inspections of a PHA’s projects 

provided by HUD and aims to ensure 

that all residents live in safe, habitable 

dwellings. The financial condition 

indicator measures a PHA’s ability to 

maintain sufficient financial resources 

to support the operation of its Public 

Housing program. It draws on financial 

information reported to HUD by PHAs. 

The management operations indicator 

measures the PHA’s ability to operate its 

Public Housing program in a way that 

assists as many households as possible 

and meets obligations to participants. It 

draws on unit-status data as well as 

financial information reported to HUD 

by PHAs. The Capital Fund program 

indicator measures the PHA’s ability to 

meet requirements to obligate Capital 

Fund program grants in a timely 

fashion. It also measures occupancy 

rates on the assumption that high 

occupancy rates reflect success in 

addressing capital needs. It draws on 

PHA reporting of the obligation of 

Capital Fund program grants and unitstatus data. Based on these four 


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indicators, a PHA receives a composite 

score and a corresponding performance 

designation (i.e., a PHA may be 

designated as a High performer, a 

Standard performer, a Substandard 

performer, or Troubled performer based 

on its PHAS assessment). 

A full PHAS assessment relies on 

components that are not simultaneously 

assessed, so HUD can receive 

information about poor performance 

months before a full performance 

designation status is determined. Under 

the current regulations, HUD is not able 

to require a PHA to take corrective 

action of any deficiency until the full 

PHAS assessment is complete. For 

example, problems may be identified 

during a physical inspection in 

December, but the PHA may not be 

identified as a Troubled performer until 

after audited financials are submitted 

nine months later. Greater flexibility is 

needed so that HUD can require, and 

PHAs can complete, corrective action 

more promptly. 

Beginning in fall 2022, HUD held a 

series of in-person and virtual listening 

sessions with PHAs across the country, 

to solicit feedback from PHAs on what 

they felt were viable and informative 

metrics for the evaluation of PHA 

performance in managing Public 

Housing. In developing the new 

proposed subindicators, HUD 

considered this feedback, striking a 

balance between what it was important 

to measure, what is reasonably possible 

to measure, and what is a fair 

assessment of PHA performance. In 

considering various alternative 

indicators or subindicators, HUD 

examined whether alternative metrics 

would require additional informationcollection burdens on PHAs, as well as 

whether alternative metrics could be 

collected reliably and objectively. 

II. This Proposed Rule 

This proposed rule would revise and 

restructure the PHAS indicators as well 

as adjust the weighting of indicators. It 

would also make several changes not 

directly related to scoring. For example, 

to correct the lag in timing and achieve 

the desired flexibility, this proposed 

rule would allow HUD to have broad, 

flexible authority to require 

interventions or corrective actions based 

on component scores as soon as those 

scores are issued; in advance of a full 

assessment; considering trending data; 

or in conjunction with a decision to 

withhold, deny, or rescind a score or 

designation, as HUD determines 

necessary. This proposed rule would 

also revise the performance indicators 

and subindicators on which scores are 

based, in order to better measure 

performance and align incentives with 

the long-term viability of the program. 

Throughout this proposed rule, HUD 

has made several technical changes that 

do not substantively affect 

requirements. 

Subpart A—General Provisions 

a. Scope 

The proposed rule would expand the 

scope of assessment tools HUD will use 

in § 902.1(d), adding other reviews or 

audits conducted on the PHA to the 

tools HUD will use to assess 

management operations. It would also 

allow HUD to advise PHAs of their 

performance designations in addition to 

their scores. 

b. Definitions 

The proposed rule would make 

several changes to definitions in § 902.3. 

First, it would remove the existing 

definition of ‘‘Assessed fiscal year’’ and 

add a definition for ‘‘Assessment year,’’ 

which is defined as the period of time 

for a single PHAS assessment including 

a schedule setting forth when 

component scores will be determined. 

For example, any property required to 

undergo a physical inspection once 

every three (3) years will retain the same 

PHAS physical condition indicator 

score it received in the first year of 

inspection for the second and third 

years for assessing the PHAS physical 

condition. In the fourth year, the 

physical condition score will be based 

on a new inspection. The financial 

condition, management operations, and 

Capital Fund program indicators will 

still be based on the PHA’s fiscal year 

for each assessment. 

The proposed rule would revise the 

definition of ‘‘Capital Fund troubled’’ to 

refer to a PHA that does not satisfy the 

requirements to pass the Capital Fund 

indicator evaluation rather than one that 

does not meet a minimum passing score. 

This revision would align the definition 

with HUD’s proposal to determine 

Capital Fund troubled status based on a 

pass/fail rather than a numeric score. It 

would also revise the definition of 

‘‘Corrective Action Plan’’ to note that 

such plan is developed in concert with 

HUD or by HUD, to introduce the 

concept that such plan may be based on 

an individual component score 

determined prior to the issuance of the 

overall PHAS score and designation, 

and that for small rural PHAs the 

equivalent term is ‘‘Corrective Action 

Agreement’’ as noted in § 902.105(c). 

The proposed rule would revise the 

definition of ‘‘Deficiency,’’ by changing 

the score for the Capital Fund indicator 

to a failing evaluation rather than below 

50 percent. At § 902.73, the proposed 

rule specifies that a deficiency may be 

a finding or determination that requires 

corrective action in advance of the 

issuance of an overall PHAS score or 

performance designation. HUD would 

also remove the definition of 

‘‘Dictionary of Deficiency Definitions.’’ 

The NSPIRE final rule (88 FR 30442) 

replaced this dictionary with the 

NSPIRE Standards and Scoring notices 

(see 24 CFR 5.709). The NSPIRE final 

rule revised and retained this definition 

to instead refer to the NSPIRE Standards 

and Scoring notices, but after further 

consideration, HUD has determined that 

term is no longer used and can be 

removed. HUD is therefore proposing to 

remove this definition. 

The proposed rule would add a 

definition for ‘‘Designation’’ to mean a 

label given to a PHA—‘‘High 

performer,’’ ‘‘Standard performer,’’ 

‘‘Substandard performer,’’ or ‘‘Troubled 

performer’’—based on its overall PHAS 

score. The definition would include the 

notion that a PHA that receives a failing 

evaluation under the Capital Fund 

program indicator would be designated 

as a ‘‘Capital Fund troubled performer.’’ 

Finally, the proposed rule would add a 

definition for ‘‘Score’’ to distinguish 

between an overall PHAS score and a 

component score (an indicator or 

subindicator score). The definition 

would specify that the overall PHAS 

score is a number between 0 to 100 and 

is calculated by adding together the 

physical condition, financial condition, 

and management operations indicator 

scores. Small rural PHAs (as defined by 

§ 902.101) would continue to be scored 

per § 902.103. 

c. Applicability 

The proposed rule would amend 

§ 902.5(a)(3) to update the applicability 

of this part to Moving-to-Work (MTW) 

agencies. The proposed rule would 

eliminate language that PHAS scores do 

not apply to MTW agencies and would 

instead state that MTW agencies 

operating under the Standard MTW 

Agreement will not be scored in PHAS 

unless the PHA elects to be scored. The 

proposed rule would also state that 

MTW agencies operating under the 

MTW Operations Notice will be subject 

to scoring in PHAS. 

At the final rule stage, HUD does not 

plan to have an immediate effective 

date. Instead, HUD plans to set an 

effective date one full assessment cycle 

after the publication of the final rule so 

that PHAs have time to learn about 

revised criteria prior to being assessed 

under them. For example, if the final 

rule is published in September 2025, the 

regulations in this part will be 


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applicable to PHAs beginning with the 

September 30, 2026 fiscal year end date. 

d. Scoring and Designations 

In § 902.9, the proposed rule would 

provide that each PHA will receive an 

overall PHAS score determined by 

adding the physical condition indicator 

(accounts for 40 points), the financial 

condition indicator (accounts for 30 

points), and the management operations 

indicator (accounts for 30 points). The 

financial condition and management 

operations indicators each contain 

subindicators. The Capital Fund 

program indicator will no longer be 

awarded points in the overall PHAS 

score and will only be evaluated on a 

pass/fail basis. If a PHA fails the Capital 

Fund program indicator, its overall 

performance designation will be Capital 

Fund troubled. The proposed rule adds 

a clarification that a PHA will not 

receive an overall PHAS score nor a 

performance designation if all of its 

projects are mixed-finance projects. Part 

902 already provides that mixed-finance 

projects are subject to the physical 

condition inspections (§ 902.22) but are 

excluded from the financial condition 

indicator (§ 902.30) and management 

operations indicator (§ 902.40). 

The proposed rule would amend 

§ 902.11 to allow HUD to withhold a 

designation altogether if HUD exercises 

its authority at § 902.66 to do so (as 

described further in the changes to 

Subpart F). To receive a High performer 

or Standard performer designation, a 

PHA would need to receive a passing 

evaluation under the Capital Fund 

program indicator along with the 

existing percentage of available points 

available in its overall PHAS score. This 

change is required to accommodate the 

move to evaluating the Capital Fund 

program indicator on a pass/fail basis, 

which is discussed in Subpart E below. 

The current regulation requires that 

High performers and Standard 

performers receive at least 50 percent of 

the points available under the Capital 

Fund indicator. For Standard 

performers, HUD may elect to craft 

Corrective Action Plans rather than have 

a PHA submit a Corrective Action Plan. 

Further assistance from HUD in crafting 

Corrective Action Plans will benefit 

smaller PHAs or those with capacityrelated challenges, allowing for the 

collective development of plans quickly. 

Except for small rural PHAs subject to 

§ 902.105, a PHA designated as a 

Troubled performer would be subject to 

the remedies provided in 42 U.S.C. 

1437d(j)(4). The proposed rule would 

remove paragraph (d)(2) of this section 

and replace it with a new paragraph (e) 

to § 902.11—Capital Fund troubled 

performer—explaining that if a PHA 

receives a failing evaluation under the 

Capital Fund program indicator, it will 

be designated as a Capital Fund 

troubled performer and be subject to 

corrective actions separate from or in 

addition to the requirements of a 

memorandum of agreement. 

e. Frequency 

This proposed rule would amend 

§ 902.13 to allow HUD to suspend or 

skip assessments and allow PHAs to 

request that HUD extend the time 

between PHAS assessments in 

accordance with requirements HUD may 

issue by Notice. HUD may grant such 

extension requests for good cause when 

it deems it appropriate. HUD 

specifically seeks comment on what 

should constitute good cause for HUD to 

approve a PHA delay request (see 

‘‘Questions for public comment,’’ infra., 

Section III, #9). For example, public 

input may suggest that PHAs need to 

request an extension when they 

experience a natural disaster or other 

emergency that affects their properties 

(e.g., severe localized flooding), or if 

supply chain delays or staffing shortages 

prevent maintenance work. A new 

paragraph (a)(4) would be added to 

§ 902.13 noting that properties of small 

PHAs would be inspected per § 5.705(c), 

which describes the timing of 

inspection cycles for various HUD 

programs and how inspection scores 

affect those cycles. 

This proposed rule would revise 

paragraph (b)(2) of § 902.13 to indicate 

that if projects are not inspected in 

accordance with the cycle laid out in 

§ 5.705, the assessment year will be 

extended just for the physical condition 

indicator, to ensure that old inspection 

scores are not rolled forward 

inappropriately. For example, if a new 

inspection is required within 3 months 

of an anniversary date of March 1 and 

the inspection is not performed until 

July 1, HUD will not issue the overall 

PHAS score until those inspections are 

completed and will use the July 

inspections, along with inspections of 

other PHA properties completed on 

time, to determine the PASS score and 

the overall PHAS score for that 

assessment year. HUD further proposes 

to revise 902.13(b)(2) to note that HUD 

may exercise discretion to skip the 

PHA’s assessment year, should a 

delayed physical condition inspection 

occur 6 months after the end of the 

assessment year. This means that the 

PHA would not receive an overall PHAS 

score for that assessment year, and the 

late physical inspection would be used 

for the subsequent PHAS assessment 

instead. In the example above, should 

the inspection that was due within 3 

months of March 1 not be performed 

until the following January, HUD would 

choose to not issue an overall PHAS 

score for the PHA for that assessment 

year. The inspection performed in 

January would be used for the overall 

PHAS score for the next assessment 

year. This would ensure that HUD does 

not inappropriately reuse inspection 

scores for the purpose of determining 

overall PHAS scores. Other indicator 

scores will continue to be issued as they 

are determined in either situation. 

This proposed rule would revise 

paragraph (b)(4) of § 902.13 to specify 

that in years subsequent to the baseline 

year, the physical inspection schedule 

in § 5.705(c) will determine whether a 

property’s physical condition score is 

based upon a new inspection or the 

previous inspection. The baseline year 

refers to the year in which a physical 

inspection takes place and in which 

HUD determines whether a property 

needs to be inspected again in one, two, 

or three years as outlined in § 5.705(c). 

The baseline year will also be used to 

determine the next PHAS assessment for 

PHAs subject to small PHA 

deregulation. 

Subpart B—Physical Condition 

Indicator 

This proposed rule would add 

language to paragraph (b) of § 902.25 to 

clarify that indicator scores will be 

issued in advance of an overall PHAS 

score and that, as with the financial 

condition and management operations 

indicator scores, a PHA may be subject 

to appropriate oversight and action as 

soon as project scores or the overall 

physical condition indicator score is 

issued. The proposed language would 

also note that indicator scores issued in 

advance of an overall PHAS score are 

subject to revision by HUD. 

Subpart C—Financial Condition 

Indicator 

This proposed rule would add 

language to paragraph (b) of § 902.35 

describing the subindicators that will be 

used to determine the financial 

condition indicator score. The language 

notes that the formulas for these 

subindicators will be provided by 

Notice and that MTW agencies will have 

variant formulas to account for the 

flexibilities of the MTW Demonstration. 

The proposed rule would amend the 

description of the Quick Ratio (QR) 

subindicator, which compares quick 

assets—cash and assets that are easily 

convertible to cash—to current 

liabilities. Specifically, the proposed 

rule clarifies that neither quick assets 

nor current liabilities include interVerDate Sep<11>2014 17:22 Nov 01, 2024 Jkt 265001 PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 E:\FR\FM\04NOP1.SGM 04NOP1

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program balances due to or due from 

other PHA projects, programs, and 

activities of a temporary nature. This is 

because HUD has found that inclusion 

of inter-program balances in the QR may 

overstate liquidity. The proposed rule 

would change the Months Expendable 

Net Assets Ratio subindicator to the 

Months Operating Reserve (MOR) 

subindicator. The MOR measures 

adequacy of reserves as a unit of time. 

It is the ratio of current assets less 

current liabilities to average monthly 

operating expenses and is the number of 

months a project can operate using 

currently available, unrestricted 

resources, before reaching insolvency. 

The proposed rule would change the 

Debt Service Coverage Ratio 

subindicator to the Expense 

Management (EM) subindicator, which 

would measure the efficiency of 

operations. The EM is the ratio of 

operating revenues—tenant rents and 

Operating Fund grants less transfers 

from the Capital Fund—to operating 

expenses as defined by the HUD 

Financial Data Schedule. In general, the 

expense management indicator is 

targeted to provide an assessment of 

how well a PHA is managing its 

expenses given their revenues. PHAs 

would be evaluated on the basis of how 

well they effectively ramp up or down 

expenses as revenue streams change. (In 

the PHAS scoring notice, HUD may 

indicate that this measurement takes 

place over a rolling 3–5 year period.) 

The benefit of this change will be that 

PHAs will be incentivized to improve 

budgeting work, and to ensure 

operations are right sized to annual 

revenues, while also providing tools to 

HUD to work with PHAs to address 

such deficiencies sooner in the process. 

The proposed rule would add 

language to paragraph (c) of § 902.35 

noting that, as with the physical 

condition and management operations 

indicator scores, the financial condition 

indicator score will be issued in 

advance of an overall PHAS score, will 

be subject to revision by HUD, and may 

subject a PHA to appropriate oversight 

and action as soon as it is issued. 

Paragraph (d) of § 902.35 specifies 

how many points make up the financial 

condition indicator score. The proposed 

rule would change the maximum 

number of points on which this score is 

based from 25 to 30. The proposed rule 

would provide that a score of at least 18 

points is needed for a PHA to receive a 

passing score under the financial 

condition indicator. 

Subpart D—Management Operations 

Indicator 

The proposed rule would replace 

paragraphs (a)(2) and (3) of § 902.43, 

which describe management operations 

subindicators. The Tenant Accounts 

Receivable subindicator and Accounts 

Payable subindicator would be 

removed, as a PHA’s performance on 

these issues is already indirectly 

reflected in the financial condition 

indicator. Paragraph (a)(2) would assess 

a PHA’s ‘‘timely reexaminations’’ of 

tenants based on the PHA’s approved 

reexamination schedule. This 

subindicator would rely on tenant data 

already provided to HUD by PHAs. 

Paragraph (a)(3) would measure ‘‘audit 

compliance’’ by using findings in 

independent audits or HUD audits or 

reviews. The audit compliance 

subindicator would measure the extent 

to which the PHA is meeting program 

compliance requirements. In paragraph 

(b) of § 902.43, the proposed rule would 

allow HUD to assess the management 

operations indicator through other 

information available to HUD, in 

addition to information electronically 

submitted to HUD through FDS. 

As noted above, HUD considered a 

wide range of alternative subindicators 

(e.g., work-order fulfillment), but found 

that many would require additional 

information-collection burdens or 

would be difficult for HUD to collect in 

a reliable, consistent manner. 

The proposed rule would remove and 

reserve § 902.44, which would mean 

that the management operations 

indicator would no longer be adjusted 

for physical condition and 

neighborhood environment (PCNE). 

Analysis of the pattern of adjustments 

between 2015 and 2019 indicates that 

nearly all properties received points for 

physical condition (which reflects only 

the age of the housing stock), so the 

adjustment does not highlight 

exceptional challenges for select PHAs. 

Likewise, a diminishing minority of 

PHAs received points for neighborhood 

environment, which is an adjustment 

made if the project is in a census tract 

in which at least 40% of families have 

an income below the poverty rate, 

suggesting it is no longer an issue that 

requires adjustment. 

This proposed rule would add 

language to paragraph (b) of § 902.45 to 

clarify that, as with the financial and 

physical condition indicators, the 

management operations indicator score 

will be issued in advance of an overall 

PHAS score, will be subject to revision 

by HUD and may subject a PHA to 

appropriate oversight and action as soon 

it is issued. The proposed rule would 

change the maximum number of points 

for the management operations indicator 

from 25 points to 30 points. A PHA 

must achieve at least 18 points to 

receive a passing score under the 

management operations indicator. 

Subpart E—Capital Fund Program 

Indicator 

The proposed rule would make 

several changes to the Capital Fund 

program indicator meant to improve the 

performance indicator system and 

remove duplication. The current Capital 

Fund program indicator measures 

occupancy according to different 

standards from the management 

operations indicator. The proposed rule 

would revise paragraph (a) of § 902.50 to 

remove the occupancy subindicator 

from the Capital Fund program 

indicator and limit what the indicator 

examines to the time taken by a PHA to 

obligate funds in relation to statutory 

deadlines. It would also restructure 

PHA evaluation under the paragraph (c) 

of § 902.50 to remove subindicators. 

Instead, PHAs would be evaluated on a 

pass/fail basis based on whether they 

satisfied the timeliness of fund 

obligation required by statute. Because 

assessments would now be pass/fail 

rather than scored, the proposed rule 

would revise references to ‘‘scores’’ 

throughout this subpart. It would also 

change the language in paragraph (b) of 

§ 902.53 to reflect that in order to 

achieve a passing evaluation under the 

Capital Fund program indicator, a PHA 

must obligate at least 90 percent of 

Capital Fund program grants or receive 

HUD approved extensions as 

documented by the system of record 

within the time required by statute. 

The proposed rule would also remove 

an unnecessary mention of HOPE VI 

and Choice Neighborhoods program 

funds in paragraph (a) of § 902.50. 

Subpart F—PHAS Scoring 

The proposed rule would revise 

paragraph (a) of § 902.60, to require a 

PHA to wait three full fiscal years after 

the effective date of the final rule before 

it is allowed to change its fiscal yearend, unless such change is approved by 

HUD for good cause. For example, PHAs 

may need to request a change due to a 

merger with another PHA or another 

significant organizational change. PHAs 

or the public may recommend other 

circumstances that provide good cause. 

The proposed rule would require that 

PHAs submit their written request for a 

waiver of their audited financial 

information submission due date to 

HUD rather than specifying it must be 

submitted to their local field office in 

paragraph (c)(1) of § 902.60. HUD 


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intends to provide a mechanism for the 

waiver process via notice and update 

such process by notice as required. 

The proposed rule would also remove 

existing paragraph (e) from § 902.60 and 

make several revisions to § 902.62. 

These changes would be prompted by 

the revision of the management 

operations indicator to include a 

subindicator for audit compliance. 

Because the findings in audit 

compliance will inform the management 

operations score, HUD proposes 

revisions to allow HUD to reduce the 

management operations score for failure 

to submit financial statements timely. 

Paragraphs (a)(2), (a)(3), and (b)(1) of 

§ 902.62 would be revised so that the 

responsive actions may apply to the 

management operations indicator, just 

as they currently apply to the financial 

condition indicator. 

Currently, HUD may only withhold, 

deny, or rescind a High Performer or 

Standard designation and does not have 

flexibility to require corrective action 

when withholding a score or 

designation. This proposed rule would 

give HUD the authority to withhold any 

score or designation if it determines the 

circumstances necessitate HUD not 

issuing that score or designation. In 

exceptional circumstances (e.g., when 

gross malfeasance is discovered that 

would not be identified by PHAS), 

withholding a score or designation 

would help avoid any 

miscommunication about HUD’s 

assessment of the PHA. Withholding a 

low score or troubled designation may 

be appropriate in rare circumstances 

when corrective action should be 

undertaken without first engaging in a 

two-year Memorandum of Agreement. 

Paragraph (a)(2) of § 902.64 would be 

revised to allow HUD to withhold, deny 

or rescind a PHAS score in addition to 

changing it, as is currently allowed. 

Section 902.66 would add paragraph 

(a)(1), which would allow HUD to 

withhold, deny, or rescind a score as 

well as a designation of any level from 

troubled performer to high performer. A 

designation may be withheld even when 

all component scores have been issued. 

Paragraph (a)(2) of § 902.66 would allow 

HUD to withhold, deny or rescind 

incentives or high performer 

designation or standard performer 

designation and add that it may do so, 

among other reasons, if a PHA 

demonstrates egregious performance 

issues not reflected in its PHAS score. 

Paragraph (a)(3) of § 902.66 would allow 

HUD to withhold, deny or rescind 

substandard performer or troubled 

performer designations at its discretion. 

Paragraph (a)(4) of § 902.66 would allow 

HUD to withhold, deny or rescind 

component scores or an overall PHAS 

score at its discretion. When scores are 

withheld, denied or rescinded, HUD 

would need to notify the PHA, provide 

the basis for the decision, and allow for 

an appeal as described in § 902.69. 

The proposed rule would also permit 

HUD to require corrective action while 

a score or designation is being withheld 

if performance deficiencies are 

identified. Paragraph (b) of § 902.64 

would be revised to describe the new 

notification timeline: HUD will issue 

component scores for indicators and 

subindicators after they are determined 

and in advance of the overall PHAS 

score. Such scores would be provisional 

and subject to revision by HUD, and 

PHAs would be subject to oversight and 

action as soon as a component score is 

issued. The overall PHAS score would 

be issued one month after the indicator 

scores for the assessment year have been 

finalized unless HUD withholds a 

component score or overall score. 

Paragraph (a)(3) of § 902.66 would allow 

HUD to substitute corrective 

requirements when deemed necessary, 

and under paragraph (a)(4) of § 902.66 

HUD could require a PHA to exercise 

appropriate oversight and take 

corrective actions as specified in 

§ 902.73, requiring a PHA to correct 

deficiencies within a specified time 

period. 

Paragraph (b) of § 902.66 would give 

HUD discretion to re-designate a PHA 

where that PHA’s designation has been 

denied or rescinded. HUD may also 

decide not to assign the PHA a new 

designation. 

The proposed rule would revise 

902.69 to remove potentially confusing 

language that there are multiple distinct 

processes—one to appeal a designation 

and another to petition to remove a 

designation. These revisions to 902.66, 

902.69, and 902.73 would not limit a 

PHA’s ability to appeal HUD decisions 

or to make second order appeals when 

compared to the current regulatory 

language. 

Subpart G—PHAS Incentives and 

Remedies 

The proposed rule would revise 

§ 902.73 to expand HUD’s authority to 

subject a PHA to appropriate oversight 

and corrective action as soon as a 

component score is issued or 

considering trending data, in advance of 

issuance of a PHAS designation 

category. Paragraph (a) would provide 

HUD the authority to require corrective 

actions when scores or designations are 

withheld, denied, or rescinded, as HUD 

determines appropriate and would also 

provide HUD greater authority to 

determine the appropriate time for 

corrective action and progress reports. It 

would allow required corrective actions 

to be incorporated into a Memorandum 

of Agreement (MOA) or Corrective 

Action Plan (CAP) if the PHA is later 

designated as a troubled or substandard 

performer. Paragraphs (b) and (d) would 

be amended to allow HUD to relay 

deadlines by means other than through 

a CAP because there may not always be 

a CAP depending on when HUD 

requires corrective action under 

paragraph (a). 

The proposed rule would revise 

paragraph (b) of § 902.75 to clarify that 

an executed MOA for a troubled 

performer is an enforceable contract, the 

material breach of which by a PHA, is 

the basis, among other remedies 

available under law, for determination 

of substantial default. 

The proposed rule would amend the 

example in paragraph (g)(3) of § 902.75 

to align with the proposed changes to 

part 902. The example provides a 

scenario in which a troubled performer 

PHA fails to execute a MOA with HUD 

or fails to show a substantial 

improvement. 

The proposed rule would add a new 

§ 902.76 to distinguish Capital Fund 

troubled as its own designation rather 

than as one dependent on a designation 

of ‘‘Troubled.’’ The new section would 

describe remedies with respect to the 

Capital Fund troubled performer 

designation and provide HUD authority 

to require a PHA to correct deficiencies 

within a time period specified by HUD. 

The requirements to correct 

deficiencies, and consequences for 

failure to correct deficiencies so 

identified, will otherwise be the same as 

for substandard performers as described 

in § 902.73. Separating the Capital Fund 

troubled performer designation from the 

troubled performer designation will 

allow the PHA to avoid entering into a 

MOA when the only performance 

deficiency is with respect to the Capital 

Fund, and the underlying deficiency 

can be resolved upon the next timely 

obligation. The Capital Fund troubled 

performer designation would also allow 

HUD to combine such designation with 

the substandard performer designation 

or the troubled performer designation. 

The proposed rule would add a 

sentence to the end of § 902.81 making 

clear that a resident is not restricted 

from communicating any complaint or 

concern about a PHA to HUD in writing 

at any time. This addition is not a 

change to the current regulations and is 

being added only for clarification. 


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Subpart H—Assessment of Small Rural 

Public Housing Agencies 

The proposed rule would revise 

sections of 24 CFR 902 subpart H— 

Assessment of small rural Public 

Housing Authorities to conform with 

the revisions in the rest of part 902. The 

proposed rule would delete references 

to PCNE from paragraph (a) of 902.103 

to parallel the removal of that concept 

in § 902.44. Paragraphs (c), (c)(5) and (d) 

of § 902.105 would be revised to align 

with § 902.75. Changes would be made 

throughout §§ 902.107 and 902.109 to 

conform with §§ 902.66 and 902.69, 

with variations where necessary to 

reflect the differences between the 

PHAS assessment and the Small and 

Rural assessment. Section 902.111 

would be renamed ‘‘Remedies for 

troubled small rural PHAs’’ to align 

with § 902.83. 

Additionally, among the changes this 

proposed rule would make to small 

PHAs, it would remove paragraph (c)(4) 

from § 5.705 applying a triennial 

inspection cycle for small PHAs per 24 

CFR 902.13(a). 

III. Questions for Public Comments 

HUD welcomes comments on all 

aspects of this proposed rule. In 

addition, HUD specifically requests 

comments on the following topics: 

Question for Comment #1: PHAS 

Metrics—The proposed rule would 

revise indicators and subindicators to 

allow HUD to conduct a more accurate 

PHAS assessment. Do the proposed 

metrics accurately assess a PHA’s 

performance or are there other metrics 

that would be appropriate for inclusion 

in PHAS? Do the new proposed 

subindicators for the financial condition 

indicator appropriately measure the 

PHA’s financial performance? Do the 

new proposed subindicators for the 

management operations indicator 

appropriately measure the PHA’s ability 

to manage its Public Housing program? 

Would scoring PHAs for the proposed 

subindicators create incentives to 

maintain and improve the quality of 

housing for families in the Public 

Housing program? 

The proposed rule would also make 

minor modifications to the relative 

weight of the indicators in the overall 

PHAS score. Are the proposed weights 

of the Physical Condition, Financial 

Condition, and Management Operations 

indicators appropriate? 

Question for Comment #2: MTW 

Agencies—MTW Expansion agencies 

operate under the MTW Operations 

Notice and will be scored in PHAS. 

Given the flexibilities available to MTW 

agencies, variant formulas or 

subindicators may be necessary to 

properly evaluate such agencies. What 

are the appropriate indicators and 

subindicators for MTW agencies? If any 

of the proposed indicators and 

subindicators for non-MTW PHAs are 

not appropriate for MTWs, what would 

serve as a suitable replacement? Do 

other considerations need to be made 

for incentives and remedies for MTW 

agencies? 

Question for Comment #3: Capital 

Fund program indicator—This proposed 

rule would change several aspects of the 

Capital Fund program indicator. The 

Capital Fund program indicator would 

no longer be scored but would be 

evaluated on a pass/fail basis; however, 

Capital Fund Troubled performers could 

still be subject to oversight. The Capital 

Fund Troubled performer designation 

would be revised such that it could be 

combined with the Substandard or 

Troubled Performer designation, and 

requirements to correct deficiencies due 

to Capital Fund Troubled status would 

otherwise be the same as for 

Substandard performers. HUD solicits 

feedback on the extent to which 

removing points from the obligation 

indicator and making it a pass/fail 

standard improves its usefulness as a 

metric. HUD also solicits feedback on 

whether it should maintain the Capital 

Fund-troubled designation. 

Question for Comment #4: Reserves— 

This proposed rule does not provide 

specific scoring criteria for the 

subindicators, but it does propose a 

subindicator for Months of Operating 

Reserve (MOR). When specific scoring 

criteria are defined, should HUD set 

upper and lower limits on reserves 

held? Would that answer be different if 

PHAs had specific accounts into which 

they could put reserves that would be 

treated differently (e.g., Capital 

Replacement Reserve accounts)? Should 

scoring upper or lower reserve limits 

interact with other features of the 

financial, physical, or management 

performance? For the Months of 

Operating Reserve subindicator and all 

other financial subindicators, how 

should HUD take into consideration 

other sources of funds (i.e., those 

generated through entrepreneurial 

activities or other actions by the PHA) 

that PHAs secure to pay for expenses? 

How can HUD ensure that PHAs are not 

penalized for entrepreneurial activity 

that secures additional sources of 

funding? Additionally, HUD would like 

to solicit comment with respect to MTW 

and non-MTW agencies alike on the 

topic of a reserve calculation. If HUD 

establishes such a calculation, what 

should be included? 

Question for Comment #5: Expense 

management—This proposed rule 

replaces the Debt Service Coverage Ratio 

with the Expense Management 

subindicator. Should the Expense 

Management subindicator include other 

sources of Public Housing operating 

revenue, such as program income? 

Should it exclude any specific operating 

expenses? Is there value to looking only 

at Public Housing subsidy plus rent 

rather than looking at all sources of 

revenue? 

Question for Comment #6—Physical 

Condition and Neighborhood 

Assessment—HUD has proposed 

eliminating the PCNE adjustment to the 

management operations indicator. Will 

the removal of those adjustments 

improve HUD’s ability to accurately 

assess a PHA’s performance? If there are 

strong reasons not to eliminate the 

PCNE adjustment, would moving the 

PCNE adjustment to the physical 

condition indicator be a better location 

for such adjustments?’’ 

Question for Comment #7—Risk 

assessment and other models of 

assessment—The indicators and 

subindicators that are appropriate to 

measuring a PHA’s performance in 

operating its Public Housing program 

may not provide a full picture of the 

long-term health of that program, or 

some criteria may not be appropriate for 

inclusion in PHAS although they are 

informative for assessing future risks. 

Are there any indicators that are not 

appropriate for performance assessment 

but valuable for a separate system of risk 

assessment? How should HUD act upon 

findings from a separate system of risk 

assessment? More generally, should 

HUD consider other models for 

assessing PHA management of Public 

Housing, as an alternative or 

complement to PHAS? 

Question for Comment #8: 

Interventions—This proposed rule 

would make it explicit that HUD may 

require corrective action as soon as 

component scores are issued or in 

response to multi-year downward trends 

in performance. It would also make 

explicit that HUD may withhold a 

designation or score and require 

corrective action. When HUD does 

withhold, deny, or rescind a designation 

or score, how should HUD notify the 

PHA and what is the appropriate 

process for a PHA to appeal such a 

decision? 

Question for Comment #9: PHA 

requests for delay—The proposed rule 

allows PHAs to request a delay in 

inspection timing. What should 

constitute good cause for HUD to 

approve a PHA delay request? How 


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should HUD evaluate requests to delay 

inspections or assessments? 

Question for Comment #10: SEMAP— 

Should HUD seek to better align PHAS 

and SEMAP (Section Eight Management 

Assessment Program), and if so, how? 

What would be the benefits and 

potential problems of such an 

alignment? Do PHAs who operate both 

Public Housing and the Housing Choice 

Voucher program face challenges 

because of differences between PHAS 

and SEMAP? 

IV. Findings and Certifications 

Regulatory Review—Executive Orders 

12866, 13563, and 14094 

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. Executive Order 

14094 entitled ‘‘Modernizing Regulatory 

Review’’ (hereinafter referred to as the 

‘‘Modernizing E.O.’’) amends section 

3(f) of Executive Order 12866 

(Regulatory Planning and Review), 

among other things. 

This rule has been determined to be 

a ‘‘significant regulatory action’’ as 

defined in Section 3(f) of Executive 

Order 12866, but not significant under 

section 3(f)(1) of the Order. HUD has 

prepared an initial regulatory impact 

analysis and has assessed the potential 

costs and benefits, both quantitative and 

qualitative, of this proposed regulatory 

action and has determined that the 

benefits would justify the costs. The 

analysis is available at 

www.regulations.gov and is part of the 

docket file for this rule. 

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. This rule 

revises the performance indicators in 

HUD’s PHAS regulations. The changes 

allow HUD to base scores more on 

measurable program data rather than 

process. Revisions would allow HUD to 

respond more quickly and effectively to 

performance deficiencies when they are 

first identified, to intervene based on 

trending performance data, and to delay 

scoring or assessments when 

appropriate. These revisions impose no 

significant economic impact on a 

substantial number of small entities. 

Therefore, the undersigned certifies that 

this rule will not have a significant 

impact on a substantial number of small 

entities. 

Notwithstanding HUD’s view 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)). The FONSI 

is available through the Federal 

eRulemaking Portal at http://

www.regulations.gov. 

Executive Order 13132, Federalism 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits an agency from 

publishing any rule that has federalism 

implications if the rule either: (i) 

imposes substantial direct compliance 

costs on State and local governments 

and is not required by statute, or (ii) 

preempts State law, unless the agency 

meets the consultation and funding 

requirements of section 6 of the 

Executive Order. This proposed 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. 

Paperwork Reduction Act 

The information collection 

requirements contained in this rule are 

currently approved by OMB and have 

been given OMB Control Numbers 

2502–0369, 2535–0107, 2577–0083, and 

2577–0157. In accordance with the 

Paperwork Reduction Act, an agency 

may not conduct or sponsor, and a 

person is not required to respond to, a 

collection of information unless the 

collection displays a currently valid 

OMB control number. 

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 

will not impose any Federal mandates 

on any State, local, or Tribal 

governments, or on the private sector, 

within the meaning of the UMRA. 

List of Subjects 

24 CFR Part 5 

Administrative practice and 

procedure; Aged; Claims; Crime; 

Government contracts; Grant 

programs—housing and community 

development; Individuals with 

disabilities; Intergovernmental relations; 

Loan programs—housing and 

community development; Low and 

moderate income housing; Mortgage 

insurance; Penalties; Pets; Public 

housing; Rent subsidies; Reporting and 

recordkeeping requirements; Social 

security; Unemployment compensation; 

Wages. 

24 CFR Part 902 

Administrative practice and 

procedure; Public housing; Reporting 

and recordkeeping requirements. 

For the reasons stated above, HUD 

proposes to amend 24 CFR parts 5 and 

902 as follows: 

PART 5—GENERAL HUD PROGRAM 

REQUIREMENTS; WAIVERS 

■ 1. The authority citation for part 5 

continues to read as follows: 

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

1437a, 1437c, 1437f, 1437n, 3535(d); 42 

U.S.C. 2000bb et seq.; 34 U.S.C. 12471 et seq.; 

Sec. 327, Pub. L. 109–115, 119 Stat. 2396; 

E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., 

p. 258; E.O. 13559, 75 FR 71319, 3 CFR, 2010 

Comp., p. 273; E.O. 14015, 86 FR 10007, 3 

CFR, 2021 Comp., p. 517. 

§ 5.705 [Amended] 

■ 2. Amend § 5.705 by removing 

paragraph (c)(4) and redesignating 

paragraphs (c)(5) through (8) as 

paragraphs (c)(4) through (7), 

respectively. 

PART 902—PUBLIC HOUSING 

ASSESSMENT SYSTEM 

■ 3. The authority citation for part 902 

continues to read as follows: 


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Authority: 42 U.S.C. 1437d(j), 42 U.S.C. 

3535(d), 1437z–10. 

Subpart A—General Provisions 

■ 4. Amend § 902.1 by revising 

paragraphs (b), (d), and (f) to read as 

follows: 

§ 902.1 Purpose, scope, and general 

matters. 

* * * * * 

(b) Scope. PHAS is a strategic measure 

of the essential housing operations of 

projects and PHAs. PHAS does not 

evaluate the compliance of a project or 

PHA with every HUD-wide or programspecific requirement or objective. 

Although not specifically evaluated 

through PHAS, PHAs are responsible for 

complying with nondiscrimination and 

equal opportunity requirements, 

including but not limited to those 

specified in 24 CFR 5.105, requirements 

under the Fair Housing Act (42 U.S.C. 

3601–19), the obligation to affirmatively 

further fair housing, requirements under 

title VI of the Civil Rights Act of 1964 

(42 U.S.C. 2000d–2000d–4), 

requirements under section 504 of the 

Rehabilitation Act of 1973 (29 U.S.C. 

794), requirements under title II of the 

Americans with Disabilities Act (42 

U.S.C. 12101 et seq.), requirements 

under the Age Discrimination Act of 

1975 (42 U.S.C. 6101–6107), and 

requirements of other federal programs 

under which the PHA is receiving 

assistance. A PHA’s adherence to these 

requirements will be monitored in 

accordance with the applicable statutes, 

program regulations and the PHA’s 

Annual Contributions Contract (ACC). 

* * * * * 

(d) Assessment tools. HUD will make 

use of uniform and objective criteria for 

the physical inspection of projects and 

PHAs and for the financial confidence 

of projects and PHAs and will use data 

from appropriate PHA data systems, as 

well as from other reviews or audits 

conducted on the PHA to assess 

management operations. For the Capital 

Fund program indicator, HUD will use 

information provided in the electronic 

Line of Credit Control System (eLOCCS) 

or successor systems. Based on this 

data, HUD will assess and score the 

results, advise PHAs of their scores and 

performance designations, and identify 

low-scoring and poor-performing 

projects and PHAs so that these projects 

and PHAs will receive the appropriate 

consideration and assistance. 

* * * * * 

(f) Scoring procedures. HUD’s scoring 

procedures will be published from time 

to time in the Federal Register for 

public comment. 

■ 5. Amend § 902.3 as follows: 

■ a. Remove the definition of ‘‘Assessed 

fiscal year’’; 

■ b. Add in alphabetical order the 

definition of ‘‘Assessment year’’; 

■ c. Remove the definition of ‘‘Capitalfund troubled’’; 

■ d. Add in alphabetical order the 

definition of ‘‘Capital-fund troubled 

performer’’; 

■ e. Revise the definitions of 

‘‘Corrective action plan’’ and 

‘‘Deficiency’’; 

■ f. Remove the definition of 

‘‘Dictionary of Deficiency Definitions’’; 

and 

■ g. Add in alphabetical order the 

definitions of ‘‘Designation’’ and 

‘‘Score’’. 

The revisions and additions read as 

follows: 

§ 902.3 Definitions. 

* * * * * 

Assessment year is the period of time 

evaluated for a single PHAS assessment, 

in which all component scores and an 

overall PHAS score are generated. 

Component scores are based on the 

PHA’s fiscal year for the financial 

condition, management operations, and 

Capital Fund program indicators, and 

are based on physical inspections 

completed prior to score generation, as 

determined by 24 CFR 5.705(c) for the 

physical condition indicator. 

* * * * * 

Capital fund troubled performer refers 

to a PHA that does not satisfy the 

requirements to pass the Capital Fund 

indicator evaluation. 

Corrective Action Plan (CAP) means a 

plan, as provided in § 902.73(a), that is 

developed by a PHA in concert with 

HUD or by HUD that specifies the 

actions to be taken, including 

timeframes, that shall be required to 

correct deficiencies identified under any 

of the PHAS indicators and 

subindicators, and identified as a result 

of a PHAS assessment or on the basis of 

individual component scores 

determined prior to issuance of the 

overall PHAS score and designation, 

when a memorandum of agreement 

(MOA) is not required. For small rural 

PHAs, the equivalent term is Corrective 

Action Agreement (CAA), as noted in 

§ 902.105(c). 

* * * * * 

Deficiency means any finding or 

determination that requires corrective 

action, or any score below 60 percent of 

the available points for the physical 

condition, financial condition, or 

management operations indicators, and 

any failing evaluation for the Capital 

Fund indicator. In the context of 

physical condition and physical 

inspection in subpart B of this part, 

‘‘deficiency’’ means a specific problem, 

as described in the documents 

published in the Federal Register that 

contain the inspection standards and 

scoring values pursuant to 24 CFR part 

5, subpart G, such as a hole in a wall 

or a damaged refrigerator in the kitchen 

that can be recorded for inspectable 

items. 

Designation means the performance 

category or label given to a PHA (i.e., 

‘‘High performer,’’ ‘‘Standard 

performer,’’ ‘‘Substandard performer,’’ 

or ‘‘Troubled performer’’) based on their 

overall PHAS score. A PHA that 

receives a failing evaluation under the 

Capital Fund program indicator will be 

designated as a ‘‘Capital Fund troubled 

performer.’’ 

* * * * * 

Score means the overall PHAS score, 

which is a number from 0 to 100 

calculated by adding the physical 

condition indicator score, the financial 

condition indicator score, and the 

management operations indicator score, 

except as provided in § 902.103 for 

small rural PHAs. By contrast, 

‘‘component score’’ refers to an 

indicator score itself (e.g., the financial 

condition indicator score) or to a 

subindicator score (e.g., the number of 

points awarded for the Quick Ratio 

subindicator). 

* * * * * 

■ 6. Amend § 902.5 by revising 

paragraphs (a)(2) introductory text and 

(a)(3), and removing and reserving 

paragraph (b) to read as follows: 

§ 902.5 Applicability. 

(a) * * * 

(2) ACC. The ACC assigns legal 

responsibility for all public housing 

operations to the PHA, except where 

DF—RMC assumes management 

operations. 

* * * * * 

(3) Moving to Work (MTW) PHAs 

operating under the MTW Standard 

Agreement shall not be scored in PHAS 

unless the PHA elects to be scored. If 

the PHA elects to be scored, the agency 

shall continue to be scored for the 

duration of the demonstration. MTW 

PHAs operating under the MTW 

Operations Notice shall be subject to 

this rule. 

(b) [Reserved] 

■ 7. Revise § 902.9 to read as follows: 

§ 902.9 PHAS Scoring. 

(a) Indicators and subindicators. Each 

PHA will receive an overall PHAS score, 

rounded to the nearest whole number, 

and designation based on three 


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indicators: Physical condition, financial 

condition, and management operations. 

The financial condition and 

management operations indicators 

contain subindicators, and the scores for 

the subindicators are used to determine 

a single score for each of these PHAS 

indicators. Individual project scores are 

used to determine a single score for the 

physical condition, financial condition, 

and management operations indicators. 

A fourth indicator, the Capital Fund 

program indicator, does not contribute 

to the overall PHAS score but can affect 

the performance designation. The 

Capital Fund program indicator is 

entity-wide and evaluated on a pass/fail 

basis. If all of a PHA’s projects are 

mixed-finance projects, they will not 

receive an overall PHAS score nor a 

performance designation. 

(b) Overall PHAS score and 

indicators. The overall PHAS score is 

determined by adding the score values 

for three of the four indicators, as 

follows: 

(1) The physical condition indicator 

accounts for 40 percent (40 points) of 

the overall PHAS score. The score for 

this indicator is obtained as indicated in 

subpart B of this part. 

(2) The financial condition indicator 

accounts for 30 percent (30 points) of 

the overall PHAS score. The score for 

this indicator is obtained as indicated in 

subpart C of this part. 

(3) The management operations 

indicator accounts for 30 percent (30 

points) of the overall PHAS score. The 

score for this indicator is obtained as 

indicated in subpart D of this part. 

(4) The Capital Fund program 

indicator is not awarded points in the 

overall PHAS score, though when a 

PHA fails the Capital Fund program 

indicator, they will be designated as a 

Capital Fund troubled performer. The 

evaluation for this indicator is obtained 

as indicated in subpart E of this part. 

■ 8. Amend § 902.11 by revising the 

introductory text and paragraphs (a)(1), 

(b), and (d), and adding paragraph (e) to 

read as follows: 

§ 902.11 PHAS performance designation. 

All PHAs that receive a PHAS 

assessment shall receive a performance 

designation, unless HUD exercises 

authority at § 902.66 to withhold a 

designation. The performance 

designation is based on the overall 

PHAS score and the four indicators, as 

set forth below. 

(a) * * * 

(1) A PHA that achieves a score of at 

least 60 percent of the points available 

under the financial condition, physical 

condition, and management operations 

indicators, receives a passing evaluation 

under the Capital Fund program 

indicator, and achieves an overall PHAS 

score of 90 percent or greater of the total 

available points under PHAS shall be 

designated a high performer. A PHA 

shall not be designated a high performer 

if it scores below the threshold 

established for any indicator. 

* * * * * 

(b) Standard performer. (1) A PHA 

that is not a high performer shall be 

designated a standard performer if the 

PHA achieves an overall PHAS score of 

at least 60 percent, and at least 60 

percent of the available points for the 

physical condition, financial condition, 

and management operations indicators, 

and a passing evaluation for the Capital 

Fund program indicator. 

(2) At HUD’s discretion, a standard 

performer may be required to submit 

and operate under a Corrective Action 

Plan. At HUD’s discretion, HUD may 

elect to craft Corrective Action Plans 

rather than to have the PHA submit a 

Corrective Action Plan. 

* * * * * 

(d) Troubled performer. A PHA that 

achieves an overall PHAS score of less 

than 60 percent shall be designated as 

a troubled performer, except for those 

PHAs subject to § 902.105. A PHA 

designated as a troubled performer will 

be subject to the remedies provided in 

section 6(j)(4) of the Act (42 U.S.C. 

1437d(j)(4)). 

(e) Capital Fund troubled performer. 

In accordance with section 6(j)(2)(A)(i) 

of the Act (42 U.S.C. 1437d(j)(2)(A)(i)), 

a PHA that receives a failing evaluation 

under the Capital Fund program 

indicator under subpart E of this part 

will be designated as a Capital Fund 

troubled performer. A PHA designated 

as a Capital Fund troubled performer 

will be subject to corrective actions 

separate from or in addition to the 

requirements of a memorandum of 

agreement. 

■ 9. Amend § 902.13 by revising the 

introductory text and paragraph (a)(3), 

adding paragraph (a)(4), and revising 

paragraphs (b)(2) and (4) as follows: 

§ 902.13 Frequency of PHAS assessments. 

The frequency of a PHA’s PHAS 

assessment is determined by the size of 

the PHA’s Low-Rent program and its 

PHAS designation. HUD may, due to 

unforeseen circumstances or other cause 

as determined by HUD, extend the time 

between assessments or suspend or skip 

assessments by direct notice to the PHA 

and relevant resident organization or 

resident management entity, and any 

other general notice that HUD deems 

appropriate. PHAs may request that 

HUD extend the time between PHAS 

assessments in accordance with such 

requirements as HUD may issue by 

Notice, and HUD may grant requests for 

good cause when HUD deems it 

appropriate. 

(a) * * * 

(3) All other small PHAs may receive 

a PHAS assessment every year, 

including a PHA that is designated as 

troubled in accordance with § 902.75. 

(4) Properties of small PHAs will be 

inspected as described in § 5.705(c). 

(b) * * * 

(2) The physical condition score for 

each project will determine the 

frequency of inspections of each project 

in accordance with the inspection cycle 

laid out in § 5.705(c). The PHAS 

physical condition indicator score for an 

assessment year shall be calculated by 

taking the unit-weighted average of the 

most recent physical condition score for 

each project, except that, starting July 1, 

2023, no new physical condition 

indicator will be issued for a PHA until 

every project under the PHA has been 

inspected on or after July 1, 2023. If 

projects are not inspected in accordance 

with the cycle laid out in § 5.705(c), the 

assessment year will be extended only 

for the physical inspection indicator 

until such time as the relevant 

inspections are performed to ensure that 

the last physical condition score of 

record will not be reused for future 

assessments. HUD may exercise 

discretion to skip the assessment should 

a delayed physical condition inspection 

occur 6 months after the assessment 

year ends. A PHA will not receive an 

overall PHAS assessment score until all 

inspections are completed. 

* * * * * 

(4) In the first, baseline year, each 

PHA will receive an evaluation on all 

four PHAS indicators (physical 

condition, financial condition, 

management operations, and Capital 

Fund program), which will be used to 

generate their overall PHAS score. In 

subsequent years, if the physical 

inspection schedule requires a new 

inspection for a PHA property, the 

physical condition score for that 

property will be based upon the new 

inspection. If a new physical inspection 

is not required that year, the physical 

condition score for that property will be 

based upon the most recent physical 

inspection. This baseline year will also 

be used to determine the next PHAS 

assessment for PHAs subject to small 

PHA deregulation. 

* * * * * 


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Subpart B—Physical Condition 

Indicator 

■ 10. Amend § 902.25 by revising 

paragraph (b) to read as follows: 

§ 902.25 Physical condition scoring and 

thresholds. 

* * * * * 

(b) Overall PHA physical condition 

indicator score. The overall physical 

condition indicator score is a unitweighted average of project scores. The 

sum of the unit-weighted values is 

divided by the total number of units in 

the PHA’s portfolio to derive the overall 

physical condition indicator score. The 

overall physical condition indicator 

score will be issued after it is 

determined, in advance of issuance of 

the overall PHAS score. PHAs may be 

subject to appropriate oversight and 

action as soon as project scores or the 

overall physical condition indicator 

score is issued, as noted in § 902.73. 

Indicator scores issued in advance of an 

overall PHAS score are provisional and 

are subject to revision by HUD. 

* * * * * 

Subpart C—Financial Condition 

Indicator 

■ 11. Amend § 902.35 by revising 

paragraphs (b) through (d) to read as 

follows: 

§ 902.35 Financial condition scoring and 

thresholds. 

* * * * * 

(b) Subindicators of the financial 

condition indicator. The following 

subindicators will be used to determine 

the financial condition indicator score. 

The formulas for these subindicators 

will be provided by public notification. 

Please note that MTW agencies will 

have variant formulas, which will also 

be provided by public notification, to 

account for the flexibilities of the MTW 

Demonstration. 

(1) Quick Ratio (QR). The QR 

compares quick assets to current 

liabilities. Quick assets are cash and 

assets that are easily convertible to cash 

and do not include inventory or interprogram balances due from other PHA 

projects, programs, and activities of a 

temporary nature. Current liabilities are 

those liabilities that are due within the 

next 12 months, not including interprogram balances due to other PHA 

projects, programs, and activities of a 

temporary nature. A QR of less than one 

indicates that the project’s ability to 

make payments on a timely basis may 

be at risk. 

(2) Months Operating Reserve (MOR). 

The MOR measures adequacy of 

reserves as a unit of time. The MOR is 

the ratio of current assets less current 

liabilities to average monthly operating 

expenses. The result of this calculation 

is the number of months that a project 

can operate using currently available, 

unrestricted resources, before reaching 

insolvency. 

(3) Expense Management (EM). The 

EM ratio measures the efficiency of 

operations. EM is the ratio of operating 

revenues to operating expenses. EM 

operating revenues are tenant rents and 

Operating Fund grants less transfers 

from Capital Fund. EM expenses are all 

operating expenses as defined by the 

HUD Financial Data Schedule (FDS). 

(c) Overall PHA financial condition 

indicator score. The overall financial 

condition indicator score is a unitweighted average of project scores. The 

sum of the weighted values is then 

divided by the total number of units in 

the PHA’s portfolio to derive the overall 

financial condition indicator score. The 

overall financial condition indicator 

score will be issued after it is 

determined, in advance of issuance of 

the overall PHAS score. PHAs may be 

subject to appropriate oversight and 

action as soon as the overall financial 

condition indicator score is issued, as 

noted in § 902.73. Indicator scores 

issued in advance of an overall PHAS 

score are provisional and are subject to 

revision by HUD. 

(d) Thresholds. (1) The PHA’s 

financial condition score is based on a 

maximum of 30 points. 

(2) In order for a PHA to receive a 

passing score under the financial 

condition indicator, the PHA must 

achieve a score of at least 18 points, or 

60 percent of the available points under 

this indicator. 

(3) A PHA that receives fewer than 18 

points available under this indicator 

will be categorized as a substandard 

financial condition agency. 

Subpart D—Management Operations 

Indicator 

■ 12. Amend § 902.43 by revising 

paragraphs (a)(2) and (3) and paragraph 

(b) to read as follows: 

§ 902.43 Management operations 

performance standards. 

(a) * * * 

(2) Timely Reexaminations. This 

subindicator measures the extent to 

which the PHA is performing regular 

reexaminations of family income and 

composition on time. Assessment will 

monitor timely reexamination based on 

the PHA’s approved reexamination 

schedule (e.g., triennially where MTW 

waiver authority allows a PHA to delay 

reexamination up to three years). 

(3) Audit Compliance. This 

subindicator measures the extent to 

which the PHA is meeting program 

compliance requirements, as measured 

by findings in independent audits or 

HUD audits or reviews. 

(b) Assessment under the 

Management Operations Indicator. 

Projects will be assessed under this 

indicator through information that is 

electronically submitted to HUD 

through the FDS and other information 

available to HUD. 

§ 902.44 [Removed and Reserved] 

■ 13. Remove and reserve § 902.44. 

■ 14. Amend § 902.45 by revising 

paragraphs (b) and (c) to read as follows: 

§ 902.45 Management operations scoring 

and thresholds. 

* * * * * 

(b) Overall PHA management 

operations indicator score. The overall 

management operations indicator score 

is a unit-weighted average of project 

scores. The sum of the weighted values 

is divided by the total number of units 

in the PHA’s portfolio to derive the 

overall management operations 

indicator score. The overall 

management operations indicator score 

will be issued after it is determined, in 

advance of issuance of the overall PHAS 

score. PHAs may be subject to 

appropriate oversight and action as soon 

as the overall management operations 

indicator score is issued, as noted in 

§ 902.73. Indicator scores issued in 

advance of an overall PHAS score are 

provisional and are subject to revision 

by HUD. 

(c) Thresholds. (1) The PHA’s 

management operations score is based 

on a maximum of 30 points. 

(2) In order to receive a passing score 

under the management operations 

indicator, a PHA must achieve a score 

of at least 18 points or 60 percent. 

(3) A PHA that receives fewer than 18 

points will be categorized as a 

substandard management operations 

agency. 

Subpart E—Capital Fund Program 

Indicator 

■ 15. Amend § 902.50 by revising 

paragraphs (a), (c), and (d) to read as 

follows: 

§ 902.50 Capital Fund program 

assessment. 

(a) Objective. The Capital Fund 

program indicator examines the period 

of time taken by a PHA to obligate funds 

in relation to statutory deadlines for 

obligation for all Capital Fund program 


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grants for which fund balances remain 

during the assessment year. 

* * * * * 

(c) Capital Fund Indicator. 

Performance under the Capital Fund 

program indicator is evaluated on a pass 

or fail basis, determined by whether the 

PHA satisfied the timeliness of fund 

obligation requirement in section 9(j) of 

the Act. This examines the period of 

time it takes for a PHA to obligate funds 

from the Capital Fund program under 

section 9(j)(1) of the Act (42 U.S.C. 

1437g(j)(1)). 

(d) Method of assessment. The 

assessment required under the Capital 

Fund program indicator will be 

performed through analysis of obligated 

amounts in HUD’s eLOCCS (or its 

successor) for all Capital Fund program 

grants that were open during the 

assessment year. This indicator 

measures a statutory requirement for the 

Capital Fund program. Other aspects of 

the Capital Fund program will be 

monitored by HUD through other types 

of reviews under 24 CFR part 905. 

(1) PHAs are responsible to ensure 

that their Capital Fund program 

information is submitted to eLOCCS by 

the submission due date. 

(2) A PHA may not appeal its PHAS 

score, Capital Fund program indicator 

failure, or both, based on the fact that it 

did not submit its Capital Fund program 

information to eLOCCS and/or the PIC 

systems by the submission due date. 

■ 16. Revise § 902.53 to read as follows: 

§ 902.53 Capital Fund program 

assessment and thresholds. 

(a) Assessment. The Capital Fund 

program indicator provides an 

assessment of a PHA’s ability to obligate 

Capital Fund program grants in a timely 

manner on capital, modernization, 

development and financing needs. 

(b) Thresholds. (1) The PHA’s Capital 

Fund program indicator is not assigned 

points but assessed on a pass/fail basis. 

(2) In order to receive a passing 

evaluation under the Capital Fund 

program indicator, a PHA must obligate 

at least 90 percent of Capital Fund 

program grants as documented in 

eLOCCS (or its successor) within the 

time required by statute or have HUD 

approved extensions under section 

9(j)(2) of the Act (42 U.S.C. 1437g(j)(2)). 

Subpart F—PHAS Scoring 

■ 17. Amend § 902.60 by: 

■ a. Revising paragraph (a); 

■ b. In paragraph (c)(1), removing the 

words ‘‘its local field office’’, and 

adding, in their place, the word ‘‘HUD’’; 

and 

■ c. Removing paragraph (e) and 

redesignating paragraph (f) as paragraph 

(e). 

The revision to read as follows: 

§ 902.60 Data Collection. 

(a) Fiscal year reporting period— 

limitation on changes after PHAS 

effective date. To allow for a period of 

consistent assessments to refine and 

make necessary adjustments to PHAS, a 

PHA is not permitted to change its fiscal 

year end for the first 3 full fiscal years 

following [EFFECTIVE DATE OF FINAL 

RULE] unless such change is approved 

by HUD for good cause. 

* * * * * 

§ 902.62 [Amended] 

■ 18. Amend § 902.62 by: 

■ a. In paragraph (a)(2), removing the 

words ‘‘financial condition indicator 

score’’ and adding, in their place, the 

words ‘‘financial condition and 

management operations indicator 

scores’’; 

■ b. In paragraph (a)(3), removing the 

words ‘‘financial condition indicator’’ 

and adding, in their place, the words 

‘‘financial condition and management 

operations indicators’’; and 

■ c. In paragraph (b)(1), after the words 

‘‘financial condition’’ adding the words 

‘‘or management operations’’. 

■ 19. Amend § 902.64 by: 

■ a. In paragraph (a)(2) after the words 

‘‘may be changed’’, adding the words 

‘‘or withheld, denied, or rescinded’’; 

and 

■ b. Revising paragraph (b). 

The revision to read as follows: 

§ 902.64 PHAS scoring and audit reviews. 

* * * * * 

(b) Issuance of a score by HUD. (1) 

The component scores for individual 

indicators will be issued after they are 

determined, in advance of issuance of 

the overall PHAS score. PHAs may be 

subject to appropriate oversight and 

action as soon as a component score is 

issued, as noted in § 902.73. Indicator 

scores issued in advance of an overall 

PHAS score are provisional and are 

subject to revision by HUD. 

(2) An overall PHAS score will be 

issued for each PHA one month after all 

indicator scores for the assessment year 

have been finalized, unless HUD uses 

the authority in § 902.66 to withhold a 

component score or overall PHAS score. 

The overall PHAS score becomes the 

PHA’s final PHAS score after any 

adjustments requested by the PHA and 

determined necessary under the 

processes provided in §§ 902.25(d), 

902.35(a), and 902.68; any adjustments 

resulting from the appeal process 

provided in § 902.69; and any 

adjustments determined necessary as a 

result of the independent public 

accountant (IPA) audit. 

(3) Each PHA (or RMC) shall post a 

notice of its final PHAS score and 

designation in appropriate conspicuous 

and accessible locations in its offices 

within 2 weeks of receipt of its final 

PHAS score and designation. In 

addition, HUD will post every PHA’s 

PHAS score and designation on HUD’s 

internet site. 

* * * * * 

■ 20. Revise § 902.66 to read as follows: 

§ 902.66 Withholding, denying, and 

rescinding score or designation. 

(a) Withholding, denying, and 

rescinding score or designation. (1) If 

determined as appropriate or necessary 

by HUD, HUD may withhold, deny, or 

rescind a designation of any level, from 

troubled performer to high performer. A 

designation may be withheld or denied 

even when all component scores have 

been issued. HUD may conduct any 

review as it may determine necessary. 

(2) HUD may withhold, deny or 

rescind incentives or high performer 

designation or standard performer 

designation, including in but not 

limited to circumstances in which a 

PHA: 

(i) Is operating under a special 

agreement with HUD (e.g., a civil rights 

Conciliation or Voluntary Compliance 

Agreement); 

(ii) Is involved in litigation that bears 

directly upon the physical, financial, or 

management performance of a PHA; 

(iii) Is operating under a court order; 

(iv) Demonstrates substantial 

evidence of fraud or misconduct, 

including evidence that the PHA’s 

certifications, submitted in accordance 

with this part, are not supported by the 

facts, as evidenced by such sources as 

a HUD review, routine reports, an Office 

of Inspector General investigation/audit, 

an independent auditor’s audit, or an 

investigation by any appropriate legal 

authority; 

(v) Demonstrates substantial 

noncompliance in one or more areas of 

a PHA’s required compliance with 

applicable laws and regulations, 

including areas not assessed under 

PHAS. Areas of substantial 

noncompliance include, but are not 

limited to, noncompliance with civil 

rights, nondiscrimination and fair 

housing laws and regulations, or the 

ACC. Substantial noncompliance casts 

doubt on the capacity of a PHA to 

preserve and protect its public housing 

projects and operate them consistent 

with federal laws and regulations; or 

(vi) Demonstrates other egregious 

performance issues not reflected in 


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PHAS component scores that require 

significant corrective action, as HUD 

determines necessary. 

(3) HUD may withhold, deny, or 

rescind substandard performer or 

troubled performer designation and 

accompanying requirements at its 

discretion. HUD may substitute other 

corrective requirements when HUD 

determines it is necessary. 

(4) HUD may withhold, deny, or 

rescind component scores or an overall 

PHAS score at its discretion. HUD must 

notify the PHA when scores are 

withheld, denied, or rescinded, provide 

the basis for the decision, and allow for 

appeal as described in § 902.69. At the 

time of withholding, denying, or 

rescinding scores, HUD may also require 

the PHA to undertake corrective actions 

as specified in § 902.73. 

(b) Effect on designation. If a high 

performer designation is denied or 

rescinded, the PHA may be designated 

a standard performer, substandard 

performer, or troubled performer, 

depending on the nature and 

seriousness of the matter or matters 

constituting the basis for HUD’s action. 

If a standard performer designation is 

denied or rescinded, the PHA may be 

designated as a substandard performer 

or troubled performer. Alternatively, 

HUD may choose not to assign the PHA 

a new designation status, as it deems 

appropriate. 

(c) Effect on score. The denial or 

rescission of a designation of high 

performer or standard performer shall 

not affect the PHA’s numerical PHAS 

score, except where the denial or 

rescission is under paragraph (a)(2)(iv) 

of this section. 

■ 21. Revise § 902.69 to read as follows: 

§ 902.69 PHA right of appeal. 

(a) Appeal of troubled performer 

designation and petition for removal of 

troubled performer designation. A PHA 

may take any of the following actions: 

(1) Appeal its troubled performer 

designation; 

(2) Appeal its final overall PHAS 

score; and 

(3) Appeal actions under § 902.66. 

(b) Appeal of PHAS score. (1) If a PHA 

believes that an objectively verifiable 

and material error(s) exists in any of the 

scores for its PHAS indicators, which, if 

corrected, will result in a significant 

change in the PHA’s PHAS score and its 

designation (i.e., as troubled performer, 

substandard performer, standard 

performer, or high performer), the PHA 

may appeal its PHAS score in 

accordance with the procedures of 

paragraphs (c), (d), and (e) of this 

section. A significant change in a PHAS 

score is a change that would cause the 

PHA’s PHAS score to increase, resulting 

in a higher PHAS designation for the 

PHA (i.e., from troubled performer to 

substandard performer or standard 

performer, or from standard performer 

to high performer). Inspection appeals 

must be made in accordance with the 

requirements of § 5.711. 

(2) A PHA may not appeal its PHAS 

score, Capital Fund program score, or 

both, based on the fact that it did not 

submit its Capital Fund program 

information to eLOCCS or updated 

profile information in PIC or subsequent 

PIC replacement system by the 

submission due date. 

(c) Appeal procedures. (1) To appeal 

a troubled performer designation or a 

final overall PHAS score, a PHA must 

submit a request in writing to the 

Deputy Assistant Secretary of the Real 

Estate Assessment Center, which must 

be received by HUD no later than 30 

days following the issuance of the 

overall PHAS score to the PHA. 

(2) An appeal of a troubled performer 

designation must include the PHA’s 

supporting documentation and reasons 

for the appeal. An appeal of a PHAS 

score must be accompanied by the 

PHA’s evidence that a material error 

occurred. An appeal submitted to HUD 

without supporting documentation will 

not be considered and will be returned 

to the PHA. 

(d) Denial, withholding, or rescission. 

A PHA that disagrees with the basis for 

denial, withholding, or rescission of its 

designation or score under § 902.66 may 

make a written request for reinstatement 

within 30 days of notification by HUD 

of the denial or rescission of the 

designation to the Assistant Secretary, 

and the request shall include reasons for 

the reinstatement. 

(e) Consideration of appeals. Upon 

receipt of an appeal of a final overall 

PHAS score, of a troubled performer 

designation, or appeal of action taken 

under § 902.66 from a PHA, HUD will 

evaluate the appeal and its merits for 

purposes of determining whether a 

reassessment of the PHA is warranted. 

HUD will review the PHA’s file and the 

evidence submitted by the PHA to 

determine whether an error occurred. 

(f) Notice and finality of decisions. (1) 

If HUD determines that one or more 

objectively verifiable and material errors 

has occurred, HUD will undertake a 

new inspection of the project, arrange 

for audit services, adjust the PHA’s 

score, or perform other reexamination of 

the financial, management, or Capital 

Fund program information, as 

appropriate in light of the nature of the 

error that occurred. A new score will be 

issued and an appropriate performance 

designation made by HUD. HUD’s 

decision on appeal of a PHAS score, or 

issuance of a troubled performer 

designation will be final agency action. 

(2) HUD will issue a written decision 

on all appeals made under this section. 

Subpart G—PHAS Incentives and 

Remedies 

■ 22. Amend § 902.71 by revising 

paragraph (a)(2) and the first sentence of 

paragraph (b) to read as follows: 

§ 902.71 Incentives for high performers. 

(a) * * * 

(2) Public recognition. High performer 

PHAs and DF–RMCs or RMCs that 

receive a score of at least 60 percent of 

the points available for the physical 

condition, financial condition, and 

management operations indicators, and 

a passing score for the Capital Fund 

program indicator, and achieve an 

overall PHAS score of 90 percent or 

greater of the total available points 

under PHAS shall be designated a high 

performer and will receive a Certificate 

of Commendation from HUD, as well as 

special public recognition, as provided 

by the HUD field office. 

* * * * * 

(b) * * * Relief from any procedural 

requirement that may be provided under 

this section does not mean that a PHA 

is relieved from compliance with the 

provisions of federal law and regulatory 

requirements. * * * 

* * * * * 

■ 23. Revise § 902.73 to read as follows: 

§ 902.73 PHAs with deficiencies. 

(a) Oversight and action. Standard 

and substandard performers will be 

subject to appropriate oversight and 

action by HUD. PHAs may also be 

subject to appropriate oversight and 

action by HUD as soon as a component 

score is issued for the PHA or for a 

specific project, or in light of 

performance trends (e.g., if overall 

PHAS scores or component scores 

notably decline for three years, even if 

the latest score would not classify the 

PHA as substandard), or when scores or 

designations are withheld, denied, or 

rescinded. 

(1) HUD may require a PHA to correct 

deficiencies in performance within a 

time period as specified by HUD when 

HUD determines it is necessary to do so 

on the basis of a component score, 

overall PHAS score or performance 

designation, or performance trend. HUD 

may require such action as a result of 

performance at the Asset Management 

Project (AMP) or PHA level (i.e., HUD 

may require corrective action for one 

AMP or across all a PHA’s projects). 

HUD may require the PHA to undertake 


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such corrective actions in advance of 

issuance of an overall PHAS score or 

PHAS designation. If the PHA is 

subsequently identified as a troubled or 

substandard performer after being 

required to undertake corrective actions, 

such corrective actions may be later 

incorporated into a Memorandum of 

Agreement or Corrective Action Plan, as 

appropriate. 

(2) When HUD exercises authority at 

§ 902.66 to withhold, deny, or rescind a 

score or designation, HUD may also 

require a PHA to correct deficiencies in 

performance or undertake other 

corrective action, in a time period as 

specified by HUD. If the PHA is 

subsequently identified as a troubled or 

substandard performer after being 

required to undertake corrective actions, 

such corrective actions may be later 

incorporated into a Memorandum of 

Agreement or Corrective Action Plan, as 

appropriate. 

(b) Correction of deficiencies—(1) 

Time period for correction. After a 

PHA’s (or DF–RMC’s or RMC’s) receipt 

of its final overall PHAS score and 

designation as: A standard performer, 

within the range described in 

§ 902.73(a)(1); or substandard performer, 

within the range described in 

§ 902.73(a)(2), a PHA, DF–RMC or RMC 

shall correct any deficiency indicated in 

its assessment within 90 days, or within 

such period as provided in the HUDexecuted Corrective Action Plan or as 

otherwise communicated by HUD, if 

required. 

(2) Notification and report to regional 

or field office. A PHA shall notify the 

regional or field office, as identified by 

HUD, of its action to correct a 

deficiency. A PHA shall also forward an 

RMC’s report of its action to the regional 

or field office to correct a deficiency. A 

DF–RMC shall forward directly to the 

regional or field office its report of its 

action to correct a deficiency. 

(c) Failure to correct deficiencies. (1) 

If a PHA (or DF–RMC or RMC) fails to 

correct deficiencies within the time 

period noted in paragraph (b) of this 

section, or to correct deficiencies within 

the time specified in a Corrective Action 

Plan or as otherwise specified by HUD, 

or within such extensions as may be 

granted by HUD, the field office will 

notify the PHA of its noncompliance. 

(2) The PHA (or DF–RMC or RMC) 

will provide the field office with its 

reasons for lack of progress in 

negotiating, executing, or carrying out 

the Corrective Action Plan or making 

the corrective actions otherwise 

required by HUD, within 30 days of the 

PHA’s receipt of the noncompliance 

notification. HUD will advise the PHA 

as to the acceptability of its reasons for 

lack of progress. 

(3) If HUD determines that the reasons 

the PHA (or DF–RMC or RMC) has 

provided for lack of progress are 

unacceptable, HUD will notify the PHA 

(or DF–RMC or RMC) that it will take 

such actions as it may determine 

appropriate in accordance with the 

provisions of the Act and other statutes, 

the ACC, this part, and other HUD 

regulations, including, but not limited 

to, the remedies available for substantial 

default. 

■ 24. Amend § 902.75 by: 

■ a. Revising paragraphs (b) 

introductory text and (b)(5); 

■ b. In the second sentence of paragraph 

(c), adding the word ‘‘factual’’ before the 

word ‘‘discrepancies’’; and 

■ c. Revising paragraphs (d)(1) and (2), 

and (g)(2) and (3). 

The revisions read as follows: 

§ 902.75 Troubled performers. 

* * * * * 

(b) Memorandum of agreement 

(MOA). Within 30 days of notification of 

a PHA’s designation as a troubled 

performer, HUD will initiate activities to 

negotiate and draft an MOA. An MOA 

is required for a troubled performer. The 

executed MOA is an enforceable 

contractual agreement between HUD 

and a PHA. Material breach of the MOA 

by the PHA is a basis, among other 

remedies available under law, for 

determination of substantial default. 

The scope of the MOA may vary 

depending upon the extent of the 

problems present in the PHA. It shall 

include, but not be limited to: 

* * * * * 

(5) The PHA’s commitment to take all 

prescribed actions to achieve the targets; 

* * * * * 

(d) * * * 

(1) Expiration of the first assessment 

year improvement period. Upon the 

expiration of the one assessment year 

period that started on the date on which 

the PHA receives initial notice of a 

troubled performer designation, the 

PHA shall, by the next PHAS 

assessment that is at least 12 months 

after the initial notice of the troubled 

performer designation, improve its 

performance by at least 50 percent of the 

difference between the initial PHAS 

assessment score that led to the troubled 

performer status and the score necessary 

to remove the PHA’s designation as a 

troubled performer. 

(2) Expiration of 2 assessment year 

recovery period. Upon the expiration of 

the 2 assessment year period that started 

on the date on which the PHA received 

the initial notice of a troubled performer 

designation, the PHA shall, by the next 

PHAS assessment that is at least 24 

months after the initial notice of the 

troubled performer designation, 

improve its performance and achieve an 

overall PHAS score of at least 60 percent 

of the total points available. 

* * * * * 

(g) * * * 

(2) For purposes of paragraph (g) of 

this section, substantial improvement is 

defined as the improvement required by 

paragraph (d) of this section. The 

maximum period of time for remaining 

in troubled performer status before 

being referred to the Assistant Secretary 

is 2 years after the initial notification of 

the troubled performer designation. 

Therefore, the PHA must make 

substantial improvement in each 

assessment year of this 2-year period. 

(3) The following example illustrates 

the provisions of paragraph (g)(1) of this 

section: 

Example: 

A PHA receives an overall PHAS 

score of 50 points; 60 points is a passing 

score. The PHA must achieve at least 55 

points overall (50 percent of the 10 

points necessary to achieve a passing 

score of 60 points) on the next PHAS 

assessment that is at least 12 months 

after the initial notice of the troubled 

performer designation to continue 

recovery efforts. In the second year, the 

PHA must achieve a minimum score of 

60 points overall (a passing score) on 

the PHAS assessment that is at least 24 

months after the initial notice of the 

troubled performer designation. If the 

PHA fails to achieve the 5-point 

increase on the year-one assessment, or 

if the PHA achieves the 5 point increase 

on the year-one assessment, but fails to 

achieve the minimum passing score of 

60 points on the year-two assessment, 

HUD will notify the PHA that it will 

take such actions as it may determine 

appropriate in accordance with the 

provisions of the ACC and other HUD 

regulations, including, but not limited 

to, the remedies available for substantial 

default. 

* * * * * 

■ 25. Add § 902.76 to subpart G to read 

as follows: 

§ 902.76 Capital Fund troubled performers. 

Upon a PHA’s designation as a Capital 

Fund troubled performer, the PHA will 

be subject to appropriate oversight and 

actions by HUD. HUD may require a 

PHA to correct deficiencies in 

performance within a time period as 

specified by HUD. The requirements to 

correct deficiencies, and consequences 

for failure to correct deficiencies so 

identified, will otherwise be the same as 


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Federal Register / Vol. 89, No. 213 / Monday, November 4, 2024 / Proposed Rules 87531 

for substandard performers as described 

in § 902.73 unless HUD exercises 

remedies and enforcement actions 

provided in 24 CFR part 905. 

§ 902.79 [Amended] 

■ 26. Amend § 902.79 by removing the 

final word of the paragraph, ‘‘period’’, 

and adding, in its place, the word 

‘‘year’’. 

§ 902.81 [Amended] 

■ 27. Amend § 902.81 by adding, to the 

end of the paragraph, the words 

‘‘Further, nothing in this section 

prohibits any resident from 

communicating to HUD in writing 

regarding their experience or complaint 

with the PHA at issue.’’ 

§ 902.83 Remedies for troubled performer 

PHAs. 

■ 28. Amend § 902.83 by removing, 

from the end of paragraph (a)(3), the 

words ‘‘for any other substantial default 

by a PHA’’, and revising the section 

heading to read as shown above. 

Subpart H—Assessment of Small Rural 

Public Housing Agencies 

■ 29. Amend § 902.103 by revising 

paragraph (a) to read as follows: 

§ 902.103 Public housing assessment of 

small rural PHAs. 

(a) Small rural public housing 

assessment. The public housing 

program of small rural PHAs as defined 

in § 902.101 shall be assessed and 

scored based only on the physical 

condition of their public housing 

properties in accordance with 24 CFR 

part 5, subpart G. Such agencies shall 

not be subject to PHAS except as noted 

below. 

* * * * * 

■ 30. Amend § 902.105 by: 

■ a. Revising paragraphs (c) 

introductory text and (c)(5); and 

■ b. In the second sentence of paragraph 

(d), adding the word ‘‘factual’’ before 

the word ‘‘discrepancies’’. 

The revisions read as follows: 

§ 902.105 Troubled small rural PHAs. 

* * * * * 

(c) Corrective Action Agreement 

(CAA). Within 30 days of notification of 

a PHA’s designation as a troubled 

performer, HUD will initiate activities to 

negotiate and develop a CAA. A CAA is 

required for a troubled performer. The 

final executed CAA is an enforceable 

contractual agreement between HUD 

and a PHA. The scope of the CAA may 

vary depending upon the extent of the 

problems present in the PHA. The term 

of the CAA will not exceed one year and 

is subject to renewal at the discretion of 

HUD if HUD determines that the 

circumstances requiring the CAA still 

exist at the expiration of the term of the 

CAA based on the annual assessment 

frequency as included in § 902.103. It 

shall include, but not be limited to: 

* * * * * 

(5) The PHA’s commitment to take all 

prescribed actions to achieve the targets; 

* * * * * 

■ 31. Revise § 902.107 to read as 

follows: 

§ 902.107 Withholding, denying, and 

rescinding score or designation. 

(a) Withholding score or designation. 

(1) If determined as appropriate or 

necessary by HUD, HUD may withhold, 

deny, or rescind a designation of any 

level, from troubled performer to high 

performer. HUD may conduct any 

review as it may determine necessary. 

(2) HUD may withhold, deny, or 

rescind incentives or high performer 

designation or non-troubled performer 

designation, including in but not 

limited to circumstances in which a 

PHA: 

(i) Is operating under a special 

agreement with HUD (e.g., a civil rights 

Conciliation or Voluntary Compliance 

Agreement); 

(ii) Is involved in litigation that bears 

directly upon the physical performance 

of a PHA; 

(iii) Is operating under a court order; 

(iv) Demonstrates substantial 

evidence of fraud or misconduct, 

including evidence that the PHA’s 

certifications, submitted in accordance 

with this part, are not supported by the 

facts, as evidenced by such sources as 

a HUD review, routine reports, an Office 

of Inspector General investigation/audit, 

an independent auditor’s audit, or an 

investigation by any appropriate legal 

authority; 

(v) Demonstrates substantial 

noncompliance in one or more areas of 

a PHA’s required compliance with 

applicable laws and regulations, 

including areas not assessed under the 

small rural assessment. Areas of 

substantial noncompliance include, but 

are not limited to, noncompliance with 

civil rights, nondiscrimination and fair 

housing laws and regulations, or the 

ACC. Substantial noncompliance casts 

doubt on the capacity of a PHA to 

preserve and protect its public housing 

projects and operate them consistent 

with federal laws and regulations; or 

(vi) Demonstrates other egregious 

performance issues not reflected in 

PHAS component score that require 

significant corrective action, as HUD 

determines necessary. 

(3) HUD may withhold, deny, or 

rescind non-troubled or troubled 

performer designation and 

accompanying requirements at its 

discretion. HUD may substitute other 

corrective requirements when HUD 

determines it is necessary. 

(4) HUD may withhold, deny, or 

rescind an overall PHAS score at its 

discretion. HUD must notify the PHA 

when scores are withheld, denied, or 

rescinded, provide the basis for the 

decision, and allow for appeal as 

described in § 902.109. 

■ 32. Amend § 902.109 by revising the 

section heading, paragraph (a) and 

paragraphs (c) through (f) to read as 

follows: 

§ 902.109 Right to appeal troubled 

designation. 

(a) Appeal of troubled performer 

designation. A PHA may take any of the 

following actions: 

(1) Appeal its troubled performer 

designation; and 

(2) Appeal any actions taken under 

§ 902.107. 

* * * * * 

(c) Appeal procedures. (1) To appeal 

a troubled performer designation a PHA 

must submit a request in writing to the 

Deputy Assistant Secretary of the Real 

Estate Assessment Center, which must 

be received by HUD no later than 30 

days following the issuance of the score 

to the PHA. 

(2) An appeal of a troubled performer 

designation must include the PHA’s 

supporting documentation and reasons 

for the appeal. An appeal of an 

assessment score must be accompanied 

by the PHA’s evidence that a material 

error occurred. 

(d) Denial, withholding, or 

rescission.A PHA that disagrees with the 

basis for denial, withholding, or 

rescission of its designation or score 

under § 902.107 may make a written 

request for reinstatement within 30 days 

of notification by HUD of the denial or 

rescission of the designation to the 

Assistant Secretary, and the request 

shall include reasons for the 

reinstatement. 

(e) Consideration of appeals. Upon 

receipt of an appeal of a final overall 

assessment score, of a troubled 

performer designation, or appeal of 

action taken under § 902.107 from a 

PHA, HUD will evaluate the appeal and 

its merits for purposes of determining 

whether a reassessment of the PHA is 

warranted. HUD will review the PHA’s 

file and the evidence submitted by the 

PHA to determine whether an error 

occurred. 

(f) Notice and finality of decisions. (1) 

If HUD determines that one or more 

objectively verifiable and material error 

has occurred, HUD will undertake a 


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87532 Federal Register / Vol. 89, No. 213 / Monday, November 4, 2024 / Proposed Rules 

new inspection of the project, adjust the 

PHA’s score, or perform other 

reexamination of information, as 

appropriate in light of the nature of the 

error that occurred. A new score will be 

issued and an appropriate performance 

designation made by HUD. HUD’s 

decision on appeal of an assessment 

score, or issuance of a troubled 

performer designation will be final 

agency action. 

(2) HUD will issue a written decision 

on all appeals made under this section. 

■ 33. Revise § 902.111 to read as 

follows: 

§ 902.111 Remedies for troubled small 

rural PHAs. 

The remedies for small rural PHAs 

with troubled public housing programs 

that remain troubled under § 902.108 

will be the same as those remedies for 

PHAs assessed under PHAS as 

described in § 902.83. 

Dominique Blom, 

General Deputy Assistant Secretary for Public 

and Indian Housing. 

[FR Doc. 2024–25469 Filed 11–1–24; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF TRANSPORTATION 

Federal Motor Carrier Safety 

Administration 

49 CFR Parts 386 and 387 

[Docket No. FMCSA–2024–0280] 

RIN 2126–AC76 

Broker and Freight Forwarder 

Financial Responsibility; Extension of 

Compliance Date 

AGENCY: Federal Motor Carrier Safety 

Administration (FMCSA), Department 

of Transportation (DOT). 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: FMCSA proposes to amend its 

November 16, 2023, final rule, ‘‘Broker 

and Freight Forwarder Financial 

Responsibility,’’ by extending the 

compliance date for certain provisions 

from January 16, 2025, to January 16, 

2026. This action is being proposed 

because FMCSA has determined that 

only its forthcoming online registration 

system will be used to accept filings and 

track notifications, and this 

functionality will not be added to its 

legacy systems. As the new system is 

not expected to be available before 

January 16, 2025, FMCSA proposes to 

extend the compliance date to provide 

regulated entities time to begin using 

and familiarizing themselves with the 

system before compliance is required. 

DATES: Comments must be received on 

or before November 19, 2024. Comments 

should be limited to the proposed 

change in the compliance date. 

ADDRESSES: You may submit comments 

identified by Docket Number FMCSA– 

2024–0280 using any one of the 

following methods: 

• Federal Rulemaking Portal: Go to 

https://www.regulations.gov. Follow the 

online instructions for submitting 

comments. 

• Mail: Dockets Operations, U.S. 

Department of Transportation, 1200 

New Jersey Avenue SE, West Building, 

Ground Floor, Washington, DC 20590– 

0001. 

• Hand Delivery or Courier: Dockets 

Operations, U.S. Department of 

Transportation, 1200 New Jersey 

Avenue SE, West Building, Ground 

Floor, Washington, DC 20590–0001, 

between 9 a.m. and 5 p.m., Monday 

through Friday, except Federal holidays. 

To be sure someone is there to help you, 

please call (202) 366–9317 or (202) 366– 

9826 before visiting Dockets Operations. 

• Fax: (202) 493–2251. 

FOR FURTHER INFORMATION CONTACT: Ana 

Alvarez, Financial Analyst, Office of 

Registration, Financial Responsibility 

Filings Division, FMCSA, 1200 New 

Jersey Avenue SE, West Building, 6th 

Floor, Washington, DC 20590; (202) 

366–0401; ana.alvarez@dot.gov. If you 

have questions on viewing or submitting 

material to the docket, call Dockets 

Operations at (202) 366–9826. 

SUPPLEMENTARY INFORMATION: FMCSA 

organizes this NPRM as follows: 

I. Public Participation and Request for 

Comments 

A. Submitting Comments 

B. Viewing Comments and Documents 

C. Privacy 

II. Executive Summary 

A. Purpose and Summary of the Regulatory 

Action 

B. Costs and Benefits 

III. Abbreviations 

IV. Legal Basis 

V. Background 

VI. Discussion of Proposed Rulemaking 

VII. Regulatory Analyses 

A. E.O. 12866 (Regulatory Planning and 

Review), E.O. 13563 (Improving 

Regulation and Regulatory Review), E.O. 

14094 (Modernizing Regulatory Review), 

and DOT Regulatory Policies and 

Procedures 

B. Regulatory Flexibility Act (Small 

Entities) 

C. Assistance for Small Entities 

D. Unfunded Mandates Reform Act of 1995 

E. Paperwork Reduction Act 

F. E.O. 13132 (Federalism) 

G. Privacy 

H. E.O. 13175 (Indian Tribal Governments) 

I. National Environmental Policy Act of 

1969 

J. Rulemaking Summary 

I. Public Participation and Request for 

Comments 

A. Submitting Comments 

If you submit a comment, please 

include the docket number for this 

NPRM (FMCSA–2024–0280), indicate 

the specific section of this document to 

which your comment applies, and 

provide a reason for each suggestion or 

recommendation. You may submit your 

comments and material online or by fax, 

mail, or hand delivery, but please use 

only one of these means. FMCSA 

recommends that you include your 

name and a mailing address, an email 

address, or a phone number in the body 

of your document so FMCSA can 

contact you if there are questions 

regarding your submission. 

To submit your comment online, go to 

https://www.regulations.gov/docket/ 

FMCSA-2024-0280/document, click on 

this NPRM, click ‘‘Comment,’’ and type 

your comment into the text box on the 

following screen. 

If you submit your comments by mail 

or hand delivery, submit them in an 

unbound format, no larger than 81⁄2 by 

11 inches, suitable for copying and 

electronic filing. 

FMCSA will consider all comments 

and material received during the 

comment period. 

Confidential Business Information (CBI) 

CBI is commercial or financial 

information that is both customarily and 

actually treated as private by its owner. 

Under the Freedom of Information Act 

(5 U.S.C. 552), CBI is exempt from 

public disclosure. If your comments 

responsive to the NPRM contain 

commercial or financial information 

that is customarily treated as private, 

that you actually treat as private, and 

that is relevant or responsive to the 

NPRM, it is important that you clearly 

designate the submitted comments as 

CBI. Please mark each page of your 

submission that constitutes CBI as 

‘‘PROPIN’’ to indicate it contains 

proprietary information. FMCSA will 

treat such marked submissions as 

confidential under the Freedom of 

Information Act, and they will not be 

placed in the public docket of the 

NPRM. 

Submissions containing CBI should 

be sent to Mr. Brian Dahlin, Chief, 

Regulatory Evaluation Division, Office 

of Policy, FMCSA, 1200 New Jersey 

Avenue SE, Washington, DC 20590– 

0001 or via email at brian.g.dahlin@

dot.gov. At this time, you need not send 

a duplicate hardcopy of your electronic 


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