5200 Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Rules and Regulations 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Parts 91 and 93 

[Docket No. FR–5246–I–03] 

RIN 2506–AC30 

Housing Trust Fund 

AGENCY: Office of the Assistant 

Secretary for Community Planning and 

Development, HUD. 

ACTION: Interim rule. 

SUMMARY: The Housing and Economic 

Recovery Act of 2008 (HERA) 

establishes a Housing Trust Fund (HTF) 

to be administered by HUD. The 

purpose of the HTF is to provide grants 

to State governments to increase and 

preserve the supply of rental housing for 

extremely low- and very low-income 

families, including homeless families, 

and to increase homeownership for 

extremely low- and very low-income 

families. This rule establishes the 

regulations that will govern the HTF. 

HUD is issuing this rule as an interim 

rule. It is HUD’s intention to open this 

interim rule for public comment to 

solicit comments once funding is 

available and the grantees gain 

experience administering the HTF 

program. 

DATES: Effective: March 31, 2015. 

FOR FURTHER INFORMATION CONTACT: 

Marcia Sigal, Director, Program Policy 

Division, Office of Affordable Housing 

Programs, Office of Community 

Planning and Development, Department 

of Housing and Urban Development, 

451 7th Street SW., Room 7164, 

Washington, DC 20410; telephone 

number 202–708–2684 (this is not a tollfree number). Persons with hearing or 

speech impairments may access this 

number through TTY by calling the tollfree Federal Relay Service at 800–877– 

8389. 

SUPPLEMENTARY INFORMATION: 

I. Executive Summary 

Purpose 

This interim rule establishes the 

regulations that will govern HTF and 

the formula that will determine how 

HTF funds are distributed among 

eligible grantees. The purpose of HTF is 

to provide grants to State governments 

to increase and preserve the supply of 

rental housing for extremely low- and 

very low-income families, including 

homeless families, and to increase 

homeownership for extremely low- and 

very low-income families. HERA (Pub. 

L. 1110–289, approved July 30, 2008) 

establishes HTF and provides for it to be 

administered by HUD. 

States and State-designated entities 

are eligible grantees for HTF. Annual 

formula grants will be made, of which 

at least 80 percent must be used for 

rental housing; up to 10 percent for 

homeownership; and up to 10 percent 

for the grantee’s reasonable 

administrative and planning costs. HTF 

funds may be used for the production or 

preservation of affordable housing 

through the acquisition, new 

construction, reconstruction, and/or 

rehabilitation of nonluxury housing 

with suitable amenities. 

Summary of Major Provisions 

This rule contains both the program 

regulations that establish how the HTF 

program will be administered and the 

allocation formula that establishes how 

grant funds will be distributed to States. 

The formula allocation, located in 

subpart B of the rule, codifies language 

found in the Federal Housing 

Enterprises Financial Safety and 

Soundness Act of 1992 (FHEFSSA) (42 

U.S.C. 4502 et seq.), as revised by HERA 

(see Division A of HERA), and provides 

for the distribution of funds to the 50 

States, the District of Columbia, Puerto 

Rico, and the Insular Areas. Allocation 

amounts are based on four need factors 

as well as a construction cost 

adjustment factor. The four need factors 

are found in 24 CFR 93.51(a)–(d). These 

need factors include: a State’s relative 

shortage of rental housing available to 

extremely low-income families; a State’s 

relative shortage of rental housing 

available to very low-income families; 

the relative number of extremely lowincome renter households living in 

substandard, overcrowded or 

unaffordable units in a particular State; 

and the relative number of very lowincome renter households living in 

substandard, overcrowded, or 

unaffordable units in a particular State. 

In addition, the State’s local cost of 

construction is factored in as described 

in § 93.51(e). 

The program regulations for HTF are 

found in subparts C through J of part 93 

and closely mirror the regulations for 

the HOME Investment Partnerships 

program located in 24 CFR part 92. 

While HTF specifically targets 

affordable housing for very low and 

extremely low-income households, 

many of the program requirements 

applicable to the HOME program are 

similar to those for HTF. Further, each 

State is a participating jurisdiction in 

the HOME program, and all States or 

their designated housing entities will be 

HTF grantees. Consequently, many of 

the participation and submission 

requirements as well as many of the 

program requirements are modeled on 

provisions found in the regulations for 

HOME. 

Major provisions in the HTF program 

regulations include: siting and 

neighborhood standards; income 

determinations; eligible costs and 

activities; project requirements; tenant 

and homeowner qualification 

requirements; other Federal 

requirements; program administration 

regulations; and quality control 

provisions. Significant changes from the 

proposed rule include: removal of a 

proposed incentive for transit-oriented 

development; inclusion of guidelines for 

a recapture provision of homeownership 

funds; permitting the use of HTF funds 

for public housing under certain Federal 

housing programs; and a requirement 

that all HTF funds be used for extremely 

low-income housing when HTF is less 

than $1 billion. 

Costs and Benefits 

The three primary impacts of this rule 

include: transfers from the governmentsponsored enterprises (GSEs) and/or 

Treasury to States for investment in 

low-income housing; distribution 

among the States based on the formula 

HUD establishes for the HTF program; 

and the effects of HUD’s program 

administration requirements. Of these, 

the largest impact is the infusion of 

Federal dollars into the affordable 

housing market. 

Congress authorized HTF with the 

stated purpose of benefiting specific 

low-income populations by: (1) 

Increasing and preserving the supply of 

rental housing for extremely lowincome families with incomes between 

0 and 30 percent of area median income 

and very low-income families with 

incomes between 30 and 50 percent of 

area median income, including 

homeless families, and (2) increasing 

homeownership for very low and 

extremely low-income families. The 

formula in this rule is designed to 

distribute funds primarily to States with 

a shortage of rental housing affordable 

to very low and extremely low-income 

households. Specifically, this program 

provides funding to add a supply of 

affordable housing to markets where 

there is strong evidence of an 

inadequate supply. 

The primary benefits of the HTF 

program are expected to be similar to 

the Housing Choice Voucher program. 

An evaluation of the impact of receiving 

a housing voucher versus not receiving 

one has shown that the primary benefit 

of housing assistance programs is to 

reduce homelessness and housing cost 

burdens. Thus, the primary benefit of 

the HTF program will be the reduction 

of number of homeless families and 


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1See HUD’s Worse Case Housing Needs 2011 

Report to Congress at http://www.huduser.org/

portal//Publications/pdf/HUD-506_WorstCase2011_

reportv3.pdf. See page 7. 

individuals, as well as the number of 

families paying a disproportionate share 

of their income for housing in relatively 

tight housing markets. 

HTF is a transfer to the low-income 

housing sector from the GSEs and/or 

Treasury. The size of the annual impact 

is equivalent to the size of the total HTF 

expenditures, which will vary 

depending on the amount of GSE 

business in a given year and any 

amounts that may be appropriated, 

transferred, or credited to the HTF 

under any other provision of law. (See 

12 U.S.C. 4568.) There will be no 

allocation of grants under HTF if there 

is neither revenue from GSEs nor other 

funds as provided by HERA. 

The formula for distributing among 

the States is largely determined by the 

statutory formula in FHEFSSA, which 

includes the four need factors described 

above, plus a construction cost 

adjustment factor. In addition, 

FHEFSSA directs that each of the 50 

States and the District of Columbia are 

to receive a minimum allocation of $3 

million. HUD’s policy discretion in 

choosing the weights for housing needs 

factors has the impact of redistributing 

allocations among States. Different 

States are characterized by different 

measures of housing needs as well as 

construction costs. At a national level, 

however, the discretion has almost no 

impact because all funds are spent on 

low-income housing regardless of the 

State. The transfers are only among 

States, re-distributing the funds 

geographically. 

Finally, the regulations governing 

program administration are not 

expected to have significant economic 

impacts. Regulations for the HOME 

program, which, like HTF, also provide 

grants for construction of low-income 

housing, served as the model for HTF 

regulations. Consequently, State 

grantees are already familiar with HTF’s 

basic compliance requirements and 

procedures, and will not have to 

develop significant capacity to 

participate in the program. A more 

detailed cost-benefit analysis is 

provided in the regulatory impact 

analysis that accompanies this rule. 

II. Background 

HERA was major housing legislation 

enacted to reform and improve the 

regulation of the GSEs—Fannie Mae and 

Freddie Mac, strengthen neighborhoods 

hardest hit by the foreclosure crisis, 

enhance mortgage protection and 

disclosures, and maintain the 

availability of affordable home loans. 

The reform of the GSEs is provided in 

the Federal Housing Finance Regulatory 

Reform Act of 2008, which is Division 

A, Title I of HERA. Section 1131 of 

Division A amended the Federal 

Housing Enterprises Financial Safety 

and Soundness Act of 1992 (12 U.S.C. 

4501 et seq.) (the Act) to add a new 

section 1337 entitled ‘‘Affordable 

Housing Allocations’’ and a new section 

1338 entitled ‘‘Housing Trust Fund.’’ 

Section 1337 of the Act provides for 

the HTF (and other programs) to be 

funded with an affordable housing setaside by Fannie Mae and Freddie Mac. 

The total set-aside amount is equal to 

4.2 basis points (.042 percent) of the 

GSEs’ new mortgage purchases, a 

portion of which is directed to the HTF. 

Under section 1337 of the Act, the 

Director of the Federal Housing Finance 

Agency (FHFA), the independent 

federal agency with oversight of the 

GSEs, has the authority to suspend 

Fannie Mae’s and Freddie Mac’s 

affordable housing contributions if such 

contributions were to have an adverse 

impact on the financial stability of the 

GSEs, as described in section 1337(b). 

Shortly after being placed in 

conservatorship in 2008, the GSEs were 

instructed by the FHFA to suspend the 

contributions. 

On December 11, 2014, the Director of 

FHFA issued a letter to the GSEs that 

reinstated the GSE contributions under 

section 1337, in accordance with the 

following terms and conditions (which 

may be supplemented or modified by 

specific guidance or directive from 

FHFA). During each GSE fiscal year 

(which runs from January 1 to December 

31), commencing with the GSE’s fiscal 

year 2015 and in each fiscal year 

thereafter, each GSE will set aside an 

amount equal to 4.2 basis points of each 

dollar of unpaid principal balance of its 

total new business purchases during the 

fiscal year for allocation in accordance 

with section 1337(a) . Within 60 

calendar days after the end of each fiscal 

year commencing with fiscal year 2015 

and for each fiscal year thereafter, the 

GSEs will allocate to the HTF the 

amount set aside unless during the 

fiscal year the GSE has made a draw 

from the Department of the Treasury 

under the terms of the Senior Preferred 

Stock Purchase Agreement (SPSPA) or 

unless the allocation would cause the 

GSE to have to make a draw from the 

Treasury Department under the terms of 

the SPSPA. If the GSE has made a draw 

from the Department of the Treasury 

under the terms of the SPSPA during 

fiscal year 2015 or makes a draw during 

a subsequent fiscal year or if the 

allocation would cause the GSE to make 

a draw for that fiscal year, the GSE will 

make no allocation for the fiscal year for 

which the draw was made or for any 

fiscal year in which it is determined that 

the allocation would cause a draw, and 

the set aside will be reversed for that 

fiscal year. 

The letter from FHFA also noted that 

although the profit levels the GSEs 

experienced since 2012 are not expected 

to be sustainable, reasonable projections 

indicate that the GSEs will remain 

profitable for the foreseeable future. 

FHFA continues to monitor the 

financial condition of the GSEs and 

retains the authority to revise or reverse 

the decision at any time in accordance 

with the provisions of section 1337(b). 

Accordingly, HUD is proceeding with 

this rule to implement the HTF. 

Congress authorized the HTF with the 

stated purpose of: (1) Increasing and 

preserving the supply of rental housing 

for extremely low-income (ELI) families 

with incomes between 0 and 30 percent 

of area median income and very lowincome (VLI) families with incomes 

between 30 and 50 percent of area 

median income, including homeless 

families, and (2) increasing 

homeownership for ELI and VLI 

families. HUD’s periodic reports to 

Congress on worst-case needs for 

affordable rental housing document that 

shortages of affordable rental housing 

for ELI and VLI families have grown 

more severe. A household defined as 

experiencing worst-case housing needs 

means that the household has an 

income at or below 50 percent of the 

area median income, receives no 

housing assistance, and has a severe 

rent burden (paying more than half of its 

income for rent) and/or lives in severely 

inadequate conditions (e.g., incomplete 

plumbing). As of 2011, the combined 

number of ELI and VLI renters with 

worst-case housing needs was 8.48 

million, or 44 percent of all ELI and VLI 

renters (19.27 million). Because 

extremely low income households also 

constitute by far most (61.1 percent) 

very low-income renters, nearly three 

out of four (73.3 percent) households 

with worst case needs had extremely 

low incomes during 2011.1

There is a documented shortage of 

low-cost rental units, as builders and 

housing providers are unable to 

construct, finance, and operate a 

sufficient supply of rental housing 

affordable to ELI and VLI households. In 

2011, for every 100 ELI renters, on 

average, there were only 36 affordable 

units available, and for every 100 VLI 

renters nationwide, only 65 rental units 


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2See HUD’s Worse Case Housing Needs 2011 

Report to Congress at page 9. 

available.2 The HTF will provide funds 

to produce additional units affordable to 

ELI and VLI households with the 

greatest need, thus increasing the 

supply and reducing the most critical 

component of the existing shortage. 

Housing Trust Fund—Formula 

Allocation 

Section 1338 of the Act directs HUD 

to establish, through regulation, the 

formula for distribution of amounts 

made available for the HTF. The statute 

specifies that only certain factors are to 

be part of the formula, and assigns 

priority to certain factors. HUD’s 

proposed formula for the allocation of 

HTF funds was published for public 

comment on December 4, 2009, at 74 FR 

63938. 

Housing Trust Fund—Administration of 

the Fund 

In addition to the statutory direction 

to establish by regulation a formula for 

the allocation of HTF funds, section 

1338 of the Act directs HUD to establish 

and manage the HTF, the purpose of 

which is to provide grants to States for 

use to: (1) Increase and preserve the 

supply of rental housing for ELI and VLI 

families, including homeless families; 

and (2) increase homeownership for ELI 

and VLI families. Section 1338 of the 

Act also directs HUD to establish 

regulations to administer the HTF, and 

this rule presents the regulations that 

will govern the HTF, on an interim 

basis, as provided in the Summary of 

this rule. 

HUD’s proposed rule for the 

administration of the HTF funds was 

published for public comment on 

October 29, 2010, at 75 FR 66978. HUD 

proposed to codify the HTF regulations 

in a new subpart N of 24 CFR part 92. 

Part 92 contains the regulations for 

HUD’s HOME Investment Partnerships 

program (HOME program). The HOME 

program is the largest federal block 

grant program that produces affordable 

housing for very low-income 

households. The HOME program 

provides formula grants that 

communities use, often in partnership 

with local nonprofit groups, to fund a 

wide range of activities that build, buy, 

and/or rehabilitate affordable housing 

units for rent or homeownership. The 

HTF will operate in substantially the 

same manner, by providing formula 

grants to States used to develop 

affordable housing units for rent or 

homeownership. In addition, the grant 

activities in both programs require the 

same grantee administration and HUD 

oversight functions. 

III. Overview of Key Changes Made in 

Interim Rule 

This interim rule largely adopts the 

provisions of the proposed rule, 

although HUD is making some changes 

based on public comments and other 

considerations. The following highlights 

key changes made to the proposed rule 

at this interim rule stage: 

• The HTF regulations will be 

codified in a new part 93. While the 

HTF regulations have been 

synchronized with the HOME program 

regulations for the reasons set forth in 

the preamble to the proposed rule, HUD 

agrees with commenters that it would be 

clearer to place the HTF regulations into 

a new 24 CFR part. Therefore, the HTF 

formula allocation and program 

administration regulations are now 

found in 24 CFR part 93. 

• The HTF proposed rule was 

published prior to the publication of the 

HOME final rule. (The HOME final rule 

published on July 24, 2013, at 78 FR 

44638.) In order to synchronize the 

applicable requirements of the HTF 

regulations with those of the HOME 

regulations, HUD has revised several 

provisions in the HTF proposed rule. 

The proposed provisions revised by this 

interim rule include definitions, eligible 

costs, eligible administrative and 

planning costs, property standards, 

inspections, income determinations, 

tenant protections and selections. For 

some of the proposed provisions 

revised, only minor word changes were 

made so that the language in the HTF 

regulations matches the HOME 

regulations, while in other sections the 

exact language of certain HOME 

regulations was incorporated in the HTF 

regulations. 

• HUD removed the proposed 

regulatory sections on property 

standards (§§ 92.741–92.745) that 

require HTF units to meet Energy Star 

and Water Sense certifications. Since 

issuance of the HTF proposed rule and 

the HOME program final rule, HUD 

proposed, in a notice published in the 

Federal Register on April 15, 2014, at 

79 FR 21259, to adopt revisions to the 

2006 International Energy Conservation 

Code (IECC) and to the 2004 energy 

codes of the American Society of 

Heating, Refrigerating, and Airconditioning Engineers (ASHRAE), and 

apply these revised standards to the 

HUD programs covered by the Energy 

Independence and Security Act of 2007 

(EISA). The covered HUD programs 

include the HOME program, and HUD 

also applies these standards to HTF to 

synchronize with the standards to be 

applied to the HOME program. 

• At the proposed rule stage, HUD 

proposed to facilitate the use of HTF 

funds in transit-oriented development 

by proposing a different definition of 

commitment of HTF funds for transitoriented development projects. HUD 

removes this definition in this interim 

rule and instead grantees will determine 

how best to use HTF funds in transitoriented development projects within 

the requirements for commitment and 

allocation plans established in this rule. 

• HUD adds a process by which 

minimum grant awards will be 

determined if the amount of funds in 

the HTF, in any given fiscal year, is 

insufficient to award each grantee a 

minimum grant of $3 million. 

• The HTF regulations regarding 

operating cost assistance and operating 

cost reserves have been modified. In 

response to public comment to allow 

more flexibility for grantees to provide 

operating cost assistance, the limit on 

the amount of operating cost assistance 

and operating cost reserves that a 

grantee may award from its annual grant 

was increased from 20 percent to one 

third. In addition, the requirements for 

operating cost reserves will differ 

depending on the source of funds for the 

HTF. For non-appropriated funds (i.e., 

the allocations from Fannie Mae and 

Freddie Mac) that become available for 

the HTF formula distribution, grantees 

will be allowed to fund operating cost 

reserves at the amount required for a 

period of up to 30 years (the term for the 

period of affordability for each HTFassisted project). However, if 

appropriated funds become available for 

HTF, grantees will be allowed to fund 

operating cost reserve for a period of no 

more than five years, as provided in the 

proposed rule and retained in this 

interim rule. At the proposed rule stage, 

HUD did not propose to allow use of 

HTF funds for public housing. This 

interim rule allows the use of HTF 

funds (1) in connection with the Choice 

Neighborhoods (Choice), and lowincome housing tax credit (LIHTC) 

programs for construction of new units 

that replace existing public housing 

properties; and (2) for the rehabilitation 

of existing public housing units in 

connection with the Rental Assistance 

Demonstration, Choice and LIHTC 

programs. 

IV. Discussion of Public Comments and 

HUD Responses 

The public comment period for the 

proposed formula rule closed on 

February 2, 2010. HUD received 13 

public comments on the proposed 

formula rule. Commenters included 


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local housing and community 

development agencies, housing groups, 

housing authorities, trade associations, 

and individuals. A majority (eight) of 

the commenters wrote in support of the 

rule or portions of it, including a 

national advocacy organization that 

fully endorses the proposed rule. HUD 

is not addressing these favorable 

comments because they do not raise 

issues which require a response. Other 

comments are discussed below. The 

public comments on the proposed 

formula rule can be found at: http://

www.regulations.gov/

#!docketDetail;D=HUD-2009-0149. 

The public comment period for the 

proposed program rule closed on 

December 28, 2010. HUD received 93 

comment letters; commenters included 

State and local housing and community 

development agencies, housing groups, 

housing authorities, trade associations, 

and individuals. The comment letters 

included general comments about the 

proposed rule and statutory 

requirements for the HTF, as well as 

suggestions for changes to specific 

provisions in the proposed rule. The 

public comments on the proposed 

program rule can be found at: http://

www.regulations.gov/

#!docketDetail;D=HUD-2010-0101. 

Issues raised in public comments on 

the proposed formula and proposed 

program rule and HUD’s responses to 

these comments follow. 

Part 91—Consolidated Submissions for 

Community Planning and Development 

Programs (Consolidated Plan Revisions) 

The proposed program rule proposed 

to make conforming changes to the 

Consolidated Plan regulations at 24 CFR 

part 91 to require information related to 

the HTF to be included in State or local 

government strategic and annual action 

plans. As stated at § 91.220 and 

§ 91.320, HUD proposed to require that 

the action plan must include the HTF 

allocation plan. 

Comments: HUD received several 

comments which suggested additional 

required elements be added to the 

allocation plan, including: National 

standards for green, healthy, sustainable 

development will be met by HTF units; 

caps on operating assistance; transitoriented development projects; an 

explanation of the State’s decision to 

use subgrantees, criteria for selecting 

subgrantees, and a method for 

distributing funds among subgrantees. 

One commenter suggested that HUD 

require the allocation plans for HTF 

funds to specifically prioritize transitoriented development. One commenter 

suggested specific revisions to the 

language for the sake of further clarity, 

such as cross references between the 

definition of HTF funds at § 92.702 in 

§ 92.220(l)(4)(i) and § 92.320(k)(5)(I). A 

commenter suggested that HUD require, 

at § 92.725(c), that the subgrantee’s HTF 

allocation plan be consistent with the 

State’s HTF allocation plan. 

Similarly, a commenter suggested that 

HUD revise § 92.220(l)(4)(i) and 

§ 92.320(k)(5)(i) so that they have 

identical language and requirements. 

One commenter suggested that the 

housing market characteristics in the 

HTF formula be added to the general 

housing market characteristics required 

in the consolidated plan at § 92.210(a) 

and § 92.310(a). Another commenter 

recommended that the rule require HTF 

allocation plans to certify that the HTF 

funds will not be subject to State or 

local laws and policies that impose 

requirements for subsidized housing 

development that exceed the 

requirements for similar residential 

development not involving subsidies. 

Two commenters stated that the 

proposed rule should not restrict the 

types or locations of HTF units, but 

instead should retain maximum 

flexibility to meet local needs. 

HUD Response: HUD appreciates the 

concern expressed by commenters that 

HTF allocation plans at the State and 

local level mirror each other so that the 

HTF funds expended are targeted to the 

needs identified in the state plans. 

However, it is possible that a State or 

State-designated entity would provide 

HTF funds to different subgrantees for 

different types of projects and programs 

throughout the state to address various 

needs. In these situations, having 

identical State and local plans would 

not be practicable. To address these 

concerns, rather than modifying part 91 

requirements related to HTF allocation 

plan, at this interim rule stage, HUD 

modified language at § 93.404 (§ 92.774 

of the proposed rule) to require that 

grantees include executed written 

agreements with subgrantees that 

specify allowable programs and 

requirements. 

An explanation of the State’s decision 

to use subgrantees, criteria for selecting 

subgrantees, and method for distributing 

funds among subgrantees are required at 

§ 91.320(k)(5). The housing market 

characteristics used in the HTF formula 

are reflected in the analyses required in 

the consolidated plan. In response to 

comments about the locations where 

HTF funds will be used, HUD notes that 

the HTF statute does not preempt State 

or local law, and the regulation cannot 

prevent the use of HTF funds in places 

that impose requirements on subsidized 

projects that are not in violation of 

Federal laws. 

General Comments on Promulgation of 

the HTF Regulations as Subpart N of 

Part 92 of the Proposed Rule 

HUD specifically solicited input from 

HTF grantees and interested parties on 

HUD’s proposed coordination of the 

HOME program and HTF regulations, as 

well as additional or alternative ways to 

better coordinate and use HTF funds 

with funding from other Federal, State, 

local programs, or private sources 

typically used to produce mixed-income 

affordable housing developments. 

Comments: Some commenters 

expressed concern that by including 

HTF regulations in Subpart N of the 

HOME program regulation, the HTF 

program will lack an identity as a 

separate program. 

HUD Response: HUD agrees with 

commenters that the regulations should 

be located in a new part 93, as this 

approach highlights HTF as a separate 

program, and this rule codifies the 

regulations in new part 93. However, 

many of the requirements are the same 

for both the HOME and HTF programs 

(e.g., administrative requirements; 

monitoring, site and neighborhood 

standards; and affirmative marketing), 

therefore, in moving the HTF 

regulations as proposed in part 92 for 

the HTF to part 93, HUD repeated the 

requirements in the HOME rule that also 

apply to the HTF. 

Several commenters also called for 

streamlining between HTF and other 

programs and asked that HUD avoid 

duplicative requirements. Because many 

HTF grantees also administer the HOME 

program, streamlining the regulations 

this way will help grantees avoid having 

to create entirely new or separate 

structures to administer HTF funds, and 

this may help grantees develop and 

deliver more affordable housing sooner 

to households and communities in 

need. 

In addressing public comments on 

specific provisions in the proposed rule, 

this preamble will refer to the regulatory 

sections as they were originally 

proposed in part 92. The following table 

matches the proposed rule sections with 

the new sections in this interim rule: 


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Proposed Final Subject 

Subpart A—General 

92.701 ......... 93.1 ............................................................ Overview. 

92.702 ......... 93.2 ............................................................ Definitions. 

92.703 ......... 93.3 ............................................................ Waivers. 

Subpart B—Allocation Formula; Reallocations 

92.710 ......... 93.50 .......................................................... Formula Allocation. 

92.711 ......... 93.51 .......................................................... Formula Factors. 

92.712 ......... 93.52 .......................................................... Minimum State Allocations. 

92.713 ......... 93.53 .......................................................... Federal Register Notice of Formula Allocations. 

92.714 ......... 93.54 .......................................................... Reallocations by Formula. 

Subpart C—Participation and Submission Requirements; Distribution of Assistance 

92.720 ......... 93.100 ........................................................ Participation and Submission Requirements. 

92.725 ......... 93.101 ........................................................ Distribution of Assistance. 

Subpart D—Program Requirements 

92.726 ......... 93.150 ........................................................ Site and Neighborhood Standards. 

92.727 ......... 93.151 ........................................................ Distribution of Assistance. 

Subpart E—Eligible and Prohibited Activities 

92.730 ......... 93.200 ........................................................ Eligible Activities: General. 

92.731 ......... 93.201 ........................................................ Eligible Project Costs. 

92.732 ......... 93.202 ........................................................ Eligible Administrative and Planning Costs. 

92.734 ......... 93.203 ........................................................ HTF Funds and Public Housing. 

92.735 ......... 93.205 ........................................................ Prohibited Activities and Fees. 

Subpart F—Income Targeting 

92.736 ......... 93.250 ........................................................ Income Targeting: Rental Units. 

92.737 ......... 93.251 ........................................................ Income Targeting: Homeownership. 

Subpart G—Project Requirements 

92.740 ......... 93.300 ........................................................ Maximum Per-Unit Subsidy Amount, Underwriting, and Subsidy Layering. 

92.741 ......... 93.301 ........................................................ Property Standards. 

92.746 ......... 93.302 ........................................................ Qualification as Affordable Housing: Rental housing. 

92.747 ......... 93.303 ........................................................ Tenant Protections and Selection. 

92.748 ......... 93.304 ........................................................ Qualification as Affordable Housing: Homeownership. 

92.749 ......... 93.305 ........................................................ Qualification as Affordable Housing: Modest Housing Requirements for Homeownership. 

92.750.

Subpart H—Other Federal Requirements 

92.760 ......... 93.350 ........................................................ Other Federal Requirements and Nondiscrimination; Affirmative Marketing. 

92.761 ......... 93.351 ........................................................ Lead-Based Paint. 

92.762 ......... 93.352 ........................................................ Displacement, Relocation, and Acquisition. 

92.763 ......... 93.353 ........................................................ Conflict of Interest. 

92.764 ......... 93.354 ........................................................ Funding Accountability and Transparency Act. 

Subpart I—Program Administration 

92.770 ......... 93.400 ........................................................ Housing Trust Fund (HTF) Accounts. 

92.771 ......... 93.401 ........................................................ HTF Grant Agreement. 

92.772 ......... 93.402 ........................................................ Program Disbursement and Information System. 

92.773 ......... 93.403 ........................................................ Program Income and Repayments. 

92.774 ......... 93.404 ........................................................ Grantee Responsibilities; Written Agreements; Onsite Inspections; Financial Oversight. 

92.775 ......... 93.405 ........................................................ Applicability of Uniform Administrative Requirements. 

92.776 ......... 93.406 ........................................................ Audit. 

92.777 ......... .................................................................... Closeout. 

92.778 ......... 93.408 ........................................................ Recordkeeping. 

92.779 ......... .................................................................... Performance reports. 

Subpart J—Performance Review and Sanctions 

92.780 ......... 93.450 ........................................................ Accountability of Recipients. 

92.781 ......... 93.451 ........................................................ Performance Reviews. 

92.782 ......... 93.452 ........................................................ Corrective and Remedial Actions. 


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Proposed Final Subject 

92.783 ......... 93.453 ........................................................ Notice and Opportunity for Hearing; Sanctions. 

Definitions Proposed § 92.702; Final 

§ 93.2 

In § 92.702(a), HUD proposed that 

several definitions in the HOME 

program regulations (24 CFR 92.2) be 

applicable to the HTF. In § 92.702(b), 

HUD outlined key definitions applicable 

to the HTF, including: ‘‘Commitment,’’ 

several definitions related to energy 

efficiency, ‘‘Grantee,’’ ‘‘Recipient,’’ 

‘‘State,’’ ‘‘State-Designated Entity,’’ and 

‘‘Subgrantee.’’ HUD received several 

comments regarding the language 

proposed to define terms applicable to 

the HTF. 

Commitment 

To facilitate transit-oriented 

development projects, the proposed 

definition of ‘‘commitment’’ permitted a 

unit of general local government to 

acquire the land for a transit-oriented 

development project in advance of 

having specific project plans. 

Specifically, HUD proposed that the 

unit of general local government must 

hold title to the land for the transitoriented development project; the 

proposed rule allowed 36 months from 

the date of acquisition of the property 

for a transit-oriented development 

project to commit additional funds to a 

specific project on the property. 

Comments: HUD received several 

comments regarding this proposed 

definition of and deadline for 

‘‘commitment’’ for transit-oriented 

development projects. Some 

commenters suggested the deadline to 

commit additional funds to transitoriented development should be 

extended to 42 months, while others 

suggested 48 months, and one 

commenter suggested 60 months. 

Another commenter suggested that the 

commitment deadline for transitoriented development should be less 

than 36 months. 

Some commenters stated that the 

proposed definition of ‘‘commitment’’ 

for transit-oriented development should 

be revised to allow non-local 

government entities to commit the few 

funds necessary to comply with the rule 

and two commenters suggested that 

these non-local government entities be 

allowed to hold title to the transitoriented development property. A few 

commenters stated that the rule’s 

emphasis on transit-oriented 

development gives preference to urban 

areas, and asked that the rule provide a 

framework for balancing transit-oriented 

development goals with rural areas that 

have limited or no transit services. 

Commenters asked HUD to instruct 

States to give the same priority to 

developments meeting the greatest rural 

needs as is given to transit-oriented 

development in urban areas. Some 

commenters stated that the rule should 

not mandate that all projects be located 

in a sustainable community since some 

States do not have fully developed 

transit systems, and the rule should 

provide flexibility to meet the varying 

needs of States. 

Another commenter suggested that 

the rule should require a minimum 

percentage of HTF funds be expended 

for transit-oriented development and 

mixed-income housing development. A 

few commenters supported allowing 

HTF funds to be used in combination 

with other government programs to 

leverage sources for creating a transitoriented development land acquisition 

or land bank program. A commenter 

proposed a more detailed definition for 

transit-oriented development that is 

intended to better target developments 

that promote transit ridership and 

reduce motor vehicle trips, remove the 

requirements for mixed-use and mixedincome development, require that 

developments within transit-oriented 

development be along a walkable route, 

and clarify what constitutes a ‘‘transit 

facility.’’ A few commenters suggested 

various methods to incentivize 

development of housing for ELI families 

in transit-oriented development projects 

that are accessible to transit and 

employment centers. 

Several commenters expressed 

concern over potential abuses of the 

different commitment deadlines and 

asked HUD to include additional 

requirements in the final rule to ensure 

that grantees do not tie up funds, e.g., 

to prevent local governments from using 

HTF funds to serially purchase land and 

hold it as if ‘‘land banking.’’ Some 

commenters stated that the rule should 

require that if the original land 

purchased is not used for ELI 

households, then the recipient must 

place the planned ELI housing within 

the same transit-oriented development 

area. A few commenters stated that the 

rule should also require that the correct 

zoning be in place before property is 

purchased for transit-oriented 

development, and one commenter 

suggested that the final rule include 

specific parameters for when property 

acquisition for transit-oriented 

development would be permissible. 

Finally, one commenter requested that 

the definition of ‘‘commitment’’ include 

a mechanism to ensure project 

completion, such as deadlines, progress 

schedules, or a recapture mechanism. 

HUD Response: HUD appreciates the 

comments regarding how HUD may 

provide incentives to encourage the use 

of HTF funds to develop housing 

affordable to ELI households that is also 

accessible to transit and employment 

centers. However, HUD acknowledges 

and agrees with the concerns expressed 

by many commenters that a separate 

commitment deadline for HTF funds 

used in transit-oriented development 

may cause a decrease in the amount of 

HTF units produced. 

Transit-oriented development is not 

required in the HTF statute or 

regulations. As proposed, § 92.725 

stated that grantees are responsible for 

distributing HTF funds throughout the 

State according to the State’s assessment 

of the priority housing needs within the 

State, as identified in the HTF allocation 

plan, which is part of the State’s 

consolidated and annual action plan. 

These plans contain several analyses of 

priority housing needs. Based on these 

identified priority needs, grantees may 

choose to prioritize development of 

HTF-assisted units near transit access 

and sustainable development. 

HUD agrees with commenters that the 

separate definition of commitment for 

transit-oriented development could lead 

to ‘‘land banking.’’ Land acquisition for 

banking purposes is not an eligible 

activity in the HTF statute, and HUD 

does not seek to encourage the use of 

HTF funds for ‘‘land banking.’’ Based on 

the comments received, HUD decided 

that use of HTF funds in transit-oriented 

development projects is best addressed 

at the State and local level, and that it 

is not necessary at this time to establish 

a separate definition or deadline related 

to the use of HTF funds for transitoriented development projects. Each 

grantee may include incentives and 

priorities in its HTF allocation plan to 

further promote sustainable 

development that is appropriate to the 

local communities where housing 

developed with HTF funds will be 

located. 

This rule, at § 93.2, eliminates the 

separate definition of commitment for 

transit-oriented development. 


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5206 Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Rules and Regulations 

State-Designated Entity, Grantee, 

Recipient 

In the proposed rule, a Statedesignated entity was defined as a State 

housing finance agency, tribally 

designated housing entity, or any other 

qualified instrumentality of the State 

that is designated by the State to be the 

grantee. 

Comments: One commenter 

recommended that the definition of 

‘‘State-designated entity’’ be revised to 

include ‘‘housing community 

development entity.’’ A commenter 

stated that the definitions of ‘‘grantee’’ 

and ‘‘recipient’’ should be consistent 

between HOME and HTF. Other 

commenters suggested that the rule be 

revised to explicitly state that public 

agencies, local governments, public 

housing authorities, non-profit entities, 

and for-profit entities are eligible 

recipients. 

HUD Response: The terms ‘‘statedesignated entity’’ and ‘‘recipient’’ are 

defined in the statute. This rule 

includes examples of the types of 

entities, such as public housing 

agencies, that may be eligible recipients 

providing that they meet the statutory 

qualifications for a recipient. 

Extremely Low- and Very Low-Income 

Families 

The HTF statute contains definitions 

of extremely low and very low-income 

families based on percent of median 

income, with adjustments for family 

size (30 percent of area median income 

(AMI) for extremely low and 50 percent 

of AMI for very low income). 

Comments: Some commenters stated 

that the proposed definitions of ‘‘very 

low-income families’’ and ‘‘extremely 

low-income families’’ are inconsistent 

with the statute. A few commenters 

requested HUD provide a definition of 

‘‘rural area’’ in the definition of ‘‘very 

low-income families.’’ Other 

commenters suggested that the HTF 

should adopt the definition of ‘‘family’’ 

as used in the HOME program. A 

commenter requested the term 

‘‘household’’ replace ‘‘family’’ 

throughout the rule. 

HUD Response: While the terms 

‘‘family’’ and ‘‘household’’ do not have 

the same meaning (a ‘‘household’’ can 

comprised more than one family), HUD 

acknowledges that the terms are 

sometimes used interchangeably in 

statute, regulation and guidance (i.e., 

HOME uses the part 5 definition of 

‘‘family’’ at 24 CFR 5.403, and defines 

household as one or more persons 

residing in a unit). 

HUD agrees with commenters that the 

HTF statute does not allow for the same 

adjustments in income as in the HOME 

program and modified the regulatory 

language at § 93.2 (from § 92.702 of the 

proposed rule) to reflect only the 

adjustments allowed by the HTF statute. 

For the purposes of the definition of 

very low-income families, in this 

interim rule, HUD defines the term 

‘‘rural’’ based on the term 

‘‘metropolitan’’ as defined by the Office 

of Management and Budget. All ‘‘nonmetropolitan ’’ areas will be considered 

‘‘rural.’’ 

Allocation Formula Proposed § 93; Final 

§ 93, Subpart B 

Comments: A commenter states that 

the need factors should be weighted 

equally to ensure fair distribution of 

resources. Another commenter 

specifically supports the 50 percent 

weight assigned to factor 1 (shortage of 

units), and the 25 percent weight 

assigned to factor 3. A commenter 

states, in the absence of information 

about how much of an increase 

California would receive compared to 

the proposed allocation, and the 

substantial housing needs of California’s 

low and very low-income population, 

that the factors should be weighted in 

accordance with alternative three, under 

which the first factor would be weighted 

at 60 percent and the other factors 

weighted at 13.3 percent. Another 

commenter states that the extremely 

low-income focus of this program means 

that it should be a key resource for 

assisting the homeless, and the formula 

allocation should reflect that priority. 

HUD Response: Section 1338(c)(3)(C) 

of the Act requires the formula to give 

priority emphasis and consideration to 

the first factor in section 

1338(c)(3)(B)(i), and therefore the factors 

cannot be weighed equally. The 

proposed rule reflected this priority 

consideration by weighting this factor 

higher than the other factors in the 

proposed allocation formula. The 

interim rule is adopting the proposal 

that the two factors addressing the 

needs of extremely low-income 

households, Factors 1 and 3, have a 

combined weight of 75 percent in 

keeping with the statutory targeting of 

funds. 

The Regulatory Impact Analysis (RIA) 

for the formula allocation HTF proposed 

rule was issued on December 4, 2009, 

and can be found on HUD’s Web site 

(http://www.huduser.org/portal/

publications/pubasst/riaforhtf.html). 

The RIA describes in detail the 

alternative weight structures that HUD 

analyzed in developing the HTF 

allocation formula, the resulting impacts 

of each alternative on the States, and the 

analysis that supports HUD’s selection 

of the alternative in the proposed 

allocation formula. The proposed 

formula strikes a balance between the 

high levels of housing needs in 

California and other States, as well as 

the competing priorities discussed in 

the RIA. 

An extremely low-income household, 

by statutory definition, means a 

household whose income does not 

exceed 30 percent of the area median 

income, with adjustments for family 

size. Homeless individuals and families 

who qualify as extremely low-income 

will be eligible for HTF units. The 

combined weight of 75 percent for the 

two factors that address the needs of 

extremely low-income households, 

factors one and three, reflects the 

statutory targeting of funds to extremely 

low-income households in the proposed 

formula. Furthermore, section 

1338(a)(1)(A) of the Act specifically 

states that the purpose of the HTF is ‘‘to 

increase and preserve the supply of 

rental housing for extremely low- and 

very low-income families, including 

homeless families . . .’’ 

Data Used in the Allocation Formula 

Comments: A commenter states that 

homeless households should be 

included in the aggregate number of 

extremely low-income renter 

households to determine the true need. 

Data are readily available from 

Continuum of Care (CoC) programs and 

the Homeless Management Information 

System (HMIS). Another commenter 

states that more detail is needed on the 

sources of data the proposed formula 

uses. A commenter states that HUD 

should state exactly which American 

Community Survey data it will use, 

whether such data will be updated and 

used every year, and at what point 2010 

Census data will be used. The 

commenter also states that HUD should 

clarify which RSMeans Cost Survey data 

will be used, and recommends data 

specific to multifamily construction. 

This commenter states that HUD should 

advise what sampling method will be 

used. Whatever method is used, the 

commenter stated that HUD should 

recognize that most multifamily 

construction is in the higher-cost areas. 

HUD Response: The proposed 

allocation formula incorporated the 

required statutory factors in section 

1338(c)(3)(B). Consistent with the 

Community Development Block Grant 

(CDBG) and HOME formulas, the data 

source used to determine the number of 

extremely low-income renters with 

housing problems for factor three will 

be the most currently available data 


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3See http://www.census.gov/housing/. 

4See http://www.census.gov/acs/www/data_

documentation/data_main/. 

from the United States Census Bureau.3

For HTF allocations in Fiscal Year (FY) 

2016, the most current data will be a 

special tabulation of the latest available 

three-year average data from the 

American Community Survey.4 Census 

standard tabulation data do not provide 

counts of households by the income 

breaks required by statute so HUD must 

request a special tabulation of American 

Community Survey data to calculate the 

HTF formula. HUD is using the threeyear average data to avoid problems 

with year-to-year bias in the data caused 

by small samples in some of the smaller 

population states. These data do not 

include homeless individuals and 

families. 

HUD appreciates the commenter’s 

view that homeless families should be 

included in the count of extremely lowincome families. HUD has considered 

the idea of including CoC counts or 

(HMIS) counts of homeless people in 

the counts for extremely low-income. 

HUD has decided not to implement 

these suggestions for two reasons: 

• Inconsistent and incomplete data. 

Neither CoC nor HMIS data are 

complete for all parts of the country and 

the method of data collection is 

somewhat different from place to place. 

That makes the data poorly suited for an 

allocation formula because they do not 

have full national coverage and different 

data collection methods may result in 

bias toward one place over another. 

• Incentive bias. Even when the data 

have full coverage, HUD is unlikely to 

use CoC or HMIS data for any allocation 

formulas because the data are being 

reported by grantees. HUD is concerned 

that some grantees may adjust their 

method of reporting if they perceive 

they might get a different funding 

allocation based on that reporting. 

The RSMeans construction cost data 

used in the formula are the RSMeans 

Square Foot Costs. Specifically, HUD 

used city-level location factors for 

residential construction to prepare statelevel estimates of the relative cost of 

residential construction. In developing 

these State estimates, HUD did not 

select a subset or sample of cities. 

Rather, every city with a published 

location factor was included, and 

location factors were weighted in 

proportion to city populations. Data are 

not available for rural areas or for 

multifamily residential construction 

specifically. However, because 

construction costs are generally higher 

in population centers, HUD believes 

that the methodology adequately 

accommodates the commenter’s concern 

about multifamily construction in costly 

areas. High-cost areas are reflected in 

the use of urban data to prepare State 

estimates as well as by the use of 

population weighting to ensure that the 

most populated cities receive their due 

priority. HUD intends to use the most 

recent available cost data and 

population data in developing future 

estimates. 

Minimum Allocations 

The interim rule contains a new 

provision to address minimum grant 

allocations. As noted earlier in this 

preamble, section 1338(c)(4)(C) of the 

Act directs that each of the 50 States 

and the District of Columbia is to 

receive a minimum grant of $3 million. 

This section of the statute further 

provides that if the formula amount 

determined in any fiscal year would 

result in an allocation of a minimum 

grant of less than $3 million to any of 

the 50 States or the District of Columbia, 

the allocation for any such State or the 

District of Columbia shall be allocated a 

minimum grant of $3 million, and the 

increase shall be deducted pro rata from 

the allocations made to all the other 

States. 

The Act did not envision a situation 

in which the HTF lacked sufficient 

funds to award each of the 50 States and 

the District of Columbia a minimum 

grant of $3 million. After the deposits 

are made to the HTF for a fiscal year, 

section 1338(c)(4)(B) of the Act requires 

HUD to make allocations to its grantees. 

To give meaning to both of these 

statutory sections, HUD interprets the 

statute to require the allocation of grants 

even if the grants are less than the $3 

million minimum. If the amount for a 

fiscal year is insufficient to provide the 

minimum allocations, HUD will publish 

a notice in the Federal Register for 

comment, describing an alternative 

allocation method. 

Participation and Submission 

Requirements; Distribution of 

Assistance Proposed §§ 92.720–92.725; 

Final §§ 93.100–101 

Allocation Plan/Participation and 

Submission Requirements § 92.720 

In § 92.720, HUD proposed requiring 

each State to notify HUD of its intent to 

participate in the HTF program and to 

have a consolidated plan that contains 

its HTF allocation plan required by the 

Act. HUD proposed to implement the 

requirement for an HTF allocation plan 

by amending its regulations in 24 CFR 

91.220 and 91.320 to include these 

requirements in the consolidated plans 

of grantees and, where applicable, 

subgrantees. Section 92.720 of the 

proposed rule directed States to include 

the HTF allocation plan in the 

consolidated plan and follow the citizen 

participation requirements found in the 

consolidated plan regulations in 24 CFR 

part 91. 

Comments: Several commenters 

expressed concern that the proposed 

requirements do not place enough 

emphasis on public participation and 

transparency. 

HUD Response: HUD recognizes the 

commenters’ concerns but believes the 

requirements adopted in this rule 

provide for sufficient public input on 

the allocation of HTF funds without the 

need for additional or new citizen 

participation requirements. Section 

92.720(b) of the proposed rule directed 

States to include the HTF allocation 

plan in the consolidated plan and 

follow the citizen participation 

requirements in the consolidated plan 

regulations in 24 CFR part 91. The HTF 

allocation plan must consider the merits 

of the application in meeting the 

priority housing needs of the State. The 

rule provides flexibility to allow each 

grantee to include incentives and 

priorities in its HTF allocation plan that 

are appropriate to the communities 

where housing developed with HTF 

funds will be located. 

The language is adopted in this rule 

as proposed. 

Distribution of Assistance: HTF 

Grantees, Subgrantees, and Recipients 

§ 92.725 

HUD proposed that a formula grant be 

provided to each State for each year that 

funds are made available for the HTF. In 

§ 92.725, HUD described the proposed 

ways HTF funds will flow to the 

communities and recipients, as well as 

the participation and submission 

requirements for grantees receiving an 

HTF allocation. 

Comments: Some commenters 

suggested that HTF funds should be 

allocated directly to municipalities and 

local participating jurisdictions, as is 

done with other Community Planning 

and Development programs (e.g., 

HOME, CDBG, Emergency Solutions 

Grants) because States may be unsuited 

to determine local housing priorities 

and unable to effectively administer the 

HTF. In addition, they stated that 

passing the funding through the State 

delays the use of funds at the local level, 

and local governments are more in tune 

with local needs. 

Several commenters stated that HUD’s 

rule should ensure adequate allocation 

to rural areas, and that allocations 

should be made based on the relative or 

proportional need of frontier, rural, and 


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5208 Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Rules and Regulations 

urban areas. A few commenters 

suggested that the final rule should 

require funding to be allocated by 

formula to areas of greatest need, and 

adjusted for high-cost living areas and 

the lack of affordable housing. 

HUD Response: States and Statedesignated entities are the only 

permissible grantees in the HTF statute. 

HUD does not have the authority to 

designate local governments as grantees. 

An HTF grantee may choose to 

distribute HTF funds through one or 

more subgrantees. A subgrantee may be 

a State public agency or a unit of general 

local government. Section 91.320(k)(5) 

requires the action plan to reflect the 

State’s decision to distribute HTF funds 

through grants to subgrantees, and 

§ 92.725(d) requires the grantee to 

ensure that its subgrantees comply with 

the HTF requirements and carry out the 

responsibilities of the grantee. The HTF 

allocation formula is statutorily 

prescribed and HUD does not have the 

authority to change the allocation 

method. However, as described in 

§ 92.725(b), each grantee is responsible 

for distributing HTF funds throughout 

the State according to the State’s 

assessment of the priority housing needs 

within the State, as identified in the 

State’s approved consolidated plan 

(which will include the HTF allocation 

plan). The HTF allocation plan must 

describe the distribution of the grant 

and priority housing needs, including 

rural housing needs. 

The language is adopted in this rule 

as proposed. 

Program Requirements Proposed 

§§ 92.726–92.727; Final §§ 93.150 

Site and Neighborhood Standards 

§ 92.726 

In § 92.726, HUD proposed that the 

site and neighborhood standards 

contained in the HOME program 

regulations at § 92.202 apply to the HTF. 

Comments: A commenter suggested 

that HUD adopt all the site and 

neighborhood standard criteria 

applicable to existing housing being 

considered for project-based vouchers 

rather than limiting the criteria to new 

construction projects. The commenter 

reasoned that HTF, unlike HOME, will 

fund rehabilitation projects. Another 

commenter suggested that HUD’s rule 

include a provision that requires site 

selection to occur in a manner that will 

not exclude people with disabilities. A 

commenter stated that the rule should 

allow HTF funds to be held when local 

opposition has delayed a project or 

when exclusionary zoning is being 

challenged. 

HUD Response: HUD is adopting the 

site and neighborhood standards from 

§ 92.202 of the proposed rule in new 

§ 93.150, with an updated crossreference to the applicable standard for 

new construction projects at 24 CFR 

983.57(e). As with the HOME program, 

HUD is not applying site and 

neighborhood standards to 

rehabilitation projects under HTF. 

However, if project-based vouchers are 

used in an HTF rehabilitation unit, the 

site and neighborhood standards for 

project-based vouchers will apply. In 

addition, the requirements of 24 CFR 

part 8 (which implement section 504 of 

the Rehabilitation Act of 1973) apply to 

the HTF, and specifically address the 

site selection with respect to 

accessibility for persons with 

disabilities. 

Income Determinations § 92.727 

In § 92.727, HUD proposed a 

definition for ‘‘annual income’’ and 

described the process for determining 

the annual income of tenants and 

homebuyers for eligibility in HTFassisted housing. 

Comments: A commenter requested 

the proposed language be revised to 

further clarify which set of income 

determination provisions are applicable 

to the HTF. Another commenter 

recommended that HUD’s rule allow 

residents and applicants to contest 

income determinations. Another 

commenter expressed concern that the 

use of the Enterprise Income 

Verification can pose a problem for 

recently institutionalized persons, as it 

can cause significant delays. 

HUD Response: HUD appreciates the 

suggestions but the income 

determination provisions provided in 

this HTF rule are those that HUD uses 

in its HOME program rule, which HUD 

believes work well. Therefore HUD is 

not inclined to change these provisions. 

The income determinations will be 

made in accordance with the HTF 

program requirements, which mirror the 

HOME program requirements, and do 

not involve the use of the Enterprise 

Income Verification system. 

Eligible and Prohibited Activities 

Proposed §§ 92.730–92.735; Final 

§§ 93.200–93.205 

In §§ 92.730–92.735, HUD proposed 

requirements that govern eligible and 

prohibited activities, eligible project 

costs, and planning and administrative 

costs. Allowable and prohibited fees 

were also addressed in these sections. 

Eligible Activities § 92.730 

In § 92.730, HUD set forth HTFeligible activities. Section 1338(c)(7)(A) 

of the Act provides that HTF funds may 

be used for assistance for the 

production, preservation, rehabilitation, 

and operating costs of rental housing. 

To achieve the goal of using HTF funds 

primarily for the production of new 

affordable units, HUD proposed to limit 

the amount of HTF funds that may be 

used for operating cost assistance to 20 

percent of each annual grant. 

Section 1338(c)(7)(B) provides that 

the production, preservation, and 

rehabilitation of housing for 

homeownership, including forms of 

down payment assistance, closing cost 

assistance, and assistance for interest 

rate buy-downs, are eligible activities. 

HTF funds may be used only for units 

that will be the principal residence of 

eligible families who are first-time 

homebuyers. 

Section 1338(c)(10)(A) of the Act 

provides that not more than 10 percent 

of the annual grant may be used for 

homeownership activities. If a grantee 

chooses to implement a homeownership 

program with HTF funds, HUD 

proposed requiring grantees to perform 

underwriting analysis. 

Eligible Activities: General § 92.730(a) 

Comments: HUD received several 

comments which suggested the rule 

expand the list of eligible activities. A 

commenter stated that HUD’s rule 

should allow for HTF funds to be used 

in projects already underway. Another 

commenter suggested HUD add explicit 

language clarifying that HTF funding 

may be used in mixed-income 

developments. A few commenters 

suggested that HUD’s rule permit HTF 

funds to be used for development costs 

associated with laundry facilities and 

community space located in buildings 

which are separate from residential 

space. A commenter requested 

additional clarification regarding the 

prohibition on charging laundry access 

fees does not impact the ability to 

impose reasonable charges for the use of 

a washer or dryer. Another commenter 

recommended that HUD’s rule include 

language that provides a basis for 

charging impact fees, and clarifies 

‘‘reasonable and necessary costs.’’ A 

commenter asked for a definition of 

‘‘non-luxury,’’ and stated that this 

requirement, as it applies to 

construction costs, is impractical to 

apply. Another commenter suggested 

that HUD allow grantees to charge 

property owners monitoring costs for 

the entire period of affordability up 

front and include monitoring costs as an 

eligible use of HTF funds. A commenter 

recommended that refinancing costs be 

included as an eligible cost. 


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Several commenters objected to 

allowing transitional housing as an 

eligible activity because it does not meet 

the intent of increasing access to rental 

properties available to ELI households 

and does not appear in the authorizing 

statute. Another commenter expressed 

concern that there may be conflicts 

between fair housing laws and 

transitional housing plans impacting 

people with disabilities. 

Another commenter stated that there 

should be a greater focus on 

homeownership in the final rule, and 

that downpayment assistance programs 

should constitute an eligible use of HTF 

funds. A few commenters opposed the 

first-time homebuyer restriction and 

recommend the final rule permit the 

rehabilitation of ELI owner-occupied 

homes as a more effective means of 

addressing homeownership for ELI 

households. Other commenters 

recommended HUD’s rule stress the 

voluntary nature of using 10 percent of 

HTF funds for homeownership 

activities. 

HUD Response: This rule makes clear 

that projects underway when the HTF 

rule is implemented are not eligible to 

receive HTF funds. HUD does not agree 

that HTF funds should be permitted to 

pay costs for constructing community 

space or laundry facilities in buildings 

that are separate from the residential 

space. Although it is sometimes 

necessary to provide such space in 

separate buildings, HUD believes that 

States should leverage other funds to 

pay such costs so that HTF funds are 

used to create as many ELI and VLI 

units as possible. Nothing in this 

interim rule prohibits reasonable 

charges for washing machines. 

HUD does not believe that inclusion 

of a definition of non-luxury in the HTF 

rule is practical, as amenities 

considered luxury change over time. For 

example, air conditioning in certain 

HUD-assisted housing was considered a 

luxury item at one time. HTF grantees 

have experience with ensuring that only 

non-luxury items are included in 

housing because they also administer 

the HOME program, which has similar 

requirements. 

HUD has reconsidered making 

transitional housing an eligible type of 

housing in the HTF and agrees with 

commenters that this type of housing is 

contrary to the primary purpose of the 

HTF, which is to increase the supply of 

permanent affordable housing. 

Transitional housing is frequently 

developed to address the needs of 

homeless persons, to provide housing 

assistance and services that will enable 

them to obtain permanent affordable 

housing. The language in this section 

was revised to delete transitional 

housing as an eligible type of housing. 

Monitoring is an eligible 

administrative cost. This interim rule 

does not allow grantees to charge 

property owners monitoring costs for 

the entire period of affordability ‘‘up 

front’’ as suggested by commenters but 

does permit HTF grantees to charge 

property owners monitoring fees (see 

§ 93.205). 

Rehabilitation of housing for existing 

homeowners is not an eligible activity 

in the statute. The statute restricts the 

use of HTF funds for homeownership to 

first-time homebuyers and limits the 

amount of each annual HTF grant that 

may be used for homeownership to 10 

percent. Each State is allowed by the 

statute to determine how it will use HTF 

funds for homeownership assistance. 

Downpayment assistance is an eligible 

activity in the regulation. 

The proposed rule made refinancing 

of existing rental projects permissible as 

part of rehabilitation when the 

proportional cost of rehabilitation is 

greater than the amount of debt 

refinanced. HUD proposed these 

restrictions on refinancing in order to 

synchronize with the HOME program 

and to facilitate the preservation and 

rehabilitation of existing housing for ELI 

and VLI households. These proposed 

restrictions are therefore retained in this 

interim rule. 

Eligible Project Costs § 92.731 

In § 92.731, HUD proposed eligible 

project costs to include development 

hard costs, refinancing costs in 

conjunction with rehabilitation, 

acquisition of standard projects, 

development-related soft costs, 

architectural and engineering fees, 

project audit costs, staff overhead 

related to the development of the units, 

settlement costs, impact fees, the cost to 

address and meet environmental and 

historic preservation property 

standards, operating costs, relocation 

costs, repayment of construction or 

other loans, and certain types of costs 

for construction undertaken before HTF 

funds were committed to the project. 

Operating Cost Assistance and 

Operating Cost Assistance Reserves 

(§ 92.731(e)) 

To achieve the goal of using HTF 

funds primarily for the production of 

new affordable units, HUD proposed, in 

§ 92.730(a)(1), to limit the amount of 

HTF funds that may be used for 

operating cost assistance to 20 percent 

of each annual grant. The proposed rule 

stated that operating cost assistance can 

be provided for the entire period of 

affordability, but may be awarded only 

in two-year increments from each HTF 

grant. Operating cost assistance, as 

defined in § 92.731(e), may include the 

cost of utilities, insurance, taxes, and 

scheduled payments to a replacement 

reserve. The eligible amount of HTF 

funds per unit for operating costs is 

determined based on the deficit 

remaining after the tenant monthly rent 

payment for the HTF-assisted unit is 

applied to the HTF-assisted unit’s share 

of monthly operating costs. The written 

agreement between the grantee and the 

recipient must set forth the maximum 

amount of the operating assistance to be 

provided to the HTF-assisted rental 

project. 

The proposed rule also included 

operating cost reserves of up to five 

years worth of operating cost assistance 

as an eligible activity (§ 92.731(e)(2)). 

Grantees would be allowed to establish 

operating cost reserves for specific HTFassisted projects if necessary to ensure 

the financial feasibility of a project. 

Comments: Several commenters 

disagreed with the proposed 20 percent 

cap on the amount of each annual grant 

that may be used for operating cost 

assistance and suggested that HUD 

eliminate any restriction on the amount 

of each annual grant that may be used 

for operating cost assistance. Others 

suggested increasing the cap. Still others 

recommended that any limits on 

operating cost assistance should be 

based on each State’s housing needs and 

should be left to the discretion of the 

States. Commenters also recommended 

that HUD impose no restriction on using 

HTF funds for operating assistance in 

the absence of Section 8 voucher 

assistance. Some commenters stated that 

HTF funding for operating assistance 

should be limited to HTF-assisted units 

and units being developed with HTF 

funds, while others support allowing 

HTF operating assistance for units 

funded by other State and Federal 

programs. 

A commenter stated that it will be 

difficult to attract investors and ensure 

the long-term financial success of 

projects without giving States flexibility 

in determining how to apply HTF funds 

toward operating assistance. Another 

commenter stated that the program will 

encounter underwriting challenges 

regardless of operating assistance, but 

depending on the mix of units, there 

may be sufficient revenue generated to 

support the properties. Commenters 

expressed concern that the proposed 

cap will limit the number of units that 

can be developed with HTF funds, 

particularly units that serve ELI 

households. 

A commenter stated that the rule must 

clarify that States are permitted to limit 


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and target operating assistance. 

Commenters recommended that the 

final rule should permit the initial HTF 

grant to include sufficient funding for 

operating assistance or operating 

reserves to last for the entire term of 

affordability. A few commenters stated 

that the final rule should permit the 

creation of capital reserves aimed at 

increasing affordability for ELI 

households. 

In response to a request from HUD for 

input on whether tax abatements can 

significantly reduce operating costs, one 

commenter stated that while tax 

abatements can reduce operating cost, 

local governments will hesitate to 

provide tax abatements due to current 

economic pressures. 

A few commenters stated that the 

time limits for offering operating cost 

assistance and operating reserves should 

be eliminated at the final rule stage. 

Commenters stated that HTF-assisted 

units that require operating assistance 

during the first two years will almost 

certainly need operating assistance 

throughout the entire term of 

affordability, and that grantees should 

have the flexibility to provide more than 

two years of assistance when faced with 

underwriting or feasibility concerns. 

Another commenter stated that the HTF 

funding should be allowed to capitalize 

Section 8 transition reserves to 

encourage private lenders to underwrite 

HTF-assisted projects with Section 8 

project-based assistance. A few 

commenters recommended that HUD 

provide guidance in the HTF program 

guidelines to State grantees on 

underwriting standards for reinvestment 

and building reserves to self-finance 

rehabilitation during the period of 

affordability. 

Lastly, several comments were 

submitted regarding the use of Section 

8 vouchers in conjunction with HTF 

funds. Some commenters recommended 

that Section 8 vouchers be awarded 

along with the HTF funding. Another 

commenter asks whether there is a unitbased or project-based prohibition on 

using HTF funds for operating costs 

when Section 8 project-based vouchers 

are also involved in the project. 

HUD Response: The HTF is primarily 

a production program meant to add 

units to the supply of affordable housing 

for ELI and VLI households. Analyses of 

the use of HTF funds for both 

development and operating cost 

assistance showed that the use of HTF 

funds for operating assistance could 

very quickly consume each State’s 

annual grant. This would deter the use 

of HTF funds for production of 

additional units, as well as preservation 

and rehabilitation of units, targeted to 

ELI households—the primary purpose of 

the HTF. HUD also assumes that HTF 

funds will be combined with other 

sources to produce and preserve 

affordable units, mostly in mixedincome projects, and that the HTF will 

not be the sole source of funding for 

operating cost assistance. Therefore, 

establishment of a cap on the amount of 

HTF funding in each annual grant that 

may be used for operating cost 

assistance is appropriate. 

However, to provide more flexibility 

to grantees to develop and finance HTFassisted projects, this interim rule 

establishes the cap at up to one-third of 

each annual grant. This interim rule also 

makes clear that the cap applies to both 

amounts used for operating cost 

assistance as well as the operating cost 

reserves. Within this cap, each fiscal 

year the grantee will have discretion in 

how it awards operating cost assistance 

to projects. The grantee may apply the 

one-third limit to all projects or adjust 

it accordingly, as long as no more than 

one-third of each annual grant is used 

for operating cost assistance and for 

operating cost reserves. 

HUD also revised the proposed rule at 

this interim rule stage to address 

comments about the way in which 

operating cost assistance may be 

provided to a project. This interim rule 

establishes that a grantee may provide 

operating cost assistance to a project 

during the entire period of the 

affordability for the project. The written 

agreement between the grantee and the 

owner that commits funds from an HTF 

grant received in a single fiscal year may 

provide operating cost assistance over a 

period for multiple years as long as the 

grantee to meet its five-year expenditure 

deadline in § 93.400(d). Allowing such 

commitment provides the grantee with 

flexibility to manage its grant funds 

when providing operating cost 

assistance to a project; however, HUD 

will recapture funds not expended by 

the five-year deadline. Because 

operating cost assistance is an eligible 

activity and may be provided to a 

project by more than one grant, the 

prohibition in the rule on providing 

additional HTF funds to a project during 

the period of affordability (§ 93.205(a)) 

does not apply to renewal of funds 

committed to operating cost assistance. 

The grantee may renew operating cost 

assistance for HTF-assisted units during 

the affordability period by executing 

written agreements after future fiscal 

year HTF grants are awarded. 

If Section 8 project-based vouchers or 

other project-based rental assistance is 

made available to HTF projects for HTFassisted units, HUD prohibits the use of 

HTF funds available for operating cost 

assistance for those same units, but such 

limitation will not hinder HTF 

implementation. Section 93.200(c) of 

the interim rule (§ 92.730(c) of the 

proposed rule) requires that only the 

actual cost of development and 

operation of HTF units can be charged 

to the HTF program, and describes the 

methods for allocating costs and 

determining HTF units in multi-unit 

projects. In this interim rule, HUD does 

not impose a limit on the use of Section 

8 project-based vouchers in a project for 

which HTF is also providing operating 

cost assistance, as long as the Section 8 

project-based voucher is not provided to 

the same unit receiving HTF operating 

cost assistance. HUD cannot guarantee 

that funds for project-based Section 8 or 

other project-based assistance will be 

appropriated for HTF-assisted projects; 

therefore, awards of HTF funding to 

projects should be made based on 

existing resources and underwriting. 

HUD understands the need for both 

capital (replacement) and operating 

reserves in housing projects. When 

grantees provide HTF funding for a 

project, the need for annual or monthly 

contributions to these reserves are 

determined through the underwriting 

process. Funding for capital or operating 

reserves ‘‘up front’’ for the present value 

of the entire amount needed over the 

required period of affordability (30 

years) is not possible if the HTF funds 

are appropriated, as Federal funds 

cannot be drawn in that manner, years 

in advance of need. However, funding 

for the HTF may come from nonappropriated sources, i.e., the proceeds 

from GSEs as described in section 1337 

of the Act. Therefore, in the interim rule 

HUD establishes separate requirements 

for operating cost reserves funded by 

appropriated and non-appropriated 

funds. 

If the operating cost assistance reserve 

is funded with appropriated HTF funds, 

the allowable amount of the reserve may 

not exceed the amount necessary to 

provide operating cost assistance to the 

HTF-assisted units in an HTF-assisted 

project for a period of up to five years. 

Because operating cost assistance 

reserves are an eligible activity and may 

be provided by more than one grant, the 

prohibition on providing additional 

HTF funds to a project during the period 

of affordability (§ 93.205(a)) does not 

apply to renewal of operating cost 

assistance reserves. The grantee may 

renew operating cost assistance reserves 

for HTF-assisted units during the 

affordability period by executing written 

agreements after future fiscal year HTF 

grants are awarded. The grantee must 

demonstrate the necessity of the reserve 

amount based on an analysis of 


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potential deficits remaining after the 

expected rent payments for the HTFassisted unit are applied to the HTFassisted unit’s expected share of 

operating costs. 

If the operating cost assistance reserve 

is funded with non-appropriated HTF 

funds, the amount necessary to fund the 

reserve must be calculated using the 

same methodology; however, the reserve 

may be funded for the amount estimated 

to be necessary for the entire period of 

affordability up front, or if this amount 

would exceed the cap (one-third of each 

annual grant), could be funded in 

phases from future grants determined to 

be suitable and necessary to secure 

advantageous financing. HUD will 

provide guidance and training to states 

about underwriting standards for 

investment of HTF funds and 

establishing replacement reserves to 

provide necessary rehabilitation during 

the period of affordability in their HTF 

program guidelines. 

Administration and Planning Costs 

§ 92.732 

As noted earlier in this preamble, the 

administrative costs allowable by statute 

in the HTF program cannot exceed 10 

percent of the annual grant. In § 92.732, 

HUD proposed eligible administrative 

and planning costs similar to the HOME 

program at § 92.207. 

Comments: HUD received very few 

comments regarding the entity eligible 

for the 10 percent allocation to 

administrative and planning costs. One 

commenter suggested that HUD’s rule 

clarify that only the agency responsible 

for the award, compliance, monitoring, 

and reporting of HTF funds is eligible 

and another commented that these 

funds should only be charged by the 

subgrantee, not the grantee. Other 

commenters offered recommendations 

about what should and should not be 

considered an eligible administrative 

and planning cost. A commenter stated 

that monitoring funds should be 

included, another stated project delivery 

costs (i.e., inspections, work write-ups) 

should not be eligible to charge as 

administrative costs, and another 

requested clarification that the 

administrative costs in § 92.732(b)(2) are 

not the same as prohibited travel costs 

at section 1338(c)(10)(D)(i)(V) of the Act. 

Another commenter suggested that 

HUD’s rule require the allocation to 

administrative and planning costs be 

proportional to the amount of HTF units 

in the project. Another commenter 

expressed concern that the 10 percent 

cap on administrative costs is not 

enough to cover all the monitoring 

requirements. A commenter requested 

that HUD make clear whether the 

amounts available for rental housing 

and homeownership activities are 

calculated based on the funds available 

after 10 percent of the annual formula 

grant is deducted for administrative 

costs. 

HUD Response: This interim rule 

permits grantees to charge monitoring 

fees to cover the costs of required 

monitoring. The HTF grantee (State or 

State-designated entity) may use up to 

10 percent of its annual grant for 

administrative costs. A grantee may 

provide funding for administrative costs 

to subgrantees. Program-related travel 

that is eligible under § 92.732(b)(2) 

remains an eligible cost in this rule, as 

this is not the same type of travel 

prohibited in section 

1338(c)(10)(D)(i)(V) of the Act. Only 

non-program-related travel is prohibited 

as an eligible cost in the HTF statute. 

The Act permits up to 10 percent of the 

annual HTF grant to be used for 

homeownership activities, and up to 10 

percent of the grant for administrative 

costs. Therefore, up to 10 percent of 

each annual grant may be spent on 

administrative costs, up to 10 percent 

may be spent on eligible 

homeownership activities, and the 

remainder on eligible rental housing. 

HTF and Public Housing and Rental 

Assistance Demonstration § 92.734 

HUD proposed prohibiting the use of 

HTF funds for public housing, including 

public housing that is developed under 

the HOPE VI program. 

Comments: Several commenters 

requested that HUD’s rule explicitly 

include public housing authorities as 

eligible recipients of HTF funding. 

Some commenters requested that the 

development, preservation, and 

rehabilitation of public housing be 

allowed as an eligible activity, as the 

exclusion of public housing was not 

clearly mentioned in HERA or the Act; 

public housing tenants meet the HTF 

eligibility requirements and public 

housing funding sources are inadequate 

to meet the demands. 

HUD Response: Public housing 

agencies (PHAs) are already eligible 

entities to be HTF recipients. They are 

eligible to apply for HTF funding if they 

have the required capacity defined in 

the HTF statute and at § 93.2. PHAs, if 

qualified as recipients, can compete for 

HTF funding to develop HTF-assisted 

projects. HUD has considered the 

comments that the HTF should be 

permitted to be used for public housing 

projects and agrees that there is a role 

for the HTF in public housing. HUD has 

decided to allow the use of HTF funds 

(1) in connection with the Choice and 

LIHTC programs for construction of new 

units that replace existing public 

housing properties; and (2) for the 

rehabilitation of existing public housing 

units in connection with the Rental 

Assistance Demonstration (RAD), 

Choice, and LIHTC programs. 

When the HTF program proposed rule 

was published on October 29, 2010, 

RAD was not yet established. RAD was 

established by HUD’s 2012 

Appropriations Act (Pub. L. 112–55, 125 

Stat. 552, approved November 18, 

20111, at 125 Stat. 673). Consequently, 

there were no public comments 

submitted on the HTF program 

proposed rule about the possible 

interplay between HTF and RAD. 

However, with RAD now an active 

demonstration program, questions have 

been raised to HUD about whether HTF 

may used for RAD units, and HUD takes 

the opportunity to address those 

questions in this preamble. HTF funds 

can be used in connection with RAD for 

the rehabilitation of public housing 

properties in which assistance will be 

converted and used. HTF funds can also 

be used for rehabilitation of ‘‘RAD 

units’’ (that is public housing properties 

in which assistance has been converted) 

after conversion takes place. Such uses 

are not contrary to HUD’s position that 

use of HTF funds for public housing is 

limited to use with other programs to 

rehabilitate or replace public housing 

properties, and not for the expansion of 

the public housing inventory, which can 

be achieved through other funding 

sources. 

Prohibited Activities § 92.735 

HUD proposed prohibited activities in 

§ 92.735. To synchronize with the 

HOME program, prohibited activities 

and fees at § 92.735 mirror the HOME 

program regulation at § 92.214. In 

addition, § 92.735 also includes 

activities expressly prohibited in the 

HTF statute. Section 1338(c)(10)(D) of 

the Act provides that HTF funds may 

not be used for: Political activities; 

advocacy; lobbying, whether directly or 

through other parties; counseling 

services; travel expenses; and preparing 

or providing advice on tax returns. This 

statutory section further provides that, 

subject to the exception in section 

1338(c)(10)(D)(iii) of the Act, HTF funds 

may not be used for administrative, 

outreach, or other costs of the grantee, 

or any other recipient of such grant 

amounts. The statutory exception to this 

prohibition is that a grantee may use up 

to 10 percent of the HTF grant for the 

administrative costs of carrying out its 

HTF-funded program, including 

homeownership counseling. 

Comments: A commenter stated that 

several provisions, including provisions 


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on renewing operating assistance and 

grants for transit-oriented development 

projects, seem to conflict with the 

prohibition on using additional HTF 

assistance for previously assisted 

projects, and requested clarification. 

Several commenters requested that HUD 

eliminate the prohibition on using HTF 

funds in developments previously 

assisted with HTF. Alternatively, these 

commenters recommended that the final 

rule should limit the prohibition to 15 

years after initial receipt of HTF funds, 

and allow for exceptions to the 

prohibition during the period of 

affordability. Other commenters stated 

that the rule should allow projects 

previously receiving HTF funds to 

obtain subsequent capital funds, 

operational expenses, and maintenance 

costs under the condition that the 

period of affordability would be reset, 

extended, or expanded to additional 

units upon receipt of additional HTF 

assistance. Another commenter stated 

that the final rule should include a 

provision that HUD has the ability to 

waive the prohibition in exchange for an 

extension of the affordability period. 

HUD Response: Per the requirements 

of 24 CFR 93.300, HUD expects that 

HTF projects will be properly 

constructed or rehabilitation with HTF 

funds and underwritten to ensure that 

capital needs can be addressed at the 

appropriate time in the life cycle of the 

property. Therefore, HUD will not 

change the regulation to allow the 

addition of HTF funds after 15 years, as 

commenters suggested. To address 

concerns about projects that may need 

additional operating cost assistance 

during the 30-year period of 

affordability, HUD revised § 93.205(a). 

Income Targeting Proposed §§ 92.736– 

92.737; Interim §§ 93.250–93.251 

Sections 92.736 and 92.737 of the 

proposed rule set forth the proposed 

income targeting requirements, as 

required by section 1338(c)(7) of the 

Act, for HTF-assisted rental units and 

homeownership units, respectively. 

The Act requires that not less than 75 

percent shall be used for the benefit 

only of ELI families or families with 

incomes at or below the poverty line 

(whichever is greater). Not more than 25 

percent may be used for the benefit only 

of VLI families. Under the rulemaking 

authority of section 1338(g) of the Act, 

the Secretary has the discretion to direct 

grantees, in any given year, to use more 

than 75 percent of the HTF funds for the 

benefit only of ELI families or families 

with incomes at or below the poverty 

line, whichever is greater. HUD 

proposed that for the first year in which 

HTF funds are made available, of the 

amount made available for rental and 

homeownership housing, grantees are 

required to expend 100 percent of HTF 

funds to provide rental and 

homeownership housing for ELI 

households. The proposed rule 

provided that the HUD would publish 

subsequent income targeting 

requirements when HUD’s allocation 

amounts to states are published. 

Comments: HUD received many 

comments opposing the proposed 

targeting of 100 percent of the HTF 

funds to ELI households in the first year 

that funding is provided under the 

program. The commenters stated that 

the income targeting should not change 

between the first year and subsequent 

years of funding, as it will make the 

HTF more difficult to administer. 

Commenters also stated that this 

approach to targeting is not reflective of 

the statute. 

Several commenters expressed 

support for targeting some VLI 

households in the first year of funding, 

with one commenter expressing concern 

that there may not be adequate local 

support to target ELI households 

exclusively. Other commenters 

requested that HUD continue to target 

100 percent of ELI households until the 

shortage of ELI housing is resolved. 

Several commenters expressed concern 

that the proposed income targets will 

limit the use of HTF funds in rural and 

non-urban areas. Another commenter 

recommended that the proposed 

language be revised to explicitly state 

that any portion of HTF funding not be 

targeted to ELI households and should 

be used for VLI households only. 

HUD also received many comments 

advising of challenges resulting from 

use of HTF funds for homeownership 

activities targeted at ELI households, 

with many of these commenters 

suggesting that HTF funding for 

homeownership would be better served 

targeting VLI households or other 

income groups. 

HUD Response: HUD is aware that 

changes over time to income targeting 

may require grantees to adjust their 

approaches to using HTF funds to 

produce affordable housing, but believes 

this necessary in order to target limited 

resources to ELI households. There is a 

well-documented and overwhelming 

need to increase the supply of housing 

targeted to ELI households within each 

grantee’s jurisdiction. 

However, in consideration of the 

comments received, at this interim rule 

stage, HUD adjusted the targeting based 

on the amount of resources being made 

available through the HTF. With limited 

resources available for production of 

affordable housing targeted to ELI 

households, HUD has determined that 

targeting 100 percent of HTF to ELI 

households is appropriate if the amount 

available in a fiscal year for HTF is less 

than $1 billion. If the amount exceeds 

$1 billion, grantees may spend up to 25 

percent for the benefit of VLI 

households. In either scenario, any 

funds not used for ELI households must 

be used to serve VLI households. 

HUD acknowledges the commenters’ 

concerns regarding the difficulty of 

providing homeownership assistance to 

ELI households. The statute and 

regulation are clear—there is no 

minimum percentage of HTF funds to be 

spent on homeownership, only a 

maximum percentage (10 percent). If 

HTF-eligible homeownership activities 

are not appropriate for ELI households 

in their jurisdictions, grantees are not 

required to use HTF funds for 

homeownership projects. HUD believes 

grantees are in the best position to 

determine whether a homeownership 

program for ELI or VLI households is 

appropriate within their jurisdictions. 

Public input on the use of HTF funds for 

rental housing or homeownership must 

be sought through public participation 

on a grantee’s proposed HTF allocation 

plan. 

Project Requirements Proposed 

§§ 92.740–92.750; Interim §§ 93.300– 

93.306 

In §§ 92.740 through 92.750, HUD 

proposed requirements applicable to 

HTF-assisted housing projects. HUD 

proposed maximum per-unit 

development subsidy, underwriting, 

and subsidy layering requirements at 

§ 92.740. To align with the HOME rule, 

the HTF proposed rule at § 92.740 

mirrored the HOME Prohibited 

Activities and Fees provisions in 

§ 92.250, with the exception of the 

maximum per-unit development 

subsidy amount section. The maximum 

per-unit development subsidy amount 

section is now § 93.300. 

Maximum Per-Unit Subsidy, 

Underwriting and Subsidy Layering 

§ 92.740 

At § 92.740(a), HUD proposed 

requiring the grantee to establish 

maximum limitations on the amount of 

HTF funds the grantee may invest on a 

per-unit basis. In § 92.740(b), HUD 

proposed requiring the grantee to 

perform subsidy layering analysis before 

committing HTF funds to a project. 

Included in this proposed provision was 

the requirement that the grantee must 

determine that costs are reasonable, 

examine the sources and uses of funds, 

and ensure that the amounts available 

and their use are necessary to provide 


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quality affordable rental or 

homeownership housing for ELI 

households for the affordability period 

(30 years). The proposed rule also stated 

that recipients of HTF-assisted projects 

may not receive undue returns on their 

investments. 

Comments: Of the commenters that 

submitted comments on this provision, 

the majority addressed the proposed 

requirement that the grantee must 

establish a maximum per-unit 

development subsidy limit. A few 

commenters opposed that the subsidy 

limit be established as a total dollar 

amount and suggested the requirement 

be revised to allow States to set the 

maximum subsidy limit as a percentage 

of the project cost on a per-project basis. 

Another commenter wrote that States 

should have the flexibility to establish 

their maximum per-unit subsidy at 100 

percent of the development costs for 

HTF-assisted units. A commenter 

suggested that the maximum per-unit 

subsidy requirement at § 92.710 be 

eliminated. Finally, a commenter stated 

that the per-unit subsidy limit and 

subsidy layering should only take into 

account capital development costs. 

With respect to a subsidy layering 

review, a commenter suggested that 

HUD’s rule should allow a subsidy 

layering review, conducted as a 

requirement of another program to 

satisfy the subsidy layering review for 

an HTF project. Another commenter 

suggested that the language in the 

proposed rule be clarified so that it is 

not interpreted to mean that 

certification of underwriting and 

subsidy layering requires HUD-specified 

processes, standards, and forms because 

it would be burdensome. Another 

commenter suggested that HUD 

establish minimum underwriting 

standards for homeownership. 

HUD Response: This interim rule 

adopts this provision as essentially 

proposed, although HUD revised the 

language to more closely mirror the 

language on subsidy layering from the 

HOME final rule. HUD does not agree 

that maximum subsidy limits should be 

established based on a percentage of 

total project cost. Some project costs are 

not eligible HTF costs, and one of the 

purposes of this requirement is to 

ensure the determination of the cost of 

HTF-assisted housing units includes a 

cost reasonableness test. With respect to 

a subsidy layering review, HUD does 

not prescribe specific subsidy layering 

forms or processes. The grantee may use 

the subsidy layering reviews conducted 

by other project funders, but a subsidy 

layering review conducted by another 

agency or funder does not ‘‘satisfy’’ the 

proposed requirement in § 92.740(b) (in 

this rule at § 93.300(b) unless the review 

is completed in accordance with the 

HTF grantee’s standards. 

Grantees must establish the minimum 

underwriting standards for their HTFfunded homeownership programs, as 

required by § 93.304. 

To address comments on maximum 

subsidy limits, HUD chose not to 

establish national maximum subsidy 

limits that would be published by HUD. 

The amount of subsidy needed to 

produce affordable rental units targeted 

to ELI or VLI households will vary 

depending upon the project proforma. It 

is possible that in some projects, the 

entire development cost of an HTF unit 

must be paid for with HTF funds in 

order to achieve affordability. For 

example, it would be desirable to pay 

the entire development cost of HTF 

units so that they carry no debt service 

because rents are likely to be 

insufficient to pay for the debt service 

of the units. However, to address 

accountability, HUD added language to 

require grantees to adopt maximum 

subsidy limits that are appropriate for 

non-luxury housing units, based on 

reasonable and actual costs of 

developing such housing in the area. 

Property Standards §§ 92.741 Through 

92.745, Interim § 93.301 

At the proposed rule stage, HUD 

proposed property standards applicable 

to HTF-assisted properties at §§ 92.741 

through 92.745. Section 92.741 contains 

the property standards for new 

construction, § 92.742 establishes the 

standards for housing undergoing 

rehabilitation, § 92.743 contains the 

property standards for existing housing 

that is acquired with HTF funds, 

§ 92.744 establishes property standards 

for manufactured housing, and § 92.745 

establishes ongoing property standards 

for rental housing during the period of 

affordability. HUD requested comments 

from interested parties on how 

additional minimum property standards 

may be imposed to increase the 

efficiency and reduce the operating 

costs of HTF assisted units. 

Comments: Several commenters 

stated that HUD’s rule should provide 

more flexibility in adopting property 

and energy efficiency standards and that 

the proposed property standards are too 

specific. A commenter stated that HUD’s 

rule should specify who will conduct 

the environmental reviews for HTF 

projects. Several commenters stated that 

the units must meet habitability 

standard requirements, but not 

necessarily the use of Housing Quality 

Standards (HQS). Another commenter 

stated that HUD’s rule should require 

properties to be free of all health and 

safety standards and specify the lifethreatening conditions that must be 

addressed. 

A commenter stated that HUD’s rule 

should provide standards that will be 

applied on a building-by-building basis. 

A few commenters stated that the 

proposed efficiency requirements will 

drive up the costs of developing ELI 

units. A commenter stated that for major 

life systems HUD should clarify 

improvements necessary to meet the 

standard. Another commenter stated 

that the term for the useful life is 

burdensome and too expensive. 

A commenter requested that buildings 

seeking historic tax credits or that are 

located in historic districts be provided 

with an exception from property 

requirements. Another commenter 

stated that the property standards will 

make it difficult for developers to use 

HTF funding to buy existing properties 

for rehabilitation. 

A commenter stated that HUD’s rule 

should include a ‘‘discreet’’ funding 

allocation to create affordable and 

accessible housing for people with 

developmental disabilities. Several 

commenters stated that HUD’s rule 

should require ‘‘visitability’’ and 

‘‘universal design.’’ Other commenters 

stated that HUD’s rule should address 

accessibility by requiring 100 percent of 

units in new construction and 

substantial rehabilitation projects be 

both visitable by wheelchair users and 

adaptable, and that 30 percent of the 

units are fully accessible. 

HUD Response: To ensure 

compatibility with the HOME rule and 

in an effort to ease implementation of 

HTF by maintaining consistency with 

the requirements of the HOME rule to 

the extent feasible, this interim rule 

adopts the language used in the HOME 

final rule property standards section at 

§ 92.251, with the exception of the 

environmental review requirements. 

For the HTF program, HUD proposed 

at minimum that all HTF-assisted units 

that are newly constructed or 

undergoing gut rehabilitation must be 

certified that they meet the guidelines 

for ENERGY STAR-Qualified New 

Homes (for residential buildings up to 

three stories) or exceed, by 20 percent, 

the energy efficiency requirements of 

the American Society of Heating, 

Refrigerating, and Air-Conditioning 

Engineers (ASHRAE) Standard 90.1– 

2007, Appendix G: Performance Rating 

Method (for residential buildings over 

three stories), as defined in § 92.741. A 

Home Energy Rater (HER) must inspect 

the units to certify that the units meet 

the ENERGY STAR guidelines. HUD 

does not adopt these proposed 

requirements in this interim rule. HUD 


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plans to establish new and consistent 

energy and water efficiency 

requirements for both the HTF program 

and HOME program through separate 

rulemaking. For new construction, the 

interim rule adopts the energy efficiency 

standards established under section 109 

of the Cranston-Gonzalez National 

Affordable Housing Act, so that the 

standards are the same for HTF and 

HOME. 

HTF grantees are responsible for 

ensuring compliance with these 

environmental review requirements. 

HUD knows of no justification to 

provide a blanket exemption of HTFassisted projects seeking historic tax 

credits or located in historic districts 

from property requirements. While HUD 

would encourage grantees to include 

‘‘visitability’’ standards in the 

development of HTF-assisted and other 

affordable housing, these visitability 

standards are not required by any 

Federal statute and are not included in 

this rule. 

HTF Property Standards Environmental 

Requirements 

Comments: Several commenters 

stated that the rule creates a new 

definition for ‘‘wetlands.’’ These 

commenters stated that HUD’s rule 

should incorporate the U.S. Army Corps 

of Engineers and the Environmental 

Protection Agency definition in 

regulations pursuant to the Clean Water 

Act. A commenter stated that the 

regulations for environmental 

remediation, testing for toxins, and 

other property standards are too 

detailed. A commenter suggested that 

the HTF rule should include language 

permitting States to request that reports 

are prepared in accordance with the 

most current ASTM standard. Another 

commenter stated that for HTF projects 

developed within a quarter mile of a site 

with an unclosed environmental case 

status, the final rule should require a 

written justification for determination 

that the proposed site does not pose a 

health and safety risk for the HTF 

project. A commenter recommended 

that the HTF rule require a State to 

maintain files with written justification 

for the State’s determination that a 

proposed site does not pose a health and 

safety risk for an HTF project located 

within a quarter mile of a site with a 

reported Federal, State, or local 

environmental case status that is open. 

Another commenter stated that HUD’s 

rule needs to specify who will conduct 

the environmental review for HTF 

projects. Several commenters stated the 

proposed rule was overly detailed and 

the final rule should replace these 

requirements with standards from the 

National Environmental Policy Act of 

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

commenter stated that HUD’s rule 

should clarify that a single 

environmental review may satisfy the 

requirements for both the HTF and 

project-based voucher programs, when 

both sources of assistance are used. 

Another commenter requested an 

exception in the property requirements 

for buildings seeking historic tax credits 

or located in historic districts. 

HUD Response: This rule adopts the 

definition of ‘‘wetland’’ as defined in 

HUD regulation at 24 CFR 55.2(b)(11) 

and which is used for all HUD 

programs. The guidance within the 

regulation for environmental 

remediation, testing for toxins, and 

other standards must remain detailed 

because the purpose of the regulations 

is to assist grantees to comply with the 

requirements of the regulations. 

HUD agrees that its HTF rule should 

not include references to the ASTM year 

and rather include language that reports 

should be prepared in accordance with 

the most current ASTM standard. HUD 

already requires HTF projects to avoid 

sites located within .25 miles of a 

Superfund or Comprehensive 

Environmental Response, 

Compensation, and Liability 

Information System (CERCLIS) site or 

other contaminated site reported to 

Federal, State, or local authorities 

without a statement in writing from the 

U.S. Environmental Protection Agency 

or the appropriate state agency that 

there is no hazard that could affect the 

health and safety of the occupants or 

conflict with the intended use of the 

property. 

HUD disagrees with the comment that 

the HTF rule should clarify that a single 

environmental review may satisfy 

requirements for both HTF and projectbased voucher (PBV) programs. The 

grantee that is responsible for these 

environmental requirements may in 

some cases be the same as the 

‘‘responsible entity’’ that conducts an 

environmental review under 24 CFR 

part 58 for a PBV project, and much of 

the environmental information needed 

to comply with both requirements may 

be the same. However, the HTF 

environmental requirements, to be 

codified at § 93.301(f), are not identical 

to the environmental review 

requirements under part 58 for PBV 

projects. For example, the HTF 

environmental requirements do not 

include certain interagency consultation 

and public notice requirements that are 

required for PBV projects under some of 

the environmental laws and authorities 

cited in part 58. 

Qualification as Affordable Housing: 

Rental Housing § 92.746, Interim 

§ 93.302 

In § 92.746(a), HUD proposed that all 

HTF-assisted rental housing be 

occupied only by ELI families. Section 

92.746(b) proposed to establish the 

maximum rent (including utilities) for 

HTF-assisted units at 30 percent of the 

annual income of a family whose 

income equals 30 percent of the area 

median income, or 30 percent of the 

poverty line, whichever is greater. 

Section 92.746(c) provided that grantees 

must establish maximum monthly 

allowances for utilities and services 

(excluding telephone, television, and 

Internet service), and must approve 

rents proposed by the owner for HTF 

units. Section 92.746(d) proposed to 

establish an affordability period of not 

less than 30 years for rental housing 

assisted with HTF funds. Section 

92.746(e) proposed to require that HTF 

project owners verify the initial and 

continued eligibility of tenants living in 

HTF-assisted rental units and 

establishes the methods by which HTF 

project owners must verify tenant 

income. 

Comments: Several commenters 

requested that HUD adopt income-based 

limits that cap the amount of rent paid 

by tenants at 30 percent of household 

income. Several other commenters 

suggested creating operating subsidy 

reserves to fund income-based rents, 

and requiring a percentage of units set 

aside for people with disabilities or 

people who receive their income from 

supplemental social security (SSI) 

income. Some commenters expressed 

concern about individuals whose sole 

source of income is SSI, because many 

of these people have incomes well 

below 30 percent of AMI and without 

operating subsidy for HTF-assisted units 

tenants will be forced to pay a 

substantial proportion of their income 

toward rent (or lose the opportunity to 

benefit from HTF-assisted housing). 

Several commenters asked for 

clarification whether there will only be 

one rent limit for the HTF program or 

whether there will be different rent 

limits for ELI and VLI households. 

Several stated that there should be a 

means for limiting a tenant’s rent 

burden depending on the type of rental 

subsidy. Another commenter stated that 

subsidy amounts should also be 

adjusted downward for units not 

carrying any debt to avoid oversubsidizing units. Another commenter 

asked whether HUD could provide rent 

and income limit levels in 5 percent 

increments. 


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A commenter stated that grantees 

should be permitted to set utility 

allowances for new projects that best 

reflect the costs to tenants. Another 

stated that HUD’s rule should provide 

additional protections to tenants 

regarding the utility allowance, 

including notice, opportunity to seek 

review, and allowance for utilities be 

provided in the lease. 

Many commenters stated that HUD 

should increase the minimum period of 

affordability proposed in the rule to 40, 

45, or 55 years, and that HUD’s rule 

should incentivize projects which agree 

to longer periods of affordability. 

Another commenter stated that the rule 

should increase the minimum period of 

affordability for non-low income 

housing tax credit (LIHTC) projects, but 

only if HUD develops a means for 

recapitalizing projects and applying the 

affordability restrictions to the land, not 

the building. Several commenters stated 

that the determination of the period of 

affordability should be left to the 

discretion of the State, or should match 

the period of affordability used by other 

funding sources. 

HUD Response: Unlike public 

housing, the HTF has no separate 

annual appropriation source of funding 

for operating costs. In any given year, if 

no funding for the HTF is provided, it 

is possible that no operating cost 

assistance would be available for HTFassisted units. Therefore, while 

operating costs may be paid with HTF 

funds, the assistance cannot be based on 

a formula that assumes income-based 

rents and an annual appropriation to 

pay for operating costs. For this reason, 

it is necessary to establish fixed rents for 

the HTF for underwriting purposes and 

required subsidy layering analyses. 

Section 8 project-based vouchers may be 

made available to HTF-assisted units, 

and these vouchers alleviate cost 

burdens for ELI tenants, including 

individuals whose source of income is 

from Supplemental Social Security 

Income. 

This interim rule includes rent limits 

for both extremely low-income and very 

low-income households. For extremely 

low-income households, rents are set at 

30 percent for a households at 30 

percent of the area median income. For 

very low-income households, rents are 

set at 30 percent for households at 50 

percent of the area median income. 

HUD will provide the actual rent limits 

for each State. 

If utility data are available on a 

project-by-project basis or utilities are 

individually metered, it would be 

permissible to establish utility 

allowances more reflective of the actual 

cost for the HTF-assisted unit. 

HTF grantees are allowed to impose 

longer periods of affordability, beyond 

the period in the regulation. HUD 

anticipates that States may adopt 

criteria whereby projects will be 

incentivized to adopt longer periods of 

affordability. 

Tenant Protections and 

Selection§ 92.747, Interim § 93.303 

In § 92.747, HUD proposed tenant 

protection, lease, and selection 

requirements, and incorporated the 

requirements of section 1338(c)(8) of the 

Act. 

Comments: A commenter 

recommended greater safeguards be 

required for tenant selection, including 

prohibition of local residency or 

employment preferences, the use of 

lottery-based selection, and strong 

affirmative marketing and outreach 

requirements. A few commenters 

suggested HUD’s rule be revised to 

include additional tenant and 

homeowner protections, including the 

right to organize, associate, advocate for 

stronger protections without fear of 

retaliation. Other commenters requested 

that HUD’s rule to clarify tenant rights 

regarding the applicant screening 

process, the prohibition on eviction 

without good cause, the lease provision 

protections, and how tenants can 

participate and protect their tenant 

rights. A few commenters pointed out 

the importance of retaining economic 

diversity in projects containing HTFassisted units, and suggested that HUD’s 

rule incorporate some mixed-income 

standards and limits on the number of 

families using vouchers. Another 

commenter suggested that § 92.747(c) be 

removed to permit residents to pursue a 

‘‘housing first’’ model for ending 

homelessness. Some commenters 

requested that the protections offered to 

people receiving any type of tenantbased assistance from being denied 

access to HTF-assisted units be 

enhanced. 

A commenter provided several 

comments about resident access to 

judicial review. The commenter stated 

that the rule should include greater 

access to judicial review for tenants and 

applicants, and that the regulations 

should require residential leases to 

include any conditions of tenancy found 

in HTF allocation plans and to 

explicitly state that a resident or tenant 

organization may seek judicial 

enforcement of plan violations which 

result in injury. The commenter 

recommended that grant agreements 

with subgrantees and recipients should 

incorporate a resident complaint review, 

grievance system, and right to judicial 

enforcement. Another commenter stated 

that if HUD has the right to initiate an 

administrative hearing or impose 

sanctions, then residents and applicants 

should have the right to join as a party 

to the proceeding. The commenter 

stated that the right to pursue an 

independent action for redress of injury 

in court should be included in the rule 

and incorporated into residential leases. 

Another commenter stated that a 

reference to the Violence Against 

Women Act (42 U.S.C. 13701 et seq.) 

should be added to § 92.747(c). 

HUD Response: The Violence Against 

Women Act of 2013 (VAWA 2013), 

enacted March 7, 2013, did not specify 

HTF as a covered program. The possible 

applicability of VAWA to HUD 

programs not listed in VAWA 2013 will 

be addressed in HUD’s upcoming 

proposed rule on VAWA 2013. 

Section 93.303 of the rule prohibits 

lease terms which require tenants 

residing in HTF-assisted units to waive 

their rights with respect to their 

tenancy. The statute does not create any 

right to judicial review; however, State 

and local law may provide rights to 

judicial review of HTF grantees or 

landlords of HTF-assisted properties. 

HUD’s proposed language is compliant 

with applicable civil rights laws and 

regulations, including section 504 of the 

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

794) and implementing regulations at 24 

CFR part 8, and therefore is not changed 

at this interim rule stage. Additionally, 

the proposed rule language did not 

present problems for the particular 

permanent supportive housing model 

favored by several commenters, which 

was their primary concern, and 

therefore this language is not changed at 

the interim rule stage. In fact, adopting 

the suggested language would limit 

flexibility to use other models of 

permanent supportive housing. 

Qualification as Affordable Housing: 

Homeownership § 92.748, Final § 93.304 

In § 92.748(a), the proposed rule 

required that homeownership activities 

funded by the HTF must be for first-time 

homebuyers. Section 92.748(b) 

proposed to require that only single 

family housing, as defined in § 92.2, is 

eligible for HTF-assisted 

homeownership activities. Section 

92.748(c) would require that all HTFassisted homeownership activities apply 

to modest housing, in accordance with 

§ 92.749. Section 92.748(d) proposed to 

establish the requirements for HTF 

requirements for first-time homebuyers 

and income requirements. Section 

92.748(e) proposed to establish the 

period of affordability for HTF-assisted 

homeownership activities. Section 

92.748(f) proposed to establish the 


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resale requirements for homeownership 

units assisted by the HTF. 

Comments: Some commenters 

suggested that HUD’s rule should 

include a recapture provision for 

homeownership funds, as permitted 

under the HOME program, and they 

expressed concern that limiting 

homeownership properties to resale, 

without the option of recapture, will be 

too burdensome for grantees and 

subgrantees. Other commenters stated 

that HUD’s rule should include more 

language to encourage the use of land 

trusts. 

HUD Response: HUD agrees with 

commenters that the recapture 

provisions should be added to the HTF 

rule. Accordingly, this rule, at § 93.304, 

adopts the structure of the HOME 

program requirements for recapture, 

with adjustments to the subsidy 

amounts to reflect the greater need for 

subsidy for very low-income 

homebuyers. The periods of 

affordability also differ from the HOME 

program to tiers that reflect the 

maximum period of affordability (30 

years) for the HTF program. The use of 

land trusts in conjunction with the HTF 

is permitted. However, HUD does not 

agree that the HTF rule needs 

modification to encourage the use of 

land trusts; guidance and technical 

assistance may be provided in the future 

on this topic. 

Other Federal Requirements Proposed 

§ 92.760–92.764; Final § 93.350–93.355 

Proposed §§ 92.760 through 92.764 set 

forth other Federal requirements that are 

applicable to the use of HTF funds, 

including nondiscrimination, 

affirmative marketing, lead-based paint, 

relocation, and funding accountability 

and transparency requirements. 

However, the proposed regulations 

inadvertently omitted a provision in 

section 1337(f) of the Act that prohibits 

the use of HTF funds in conjunction 

with property taken by eminent domain 

unless eminent domain is employed 

only for a public use. The HTF 

regulation at § 93.355 includes this 

statutory prohibition. 

Program Administration Proposed 

§ 92.770–92.779; Final § 93.400–93.409 

Proposed §§ 92.770 through 92.779 set 

forth the conditions and requirements 

by which States are to administer their 

HTF funds, including HTF accounts, 

allocation and reallocation of HTF 

funds, program disbursement and the 

establishment of an information system, 

written agreement, onsite inspections, 

financial and project reporting, record 

retention, and audit requirements. 

Comments: Several commenters 

suggested that HUD eliminate 

duplicative monitoring, review, and 

inspection requirements. A few 

commenters stated that if a subgrantee 

receives HOME funding, the subgrantee 

should be directly responsible for 

compliance and alleviate grantees of the 

burden of annual performance reviews. 

A commenter recommended revising 

the HTF audit requirements to mirror 

HOME and that additional audit 

requirements should be removed. A few 

commenters suggested that equivalent 

onsite property inspections for other 

public funding programs and 

construction oversight by third parties 

should be allowed to satisfy the HTF 

requirements to avoid duplicative 

inspections. A commenter stated that 

the rule should permit HOME 

inspection standards rather than 

Uniform Physical Conditions Standards 

(UPCS) standards. Another commenter 

stated that the initial inspection during 

the period of affordability should be 

required to occur within 24 months 

instead of 12 months, as proposed, to 

align with LIHTC requirements. A 

commenter stated that the requirement 

to follow up with an inspection within 

12 months of observing a deficiency 

during an onsite inspection is 

burdensome and suggested that 

evidence of the correction, with the 

right to re-inspect, should be sufficient. 

Some commenters offered 

recommendations for other 

administrative issues. A commenter 

suggested that the project completion 

date for HTF units should be the date 

the project is placed in service. Another 

commenter stated that HUD’s rule 

should clarify that the recordkeeping 

requirements in § 92.778 would allow a 

grantee to delegate record maintenance 

to the project owner or manager who 

would make the records accessible to 

the grantee. 

Several commenters stated that the 

rule should increase opportunities for 

forgiveness under the repayment and 

recapture provisions. Commenters 

suggested that the rule permit a prorated 

reduction of the repayment obligation 

based on the extent that the affordability 

period was satisfied. A commenter 

suggested that this prorated reduction in 

the repayment obligation also apply to 

HTF-assisted housing lost through a 

foreclosure action, natural events or 

disasters, or similar events that are not 

the result of malfeasance on the part of 

the grantee or subgrantee. A few 

commenters suggested that complete 

forgiveness should be permitted when 

there have been best faith efforts to 

avoid foreclosure. A commenter stated 

that the repayment provisions are too 

onerous and repayments for failed ELI 

housing projects should be limited to 

instances when the grantee directly 

provides funds for an ineligible activity. 

Some commenters offered suggestions 

about the foreclosure provisions. A 

commenter suggested that if HUD is the 

foreclosing entity, the affordability 

restrictions should not terminate and 

funds should not be required to be 

repaid. Another commenter suggested 

that the rule should authorize HUD and 

the grantee to modify the affordability 

restrictions in limited circumstances 

(e.g., loss of rental assistance through no 

fault of the owner), if doing so is 

necessary to avoid a foreclosure and 

complete loss of affordable units. 

Another commenter suggested that HUD 

should require grantees to use purchase 

options, right of first refusal, or other 

preemptive rights to purchase as tools to 

protect HTF-assisted housing from 

foreclosure or deed in lieu of 

foreclosure. Another commenter 

suggested that additional data collection 

requirements be required. The 

commenter attached a list of 22 projectlevel data points that should be listed in 

§ 92.778(a)(2)(i). 

HUD Response: The HTF statute 

includes mandatory monitoring, 

reporting, and audit requirements. HUD 

does not have the authority to change 

these requirements. 

Except where that statute differs, or 

where policy determinations about the 

HTF have been made by HUD that 

preclude alignment, HUD adopted the 

majority of the requirements of the 

HOME program for the HTF rule, but 

the HTF audit requirements cannot be 

modified to mirror HOME requirements, 

as suggested by a commenter, because 

the HTF statute imposes different 

requirements for the audit of HTFassisted projects than what is required 

by the HOME program. 

HUD does not agree that grantees are 

relieved of responsibility for compliance 

if a subgrantee receives the HTF funds. 

The statute makes clear that the State or 

State-designated entity is the grantee of 

the HTF funds and that compliance 

with all requirements, including 

compliance monitoring of subgrantees, 

is the responsibility of the grantee. 

Moreover, HUD has no relationship 

with a subgrantee and has no basis to 

take action against a subgrantee. 

This interim rule requires that 

Uniform Physical Condition Standards 

(UPCS) be incorporated into the 

property standards, as is the case with 

the property standards for the HOME 

program. This will facilitate alignment 

of HTF-assisted projects with projects 

assisted by the LIHTC program and 

HOME. Training and guidance will be 


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5The Transparency Act requires disclosure to the 

public of all entities or organizations receiving 

Federal funds, beginning in fiscal year 2007. The 

disclosure of such funds can be found at the 

USAspending.gov Web site, which is managed by 

the Office of Management and Budget. 

provided to address some of the 

concerns about implementing UPCS. 

HUD has chosen not to synchronize 

when project completion occurs for an 

HTF-assisted projects with when an 

LIHTC project is placed in service. The 

HTF rule requires beneficiary reporting 

that is different than that required for 

LIHTCs. The project completion date 

must ensure timely occupancy. 

Accordingly, HUD adopts the language 

as proposed. 

One commenter suggested that the 

rule should authorize HUD and the 

grantee to modify the affordability 

restrictions in limited circumstances 

(e.g., loss of rental assistance through no 

fault of the owner). To ensure 

compatibility with the HOME rule and 

in an effort to ease HTF implementation, 

this interim rule contains language that 

is consistent with the repayment 

language in the HOME regulations. For 

natural events or other disasters, 

insurance proceeds should be used to 

replace the lost housing. In the case of 

foreclosure, repayment would not be 

required if the affordability restrictions 

are preserved and the project continues 

to meet HTF requirements. Grantees 

have the option, rather than a 

requirement, of using preemptive rights 

to ensure flexibility for each grantee to 

ensure HTF projects remain affordable. 

The repayment and foreclosure 

provisions are required and the 

language is adopted in this interim rule 

as proposed. 

Performance Review and Sanctions 

Review Proposed § 92.780–92.783; Final 

§ 93.450–93.453 

HUD proposed that grantees report on 

their progress and performance in 

meeting the requirements of the HTF in 

HUD’s Integrated Disbursement and 

Information System (IDIS) and the 

consolidated plan. The statutory 

requirements for corrective and 

remedial actions at section 1338(e)(1)(B) 

of the Act are reflected in § 92.782. The 

statutory requirements at section 

1338(e)(2)(B) of the Act for notification 

of determination and opportunity for 

hearing and sanctions are reflected in 

§ 92.783. 

Comments: One commenter 

recommended that performance report 

on grantees be posted regularly on 

public Web sites. 

HUD Response: In this interim rule, 

HUD moved the requirement for a HTF 

performance report to the Consolidated 

Plan regulations at 24 CFR part 91. The 

HTF performance report is included in 

the performance reports for the 

consolidated plans in 24 CFR 91.520, 

thereby subjecting the report to the 

citizen participation plan of the grantee 

and subgrantee. In addition, the HTF 

grant is subject to the requirements of 

the Federal Funding Accountability and 

Transparency Act of 2006 (Pub. L. 109– 

282, approved September 26, 2006), as 

amended by section 6202 of Public Law 

110–252, approved June 30, 2008 

(Transparency Act) (See § 93.354 of the 

HTF regulations.) 5

Other Comments 

Align the HTF With Other Programs 

Comments: Some commenters 

suggested that the HTF be coordinated 

with and mirror the LIHTC rules to the 

greatest extent possible to provide 

maximum flexibility. They suggested 

that LIHTC is more likely to be used in 

combination with HTF funds for 

development than HOME. Other 

commenters suggested that the HTF 

requirements should be aligned with 

other program requirements (e.g., such 

as those required under HUD’s Section 

811 Supportive Housing for Persons 

with Disabilities program, HUD’s 

Housing Choice voucher program, U.S. 

Department of Health and Human 

Services program, Supplemental 

Security Income, and U.S. Department 

of Veterans Affairs) and HUD should 

identify any potential conflicts between 

the program requirements. A few 

commenters recommended that HUD’s 

HTF rule should waive requirements of 

Section 8 project-based vouchers that 

complicate using them in HTF projects. 

A few commenters suggested that HUD 

eliminate duplicative reviews and 

requirements that create conflict when 

the HTF is combined with other sources 

of funding in development projects. 

HUD Response: HUD expects that 

HTF funds will be combined with other 

sources of private funding and financing 

typically used for the development of 

affordable housing, such as LIHTCs. The 

affordability period for HTF-assisted 

units is consistent with the 30-year 

affordability period (compliance period 

plus extended use period) for LIHTC 

projects. Grantees may also establish 

longer affordability periods in their HTF 

allocation plans. The VLI income 

targeting and frequency of onsite 

inspections during the period of 

affordability regulations in the HTF also 

align with LIHTC. Some HTF 

requirements, such as ELI income 

targeting and rents, are statutory and 

HUD does not have the discretion to 

change these statutory requirements to 

align with other programs. Also, the 

HTF rule cannot waive the requirements 

of other Federal programs. In order to 

allow maximum flexibility when 

combining and coordinating the HTF 

with other Federal funding sources, 

HUD streamlined the HTF requirements 

and aligned them with other Federal 

programs (e.g., HOME, LIHTC, Federal 

Housing Administration (FHA), Public 

Housing, and other HUD programs) to 

the greatest extent possible, given 

statutory constraints and policy 

decisions by HUD. 

Manufactured Housing 

In the proposed rule, HUD stated that 

HTF funds may be used to purchase 

and/or rehabilitate a manufactured 

housing unit, or purchase the land upon 

which a manufactured housing unit is 

located. HUD stated that the 

manufactured housing unit must, at the 

time of project completion, be 

connected to permanent utility hookups 

and be located on land that is owned by 

the manufactured housing unit owner or 

land for which the manufactured 

housing owner has a lease for a period 

at least equal to the applicable period of 

affordability. The proposed rule also 

required that construction of all 

manufactured housing must meet the 

Manufactured Home Construction and 

Safety Standards codified at 24 CFR part 

3280. HUD noted that these standards 

pre-empt State and local codes covering 

the same aspects of performance for 

such housing. 

Comments: A commenter stated that 

language should be added to the rule to 

clarify that manufactured housing can 

be purchased with HTF funds for both 

rental and homeownership purposes. 

One commenter stated that eligible 

relocation costs should include one-forone replacement when manufactured 

homes are demolished or converted for 

another use. A commenter 

recommended that the language in the 

proposed rule should be changed to 

clarify that HTF funds may be used to 

purchase the land under manufactured 

homes to preserve the affordability of 

these homes, and another stated that the 

requirement that the land under assisted 

manufactured housing be owned or 

leased will be difficult to meet. Another 

commenter states that the proposed rule 

conflicts with other HUD policies, 

including the Model Manufactured 

Home Installation Standards and 

Manufactured Housing Installation 

Rules and Regulations, 24 CFR parts 

3285 through 3286. A commenter stated 

that HUD’s rule should eliminate the 

‘‘permanent foundation requirement’’ to 

avoid confusion, and to align with 24 

CFR parts 3285 through 3286. Another 


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5218 Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Rules and Regulations 

commenter stated that HUD’s rule 

should create an exception to the 

requirement that homeownership funds 

be targeted to income-eligible, first-time 

homebuyers because manufactured 

homes are a means for older, lowincome homeowners to transition from 

their current home to a more affordable 

alternative, and they are often not firsttime homebuyers. Another commenter 

stated that HUD’s rule should include 

mobile home park infrastructure 

improvements as eligible costs and give 

more consideration to deteriorating park 

infrastructure. 

HUD Response: The HTF statute 

requires that homebuyer assistance be 

provided to first-time homebuyers 

only—this would apply to 

manufactured housing that is purchased 

by eligible families with HTF assistance. 

This interim rule does not prohibit 

the expenditure of HTF funds on 

manufactured housing that is rental 

housing. A State may award HTF funds 

for the development of a manufactured 

housing park for rental units. The Act 

does not contain any requirement for 

the one-for-one replacement of housing 

units if HTF funds are used in the 

demolition or conversion of any unit. 

If HTF funds are used to purchase 

land to develop a manufactured home, 

or relocate a manufactured home, the 

manufactured housing must be secured 

with a foundation system meeting 24 

CFR part 3280. 

The use of HTF funds for 

infrastructure to rehabilitate the parks in 

which manufactured homes are situated 

is only eligible if all units are rental 

housing with income eligible tenants. 

Infrastructure that is not on the site of 

the HTF project is not eligible for HTF 

financing. 

Consistent with the HOME rule, the 

definition of ‘‘permanent foundation’’ in 

the HTF rule means a foundation system 

of supports that is capable of 

transferring all design loads to the 

ground that meets the requirements of 

24 CFR 3282.12. This definition is also 

consistent with the FHA mortgage 

insurance requirements for all 

manufactured homes that must be 

constructed in conformance with the 

Federal Manufactured Home and Safety 

Standards, as evidenced by an affixed 

certification label in accordance with 24 

CFR 3280.11. 

III. Opportunity for Further Comment 

As noted in the Summary portion at 

the beginning of this preamble, HUD is 

issuing this rule as an interim rule. It is 

HUD’s intention that following funding 

of the HTF as provided in HERA, and 

allocations of funds to States as 

provided in this rule, HUD will open 

this interim rule for public comment to 

solicit comment on how these 

regulations work once funding is 

available and the grantees gain 

experience administering the HTF 

program. 

IV. Findings and Certifications 

Executive Order 12866, Regulatory 

Planning and Review 

The Office of Management and Budget 

(OMB) reviewed this rule under 

Executive Order 12866 (entitled, 

‘‘Regulatory Planning and Review’’). 

This rule was determined to be 

economically significant as provided in 

section 3(f)(1) of the Order. The reasons 

for the determination are as follows: 

As discussed above in this preamble, 

HERA charged HUD to establish, the 

formula for the distribution of HTF 

grants to states through regulation, and 

to follow that rule with one that 

implements the programmatic 

requirements for the HTF. Consistent 

with that statutory direction, on 

December 4, 2009 (74 FR 63938), HUD 

published a proposed rule submitting 

for public comment the proposed 

formula for allocating HTF funds. As the 

first rule to be issued in the rulemaking 

process for the HTF, the formula 

allocation constituted, on behalf of the 

entire HTF rulemaking, an economically 

significant regulatory action under 

Executive Order 12866. The preamble to 

the December 2009 rule summarized the 

economic impacts of the HTF program, 

as proposed to be implemented through 

the formula issued for public comment 

on December 4, 2009. (For a discussion 

of the economic impact, please see 74 

FR 63940–63941.) 

On October 29, 2010, HUD published 

the proposed program rule for the HTF 

(see 75 FR 66978). This interim rule 

incorporates the December 4, 2009, 

allocation formula rule and October 29, 

2010, program rule. HUD’s full 

economic analysis for the proposed 

allocation rule is available for 

inspection on HUD’s Web site at 

http://www.huduser.org/portal/

publications/pubasst/riaforhtf.html. 

The docket file is available for public 

inspection between the hours of 8 a.m. 

and 5 p.m. weekdays in the Regulations 

Division, Office of General Counsel, 

Department of Housing and Urban 

Development, 451 7th Street SW., Room 

10276, Washington, DC 20410–0500. 

Due to security measures at the HUD 

Headquarters building, please schedule 

an appointment to review the docket file 

by calling the Regulations Division at 

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

number). Persons with hearing or 

speech impairments may access the 

above telephone number via TTY by 

calling the toll-free Federal Information 

Relay Service at 800–877–8339. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (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. 

Under the HTF program, HUD makes 

grants to the relatively large entities of 

States or their designated housing 

entities for the purposes of preserving 

and increasing the supply of rental 

housing and increasing homeownership 

for eligible families. Therefore, the 

primary focus on the rule is on these 

large entities. The States and Statedesignated housing entities may, in 

turn, make funding available to 

recipients, which may include smaller 

entities (such as nonprofit or for-profit 

organizations), but the funding made 

available to recipients is provided under 

application procedures and 

requirements established by the States 

or State-designated housing entities, not 

HUD; however, the grantees must 

ensure their recipients’ adherence to the 

statutory requirements and regulatory 

requirements promulgated by HUD. 

Additionally, the regulatory text 

largely reflects statutory requirements of 

the Federal Housing Enterprises 

Financial Safety and Soundness Act of 

1992 (12 U.S.C. 4501 et seq.). Where 

HUD has exercised the discretion to 

elaborate on the statutory requirements, 

HUD has strived to closely model these 

procedures on existing development 

programs, which are familiar to entities 

likely to be participants under the new 

HTF program. For example, as noted 

earlier in this preamble, the HTF 

program adopts several definitions used 

under the HOME program. The 

organization of the HTF regulations is 

modeled after those for the HOME 

program, and HUD has elected to adopt 

many existing HOME program 

requirements. Given that HTF funding is 

statutorily provided for the benefit of 

the States and is to be allocated to the 

States, HUD has determined that the 

rule will not have a significant 

economic impact on a substantial 

number of small entities. 

Environmental Impact 

A Finding of No Significant Impact 

(FONSI) with respect to the 

environment was made, at the proposed 

rule stage, in accordance with HUD 

regulations at 24 CFR part 50, which 


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implement section 102(2)(C) of the 

National Environmental Policy Act of 

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

Finding remains applicable to this rule 

and can be found at 

www.regulations.gov under docket 

number FR–5246–F–03. 

Executive Order 13132, Federalism 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits, to the extent 

practicable and permitted by law, an 

agency from promulgating a regulation 

that has federalism implications and 

either imposes substantial direct 

compliance costs on State and local 

governments and is not required by 

statute, or preempts State law, unless 

the relevant requirements of section 6 of 

the Executive Order are met. This rule 

does not have federalism implications, 

and does not impose substantial direct 

compliance costs on State and local 

governments or preempt State law 

within the meaning of the Executive 

Order. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA) (2 U.S.C. 

1531–1538) establishes requirements for 

Federal agencies to assess the effects of 

their regulatory actions on State, local, 

and tribal governments and the private 

sector. This rule does not impose any 

Federal mandate on any State, local, or 

tribal government or the private sector 

within the meaning of UMRA. 

Congressional Review Act 

This rule constitutes a ‘‘major rule’’ as 

defined in the Congressional Review 

Act (5 U.S.C. Chapter 8). The 

Congressional Review Act provides for 

major rules to have a 60-day delayed 

effective date. 

Paperwork Reduction Act 

The information collection 

requirements contained in this rule have 

been submitted to the Office of 

Management and Budget (OMB) under 

the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3520), and assigned an 

OMB control number. 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. 

The burden of the information 

collections in this rule is estimated as 

follows: 

List of Subjects 

24 CFR Part 91 

Aged, Grant programs-housing and 

community development, Homeless, 

Individuals with disabilities, Low- and 

moderate-income housing, Reporting 

and recordkeeping requirements. 

24 CFR Part 93 

Administrative practice and 

procedure, Grant programs-housing and 

community development, Low- and 

moderate-income housing, 

Manufactured homes, Rent subsidies, 

Reporting and recordkeeping 

requirements. 

For the reasons stated in the 

preamble, HUD amends 24 CFR chapter 

I as follows: 

PART 91—CONSOLIDATED 

SUBMISSIONS FOR COMMUNITY 

PLANNING AND DEVELOPMENT 

PROGRAMS 

■ 1. The authority citation part 91 

continues to read as follows: 

Authority: 42 U.S.C. 3535(d), 3601–3619, 

5301–5315, 11331–11388, 12701–12711, 

12741–12756, 12901–12912, and 12 U.S.C. 

1301 et seq. 

■ 2. In § 91.2, remove the word ‘‘and’’ at 

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

period at the end of paragraph (a)(4) and 

add ‘‘; and’’ in its place, and add 

paragraph (a)(5) to read as follows: 

§ 91.2 Applicability. 

(a) * * * 

(5) The Housing Trust Fund (HTF) 

program (see 24 CFR part 93). 

* * * * * 

■ 3. In § 91.10, revise the first sentence 

of paragraph (a) to read as follows: 

§ 91.10 Consolidated Program Year. 

(a) Each of the following programs 

shall be administered by a jurisdiction 

on a single consolidated program year, 

established by the jurisdiction: CDBG, 

ESG, HOME, HOPWA, and HTF. * * * 

* * * * * 

■ 4. In § 91.215, revise paragraph (b)(2) 

to read as follows: 

§ 91.215 Strategic Plan. 

* * * * * 

(b) * * * 

(2) The affordable housing section 

shall include specific objectives that 

describe proposed accomplishments the 

jurisdiction hopes to achieve and must 

specify the number of extremely lowincome, low-income, and moderateincome families to whom the 

jurisdiction will provide affordable 

housing as defined in 24 CFR 92.252 for 

rental housing, 24 CFR 92.254 for 

homeownership, and 24 CFR 93.302 and 

24 CFR 93.304 (if the jurisdiction 

receives HTF funds from the State) over 

a specific time period. 

* * * * * 

■ 5. In § 91.220, add paragraph (l)(5) to 

read as follows: 

§ 91.220 Action Plan. 

* * * * * 

(l) * * * 

(5) Housing Trust Fund. (i) If the 

jurisdiction receives HTF funds from 

the State under 24 CFR 93.105, the 

action plan must include the HTF 

allocation plan (consistent with the 

State’s HTF requirements) that describes 

the distribution of the HTF funds, and 

establishes the application requirements 

and the criteria for selection of 

applications submitted by eligible 

recipients that meet the jurisdiction’s 

priority housing needs. The plan must 

include the following: 

(A) The plan must identify priority 

factors for funding that shall include the 

following: geographic distribution 

which is a description of the geographic 

areas of the State (including areas of 

low-income and minority concentration) 

in which it will direct assistance during 

the ensuing program year; the 

applicant’s ability to obligate HTF funds 

and undertake eligible activities in a 

timely manner; in the case of rental 

housing projects, the extent to which 

rents for units in the project are 

affordable to extremely low-income 

families; in the case of rental housing 

projects, the duration of the units’ 

affordability period; the merits of the 

application in meeting the priority 

housing needs of the jurisdiction (such 

as housing that is accessible to transit or 

employment centers, housing that 

includes green building and sustainable 

development features, and housing that 

serves special needs populations); the 

location of existing affordable housing, 

and the extent to which the application 

makes use of non-federal funding 

sources. 

(B) The plan must include the 

requirement that the application contain 

a description of the eligible activities to 

be conducted with the HTF funds (as 

provided in 24 CFR 93.200) and contain 

a certification by each eligible recipient 

that housing units assisted with the HTF 

will comply with HTF requirements. 

The plan must also describe eligibility 

requirements for recipients (as defined 

in 24 CFR 93.2). 

(C) The plan must provide for 

performance goals, consistent with the 

jurisdiction’s goals established under 24 

CFR 91.215(b)(2). 

(D) The plan must provide the 

jurisdiction’s rehabilitation standards, 

as required by 24 CFR 93.301(b). 

(E) If the jurisdiction intends to use 

HTF funds for first-time homebuyers, it 

must set forth the guidelines for resale 

or recapture, and obtain HUD’s specific, 


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written approval, as required in 

§ 93.304(f). Approval of the 

consolidated plan or action plan under 

§ 91.500 or the failure to disapprove the 

consolidated plan or action plan does 

not satisfy the requirement for specific 

HUD approval for resale or recapture 

guidelines. 

(F) If the jurisdiction intends to use 

HTF funds for homebuyer assistance 

and does not use the HTF affordable 

homeownership limits for the area 

provided by HUD, it must determine 95 

percent of the median area purchase 

price and set forth the information in 

accordance with § 93.305. 

(G) The jurisdiction may limit the 

beneficiaries or give preferences to a 

particular segment of the extremely lowor very low-income population only if 

described in the action plan. 

(1) Any limitation or preference must 

not violate nondiscrimination 

requirements in 24 CFR 93.350, and the 

jurisdiction must not limit or give 

preferences to students. 

(2) The jurisdiction may permit rental 

housing owners to limit tenants or give 

a preference in accordance with 24 CFR 

93.303 only if such limitation or 

preference is described in the action 

plan. 

(H) The plan must describe the 

conditions under which the jurisdiction 

will refinance existing rental housing 

project debt. 

(ii) [Reserved]. 

■ 6. In § 91.315, revise paragraph (b)(2) 

to read as follows: 

§ 91.315 Strategic Plan. 

* * * * * 

(b) * * * 

(2) The affordable housing section 

shall include specific objectives that 

describe proposed accomplishments the 

State hopes to achieve and must specify 

the number of extremely low-income, 

low-income, and moderate-income 

families to which the State will provide 

affordable housing, as defined in 24 CFR 

92.252 for rental housing, 24 CFR 

92.254 for homeownership, and 24 CFR 

93.302 for rental housing and 24 CFR 

93.304 for homeownership over a 

specific time period. 

* * * * * 

■ 7. In § 91.320, revise paragraph (k)(5) 

to read as follows: 

§ 91.320 Action Plan. 

* * * * * 

(k) * * * 

(5) Housing Trust Fund. The action 

plan must include the HTF allocation 

plan that describes the distribution of 

the HTF funds, and establishes the 

application requirements and the 

criteria for selection of applications 

submitted by eligible recipients that 

meet the State’s priority housing needs. 

The plan must also establish the State’s 

maximum per-unit development 

subsidy limit for housing assisted with 

HTF funds. If the HTF funds will be 

used for first-time homebuyers, it must 

state the guidelines for resale and 

recapture as required in 24 CFR 93.304. 

The plan must reflect the State’s 

decision to distribute HTF funds 

through grants to subgrantees and/or to 

select applications submitted by eligible 

recipients. If the State is selecting 

applications submitted by eligible 

recipients, the plan must include the 

following: 

(i) The plan must provide priority for 

funding based on geographic diversity 

(as defined by the State in the 

consolidated plan); the applicant’s 

ability to obligate HTF funds and 

undertake eligible activities in a timely 

manner; in the case of rental housing 

projects, the extent to which the project 

has Federal, State, or local project-based 

rental assistance so that rents are 

affordable to extremely low-income 

families; in the case of rental housing 

projects, the duration of the units’ 

affordability period; the merits of the 

application in meeting the priority 

housing needs of the State (such as 

housing that is accessible to transit or 

employment centers, housing that 

includes green building and sustainable 

development features, or housing that 

serves special needs populations); and 

the extent to which the application 

makes use of non-federal funding 

sources. 

(ii) The plan must include the 

requirement that the application contain 

a description of the eligible activities to 

be conducted with the HTF funds (as 

provided in 24 CFR 93.200) and contain 

a certification by each eligible recipient 

that housing units assisted with the HTF 

will comply with HTF requirements. 

The plan must also describe eligibility 

requirements for recipients (as defined 

in 24 CFR 93.2). 

(iii) The plan must provide for 

performance goals and benchmarks 

against which the State will measure its 

progress, consistent with the State’s 

goals established under 24 CFR 

91.315(b)(2). 

(iv) The plan must include the State’s 

rehabilitation standards, as required by 

24 CFR 93.301(b)(1). 

(v) If the State intends to use HTF 

funds for first-time homebuyers, it must 

set forth the guidelines for resale or 

recapture, and obtain HUD’s specific, 

written approval, as required in 

§ 93.304(f). Approval of the 

consolidated plan or action plan under 

§ 91.500 or the failure to disapprove the 

consolidated plan or action does not 

satisfy the requirement for specific HUD 

approval for resale or recapture 

guidelines. 

(vi) If the State intends to use HTF 

funds for homebuyer assistance and 

does not use the HTF affordable 

homeownership limits for the area 

provided by HUD, it must determine 95 

percent of the median area purchase 

price and set forth the information in 

accordance with § 93.305. 

(vii) The State may limit the 

beneficiaries or give preferences to a 

particular segment of the extremely lowor very low-income population only if 

described in the action plan. 

(A) Any limitation or preference must 

not violate nondiscrimination 

requirements in 24 CFR 93.350, and the 

State must not limit or give preferences 

to students. 

(B) The State may permit rental 

housing owners to limit tenants or give 

a preference in accordance with 24 CFR 

93.303(d)(3) only if such limitation or 

preference is described in the action 

plan. 

(viii) The plan must describe the 

conditions under which the State will 

refinance existing debt. 

■ 8. In § 91.520, redesignate paragraphs 

(h) and (i) as paragraphs (i) and (j), 

respectively and add a new paragraph 

(h) to read as follows: 

§ 91.520 Performance reports. 

* * * * * 

(h) HTF. For jurisdictions receiving 

HTF funds, the report must describe the 

HTF program’s accomplishments, and 

the extent to which the jurisdiction 

complied with its approved HTF 

allocation plan and the requirements of 

24 CFR part 93. 

* * * * * 

■ 9. Add part 93 to read as follows: 

PART 93—HOUSING TRUST FUND 

Subpart A—General 

93.1 Overview. 

93.2 Definitions. 

93.3 Waivers. 

Subpart B—Allocation Formula; 

Reallocations 

93.50 Formula allocation. 

93.51 Formula factors. 

93.52 Minimum allocations. 

93.53 Federal Register notice of formula 

allocations. 

93.54 Reallocations by formula. 

Subpart C—Participation and Submission 

Requirements; Distribution of Assistance 

93.100 Participation and submission 

requirements. 

93.101 Distribution of assistance. 

Subpart D—Program Requirements 

93.150 Site and neighborhood standards. 


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93.151 Income determinations. 

Subpart E—Eligible and Prohibited 

Activities 

93.200 Eligible activities: General. 

93.201 Eligible project costs. 

93.202 Eligible administrative and planning 

costs. 

93.203 HTF funds and public housing. 

93.204 Prohibited activities and fees. 

Subpart F—Income Targeting 

93.250 Income targeting. 

Subpart G—Project Requirements 

93.300 Maximum per-unit subsidy amount, 

underwriting, and subsidy layering. 

93.301 Property standards. 

93.302 Qualification as affordable housing: 

rental housing. 

93.303 Tenant protections and selection. 

93.304 Qualification as affordable housing: 

homeownership. 

93.305 Qualification as affordable housing: 

modest housing requirements for 

homeownership; resale or recapture 

requirements. 

Subpart H—Other Federal Requirements 

93.350 Other Federal requirements and 

nondiscrimination; affirmative 

marketing. 

93.351 Lead-based paint. 

93.352 Displacement, relocation, and 

acquisition. 

93.353 Conflict of interest. 

93.354 Funding Accountability and 

Transparency Act. 

92.355 Eminent domain. 

Subpart I—Program Administration 

93.400 Housing Trust Fund (HTF) 

accounts. 

93.401 HTF grant agreement. 

93.402 Program disbursement and 

information system. 

93.403 Program income and repayments. 

93.404 Grantee responsibilities; written 

agreements; onsite inspections; financial 

oversight. 

93.405 Applicability of uniform 

administrative requirements, cost 

principles, and audits. 

93.406 Audits. 

93.407 Recordkeeping. 

93.408 Performance reports. 

Subpart J—Performance Reviews and 

Sanctions 

93.450 Accountability of recipients. 

93.451 Performance reviews. 

93.452 Corrective and remedial actions. 

93.453 Notice and opportunity for hearing; 

sanctions. 

Authority: 42 U.S.C. 3535(d), 12 U.S.C. 

4568. 

Subpart A—General 

§ 93.1 Overview. 

(a) This part implements the Housing 

Trust Fund (HTF) program established 

under section 1338 of the Federal 

Housing Enterprises Financial Safety 

and Soundness Act of 1992, as amended 

(12 U.S.C. 4501 et seq.) (the Act). In 

general, under the HTF program, HUD 

allocates funds by formula to eligible 

States to increase and preserve the 

supply of decent, safe, sanitary, and 

affordable housing, with primary 

attention to rental housing for extremely 

low-income and very low-income 

households, including homeless 

families. 

(b) Section 1337 of the Act requires a 

percentage of the unpaid principal 

balance of total new business for the 

Federal Home Loan Mortgage 

Corporation (Freddie Mac) and the 

Federal National Mortgage Association 

(Fannie Mae) (collectively, the 

government-sponsored enterprises or 

GSEs) to be setaside and allocated as a 

dedicated source of annual funding for 

the HTF, unless allocations are 

suspended by the Director of the Federal 

Housing Finance Agency, the agency 

that regulates the GSEs. These funds 

will be deposited into an HTF account 

established in the Treasury of the 

United States by the Secretary of the 

Treasury to carry out the HTF program. 

The Act also provides that the HTF may 

be funded with amounts appropriated, 

transferred, or credited to the HTF 

under other provisions of law. 

§ 93.2 Definitions. 

1937 Act means the United States 

Housing Act of 1937 (42 U.S.C. 1437 et 

seq.). 

Act means the Federal Housing 

Enterprises Financial Safety and 

Soundness Act of 1992, as amended (12 

U.S.C. 4501 et seq). 

Annual income. See § 93.151. 

Commitment means: 

(1) The grantee has executed a legally 

binding written agreement (that 

includes the date of the signature of 

each person signing the agreement) with 

an eligible recipient for a project that 

meets the definition of ‘‘commit to a 

specific local project’’ of paragraph (2) 

of this definition. 

(2) ‘‘Commit to a specific local 

project’’ means: 

(i) If the project consists of 

rehabilitation or new construction (with 

or without acquisition), the grantee and 

recipient have executed a written legally 

binding agreement under which HTF 

assistance will be provided to the 

recipient for an identifiable project for 

which construction can reasonably be 

expected to start within 12 months of 

the agreement date. The written 

agreement for rehabilitation or new 

construction of rental housing may also 

provide operating cost assistance and/or 

operating cost assistance reserves. 

(ii) If the project consists of 

acquisition of standard housing and the 

grantee is providing HTF funds to a 

recipient to acquire rental housing, or to 

a first-time homebuyer family to acquire 

single family housing for 

homeownership, the grantee and 

recipient or the family have executed a 

written agreement under which HTF 

assistance will be provided for the 

purchase of the rental housing or single 

family housing and the property title 

will be transferred to the recipient or 

family within 6 months of the 

agreement date. The written agreement 

for acquisition of rental housing may 

also provide operating cost assistance 

and/or operating cost assistance 

reserves. 

(iii) If the project is for renewal of 

operating cost assistance or operating 

cost assistance reserves, the grantee and 

the recipient must have executed a 

legally binding written agreement under 

which HTF funds will be provided to 

the recipient for operating cost 

assistance or operating cost assistance 

reserves for the identified HTF project. 

Consolidated plan means the plan 

submitted and approved in accordance 

with 24 CFR part 91. 

Displaced homemaker means an 

individual who: 

(1) Is an adult; 

(2) Has not worked full-time full-year 

in the labor force for a number of years, 

but has, during such years, worked 

primarily without remuneration to care 

for the home and family; and 

(3) Is unemployed or underemployed 

and is experiencing difficulty in 

obtaining or upgrading employment. 

Extremely low-income families means 

low-income families whose annual 

incomes do not exceed 30 percent of the 

median family income of a geographic 

area, as determined by HUD with 

adjustments for smaller and larger 

families. 

Family has the same meaning given 

that term in 24 CFR 5.403. 

First-time homebuyer means an 

individual and his or her spouse who 

have not owned a home during the 3- 

year period prior to purchase of a home 

with assistance under this part. The 

term first-time homebuyer also includes 

an individual who is a displaced 

homemaker or single parent, as those 

terms are defined in this section. 

Grantee means the State or the Statedesignated entity that receives the HTF 

funds from HUD. 

HTF allocation plan means the annual 

submission to HUD required by the Act 

that describes how the grantee will 

distribute its HTF funds, including how 

it will use the funds to address its 

priority housing needs, what activities 

may be undertaken with those funds, 

and how recipients and projects will be 


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selected to receive those funds. See 24 

CFR 91.220(l)(4) and 91.320(k)(5). 

HTF funds means funds made 

available under this part through 

formula allocations and reallocations, 

plus program income. 

Homeownership means ownership in 

fee simple title in a 1- to 4-unit dwelling 

or in a condominium unit, or equivalent 

form of ownership approved by HUD. 

(1) The land may be owned in fee 

simple or the homeowner may have a 

99-year ground lease. 

(i) For housing located in the insular 

areas, the ground lease must be 40 years 

or more. 

(ii) For housing located on Indian 

trust or restricted Indian lands or a 

Community Land Trust, the ground 

lease must be 50 years or more. 

(iii) For manufactured housing, the 

ground lease must be for a period at 

least equal to the applicable period of 

affordability in § 93.304(e). 

(2) Right to possession under a 

contract for deed, installment contract, 

or land contract (pursuant to which the 

deed is not given until the final 

payment is made) is not an equivalent 

form of ownership. 

(3) The ownership interest may be 

subject only to the restrictions on resale 

required under § 93.304; mortgages, 

deeds of trust, or other liens or 

instruments securing debt on the 

property as approved by the grantee; or 

any other restrictions or encumbrances 

that do not impair the good and 

marketable nature of title to the 

ownership interest. 

(4) The grantee must determine 

whether or not ownership or 

membership in a cooperative or mutual 

housing project constitutes 

homeownership under State law; 

however, if the cooperative or mutual 

housing project receives low income 

housing tax credits, the ownership or 

membership does not constitute 

homeownership. 

Household means one or more 

persons occupying a housing unit. 

Housing includes manufactured 

housing and manufactured housing lots, 

permanent housing for disabled 

homeless persons, single-room 

occupancy housing, and group homes. 

Housing does not include emergency 

shelters (including shelters for disaster 

victims) or facilities such as nursing 

homes, convalescent homes, hospitals, 

residential treatment facilities, 

correctional facilities, halfway houses, 

housing for students, or dormitories 

(including farmworker dormitories). 

HUD means the Department of 

Housing and Urban Development. 

Income-eligible means a family, 

homeowner, or household (as 

appropriate given the context of the 

specific regulatory provision) that is 

very low-income, extremely lowincome, or both, depending on the 

income-targeting requirements set forth 

in § 93.250. 

Insular areas means Guam, the 

Commonwealth of the Northern Mariana 

Islands, the United States Virgin 

Islands, and American Samoa. 

Neighborhood means a geographic 

location designated in comprehensive 

plans, ordinances, or other local 

documents as a neighborhood, village, 

or similar geographical designation that 

is within the boundary but does not 

encompass the entire area of a unit of 

general local government; except that if 

the unit of general local government has 

a population under 25,000, the 

neighborhood may, but need not, 

encompass the entire area of a unit of 

general local government. 

Poverty line is defined in section 673 

of the Omnibus Budget Reconciliation 

Act of 1981 (42 U.S.C. 9902). 

Program income means gross income 

received by the grantee that is directly 

generated from the use of HTF funds. 

When program income is generated by 

housing that is only partially assisted 

with HTF funds, the income shall be 

prorated to reflect the percentage of HTF 

funds used. Program income includes, 

but is not limited to, the following: 

(1) Proceeds from the disposition by 

sale or long-term lease of real property 

acquired, rehabilitated, or constructed 

with HTF funds; 

(2) Gross income from the use or 

rental of real property owned by the 

grantee that was acquired, rehabilitated, 

or constructed with HTF funds, minus 

costs that were incidental to generation 

of the income; therefore, program 

income does not include gross income 

from the use, rental, or sale of real 

property received by the recipient, 

unless the funds are paid by the 

recipient to the grantee); 

(3) Payments of principal and interest 

on loans made using HTF funds; 

(4) Proceeds from the sale of loans 

made with HTF funds; 

(5) Proceeds from the sale of 

obligations secured by loans made with 

HTF funds; 

(6) Interest earned on program income 

pending its disposition; and 

(7) Any other interest or return on the 

investment of HTF funds, as permitted 

under § 93.200(b). 

Project means a site or sites together 

with any building (including a 

manufactured housing unit) or buildings 

located on the site(s) that are under 

common ownership, management, and 

financing and are to be assisted with 

HTF funds as a single undertaking 

under this part. The project includes all 

the activities associated with the site 

and building. 

Project completion means that all 

necessary title transfer requirements and 

construction work have been performed, 

the project complies with the 

requirements of this part (including the 

property standards under § 93.301 of 

this part), the final drawdown has been 

disbursed for the project, and the project 

completion information has been 

entered in the disbursement and 

information system established by HUD, 

except that with respect to rental 

housing project completion, for the 

purposes of § 93.402(d) of this part, 

project completion occurs upon 

completion of construction before 

occupancy. 

Recipient means an organization, 

agency, or other entity (including a 

public housing agency, or a for-profit 

entity or a nonprofit entity) that receives 

HTF assistance from a grantee as an 

owner or developer to carry out an HTFassisted project. A recipient must: 

(1) Make acceptable assurances to the 

grantee that it will comply with the 

requirements of the HTF program 

during the entire period that begins 

upon selection of the recipient to 

receive HTF funds, and ending upon the 

conclusion of all HTF-funded activities; 

(2) Demonstrate the ability and 

financial capacity to undertake, comply, 

and manage the eligible activity; 

(3) Demonstrate its familiarity with 

the requirements of other Federal, State, 

or local housing programs that may be 

used in conjunction with HTF funds to 

ensure compliance with all applicable 

requirements and regulations of such 

programs; and 

(4) Have demonstrated experience and 

capacity to conduct an eligible HTF 

activity as evidenced by its ability to: 

(i) Own, construct, or rehabilitate, and 

manage and operate an affordable 

multifamily rental housing 

development; or 

(ii) Design, construct, or rehabilitate, 

and market affordable housing for 

homeownership. 

(iii) Provide forms of assistance, such 

as down payments, closing costs, or 

interest rate buydowns for purchasers. 

Reconstruction means the rebuilding, 

on the same lot, of housing standing on 

a site at the time of project commitment, 

except that housing that was destroyed 

may be rebuilt on the same lot if HTF 

funds are committed within 12 months 

of the date of destruction. The number 

of housing units on the lot may not be 

decreased or increased as part of a 

reconstruction project, but the number 

of rooms per unit may be increased or 

decreased. Reconstruction also includes 


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replacing an existing substandard unit 

of manufactured housing with a new or 

standard unit of manufactured housing. 

Reconstruction is new construction for 

purposes of this part. 

Shortage of standard rental units both 

affordable and available to extremely 

low-income renter households means 

(1) For any State or other geographical 

area the gap between: 

(i) The number of units with complete 

plumbing and kitchen facilities with a 

rent that does not exceed 30 percent of 

30 percent of the adjusted area median 

income (AMI) as determined by HUD 

that either are occupied by extremely 

low-income renter households or are 

vacant for rent; and 

(ii) The number of extremely lowincome renter households. 

(2) If the number of units described in 

paragraph (1)(i) of this definition 

exceeds the number of extremely lowincome households described in 

paragraph (1)(ii) of this definition, there 

is no shortage. 

Single family housing means a one-to 

four-family residence, condominium 

unit, cooperative unit, combination of 

manufactured housing and lot, or 

manufactured housing lot. 

Single parent means an individual 

who: 

(1) Is unmarried or legally separated 

from a spouse; and 

(2) Has one or more minor children of 

whom the individual has custody or 

joint custody, or is pregnant. 

State means any State of the United 

States, the District of Columbia, the 

Commonwealth of Puerto Rico, the 

Commonwealth of the Northern Mariana 

Islands, Guam, the Virgin Islands, and 

American Samoa. 

State-designated entity means a State 

housing finance agency, tribally 

designated housing entity, or any other 

qualified instrumentality of the State 

that is designated by the State to be the 

grantee. 

Subgrantee means a unit of general 

local government or State agency 

selected by the grantee to administer all 

or a portion of its HTF program. A local 

government subgrantee must have an 

approved consolidated plan submitted 

in accordance with 24 CFR part 91. The 

selection of a subgrantee by a grantee is 

not subject to the procurement 

procedures and requirements. 

Tribally designated housing entity has 

the meaning given the term in section 4 

of the Native American Housing 

Assistance and Self-Determination Act 

of 1997 (25 U.S.C. 4103). 

Unit of general local government 

means a city, town, township, county, 

parish, village, or other general purpose 

political subdivision of a State; and any 

agency or instrumentality thereof that is 

established pursuant to legislation and 

designated by the chief executive to act 

on behalf of the jurisdiction with regard 

to provisions of this part. When a 

county is an urban county, the urban 

county is the unit of general local 

government for purposes of the HTF 

program. 

Urban county has the meaning given 

the term in 24 CFR 570.3. 

Very low-income renter households 

means a household whose income is in 

excess of 30 percent but not greater than 

50 percent of the area median income, 

with adjustments for smaller and larger 

families, as determined by HUD. 

Very low-income families means lowincome families whose annual incomes 

are in excess of 30 percent but not 

greater than 50 percent of the median 

family income of a geographic area, as 

determined by HUD with adjustments 

for smaller and larger families. ‘‘Very 

low-income family’’ also includes any 

family that resides in a nonmetropolitan 

area that does not exceed the poverty 

line applicable to the family size 

involved. 

§ 93.3 Waivers. 

HUD may, upon a determination of 

good cause and subject to statutory 

limitations, waive any provision of this 

part and delegate this authority in 

accordance with section 106 of the 

Department of Housing and Urban 

Development Reform Act of 1989 (42 

U.S.C. 3535(q)). 

Subpart B—Allocation Formula; 

Reallocations 

§ 93.50 Formula allocation. 

(a) Allocations to States. HUD will 

provide to the States allocations of 

funds in amounts determined by the 

formula described in this part. 

(b) Amount available for allocation. 

The amount of funds available for 

allocation by the formula is the balance 

remaining after providing for other 

purposes authorized by Congress, in 

accordance with the Act and 

appropriations. 

(c) Allocations for the insular areas. 

The allocation amount for each insular 

area is determined by multiplying the 

funds available times the ratio of renter 

households in each insular area to the 

total number of renter households in the 

50 States, the District of Columbia, the 

Commonwealth of Puerto Rico, and the 

insular areas. 

(d) Allocations for the 50 States, the 

Commonwealth of Puerto Rico, and the 

District of Columbia—(1) Amounts 

available for allocations. The amount of 

funds that is available for allocation by 

the formula to the 50 States, the 

Commonwealth of Puerto Rico, and the 

District of Columbia is determined using 

the most current data available from the 

U.S. Census Bureau that is available for 

the same year for all these geographic 

areas. The amount is equal to the 

balance of funds remaining after 

determining formula allocations for the 

insular areas under § 93.50(c). For 

purposes of paragraphs (d)(1) and (2) of 

this section, the term ‘‘State’’ means any 

of the 50 United States, the 

Commonwealth of Puerto Rico, and the 

District of Columbia. 

(2) Allocations. (i) Allocations to the 

States are determined using the four 

needs factors described in § 93.51(a) 

through (d), multiplying each factor by 

the amount available under § 93.51(d)(1) 

by its priority weight, and summing the 

four factors for each State. 

(ii) The factor described in § 93.51(a) 

is weighted 0.5. The factors described in 

§ 93.51(b) and (d) are weighted at 0.125 

and the factor described in § 93.51(c) of 

this section is weighted at 0.25. 

(iii) The sum of the four needs factors 

for each State is then multiplied by the 

construction cost factor described in 

§ 93.51(e) of this section and by the total 

amount of funds available for State 

allocations. 

§ 93.51 Formula factors. 

(a) Need factor one. The ratio of the 

shortage of standard rental units both 

affordable and available to extremely 

low-income renter households in the 

State to the aggregate shortage of 

standard rental units both affordable 

and available to extremely low-income 

renter households in all the States. 

(b) Need factor two. The ratio of the 

shortage of standard rental units both 

affordable and available to very lowincome renter households in the State to 

the aggregate shortage of standard rental 

units both affordable and available to 

very low-income renter households in 

all the States. 

(c) Need factor three. The ratio of: 

(1) Extremely low-income renter 

households in the State living with 

either incomplete kitchen or plumbing 

facilities, more than one person per 

room, or paying more than 50 percent of 

income for housing costs, to 

(2) The aggregate number of extremely 

low-income renter households living 

with either incomplete kitchen or 

plumbing facilities, more than one 

person per room, or paying more than 

50 percent of income for housing costs 

in all the States. 

(d) Need factor four. The ratio of very 

low-income renter households in the 

State paying more than 50 percent of 

income on rent relative to the aggregate 


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number of very low-income renter 

households paying more than 50 

percent of income on rent in all the 

States. 

(e) Construction cost factor. The 

resulting sum calculated from the 

factors described in paragraphs (a) 

through (d) of this section shall be 

multiplied by the relative cost of 

construction in the state. For purposes 

of calculating this factor, the term ‘‘cost 

of construction’’: 

(1) Means the cost of construction or 

building rehabilitation in the State 

relative to the national cost of 

construction or building rehabilitation; 

and 

(2) Is calculated so that values higher 

than 1.0 indicate that the State’s 

construction costs are higher than the 

national average, a value of 1.0 indicates 

that the State’s construction costs are 

exactly the same as the national average, 

and values lower than 1.0 indicate that 

the State’s cost of construction are lower 

than the national average. 

§ 93.52 Minimum allocations. 

(a) In accordance with the HTF 

statute, HUD is required to provide each 

of the States and the District of 

Columbia with a minimum grant of $3 

million. If the formula amount 

determined for a fiscal year is less than 

$3 million to any of the 50 States or the 

District of Columbia, then the allocation 

to that State or the District of Columbia 

is increased to $3 million, and 

allocations to States and the District of 

Columbia above $3 million and to the 

Commonwealth of Puerto Rico and the 

insular areas are adjusted by an equal 

amount on a pro rata basis. 

(b) If in any fiscal year, funding in the 

HTF is insufficient to provide each of 

the 50 States and the District of 

Columbia with a minimum grant of $3 

million, HUD will, through notice 

published in the Federal Register for 

public comment, describe an alternative 

method for allocating grant funds to the 

50 States and the District of Columbia. 

§ 93.53 Federal Register notice of formula 

allocations. 

Not later than 60 calendar days after 

the date that HUD determines the 

formula amounts under this subpart, 

HUD will publish a notice in the 

Federal Register announcing the 

availability of the allocations to States. 

§ 93.54 Reallocations by formula. 

(a) HUD will reallocate under this 

section: 

(1) Any HTF funds available for 

reallocation because HUD reduced or 

recaptured funds from an HTF grantee 

under § 93.400(d) for failure to commit 

or expend the funds within the time 

specified, or under § 93.453 for failure 

to comply substantially with any 

provision of this part; 

(2) Any HTF funds reduced for failure 

by the grantee to obtain funds required 

to be reimbursed or returned under 

§ 93.450; and 

(3) Any HTF funds remitted to HUD 

under § 93.403(b)(4) when a grantee 

ceases to be an HTF grantee for any 

reason. 

(b) Any reallocation of funds must be 

made only among all participating 

States, except those States from which 

the funds were recaptured or reduced. 

(c) Any amounts that become 

available for reallocation shall be added 

to amounts for formula allocation in the 

succeeding fiscal year. 

Subpart C—Participation and 

Submission Requirements; 

Distribution of Assistance 

§ 93.100 Participation and submission 

requirements. 

(a) Notification of intent to 

participate. Not later than 30 calendar 

days after HUD’s publication of the 

formula allocation amounts as provided 

in § 93.53, the State must notify HUD in 

writing of its intention to become an 

HTF grantee for the first year of HTF 

funding. 

(b) Submission requirement. To 

receive its HTF grant, the grantee must 

submit a consolidated plan in 

accordance with 24 CFR part 91. 

§ 93.101 Distribution of assistance. 

(a) A State may choose to be the HTF 

grantee to receive and administer its 

grant or it may choose a qualified Statedesignated entity to be the HTF grantee. 

(b) Each grantee is responsible for 

distributing HTF funds throughout the 

State according to the State’s assessment 

of the priority housing needs within the 

State, as identified in the State’s 

approved consolidated plan. 

(c) An HTF grantee may choose to 

directly fund projects by eligible 

recipients in accordance with the State’s 

HTF allocation plan or to fund projects 

by eligible recipients through one or 

more subgrantees. An HTF subgrantee 

that is a unit of general local 

government must have a consolidated 

plan under 24 CFR part 91, and must 

include an HTF allocation plan in its 

consolidated plan (see 24 CFR 

91.220(l)(4)), and must select projects by 

eligible recipients in accordance with its 

HTF allocation plan. Because a State has 

only one consolidated plan, and HTF 

allocation plan for an HTF subgrantee 

that is a State agency must be included 

in the State’s HTF allocation plan. The 

grantee or subgrantee must determine 

that the applicant is an eligible recipient 

that meets the definition of ‘‘recipient’’ 

in § 93.2 before awarding HTF 

assistance. 

(d) If the HTF grantee subgrants HTF 

funds to subgrantees, the grantee must 

ensure that its subgrantees comply with 

the requirements of this part and carry 

out the responsibilities of the grantee. 

The grantee must annually review the 

performance of subgrantees in 

accordance with 24 CFR 93.404(a). 

Subpart D—Program Requirements 

§ 93.150 Site and neighborhood standards. 

(a) General. A grantee must 

administer its HTF program in a manner 

that provides housing that is suitable 

from the standpoint of facilitating and 

furthering full compliance with the 

applicable provisions of title VI of the 

Civil Rights Act of 1964 (42 U.S.C. 

2000d–2000d–4), the Fair Housing Act 

(42 U.S.C. 3601 et seq., E.O. 11063, 3 

CFR, 1959–1963 Comp., p. 652) and 

HUD regulations issued pursuant 

thereto; and promotes greater choice of 

housing opportunities. 

(b) New rental housing. In carrying 

out the site and neighborhood 

requirements with respect to new 

construction of rental housing, a grantee 

is responsible for making the 

determination that proposed sites for 

new construction meet the requirements 

in 24 CFR 983.57(e)(2). 

§ 93.151 Income determinations. 

(a) General. The HTF program has 

income-targeting requirements. 

Therefore, the grantee must determine 

that each family occupying an HTFassisted unit is income-eligible by 

determining the family’s annual income. 

(b) Definition of ‘‘annual income.’’ (1) 

When determining whether a family is 

income-eligible, the grantee must use 

one of the following two definitions of 

‘‘annual income’’: 

(i) ‘‘Annual income’’ as defined at 24 

CFR 5.609; or 

(ii) ‘‘Adjusted gross income’’ as 

defined for purposes of reporting under 

the Internal Revenue Service (IRS) Form 

1040 series for individual federal annual 

income tax purposes. 

(2) The grantee may use only one 

definition for each HTF-assisted 

program (e.g., down payment assistance 

program) that it administers and for 

each rental housing project. 

(c) Determining annual income—(1) 

Tenants in HTF-assisted housing. For 

families who are tenants in HTFassisted housing, the grantee must 

initially determine annual income using 

the method in paragraph (d)(1) of this 


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section. For subsequent income 

determinations during the period of 

affordability, the grantee may use any 

one of the methods described in 

paragraph (d) of this section, in 

accordance with § 93.302(e). 

(2) HTF-assisted homebuyers. For 

families who are HTF-assisted 

homebuyers, the grantee must 

determine annual income using the 

method described in paragraph (d)(1) of 

this section. 

(d) Methods of determining annual 

income. (1) Examine at least 2 months 

of source documents evidencing annual 

income (e.g., wage statement, interest 

statement, unemployment 

compensation statement) for the family. 

(2) Obtain from the family a written 

statement of the amount of the family’s 

annual income and family size, along 

with a certification that the information 

is complete and accurate. The 

certification must state that the family 

will provide source documents upon 

request. 

(3) Obtain a written statement from 

the administrator of a government 

program under which the family 

receives benefits and which examines 

each year the annual income of the 

family. The statement must indicate the 

tenant’s family size and state the 

amount of the family’s annual income; 

or alternatively, the statement must 

indicate the current dollar limit for very 

low- or low-income families for the 

family size of the tenant and state that 

the tenant’s annual income does not 

exceed this limit. 

Subpart E—Eligible and Prohibited 

Activities 

§ 93.200 Eligible activities: General. 

(a)(1) HTF funds may be used for the 

production, preservation, and 

rehabilitation of affordable rental 

housing and affordable housing for firsttime homebuyers through the 

acquisition (including assistance to 

homebuyers), new construction, 

reconstruction, or rehabilitation of 

nonluxury housing with suitable 

amenities, including real property 

acquisition, site improvements, 

conversion, demolition, and other 

expenses, including financing costs, 

relocation expenses of any displaced 

persons, families, businesses, or 

organizations; for operating costs of 

HTF-assisted rental housing; and for 

reasonable administrative and planning 

costs. Not more than one third of each 

annual grant may be used for operating 

cost assistance and operating cost 

assistance reserves. Operating cost 

assistance and operating cost assistance 

reserves may be provided only to rental 

housing acquired, rehabilitated, 

reconstructed, or newly constructed 

with HTF funds. Not more than 10 

percent of the annual grant shall be used 

for housing for homeownership. HTFassisted housing must be permanent 

housing. The specific eligible costs for 

these activities are found in §§ 93.201 

and 93.202. The activities and costs are 

eligible only if the housing meets the 

property standards in § 93.301, as 

applicable, upon project completion. 

(2) Acquisition of vacant land or 

demolition must be undertaken only 

with respect to a particular housing 

project intended to provide affordable 

housing within the time frames 

established in the definition of 

‘‘commitment’’ in § 93.2. 

(3) HTF funds may be used to 

purchase and/or rehabilitate a 

manufactured housing unit, and 

purchase the land upon which a 

manufactured housing unit is located. 

The manufactured housing unit must, at 

the time of project completion, be 

connected to permanent utility hookups and be located on land that is 

owned by the manufactured housing 

unit owner or land for which the 

manufactured housing owner has a lease 

for a period at least equal to the 

applicable period of affordability. 

(b) Forms of assistance to projects. A 

grantee may provide HTF funds as 

equity investments, interest-bearing 

loans or advances, non-interest-bearing 

loans or advances, interest subsidies 

consistent with the purposes of this 

part, deferred payment loans, grants, or 

other forms of assistance that HUD 

determines to be consistent with the 

purposes of this part. Each grantee has 

the right to establish the terms of 

assistance, subject to the requirements 

of this part. 

(c) Multi-unit projects. (1) HTF funds 

may be used to assist in the 

development of one or more housing 

units in a multi-unit project. Only the 

actual HTF eligible development costs 

of the assisted units may be charged to 

the HTF program. If the assisted and 

non-assisted units are not comparable, 

the actual costs may be determined 

based on a method of cost allocation. If 

the assisted and non-assisted units are 

comparable in terms of size, features, 

and number of bedrooms, the actual cost 

of the HTF-assisted units can be 

determined by prorating the total HTFeligible development costs of the project 

so that the proportion of the total 

development costs charged to the HTF 

program does not exceed the proportion 

of the HTF-assisted units in the project. 

(2) After project completion, the 

number of units designated as HTFassisted may be reduced only in 

accordance with § 93.203, except that in 

a project consisting of all HTF-assisted 

units, one unit may be converted to an 

onsite manager’s unit if the grantee 

determines the conversion is reasonable 

and that, based on one fewer HTFassisted unit, the costs charged to the 

HTF program do not exceed the actual 

costs of the HTF-assisted units and do 

not exceed the subsidy limit established 

pursuant to § 93.300(a). 

(d) Terminated projects. An HTFassisted project that is terminated before 

completion, either voluntarily or 

otherwise, constitutes an ineligible 

activity and the grantee must repay any 

HTF funds invested in the project to its 

HTF account from which the funds were 

drawn (i.e., local or Treasury account), 

in accordance with § 93.403(b). A 

project that does not meet the 

requirements for affordable housing 

must be terminated and the grantee 

must repay the HTF funds to the 

grantee’s HTF account. 

§ 93.201 Eligible project costs. 

HTF funds may be used to pay the 

following eligible costs: 

(a) Development hard costs. The 

actual cost of constructing or 

rehabilitating housing. These costs 

include the following: 

(1) For new construction projects, 

costs to meet the new construction 

standards of the grantee in § 93.301; 

(2) For rehabilitation, costs to meet 

the property standards for rehabilitation 

projects in § 93.301(b); 

(3) For both new construction and 

rehabilitation projects, costs: 

(i) To demolish existing structures; 

(ii) To make utility connections 

including off-site connections from the 

property line to the adjacent street; and 

(iii) To make improvements to the 

project site that are in keeping with 

improvements of surrounding, standard 

projects. Site improvements may 

include onsite roads and sewer and 

water lines necessary to the 

development of the project. The project 

site is the property, owned by the 

project owner, upon which the project 

is located. 

(4) For both new construction and 

rehabilitation of multifamily rental 

housing projects, costs to construct or 

rehabilitate laundry and community 

facilities that are located within the 

same building as the housing and which 

are for the use of the project residents 

and their guests. 

(5) Costs to make utility connections 

or to make improvements to the project 

site, in accordance with the provisions 

of paragraphs (a)(3)(ii) and (iii) of this 

section are also eligible in connection 


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with the acquisition of standard 

housing. 

(b) Refinancing costs. (1) The cost to 

refinance existing debt secured by rental 

housing units that are being 

rehabilitated with HTF funds, but only 

if the refinancing is necessary to reduce 

the overall housing costs and to make 

the housing more affordable and 

proportional to the number of HTFassisted units in the rental project. The 

proportional rehabilitation cost must be 

greater than the proportional amount of 

debt that is refinanced. 

(2) The grantee must establish 

refinancing guidelines and state them in 

its consolidated plan described in 24 

CFR part 91. The guidelines shall 

describe the conditions under which the 

grantee will refinance existing debt. At 

minimum, the guidelines must 

demonstrate that rehabilitation is the 

primary eligible activity and ensure that 

this requirement is met by establishing 

a minimum level of rehabilitation per 

unit or a required ratio between 

rehabilitation and refinancing. 

(c) Acquisition costs. Costs of 

acquiring improved or unimproved real 

property, including acquisition by 

homebuyers. 

(d) Related soft costs. Other 

reasonable and necessary costs incurred 

by the owner or grantee and associated 

with the financing, or development (or 

both) of new construction, rehabilitation 

or acquisition of housing assisted with 

HTF funds. These costs include, but are 

not limited to: 

(1) Architectural, engineering, or 

related professional services required to 

prepare plans, drawings, specifications, 

or work write-ups. The costs may be 

paid if they were incurred not more 

than 24 months before the date that HTF 

funds are committed to the project and 

the grantee expressly permits HTF funds 

to be used to pay the costs in the written 

agreement committing the funds. 

(2) Costs to process and settle the 

financing for a project, such as private 

lender origination fees, credit reports, 

fees for title evidence, fees for 

recordation and filing of legal 

documents, building permits, attorneys’ 

fees, private appraisal fees and fees for 

an independent cost estimate, and 

builders’ or developers’ fees. 

(3) Costs of a project audit, including 

certification of costs performed by a 

certified public accountant, that the 

grantee may require with respect to the 

development of the project. 

(4) Costs to provide information 

services such as affirmative marketing 

and fair housing information to 

prospective homeowners and tenants as 

required by § 93.350. 

(5) For new construction or 

rehabilitation, the cost of funding an 

initial operating deficit reserve, which is 

a reserve to meet any shortfall in project 

income during the period of project 

rent-up (not to exceed 18 months) and 

which may only be used to pay project 

operating expenses, scheduled 

payments to a replacement reserve, and 

debt service. Any HTF funds placed in 

an operating deficit reserve that remain 

unexpended after the period of project 

rent-up may be retained for project 

reserves if permitted by the grantee. 

(6) Staff and overhead costs of the 

grantee directly related to carrying out 

the project, such as work specifications 

preparation, loan processing, and 

inspections. For multi-unit projects, 

such costs must be allocated among 

HTF-assisted units in a reasonable 

manner and documented. Although 

these costs may be charged as project 

costs, these costs cannot be charged to 

or paid by the assisted families. 

(7) For both new construction and 

rehabilitation, costs for the payment of 

impact fees that are charged for all 

projects within a jurisdiction. 

(e) Operating cost assistance and 

operating cost assistance reserves. For 

HTF-assisted units for which projectbased assistance is not available, when 

necessary and subject to the limitations 

in § 93.200(a), HTF funds may be used 

to pay for operating cost assistance and 

operating cost assistance reserves, as 

follows: 

(1) Operating costs are costs for 

insurance, utilities, real property taxes, 

and maintenance and scheduled 

payments to a reserve for replacement of 

major systems (provided that the 

payments must be based on the useful 

life of each major system and expected 

replacement cost) of an HTF-assisted 

unit. The eligible amount of HTF funds 

per unit for operating cost assistance is 

determined based on the deficit 

remaining after the monthly rent 

payment for the HTF-assisted unit is 

applied to the HTF-assisted unit’s share 

of monthly operating costs. The 

maximum amount of the operating cost 

assistance to be provided to an HTFassisted rental project must be based on 

the underwriting of the project and must 

be specified in a written agreement 

between the grantee and the recipient. 

The written agreement may commit, 

from a fiscal year HTF grant, funds for 

operating cost assistance for a multiyear 

period provided that the grantee is able 

meet its expenditure deadline in 

§ 93.400(d). The grantee may renew 

operating cost assistance with future 

fiscal year HTF grants during the 

affordability period and the amount 

must be based on the need for the 

operating cost assistance at the time the 

assistance is renewed. 

(2) An operating cost assistance 

reserve may be funded by the grantee for 

HTF-assisted units in a project where 

the grantee determines in its 

underwriting of the project the reserve 

is necessary to ensure the project’s 

financial feasibility. If the operating cost 

assistance reserve is funded with 

appropriated HTF funds, the allowable 

amount of the reserve shall not exceed 

the amount determined by the grantee to 

be necessary to provide operating cost 

assistance for HTF-assisted units, for a 

period not to exceed 5 years, based on 

an analysis of potential deficits 

remaining after the expected rent 

payments for the HTF-assisted unit are 

applied to the HTF-assisted unit’s 

expected share of operating costs. The 

grantee may renew operating cost 

assistance reserves with future fiscal 

year HTF grants during the affordability 

period and the amount must be based 

on the need for the operating cost 

assistance reserve at the time the 

assistance for the reserve is renewed. If 

the operating cost assistance reserve is 

funded with non-appropriated HTF 

funds, the reserve may be funded for the 

period of affordability. 

(f) Relocation costs. The cost of 

relocation payments and other 

relocation assistance to persons 

displaced by the project are eligible 

costs. 

(1) Relocation payments include 

replacement housing payments, 

payments for moving expenses, and 

payments for reasonable out-of-pocket 

costs incurred in the temporary 

relocation of persons. 

(2) Other relocation assistance means 

staff and overhead costs directly related 

to providing advisory and other 

relocation services to persons displaced 

by the project, including timely written 

notices to occupants, referrals to 

comparable and suitable replacement 

property, property inspections, 

counseling, and other assistance 

necessary to minimize hardship. 

(g) Costs relating to payment of loans. 

If the HTF funds are not used to directly 

pay a cost specified in this section, but 

are used to pay off a construction loan, 

bridge financing loan, or guaranteed 

loan, the payment of principal and 

interest for such loan is an eligible cost 

only if: 

(1) The loan was used for eligible 

costs specified in this section, and 

(2) The HTF assistance is part of the 

original financing for the project and the 

project meets the requirements of this 

part. 

(h) Construction undertaken before 

the HTF funds are committed to the 


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project. HTF funds cannot be used for 

development hard costs, as provided in 

paragraph (a) of this section, or for 

acquisition, undertaken before the HTF 

funds are committed to the project. 

However, the written agreement 

committing the HTF funds to the project 

may authorize HTF funds to be used for 

architectural and engineering costs and 

other related professional services, as 

provided in paragraph (d)(1) of this 

section. 

§ 93.202 Eligible administrative and 

planning costs. 

(a) General. A HTF grantee may 

expend, for payment of reasonable 

administrative and planning costs of the 

HTF, an amount of HTF funds that is 

not more than 10 percent of the sum of 

each fiscal year HTF grant and of 

program income deposited into its local 

account or received and reported by its 

subgrantees during the program year. A 

HTF grantee may expend the funds 

directly or may authorize its 

subgrantees, if any, to expend all or a 

portion of such funds, provided total 

expenditures for planning and 

administrative costs do not exceed the 

maximum allowable amount. 

Reasonable administrative and planning 

costs are those costs described in 

paragraphs (b) through (h) of this 

section: 

(b) General management, oversight 

and coordination. Reasonable costs of 

overall program management, 

coordination, monitoring, and 

evaluation. Such costs include, but are 

not limited to, necessary expenditures 

for the following: 

(1) Salaries, wages, and related costs 

of the grantee’s staff. In charging costs 

to this category the grantee may either 

include the entire salary, wages, and 

related costs allocable to the program of 

each person whose primary 

responsibilities with regard to the 

program involves program 

administration assignments, or the 

prorated share of the salary, wages, and 

related costs of each person whose job 

includes any program administration 

assignments. The grantee may use only 

one of these methods. Program 

administration includes the following 

types of assignments: 

(i) Developing systems and schedules 

for ensuring compliance with program 

requirements; 

(ii) Developing interagency 

agreements and agreements with entities 

receiving HTF funds; 

(iii) Monitoring HTF-assisted housing 

for progress and compliance with 

program requirements; 

(iv) Preparing reports and other 

documents related to the program for 

submission to HUD; 

(v) Coordinating the resolution of 

audit and monitoring findings; 

(vi) Evaluating program results against 

stated objectives; and 

(vii) Managing or supervising persons 

whose primary responsibilities with 

regard to the program include such 

assignments as those described in 

paragraphs (a)(1)(i) through (vi) of this 

section; 

(2) Travel costs incurred for official 

business in carrying out the program; 

(3) Administrative services performed 

under third party contracts or 

agreements, including such services as 

general legal services, accounting 

services, and audit services; 

(4) Other costs for goods and services 

required for administration of the 

program, including such goods and 

services as rental or purchase of 

equipment, insurance, utilities, office 

supplies, and rental and maintenance 

(but not purchase) of office space; and 

(c) Staff and overhead. Staff and 

overhead costs of the grantee directly 

related to carrying out the project, such 

as work specifications preparation, loan 

processing, inspections, lead-based 

paint evaluations (visual assessments, 

inspections, and risk assessments), other 

services related to assisting potential 

owners, tenants and homebuyers (e.g., 

housing counseling); and staff and 

overhead costs directly related to 

providing advisory and other relocation 

services to persons displaced by the 

project, including timely written notices 

to occupants, referrals to comparable 

and suitable replacement property, 

property inspections, counseling, and 

other assistance necessary to minimize 

hardship. These costs (except 

homeownership counseling) may be 

charged as administrative costs or as 

project costs under § 93.201(d)(6) and 

(f)(2), at the discretion of the grantee; 

however, these costs (except 

homeownership counseling) cannot be 

charged to or paid by the low-income 

families. 

(d) Public information. The provision 

of information and other resources to 

residents and citizen organizations 

participating in the planning, 

implementation, or assessment of 

projects being assisted with HTF funds. 

(e) Fair housing. Activities to 

affirmatively further fair housing in 

accordance with the grantee’s 

certification under 24 CFR part 91. 

(f) Indirect costs. Indirect costs may be 

charged to the HTF program in 

accordance with 2 CFR part 200, subpart 

E. 

(g) Preparation of the consolidated 

plan. Preparation of the consolidated 

plan required under 24 CFR part 91. 

Preparation includes the costs of public 

hearings, consultations, and 

publication. 

(h) Other Federal requirements. Costs 

of complying with the Federal 

requirements in subpart H of this part. 

§ 93.203 HTF funds and public housing. 

(a) HTF funds may be used for new 

construction or rehabilitation of public 

housing units only in accordance with 

the following: 

(1) HTF funds may be used for new 

construction of public housing as part of 

the Choice Neighborhoods (Choice) 

program under a HUD appropriation act 

or for new public housing units that 

have been allocated and will receive 

low-income housing tax credits under 

section 42 of the Internal Revenue Code 

of 1986 (26 U.S.C. 42). 

(2) HTF funds may be used for the 

rehabilitation of existing public housing 

units in which the public housing 

assistance will be converted and used at 

the properties under the Rental 

Assistance Demonstration (RAD) 

program under HUD’s 2012 

Appropriations Act (Pub. L. 112–55, 125 

Stat. 552, approved November 18, 2011) 

or subsequent statutes. HTF funds may 

also be used for the rehabilitation of 

existing public housing under the 

Choice program, and of existing public 

housing units that have been allocated 

and will receive low-income housing 

tax credits under section 42 of the 

Internal Revenue Code of 1986 (26 

U.S.C. 42). 

(b) The public housing units 

constructed using funds under this part 

must replace units that were removed 

from a public housing agency’s public 

housing inventory as part of a Choice 

program grant, or as part of a mixedfinanced development under section 35 

of the 1937 Act. The number of 

replacement units cannot be more than 

the number of units removed from the 

public housing agency’s inventory. The 

public housing units constructed or 

rehabilitated using funds under this part 

must receive Public Housing Operating 

Fund assistance (and may receive Public 

Housing Capital Fund assistance) under 

section 9 of the 1937 Act. These units 

cannot receive operating costs 

assistance or operating cost assistance 

reserves under this part. 

(c) Except as provided in paragraph 

(b) of this section, HTF-assisted housing 

may not receive Operating Fund or 

Capital Fund assistance under section 9 

of the 1937 Act during the HTF period 

of affordability. 


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(d) Consistent with § 93.200(c), HTF 

funds may be used for affordable 

housing in a project that also contains 

public housing units, provided that the 

HTF funds are not used for the public 

housing units and HTF funds are used 

only for eligible costs, in accordance 

with this part. 

§ 93.204 Prohibited activities and fees. 

(a) HTF funds may not be used to: 

(1) Provide assistance (other than 

assistance to a homebuyer to acquire 

housing previously assisted with HTF 

funds or renewal of operating cost 

assistance or renewal of operating cost 

assistance reserve) to a project 

previously assisted with HTF funds 

during the period of affordability 

established by the grantee in the written 

agreement under § 93.404 (c)(2)(iv). 

However, additional HTF funds may be 

committed to a project up to one year 

after project completion, but the amount 

of HTF funds in the project may not 

exceed the maximum per-unit 

development subsidy amount 

established pursuant to § 93.300. 

(2) Pay for the acquisition of property 

owned by the grantee, except for 

property acquired by the grantee with 

HTF funds or property acquired in 

anticipation of carrying out an HTF 

project. 

(3) Pay delinquent taxes, fees, or 

charges on properties to be assisted with 

HTF funds. 

(4) Pay for political activities, 

advocacy, lobbying (whether directly or 

through other parties), counseling 

services (except for housing counseling), 

travel expenses (other than those 

eligible under § 93.202(b)), or preparing 

or providing advice on tax returns. The 

prohibited use of funds for political 

activities includes influencing the 

selection, nomination, election, or 

appointment of one or more candidates 

to any Federal, State, or local office as 

codified in section 501 of the Internal 

Revenue Code of 1986 (26 U.S.C. 501). 

(5) Pay for administrative, outreach, 

or other costs to manage and operate the 

grantee of HTF funds, except those 

administrative costs necessary to carry 

out the HTF program in § 93.202, 

including housing counseling. 

(6) Pay for any cost that is not eligible 

under § 93.201 and § 93.202. 

(b)(1) The grantee may not charge 

(and must prohibit subgrantees and 

recipients from charging) servicing, 

origination, or other fees for the costs of 

administering the HTF program. 

However, the grantee may charge 

owners of rental projects reasonable 

annual fees for monitoring compliance 

during the period of affordability. The 

fees must be based upon the average 

actual cost of performing the monitoring 

of HTF-assisted rental projects. The 

basis for determining the amount of the 

fee must be documented and the fee 

must be included in the costs of the 

project as part of the project 

underwriting. 

(2) The grantee may also charge 

nominal application fees (although 

these fees are not an eligible HTF cost) 

to eligible recipients, to discourage 

frivolous applications. The amount of 

application fees must be appropriate to 

the type of application and may not 

create an undue impediment to an 

extremely low-income family to be able 

to participate in the grantee’s program. 

(3) All fees are applicable credits 

under 2 CFR part 200, subpart E. 

(4) In addition, the grantee must 

prohibit project owners from charging 

fees that are not customarily charged in 

rental housing (e.g., laundry room 

access fees), except that rental project 

owners may charge: 

(i) Reasonable application fees to 

prospective tenants; 

(ii) Parking fees to tenants only if such 

fees are customary for rental housing 

projects in the neighborhood; and 

(iii) Fees for services such as bus 

transportation or meals, as long as the 

services are voluntary and fees are 

charged for services provided. 

Subpart F—Income Targeting 

§ 93.250 Income targeting. 

(a) In any fiscal year in which the 

total amount available for allocation of 

HTF funds is less than $1 billion, the 

grantee must use 100 percent of its HTF 

grant for the benefit of extremely lowincome families or families with 

incomes at or below the poverty line 

(whichever is greater). In any fiscal year 

in which the total amount available for 

allocation of HTF funds is greater than 

$1 billion, the grantee must use at least 

75 percent of its grant for the benefit of 

extremely low-income families or 

families with incomes at or below the 

poverty line. 

(b) Any grant funds not used in 

accordance with paragraph (a) of this 

section must be used for the benefit of 

very-low income families. 

Subpart G—Project Requirements 

§ 93.300 Maximum per-unit development 

subsidy amount, underwriting, and subsidy 

layering. 

(a) Maximum per-unit development 

subsidy amount. The grantee must 

establish maximum limitations on the 

total amount of HTF funds that the 

grantee may invest per-unit for 

development of non-luxury housing, 

with adjustments for the number of 

bedrooms and the geographic location of 

the project. These limits must be 

reasonable and based on actual costs of 

developing non-luxury housing in the 

area. The grantee must include these 

limits in its consolidated plan and 

update these limits annually. 

(b) Underwriting and subsidy 

layering. Before committing funds to a 

project, the grantee must evaluate the 

project in accordance with guidelines 

that it has adopted for determining a 

reasonable level of profit or return on 

recipient’s investment in a project and 

must not invest any more HTF funds, 

alone or in combination with other 

governmental assistance, than is 

necessary to provide quality affordable 

housing that is financially viable for a 

reasonable period (at minimum, the 

period of affordability in § 93.302 or 

§ 93.304) and that will not provide a 

profit or return on the recipient’s 

investment that exceeds the grantee’s 

established standards for the size, type, 

and complexity of the project. The 

guidelines adopted by the grantees must 

require the grantee to undertake: 

(1) An examination of the sources and 

uses of funds for the project (including 

any operating cost assistance, operating 

cost assistance reserve, or project-based 

rental assistance that will be provided to 

the project) and a determination that the 

costs are reasonable; and 

(2) An assessment, at minimum, of the 

current market demand in the 

neighborhood in which the project will 

be located, the experience of the 

recipient, the financial capacity of the 

recipient, and firm written financial 

commitments for the project. 

(3) For HTF-funded downpayment 

assistance, a market analysis is not 

required. 

§ 93.301 Property standards. 

(a) New construction projects. (1) 

State and local codes, ordinances, and 

zoning requirements. Housing that is 

newly constructed with HTF funds must 

meet all applicable State and local 

codes, ordinances, and zoning 

requirements. HTF-assisted new 

construction projects must meet State or 

local residential and building codes, as 

applicable or, in the absence of a State 

or local building code, the International 

Residential Code or International 

Building Code (as applicable to the type 

of housing) of the International Code 

Council. The housing must meet the 

applicable requirements upon project 

completion. 

(2) HUD requirements. All new 

construction projects must also meet the 

requirements described in paragraphs 

(a)(2)(i) through (v) of this section: 


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(i) Accessibility. The housing must 

meet the accessibility requirements of 

24 CFR part 8, which implements 

section 504 of the Rehabilitation Act of 

1973 (29 U.S.C. 794), and Titles II and 

III of the Americans with Disabilities 

Act (42 U.S.C. 12131–12189) 

implemented at 28 CFR parts 35 and 36, 

as applicable. ‘‘Covered multifamily 

dwellings,’’ as defined at 24 CFR 

100.201, must also meet the design and 

construction requirements at 24 CFR 

100.205, which implements the Fair 

Housing Act (42 U.S.C. 3601–3619). 

(ii) Energy efficiency. The housing 

must meet the energy efficiency 

standards established pursuant to 

section 109 of the Cranston-Gonzalez 

National Affordable Housing Act (42 

U.S.C. 12709). 

(iii) Disaster mitigation. Where 

relevant, the housing must be 

constructed to mitigate the impact of 

potential disasters (e.g., earthquakes, 

hurricanes, flooding, and wildfires), in 

accordance with State and local codes, 

ordinances, or other State and local 

requirements, or such other 

requirements as HUD may establish. 

(iv) Written cost estimates, 

construction contracts, and construction 

documents. The grantee must ensure the 

construction contract(s) and 

construction documents describe the 

work to be undertaken in adequate 

detail so that inspections can be 

conducted. The grantee must review 

and approve written cost estimates for 

construction and determine that costs 

are reasonable. 

(v) Construction progress inspections. 

The grantee must conduct progress and 

final inspections of construction to 

ensure that work is done in accordance 

with the applicable codes, the 

construction contract, and construction 

documents. 

(b) Rehabilitation projects. All 

rehabilitation that is performed using 

HTF funds must meet the requirements 

of this paragraph (b). 

(1) Rehabilitation standards. The 

grantee must establish rehabilitation 

standards for all HTF-assisted housing 

rehabilitation activities that set forth the 

requirements that the housing must 

meet upon project completion. The 

grantee’s description of its standards 

must be in sufficient detail to determine 

the required rehabilitation work 

including methods and materials. The 

standards may refer to applicable codes 

or they may establish requirements that 

exceed the minimum requirements of 

the codes. The rehabilitation standards 

must address each of the following: 

(i) Health and safety. The grantee’s 

standards must identify life-threatening 

deficiencies that must be addressed 

immediately if the housing is occupied. 

(ii) Major systems. Major systems are: 

structural support; roofing; cladding and 

weatherproofing (e.g., windows, doors, 

siding, gutters); plumbing; electrical; 

and heating, ventilation, and air 

conditioning. For rental housing, the 

grantee’s standards must require the 

grantee to estimate (based on age and 

condition) the remaining useful life of 

these systems, upon project completion 

of each major system. For multifamily 

housing projects of 26 units or more, the 

grantee’s standards must require the 

grantee to determine the useful life of 

major systems through a capital needs 

assessment of the project. For rental 

housing, if the remaining useful life of 

one or more major system is less than 

the applicable period of affordability, 

the grantee’s standards must require the 

grantee to ensure that a replacement 

reserve is established and monthly 

payments are made to the reserve that 

are adequate to repair or replace the 

systems as needed. For homeownership 

housing, the grantee’s standards must 

require, upon project completion, each 

of the major systems to have a 

remaining useful life for a minimum of 

5 years or for such longer period 

specified by grantee, or the major 

systems must be rehabilitated or 

replaced as part of the rehabilitation 

work. 

(iii) Lead-based paint. The grantee’s 

standards must require the housing to 

meet the lead-based paint requirements 

at 24 CFR part 35. 

(iv) Accessibility. The grantee’s 

standards must require the housing to 

meet the accessibility requirements in 

24 CFR part 8, which implements 

section 504 of the Rehabilitation Act of 

1973 (29 U.S.C. 794), and Titles II and 

III of the Americans with Disabilities 

Act (42 U.S.C. 12131–12189) 

implemented at 28 CFR parts 35 and 36, 

as applicable. ‘‘Covered multifamily 

dwellings,’’ as defined at 24 CFR 

100.201, must also meet the design and 

construction requirements at 24 CFR 

100.205, which implements the Fair 

Housing Act (42 U.S.C. 3601–3619). 

Rehabilitation may include 

improvements that are not required by 

regulation or statute that permit use by 

a person with disabilities. 

(v) [Reserved]. 

(vi) Disaster mitigation. Where 

relevant, the grantee’s standards must 

require the housing to be improved to 

mitigate the impact of potential 

disasters (e.g., earthquake, hurricanes, 

flooding, and wildfires) in accordance 

with State and local codes, ordinances, 

and requirements, or such other 

requirements as HUD may establish. 

(vii) State and local codes, 

ordinances, and zoning requirements. 

The grantee’s standards must require the 

housing to meet all applicable State and 

local codes, ordinances, and 

requirements or, in the absence of a 

State or local building code, the 

International Existing Building Code of 

the International Code Council. 

(viii) Uniform Physical Condition 

Standards. The standards of the grantee 

must be such that, upon completion, the 

HTF-assisted project and units will be 

decent, safe, sanitary, and in good repair 

as described in 24 CFR 5.703. HUD will 

establish the minimum deficiencies that 

must be corrected under the grantee’s 

rehabilitation standards based on 

inspectable items and inspected areas 

from HUD-prescribed physical 

inspection procedures (Uniform 

Physical Conditions Standards) 

pursuant to 24 CFR 5.705. 

(ix) Capital Needs Assessments. For 

multifamily rental housing projects of 

26 or more total units, the grantee must 

determine all work that will be 

performed in the rehabilitation of the 

housing and the long-term physical 

needs of the project through a capital 

needs assessment of the project. 

(2) Construction documents and cost 

estimates. The grantee must ensure that 

the work to be undertaken will meet the 

grantee’s rehabilitation standards. The 

construction documents (i.e., written 

scope of work to be performed) must be 

in sufficient detail to establish the basis 

for a uniform inspection of the housing 

to determine compliance with the 

grantee’s standards. The grantee must 

review and approve a written cost 

estimate for rehabilitation after 

determining that costs are reasonable. 

(3) Frequency of inspections. The 

grantee must conduct an initial property 

inspection to identify the deficiencies 

that must be addressed. The grantee 

must conduct progress and final 

inspections to determine that work was 

done in accordance with work writeups. 

(c) Acquisition of standard housing. 

(1) Existing housing that is acquired 

with HTF assistance for rental housing, 

and that was newly constructed or 

rehabilitated less than 12 months before 

the date of commitment of HTF funds, 

must meet the property standards of 

paragraph (a) or paragraph (b) of this 

section, as applicable, for new 

construction and rehabilitation projects. 

The grantee must document this 

compliance based upon a review of 

approved building plans and 

Certificates of Occupancy, and an 

inspection that is conducted no earlier 

than 90 calendar days before the date of 

commitment of HTF assistance. 


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(2) All other existing housing that is 

acquired with HTF assistance for rental 

housing must meet the rehabilitation 

property standards requirements of 

paragraph (b) of this section. The 

grantee must document this compliance 

based upon an inspection that is 

conducted no earlier than 90 calendar 

days before the date of commitment of 

HTF assistance. If the property does not 

meet these standards, HTF funds cannot 

be used to acquire the property unless 

it is rehabilitated to meet the standards 

of paragraph (b) of this section. 

(3) Existing housing that is acquired 

for homeownership (e.g., downpayment 

assistance) must be decent, safe, 

sanitary, and in good repair. The grantee 

must establish standards to determine 

that the housing is decent, safe, sanitary, 

and in good repair. At minimum, the 

standards must provide that the housing 

meets all applicable State and local 

standards and code requirements and 

the housing does not contain the 

specific deficiencies proscribed by HUD 

based on the applicable inspectable 

items and inspected areas in HUDprescribed physical inspection 

procedures (Uniform Physical Condition 

Standards) issued pursuant to 24 CFR 

5.705. The grantee must inspect the 

housing and document this compliance 

based upon an inspection that is 

conducted no earlier than 90 calendar 

days before the date of commitment of 

HTF assistance. If the housing does not 

meet these standards, the housing must 

be rehabilitated to meet the standards of 

this paragraph (c)(3) or it cannot be 

assisted with HTF funds. 

(d) Manufactured housing. 

Construction of all manufactured 

housing (including manufactured 

housing that replaces an existing 

substandard unit under the definition of 

‘‘reconstruction’’) must meet the 

Manufactured Home Construction and 

Safety Standards codified at 24 CFR part 

3280. These standards preempt State 

and local codes which are not identical 

to the Federal standards for the new 

construction of manufactured housing. 

The grantees providing HTF funds to 

assist manufactured housing units must 

comply with applicable State and local 

laws or codes. In the absence of such 

laws or codes, the installation must 

comply with the manufacturer’s written 

instructions for installation of 

manufactured housing units. All new 

manufactured housing and all 

manufactured housing that replaces an 

existing substandard unit under the 

definition of ‘‘reconstruction’’ must be 

on a permanent foundation that meets 

the requirements for foundation systems 

as set forth in 24 CFR 203.43f(c)(i). All 

new manufactured housing (and all 

manufactured housing that replaces an 

existing substandard unit under the 

definition of ‘‘reconstruction’’) must, at 

the time of project completion, be 

connected to permanent utility hookups and be located on land that is 

owned by the manufactured housing 

unit owner or land for which the 

manufactured housing owner has a lease 

for a period at least equal to the 

applicable period of affordability. In 

HTF-funded rehabilitation of existing 

manufactured housing the foundation 

and anchoring must meet all applicable 

State and local codes, ordinances, and 

requirements or in the absence of local 

or State codes, the Model Manufactured 

Home Installation Standards at 24 CFR 

part 3285. Manufactured housing that is 

rehabilitated using HTF funds must 

meet the property standards 

requirements in paragraph (b) of this 

section, as applicable. The grantee must 

document this compliance in 

accordance with inspection procedures 

that the grantee has established 

pursuant to § 92.301, as applicable. 

(e) Ongoing property condition 

standards: Rental housing—(1) Ongoing 

property standards. The grantee must 

establish property standards for rental 

housing (including manufactured 

housing) that apply throughout the 

affordability period. The standards must 

ensure that owners maintain the 

housing as decent, safe, and sanitary 

housing in good repair. The grantee’s 

description of its property standards 

must be in sufficient detail to establish 

the basis for a uniform inspection of 

HTF rental projects. The grantee’s 

ongoing property standards must 

address each of the following: 

(i) At a minimum, the grantee’s 

ongoing property standards must 

include all inspectable items and 

inspectable areas specified by HUD 

based on the HUD physical inspection 

procedures (Uniform Physical Condition 

Standards (UPCS)) prescribed by HUD 

pursuant to 24 CFR 5.705. 

(ii) Health and safety. The grantee’s 

standards must require the housing to 

be free of all health and safety defects. 

The standards must identify lifethreatening deficiencies that the owner 

must immediately correct and the time 

frames for addressing these deficiencies. 

(iii) Lead-based paint. The grantee’s 

standards must require the housing to 

meet the lead-based paint requirements 

in 24 CFR part 35. 

(2) Inspections. The grantee must 

undertake ongoing property inspections, 

in accordance with § 93.404. 

(3) Corrective and remedial actions. 

The grantee must have procedures for 

ensuring that timely corrective and 

remedial actions are taken by the project 

owner to address identified deficiencies. 

(4) Inspection procedures. The grantee 

must establish written inspection 

procedures. The procedures must 

include detailed inspection checklists, 

description of how and by whom 

inspections will be carried out, and 

procedures for training and certifying 

qualified inspectors. The procedures 

must also describe how frequently the 

property will be inspected, consistent 

with section § 93.404(d). 

(f) Environmental provisions—(1) New 

construction projects environmental 

requirements—(i) Historic 

preservation—(A) Standards. The 

project activities (including demolition) 

must not be performed on properties 

that are either listed in or determined 

eligible for listing in the National 

Register of Historic Places, unless the 

project activities meet the Secretary of 

the Interior’s Standards for 

Rehabilitation, either as certified 

through the Federal and/or State 

historic rehabilitation tax credit 

programs or as verified by someone that 

meets the relevant Secretary of the 

Interior’s Professional Qualification 

Standards; 

(B) Archaeological resources. If 

archaeological resources or human 

remains are discovered on the project 

site during construction, the grantee 

must consult with affected tribes and/or 

descendant communities and comply 

with the Native American Graves 

Protection and Repatriation Act (25 

U.S.C. 3001–3013), State law and/or 

local ordinance (e.g., State unmarked 

burial law). 

(ii) Farmland. Project activities must 

not result in the conversion of unique, 

prime, or statewide or locally significant 

agricultural properties to urban uses. 

(iii) Airport zones. Projects are not 

permitted within the runway protection 

zones of civilian airports, or the clear 

zones or accident potential zones of 

military airfields. 

(iv) Coastal Barrier Resource System. 

No projects may be assisted in Coastal 

Barrier Resource System (CBRS) units. 

CBRS units are mapped and available 

from the U.S. Fish and Wildlife Service. 

(v) Coastal zone management. 

Development must be consistent with 

the appropriate State coastal zone 

management plan. Plans are available 

from the local coastal zone management 

agency. 

(vi) Floodplains. Except as modified 

below, definitions for terms used below 

can be found at 24 CFR part 55. 

(A) Construction and other activities 

in the 100-year floodplain are to be 

avoided when practicable. If there are 

no practicable alternatives to new 


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construction or substantial 

improvement in the 100-year floodplain, 

the structure must be elevated at least 

the base flood elevation (BFE) or 

floodproofed to one foot above the BFE. 

Elevated and floodproofed buildings 

must adhere to National Flood 

Insurance Program standards. The 

primary sources of floodplain data are 

Federal Emergency Management Agency 

(FEMA) Flood Insurance Rate Maps 

(FIRMs). When FEMA provides interim 

flood hazard data, such as Advisory 

Base Flood Elevations (ABFE) or 

preliminary maps or studies, the latest 

of these sources shall be used. 

(B) No HTF assistance may be 

approved with respect to: 

(1) Any action, other than a 

functionally dependent use, located in a 

floodway; 

(2) Any new construction critical 

action located in a coastal high hazard 

area, 100- or 500-year floodplain; or 

(3) Any non-critical new construction 

action in a coastal high hazard area, 

unless the action is reconstruction 

following destruction caused by a 

disaster and is designed for location in 

a coastal high hazard area consistent 

with the FEMA National Flood 

Insurance Program requirements for VZones. 

(vii) Wetlands. (A) No draining, 

dredging, channelizing, filling, diking, 

impounding, or related grading 

activities are to be performed in 

wetlands. No activities, structures, or 

facilities funded under this program are 

to adversely impact a wetland. 

(B) A wetland means those areas that 

are inundated by surface or ground 

water with a frequency sufficient to 

support, and under normal 

circumstances, does or would support a 

prevalence of vegetative or aquatic life 

that requires saturated or seasonally 

saturated soil conditions for growth and 

reproduction. Wetlands generally 

include swamps, marshes, bogs, and 

similar areas such as sloughs, potholes, 

wet meadows, river overflows, mud 

flats, and natural ponds. This definition 

includes those wetland areas separated 

from their natural supply of water as a 

result of activities, such as the 

construction of structural flood 

protection methods or solid-fill road 

beds, or mineral extraction and 

navigation improvements. This 

definition is independent of the 

definition of jurisdictional wetland used 

by the U. S. Army Corps of Engineers 

under section 404 of the Clean Water 

Act (33 U.S.C. 1251 et seq.). 

(viii) Explosives and hazards. Projects 

must be in compliance with the 

standards for acceptable separation 

distance, as set forth at 24 CFR part 51, 

subpart C. 

(ix) Contamination. All properties 

assisted with HTF funds must be free of 

hazardous materials, contamination, 

toxic chemicals and gases, and 

radioactive substances, where a hazard 

could affect the health and safety of 

occupants or conflict with the intended 

use of the property. 

(A) All proposed multifamily (more 

than four housing units) HTF projects 

require a Phase I Environmental Site 

Assessment (ESA–ASTM). If the Phase I 

ESA identifies recognized 

environmental concerns (RECs), a Phase 

II (ESA–ASTM) will be required. ASTM 

reports shall be prepared in accordance 

with the most current ASTM standard. 

Single family housing does not require 

a Phase I ESA. 

(B) HTF projects must avoid sites 

located within 0.25 miles of a 

Superfund or CERCLIS (Comprehensive 

Environmental Response, 

Compensation, and Liability 

Information System) site or other 

contaminated site reported to Federal, 

State, or local authorities without a 

statement in writing from the U.S. 

Environmental Protection Agency (EPA) 

or the appropriate State agency that 

there is no hazard that could affect the 

health and safety of the occupants or 

conflict with the intended use of the 

property. 

(x) Noise. (A) Internal noise levels: All 

activities will be developed to ensure an 

interior noise level of no more than 45 

decibels (dB). 

(B) External noise levels: 

(1) Project sites exposed to less than 

or equal to 65 dB of environmental 

noise are acceptable. 

(2) Sites between 65 dB and less than 

75 dB are acceptable with mitigation 

(e.g., noise walls, careful site planning) 

that result in an interior standard of 45 

dB. 

(3) Locations with environmental 

noise levels of 75 dB or greater may not 

have noise sensitive outdoor uses (e.g., 

picnic areas, tot lots, balconies, or 

patios) and require sound attenuation in 

the building shell to achieve the 45 dB 

interior standard. 

(xi) Endangered species. The grantee 

must avoid all actions which could 

jeopardize the continued existence of 

any endangered or threatened species, 

as designated by the U.S. Fish and 

Wildlife Service or National Marine 

Fisheries Service, or would result in the 

destruction or adversely modify the 

designated critical habitat of such 

species. 

(xii) Wild and scenic rivers. The 

grantee must avoid activities that are 

inconsistent with conservation 

easements, land-use protections, and 

restrictions adjacent to wild and scenic 

rivers, as designated/listed by the 

Departments of Agriculture or Interior. 

Maps for the National Wild and Scenic 

Rivers System are available at the 

governing departments. 

(xiii) Safe drinking water. Projects 

with a potable water system must use 

only lead-free pipes, solder, and flux. 

(xiv) Sole-source aquifers. Project 

activities should avoid sites and 

activities that have the potential to 

contaminate sole source aquifer areas 

(SSAs). EPA defines a sole or principal 

source aquifer as an aquifer that 

supplies at least 50 percent of the 

drinking water consumed in the area 

overlying the aquifer. If the project 

overlies an SSA, EPA must review the 

project. EPA review is designed to 

reduce the risk of ground water 

contamination that could pose a health 

hazard to those who use it. 

(2) Rehabilitation projects 

environmental requirements—(i) 

Historic preservation. (A) The project 

activities (including demolition) must 

not be performed on properties that are 

either listed in or determined eligible 

for listing in the National Register of 

Historic Places, unless the project 

activities meet the Secretary of the 

Interior’s Standards for Rehabilitation, 

either as certified through the Federal 

and/or State historic rehabilitation tax 

credit programs or as verified by 

someone that meets the relevant 

Secretary of the Interior’s Professional 

Qualification Standards; 

(B) Archaeological resources. If 

archaeological resources or human 

remains are discovered on the project 

site during construction or 

rehabilitation, the grantee must consult 

with affected tribes and/or descendant 

communities and comply with the 

Native American Graves Protection and 

Repatriation Act (25 U.S.C. 3001–3013), 

State law, and/or local ordinance (e.g., 

State unmarked burial law). 

(ii) Farmland. Project activities must 

not result in the conversion of unique, 

prime, or locally significant agricultural 

properties to urban uses. 

(iii) Airport zones. Projects are not 

permitted within the runway protection 

zones of civilian airports, or the clear 

zones or accident potential zones of 

military airfields. 

(iv) Coastal Barrier Resource System. 

No projects may be assisted in Coastal 

Barrier Resource System (CBRS) units. 

CBRS units are mapped and available 

from the U.S. Fish and Wildlife Service. 

(v) Coastal zone management. 

Development must be consistent with 

the appropriate State coastal zone 

management plan. Plans are available 


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5232 Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Rules and Regulations 

from the local coastal zone management 

agency. 

(vi) Floodplains. Except as modified 

below, definitions for terms used below 

can be found at 24 CFR part 55. 

(A) Construction and other activities 

in the 100-year floodplain are to be 

avoided when practicable. If there are 

no practicable alternatives to new 

construction or substantial 

improvement in the 100-year floodplain, 

the structure must be elevated at least to 

the base flood elevation (BFE) or 

floodproofed to one foot above the BFE. 

Elevated and floodproofed buildings 

must adhere to National Flood 

Insurance Program standards. The 

primary sources of floodplain data are 

Federal Emergency Management Agency 

(FEMA) Flood Insurance Rate Maps 

(FIRMS). When FEMA provides interim 

flood hazard data, such as Advisory 

Base Flood Elevations (ABFE) or 

preliminary maps or studies, the latest 

of these sources shall be used. 

(B) No HTF assistance may be 

approved with respect to: 

(1) Any action, other than 

functionally dependent uses, located in 

a floodway; 

(2) Any critical action located in a 

coastal high hazard area, 100- or 500- 

year floodplain; or 

(3) Any non-critical action located in 

a coastal high hazard area, unless the 

action is designed for location in a 

coastal high hazard area consistent with 

the FEMA National Flood Insurance 

Program requirements for V-Zones. 

‘‘Any non-critical action in a coastal 

high hazard area, unless the action is 

reconstruction following destruction 

caused by a disaster and is designed for 

location in a coastal high hazard area 

consistent with the FEMA National 

Flood Insurance Program requirements 

for V-Zones.’’ 

(vii) Wetlands. No rehabilitation of 

existing properties that expands the 

footprint into a wetland is allowed. A 

wetland means those areas that are 

inundated by surface or ground water 

with a frequency sufficient to support, 

and under normal circumstances, does 

or would support a prevalence of 

vegetative or aquatic life that requires 

saturated or seasonally saturated soil 

conditions for growth and reproduction. 

Wetlands generally include swamps, 

marshes, bogs, and similar areas such as 

sloughs, potholes, wet meadows, river 

overflows, mud flats, and natural ponds. 

This definition includes those wetland 

areas separated from their natural 

supply of water as a result of activities 

such as the construction of structural 

flood protection methods or solid-fill 

road beds and activities such as mineral 

extraction and navigation 

improvements. This definition is 

independent of the definition of 

jurisdictional wetland used by the U.S. 

Army Corps of Engineers under section 

404 of the Clean Water Act (33 U.S.C. 

1251 et seq.). 

(viii) Explosives and hazards. If the 

rehabilitation of the building increases 

the number of dwelling units, then the 

project must be in compliance with the 

standards for acceptable separation 

distance as set forth at 24 CFR part 51, 

subpart C. 

(ix) Contamination. All properties 

assisted with HTF funds must be free of 

hazardous materials, contamination, 

toxic chemicals and gases, and 

radioactive substances, where a hazard 

could affect the health and safety of 

occupants or conflict with the intended 

use of the property: 

(A) All proposed multifamily (more 

than four housing units) HTF project 

activities require a Phase I 

Environmental Site Assessment (ESA— 

ASTM). If the Phase I ESA identifies 

recognized environmental concerns 

(RECs), a Phase II (ESA–ASTM) will be 

required. ASTM reports shall be 

prepared in accordance with the most 

current ASTM standard. Single family 

housing does not require a Phase I ESA. 

(B) HTF projects must avoid sites 

located within 0.25 miles of a 

Superfund or CERCLIS (Comprehensive 

Environmental Response, 

Compensation, and Liability 

Information System) site or other 

contaminated site reported to Federal, 

State, or local authorities without a 

statement in writing from EPA or the 

appropriate State agency that there is no 

hazard that could affect the health and 

safety of the occupants or conflict with 

the intended utilization of the property. 

(x) Noise—(A) Internal noise levels. 

All activities will be developed to 

ensure an interior noise level of no more 

than45 decibels (dB). 

(B) [Reserved]. 

(xi) Endangered species. (A) The 

grantee must avoid all actions that could 

jeopardize the continued existence of 

any species designated by the U.S. Fish 

and Wildlife Service or National Marine 

Fisheries Service as endangered or 

threatened. 

(B) The grantee must avoid all actions 

that adversely modify the critical habitat 

of such species. 

(xii) Wild and scenic rivers. The 

grantee must avoid activities that are 

inconsistent with conservation 

easements, land-use protections, and 

restrictions adjacent to wild and scenic 

rivers, as designated/listed by the 

Departments of Agriculture and Interior. 

Maps for the National Wild and Scenic 

Rivers System are available at the 

governing departments. 

(xiii) Safe drinking water. Projects 

with a potable water system must use 

only lead-free pipes, solder, and flux. 

(xiv) Sole-source aquifers. Project 

activities should avoid sites and 

activities that have the potential to 

contaminate sole source aquifer areas 

(SSAs). The EPA defines a sole or 

principal source aquifer as an aquifer 

that supplies at least 50 percent of the 

drinking water consumed in the area 

overlying the aquifer. If the project 

overlies an SSA, the EPA must review 

the project. The EPA review is designed 

to reduce the risk of ground water 

contamination, which could pose a 

health hazard to those who use it. 

(3) Acquisition projects environmental 

requirements. (i)(A) Existing housing 

that is acquired with HTF funds, and 

has been newly constructed or 

rehabilitated less than 12 months before 

the commitment of HTF funds must 

meet the property standards at 

paragraph (f)(1) of this section. 

(B) All other existing housing that is 

acquired with HTF assistance must meet 

the property standards requirements of 

paragraph (f)(2) of this section. 

(ii) If under paragraph (f)(3)(i)(A) or 

paragraph (B) of this section, the 

property does not meet these standards, 

with the exception of the noise 

standards in paragraph (f)(2) of this 

section, HTF funds cannot be used to 

acquire the property. 

(4) Manufactured housing 

environmental requirements. 

Manufactured housing is subject to the 

environmental standards in paragraph 

(f)(1) of this section for new 

construction or paragraph (f)(2) of this 

section for rehabilitation, as applicable. 

If an existing property does not meet 

these standards, HTF funds cannot be 

used to acquire the property unless it is 

rehabilitated to meet the standards in 

paragraph (f)(2), as applicable, with the 

exception of noise standards in 

paragraph (f)(2)(x). 

§ 93.302 Qualification as affordable 

housing: rental housing. 

(a) Eligible tenants. The HTF-assisted 

units in a rental housing project must be 

occupied by households who are 

eligible families in accordance with the 

income targeting requirements in 

§ 93.250. 

(b) Rent limitations—(1)(i) Extremely 

low-income tenants. The HTF rent plus 

utilities of an extremely low-income 

tenant shall not exceed the greater of 30 

percent of the federal poverty line or 30 

percent of the income of a family whose 

annual income equals 30 percent of the 

median income for the area, as 


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determined by HUD, with adjustments 

for the number of bedrooms in the unit. 

HUD will publish the HTF rent limits 

on an annual basis. 

(ii) Very-low income tenants. The HTF 

rent plus utilities of a very low-income 

tenant shall not exceed 30 percent of the 

income of a family whose annual 

income equals 50 percent of the median 

income for the area, as determined by 

HUD, with adjustments for the number 

of bedrooms in the unit. HUD will 

publish the HTF rent limits on an 

annual basis. 

(2) If the unit receives Federal or State 

project-based rental subsidy, and the 

tenant pays as a contribution toward 

rent not more than 30 percent of the 

tenant’s adjusted income, the maximum 

rent is the rent allowable under the 

Federal or State project-based rental 

subsidy program. 

(c) Initial rent schedule and utility 

allowance. (1) The grantee must 

establish maximum monthly allowances 

for utilities and services (excluding 

telephone, television, and Internet 

service). 

(2) The grantee must annually review 

and approve rents proposed by the 

owner for HTF units. For all units for 

which the tenant is paying utilities, the 

grantee must ensure that the rents do 

not exceed the maximum rent minus the 

monthly allowances for utilities. 

(d) Periods of affordability. (1) HTFassisted units must meet the 

affordability requirements for not less 

than 30 years, beginning after project 

completion. The grantee may impose 

longer periods. 

(2) The affordability requirements 

apply without regard to the term of any 

loan or mortgage, repayment of the HTF 

investment, or the transfer of 

ownership. They must be imposed by a 

deed restriction, covenant running with 

the land, an agreement restricting the 

use of the property, or other 

mechanisms approved by HUD under 

which the grantee and beneficiaries 

have the right to require specific 

performance, except that the 

affordability restrictions may terminate 

upon foreclosure or transfer in lieu of 

foreclosure. The affordability 

requirements must be recorded in 

accordance with State recordation laws. 

(3) The grantee may use purchase 

options, rights of first refusal, or other 

preemptive rights to purchase the 

housing before foreclosure or deed in 

lieu of foreclosure to preserve 

affordability. 

(4) The affordability restrictions shall 

be revived according to the original 

terms if, during the original affordability 

period, the owner of record before the 

foreclosure, or deed in lieu of 

foreclosure, or any entity that includes 

the former owner or those with whom 

the former owner has or had family or 

business ties, obtains an ownership 

interest in the project or property. 

(5) The termination of the restrictions 

on the project does not terminate the 

grantee’s repayment obligation under 

§ 93.403. 

(e) Tenant income. (1) The income of 

each tenant must be determined initially 

in accordance with § 93.151. In 

addition, in each year during the period 

of affordability, the project owner must 

re-examine each tenant’s annual income 

in accordance with one of the options in 

§ 93.151(c) selected by the grantee. 

(2) An owner who re-examines a 

tenant’s annual income through a 

statement and certification in 

accordance with § 93.151(a)(1)(iii) must 

examine the source documentation of 

the income of each tenant every 6th year 

of the affordability period, except that, 

for units that receive project-based 

assistance, the owner must re-examine 

the tenant’s annual income in 

accordance with the project-based 

assistance rules. Otherwise, an owner 

who accepts the tenant’s statement and 

certification in accordance with 

§ 93.151(a)(1)(iii) is not required to 

examine the income of tenants, unless 

there is evidence that the tenant’s 

written statement failed to completely 

and accurately state information about 

the family’s size or income. 

(f) Over-income tenants. HTF-assisted 

units continue to qualify as affordable 

housing despite a temporary 

noncompliance caused by increases in 

the incomes of existing tenants if 

actions satisfactory to HUD are being 

taken to ensure that all vacancies are 

filled in accordance with this section 

until the noncompliance is corrected. 

(g) Fixed and floating HTF units. In a 

project containing HTF-assisted and 

other units, the grantee may designate 

fixed or floating HTF units. This 

designation must be made at the time of 

project commitment in the written 

agreement between the grantee and the 

recipient, and the HTF units must be 

identified not later than the time of 

project completion. Fixed units must 

remain the same throughout the period 

of affordability. Floating units must be 

changed to maintain conformity with 

the requirements of this section during 

the period of affordability so that the 

total number of housing units meeting 

the requirements of this section remains 

the same, and each substituted unit 

must be comparable in terms of size, 

features, and number of bedrooms to the 

originally designated HTF-assisted unit. 

(h) Tenant selection. The tenants must 

be selected in accordance with § 93.303. 

(i) Onsite inspections and financial 

oversight. See § 93.404(d) for the 

grantee’s ongoing responsibilities for 

onsite inspections and financial 

oversight. 

§ 93.303 Tenant protections and selection. 

(a) Lease. There must be a written 

lease between the tenant and the owner 

of rental housing assisted with HTF 

funds that is for a period of not less than 

one year, unless by mutual agreement 

between the tenant and the owner a 

shorter period is specified. 

(b) Prohibited lease terms. The lease 

may not contain any of the following 

provisions: 

(1) Agreement to be sued. Agreement 

by the tenant to be sued, to admit guilt, 

or to a judgment in favor of the owner 

in a lawsuit brought in connection with 

the lease; 

(2) Treatment of property. Agreement 

by the tenant that the owner may take, 

hold, or sell personal property of 

household members without notice to 

the tenant and a court decision on the 

rights of the parties. This prohibition, 

however, does not apply to an 

agreement by the tenant concerning 

disposition of personal property 

remaining in the housing unit after the 

tenant has moved out of the unit. The 

owner may dispose of this personal 

property in accordance with State law; 

(3) Excusing owner from 

responsibility. Agreement by the tenant 

not to hold the owner or the owner’s 

agents legally responsible for any action 

or failure to act, whether intentional or 

negligent; 

(4) Waiver of notice. Agreement of the 

tenant that the owner may institute a 

lawsuit without notice to the tenant; 

(5) Waiver of legal proceedings. 

Agreement by the tenant that the owner 

may evict the tenant or household 

members without instituting a civil 

court proceeding in which the tenant 

has the opportunity to present a 

defense, or before a court decision on 

the rights of the parties; 

(6) Waiver of a jury trial. Agreement 

by the tenant to waive any right to a trial 

by jury; 

(7) Waiver of right to appeal court 

decision. Agreement by the tenant to 

waive the tenant’s right to appeal, or to 

otherwise challenge in court, a court 

decision in connection with the lease; 

(8) Tenant chargeable with cost of 

legal actions regardless of outcome. 

Agreement by the tenant to pay 

attorney’s fees or other legal costs even 

if the tenant wins in a court proceeding 

by the owner against the tenant. The 

tenant, however, may be obligated to 

pay costs if the tenant loses; and 


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(9) Mandatory supportive services. 

Agreement by the tenant to accept 

supportive services that are offered. 

(c) Termination of tenancy. An owner 

may not terminate the tenancy or refuse 

to renew the lease of a tenant of rental 

housing assisted with HTF funds, 

except for serious or repeated violation 

of the terms and conditions of the lease; 

for violation of applicable Federal, 

State, or local law; or for other good 

cause. Good cause does not include an 

increase in the tenant’s income. To 

terminate or refuse to renew tenancy, 

the owner must serve written notice 

upon the tenant specifying the grounds 

for the action and providing a specific 

period for vacating that is consistent 

with State or local law. 

(d) Tenant selection. An owner of 

rental housing assisted with HTF funds 

must comply with the affirmative 

marketing requirements established by 

the grantee pursuant to § 93.350. The 

owner must adopt and follow written 

tenant selection policies and criteria 

that: 

(1) Limit the housing to incomeeligible families; 

(2) Are reasonably related to the 

applicants’ ability to perform the 

obligations of the lease (i.e., to pay the 

rent, not to damage the housing; not to 

interfere with the rights and quiet 

enjoyment of other tenants); 

(3) Limit eligibility or give a 

preference to a particular segment of the 

population if permitted in its written 

agreement with the grantee (and only if 

the limitation or preference is described 

in the grantee’s consolidated plan). 

(i) Any limitation or preference must 

not violate nondiscrimination 

requirements in § 93.350. A limitation 

or preference does not violate 

nondiscrimination requirements if the 

housing also receives funding from a 

Federal program that limits eligibility to 

a particular segment of the population 

(e.g., the Housing Opportunity for 

Persons With AIDS program under 24 

CFR part 574), and the limit or 

preference is tailored to serve that 

segment of the population. 

(ii) If a project does not receive 

funding from a Federal program that 

limits eligibility to a particular segment 

of the population, the project may have 

a limitation or preference for persons 

with disabilities who need services 

offered at a project only if: 

(A) The limitation or preference is 

limited to the population of families 

(including individuals) with disabilities 

that significantly interfere with their 

ability to obtain and maintain housing; 

(B) Such families will not be able to 

obtain or maintain themselves in 

housing without appropriate supportive 

services; and 

(C) Such services cannot be provided 

in a nonsegregated setting. The families 

must not be required to accept the 

services offered at the project. In 

advertising the project, the owner may 

advertise the project as offering services 

for a particular type of disability; 

however, the project must be open to all 

otherwise eligible persons with 

disabilities who may benefit from the 

services provided in the project. 

(4) Do not exclude an applicant with 

a voucher under the Section 8 TenantBased Assistance: Housing Choice 

Voucher program (24 CFR part 982) or 

an applicant participating in a HOME 

tenant-based rental assistance program 

(24 CFR part 92) because of the status 

of the prospective tenant as a holder of 

such voucher or comparable HOME 

tenant-based assistance document. 

(5) Provide for the selection of tenants 

from a written waiting list in the 

chronological order of their application, 

insofar as is practicable; and 

(6) Give prompt written notification to 

any rejected applicant of the grounds for 

any rejection. 

§ 93.304 Qualification as affordable 

housing: Homeownership. 

(a) Homeownership activities. 

Housing that is for purchase by a firsttime homebuyer must meet the 

affordability requirements of this 

section. 

(b) Single family housing. The 

housing must be single-family housing, 

as defined at § 93.2. 

(c) Modest housing. The housing must 

be modest housing, in accordance with 

§ 93.305. 

(d) First-time homebuyer and income 

requirements. The housing must be 

acquired by a first-time homebuyer 

whose family qualifies as an incomeeligible family in accordance with 

§ 93.251 and the housing must be the 

principal residence of the family 

throughout the period described in 

paragraph (e) of this section. In 

determining the income eligibility of the 

family, the grantee must include the 

income of all persons living in the 

housing. Before purchasing the housing, 

the family must have completed a 

program of independent financial 

education and homeownership 

counseling from an eligible organization 

that has been certified in accordance 

with section 106(e) of the Housing and 

Urban Development Act of 1968 (12 

U.S.C. 1701x (e)). 

(e) Period of affordability. The HTFassisted housing must meet the 

affordability requirements for not less 

than 30 years. 

(f) Resale or recapture requirements. 

The grantee must establish the resale or 

recapture requirements that comply 

with the standards of § 93.305 and set 

forth the requirements in its 

consolidated plan. HUD must determine 

that they are appropriate and must 

specifically approve them in writing. 

(g) Special considerations for single 

family properties with more than one 

unit. (1) If the HTF funds are used only 

to assist an income-eligible homebuyer 

in acquiring one unit in a single family 

property containing more than one unit 

and the assisted unit will be the 

principal residence of the homebuyer, 

the affordability requirements of this 

section apply only to the assisted unit. 

(2) If HTF funds are also used to assist 

the income-eligible homebuyer in 

acquiring one or more of the rental units 

in the single family property, the 

affordability requirements of § 93.302 

apply to assisted rental units, except 

that the grantee must impose resale 

restrictions on all assisted units (owneroccupied and rental units) in the singlefamily housing. The affordability 

requirements on all assisted units 

continue for the period of affordability. 

If HTF funds are used to assist only the 

rental units in such a property, then the 

requirements of § 93.302 would apply 

and the owner-occupied unit would not 

be subject to the income targeting or 

affordability provisions of this section. 

(h) Lease-purchase. (1) HTF funds 

may be used to assist homebuyers 

through lease-purchase programs for 

existing housing and for housing to be 

constructed. The housing must be 

purchased by an eligible homebuyer 

within 36 months of signing the leasepurchase agreement. The homebuyer 

must qualify as an income-eligible 

family at the time the lease-purchase 

agreement is signed. 

(2) If HTF funds are used to acquire 

housing that will be resold to a 

homebuyer through a lease-purchase 

program, the HTF affordability 

requirements for rental housing in 

§ 93.302 shall apply if the housing is not 

transferred to an eligible homebuyer 

within 42 months after project 

completion. 

(i) Contract to purchase. If HTF funds 

are used to assist a homebuyer who has 

entered into a contract to purchase 

housing to be constructed, the 

homebuyer must qualify as an incomeeligible family at the time the contract 

is signed. 

(j) If there is no ratified sales contract 

with an eligible homebuyer for the 

housing within 9 months of the date of 

completion of construction or 

rehabilitation, the housing must be 


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rented to an eligible tenant in 

accordance with § 93.301. 

(k) Preserving affordability. (1) To 

preserve the affordability of housing 

that was previously assisted with HTF 

funds and subject to the requirements of 

this section, a grantee may use 

additional HTF funds to acquire the 

housing through a purchase option, 

right of first refusal, or other preemptive 

right before foreclosure, or to acquire 

the housing at the foreclosure sale, 

undertake any necessary rehabilitation, 

and provide assistance to another firsttime homebuyer. The housing must be 

sold to a new eligible homebuyer in 

accordance with the requirements of 

this section. Additional HTF funds may 

not be used if the mortgage in default 

was funded with HTF funds. 

(2) The total amount of original and 

additional HTF assistance may not 

exceed the maximum per-unit 

development subsidy amount 

established pursuant to § 93.300. As an 

alternative to charging the cost to the 

HTF program under § 93.201, the 

grantee may charge the cost to the HTF 

program under § 93.302 as a reasonable 

administrative cost of its HTF program, 

so that the additional HTF funds for the 

housing are not subject to the maximum 

per-unit subsidy amount. 

(l) Agreements with lending 

institutions. (1) The grantee may 

provide homeownership assistance 

through written agreements with forprofit or nonprofit lending institutions 

that are providing the first mortgage 

loan to a family. The grantee must 

independently verify that the family is 

income-eligible and meets the definition 

of ‘‘first-time homebuyer,’’ and must 

inspect the housing for compliance with 

the applicable property standards. 

(2) No fees may be charged to the 

family for the HTF homeownership 

assistance (e.g., origination fees or 

points, processing fees, inspection fees). 

The grantee must determine that the 

fees and other amounts charged to the 

family by the lender for the first 

mortgage financing are reasonable. 

Reasonable administrative costs of the 

HTF homeownership assistance can be 

charged to the HTF program as a project 

cost. If the grantee requires lenders to 

pay a fee to participate in the HTF 

program, the fee is program income to 

the HTF program. 

(m) Written policies. The grantee must 

have and follow written policies for: 

(1) Underwriting standards for 

homeownership assistance that examine 

the family’s housing debt, overall debt, 

income, and ability to maintain the 

housing; 

(2) Anti-predatory lending; and 

(3) Refinancing loans to which HTF 

loans are subordinated to ensure that 

the terms of the new loan are 

reasonable. 

§ 93.305 Qualification as affordable 

housing: modest housing requirements for 

homeownership; resale or recapture 

requirements. 

(a) Housing that is for acquisition by 

a family pursuant to § 93.304 must be 

modest housing. 

(1) The housing must be modest 

housing as follows: The housing has a 

purchase price for the type of single 

family housing that does not exceed 95 

percent of the median purchase price for 

the area for newly constructed or 

standard housing. The grantee must use 

the HTF affordable homeownership 

limits provided by HUD for newly 

constructed housing and for existing 

housing. HUD will provide limits for 

affordable newly constructed housing 

based on 95 percent of the median 

purchase price for the area using 

Federal Housing Administration (FHA) 

single family mortgage program data for 

newly constructed housing, with a 

minimum limit based on 95 percent of 

the U.S. median purchase price for new 

construction for nonmetropolitan areas. 

HUD will provide limits for affordable 

existing housing based on 95 percent of 

the median purchase price for the area 

using FHA single family mortgage 

program data for existing housing data 

and other appropriate data that are 

available nation-wide for sales of 

existing housing, with a minimum limit 

based on 95 percent of the state-wide 

nonmetropolitan area median purchase 

price using these data. For States with 

no non-metropolitan areas, the 

minimum purchase price is defined as 

the lesser of the State non-metro or the 

United States non-metro median. 

(2) In lieu of the limits provided by 

HUD, the grantee may determine 95 

percent of the median area purchase 

price for single family housing in the 

jurisdiction annually, as follows: The 

grantee must set forth the price for 

different types of single family housing 

for the jurisdiction. The grantee may 

determine separate limits for existing 

housing and newly constructed housing. 

For housing located outside of 

metropolitan areas, a grantee may 

aggregate sales data from more than one 

county, if the counties are contiguous 

and similarly situated. The following 

information must be included in the 

annual action plan of the consolidated 

plan submitted to HUD for review and 

updated in each action plan: 

(i) The 95 percent of median area 

purchase price must be established in 

accordance with a market analysis that 

ensured that a sufficient number of 

recent housing sales are included in the 

survey. 

(ii) Sales must cover the requisite 

number of months based on volume: For 

500 or more sales per month, a onemonth reporting period; for 250 through 

499 sales per month, a 2-month 

reporting period; for less than 250 sales 

per month, at least a 3-month reporting 

period. The data must be listed in 

ascending order of sales price. 

(iii) The address of the listed 

properties must include the location 

within the grantee. Lot, square, and 

subdivision data may be substituted for 

the street address. 

(iv) The housing sales data must 

reflect all, or nearly all, of the onefamily house sales in the entire area. 

(v) To determine the median, take the 

middle sale on the list if an odd number 

of sales, and if an even number, take the 

higher of the middle numbers and 

consider it the median. After identifying 

the median sales price, the amount 

should be multiplied by 0.95 to 

determine 95 percent of the median area 

purchase price. 

(b) Resale or recapture requirements. 

The grantee must establish the resale or 

recapture requirements that comply 

with the standards of this section and 

set forth the requirements in its 

consolidated plan. The HTF-assisted 

housing must meet the affordability 

requirements for not less than 30 years 

if resale restrictions are used. If 

recapture restrictions are used, the 

affordability periods are based on the 

amount of HTF funds per unit as 

follows: 

Homeownership 

assistance HTF amount 

per-unit 

Minimum period of 

affordability in 

years 

Under $30,000 ................ 10 

$30,000–$50,000 ............ 20 

Over $50,000 .................. 30 

(1) Resale. Resale requirements must 

ensure, if the housing does not continue 

to be the principal residence of the 

family for the duration of the period of 

affordability, that the housing is made 

available for subsequent purchase only 

to a buyer whose family qualifies as a 

very low-income family and will use the 

property as the family’s principal 

residence. The resale requirement must 

also ensure that the price at resale 

provides the original HTF-assisted 

owner a fair return on investment 

(including the homeowner’s investment 

and any capital improvement) and 

ensure that the housing will remain 

affordable to a reasonable range of 

income-eligible homebuyers. The 

grantee must specifically define ‘‘fair 


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return on investment’’ and 

‘‘affordability to a reasonable range of 

very low-income homebuyers,’’ and 

specifically address how it will make 

the housing affordable to an income 

eligible homebuyer in the event that the 

resale price necessary to provide fair 

return is not affordable to the 

subsequent buyer. Deed restrictions, 

covenants running with the land, or 

other mechanisms approved by HUD 

must be used as the mechanism to 

impose the resale requirements. The 

affordability restrictions may terminate 

upon occurrence of any of the following 

termination events: foreclosure, transfer 

in lieu of foreclosure, or assignment of 

an FHA insured mortgage to HUD. The 

grantee may use purchase options, 

rights of first refusal or other preemptive 

rights to purchase the housing before 

foreclosure to preserve affordability. 

The affordability restrictions shall be 

revived according to the original terms 

if, during the original affordability 

period, the owner of record before the 

termination event, obtains an ownership 

interest in the housing. 

(2) Recapture. (i) Recapture 

provisions must ensure that the grantee 

recoups all or a portion of the HTF 

assistance to the homebuyers, if the 

housing does not continue to be the 

principal residence of the family for the 

duration of the period of affordability. 

The grantee may structure its recapture 

provisions based on its program design 

and market conditions. Recapture 

provisions may permit the subsequent 

homebuyer to assume the HTF 

assistance (subject to the HTF 

requirements for the remainder of the 

period of affordability) if the subsequent 

homebuyer is income-eligible, and no 

additional HTF assistance is provided. 

(ii) The following options for 

recapture requirements are acceptable to 

HUD. The grantee may adopt, modify, or 

develop its own recapture requirements 

for HUD approval. In establishing its 

recapture requirements, the grantee is 

subject to the limitation that, when the 

recapture requirement is triggered by a 

sale (voluntary or involuntary) of the 

housing unit, the amount recaptured 

cannot exceed the net proceeds, if any. 

The net proceeds are the sales price 

minus superior loan repayment (other 

than HTF funds) and any closing costs. 

(A) Recapture entire amount. The 

grantee may recapture the entire amount 

of the HTF assistance from the 

homeowner. 

(B) Reduction during affordability 

period. The grantee may reduce the HTF 

assistance amount to be recaptured on a 

prorata basis for the time the 

homeowner has owned and occupied 

the housing measured against the 

required affordability period. 

(C) Shared net proceeds. If the net 

proceeds are not sufficient to recapture 

the full HTF assistance (or a reduced 

amount as provided for in this section) 

plus enable the homeowner to recover 

the amount of the homeowner’s 

downpayment and any capital 

improvement investment made by the 

owner since purchase, the grantee may 

share the net proceeds. The net 

proceeds are the sales price minus loan 

repayment (other than HTF funds) and 

closing costs. The net proceeds may be 

divided proportionally as set forth in 

the following mathematical formulas: 

(D) Owner investment returned first. 

The grantee may permit the homebuyer 

to recover the homebuyer’s entire 

investment (downpayment and capital 

improvements made by the owner since 

purchase) before recapturing the HTF 

assistance. 

(E) Amount subject to recapture. The 

HTF assistance that is subject to 

recapture is based on the amount of 

HTF assistance that enabled the 

homebuyer to buy the dwelling unit. 

This includes any HTF assistance that 

reduced the purchase price from fair 

market value to an affordable price, but 

excludes the amount between the cost of 

producing the unit and the market value 

of the property (i.e., the development 

subsidy). The recaptured funds must be 

used to carry out HTF-eligible activities 

in accordance with the requirements of 

this part. If the HTF assistance is only 

used for the development subsidy and 

therefore not subject to recapture, the 

resale option must be used. 

Subpart H—Other Federal 

Requirements 

§ 93.350 Other federal requirements and 

nondiscrimination; affirmative marketing. 

(a) General. The Federal requirements 

set forth in 24 CFR part 5, subpart A, are 

applicable to participants in the HTF 

program. The requirements of this 

subpart include: nondiscrimination and 

equal opportunity; disclosure 

requirements; debarred, suspended, or 

ineligible contractors; and drug-free 

workplace. 

(b) Affirmative marketing. (1) Each 

grantee must adopt and follow 

affirmative marketing procedures and 

requirements for rental projects 

containing five or more HTF-assisted 

housing units and for homeownership 

assistance programs. Affirmative 

marketing steps consist of actions to 

provide information and otherwise 

attract eligible persons in the housing 

market area to the available housing 

without regard to race, color, national 

origin, sex, religion, familial status, or 

disability. If a grantee’s written 

agreement with the project owner 

permits the rental housing project to 

limit tenant eligibility or to have a 

tenant preference in accordance with 

§ 93.303(d)(3), the grantee must have 

affirmative marketing procedures and 

requirements that apply in the context 

of the limited/preferred tenant 

eligibility for the project. 

(2) The affirmative marketing 

requirements and procedures adopted 

must include: 

(i) Methods for informing the public, 

owners, and potential tenants about 

Federal fair housing laws and the 

grantee’s affirmative marketing policy 

(e.g., the use of the Equal Housing 

Opportunity logotype or slogan in press 

releases and solicitations for owners, 

and written communication to fair 

housing and other groups); 

(ii) Requirements and practices the 

grantee and owner must adhere to in 

order to carry out the grantee’s 

affirmative marketing procedures and 

requirements (e.g., use of commercial 

media, use of community contacts, use 

of the Equal Housing Opportunity 


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logotype or slogan, and display of fair 

housing poster); 

(iii) Procedures to be used by the 

grantee and owners to inform and solicit 

applications from persons in the 

housing market area who are not likely 

to apply for the rental housing or 

homeownership assistance program 

without special outreach (e.g., through 

the use of community organizations, 

places of worship, employment centers, 

fair housing groups, or housing 

counseling agencies); 

(iv) Records that will be kept 

describing actions taken by the grantee 

and owners to affirmatively market 

rental housing units and 

homeownership assistance program and 

records to assess the results of these 

actions; and 

(v) A description of how the grantee 

will annually assess the success of 

affirmative marketing actions and what 

corrective actions will be taken where 

affirmative marketing requirements are 

not met. 

(3) A grantee that subgrants HTF 

funds to subgrantees must require each 

subgrantee to either follow the grantee’s 

procedures and requirements or adopt 

its own affirmative marketing 

procedures and requirements that meet 

this section. 

§ 93.351 Lead-based paint. 

Housing assisted with HTF funds is 

subject to the regulations at 24 CFR part 

35, subparts A, B, J, K, and R. 

§ 93.352 Displacement, relocation, and 

acquisition. 

(a) Minimizing displacement. 

Consistent with the other goals and 

objectives of this part, the grantee must 

ensure that it has taken all reasonable 

steps to minimize the displacement of 

persons (families, individuals, 

businesses, nonprofit organizations, and 

farms) as a result of a project assisted 

with HTF funds. To the extent feasible, 

displaced residential tenants must be 

provided a reasonable opportunity to 

lease and occupy a suitable, decent, 

safe, sanitary, and affordable dwelling 

unit in the building/complex upon 

completion of the project. 

(b) Temporary relocation. The 

following policies cover residential 

tenants who will not be required to 

move permanently but who must 

relocate temporarily for the project. 

Such tenants must be provided: 

(1) Reimbursement for all reasonable 

out-of-pocket expenses incurred in 

connection with the temporary 

relocation, including the cost of moving 

to and from the temporarily occupied 

housing and any increase in monthly 

rent/utility costs. 

(2) Appropriate advisory services, 

including reasonable advance written 

notice of: 

(i) The date and approximate duration 

of the temporary relocation; 

(ii) The location of the suitable, 

decent, safe, and sanitary dwelling to be 

made available for the temporary 

period; 

(iii) The terms and conditions under 

which the tenant may lease and occupy 

a suitable, decent, safe, and sanitary 

dwelling in the building/complex upon 

completion of the project; and 

(iv) The provisions of paragraph (b)(1) 

of this section. 

(c) Relocation assistance for displaced 

persons—(1) General. A displaced 

person (defined in paragraph (c)(2) of 

this section) must be provided 

relocation assistance at the levels 

described in, and in accordance with 

the requirements of the Uniform 

Relocation Assistance and Real Property 

Acquisition Policies Act of 1970 (URA) 

(42 U.S.C. 4201–4655) and 49 CFR part 

24. A ‘‘displaced person’’ must be 

advised of his or her rights under the 

Fair Housing Act and, if the comparable 

replacement dwelling used to establish 

the amount of the replacement housing 

payment to be provided to a minority 

person is located in an area of minority 

concentration, the minority person also 

must be given, if possible, referrals to 

comparable and suitable, decent, safe, 

and sanitary replacement dwellings not 

located in such areas. 

(2) Displaced person. (i) For purposes 

of this paragraph (c), the term 

‘‘displaced person’’ means a person 

(family individual, business, nonprofit 

organization, or farm, including any 

corporation, partnership or association) 

that moves from real property or moves 

personal property from real property, 

permanently, as a direct result of 

acquisition, rehabilitation, or 

demolition for a project assisted with 

HTF funds. This includes any 

permanent, involuntary move for an 

assisted project, including any 

permanent move from the real property 

that is made: 

(A) After notice by the owner to move 

permanently from the property, if the 

move occurs on or after: 

(1) The date of the submission of an 

application to the grantee or HUD, if the 

applicant has site control and the 

application is later approved; or 

(2) The date the grantee approves the 

applicable site, if the applicant does not 

have site control at the time of the 

application; or 

(B) Before the date described in 

paragraph (c)(2)(i)(A) of this section, if 

the grantee or HUD determines that the 

displacement resulted directly from 

acquisition, rehabilitation, or 

demolition for the project; or 

(C) By a tenant-occupant of a dwelling 

unit, if any one of the following three 

situations occurs: 

(1) The tenant moves after execution 

of the agreement covering the 

acquisition, rehabilitation, or 

demolition and the move occurs before 

the tenant is provided written notice 

offering the tenant the opportunity to 

lease and occupy a suitable, decent, 

safe, and sanitary dwelling in the same 

building/complex upon completion of 

the project under reasonable terms and 

conditions. Such reasonable terms and 

conditions must include a term of at 

least one year at a monthly rent and 

estimated average monthly utility costs 

that do not exceed the greater of: 

(i) The tenant’s monthly rent before 

such agreement and estimated average 

monthly utility costs; or 

(ii) The total tenant payment, as 

determined under 24 CFR 5.628, if the 

tenant is low-income, or 30 percent of 

gross household income, if the tenant is 

not low-income; 

(2) The tenant is required to relocate 

temporarily, does not return to the 

building/complex, and either: 

(i) The tenant is not offered payment 

for all reasonable out-of-pocket 

expenses incurred in connection with 

the temporary relocation; or 

(ii) Other conditions of the temporary 

relocation are not reasonable; or 

(3) The tenant is required to move to 

another dwelling unit in the same 

building/complex but is not offered 

reimbursement for all reasonable out-ofpocket expenses incurred in connection 

with the move, or other conditions of 

the move are not reasonable. 

(ii) Notwithstanding paragraph 

(c)(2)(i) of this section, a person does 

not qualify as a ‘‘displaced person’’ if: 

(A) The person has been evicted for 

cause based upon a serious or repeated 

violation of the terms and conditions of 

the lease or occupancy agreement, 

violation of applicable Federal, State or 

local law, or other good cause, and the 

grantee determines that the eviction was 

not undertaken for the purpose of 

evading the obligation to provide 

relocation assistance. The effective date 

of any termination or refusal to renew 

must be preceded by at least 30 calendar 

days advance written notice to the 

tenant specifying the grounds for the 

action. 

(B) The person moved into the 

property after the submission of the 

application, but before signing a lease 

and commencing occupancy, was 

provided written notice of the project, 

its possible impact on the person (e.g., 

the person may be displaced, 


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temporarily relocated, incur a rent 

increase), and the fact that the person 

would not qualify as a ‘‘displaced 

person’’ (or for any assistance under this 

section) as a result of the project; 

(C) The person is ineligible under 49 

CFR 24.2(g)(2); or 

(D) HUD determines that the person 

was not displaced as a direct result of 

acquisition, rehabilitation, or 

demolition for the project. 

(iii) The grantee may, at any time, ask 

HUD to determine whether a 

displacement is or would be covered by 

this rule. 

(3) Initiation of negotiations. For 

purposes of determining the formula for 

computing replacement housing 

assistance to be provided under this 

paragraph (c) to a tenant displaced from 

a dwelling as a direct result of privateowner rehabilitation, demolition, or 

acquisition of the real property, the term 

‘‘initiation of negotiations’’ means the 

execution of the agreement covering the 

acquisition, rehabilitation, or 

demolition. 

(d) Optional relocation assistance. 

The grantee may provide relocation 

payments and other relocation 

assistance to families, individuals, 

businesses, nonprofit organizations, and 

farms displaced by a project assisted 

with HTF funds where the displacement 

is not subject to paragraph (c) of this 

section. The grantee may also provide 

relocation assistance to persons covered 

under paragraph (c) of this section 

beyond that required. For any such 

assistance that is not required by State 

or local law, the grantee must adopt a 

written policy available to the public 

that describes the optional relocation 

assistance that it has elected to furnish 

and provides for equal relocation 

assistance within each class of 

displaced persons. 

(e) Real property acquisition 

requirements. The acquisition of real 

property for a project is subject to the 

URA and the requirements of 49 CFR 

part 24, subpart B. 

(f) Appeals. A person who disagrees 

with the grantee’s determination 

concerning whether the person qualifies 

as a displaced person, or the amount of 

relocation assistance for which the 

person may be eligible, may file a 

written appeal of that determination 

with the grantee. 

§ 93.353 Conflict of interest. 

(a) Applicability of 2 CFR 200.318. In 

the procurement of property and 

services by grantees and subgrantees, 

the conflict of interest provisions in 2 

CFR 200.318 apply. In all cases not 

governed by 2 CFR 200.318, the 

provisions of this section apply. 

(b) Conflicts prohibited. No persons 

described in paragraph (c) of this 

section who exercise or have exercised 

any functions or responsibilities with 

respect to activities assisted with HTF 

funds or who are in a position to 

participate in a decision-making process 

or gain inside information with regard 

to these activities may obtain a financial 

interest or financial benefit from a HTFassisted activity, or have a financial 

interest in any contract, subcontract, or 

agreement with respect to the HTFassisted activity, or the proceeds from 

such activity, either for themselves or 

those with whom they have business or 

immediate family ties, during their 

tenure or for one year thereafter. 

Immediate family ties include (whether 

by blood, marriage, or adoption) the 

spouse, parent (including a stepparent), 

child (including a stepchild), brother, 

sister (including a stepbrother or 

stepsister), grandparent, grandchild, and 

in-laws of a covered person. 

(c) Persons covered. The conflict of 

interest provisions of paragraph (b) of 

this section apply to any person who is 

an employee, agent, consultant, officer, 

or elected official or appointed official 

of the grantee or subgrantee. 

(d) Exceptions: Threshold 

requirements. Upon the written request 

of the grantee, HUD may grant an 

exception to the provisions of paragraph 

(b) of this section on a case-by-case basis 

when it determines that the exception 

will serve to further the purposes of the 

HTF and the effective and efficient 

administration of the grantee’s program 

or project. An exception may be 

considered only after the grantee has 

provided the following: 

(1) A disclosure of the nature of the 

conflict, accompanied by an assurance 

that there has been public disclosure of 

the conflict and a description of how the 

public disclosure was made; and 

(2) An opinion of the grantee’s 

attorney that the interest for which the 

exception is sought would not violate 

State or local law. 

(e) Factors to be considered for 

exceptions. In determining whether to 

grant a requested exception after the 

grantee has satisfactorily met the 

requirements of paragraph (d) of this 

section, HUD will consider the 

cumulative effect of the following 

factors, where applicable: 

(1) Whether the exception would 

provide a significant cost benefit or an 

essential degree of expertise to the 

program or project which would 

otherwise not be available; 

(2) Whether the person affected is a 

member of a group or class of income 

eligible persons intended to be the 

beneficiaries of the assisted activity, and 

the exception will permit such person to 

receive generally the same interests or 

benefits as are being made available or 

provided to the group or class; 

(3) Whether the affected person has 

withdrawn from his or her functions or 

responsibilities, or the decisionmaking 

process with respect to the specific 

assisted activity in question; 

(4) Whether the interest or benefit was 

present before the affected person was 

in a position as described in paragraph 

(c) of this section; 

(5) Whether undue hardship will 

result either to the grantee or the person 

affected when weighed against the 

public interest served by avoiding the 

prohibited conflict; and 

(6) Any other relevant considerations. 

(f) Recipient—(1) General. No 

recipient assisted with HTF funds (or 

officer, employee, agent, elected or 

appointed official, or consultant of 

recipient or immediate family member 

or immediate family member of an 

officer, employee, agent, elected or 

appointed official, or consultant of a 

recipient) whether private, for-profit or 

nonprofit, may occupy a HTF-assisted 

affordable housing unit in a project 

during the required period of 

affordability specified in § 93.302(e) or 

§ 93.304. This provision does not apply 

to an employee or agent of the recipient 

who occupies a housing unit as the 

project manager or maintenance worker. 

(2) Exceptions. Upon written request 

of a recipient, the grantee (or 

subgrantee, if authorized by the grantee) 

may grant an exception to the 

provisions of paragraph (f)(1) of this 

section on a case-by-case basis when it 

determines that the exception will serve 

to further the purposes of the HTF 

program and the effective and efficient 

administration of the recipient’s HTFassisted project. In determining whether 

to grant a requested exception, the 

grantee shall consider the following 

factors: 

(i) Whether the person receiving the 

benefit is a member of a group or class 

of low-income persons intended to be 

the beneficiaries of the assisted housing, 

and the exception will permit such 

person to receive generally the same 

interests or benefits as are being made 

available or provided to the group or 

class; 

(ii) Whether the person has 

withdrawn from his or her functions or 

responsibilities, or the decisionmaking 

process with respect to the specific 

assisted housing in question; 

(iii) Whether the tenant protection 

requirements of § 93.303 are being 

observed; 


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(iv) Whether the affirmative marketing 

requirements of § 93.350 are being 

observed and followed; and 

(v) Any other factor relevant to the 

grantee’s determination, including the 

timing of the requested exception. 

§ 93.354 Funding Accountability and 

Transparency Act. 

The HTF grant to the grantee and all 

assistance provided to subgrantees and 

recipients shall be considered a Federal 

award for purposes of the Federal 

Funding Accountability and 

Transparency Act of 2006 (31 U.S.C. 

6101 note). 

§ 92.355 Eminent domain. 

No HTF funds may be used in 

conjunction with property taken by 

eminent domain, unless eminent 

domain is employed only for a public 

use, except that, public use shall not be 

construed to include economic 

development that primarily benefits any 

private entity. 

Subpart I—Program Administration 

§ 93.400 Housing Trust Fund (HTF) 

accounts. 

(a) General. HUD will establish an 

HTF United States Treasury account 

(HTF Treasury account) for each 

grantee. Each grantee may use either a 

separate HTF local account or a 

subsidiary account within its general 

fund (or other appropriate fund) as the 

HTF local account. 

(b) HTF Treasury account. The HTF 

Treasury account includes the annual 

grant and funds reallocated to the State 

by formula. 

(c) HTF local account. (1) The HTF 

local account includes deposits of HTF 

funds disbursed from the HTF Treasury 

account, any program income, and any 

repayments as required by § 93.403. 

(2) The HTF local account must be 

interest-bearing. 

(d) Reductions. HUD will reduce or 

recapture funds in the HTF account by 

the amount of: 

(1) Any fiscal year grant funds in the 

HTF Treasury account that are not 

committed within 24 months after the 

date of HUD’s execution of the HTF 

grant agreement; 

(2) Any fiscal year grant funds in the 

HTF local account that are not 

expended within 5 years after the date 

of HUD’s execution of the HTF grant 

agreement; 

(3) Any amounts pursuant to § 93.453; 

and 

(4) Amounts that the grantee fails to 

obtain and that were required to be 

reimbursed or returned under § 93.450. 

§ 93.401 HTF grant agreement. 

Allocated and reallocated funds will 

be made available pursuant to an HTF 

grant agreement. 

§ 93.402 Program disbursement and 

information system. 

(a) General. The HTF Treasury 

account is managed through a 

computerized disbursement and 

information system established by HUD. 

The system disburses HTF funds that 

are allocated or reallocated, and collects 

and reports information on the use of 

funds in the HTF Treasury account. The 

grantee must report on the receipt and 

use of all program income in HUD’s 

computerized disbursement and 

information system. The grantee must 

develop and maintain a system to 

ensure that each recipient and 

subgrantee uses HTF funds in 

accordance with the requirements of 

this part and that any requirements or 

conditions under which the HTF funds 

were provided. 

(b) Project set-up. (1) After the grantee 

executes the HTF grant agreement, 

submits the applicable banking and 

security documents, and commits funds 

to a specific local project, the grantee 

shall identify (set up) specific activities 

(i.e., projects) in the disbursement and 

information system. Investments that 

require the set-up of projects in the 

system are the acquisition, new 

construction, or rehabilitation of 

housing, operating cost assistance, and 

operating cost assistance reserves. The 

grantee is required to enter complete 

project set-up information at the time of 

project set-up. 

(2) If the project set-up information is 

not completed within 20 calendar days 

of the date of the initial project set-up, 

the project may be canceled by the 

system. In addition, a project that has 

been committed in the system for 12 

months without an initial disbursement 

of funds may be canceled by the system. 

(c) Disbursement of HTF Funds. 

(1) After complete project set-up 

information is entered into the 

disbursement and information system, 

HTF funds for the project may be drawn 

down from the HTF Treasury account 

by the grantee by electronic funds 

transfer. Any drawdown of funds in the 

HTF Treasury account is conditioned 

upon the provision of satisfactory 

information by the grantee about the 

project and compliance with other 

procedures, as specified by HUD. 

(2) Funds drawn from the HTF 

Treasury account are subject to the 

Intergovernmental Cooperation Act (31 

U.S.C. 6501 et seq.) and regulations at 

31 CFR part 205. 

(3) Funds in the HTF local account 

must be disbursed before requests are 

made for funds in the HTF Treasury 

account. 

(d) Project completion. (1) Complete 

project completion information must be 

entered into the disbursement and 

information system, or otherwise 

provided, within 120 calendar days of 

the date of the final project drawdown. 

If satisfactory project completion 

information is not provided, HUD may 

suspend further project set-ups or take 

other corrective actions. 

(2) Additional HTF funds for 

development-related costs may be 

committed to a project up to one year 

after project completion, but the amount 

of HTF funds in the project may not 

exceed the maximum per-unit 

development subsidy amount 

established pursuant to § 93.300. 

(e) Access by other participants. 

Access to the disbursement and 

information system by other entities 

participating in the HTF program will 

be governed by procedures established 

by HUD. 

§ 93.403 Program income and repayments. 

(a) Program income. Program income 

must be treated as HTF funds and must 

be used in accordance with the 

requirements of this part. Program 

income must be deposited in the 

grantee’s HTF local account unless the 

grantee permits a subgrantee to retain 

the program income for additional HTF 

projects pursuant to the written 

agreement required by § 93.404(b). The 

grantee must report the program income 

received as well as the use of the 

program income in the disbursement 

and information system that HUD 

designates for the HTF. 

(b) Repayments. (1) Any HTF funds 

invested in housing that does not meet 

the affordability requirements for the 

period specified in § 93.302 or § 93.304, 

as applicable, must be repaid by the 

grantee in accordance with paragraph 

(b)(3) of this section. 

(2) Any HTF funds invested in a 

project that is terminated before 

completion, either voluntarily or 

otherwise, must be repaid by the 

grantee, in accordance with paragraph 

(b)(3) of this section. 

(3) HUD will instruct the grantee to 

either repay the funds to the HTF 

Treasury account or the local account. 

Generally, if the HTF funds were 

disbursed from the grantee’s HTF 

Treasury account, they must be repaid 

to the HTF Treasury account. If the HTF 

funds were disbursed from the grantee’s 

HTF local account, they must be repaid 

to the local account. 


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(4) If the grantee is no longer a grantee 

in the HTF program when the 

repayment is made, the funds must be 

remitted to HUD and reallocated in 

accordance with § 93.54 of this part. 

§ 93.404 Grantee responsibilities; written 

agreements; onsite inspections; financial 

oversight. 

(a) Responsibilities. The grantee is 

responsible for managing the day-to-day 

operations of its HTF program, ensuring 

that HTF funds are used in accordance 

with all program requirements and 

written agreements, and taking 

appropriate action when performance 

problems arise. The use of subgrantees 

or contractors does not relieve the 

grantee of this responsibility. The 

performance and compliance of each 

contractor and subgrantee must be 

reviewed at least annually. The grantee 

must have and follow written policies, 

procedures, and systems, including a 

system for assessing risk of activities 

and projects and a system for 

monitoring entities consistent with this 

section, to ensure that the requirements 

of this part are met. 

(b) Executing a written agreement. 

Before disbursing any HTF funds to any 

entity, the grantee must enter into a 

written agreement with that entity. The 

written agreement must ensure 

compliance with the requirements of 

this part. 

(c) Provisions in written agreements. 

The contents of the agreement may vary 

depending upon the role the entity is 

asked to assume or the type of project 

undertaken. This section details basic 

requirements by role and the minimum 

provisions that must be included in a 

written agreement. 

(1) Subgrantee. The agreement must 

require the subgrantee to comply with 

the requirements applicable to the 

grantee under this part. The agreement 

between the grantee and the subgrantee 

must include: 

(i) Use of the HTF funds. An HTF 

subgrantee that is a unit of general local 

government must have a consolidated 

plan under 24 CFR part 91, and the 

written agreement must require that an 

HTF allocation plan to be part of the 

subgrantee’s consolidated plan (see 24 

CFR 91.220(l)(5)). The HTF allocation 

plan of an HTF subgrantee that is a State 

agency is included in the grantee’s HTF 

allocation plan. The grantee may impose 

restrictions on the use of funds by the 

subgrantee, e.g., limit to rental projects. 

The written agreement must require that 

the selection of projects by eligible 

recipients will be in accordance with 

the HTF allocation plan. The agreement 

must describe the tasks to be performed, 

a schedule for completing the tasks 

(including a schedule for committing 

funds to projects), a budget, and the 

period of the agreement. These items 

must be in sufficient detail to provide a 

sound basis for the grantee to effectively 

monitor performance under the 

agreement. 

(ii) Deadlines. The agreement must 

state the time requirements for the 

commitment and expenditure of HTF 

funds and specify that remaining funds 

will be reduced or recaptured by the 

grantee so that the grantee can meet its 

commitment and expenditure deadlines 

in § 93.400. 

(iii) Audit. The agreement must state 

that an audit of the subgrantee must be 

conducted at least annually, in 

accordance with § 93.406. 

(iv) Program income. The agreement 

must state if program income is to be 

remitted to the grantee or to be retained 

by the subgrantee for additional HTF 

eligible activities. 

(v) Uniform administrative 

requirements. The agreement must 

require the subgrantee to comply with 

the requirements of 2 CFR part 200, as 

described in § 93.405. The agreement 

must include the information in 2 CFR 

200.331. 

(vi) Other program requirements. The 

agreement must require the subgrantee 

to carry out each project in compliance 

with all Federal laws and regulations 

described in §§ 93.350–93.354 of this 

part. 

(vii) Affirmative marketing. The 

agreement must specify the subgrantee’s 

affirmative marketing responsibilities, 

in accordance with § 93.350. 

(viii) Requests for disbursement of 

funds. The agreement must specify that 

the subgrantee may not request 

disbursement of funds under the 

agreement until the funds are needed for 

payment of eligible costs. The amount of 

each request must be limited to the 

amount needed. Program income must 

be disbursed before the subgrantee 

requests grant funds from the grantee. 

(ix) Reversion of assets. The 

agreement must specify that upon 

closeout of the subgrant agreement, the 

subgrantee must transfer to the grantee 

any HTF funds on hand and any 

accounts receivable attributable to the 

use of HTF funds. 

(x) Records and reports. The 

agreement must specify the particular 

records that must be maintained and the 

information or reports that must be 

submitted in order to assist the grantee 

in meeting its recordkeeping and 

reporting requirements. 

(xi) Enforcement of the agreement. 

The agreement must specify remedies 

for breach of the provisions of the 

agreement. The agreement must specify 

that, in accordance with 2 CFR 200.338, 

suspension or termination may occur if 

the subgrantee materially fails to 

comply with any term of the agreement. 

The grantee may permit the agreement 

to be terminated in whole or in part, in 

accordance with 2 CFR 200.339. 

(xii) Written agreement. The 

agreement must require that before the 

subgrantee provides HTF funds to 

eligible recipients, first-time 

homebuyers, or contractors, the 

subgrantee must have a written 

agreement that meets the requirements 

of this section. 

(xiii) Duration of the agreement. The 

agreement must specify the period of 

performance of the agreement. 

(xiv) Fees. The agreement must 

prohibit the subgrantee from charging 

servicing, origination, or other fees for 

the costs of administering the HTF 

program, except that: 

(A) The subgrantee may charge 

owners of rental projects reasonable 

annual fees for compliance monitoring 

during the period of affordability. The 

fees must be based upon the average 

actual cost of performing the monitoring 

of HTF-assisted rental projects. The 

basis for determining the amount of the 

fee amount must be documented and 

the fee must be included in the costs of 

the project as part of the project 

underwriting; 

(B) The subgrantee may charge 

nominal application fees (although 

these fees are not an eligible HTF cost) 

to discourage frivolous applications. 

The amount of application fees must be 

appropriate to the type of application 

and may not create an undue 

impediment to an income-eligible 

family’s, or other potential recipient’s 

participation in the HTF program; and 

(C) The subgrantee may charge 

homebuyers a fee for housing 

counseling. 

(2) Eligible recipient. The agreement 

between the grantee and the eligible 

recipient selected for funding must 

include: 

(i) Use of the HTF funds. The 

agreement must describe the use of the 

HTF funds for the project, including the 

tasks to be performed, a schedule for 

completing the tasks and project 

(including the expenditure deadline), 

and a project budget. These items must 

be in sufficient detail to provide a sound 

basis for the grantee to effectively 

monitor performance under the 

agreement. If the grantee is providing 

operating cost assistance, the written 

agreement must include the provisions 

required by § 93.201. 

(ii) Deadlines. The agreement must 

state the time requirements for the 

commitment and expenditure of HTF 


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funds and specify that remaining funds 

will be reduced or recaptured. 

(iii) Audit. The agreement must 

specify that the recipient will submit to 

the grantee a cost certification 

performed by a certified public 

accountant for each project assisted 

with HTF funds. The agreement must 

specify that the recipient will submit to 

the grantee an annual audit performed 

on each project assisted with HTF 

funds, beginning the first year following 

the cost certification and with the final 

annual audit occurring the last year of 

the affordability period. 

(iv) Affordability. The agreement must 

specify the affordability period, require 

housing assisted with HTF funds to 

meet the affordability requirements of 

§ 93.302 or § 93.304, as applicable, and 

must require repayment of the funds if 

the housing does not meet the 

affordability requirements for the 

specified time period. If the recipient is 

undertaking a rental project, the 

agreement must establish the initial 

rents and the procedures for rent 

increases, the number of HTF units, the 

size of the HTF units, the designation of 

the HTF units as fixed or floating, and 

the requirement to provide the address 

(e.g., street address and apartment 

number) of each HTF unit no later than 

the time of project completion. If the 

recipient is undertaking 

homeownership projects for sale to firsttime homebuyers, in accordance with 

§ 93.304, the agreement must establish 

the resale or recapture requirements that 

must be imposed on the housing, the 

sales price or the basis upon which the 

sales price will be determined, and the 

disposition of the sales proceeds. 

(v) Project requirements. The 

agreement must require the housing to 

meet the property standards in § 93.301 

of this part, as applicable, and in 

accordance with the type of project 

assisted upon project completion. The 

agreement must also require owners of 

rental housing assisted with HTF funds 

to maintain the housing in compliance 

with § 93.301 of this part for the 

duration of the affordability period, and 

to comply with the requirements of 

§ 93.303. The agreement may permit the 

recipient to limit eligibility or give a 

preference to a particular segment of the 

population, only if the grantee has 

described any such limited eligibility or 

preference in its consolidated plan; 

provided, however, that any limitation 

or preference cannot violate 

nondiscrimination requirements in 

§ 93.350. 

(vi) Other program requirements. The 

agreement must require the eligible 

recipient to carry out each project in 

compliance with all Federal laws and 

regulations described in §§ 93.350 

through 93.355 of this part. 

(vii) Affirmative marketing. The 

agreement must specify the recipient’s 

affirmative marketing responsibilities, 

as enumerated by the grantee in 

accordance with § 93.350. 

(viii) Requests for disbursement of 

funds. The agreement must specify that 

the recipient may not request 

disbursement of funds under the 

agreement until the funds are needed for 

payment of eligible costs. The amount of 

each request must be limited to the 

amount needed. 

(ix) Records and reports. The 

agreement must specify the particular 

records that must be maintained and the 

information or reports that must be 

submitted to assist the grantee in 

meeting its recordkeeping and reporting 

requirements. The owner of rental 

housing must annually provide the 

grantee with information on rents and 

occupancy of HTF-assisted units to 

demonstrate compliance with § 93.302. 

If the rental housing project has floating 

HTF units, the owner must provide the 

grantee with information regarding unit 

substitution and filling vacancies so that 

the project remains in compliance with 

HTF rental occupancy requirements. 

The agreement must specify the 

reporting requirements (including 

copies of financial statements) to enable 

the grantee to determine the financial 

condition (and continued financial 

viability) of the rental project. 

(x) Enforcement of the agreement. The 

agreement must provide for a means of 

enforcement of the affordable housing 

requirements by the grantee and the 

intended beneficiaries. This means of 

enforcement and the affordability 

requirements in § 93.302 must be 

imposed by deed restrictions, covenants 

running with the land, use restrictions, 

or other mechanisms approved by HUD 

under which the grantee and 

beneficiaries may require specific 

performance. In addition, the agreement 

must specify remedies for breach of the 

provisions of the agreement. 

(xi) Duration of the agreement. The 

agreement must specify the duration of 

the agreement. If the housing assisted 

under this agreement is rental housing, 

the agreement must be in effect through 

the affordability period required by the 

grantee under § 93.302. If the housing 

assisted under this agreement is 

homeownership housing, the agreement 

must be in effect at least until 

completion of the project and 

ownership by the first-time homebuyer. 

(xii) Fees. The agreement must 

prohibit project owners from charging 

origination fees, parking fees, laundry 

room access fees, and other fees; 

however, rental project owners may 

charge reasonable application fees to 

prospective tenants. 

(3) First-time homebuyer. When a 

grantee provides assistance to a 

homebuyer, the written agreement must 

include as a minimum: 

(i) Use of the HTF funds. The 

agreement must conform to the 

requirements in § 93.304, including the 

limitations on the value of the property, 

principal residence requirement, leasepurchase terms, if applicable, and the 

resale or recapture provisions. The 

agreement must specify the amount of 

HTF funds, the form of assistance (e.g., 

grant, amortizing loan, deferred 

payment loan), the use of the funds (e.g., 

downpayment, closing costs), and the 

time by which the housing must be 

acquired. 

(ii) Resale or recapture restrictions. 

The agreement must specify the resale 

or recapture restrictions established 

under § 93.304 for the specified time 

period. 

(iii) Enforcement of the agreement. 

The agreement must provide for a 

means of enforcement of the affordable 

housing requirements by the grantee. 

The means of enforcement and the 

affordability requirements in § 93.304 

for resale restrictions must be imposed 

by deed restrictions, covenants running 

with the land, use restrictions, or other 

mechanisms approved by HUD under 

which the grantee may require specific 

performance. In addition, the agreement 

must specify remedies for breach of the 

provisions of the agreement. 

(d) Onsite inspections—(1) Project 

completion. The grantee must perform 

an onsite inspection of each HTFassisted project at project completion to 

determine that the housing meets the 

property standards of § 93.301. The 

inspections must be in accordance with 

the inspection procedures that the 

grantee establishes to meet the 

inspection requirements of § 93.301. 

(2) Period of affordability. (i) During 

the period of affordability, the grantee 

must perform onsite inspections of HTFassisted rental housing buildings to 

determine compliance with the ongoing 

property standards of § 93.301 and to 

verify the information submitted by the 

owners in accordance with the 

requirements of § 93.302. The 

inspections must be in accordance with 

the inspection procedures that the 

grantee establishes to meet the 

inspection requirements of § 93.301. 

(ii) The onsite inspections must occur 

12 months after project completion and 

at least once every 3 years thereafter 

during the period of affordability. 

(iii) If there are observed deficiencies 

for any of the inspectable items 


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established by the grantee, in 

accordance with the inspection 

requirements of § 93.301, a follow-up 

onsite inspection must occur within 12 

months, or within a reasonable time 

frame established by the grantee 

depending on the severity of the 

deficiency, to verify that all observed 

deficiencies have been corrected. The 

grantee may establish a list of nonhazardous deficiencies for which 

correction can be verified by third party 

documentation rather than reinspection. 

The grantee must adopt a more frequent 

inspection schedule for properties that 

have been found to have health and 

safety violations. Life-threatening health 

and safety deficiencies must be 

corrected immediately, in accordance 

with § 93.301. 

(iv) The property owner must 

annually certify to the grantee that each 

building in the project is suitable for 

occupancy, taking into account State 

and local health, safety, and other 

applicable codes, ordinances, and 

requirements, and the ongoing property 

standards established by the grantee to 

meet the requirements of § 93.301. 

(v) Inspections must be based on a 

statistically valid sample of units 

appropriate for the size of the HTFassisted project, as set forth by HUD 

through notice. The grantee must select 

the sample. For projects with one to four 

HTF-assisted units, the inspectable 

items (site, building exterior, building 

systems, and common areas) for each 

building with HTF-assisted units and 

100 percent of the HTF-assisted 

dwelling units must be inspected. 

(e) Financial oversight. During the 

period of affordability, the grantee must 

examine regularly (at least annually) the 

financial condition of HTF-assisted 

rental projects with 10 or more HTFassisted units to determine the 

continued financial viability of the 

housing and must take actions to correct 

problems. 

§ 93.405 Applicability of uniform 

administrative requirements, cost 

principles, and audits. 

The requirements of 2 CFR part 200 

apply to the grantees and subgrantees 

receiving HTF funds, except for the 

following provisions: §§ 200.307, 

200.311, 300.328(b), 200.329, and 

200.333. If there is a conflict between 

the definitions in 2 CFR part 200 and 24 

CFR part 93, the definitions in part 93 

govern. 

§ 93.406 Audits. 

(a) Audits of the grantee and 

subgrantees must be conducted in 

accordance with 2 CFR part 200, subpart 

F. The use of HTF grant funds by the 

grantee must be audited not less than 

annually to ensure compliance with this 

part. Any financial statement submitted 

by the grantee to HUD must be reviewed 

by an independent certified public 

accountant, in accordance with 

Statements on Standards for Accounting 

and Review Services, which is issued by 

the American Institute of Certified 

Public Accountants. 

(b) The written agreement providing 

HTF assistance to the recipient must 

specify that the recipient will submit to 

the grantee a cost certification 

performed by a certified public 

accountant for each project assisted 

with HTF funds. The agreement must 

specify that the recipient will submit to 

the grantee an annual audit performed 

on each project assisted with HTF 

funds, beginning the first year following 

the cost certification and with the final 

annual audit occurring the last year of 

the affordability period. 

§ 93.407 Recordkeeping. 

(a) General. Each grantee must 

establish and maintain sufficient 

records to enable HUD to determine 

whether the grantee has met the 

requirements of this part. At a 

minimum, the following records are 

needed: 

(1) Program records. (i) The forms of 

HTF assistance used in the program. 

(ii) The subsidy layering guidelines 

adopted in accordance with § 93.300. 

(iii) If HTF funds are used for housing 

for first-time homebuyers, the 

procedures used for establishing 95 

percent of the median purchase price for 

the area in accordance with § 93.305, as 

set forth in the consolidated plan. 

(iv) If HTF funds are used for 

acquisition of housing for 

homeownership, the resale guidelines 

established in accordance with § 93.304, 

as set forth in the consolidated plan. 

(v) Records documenting compliance 

with the 24-month commitment 

deadline of § 93.400(d)(l). 

(vi) Records documenting compliance 

with the 10 percent limitation on 

administrative and planning costs in 

accordance with § 93.202. 

(2) Project records. (i) A full 

description of each project assisted with 

HTF funds, including the location 

(address of each unit), form of HTF 

assistance, and the units assisted with 

HTF funds. 

(ii) The source and application of 

funds for each project, including 

supporting documentation, in 

accordance with 2 CFR 200.333 through 

200.337, and records to document the 

eligibility and allowability of the project 

costs, including the documentation of 

the actual HTF-eligible development 

costs of each HTF-assisted unit (through 

allocation of costs, if permissible under 

§ 93.200(c)) where HTF funds are used 

to assist less than all of the units in a 

multi-unit project. 

(iii) Records demonstrating that each 

rental housing or homeownership 

project meets the maximum per-unit 

subsidy amount established pursuant to 

§ 93.300(a), and the subsidy layering 

and underwriting evaluation in 

accordance with § 93.300. 

(iv) Records (e.g., inspection reports) 

demonstrating that each project meets 

the property standards of § 93.301 of 

this part at project completion. In 

addition, during the period of 

affordability, records for rental projects 

demonstrating compliance with the 

property standards, and financial 

reviews and actions pursuant to 

§ 93.404(a). 

(v) Records demonstrating that each 

family is income-eligible. 

(vi) Records demonstrating that each 

rental housing project meets the 

affordability and income targeting 

requirements of § 93.302 for the 

required period. Records must be kept 

for each family assisted. 

(vii) Records demonstrating that each 

lease for an assisted rental housing unit 

complies with the tenant and 

participant protections of § 93.303. 

Records must be kept for each family 

assisted. 

(viii) Records demonstrating that the 

purchase price for each housing unit for 

a first-time homebuyer does not exceed 

95 percent of the median purchase price 

for the area, in accordance with 

§ 93.305. 

(ix) Records demonstrating that each 

housing unit for a first-time homebuyer 

meets the affordability requirements of 

§ 93.304 for the required period. 

(x) Records demonstrating that a site 

and neighborhood standards review was 

conducted for each project that included 

new construction of rental housing 

assisted under this part, to determine 

that the site meets the requirements of 

§ 93.150. 

(xi) Records (written agreements) 

demonstrating compliance with the 

written agreements requirements in 

§ 93.404. 

(3) Financial records. (i) Records 

identifying the source and application 

of funds for each fiscal year, including 

the annual grant and any reallocation 

(identified by federal fiscal year). 

(ii) Records concerning the HTF 

Treasury account and local account 

required to be established and 

maintained by § 93.400, including 

deposits, disbursements, balances, 

supporting documentation, and any 

other information required by the 


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program disbursement and information 

system established by HUD. 

(iii) Records identifying the source 

and application of program income and 

repayments. 

(iv) Records demonstrating adequate 

budget control, in accordance with 2 

CFR part 200, including evidence of 

periodic account reconciliations. 

(4) Program administration records. 

(i) Written policies, procedures, and 

systems, including a system for 

assessing risk of activities and projects, 

and a system for monitoring entities 

consistent with this section, to ensure 

that the requirements of this part are 

met. 

(ii) Records demonstrating 

compliance with the applicable uniform 

administrative requirements required by 

§ 93.405. 

(iii) Records documenting required 

inspections, monitoring reviews and 

audits, and the resolution of any 

findings or concerns. 

(5) Records concerning other Federal 

requirements. (i) Equal opportunity and 

fair housing records, as required under 

24 CFR part 121. 

(A) Data on the extent to which each 

racial and ethnic group and singleheaded households (by gender of 

household head) have applied for, 

participated in, or benefited from, any 

program or activity funded in whole or 

in part with HTF funds. 

(B) Documentation of actions 

undertaken to meet the requirements of 

24 CFR part 135, which implements 

section 3 of the Housing and Urban 

Development Act of 1968, as amended 

(12 U.S.C. 1701u). 

(ii) Records demonstrating 

compliance with the affirmative 

marketing procedures and requirements 

of § 93.350. 

(iii) Records demonstrating 

compliance with the lead-based paint 

requirements of 24 part 35, subparts A, 

B, J, K, M, and R. 

(iv) Records demonstrating 

compliance with requirements of 

§ 93.352 regarding displacement, 

relocation, and real property 

acquisition. 

(v) Records supporting exceptions to 

the conflict-of-interest prohibition 

pursuant to § 93.353. 

(vi) Debarment and suspension 

certifications required by 24 

CFR5.105(c) and 2 CFR part 2424. 

(vii) Records demonstrating 

compliance with § 93.354. 

(viii) Records demonstrating 

compliance with 2 CFR 200.321 

regarding the grantee’s activities related 

to minority business enterprise (MBE) 

and women’s business enterprise 

(WBE). 

(b) Period of record retention. All 

records pertaining to each fiscal year of 

HTF funds must be retained in a secure 

location for the most recent 5-year 

period, except as provided below. 

(1) For rental housing projects, 

records may be retained for 5 years after 

the project completion date, except that 

records of individual tenant income 

verifications, project rents, and project 

inspections must be retained for the 

most recent 5-year period, until 5 years 

after the affordability period terminates. 

(2) For homeownership housing 

projects, records may be retained for 5 

years after the project completion date, 

except for documents imposing resale or 

recapture restrictions that must be 

retained for 5 years after the 

affordability period terminates. 

(3) Written agreements must be 

retained for 5 years after the agreement 

terminates. 

(4) Records covering displacements 

and acquisitions must be retained for 5 

years after the date by which all persons 

displaced from the property and all 

persons whose property is acquired for 

the project have received the final 

payment to which they are entitled, in 

accordance with § 93.352. 

(5) If any litigation, claim, negotiation, 

audit, monitoring, inspection, or other 

action has been started before the 

expiration of the required record 

retention period, records must be 

retained until completion of the action 

and resolution of all issues that arise 

from it, or until the end of the required 

period, whichever is later. 

(c) Access to records. (1) The grantee 

must provide citizens, public agencies, 

and other interested parties with 

reasonable access to records, consistent 

with applicable State and local laws 

regarding privacy and obligations of 

confidentiality. 

(2) HUD and the Comptroller General 

of the United States, and any of their 

representatives, have the right of access 

to any pertinent books, documents, 

papers, or other records of the grantee, 

subgrantees, and recipients, to make 

audits, examinations, excerpts, and 

transcripts. 

§ 93.408 Performance reports. 

Each grantee must develop and 

maintain a system to track the use of its 

HTF funds, and submit annual 

performance and management reports 

on its HTF program in accordance with 

24 CFR 91.520. HUD will make the 

performance and management reports 

publicly available. 

Subpart J—Performance Reviews and 

Sanctions 

§ 93.450 Accountability of recipients. 

The grantee shall review each 

recipient to determine compliance with 

the requirements of this part and the 

terms of the written agreement in 

accordance with the grantee’s policies, 

procedures, and systems established 

pursuant to § 93.404(a). 

(a) Misuse of funds—(1) 

Reimbursement requirement. If a 

recipient of HTF assistance is 

determined to have used HTF funds in 

a manner that is materially in violation 

of the requirements of this part or any 

requirements or conditions under which 

the funds were provided, the grantee 

must require that, within 12 months 

after the determination of such misuse, 

the recipient reimburse the grantee for 

such misused amounts and return to the 

grantee any such amounts that remain 

unused or uncommitted for use. The 

reimbursement is in addition to any 

other remedies that may be available 

under law. 

(2) Determination. The grantee or 

HUD may make the determination, 

provided that: 

(i) The grantee provides notification 

and opportunity for discretionary 

review to HUD; and 

(ii) HUD does not subsequently 

reverse the determination. 

(b) Reduction for failure to obtain 

return of misused funds. (1) If, in any 

year, a grantee fails to obtain 

reimbursement or return of the full 

amount required to be reimbursed or 

returned to the grantee during the year, 

the amount of the grant for the grantee 

for the succeeding year will be reduced 

by the amount by which the amounts 

required to be reimbursed or returned 

exceed the amount actually reimbursed 

or returned. 

(2) In any case in which a failure to 

obtain reimbursement or return occurs 

during a year immediately preceding a 

year in which HTF grants will not be 

made, the grantee shall pay to HUD, for 

reallocation among the other grantees, 

an amount equal to the amount of the 

reduction for the entity that would 

otherwise apply. 

§ 93.451 Performance reviews. 

(a) General. HUD will review the 

performance of each grantee in carrying 

out its responsibilities under this part 

whenever determined necessary by 

HUD, but at least annually. In 

conducting performance reviews, HUD 

will rely primarily on information 

obtained from the grantee’s records and 

reports, findings from onsite 

monitoring, audit reports, and 


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5244 Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Rules and Regulations 

information generated from the 

disbursement and information system 

established by HUD. Where applicable, 

HUD may also consider relevant 

information pertaining to a grantee’s 

performance gained from other sources, 

including citizen comments, complaint 

determinations, and litigation. Reviews 

to determine compliance with specific 

requirements of this part will be 

conducted as necessary, with or without 

prior notice to the grantee. Onsite 

comprehensive performance reviews 

under the standards in paragraph (b) of 

this section will be conducted after 

prior notice to the grantee. 

(b) Standards for comprehensive 

performance review. A grantee’s 

performance will be comprehensively 

reviewed periodically, as prescribed by 

HUD, to determine whether the grantee 

has committed and expended the HTF 

funds as required by § 93.400; has met 

the requirements of this part, 

particularly eligible activities, income 

targeting, affordability, and property 

standards; has awarded the funds in 

accordance with its HTF allocation plan 

and requirements of this part; has 

reviewed its subgrantees and recipients 

to determine whether they have 

satisfied the requirements of this part 

and the terms of their written 

agreements; and has met its 

performance measures in its 

consolidated plan. 

§ 93.452 Corrective and remedial actions. 

(a) General. HUD will use the 

procedures in this section in conducting 

the performance review as provided in 

§ 93.451 and in taking corrective and 

remedial actions. 

(b) Performance review. (1) If HUD 

determines preliminarily that the 

grantee has not met a requirement of 

this part, the grantee will be given 

notice of this determination and an 

opportunity to demonstrate, within the 

time prescribed by HUD (not to exceed 

30 calendar days) and on the basis of 

substantial facts and data, that it has 

done so. 

(2) If the grantee fails to demonstrate 

to HUD’s satisfaction that it has met the 

requirement, HUD will take corrective 

or remedial action in accordance with 

this section or § 93.453. 

(c) Corrective and remedial actions. 

Corrective or remedial actions for a 

performance deficiency (failure to meet 

a provision of this part) will be designed 

to prevent a continuation of the 

deficiency; mitigate, to the extent 

possible, its adverse effects or 

consequences; and prevent its 

recurrence. 

(1) HUD may instruct the grantee to 

submit and comply with proposals for 

action to correct, mitigate, and prevent 

a performance deficiency, including: 

(i) Preparing and following a schedule 

of actions for carrying out the affected 

activities, consisting of schedules, 

timetables, and milestones necessary to 

implement the affected activities; 

(ii) Establishing and following a 

management plan that assigns 

responsibilities for carrying out the 

remedial actions; 

(iii) Canceling or revising activities 

likely to be affected by the performance 

deficiency, before expending HTF funds 

for the activities; 

(iv) Reprogramming HTF funds that 

have not yet been expended from 

affected activities to other eligible 

activities; 

(v) Reimbursing its HTF account in 

any amount not used in accordance 

with the requirements of this part; 

(vi) Suspending disbursement of HTF 

funds for affected activities; and 

(vii) Establishing procedures to ensure 

compliance with HTF requirements; 

(2) HUD may also change the method 

of payment from an advance to 

reimbursement basis and may require 

supporting documentation to be 

submitted for HUD review for each 

payment request before payment is 

made; determine the grantee to be high 

risk and impose special conditions or 

restrictions on the allocation in 

accordance with 2 CFR 200.207 or 

200.338; and take other remedies that 

may be legally available. 

§ 93.453 Notice and opportunity for 

hearing; sanctions. 

(a) If HUD finds after reasonable 

notice and opportunity for hearing that 

a grantee has substantially failed to 

comply with any provision of this part, 

and until HUD is satisfied that there is 

no longer any such failure to comply: 

(1) HUD shall reduce the funds in the 

grantee’s HTF account by the amount of 

any expenditures that were not in 

accordance with the requirements of 

this part or require the grantee to repay 

to HUD any amount of the HTF grant 

that was not used in accordance with 

the requirements of this part; and 

(2) HUD may do one or more of the 

following: 

(i) Prevent withdrawals from the 

grantee’s HTF account for activities 

affected by the failure to comply; 

(ii) Restrict the grantee’s activities 

under this part to activities or recipients 

not affected by the failure to comply; 

(iii) Remove the State from 

participation in allocations or 

reallocations of funds made available 

under §§ 93.50 through 93.54 of this 

part; or 

(iv) Terminate any HTF assistance to 

the grantee. HUD may, on due notice, 

suspend payments at any time after the 

issuance of a notice of opportunity for 

hearing pursuant to paragraph (a) of this 

section, pending such hearing and a 

final decision, to the extent that HUD 

determines such action to be necessary 

to preclude the further expenditure of 

funds for activities affected by the 

failure to comply. 

(b) Proceedings. When HUD proposes 

to take action pursuant to this section, 

the respondent in the proceedings will 

be the grantee. Proceedings will be 

conducted in accordance with 24 CFR 

part 26. 

Dated: January 23, 2015. 

Julia ́n Castro, 

Secretary. 

[FR Doc. 2015–01642 Filed 1–29–15; 8:45 am] 

BILLING CODE 4210–67–P 


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