23826 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

24 CFR Parts 5, 8, 882, 982, and 983

[Docket No. FR–4054–F–02]

RIN 2577–AB63

Section 8 Certificate and Voucher

Programs Conforming Rule

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

SUMMARY: This final rule completes the

process of combining and conforming

the regulations for tenant-based rental

assistance under the Section 8

certificate and voucher programs, by

adding two subparts that had been

reserved in the previous final rule

establishing the single part governing

tenant-based assistance. This rule also

amends requirements for project-based

assistance under the certificate program.

In addition, this rule continues the

Department’s regulation streamlining

efforts by revising various sections in

the part previously created to cover the

combined Section 8 certificate and

voucher programs and by consolidating

definitions now found in individual

program regulations into the part that

covers definitions that have broader

applicability.

EFFECTIVE DATES: This rule shall be

effective June 1, 1998, except

§§ 983.254(a)(1) and (2)(i); and

983.256(c)(2)(v) shall be effective

November 27, 1998.

FOR FURTHER INFORMATION CONTACT:

Gloria Cousar, Deputy Assistant

Secretary for Public and Assisted

Housing Delivery, Office of Public and

Indian Housing, Room 4204. Her

telephone numbers are (202) 708–2841

(voice); (202) 708–0850 (TTY). (These

are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The information collection

requirements contained in §§ 982.516,

982.517, 983.254, 983.255, and 983.256

of this rule have been approved by the

Office of Management and Budget

(OMB) under the Paperwork Reduction

Act of 1995 (44 U.S.C. 3501–3520). The

OMB approval number is 2577–0169,

which expires on April 30, 2001. 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 valid control

number.

Discussion

Table of Contents

I. History and Scope of Rule

II. Types of Tenancy

III. Rent to Owner

A. Rent reasonableness (comparability)

1. Comparability requirement

2. Comparability: comments

a. Against comparability

b. For comparability

c. Comparability during term

d. How HA determines comparability

e. Rents charged by Section 8 owner

f. Administration of comparability

g. Comparability: Other issues

3. Comparability: HUD response

a. Use of comparability

b. How HA determines comparability

c. Factors considered in valuing unit

d. Rent charged by owner

B. Other limits on rent to owner

1. New provisions

2. Rent control

3. HOME rents

4. Other subsidies

IV. Maximum Subsidy

A. Purpose and proposed changes

B. FMR/exception rent limit: Comments

1. Certificate program: Elimination of HA

exception authority

2. Over-FMR tenancy

3. Exception rent: HUD approval

4. Exception rent: New procedure

C. FMR/exception rent limit: New rule

1. Approval of exception rent

a. New rule

b. Area exception rent

c. Regular tenancy: Accommodation for

person with disabilities

2. Exception rent: New rule—HUD

response

V. Minimum Rent: Family Share of Rent

VI. Certificate Program: Over-FMR Tenancy

A. New type of tenancy

B. Over-FMR tenancy: Comments

1. General effect of rule

2. Objections to over-FMR tenancy

C. Over-FMR tenancy: 10 percent limit

1. Law

2. Comments

3. HUD response

D. Over-FMR tenancy: Affordability of rent

(maximum family share)

1. Law and regulation

2. Comments

a. Objections to affordability

b. Defining affordability

c. Affordability: Other comments

3. How HA determines affordability

E. Over-FMR tenancy: Amount of subsidy

1. Comments

2. HUD response

3. How subsidy is adjusted

F. Over-FMR tenancy: Other comments

1. HA discretion

2. Administrative fee

VII. Voucher Tenancy: Payment Standard

A. Voucher payment standard

1. Setting payment standard

2. Minimum and maximum payment

standard: Comments

3. Minimum and maximum payment

standard: HUD response

B. Shopping incentive

1. Comments

2. HUD response

VIII. Family Size: Effect on Amount of

Subsidy

A. General

B. Space for live-in aide

IX. Over-FMR or Voucher Tenancy—Payment

Standard: Changes in Subsidy During

Tenancy

A. How assistance is adjusted

B. Protecting family against drop in

subsidy

C. When payment standard changes

X. Regular Tenancy—Rent to Owner:

Annual Rent Adjustment During

Tenancy

A. Comments

B. New rule

XI. Regular Tenancy—Rent To Owner:

Special Rent Adjustment During

Tenancy

A. General

B. Purpose

C. Comparability

D. Required documentation

E. HUD approval

F. Term

XII. Fees and Charges To Family For Meals,

Supportive Services or Other Items

XIII. Utility Allowance

A. Objections to utility allowance

1. Comments

2. HUD response

B. Administration of utility allowance

1. Comments

2. HUD response

C. Services included in utility allowance

1. Comments

2. HUD response

D. Determining utility allowance: Unit size

and size of family

1. Comments

2. HUD response

E. Reasonable accommodation

F. Direct HA payment of tenant utility cost

1. Comments

2. HUD response

XIV. Reexamination of Family Income

A. Comments

B. HUD response

XV. Project-Based Certificate (PBC) Program:

Rent To Owner

A. PBC: Comparability procedures

B. PBC: Approval of rent; HA certification

that rent is reasonable

C. PBC: Rent to owner: Annual adjustments

1. Adjustment by published factor

2. Adjustment comparability:

Comparability studies

3. When owner requests rent increase; HA

comparability study

4. Rent decrease at annual adjustment

D. PBC: Rent to owner: Special adjustments

E. PBC: Rent to owner: Correcting mistakes

F. PBC: Rent to owner: HA-owned units

XVI. Special Housing Types

A. General

B. HA choice

1. HA discretion to offer special housing

type

2. Person with disabilities: Reasonable

accommodation

3. Manufactured home

C. Family choice

D. Group homes for elderly or disabled

E. Other changes

1. Congregate housing

2. Shared housing

XVII. Live-In Aide For Disabled Resident

XVIII. Streamlining of Part 982

XIX. Other Changes

XX. Findings and Certifications
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23827

A. Impact on the environment

B. Federalism impact

C. Unfunded Mandates Reform Act

D. Impact on small entities

E. Regulatory review

I. History and Scope of Rule

On February 24, 1993 (58 FR 11292),

HUD published a comprehensive

proposed rule to combine and conform

the rules for tenant-based Section 8

rental assistance under the certificate

and voucher programs. The proposed

rule also would have amended

requirements for project-based

assistance under the Section 8

certificate program. HUD received

approximately 400 comments on the

proposed rule, which generally approve

the broad purpose of the rule.

Comments recommend revision of

particular features of the rule.

On July 18, 1994, HUD published the

first portion of the comprehensive final

rule for the tenant-based program at 24

CFR part 982. This publication

contained the final rule on unified

admission procedures for the program

(59 FR 36662) (part 982, subpart E). On

July 3, 1995 (60 FR 34660), HUD

published the second portion of the

comprehensive final rule for the tenantbased programs at 24 CFR part 982, as

well as regulations for the project-based

certificate program at 24 CFR part 983.

This publication did not include

provisions concerning:

— Calculation of the rent and housing

assistance payment for the tenant or

project-based programs.

— ‘‘Special housing types’’: program

variants to meet special housing

needs, such as congregate housing,

shared housing, single room

occupancy housing and group homes.

Today’s publication covers the

subjects omitted in the July 1995 final

rule. In addition, the rule includes some

streamlining and clarifying changes to

parts 982 and 983.

II. Types of Tenancy

The rule (§ 982.501) specifies that

there are three types of tenancy in the

Section 8 tenant-based programs:

— A ‘‘regular’’ tenancy under the

certificate program;

— An ‘‘over-FMR’’ tenancy under the

certificate program; and

— A tenancy under the voucher

program.

In a regular certificate tenancy, the

share of rent paid by an assisted family

is defined by a statutory formula.

Section 8 subsidy covers the balance of

rent for the unit. The family may not

agree to pay a bigger share of the rent.

In an over-FMR tenancy, the family may

agree to pay more. This rule adds

authority for over-FMR tenancies. The

term ‘‘regular’’ tenancy is added to

designate and distinguish the original

form of certificate tenancy.

Comments propose that HUD should

combine the certificate and voucher

programs. Subsidy should be calculated

by the same method. The programs

should not use different FMRs and

voucher payment standards. The

certificate and voucher programs should

use the same rent formula. The HA

should assume responsibility to

administer the program and stretch the

dollars.

In this rulemaking, HUD has fully

unified the tenant-based certificate and

voucher programs so far as allowed by

current Federal law. Except for limited

differences in calculation of subsidy and

family contribution, the same

regulations apply to the tenant-based

certificate and voucher programs, and to

a regular or over-FMR tenancy under the

certificate program. For example, both

programs are subject to the same

requirements concerning finding and

leasing a unit, housing quality standards

and subsidy standards (maximum unit

size), landlord responsibility and family

obligations.

The three forms of tenancy conform to

specific statutory requirements affecting

subsidy and family contribution. Within

this framework, however, the rule is

designed to minimize or eliminate

unnecessary differences.

For each tenancy, the same fair

market rent or HUD approved exception

rent (called the ‘‘FMR/exception rent

limit’’) determines the maximum

subsidy for a program family. Actual

subsidy generally equals maximum

subsidy minus 30 percent of a family’s

adjusted income. For a regular tenancy

in the certificate program, the FMR/

exception rent limit is the maximum

initial rent. For a voucher or over-FMR

tenancy, the FMR/exception rent limit is

the maximum payment standard. The

same area exception rents apply for a

regular, voucher or over-FMR tenancy.

For each type of tenancy, the rent to

owner may not exceed comparable rent.

III. Rent to Owner

A. Rent Reasonableness (Comparability)

1. Comparability Requirement

During a Section 8 tenancy, an

owner’s rent must be ‘‘reasonable.’’ The

HA must determine whether the initial

or adjusted rent for a Section 8 unit is

reasonable in comparison with rent for

units in the private unassisted market

(§ 982.503(b) and § 983.256(b)).

The final rule (§ 982.503(b)) refines

requirements on how the HA

determines comparable rent. To

determine comparability, the HA must

consider:

— Location, quality, size, unit type and

age of the contract unit, and

— Any amenities, housing services,

maintenance and utilities to be

provided by the owner in accordance

with the lease.

2. Comparability: Comments

a. Against comparability. Comments

assert that HUD should not require that

rents must be reasonable. Some

comments suggest that HUD should

eliminate rent reasonableness in both

the certificate and voucher programs. In

the certificate program, rents are

controlled by the FMRs. In the voucher

program, tenants choose to pay the rent.

Other comments urge that the rent

reasonableness requirement should be

limited to the certificate program and

should not apply to the voucher

program. Rent reasonableness negates

the designed purpose of the voucher

program—allowing a participant to

freely select a higher priced unit,

reducing concentrations of low-income

housing. Rent reasonableness curbs the

ability to disperse low-income families.

Comments state that participants in

the voucher program like the flexibility

to negotiate rent, and to choose a higher

rent unit. Owners prefer the voucher

program because they do not want to

negotiate rents with the HA. If voucher

rents are limited by comparability,

owners may refuse to participate.

Comments claim that comparability

subjects a landlord to de facto rent

control. Ongoing HA inspection of

reasonableness reduces a landlord’s

incentive to offer assisted housing.

Application of rent reasonableness

creates undue owner uncertainty and

confusion. Requiring initial and annual

examination of rent is a burden on a

landlord’s property and privacy.

b. For Comparability. Some comments

support rent reasonableness

requirements and extension of

comparability to the voucher program.

A cap on family rent payment in the

voucher program is overdue. Rent

reasonableness prevents owners

charging excessive rents for marginal

units. Owners charge different rents for

different programs. In tight markets, a

voucher tenant is forced to pay higher

rent out-of-pocket. Under the new rule,

an HA can establish a systematic

method for establishing reasonable rent

for the unit size.

c. Comparability During Term. The

rule (§ 982.503(a)(4)) provides that rent

must be reasonable during the whole

course of an assisted tenancy. This

principle applies both to the certificate

program and to the voucher program.
23828 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

The rent must be reasonable at the

beginning of the lease, and during the

lease term.

Comments state that rent

reasonableness should only apply to

new HAP contracts, not annually.

Comparability should not be required

unless rent increases. According to the

comments, requiring reasonableness

when rent does not increase during the

lease term is an unnecessary

administrative burden.

Comments ask HUD to clarify what

happens if the HA determines that a

proposed rent increase is not

reasonable.

d. How HA Determines Comparability.

Comments state that HUD should clarify

how to determine the relevant ‘‘market’’,

and should define ‘‘private unassisted

market’’. Does the unassisted market

include types of assisted housing other

than Section 8? Does assisted refer to all

types of Federal, State or local

subsidies, or only to housing assisted

under Section 8?

Comments state that reasonableness

should not be applied on a building by

building basis. Comparability should

recognize market differences between

units. An HA should not set single rents

for a class of units in a particular

property. Comparability should only

assure that rent and rent increases for

Section 8 and non-Section 8 units are

substantially the same. Rent

reasonableness should take into account

unit to unit value differences ordinarily

recognized in the market. Comparability

should not override an owner’s rental

determination in response to actual

market dynamics.

Comments recommend that HAs

should emphasize quality, age and

location of a Section 8 unit as compared

with the other units. The comments

claim that HAs consider any unit that

passes HQS as comparable to an

unassisted private market unit with an

equal number of bedrooms. Substandard

housing and apartments are rented for

the same amount as standard and above

standard rentals in the same

neighborhood. Comments state that

families should not pay equal or higher

rent for ‘‘substandard’’ units as for

standard units rented on the unassisted

private market.

Comments assert that HUD has not

given adequate guidance for

determining rent reasonableness. By

contrast, there are ‘‘extensive

regulations’’ on setting and review of

Fair Market Rents. Comments

recommend that HUD should require:

—Determination by a qualified person;

—Information on procedures used by an

HA;

—Opportunity for negotiation and

correction, and a procedure for

resolution of disputes;

—Review and correction of the HA

determination of reasonable rent.

Comments ask HUD to clarify whether

rent for an over-FMR tenancy must meet

rent reasonableness.

e. Rents Charged by Section 8 Owner.

The proposed rule would have provided

that ‘‘reasonable rent’’ may not exceed

rent charged by a Section 8 owner for

a comparable ‘‘assisted or unassisted’’

unit in the same building. (This

definition was issued as a final rule in

the second phase of this rulemaking,

published July 3, 1995.) The proposed

rule also provided that an owner who

accepts an assistance payment from the

HA certifies that rent does not exceed

rents charged by the owner for any

comparable ‘‘assisted or unassisted’’

unit in the building.

Comments argue that owner rents for

assisted units should not be used to

show market rent.

f. Administration of Comparability.

Comments remark that determination of

comparability is an additional

administrative burden for the HA, and

wastes program administrative

resources.

Comments note that the comparability

requirement is no longer limited to the

certificate program. The new rule will

require HAs to determine rent

reasonableness in both the certificate

and voucher programs. In the past, HUD

justified lower fees for administration of

the voucher program on the ground that

an HA does not have to perform rent

reasonableness. Under the new rule,

HAs will now incur additional costs to

perform comparability for the voucher

program. Comments recommend that

HUD should not reduce the

administrative fee, or should increase

the fee.

Comments note that Section 8 rent

setting is more complicated than in

private transactions, because Section 8

rent is subject to HUD and HA

regulation.

Comments state that HUD should

increase monitoring of rent

reasonableness if there is more than one

HA operating in a jurisdiction. HUD

should prevent landlords from playing

HAs against each other to increase the

rent.

Some comments state that an owner

should certify that rent is no more than

rent the owner charges for a comparable

unit in the building or complex.

Comments state that an HA should

presume that the rent for a Section 8

unit is reasonable unless rent is higher

than rent for a comparable non-Section

8 unit in the building.

Comments state that non-profit

owners charge a lower rent for families

who do not receive Section 8 subsidies.

These owners want to charge a

neighborhood comparable rent to

Section 8 participants. The comment

recommends that an owner should be

allowed to charge a higher rent for

Section 8 tenants than for market rate

tenants if comparable rents are charged

in the neighborhood.

g. Comparability: Other Issues.

Comments express concern on how

implementation of rent reasonableness

may affect existing tenancies. Comments

ask HUD to clarify how rent

reasonableness applies to existing

voucher tenancies. Comments ask HUD

to clarify when and how voucher

landlords can raise the rent.

By law, an HA may serve as contract

administrator of units owned by the HA.

Because of the evident conflict between

the HA’s proprietary interest and the

responsibility for determining if the

landlord’s rent is reasonable, HUD

determines whether rent of HA-owned

units is reasonable. Comments state that

comparability should be determined by

the HUD field office economist rather

than the Secretary.

The proposed rule provides than an

HA must ‘‘assist’’ the family in

negotiating reasonable rent. Comments

ask what assistance must be provided.

3. Comparability: HUD Response

a. Use of Comparability. By law, rents

for voucher units must be ‘‘reasonable

in comparison with rents charged for

comparable units in the private

unassisted market’’ (or for units assisted

under the Section 8 certificate program)

(42 U.S.C. 1437f(o)(10)(A)). The HA

must review all initial rents or rent

increases, and must determine whether

the rent requested by an owner is

reasonable.

A public housing agency shall review all

rents for [voucher] units * * * (and all rent

increases for [voucher] units.* * *) to

determine whether the rent (or rent increase)

requested by an owner is reasonable. If the

public housing agency determines that the

rent (or rent increase) for a unit is not

reasonable, the agency may disapprove a

lease for such unit. (42 U.S.C.

1437f(o)(10)(A))

Under this law, the rent reasonableness

requirement must be applied in the

voucher program. Rent reasonableness

may not be restricted to the certificate

program as suggested by some public

comment.

In the certificate program, by law rent

adjustment is subject to comparability.

‘‘Adjustments’’ may not result in

‘‘material differences’’ between rent for

a Section 8 assisted unit and rent for
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23829

comparable unassisted units (42 U.S.C.

1437f(c)(2)(C)). The adjusted rent may

not exceed ‘‘the rent for a comparable

unassisted unit of similar quality, type

and age in the market area’’ (42 U.S.C.

1437f(c)(2)(A)). By this HUD regulation,

comparability applies both to initial rent

to owner and rent to owner as adjusted

during the life of the assisted tenancy

(§ 982.503(a)).

Under this rule, comparability for a

voucher or certificate tenancy limits the

maximum ‘‘rent to owner’’—the amount

of rent payable to the owner in

accordance with the lease (§ 982.4). Rent

to owner does not include any

allowance for tenant-paid utilities. By

contrast, the fair market rent limit (for

a regular tenancy under the Section 8

certificate program) is a limit on the

initial ‘‘gross rent’’—the total amount of

the rent to owner plus any allowance for

tenant-paid utilities.

In the regular certificate program, the

initial rent is subject to both limits:

initial rent to owner must be reasonable,

and the total of the rent to owner plus

any utility allowance may not exceed

the fair market rent. In a voucher or

over-FMR tenancy, the initial rent to

owner must be reasonable. However, the

fair market rent is not used as a

restriction on the rent. Instead, the fair

market rent is used as a limit on the

‘‘payment standard’’—the maximum

subsidy for a family.

Comparability review by the HA

prevents owners from charging Section

8 families more than market rents

charged for private market tenants.

Experience in operation of the Section

8 programs shows that without this

control, the availability of the Section 8

subsidy encourages and enables owners

to charge more than a normal market

rent.

A Section 8 family may lack the

motive, knowledge or leverage to

negotiate a market rent. For a regular

certificate tenancy, the participant has

no economic motive to limit the amount

of rent paid to an owner, since the

amount of the rent paid to the owner

does not affect the family’s share of rent.

A higher rent is covered by a higher

Federal subsidy. In a voucher or overFMR tenancy a higher rent increases the

family’s out of pocket payment.

Nevertheless, without comparability,

families may agree to excess rents since

part of the rent—often the greatest part

of the rent—is paid by the Section 8

subsidy.

The Section 8 program is designed to

enable poor families to pay a fair rent

for decent housing, not to subsidize

excessive rents or profits. High rents

waste Federal subsidy. By requiring

reasonable rents for Section 8 families,

this rule attempts to gain the maximum

benefits from use of available program

funds.

Comments state that HUD should not

require the HA to redetermine

comparability unless the rent increases,

and express concern with the

administrative burden of the annual

determination. In response to these

concerns, the final rule (§ 982.503(a)(2))

only requires that the HA conduct a

redetermination of reasonable rent in

two cases:

—Before any increase of rent to owner,

or

—If there is a five percent decrease in

the published FMR (in effect 60 days

before the contract anniversary) as

compared with the FMR in effect one

year before the contract anniversary.

In a regular certificate tenancy, rent

may increase by application of the

published factor at the annual

anniversary, or by a HUD-approved

special adjustment. In an over-FMR or

voucher tenancy, rent may increase by

terms of the lease between the owner

and the tenant. For each type of

tenancy, the HA must conduct a

comparability analysis before an owner

may increase the rent. An increased rent

may not exceed the reasonable rent for

unassisted units in the local market.

Market rents may decline. Even

absent a rent increase, the current rent

to owner for a program unit—though

reasonable at the time of the last HA

comparability determination—may now

exceed reasonable rent for comparable

unassisted units rented in the local

market. This excess is a windfall to the

owner and results in excess subsidy

payment by HUD or an excess payment

by the family. To prevent excess rent in

such cases, the rule will now require

that the HA must conduct a

comparability analysis if there is a five

percent or greater decrease in the

published FMR in effect 60 days before

the contract anniversary as compared

with the FMR rent in effect one year

before the contract anniversary.

The FMR is HUD’s estimate of the

fortieth percentile rent for standard

units in the local market. A five percent

decrease in the FMR indicates a

substantial decrease in market rents,

and justifies requiring the HA to

undertake a comparability

determination. Conversely, however, the

rule does not require that the HA

automatically and routinely conduct a

comparability determination if the unit

rent does not rise, and if there is no fall

in the published FMR for the market.

Even if there is substantial decline in

local market rents, signalled by a fall in

the FMR, rent for the particular assisted

unit is not reduced unless the

comparability analysis shows that

current unit rent exceeds rent for

comparable unassisted units.

At any time, HUD may direct the HA

to determine comparability for its

program generally or for particular

units, though there is no proposed

increase in unit rent or decrease in

market rents (§ 982.503(a)(2)(iii)). For

example, HUD may exercise this

authority because of concern that

program rents are excessive because an

HA has failed to carry out rent

comparability in accordance with

program requirements.

The rule also provides that the HA

may redetermine reasonable rent at any

time (§ 982.503(a)(3)). The HA has

discretion to conduct rent

reasonableness analysis for any or all

units, though not mandated in

accordance with the rule.

Comparability applies to existing

program tenancies, as well as new

tenancies. Application of

reasonableness during the lease term is

required by law, and is consistent with

provisions of assistance contracts for

existing certificate and voucher

tenancies. In the certificate program,

HAP contracts provide that rent

adjustments must be reasonable. In the

voucher program, current HAP contracts

also provide that rent paid to the owner

must be reasonable.

The HA must keep records to

document the basis for each HA

determination, as required under the

rule, that the initial and adjusted rent to

owner is reasonable during the assisted

tenancy (§ 982.158(f)(7) (for tenantbased programs) and § 983.12(b)(2) (for

PBC program)). In the tenant-based

programs, a comparability

determination must be kept for at least

three years. In the PBC program, a

comparability determination must be

kept during the HAP contract term and

for at least three years thereafter.

b. How HA Determines Comparability.

HUD has not adopted comments

recommending that HUD issue

extensive and detailed Federallyprescribed procedures for rental

valuation and for resolution of valuation

issues. Instead, the final rule

(§ 982.503(b)) contains a brief and

simple statement of the basic standards

to be applied by an HA in determining

reasonable rent of a unit with Section 8

tenant-based assistance.

Each HA should use appropriate and

practical procedures for determining

rental values in the local market. The

HA is responsible for designating

qualified HA staff or outside analysts.

HAs have extensive experience in

determining rent reasonableness for the
23830 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

Section 8 tenant-based programs, and

can utilize available techniques and

expertise. An HA is well able to gather

and maintain data on rent values in its

local market, or to retain qualified

analysts for this purpose.

An HA’s day-to-day operation of a

tenant-based program is a prime source

of up-to-date information on private

market rentals in the HA community. In

the process of examining and approving

rentals for program participants, the HA

receives on-the-ground information on

rents demanded and accepted by local

landlords. HA’s can maintain current

rental data, and can designate staff or

outside specialists with training and

experience in rental valuation.

The determination of rent

reasonableness for Section 8 tenantbased assistance does not call for a

special or unusual valuation in

accordance with detailed procedures

prescribed by HUD. The central purpose

of comparability is merely to assure that

federally subsidized rents do not exceed

rental values in the private market. Each

individual HA should value units so

that the HA’s determination of

reasonable rent faithfully reflects the

characteristics of the Section 8 unit, and

the valuation of comparable units in the

private unassisted market.

c. Factors Considered in Valuing Unit.

To determine if rent is reasonable, the

HA must compare characteristics of the

contract unit with characteristics of

comparable unassisted units. The rule

provides (§ 982.503(b) and § 983.256(b))

that an HA must consider:

—Location, quality, size, unit type and

age of the contract unit.

—Amenities, housing services,

maintenance and utilities to be

provided by the owner of the contract

unit in accordance with the assisted

lease.

The proposed rule would have

provided that the HA must consider

‘‘any’’ owner services. The final rule

specifies that the HA may only consider

‘‘housing’’ services (§ 982.503(b)(2) and

§ 983.256(b)(2)). Comparable rent does

not include the value of any nonhousing services provided by the owner

to the assisted tenant (for example, the

value of any food or medical services).

In determining comparable rent, rent of

any comparable with non-housing

services must be adjusted down to

indicate rent of an assisted unit without

such services.

Comments state that an HA should

consider local regulations that affect

rent of comparable units. HUD agrees

that local laws or regulations may affect

rent of a comparable or subject unit.

However, such effects would be

reflected in the comparable rents, and in

the comparison between the comparable

and subject. There is no need to add any

special regulatory treatment concerning

the effect of local laws or regulations.

d. Rent Charged by Owner. The

proposed rule would have provided that

rent to owner may not exceed rent that

the owner is charging for a comparable

assisted or unassisted unit. Public

comments state that comparability

should not be based on owner rent for

assisted units. On reconsideration, HUD

agrees that the rent for assisted units is

not a persuasive indicator of private

market unassisted rents. In renting to

certificate or voucher families, the

owner may not be able to match reduced

rents for subsidized units in the same

building.

Under the final rule (§ 982.503(b)),

reasonable rent for a contract unit is

determined by comparison with rents

for other comparable ‘‘unassisted’’ units

in the local market and the owner’s

premises. In the final rule (§ 982.4), the

term ‘‘reasonable rent’’ means a rent that

is not more than rent for comparable

units in the private unassisted market,

including rent charged by the owner for

comparable unassisted units in the

premises.

The final rule does not provide, as

proposed, that rent for a contract unit

may not exceed rent charged by the

owner for a comparable ‘‘assisted’’ unit

in the premises. The rule therefore

deletes the requirement for owner

certification of this fact. By accepting

the HA’s monthly Section 8 payment, an

owner certifies that rent for a Section 8

unit does not exceed rent charged by the

owner for comparable unassisted units

in the premises (§ 982.503(c);

§ 983.256(d)).

If requested, the owner must give the

HA information on rents charged by the

owner for other units in the premises or

elsewhere (§ 982.503(c); § 983.256(d)).

Comments agree with HUD that the

owner should be required to give the

HA information on rents charged by

owner.

B. Other Limits on Rent to Owner

1. New Provisions

The final rule adds new provisions to

confirm that owner rents for some units

may be subject to limits in addition to

rent reasonableness. These limits apply:

—To units subject to rent control under

local law;

—To units subject to rent restrictions

under rules for the HUD HOME

program (HOME Investment

Partnerships Program; see 24 CFR part

92);

—To project-based certificate (PBC)

units, to ensure that an owner does

not receive excessive subsidy by

combining Section 8 assistance with

tax credits or other subsidies.

—At the discretion of the HA, because

of other governmental subsidies in

addition to Section 8 assistance.

2. Rent Control

Local rent control may force an owner

to reduce the rent to owner below the

HA-determined reasonable rent (or

below the fair market rent for a regular

tenancy in the Section 8 certificate

program). The rule provides that the

amount of rent to owner may be subject

to rent control limits under State or

local law (§ 982.511 and § 983.258).

The new rule confirms that the

Section 8 program rule establishes the

maximum rent to owner, but does not

establish the minimum rent to owner.

Therefore the rule does not pre-empt

local rent control laws which may

prohibit an owner from charging the full

comparable rent otherwise allowed in

accordance with requirements of the

Federal program regulation.

3. HOME Rents

Section 8 families may rent units in

projects assisted under the HUD HOME

program. Requirements of the HOME

program determine the maximum rents

for units in a HOME-assisted project.

The Section 8 rule provides that rent for

HOME-assisted units is subject to

requirements of the HOME program

(§ 982.512(b) and § 983.257(a)).

This rule thus confirms that

participation in the Section 8 program

does not relieve or replace rent limits

required by the HOME program. The

converse is also true. Participation in

the HOME program does not relieve or

replace rent limits required by the

Section 8 program. Rather, for a unit

that is assisted both under the HOME

program and under the Section 8

program, the owner is subject both to

the HOME and Section 8 limits on unit

rents. As for other Section 8 units, rent

for a HOME-assisted unit must not

exceed rents charged by the owner for

comparable unassisted units.

4. Other Subsidies

The new rule provides that an HA

may adopt policies requiring a

reduction of the initial rent to owner

because of other governmental subsidies

(§ 982.512(c) and § 983.257(c)). In some

cases the owner or property may benefit

from Governmental subsidies in

addition to Section 8. Such subsidies

may flow from the Federal government,

or from a State or local government. The

subsidy may take various forms: such as
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23831

tax concessions or credits, subsidized

loans or grants to an owner.

The HA may judge that the

combination of Section 8 subsidy with

other subsidies is an excess

concentration of public resources, is

more than necessary to induce the

owner to provide the housing, or

provides a windfall or excessive profit

to the owner. The final rule explicitly

grants the HA discretion to refuse

Section 8 initial rents that the HA

deems excessive after considering other

available subsidies for the project, and

to require an initial rent below the

reasonable rent otherwise allowed

under the program.

Section 8 housing may benefit from

federal tax credits allocated by State

housing credit agencies. Section 102(d)

of the HUD Reform Act of 1979 (42

U.S.C. 3545 and 3545 note) requires

HUD to take into account other

government assistance in determining

the amount of Section 8 or other HUD

assistance for ‘‘any housing project.’’

Before the HA commits assistance under

the project-based certificate program,

HUD or a State housing credit agency

must certify that the combination of

Section 8 and other governmental

assistance for a project is not ‘‘more

than is necessary to provide affordable

housing.’’

Departmental regulations provide that

in making a certification under Section

102(d), HUD will consider the aggregate

amount of assistance from the

Department and other sources that is

‘‘necessary to ensure the feasibility of

the assisted activity’’ (24 CFR 4.13(a)). If

HUD determines that the aggregate

amount of assistance is more than

necessary for this purpose ‘‘the

Department will consider all options

available to enable it to make the

required certification, including

reductions in the amount of Section 8

subsidies’’ (24 CFR 4.13(b)). To

implement the limitation of Federal

assistance for a project, HUD has issued

administrative guidelines on the

‘‘layering’’ of governmental subsidies

(59 FR 9332, February 25, 1994).

The proposed PBC rule would have

provided that the initial rents to owner

(contract rent) may not exceed the rents

necessary to make the assisted activity

feasible, after taking into account

assistance from other government

sources, and that the HA and owner

must so certify. Comments object to the

requirement for certification that this

standard is met. The final PBC rule does

not include this certification

requirement.

The final PBC rule provides, at

§ 983.257(b), that:

* * * the HA may only approve or assist

a project in accordance with HUD regulations

and guidelines designed to ensure that

participants do not receive excessive

compensation by combining HUD program

assistance with assistance from other Federal,

State or local agencies, or with low income

housing tax credits.

An owner may receive excessive

benefit by combining Section 8 benefits

with tax credit or other governmental

subsidies. Excess aggregate subsidy may

be eliminated by reducing Section 8

rents or by reducing tax credits or other

governmental subsidies. On the one

hand, a State housing credit agency may

reduce the allocation of Federal tax

credits. Alternatively, the HA may

exercise its regulatory discretion to

reduce initial Section 8 rents because of

tax credits or other subsidies for the

project.

IV. Maximum Subsidy

A. Purpose and Proposed Changes

HUD publishes the fair market rent

(FMR) for each market area. The FMRs

are estimates of the cost to rent standard

existing housing. In the Section 8

certificate and voucher programs, the

published FMR is generally the

maximum subsidy for a family.

However, HUD may approve an

‘‘exception rent’’ to allow a higher

subsidy. The ‘‘FMR/exception rent

limit’’ is the fair market rent or any

HUD-approved exception rent.

(§ 982.504, and definition of FMR/

exception rent limit in § 982.4.) (In

addition to the tenant-based programs,

the exception rent requirements in

§ 982.504 also apply to PBC

(§ 983.252(b)).)

For a regular tenancy in the certificate

program, the FMR/exception rent limit

is the maximum initial rent

(§ 982.508(a); see also § 982.504(a)(2)).

The initial rent may not exceed the

FMR/exception rent limit either for the

actual size of the unit rented, or for the

‘‘family unit size’’—the appropriate unit

size for the family (§ 982.508(a)(2);

§ 982.402(c)(1)). Family unit size is

determined under the HA subsidy

standards (§ 982.402).

For a voucher or over-FMR tenancy,

the FMR/exception rent limit

determines the HA payment standard

(maximum subsidy amount) (§ 982.505;

see also § 982.504(a)(2)). For the

voucher program, the payment standard

may not exceed the FMR/exception rent

limit (§ 982.505(b)(1)). For an over-FMR

tenancy, the payment standard is the

FMR/exception rent limit

(§ 982.505(c)(1)).

Under the old certificate rule, an HA

was permitted to approve exception

rents up to 110 percent of published

FMR for up to 20 percent of units in the

HA certificate program. The HA did not

need to ask HUD permission to approve

such exception rents. In addition, HUD

could approve certificate program

exception rents for neighborhoods or

special cases. In the voucher program,

the HA could set a payment standard up

to a HUD-approved exception rent for

the whole HA jurisdiction. In this

rulemaking, HUD proposed to eliminate

the existing exception rent authorities,

and to substitute a new uniform

exception rent standard for the tenantbased programs.

Under the proposed and final rule

HUD may approve an exception rent

limit for part of the area covered by a

published FMR. In all cases, the

approved exception rent limit may not

exceed 120 percent of the published

FMR (§ 982.504(b)(1)(ii) of final rule)—

the statutory exception rent limit.

Within this limit, the final rule allows

two alternative procedures for

determining the maximum exception

rent.

First, in accordance with prior

practice and as provided in the

proposed rule, the final rule provides

that HUD may approve an exception

rent that does not exceed the 40th

percentile of rents to lease standard

units in the exception rent area. Under

this method, the 40th percentile rent is

determined by the same method as is

used to establish the published FMR for

the whole FMR area.

Second, the final rule adds a new

method for determining the maximum

approvable exception rent. The final

rule provides that HUD may approve an

exception rent if the exception rent does

not exceed the FMR times a fraction

comprised of the median rent of the

exception rent area divided by the

median rent of the entire FMR area. For

this purpose, HUD will use decennial

census data and other available

statistically valid information to

determine the median rent for the

exception rent area and FMR area

(§ 982.504(b)(1)(ii)(B).)

The final rule also provides that HUD

will not approve an area exception rent

unless HUD determines that an

exception rent is needed for either of

two specific program reasons

(§ 982.504(b)(1)(iii)):

—To help families find housing outside

area of high poverty, or

—Because a high percentage of

certificate or voucher holders have

trouble finding housing for lease

under the tenant-based program

within the term of the certificate or

voucher.
23832 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

The total population of exception rent

areas in an FMR area may not include

more than 50 percent of the population

of the fair market rent area

(§ 982.504(b)(1)(iv)).

A HUD-approved area exception rent

applies to any family that rents a unit

with tenant-based assistance in a HUDapproved exception rent area

(§ 982.504(b)(1)(i)). The rule does not

limit the number of exception rent

tenancies in these areas.

In addition, the final rule provides

that for a regular certificate tenancy, the

HA may approve an exception rent up

to 120 percent of the published FMR, as

a reasonable accommodation for a

disabled family member

(§ 982.504(b)(2)).

B. FMR/Exception Rent Limit:

Comments

1. Certificate Program: Elimination of

HA Exception Authority

Some comments argue that HUD

should not change the old exception

rent regulation. Other comments state

that the new exception rent system is

flexible and offers more choice for

clients.

Comments object to losing the HA’s

20 percent exception authority in the

certificate program. Comments

recommend increasing the percentage of

exception units.

Comments complain that the new rule

restricts HA flexibility. They state that

an HA should retain discretion to allow

FMR exceptions on a community-wide

or unit-by-unit basis. The comments

state that the old certificate system

allows the HA to consider local market

conditions and circumstances of

participating families. The HA needs

discretion to meet special needs or

unusual circumstances. Sometimes the

HA needs to grant an exception rent for

a specific unit because of special family

needs.

Comments suggest that an HA may

reduce arbitrary variation in HA

exception rent approval by adopting

objective criteria for determining when

to grant exception rents. The HA

administrative plan should include

provisions on HA approval of exception

rents. Inclusion of HA exception rent

policy in the administrative plan

prevents arbitrary or abusive action by

the HA.

Comments note that removal of HA

exception rent authority hampers ability

of certificate-holders to lease units. The

HA loses landlords when the FMR is

low and rents are high. A tight market

forces tenants into poor neighborhoods.

Under the old rule, an HA can use the

20 percent exception authority so

program families can lease in new areas.

However, an HA comment states that

the HA does not allow exception rents

since there are many units available

under the FMR.

2. Over-FMR Tenancy

Some public comments concern the

relation between exception rent limits

on maximum subsidy, and the new

rules that allow some certificate families

to pay a higher rent. In this type of

tenancy, the maximum subsidy is

capped at the FMR limit, but the family

can pay the owner rent that exceeds the

FMR limit. (In the proposed rule, this is

called an ‘‘excess rent’’ tenancy. In the

final rule this is called an ‘‘over-FMR’’

tenancy.) By law, the HA may not

approve such tenancies for more than 10

percent of ‘‘incremental’’ units in the

HA program.

Comments state that the over-FMR

tenancy is not an adequate substitute for

the 20 percent exception rent authority.

Over-FMR tenancies are limited to 10

percent of the HA program and families

who can afford to pay more than the

FMR. Poor welfare families will not

qualify for excess rent tenancy.

According to the comments, the overFMR tenancy substitutes for the

individual exception rent authority

under old rule. An HA needs authority

to approve higher rents for more than 10

percent of incremental units.

3. Exception Rent: HUD Approval

Comments note that the new rule

requires HUD approval for all exception

rents. The law does not require HUD

approval for exception rents up to 10

percent over FMR. Comments claim that

elimination of HA exception rent

authority is contrary to law.

Comments state that communities

should not be required to submit an

unusual amount of data in requesting

approval of an exception rent. An HA

cannot afford to hire consultants for

each FMR change.

Comments recommend a 30 day

deadline for HUD to review an HA

exception rent request. If HUD misses

the deadline, the HA request should be

automatically approved.

Comments ask HUD to clarify some

aspects of the new exception rent

system. HUD should specify that the

new exception rent authority replaces

the former HA authority to approve

exception rents without HUD approval.

HUD should explain how deletion of 20

per cent authority is phased-in, and

whether prior approved exceptions are

grandparented.

Comments note that the new system

only allows an exception rent for a unit

located in an approved exception rent

area. The new system may eliminate

incentive for an owner to improve

property over the HQS.

4. Exception Rent: New Procedure

Comments state that the new

exception rent procedure is too

complex. The authority to approve an

exception rent is not based on

individual family circumstances. HUD

should not require the HA to document

the rent level representing a given

percentile of the local market.

C. FMR/Exception Rent Limit: New Rule

1. Approval of Exception Rent

a. New rule. Fair market rents (FMRs)

are published annually by HUD. An

‘‘exception rent’’ is a maximum rent

subsidy in excess of the published FMR.

Under the old rule, an HA was

authorized to approve exception rents

up to 110 percent of the FMR for up to

20 percent of units under the ACC

(annual contributions contract between

HUD and an HA).

The new rule (§ 982.504(b)) permits

two types of exception rent:

—An exception rent for part of the FMR

area. Such exception rents must be

approved by HUD. Area exception

rents apply to all three types of

program tenancy: a regular certificate

tenancy, a voucher tenancy and an

over-FMR tenancy.

—For a regular certificate tenancy only,

an exception rent granted by the HA

as a reasonable accommodation for a

person with disabilities.

b. Area Exception Rent. The final rule

provides that an HA may request

exception rent approval for a part of the

fair market rent area designated as an

‘‘exception rent area’’ (§ 982.504(b)(1)).

HUD may approve an exception rent for

all units, or for all units of a given size

(number of bedrooms), leased by

program families in a HUD-approved

exception rent area. However, the total

population of exception rent areas in a

fair market rent area may not include

more than 50 percent of the population

of the fair market rent area

(§ 982.504(b)(1)(iv)).

The amount of the HUD-approved

exception rent is subject to two

restrictions. First, the exception rent

may not exceed 120 percent of the

published fair market rent

(§ 982.504(b)(1)(ii)(A)). For a regular

tenancy in the Section 8 certificate

program, the maximum monthly rent is

120 percent of the published FMR (42

U.S.C. 1437f(c)(1)). In the voucher

program, the payment standard must be

‘‘based on’’ the published fair market

rent (42 U.S.C. 1437f(o)(1). Under the

rule (§ 982.505), the 120 percent of FMR
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23833

limit is the maximum payment standard

for a voucher or over-FMR tenancy.

Second, in addition to the 120 percent

limit, the exception rent may not exceed

a second limit, designed to test whether

there is a need for higher rental subsidy

in a proposed exception rent area.

Under the proposed rule, HUD would

have applied the same methodology that

is used to determine the FMR for the

whole FMR area. FMRs are currently set

at the 40th percentile rent—the rent

level that includes rents for 40 percent

of standard quality units renting in the

local housing market (§ 888.113(a)).

When the proposed rule was published

in February 1993, FMRs were set at the

45th percentile rent. The proposed rule

would have provided that the exception

rent may not exceed the 45th percentile

rent as determined by the methodology

used to determine the published FMR.

Under the final rule, the HUD field

office may approve an area exception

rent for a high-rent portion of the FMR

area. HUD may use one of two

alternative methods for determining the

maximum area exception rent. The area

exception rent may be based either: (1)

on the 40th percentile rent for the

exception rent area, or (2) on the

relationship between the median rent of

the exception rent area as compared

with the median rent for the whole FMR

area (§ 982.504(b)(1)).

Using the first method, the exception

rent may not exceed the lower of:

—120 percent of the published FMR, or

—The 40th percentile rent for the

exception rent area.

Using the second method, the

exception rent may not exceed the lower

of:

—120 percent of the FMR, or

—The published FMR times a fraction

comprised of the median rent of the

exception rent area divided by the

median rent of the entire FMR area.

When the second method is used,

HUD compares exception area median

rent to median rent for the entire FMR

area. The information needed for this

comparison can be obtained easily from

the decennial United States census. By

contrast, information on the 40th

percentile rent level relationships for

the FMR and exception rent areas is not

available in census publications or

tabulations in the same detail used by

HUD to compute the FMR.

Under the proposed rule and existing

practice, an HA would have been

required to submit survey data which

justifies the HA’s request for HUD

approval of an exception rent. To secure

exception rent approval, the HA would

have been forced to gather and submit

survey data showing the 40th percentile

rent for the proposed exception rent

area. The new rule relieves the HA of

the obligation and burden of supplying

rental survey data to support its request

for exception rent approval.

The new rule provides instead that

HUD may use decennial census data

and other available statistically valid

information to determine the median

rent for the exception rent area and FMR

area. HAs usually lack the resources and

statistical know-how to conduct

adequate rental surveys for

determination of percentile rent.

Moreover, the random digit dialing

technique that is used to determine the

FMR does not work well for parts of

FMR areas because of the large number

of calls, and therefore the associated

high cost, that is required to obtain an

adequate sample size for the exception

rent area.

The determination that exception area

rents are more expensive than rents for

the FMR area as a whole (either by

median rent comparison or by

determination of the 40th percentile

rent) does not itself show that there is

a programmatic justification for a higher

subsidy. The final rule

(§ 982.504(b)(1)(iii)) provides that HUD

will not approve an exception rent

unless HUD determines that an

exception rent is needed either:

—To help families find housing outside

areas of high poverty, or

—Because a high percentage of

certificate or voucher holders have

trouble finding housing for lease

under the program within the term of

the certificate or voucher.

An area exception rent only applies if

a family selects and rents a unit within

a HUD-approved exception rent area

(§ 982.504(b)(1)(i)). There is no limit on

the number or percentage of area

exception rent units in the HA program.

However, the total population of

exception rent areas in an FMR area

may not include more than 50 percent

of the population of the fair market rent

area (§ 982.504(b)(1)(iv)).

c. Regular Tenancy: Accommodation

for Person With Disabilities. The final

rule (§ 982.504(b)(2)) provides that on

request from a family that includes a

person with disabilities, the HA must

approve an exception rent of up to 120

percent of the fair market rent if

appropriate as a reasonable

accommodation for the needs of a such

person arising from such person’s

disability. This authority to approve a

higher rent only applies to a regular

certificate tenancy, and does not apply

to a voucher tenancy or over-FMR

certificate tenancy.

2. Exception Rent: New Rule—HUD

Response

HUD has not adopted the

recommendation to retain the HA 20

percent exception authority in the old

certificate rule, or to retain a broad

authority for HAs to grant exception

rents for neighborhoods or special cases.

Instead, the rule is designed to apply a

uniform and equitable exception

standard for all areas and all cases (with

a limited exception to accommodate the

special needs of a person with

disabilities). This standard is applied

across the whole universe of the HA

tenant-based programs—to establish the

maximum initial rent to owner in a

regular certificate tenancy, or the

payment standard for a voucher or overFMR tenancy.

Under the old voucher rule, HUD only

allowed the use of ‘‘community-wide’’

exception rents to determine the

voucher payment standard: certificate

exception rents that apply to the whole

HA jurisdiction. Under the new rule, the

same exception rent limit applies for

certificates and vouchers. For both

tenant-based programs, and for any form

of tenancy, HUD may approve an

exception rent for a portion of the HA

jurisdiction. Some comments support

this change, noting that exception rents

are critical to success of the certificate

and voucher programs.

As noted above, some comments

claim that elimination of the HA’s 20

percent exception authority limits

family opportunity to search for units in

better areas—nearer to schools or jobs,

and outside impacted areas with a high

concentration of poor or minority

families. However, under the new rule

HUD may approve area exception rents

so families can rent more expensive

units in better areas. The granting of an

area exception rent allows families to

access decent units in the exception rent

area. There is no percentage limit on the

number of assisted families that may

rent in exception rent areas.

In a regular certificate tenancy, the

family may rent a unit up to the

exception rent limit. Such rentals do not

count against the statutory limit on the

percent of certificate families paying in

excess of the FMR/exception rent limit

under an over-FMR tenancy.

HUD has not accepted a comment

urging HUD to phase in elimination of

an HA’s 20 percent exception rent

authority. There is no need for a phasein since the new procedure does not

reduce the subsidy for existing program

tenancies. The new provision only

applies to lease approvals after the

regulation effective date. In the regular

certificate program, the FMR/exception
23834 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

rent limit only operates as a constraint

on rent at the beginning of the lease

term, but does not affect rent

adjustments during the lease term. In a

voucher or over-FMR tenancy, the

family is protected against a drop of the

payment standard during the lease term.

Under the new rule, HUD may

approve an exception rent for a

‘‘designated’’ part of the FMR area.

Comments state HUD should define

what this means. HUD believes there is

no need for further definition. Under the

rule, HUD may designate any part of the

FMR area.

The rule specifies that a designated

exception rent area may not include

more than 50 percent of the FMR area

population. If there is a need for higher

rents and subsidy in a larger portion of

the FMR area, HUD will consider

whether the available data indicate that

HUD should adopt a higher published

FMR, instead of adopting a higher

‘‘exception rent’’ for more than half of

the FMR area.

V. Minimum Rent: Family Share of

Rent

In the certificate and voucher

programs the family must contribute at

least 10 percent of gross income as rent

for the unit (for certificates: 42 U.S.C.

1437a(a)(1) and 1437f(c)(3)(A); see also

24 CFR 5.613 (61 FR 54502, October 18,

1996); for vouchers: 42 U.S.C.

1437f(o)(2); see also § 982.507 (regular

certificate tenancy); § 982.505(b)(2)(ii)

(vouchers); § 982.505(c)(2) (over-FMR

tenancy)). Comments state that HUD

should raise the ‘‘minimum rent’’ from

10 percent of gross income to 14

percent.

HUD has not raised the minimum

rent. The minimum rent percentage is

determined by the statute.

For several years, temporary laws

have provided that a Section 8 assisted

family must pay a ‘‘minimum monthly

rent’’: the minimum share of rent that is

not covered by Section 8 subsidy (110

Stat. 40, sec. 402(a) of P.L. 104–99,

1/26/96, as amended by 110 Stat. 2892–

2893, sec. 201(c) of P.L. 104–204,

9/26/96). The temporary minimum rent

requirement applies in addition to

standing statutory requirements that

specify the amount of the rent a Section

8 (non-voucher) family is ‘‘required to

pay’’ (42 U.S.C. 1437f(c)(3)(A)), and the

amount of subsidy for a voucher family

(42 U.S.C. 1437f(o)(2)). The Congress

may extend temporary minimum rent

requirements to future years. The rule is

revised to provide for enforcement of

minimum rents as enacted by the

Congress.

In an over-FMR tenancy, the initial

gross rent (rent paid to owner plus

allowance for tenant-paid utilities)

exceeds the FMR limit (§ 982.4). The

final rule provides that the subsidy

payment for an over-FMR tenancy may

not exceed gross rent minus the

minimum rent as required by law

(§ 982.505(c)(2)(ii)). For a regular

tenancy, the final rule provides that the

subsidy payment equals the gross rent

minus the higher of the total tenant

payment or the minimum rent as

required by law (§ 982.507(b)).

In a voucher tenancy, the subsidy

payment may not exceed gross rent

minus the minimum rent (minimum

family share) (§ 982.505(b)(2)). In the

voucher program, the minimum rent is

the higher of (1) 10 percent of gross

income (42 U.S.C. 1437f(o)(2)) or (2) a

higher minimum rent as required by

law. For each type of tenancy, the

minimum rent requirement assures that

the family must pay out-of-pocket at

least a minimum share of actual rent

during the course of the tenancy.

In the regulatory formula for

determining the amount of subsidy in

an over-FMR tenancy (§ 982.505(c)(2)),

total tenant payment is deducted from

the payment standard to calculate the

maximum subsidy (payment standard

minus total tenant payment). Minimum

rent is deducted from the actual unit

rent (gross rent) to determine the

minimum family share. The actual

subsidy for a family is the lesser of the

amounts derived from these two

calculations.

For a voucher or over-FMR tenancy,

the assistance formulas also assure that

the subsidy does not exceed the amount

needed to support the actual reasonable

rent for the unit. Subsidy may not

exceed the difference between the

‘‘gross rent’’ and the minimum rent

(§ 982.505(b)(2)(i) (voucher tenancy) and

§ 982.505(c)(2) (over-FMR tenancy)).

‘‘Gross rent’’ is the sum of the actual

rent to owner and the HA allowance for

tenant-paid utilities (definition at

§ 982.4). Rent to owner must be

reasonable (§ 982.503(a)).

VI. Certificate Program: Over-FMR

Tenancy

A. New Type of Tenancy

For the first time under this rule,

some families in the certificate program

may choose to rent units that rent for

more than the fair market rent (FMR)/

exception rent limit. In the proposed

rule this type of tenancy was called an

‘‘excess rent tenancy.’’ In the final rule

this type of tenancy is called an ‘‘overFMR tenancy’’ (§ 982.4).

The name used in the proposed rule

may be misleading, since the phrase

‘‘excess rent tenancy’’ suggests that the

rent is excessive. By law and HUD

regulation, rent paid to the owner must

be reasonable—both in relation to

comparable market rents and to family

financial resources. Thus the rent may

not be ‘‘excessive.’’ The phrase ‘‘overFMR tenancy’’ better indicates that the

family pays a rent that exceeds the FMR

limit—the cap on gross rent in the

regular certificate program.

By allowing a family to rent above the

FMR/exception rent limit, this

regulatory change enlarges the pool of

available housing that can be rented by

a family under the certificate program,

and may enable the family to pick a unit

that better fits the family needs. A

family that enters an over-FMR tenancy

pays more than the statutory formula

rent (‘‘total tenant payment’’) that

otherwise defines the family share of

unit rent. However, as for all housing

assisted in the certificate and voucher

programs, the total rent to owner may

not exceed the reasonable market rent.

Moreover, as for all housing assisted in

the certificate program, the fair market

rent limit is the maximum initial

subsidy. (The initial subsidy payment is

the difference between the fair market

rent limit and the formula rent paid by

the family.)

In the final rule, the term ‘‘regular

tenancy’’ is used to distinguish the basic

form of certificate program tenancy used

since the beginning of the certificate

program from an ‘‘over-FMR’’ tenancy,’’

newly authorized by this rule. A regular

tenancy is defined as a certificate

program tenancy ‘‘other than an overFMR tenancy’’ (§ 982.4).

In a regular tenancy, the initial rent

(the rent at the beginning of the lease

term, including the HA allowance for

tenant-paid utilities) may not exceed the

FMR/exception rent limit. The family

pays the portion of rent determined by

the statutory formula (42 U.S.C.

1437f(c)(3)(A) and 1437a(a)(1)),

generally 30 percent of adjusted income.

The family is prohibited from paying a

higher share of the rent. The subsidy

covers the difference between the actual

unit rent and the formula rent paid by

the family.

Both in the voucher program and in

an over-FMR tenancy in the certificate

program, the family may rent a unit for

more than FMR/exception rent limit.

The family pays the portion of rent not

covered by the HUD subsidy.

For a tenancy in the voucher program,

the HA sets the maximum subsidy level,

called the ‘‘payment standard’’. The

payment standard may not exceed the

FMR/exception rent limit. Unless HUD

approves a lower percent, the payment

standard may not be less than 80

percent of the FMR/exception rent limit.
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23835

For an over-FMR tenancy in the

certificate program, the maximum

subsidy equals the FMR/exception rent

limit. (For any tenancy in the certificate

and voucher programs, the actual

subsidy payment generally equals the

maximum subsidy minus 30 percent of

the family’s adjusted income.)

B. Over-FMR Tenancy: Comments

1. General Effect of Rule

Some comments welcome regulatory

change to allow over-FMR tenancies in

the certificate program. By permitting

use of an over-FMR tenancy, the

certificate program operates more like

the voucher program. The over-FMR

tenancy opens housing opportunities for

program participants. The over-FMR

tenancy helps families, including large

families, that cannot find suitable units

at rents under the FMR.

Comments state that the over-FMR

tenancy removes the need for ‘‘side

payments’’ by a family. (‘‘Side

payments’’ are illegal family rental

payments to a Section 8 landlord that

exceed the tenant rent share (‘‘tenant

rent’’) defined by federal law.)

Comparability assures that rent paid to

the owner is not excessive. Comments

assert that the tenant-based programs

need flexibility for higher rental

payments.

2. Objections to Over-FMR Tenancy

Other comments object to the overFMR tenancy. Comments state that HUD

should not allow an assisted family to

pay a higher share of family income.

Authorization for the over-FMR tenancy

casts the HA as a financial manager for

the tenant. An over-FMR tenancy is not

consistent with the low-income

program. A tenant may overextend

financially in agreeing to a higher rent.

Family income may decrease after rental

of the unit. The tenant may be forced to

move. The HA will have a financial

burden if a family is forced to move.

HA comment indicates that there may

be little need to allow the over-FMR

tenancy. An HA states that there are

many units available within the FMR in

the HA’s local housing market. Because

of deflation, Section 8 tenants have a

wider choice of housing.

Comments state that the over-FMR

tenancy encourages fraud, and nonreporting of family income by

participants. Owners will try to collect

extra money. The over-FMR tenancy

will make owners greedy, and cause

price escalation in tight markets. The

over-FMR tenancy may be

‘‘discriminatory.’’ Landlords will favor

over-FMR tenants. The permission to

allow an over-FMR tenancy limits the

ability of other families to find housing

in the open market.

Comments state that the over-FMR

tenancy will be an administrative

burden. The HA must determine

residual income, and track over-FMR

tenancies. HA’s cannot explain the overFMR tenancy to families, and the

families will not understand how such

a tenancy works. The new rule will

create a new certificate sub-program

rather than simplifying administration

by combining and conforming the

certificate and voucher programs, the

stated objective of the conforming rule.

C. Over-FMR Tenancy: 10 Percent Limit

1. Law

The law provides that an HA may not

approve over-FMR tenancies (‘‘excess

rentals’’) for more than 10 percent of

‘‘incremental rental assistance’’ (42

U.S.C. 1437f(c)(3)(B)(ii)). To implement

this statutory restriction, the proposed

rule would have provided that the

number of over-FMR tenancies may not

exceed 10 percent of ‘‘incremental

units’’ in the HA certificate program.

Incremental refers to additional program

units not provided for families

previously receiving Section 8

assistance.

2. Comments

Comments state that the HUD rule

should not restrict the number of overFMR tenancies in an HA program. HUD

should not limit HA authority to

approve over-FMR tenancies to 10 per

cent of the HA’s incremental units. The

10 percent limit is arbitrary and too low.

Comments also state that the same

requirements should apply to

certificates and vouchers. The certificate

rule should follow the voucher program.

In the voucher program, there is no limit

on the number or percentage of units

that rent above the voucher payment

standard. The voucher program should

be the model for a future combined

tenant-based program. Different

certificate and voucher limits on family

share of rent confuse families and

landlords.

Comments state that the rule should

allow over-FMR tenancy for all families.

The HA should not have to approve

over-FMR tenancies on a unit by unit

basis. Tenants and owners will not

know if HA exception authority is

available. Comments ask how an HA

determines whether to approve a

family’s request within the 10 percent

limit.

Comments note that the opportunity

for an over-FMR tenancy opens up a

tight housing market. Availability of

over-FMR tenancy for all units would

increase family opportunities. The 10

percent maximum restricts family

choice. All families should have the

same choice. An over-FMR tenancy

permits a family to rent a single family

dwelling instead of an apartment.

Comments state that there is no need

for a 10 percent cap. Rent paid by a

family must be reasonable and

affordable. Allowing Section 8

assistance for an over-FMR tenancy does

not increase the amount of HUD

subsidy. The family pays the excess

over FMR.

The meaning of ‘‘incremental’’ units

is not clear, and should be stated in

plain language.

Under the old rule, an HA could

approve exception rents for up to 20

percent of units under ACC. However,

over-FMR tenancies are only permitted

for 10 percent of ACC units. Comments

claim that the proposed rule reduces

authority to grant exceptions from 20

percent to 10 percent of ACC. Comment

asks if pre-rule exception rents count

against the 10 percent limit.

3. HUD Response

HUD agrees with commenters that the

10 percent limit is an arbitrary

restriction on the HA’s authority to

approve over-FMR rentals in the

certificate program. As remarked in the

comments, the opportunity for an overFMR tenancy opens up new housing

choices for an assisted family, but does

not increase the maximum federal

subsidy. HUD is, however, constrained

by current law, under which such

rentals may not exceed 10 percent of

‘‘incremental’’ units in the HA

certificate program (see 42 U.S.C.

1437f(c)(3)(B)(ii)).

In HUD appropriations practice,

incremental assistance generally refers

to appropriated funding for units which

increase the aggregate supply of

federally assisted housing, as contrasted

with continued funding for previously

assisted units or families. The 10

percent limit is applied to the base of

incremental units in the HA program.

Under the proposed rule, the number of

incremental units under the ACC

(consolidated ACC) would be calculated

by subtracting ACC units for families

previously assisted under other Section

8 or federal housing programs. Under

the final rule (§ 982.506(a)(2)), all

certificate units are counted as

incremental except units provided to

replace units for which HUD provided

tenant-based program funding

designated for families residing in

section 8 project-based housing.
23836 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

D. Over-FMR Tenancy: Affordability of

Rent (Maximum Family Share)

1. Law and Regulation

In a regular Section 8 certificate

tenancy, a family must rent a unit below

the FMR limit, and a statutory formula

specifies the family share of the rent

(called ‘‘total tenant payment’’) as a

percentage of family income (42 U.S.C.

1437f(c)(3)(A) and 1437a(a)(1)). The

family usually pays 30 percent of

adjusted income toward the total unit

rent.

In an over-FMR tenancy, a family may

rent a unit over the FMR limit. The

family pays a higher percentage of

income towards the total unit rent than

otherwise allowed by the statutory

Section 8 rent formula. The law

provides that a family may not enter an

over-FMR tenancy (agree to pay more

than 30 percent of income) unless the

HA has determined that:

* * * the rent for the unit and the rental

payments of the family are reasonable, after

taking into account other family expenses

(including child care, unreimbursed medical

expenses, and other appropriate family

expenses). (42 U.S.C. 1437f(c)(3)(B)(i)(II))

The proposed rule would have

provided, both for vouchers and for an

excess rent (over-FMR) tenancy, that the

initial family share of rent may not

exceed half of a family’s adjusted

income. Under the proposed rule, the

other half of family income must not be

needed for rent, and remains available

(as ‘‘residual income’’) for family

expenses other than housing—including

costs of food, child care, unreimbursed

medical expenses and other appropriate

family expense.

The final rule does not prescribe the

percent or amount of residual family

income that must be left over for nonhousing expenses in an over-FMR

tenancy. The HA decides how to

implement the statutory test. The final

rule grants the HA maximum authority

to determine whether the family share

of rent at the beginning of the lease term

is reasonable. In making this

determination, the HA must consider

amounts remaining for other family

expenses, such as child care,

unreimbursed medical expenses, and

other appropriate family expenses as

determined by the HA (§ 982.506(b)(2)).

In the proposed rule, the residual

income requirement would have

applied to rentals under the voucher

program, as well as over-FMR tenancies

(called ‘‘excess rent’’ tenancies in the

proposed rule) under the certificate

program. In the final rule, the revised

residual income requirement only

applies for an over-FMR tenancy in the

certificate program. There is no such

statutory or regulatory requirement for

rentals under the voucher program.

2. Comments

a. Objections to Affordability. Some

comments object to the affordability

(residual income requirement) for an

over-FMR tenancy under the statute and

proposed rule. These comments assert

that the family should be allowed to pay

a higher rent.

Comments object that the affordability

test limits use of the over-FMR tenancy

to families that can afford to pay the

rent. The residual income requirement

excludes families that are too poor to

locate an affordable unit. HUD should

not deny assistance for rental of a unit

because a family would have to pay

more than half of income for rent, if the

family would have to pay even more on

the private market.

The family should choose how much

to pay for rent, and whether a unit is

affordable. The HA should not be

responsible for determining if the rent is

affordable for the family. The family

should have freedom of choice. The

family should not be prevented from

renting above the payment standard

because the rent does not leave enough

residual income for non-rental

purposes. The family should decide its

own priorities. The program should not

decide maximum housing cost in

relation to family income, and should

not require rent reasonableness.

Comments state that the proposed 50

percent residual income requirement is

arbitrary. The rule should not require

that participant has 50 percent for other

costs. If an HA believes the family

cannot afford the unit, the HA should

counsel the family.

Comments also indicate that the HA

cannot enforce the residual income

requirement. Residents will choose

units beyond their means. A residual

income requirement is not needed since

the HA performs rent reasonableness.

Other comments urge that HUD should

not require either affordability or rent

reasonableness.

b. Defining Affordability. Comments

argue that the HA should limit the rent

paid by a family. The HA should not

approve a unit unless the family can

afford the rent.

Some comments favor a residual

income test that prevents a family from

renting a unit if the family will not have

income to cover other everyday living

expenses. A family needs residual

income for other non-rent family

necessities. A residual income test

avoids problems between the tenant and

owner. A tenant who cannot afford the

rent may break the lease.

Comments express different views on

the appropriate test of residual income.

Some comments indicate that an HA

should have discretion whether to

approve an over-FMR tenancy if a

family is paying more than half of

income for rent. Other comments state

that the rule should not allow rent over

50 percent of income. Comments

welcome the proposed change requiring

that a voucher family must have 50

percent residual income after payment

of its rent.

Comments state that a family should

not be permitted to pay as much as 50

per cent of income (adjusted income) for

rent. A family paying 50 percent (of

gross income) would qualify for

statutory federal preference in

admission to assisted housing. (Note:

federal preference requirements have

been suspended.) Comments state that it

is disturbing and absurd to provide

federal preference for admission of a

family with a 50 percent rent burden,

but allow a program rent burden

exceeding 50 percent. Comments note

that a family that qualifies for rent

burden preference (because rent is more

than 50 percent of income) cannot meet

the residual income test unless the

family moves or rent is reduced.

Comments recommend that HUD

should allow an HA to:

—Limit maximum rents: Rent cannot

exceed 10 or 20 percent over the

FMR/exception rent.

—Require affordability: Rent cannot

exceed 50 percent or 40 per cent of

adjusted income.

c. Affordability: Other Comments.

Comments state that the regulatory

affordability test should consider family

payments for taxes and social security.

HUD adjusted income does not reflect

tax payments. Families pay a higher

percent of ‘‘real’’ (after tax) income for

rent. On the other hand, comments note

that adjusted income does not count all

family resources, such as student loans.

Comments state that there should be

a uniform affordability policy for

certificates and vouchers. The same

limit should apply for both tenant-based

programs. Comments object to HUD’s

proposal to apply a residual income test

in the voucher program, as well as an

over-FMR tenancy in the certificate

program.

The rule should clarify what happens

if family does not maintain required

residual income.

Comments note that the affordability

test is an administrative burden for the

HA. The affordability (residual income)

requirement is confusing.
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23837

3. How HA Determines Affordability

Program subsidy pays a part of the

rent. The balance is paid by the family.

To decide, as required by law, whether

the family can afford the housing, the

HA must examine whether the family

share of the rent (‘‘rental payments of

the family’’) is reasonable in relation to

family resources and other family

expenses. By contrast, the rent

reasonableness test examines whether

the rent paid to an owner is reasonable

in relation to market rents for

comparable units, not whether the rent

is reasonable for an individual assisted

family.

The final rule (§ 982.4) adds the

defined term ‘‘family share’’: ‘‘the

portion of rent and utilities paid by the

family’’. Family share is calculated by

subtracting the housing assistance

payment from the gross rent (rent to

owner plus any utility allowance)

(§ 982.515(a)).

The term ‘‘family share’’ replaces the

equivalent term ‘‘tenant contribution’’

in the proposed rule. Gross rent is the

total of rent to owner plus any

allowance for tenant paid utilities.

Family share is the family-paid portion

of gross rent. The definition of family

share as including tenant-paid utilities

is consistent with the traditional use of

gross rent to determine the family rent

contribution (total tenant payment) for

Section 8 or public housing.

The rule provides that the HA may

not use housing assistance payments or

other program funds (including any

administrative fee reserve) to pay any

part of the family share (§ 982.515(b)).

Payment of the family share is the

responsibility of the family.

The proposed rule prescribed a

specific formula for an HA

determination that family rental

payments are ‘‘reasonable.’’ The

proposed rule would have provided that

the family share of rent (tenant

contribution) must leave at least 50

percent of adjusted income to meet

other family expenses (‘‘residual

income’’). In the proposed rule, this

requirement would have applied both to

an over-FMR tenancy, and to a voucher

tenancy.

The final rule (§ 982.506(b)(2))

essentially tracks the statutory

requirement. The HA may not approve

an over-FMR tenancy unless the HA

determines that the initial family share

is reasonable.

In making this determination, the HA must

take into account other family expenses, such

as child care, unreimbursed medical

expenses, and other appropriate family

expenses as determined by the HA.

The final rule does not dictate any

specific formula or procedure for

determining that the family will have

enough money left over for non-rent

expenses. The HA has discretion to

develop an appropriate procedure.

Under the proposed and final rule, the

requirement to determine that the

family share of rent does not absorb an

unreasonable share of family income

only applies at initial HA approval of an

over-FMR tenancy. The HA does not

repeat this determination during the

course of the assisted tenancy. By

contrast, the rent reasonableness

requirement (to determine that rent paid

to owner does not exceed comparable

market rents) applies both at initial

lease approval and during the course of

the assisted tenancy.

In the proposed rule, the requirement

to assure that the family rent burden is

reasonable would have been applied to

the voucher program, as well as to an

over-FMR tenancy in the certificate

program. Under the final rule, the

requirement is only applied to approval

of an over-FMR tenancy, as required by

law.

E. Over-FMR Tenancy: Amount of

Subsidy

1. Comments

In a voucher or over-FMR tenancy, the

‘‘payment standard’’ is the maximum

subsidy for a family. In an over-FMR

tenancy, the payment standard is the

FMR limit (‘‘FMR/exception rent

limit’’). In a voucher tenancy, the HA

sets the payment standard. Generally,

the voucher payment standard must be

in the band from 80 percent to 100

percent of the FMR limit.

Comments note that the voucher

payment standard may be less than the

FMR limit. Consequently the maximum

subsidy in the voucher program may be

less than the maximum subsidy for an

over-FMR tenancy. Comments state that

the same payment standard should be

used for an over-FMR tenancy and a

voucher tenancy. An HA should not

allow over-FMR tenancies in its

certificate program unless the voucher

payment standard equals the FMR.

Otherwise over-FMR tenancy families

will get a bigger subsidy in the same

kind of program.

In the regular certificate program,

owner rents are adjusted annually by

applying the annual adjustment factor

(AAF) that is published by HUD. In the

proposed rule, HUD proposed to adjust

the subsidized rent for an over-FMR

tenancy in the same way, by applying

the published AAF. However,

comments state that the proposed

calculation of adjustment for an overFMR tenancy is too complicated.

Comments ask HUD to streamline the

method of calculating subsidy

adjustments.

2. HUD Response

For an over-FMR tenancy, the new

rule provides that the payment standard

is always set at the FMR/exception rent

limit during the lease term

(§ 982.505(c)(1)). For an over-FMR

tenancy, unlike a voucher tenancy, the

HA may not set a payment standard

below the FMR/exception rent limit.

In a regular certificate tenancy, the

FMR/exception rent limit only restricts

rent at the beginning of the lease term.

In such a tenancy, the FMR does not

limit or affect subsequent adjustments of

the rent to owner (by application of the

published annual adjustment factor at

the annual anniversary). Under the

proposed rule for an over-FMR tenancy,

the FMR/exception rent limit would

have been applied in the same fashion—

solely as a limit on subsidized rent at

the beginning of the lease term. The

FMR/exception rent limit would not

have affected later adjustments by

application of the AAF during the term

of the lease.

Under the final rule, the FMR/

exception rent limit determines the

amount of the payment standard for an

over-FMR tenancy, both at initial

leasing and over the course of the

assisted tenancy. HUD believes that this

is a simpler and more readily

understandable way to adjust the

amount of assistance. For an over-FMR

tenancy, the amount of subsidy is

always set at the program limit. As in

the voucher program, the maximum

subsidy is treated as a ‘‘payment

standard,’’ and the same rules apply to

determination of payment standards for

a voucher or over-FMR subsidy

(§ 982.505(d)). In this way, the rule gives

parallel treatment of subsidies for overFMR and voucher tenancies. In both

forms of tenancy, a family may choose

a unit renting for more than the

maximum subsidy, and the family’s

share of rent is not fixed.

3. How Subsidy Is Adjusted

Under the Section 8 statute, HUD has

discretion to determine a system for

adjusting the subsidized rent over the

life of an assistance contract. The

system for adjustment of rents may

provide for annual adjustments:

* * * to reflect changes in the fair market

rentals established in the housing area * * *

or, if the Secretary [of HUD] determines, on

the basis of a reasonable formula. (42 U.S.C.

1437f(c)(2)(A))

In a regular certificate tenancy, the

rent to owner (formerly called ‘‘contract
23838 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

rent’’) is adjusted each year of the lease.

Under the HUD-determined ‘‘reasonable

formula,’’ the old rent to owner

(contract rent) is multiplied by a HUDpublished factor. (See 24 CFR, part 888,

subpart B.) The adjusted rent may not

exceed the reasonable rent for a

comparable unassisted unit (42 U.S.C.

1437f(c)(2)(C)).

In this rulemaking, HUD proposed to

adjust the subsidized rent (maximum

subsidy) for an over-FMR tenancy in the

same fashion as for a regular tenancy—

by applying the published annual

adjustment factor (AAF) to the

subsidized rent for the prior year. As for

a regular tenancy, the adjusted

subsidized rent for an over-FMR

tenancy would not exceed the

reasonable rent. Thus under this

proposed system, the amount of the

rental subsidy would be identical for a

regular tenancy and for an over-FMR

tenancy, both at initial leasing and over

the course of the tenancy. However, in

the case of an over-FMR tenancy, the

family may pay the amount by which

the actual rent to the owner exceeds the

FMR/exception rent limit (42 U.S.C.

1437f(c)(3)(B)).

In the final rule, HUD has adopted a

different formula to adjust the subsidy

for an over-FMR tenancy in the Section

8 certificate program (§ 982.505(c)(2)).

For an over-FMR tenancy, the housing

assistance payment equals the lesser of:

(1) The applicable over-FMR payment

standard (i.e., the FMR/exception rent

limit) minus the total tenant payment

(the statutory formula rent), or

(2) The monthly gross rent (rent to

owner plus utility allowance for any

tenant-paid utilities) minus any

minimum rent required by law.

This new HUD adjustment formula

meets both of the alternate statutory

standards for adjustment of Section 8

subsidized rents (42 U.S.C.

1437f(c)(2)(A)). Subsidy is adjusted in

accordance with a HUD-determined

‘‘reasonable formula.’’ Under the

formula, changes in the over-FMR

payment standard are based on

‘‘changes in the fair market rentals’’ for

the area.

F. Over-FMR Tenancy: Other Comments

1. HA Discretion

The proposed rule would have

provided that an HA is not required to

approve an over-FMR tenancy.

Comments argue that an HA may not

refuse if a family asks the HA to approve

an over-FMR tenancy that satisfies

statutory conditions (rent is reasonable,

rent payments are reasonable for the

family, and the number of such

tenancies does not exceed 10 percent

limit of the HA’s incremental units).

In HUD’s view, the choice to approve

an over-FMR tenancy in the HA

program generally, or in a particular

case, rests with the HA. The language of

the law explicitly allows the HA to

‘‘approve’’ family requests that meet the

statutory conditions, and therefore vests

in the HA the discretion whether or not

to approve such requests in any or all

cases (42 U.S.C. 1437f(c)(3)(B)). The law

provides that the family ‘‘may pay’’ a

higher rental contribution if the HA has

granted approval of an over-FMR

tenancy. In this way, the statute merely

grants permission for the HA to approve

an over-FMR tenancy in which the

assisted family will ‘‘pay a higher

percentage of income’’ than specified in

the statutory Section 8 rental formula.

The final rule (§ 982.506(a)(1))

provides that the HA ‘‘may approve’’ an

over-FMR tenancy at the request of a

family. Generally, the HA is not

required to approve any over-FMR

tenancy (§ 982.506(a)(2)). However, the

HA must approve an over-FMR tenancy

in accordance with program

requirements if needed as a reasonable

accommodation for a person with

disabilities.

2. Administrative Fee

Comments state that HUD should

consider the HA’s burden of

administering over-FMR tenancies in

setting the administrative fee.

This rule does not establish

procedures for determining the HA

administrative fee. Currently,

administrative fees are calculated in

accordance with permanent

requirements enacted in the fiscal year

1997 HUD appropriation act (section

202, Pub.L. 104–204, 110 Stat. 2893–

2894). (See also 62 FR 9488, March 3,

1997.)

Comments state that HAs need to

educate families and the public about

the over-FMR tenancy. Otherwise

people will believe that the program is

illegal. HUD agrees that HAs should

provide information on over-FMR

tenancies and other aspects of the

program.

VII. Voucher Tenancy: Payment

Standard

A. Voucher Payment Standard

1. Setting Payment Standard

In a voucher tenancy, as in a

certificate over-FMR tenancy, the

maximum monthly subsidy is based on

the HA’s ‘‘payment standard’’

(§ 982.505). In both cases, the assistance

payment generally equals the difference

between the payment standard and 30

percent of adjusted income.

In the voucher program, the HA

establishes the amount of the payment

standard. Under the old rule, the HA

was required to set a payment standard

within the band from 80 percent to 100

percent of either: (1) the published fair

market rent (for each FMR area and unit

size) or (2) the ‘‘community-wide’’

exception rent (i.e., a HUD-approved

exception rent for the whole HA

jurisdiction).

The proposed rule would have

removed the 80 percent minimum. The

proposed rule would have permitted the

HA to establish a payment standard at

any level below the FMR/exception rent

limit (including HUD-approved

exception rents) in effect when the

payment standard is adopted. The final

rule provides that an HA must ask HUD

approval to establish a payment

standard below 80 percent of the FMR

limit (§ 982.505(b)(1)(ii)).

2. Minimum and Maximum Payment

Standard: Comments

Some comments state that an HA

should have discretion, as provided in

HUD’s proposed rule, to set the HA’s

voucher payment standard at any level

below the FMR. HUD should not set a

minimum payment standard.

However, other comments argue that

HUD should require a minimum

payment standard. The HA should not

be allowed to set its voucher payment

standard below 80 percent of the FMR.

According to the comments, removing a

federal minimum reduces subsidy, and

harms families with the lowest income.

If rent exceeds the FMR, the family pays

more than 30 percent of income for rent.

Reducing subsidy below the FMR

increases the gap between the HA

payment standard and the actual rent.

The lowest income poor may not be able

to cover the gap and obtain decent

housing.

Comments state that if an HA lowers

its voucher payment standard, an

assisted family will not be able to afford

the rent in spite of the housing subsidy.

A low payment standard limits housing

choices of assisted families. Elimination

of a minimum voucher payment

standard deprives participant families of

the opportunity to rent decent, safe and

affordable housing.

Comments also note that if HUD

removes the Federally required

minimum payment standard, HAs may

try to stretch voucher dollars too far.

Rent burdens could rise closer to 50

percent of family income, than to 30

percent of income.

Comments state that HUD should

either set the minimum percent of FMR
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23839

that can be used as the voucher payment

standard, or prohibit an HA setting the

payment standard at a level that makes

housing unaffordable to the poorest

families. HUD should not allow a

payment standard below the amount

needed to afford decent housing in a

local market.

Comments argue that the HA should

be required to set the voucher payment

standard at the FMR. A lower voucher

payment standard has a segregative

effect. The voucher program should use

the same payment standard as for an

over-FMR tenancy in the certificate

program. For both types of tenancy, the

same standard should determine the

point at which a family pays more than

30 percent of income as the family share

of rent.

Comments state that setting the

voucher payment standard to conform

with the FMR would permit more

efficient and consistent program

administration.

Comments state that HUD should

clarify if an HA may automatically

adjust payment standards when FMRs

increase or decrease, or must perform a

‘‘convoluted analysis.’’ The HA should

be allowed to set its payment standard

up to the current FMR without the need

to obtain HUD approval or to submit

rent studies or documentation. Increases

in the FMR have already been studied

and approved by HUD.

3. Minimum and Maximum Payment

Standard: HUD Response

After consideration of public

comments, HUD has decided to retain

the restriction, absent special HUD

approval, against setting the voucher

payment standard below 80 percent of

the FMR/exception rent limit. An HA’s

voucher payment standards must be

‘‘based on’’ the fair market rent (42

U.S.C. 1437f(o)(1)), which represents

HUD estimate of the amount needed to

rent decent housing in the local market.

The level of the voucher payment

standard may not be wholly

disconnected from the fair market rent

limit.

Under current procedures, FMRs are

set at the ‘‘40th percentile rent’’

(§ 888.113). Forty percent of units in the

local market rent below the FMR. By

setting a payment standard below the

FMR, an HA reduces the percentage of

units that can be rented below the

payment standard. At a given rent, a

reduction of the payment standard

reduces the assistance payment, and

therefore increases the share of rent that

must be paid by an assisted family. A

reduction of the payment standard

therefore either limits family choice of

rental housing in the local market, or

increases family rent burden.

To assure that the voucher standard is

‘‘based on’’ the FMR, and does not

unduly limit family housing choice,

HUD has decided to retain the 80

percent minimum. The HA may,

however, request approval of a payment

standard below this amount. HUD may

then consider whether the proposed

payment standard level allows a

reasonable housing choice in the local

market, and bears a reasonable relation

to the published FMR.

B. Shopping Incentive

1. Comments

In the regular certificate program, a

participant family does not have an

economic incentive to shop for a lower

rent unit. The subsidy covers the actual

rent paid to the owner (up to the FMR),

and any reduction in rent reduces the

amount of the subsidy. In the voucher

program, however, the payment

standard, not the actual unit rent,

determines the amount of subsidy

(except in cases when the so-called

minimum rent limits the amount of

subsidy). A lower rent to the owner

generally does not reduce the amount of

the subsidy. In the voucher program, the

family has an incentive to shop for a

cheaper unit.

Comments express different views on

the value of a shopping incentive in the

tenant-based programs. Some comments

approve use of a shopping incentive,

and recommend a shopping incentive

for both the certificate and voucher

programs. A participant should be

rewarded for renting a less expensive

unit. Other comments criticize the

voucher shopping incentive, and assert

shopping incentive should be

eliminated or restricted. Comments

suggest that shopping incentive should

be treated the same way in the

certificate and voucher programs. HUD

should include or exclude shopping

incentive in both programs.

Comments claim that the shopping

incentive does not work. Comments

state that voucher families do not shop

for lower rents. Voucher families seek

higher-priced housing in safer

neighborhoods with better schools. The

shopping incentive is paid largely to inplace families who do not shop for new

apartments. The shopping incentive is

inequitable, costly, and wastes subsidy

resources. The voucher shopping

incentive should be either eliminated or

granted only to families that actually

move to housing renting below the

payment standard.

Under the voucher formula, the

maximum assistance payment for a

family is determined by an HAestablished payment standard, rather

than actual rent of the assisted unit (42

U.S.C. 1437f(o) (1) and (3)). For this

reason, a lower rent generally does not

reduce the amount of subsidy. (In some

cases, a family that rents a unit

substantially below the payment

standard must pay a minimum share of

the rent.)

Comments note that in the certificate

program, subsidy is limited according to

the size of unit actually rented by

family. Comments recommend that this

principle should also apply in the

voucher program.

A comment acknowledges that a form

of voucher shopping incentive is

required by federal law. The comment

proposes, however, that HUD delete the

regulatory shopping incentive not

required by the law. Under the old

voucher rule, the amount of subsidy is

based on size of the assisted family, not

the size of the unit actually rented by

the family. The comment contends that

the old regulatory system in the voucher

program is wasteful and inequitable. In

the certificate program, a family pays

the same contribution even if it rents a

smaller unit. The landlord only receives

rent for the size of unit actually rented

by family. In the voucher program also,

a family should receive subsidy for the

unit size actually rented by the family.

2. HUD Response

Since the beginning of the certificate

program, the Section 8 subsidy has been

based on rent for the unit finally

selected by a family, even if the family

could have elected to rent a bigger unit

within the appropriate FMR for the

family size. The certificate assistance

covered the actual rent for the unit

selected, within the FMR for the actual

size of the unit selected. In the second

phase of the conforming rule, published

on July 3, 1995, this principle was

extended to the voucher program. In

describing principles governing use of

the HA ‘‘subsidy standards’’ (HA

policies governing the appropriate

subsidy for the family size and

composition), the 1995 rule provides

that the voucher payment standard may

not exceed the payment standard for the

unit rented by the family

(§ 982.402(c)(2)).

This final stage of the conforming rule

states the formulas for determining the

amount of assistance in a regular

certificate tenancy, and for a voucher, or

an over-FMR tenancy. For all three

types of assistance, the subsidy may not

exceed the maximum subsidy ‘‘for the

unit size rented by the family’’

(§ 982.508(a)(2)(ii) (regular tenancy);
23840 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

(§ 982.505(d)(2)(ii)) (voucher or overFMR tenancy).

In the final rule, a common provision

describes how to determine the payment

standard for either a voucher tenancy or

an over-FMR tenancy (§ 982.505(d)(2)).

The payment standard for a family is the

lower of:

—the payment standard for the family

unit size, or

—the payment standard for the unit size

rented by the family.

VIII. Family Size: Effect on Amount of

Subsidy

A. General

An HA adopts standards (‘‘subsidy

standards’’) to determine the number of

bedrooms for a family. ‘‘Family unit

size’’ is the appropriate number of

bedrooms for a family under the HA

subsidy standards. The family unit size

is used to determine the maximum rent

subsidy for a family.

The HUD rule describes how family

unit size determines the maximum rent

subsidy for a family in the certificate or

voucher program (§ 982.402(c);

definitions of ‘‘family unit size’’ and

‘‘subsidy standards’’ in § 982.4). (These

rules were contained in the second

phase of this conforming rule, published

60 FR 34660, July 3, 1995). Under these

existing rules, the subsidy for a family

in the certificate or voucher program is

the lower of the appropriate subsidy (1)

for the size and composition of a

particular family (family unit size); or

(2) for the particular unit size rented by

the family (§ 982.402(c)). The same

principle is applied and clarified in this

rule, and is extended to calculation of

subsidy for an over-FMR tenancy.

In calculating a family’s subsidy for a

voucher tenancy or over-FMR tenancy,

the payment standard is the lower of:

the payment standard for the family unit

size, or the payment standard for the

unit size rented by the family

(§ 982.505(d)(2)). This rule applies to

each determination and redetermination

of the applicable payment standard

during the course of a voucher or overFMR tenancy.

In a regular tenancy under the

certificate program, the FMR/exception

rent limit is the lower of the FMR/

exception rent limit for the family unit

size, or the FMR/exception rent limit for

the unit size rented by the family

(§ 982.508(a)(2)). For a regular tenancy,

the FMR/exception rent limit is the

maximum gross rent (and therefore the

maximum rent to owner) at the

beginning of the lease term. The initial

rent to owner is the base for subsequent

rent adjustment at each annual

anniversary. The FMR/exception rent

limit does not otherwise affect rent

adjustments during the course of a

regular tenancy.

B. Space for Live-in Aide

With HA approval, a live-in aide may

reside in the unit to provide necessary

supportive services for a member of the

assisted family who is a person with

disabilities (see § 982.316). In

previously published provisions, the

conforming rule provides that a live-in

aide must be counted in determining the

family unit size under the HA subsidy

standards (§ 982.402(b)(6)). Thus the

maximum subsidy increases so that the

family can rent a unit with additional

space for the live-in aide. In this phase

of the conforming rule, the rule specifies

that this general principle also applies

when a person with disabilities chooses

to reside in certain special housing

types: congregate housing (§ 982.608(b));

a group home (§ 982.613(c)(1)(ii));

shared housing (§ 982.617(c)(3)); or a

cooperative (§ 982.619(d)(2)).

IX. Over-FMR or Voucher Tenancy—

Payment Standard: Changes in Subsidy

During Tenancy

A. How Assistance is Adjusted

In a regular certificate tenancy, rent to

owner is adjusted at each annual

anniversary during the lease term

(§ 982.509). Under the proposed rule,

HUD would have used the same system

to adjust HUD subsidy for an over-FMR

tenancy. On each contract anniversary,

the amount of subsidy would have been

adjusted by applying the most recent

adjustment factor published by HUD.

Under the final rule, the amount of

the monthly assistance payment for an

over-FMR tenancy is adjusted by the

same system used for a voucher

tenancy.

For a voucher or over-FMR tenancy,

the amount of the monthly subsidy

(assistance payment) for a participant

family is the amount by which the HA

‘‘payment standard’’ exceeds the family

contribution (as determined by statute

and rule for each program). The

payment standard is the lower of the

appropriate payment standard for the

family size or for the unit size actually

rented by the family (§ 982.505(d)(2);

§ 982.402(c)(2)).

The final rule provides

(§ 982.505(d)(4)) that the payment

standard used to compute the subsidy

during the lease term is the higher of: (1)

the current payment standard, or (2) the

initial payment standard minus any

drop in rent to owner. The current

payment standard is the payment

standard amount determined at the most

recent regular HA reexamination. The

initial payment standard is the payment

standard determined when the HA

approves the lease (before the beginning

of the lease term). If rent to owner drops

during the term, the rent decrease is

subtracted from the initial payment

standard. Thus this amount equals the

initial payment standard minus any

amount by which the initial rent to

owner exceeds the current rent to

owner.

B. Protecting Family Against Drop in

Subsidy

Under existing requirements for the

voucher program, a participant family is

protected against a drop in the monthly

subsidy during the lease. The payment

standard may rise (for example, if there

is an increase in the published FMR).

However, if family composition does

not change, the payment standard may

not fall below the HA payment standard

at the beginning of the lease term. When

deciding whether to lease a unit at the

rent demanded by an owner, a family

can count on receiving a subsidy

calculated from the same (or higher)

payment standard during the term of the

lease, though the subsidy may decrease

if there is a change in family

composition or the family decides to

move to another unit.

In an over-FMR tenancy, the payment

standard for each unit size is the FMR/

exception rent limit. In the voucher

program, the HA may set its payment

standard for each unit size at 80 to 100

percent of the FMR/exception rent limit.

For a voucher or over-FMR tenancy, the

payment standard for the family is the

higher of (1) the payment standard at

the beginning of the lease term (minus

the amount of any actual drop in the

rent to owner during the course of the

tenancy) or (2) the payment standard

determined at the most recent regular

reexamination (§ 982.505(d)(4)).

In an over-FMR or voucher tenancy,

the family must pay out-of-pocket any

rent in excess of the payment standard.

In deciding whether to lease at a given

rent, the family needs assurance that the

HA assistance payment will not fall

during the term of the tenant’s lease

because of reductions in the payment

standard. Under this rule, the family is

protected against a drop in the payment

standard during the lease term. The

payment standard that is used to

calculate the family’s assistance does

not drop below the HA payment

standard in effect at the time the lease

is approved.

During the tenancy, a family is largely

insulated against a decrease in voucher

or over-FMR subsidy because of a

decrease in the applicable HA payment

standard. In the final rule, this
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protection is modified by reducing the

subsidy to the extent of any actual

decrease in the rent to owner since the

beginning of the tenancy.

Most often, rent to owner decreases if

there is a general fall in market rents,

and if rent to owner is reduced by

enforcement of market comparability at

the annual anniversary. This rule

provides that the HA must redetermine

comparability if there has been a five

percent decrease in the FMR in effect 60

days before the contract anniversary as

compared with the FMR in effect at the

prior contract anniversary. Rent to

owner may also decrease in accordance

with the terms of the lease, or because

rent is reduced by local rent control or

some other binding requirement.

Regardless of the cause of any reduction

in the rent to owner, the actual amount

of the rent reduction is deducted from

the amount of the initial payment

standard in calculating the current

payment standard.

The family is protected against a fall

of the payment standard during the term

of the lease. On the other hand,

however, the payment standard for the

family rises if the HA payment standard

at the time of regular reexamination is

higher than the HA payment standard at

the beginning of the lease/contract term.

If the family enters a new assisted lease

(for the same or a different unit), the

payment standard for the family is then

conformed to the current HA payment

standard in effect when the new lease is

approved. The family is only protected

against a fall in the HA payment

standard during the HAP contract term.

C. When Payment Standard Changes

Comments state that an HA should

only change the payment standard at the

annual recertification. The HA should

not change the payment standard as

soon as there is a change in the family

size.

Under the payment standard formula

in the final rule, the payment standard

is adjusted if there is a change in the

payment as determined at the most

recent ‘‘regular’’ reexamination, the

annual recertification of family income

and composition.

X. Regular Tenancy—Rent to Owner:

Annual Rent Adjustment During

Tenancy

A. Comments

Some comments approve allowing

downward adjustment of certificate

program contract rents—now called

‘‘rent to owner.’’ An HA should adjust

rent as market conditions change.

Other comments object to decrease of

contract rent by annual adjustment.

Generally, a conventional landlord does

not lower rent on an ongoing lease.

Conventional rents increase or remain

steady. The comments claim that

negative rent adjustments are a

disincentive to owner participation. The

owner runs a risk of rent reduction. If

area rents are falling, Section 8 rent to

owner should not increase by

application of the AAF. However, rents

should not be reduced. Rent

reasonableness should be used to

control excess rents, rather than

adjustment by a negative AAF.

The new rule deletes the old

provision that prohibited annual

adjustment below the initial rent (at the

beginning of the lease term). Comments

state that this change will discourage

owner participation. The rule should

not permit adjustment below the initial

rent.

Comments recommend that so long as

rent is reasonable, rent should be

adjusted up to the FMR exception rent

limit at time of adjustment. The increase

in the FMR is greater than the AAF.

Because of the AAF system, an HA

cannot approve adjusted rent that is

reasonable and within the FMR.

The rule provides that an owner must

request an annual adjustment at least

sixty days in advance (§ 982.509(b)(5)).

Adjustments are not retroactive. The

annual adjustment for a contract

anniversary must be requested at least

sixty days before the next anniversary

(§ 982.509(b)(6)).

Comments ask HUD to clarify

requirements concerning an owner

request for adjustment. An HA points

out that the requirement to submit a

written request for rent adjustment is

burdensome, and creates paperwork for

administration of the program. The HA

prefers to contact owners personally or

by telephone. Other comments state that

the rule should require an HA to give an

owner advance notice of an available

increase in rent, and that the increase

must be requested in writing. Rules that

deny owner rent increases because of

their lack of sophistication contribute to

growing owner hostility. Because of

such hostility, families experience

greater difficulty locating housing.

Comment suggests that an owner should

be permitted to terminate the tenancy if

dissatisfied with the adjustment.

Some comments assert that annual

adjustments should only be granted

when the owner requests. HUD should

require written notice of rent increases

(both in the certificate and voucher

programs). This requirement would

reduce confusion for landlords with

tenants in both programs. Requiring an

owner to give notice of a rent increase

may delay or reduce rent increase

requests. Another HA currently requires

the owner and tenant to submit request

for lease approval 60 days before the

anniversary date. By this process, an HA

can determine if a proposed rent

increase is consistent with the annual

adjustment factor and rent

reasonableness.

Comments state that an adjustment

should be effective a month after the HA

receives the owner’s written request.

The owner should not receive a

retroactive adjustment. Other comment

says that owners will object if

adjustment is not retroactive when the

owner request is late. The current

regulation causes incredible paperwork

processing rent increases.

Comments recommend that the rule

should state whether HA is allowed to

supply forms for requesting adjustment.

B. New Rule

In a regular certificate tenancy, rent to

owner is adjusted each year. The new

rule provides (§ 982.509(b)) that the

adjusted rent is the lower of:

—The pre-adjustment rent (minus any

previously approved special

adjustments) multiplied by the annual

adjustment factor (AAF) published by

HUD, or

—The reasonable rent.

Rent to owner may be increased or

decreased by applying the two elements

of the regulatory adjustment formula

(§ 982.509(b)(3)).

An AAF may be positive or negative.

The published AAF for the area is based

on objective data concerning changes in

residential rental costs for the area (see

60 FR 12594, March 7, 1995). In

addition, the adjusted rent may not

exceed the reasonable rent for

comparable units rented on the private

unassisted market.

HUD has not adopted

recommendations to hold owner

harmless against a rent decrease either

because of a negative published factor

(however rare), or because the market

rent is less than rent adjusted by the

formula factor. The regulatory

adjustment formula for a regular

certificate tenancy is a reasonable basis

for determining changes in rent to

owner during the assisted lease, and

thereby determining the appropriate

amount of Federal subsidy.

For a regular tenancy, the family does

not negotiate the procedure for adjusting

rent received by the owner. Changes in

rent are not controlled by normal

constraints of the private unassisted

market. The family’s share of the rent is

determined by the amount of family

income, and is not affected at all by the

amount of the adjusted rent to owner.
23842 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

The family therefore lacks any incentive

to limit the rent paid to the owner from

HA assistance payments.

For this reason, the program must

supply another formula to determine

rent adjustments during the assisted

tenancy. The adjustment formula in this

rule substantially restates the formula

successfully used since the beginning of

the Section 8 certificate program (with

some technical modifications). Section 8

rents must provide an adequate

incentive for participation by private

owners at competitive private market

rents. In general, massive participation

by private landlords shows that existing

certificate rent mechanisms, including

procedures for adjustment of owner

rent, have largely afforded adequate

compensation for private landlords. In

addition, HUD believes that the

procedures for determining initial rent

and rent adjustments reflect a

reasonable balance between rents that

open housing opportunities for program

participants, and limitations to

maximize the number of families

assisted with available funds.

In the final rule, HUD has revised

proposed language that states when an

owner must request an annual

adjustment. The proposed rule would

have provided that the rent will only be

increased prospectively, and that an

increase for any anniversary date must

be requested by the next anniversary.

These provisions are modified to allow

at least sixty days for HA action on the

owner request.

The owner must give the HA written

notice requesting an increase in the rent

(§ 982.509(b)(4)). The rent is not

increased unless the owner has

complied with the HAP contract. To

receive a rent increase, the request must

be submitted at least sixty days before

the increase is effective, and at least

sixty days before the next annual

anniversary (§ 982.509(b)(5) and (6)).

XI. Regular Tenancy—Rent to Owner:

Special Rent Adjustment During

Tenancy

A. General

In a regular certificate tenancy, rents

are adjusted annually by a published

factor. If formula adjustments are not

sufficient, HUD may approve additional

increases in the rent to owner. Such

increases are called ‘‘special

adjustments.’’ By law (42 U.S.C.

1437f(c)(2)(B)), HUD has discretion to

approve special adjustments:

* * * necessary to reflect increases in the

actual and necessary expenses of owning and

maintaining the units which have resulted

from substantial general increases in real

property taxes, utility rates, or similar costs

which are not adequately compensated for by

[formula adjustments] * * *.

In accordance with the law, the rule

provides that special adjustments may

only be granted because of ‘‘substantial

and general increases’’ of unit costs

(§ 982.510(a)(1)). Comments approve

these requirements. By law, special

adjustments are subject to

comparability. Adjusted rent, including

any special adjustment, may not exceed

reasonable rent for comparable

unassisted units (42 U.S.C.

1437f(c)(2)(C); § 982.510(b)).

An owner does not have any right to

receive a special adjustment of the rent

to owner (previously called ‘‘contract’’

rent). A special adjustment must be

approved by HUD (§ 982.510(a)(2)).

HUD has ‘‘sole discretion’’ whether to

approve or withhold a special

adjustment requested by an owner

(§ 982.510(a)(1)).

B. Purpose

The old rule allowed special

adjustments only for the following

specific cost categories: real property

taxes and assessments, and regulated or

non-regulated utility costs. The

proposed rule would have enlarged the

list of covered cost categories, by

permitting HUD approval of special

adjustments for ‘‘security costs’’ as well

as a broad authorization for approval of

costs ‘‘similar’’ to the enumerated cost

categories. The proposed rule would

also have provided that HUD must

approve a special adjustment to cover

increases in ownership and

maintenance cost that results from

expiration of a real property tax

exemption.

The final rule does not expand the

purpose of special adjustments allowed

under the old rule. In this respect, the

new rule substantially restates the

grounds for special adjustment in the

old rule. The final rule permits special

adjustments to cover increases in utility

costs or in real property taxes and

special governmental assessments

(§ 982.510(a)(1) and § 983.255(b)). The

final rule does not include authority to

approve special adjustments for

‘‘security costs’’ or ‘‘similar costs.’’

Special adjustments may only be

approved by HUD for the specific

purposes enumerated in the rule.

At this time, HUD knows no

persuasive justification for expansion of

special adjustments. First, any increase

in special adjustments would draw on

limited program funds in a time of

severe budgetary restrictions. Second,

HUD knows of no persuasive showing

or evidence that a loosening of policy on

special adjustments is necessary to

provide adequate housing choice for

assisted families. Third, while owners

will always seek maximum rents, it is

hard for HAs to determine when special

adjustments are really necessary in a

particular case, and for HUD to evaluate

relative need for special adjustments in

particular cases. Fourth, special

adjustments significantly complicate

HA administration and control of

program rents. HUD believes that HAs

should primarily rely on formula

adjustments by published factors, as a

universal process for adjusting program

rents.

The law provides that HUD may

approve rent adjustments HUD

determines necessary to cover increases

in ownership and maintenance

expenses ‘‘. . . that have resulted from

the expiration of a real property tax

exemption’’ (42 U.S.C. 1437f(c)(2)(B)).

Such adjustments may only be approved

if appropriations are available.

The proposed rule would have

provided that HUD must approve a

special adjustment to cover increased

expenses when a real property tax

exemption expires. Although some

comments endorse this provision, the

final rule does not require or authorize

special adjustments at expiration of a

real property tax exemption. At this

time, appropriated funds are not

available for this purpose. The final rule

therefore removes a proposed provision

reciting the authority to grant a special

adjustment for this purpose.

Comments state that the rule should

allow special adjustments for security

costs, and for increases in insurance

cost because of crime. The final rule

does not authorize HUD approval of

special adjustments for ‘‘security costs.’’

HUD believes that such costs should be

met from market rents in accordance

with program requirements. In the

certificate and voucher programs, HAs

do not review owner budgets. It would

be difficult to determine if proposed

increases are really required, or if crimerelated costs can be met from assisted

rental revenues. If increases were

granted for security costs, there is no

existing mechanism to assure that the

owner would actually use the additional

money for this purpose. For efficient

administration of the tenant-based

programs, the HA should not attempt to

micro-manage owner expenditures for

particular costs.

Comments state that HUD should

allow special adjustments because of

major property upgrades that benefit the

tenant. This recommendation is not

adopted. This proposal would evade the

fair market rent (for the family size and

for the size of the unit rented) as the

central statutory and regulatory control

on unit rent. Moreover, the law does not
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23843

permit special adjustments for

improvement of the particular project.

As noted above, special adjustments

may only be granted because of ‘‘general

increases’’ in real property costs—i.e.,

common increases that broadly affect

landlord operating costs in the market

area.

HA comments state that the special

adjustment rules are confusing. HUD

should give a better description of the

cases when special adjustments are

warranted. HUD believes that the final

rule contains a clear and straightforward list of the types of expenses for

which HUD may approve a special

adjustment of the rent paid to owner.

Comments recommend eliminating

special adjustments, and substituting

adjustment to level of the current FMR.

In the current system, HAs negotiate

new HAP contracts to avoid the need for

HUD approval of special adjustments.

HUD has not adopted this

recommendation.

C. Comparability

In accordance with the law, the rule

provides that adjusted rent must be

reasonable in comparison with rent of

unassisted units in the local market.

This principle applies to both the

tenant-based and the project-based

certificate programs. The reasonableness

limit applies to special adjustments, as

well as regular annual adjustments of

the rent.

HUD may not approve a special

adjustment if the adjusted rent to owner

would exceed the reasonable rent for

comparable unassisted units

(§ 982.510(b) and § 983.255(c)(2)). (For

PBC, reasonable rent is determined by a

comparability study in accordance with

special PBC requirements.) HUD may

not consider granting a special

adjustment over the amount of rent as

adjusted by applying the published

formula factor (AAF), unless reasonable

rent exceeds the factor adjusted rent.

Application of comparability for

special adjustments satisfies two

statutory requirements. First, the law

provides that regular and special

adjustments may not result in material

difference between rents charged

‘‘* * * for assisted units and unassisted

units of similar quality, type and age in

the same market area. * * *’’ (42 U.S.C.

1437f(c)(2)(C)). Second, the law also

provides that special adjustments may

only be granted for costs ‘‘not

adequately compensated’’ by regular

annual formula adjustments (42 U.S.C.

1437f(c)(2)(B)).

In the project-based and tenant-based

certificate programs, market rent for

comparable unassisted units is used as

a regulatory standard for determining

whether owner is ‘‘adequately

compensated’’ by the unit rent. Under

the law, special adjustments are not

designed to meet special or unique

needs of a particular landlord. Special

adjustments may only be approved to

cover ‘‘substantial general increases’’ in

costs common to owners in the locality,

such as a general increase in real

property tax rates (42 U.S.C.

1437f(c)(2)(B)). Thus levels of

comparable unassisted market rents are

used to gauge rents generally needed to

adequately compensate landlords for

increased costs to maintain and operate

rental housing in the market area.

D. Required Documentation

The old rule provides that an owner

who seeks a special adjustment must

submit ‘‘financial statements’’ which

‘‘clearly support’’ the owner’s request

for a special adjustment. This

requirement applied both to the tenantbased and project-based certificate

programs. In this rulemaking, HUD

proposed to continue this requirement

for both programs.

In the final rule, the financial

statement requirement is retained only

for PBC (§ 983.255(d)), but is not

included in the special adjustment

requirements for a regular tenancy in

the tenant-based certificate program

(§ 982.510). The final PBC rule

(§ 983.255(c)(1)) provides that an owner

must demonstrate that rent to owner ‘‘is

not sufficient for proper operation of the

housing’’. The PBC rule (§ 983.255(d))

also states that:

The owner must submit financial

information, as requested by the HA, that

support the grant or continuance of a special

adjustment. For HAP contracts of more than

twenty units, such financial information

must be audited.

In the tenant-based certificate

program, the grant or denial of a special

adjustment only affects rent during the

present lease term of a particular

assisted family. Conversely the special

adjustment will not affect rent under a

new lease for the same family or for any

other family. In PBC, the grant or denial

of a special adjustment may affect the

level of rents during the remaining term

of the project-based HAP contract, and

may apply to all units covered by the

project-based HAP contract.

For the tenant-based program, the

owner will not be required to submit a

‘‘financial statement’’ showing that costs

are not adequately compensated by

regular annual adjustments. To receive

a special adjustment, the owner must

show that a requested adjustment meets

the regulatory standard—that the

adjustment is appropriate to cover

increases in actual and necessary costs

for eligible cost items. However, the rule

does not specify any particular format or

procedure for documenting this fact.

For PBC, however, the rule provides

owner must ‘‘demonstrate’’ that cost

increases are not adequately

compensated for by the annual factor

adjustment (§ 983.255(c)(1)). The PBC

owner must submit ‘‘financial

information’’ that support grant or

continuance of a special adjustment

(§ 983.255(d)). For PBC HAP contracts

covering more than 20 units, the

financial information must be audited.

E. HUD Approval

Comments state that HUD should

allow an HA to approve special

adjustments without HUD approval.

HAs are qualified to approve special

adjustments.

Under the law, HUD may not adopt

this recommendation. HUD itself must

approve all special adjustments. The

HAP contract must provide ‘‘for the

Secretary to make’’ special adjustments.

The Secretary may make special

adjustments to the extent ‘‘* * * [the

Secretary] determines such adjustments

are necessary. * * *’’ (42 U.S.C.

1437f(c)(2)(B)). By these provisions,

HUD has statutory authority to

determine that a special adjustment is

necessary, and the authority to make a

special adjustment in accordance with

the Secretary’s determination. This

authority is clearly assigned to HUD,

and may not be delegated to the HA.

Comments state that an HA should

have opportunity to comment before

HUD decides to grant or deny a special

adjustment. HUD believes there is no

need to modify the rule in this respect.

Ordinarily, a special adjustment is not

granted without the HA’s support. The

HA submits the owner’s request for

special adjustment to HUD. The HA has

ample opportunity to present its views.

The HA provides supporting

documentation and justification. The

HA may submit any comments or

information in support of, or in

opposition to, the owner’s request for a

special adjustment. There is no need or

advantage to complicate the adjustment

process with additional procedural

requirements.

Comments state that HUD should be

required to respond in 30 days when an

HA asks HUD to approve a special

adjustment. This recommendation is not

adopted. HUD will try to respond

promptly to special adjustment or other

HA or owner concerns. However, HUD

cannot undertake to comply with an

arbitrary deadline that may not fit the

facts of individual cases.

A special adjustment must be

approved by HUD. The special
23844 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

adjustment provisions are revised to

emphasize that HUD has sole discretion

whether to grant or deny a special

adjustment. The final rule states that

HUD may approve a special adjustment

‘‘* * * at HUD’s sole discretion * * *.

’’ (§ 982.510(a)(1) and § 983.255(a)(1)).

The rule also provides that the Section

8 owner ‘‘does not have any right to

receive a special adjustment’’

(§ 982.510(a)(2) and § 983.255(a)(2)).

F. Term

Comments state that HUD should not

require an HA to track rent increases for

a one-time special adjustment. A special

adjustment for ongoing costs should not

be treated as a one-time adjustment.

Comments note that it is burdensome

and unnecessary to track special

adjustments, and require re-justification

of approved special adjustments.

Comments assert that the cost of

deducting approved special adjustments

may not exceed the saving. The

deduction of special adjustments must

be calculated, tracked and explained to

owners.

The final rule re-states and

substantially simplifies proposed

provisions on special adjustments for

temporary or one-time costs

(§ 982.510(c)(2) and § 983.255(e)(2)).

The HA may withdraw or limit the term

of a special adjustment. If HUD

approves a special adjustment to cover

temporary or one-time costs (e.g., a onetime special assessment for drainage

improvements), the special adjustment

is only a temporary or one-time increase

of the rent to owner.

The rule also clarifies the relation

between a special adjustment, and a

subsequent regular annual adjustment

by application of HUD’s published

annual adjustment factor (AAF). In an

annual adjustment, the owner’s preadjustment rent is multiplied by the

AAF (§ 982.509(b)(1)(i) and

§ 983.254(b)(1)(i)). The rule now states

that the pre-adjustment rent to owner—

the base for the annual adjustment, does

not include any previously approved

special adjustment (§ 982.509(b)(2) and

§ 983.254(b)(3)).

XII. Fees and Charges to Family for

Meals, Supportive Services or Other

Items

The final rule contains new

provisions that state restrictions on

owner charges to the family. These

provisions largely codify and clarify

HUD’s construction of the existing

program rules.

The rule (§ 982.513) provides that:

—Rent to owner may not include the

cost of meals or supportive services.

Reasonable rent (comparable rent)

does not include the value of meals or

supportive services.

—The lease may not require the tenant

or family members to pay charges for

meals or supportive services. Nonpayment of such charges is not

grounds for eviction.

—The owner may not charge the tenant

extra amounts for items customarily

included in rent in the locality, or

provided at no additional cost to the

unsubsidized tenants in the premises.

XIII. Utility Allowance

A. Objections to Utility Allowance

1. Comments

Comments state that HUD should

eliminate the utility allowance in the

certificate and voucher programs.

Comments claim that elimination of

utility allowances would unify the

certificate and voucher programs.

Comments assert that the utility

allowance promotes dependence and

reliance on federal subsidy. Because of

the utility allowance, the HA must pay

a tenant without countable income to

live in an assisted unit. The utility

allowance does not encourage

conservation and reduce tenant

consumption.

2. HUD Response

The utility allowance is used when

the family is responsible for paying the

cost of utilities or other housing services

that are not included in the rent to

owner. The HA’s utility allowance is the

HA’s estimate of the monthly cost for

reasonable utility consumption (see

definition of ‘‘utility allowance’’ at

§ 5.603). The utility allowance performs

different roles in the certificate and

voucher programs. In the certificate

program, the utility allowance is used so

that a family does not pay more than the

maximum rent. In the voucher program,

the utility allowance is used so that a

family does not pay less than the

minimum rent.

In the certificate program, the utility

allowance is deducted from the family’s

total rent (‘‘total tenant payment’’) to

calculate the amount payable to the

owner (‘‘tenant rent’’). The utility

allowance is used so that all families

pay the same rental contribution (‘‘total

tenant payment’’), regardless of whether

utilities for a particular unit are paid by

the owner or the family. The utility

allowance is necessary for equivalent

and equitable treatment of families that

rent units with or without tenant-paid

utilities.

In the certificate program, the amount

of ‘‘rent’’ paid by a family is specified

by law. If the utility allowance is more

than the total tenant payment, the

family receives a ‘‘utility

reimbursement’’ from the HA. The

utility reimbursement is paid so that the

family’s out of pocket utility cost to live

in the unit does not exceed rent payable

under the statutory rent formula. The

HA utility reimbursement provides

money the family can use to pay for

utilities not included in the rent to

owner.

The amount of the utility allowance

and utility reimbursement are not

determined by the actual utility costs of

a particular assisted family. Rather, the

utility allowance is based on reasonable

consumption by an ‘‘energy

conservative household of modest

circumstances’’ (§ 5.603) in the

community. A family that wastes or

over-uses utilities does not get a higher

utility allowance or utility

reimbursement. The family pays for any

excess consumption of tenant-paid

utilities and benefits from its own

funds.

In the voucher program, the utility

allowance only affects calculation of the

statutory maximum subsidy (‘‘minimum

rent’’). Under the voucher law, the

family must pay a minimum share of the

actual rent for the unit ‘‘including the

amount allowed for utilities in the case

of a unit with separate utility metering’’

(42 U.S.C. 1437f(o)(2)). Thus the

voucher statute explicitly requires use

of a utility allowance for separately

metered utilities that are not included in

rent to owner. The utility allowance

increases the base for calculation of the

minimum rent, and therefore increases

the minimum rent paid by affected

voucher families.

B. Administration of Utility Allowance

1. Comments

Comments state that the utility

allowance requirement forces an HA to

review utility costs annually and submit

cumbersome utility calculations for

HUD approval. Comments state that the

rule should require HUD to act on the

HA utility allowance submission within

30 days. Comments ask if an HA should

use the new utility allowance schedule

if the HA is conducting a interim

reexamination because of a change in

family income. Comments state that an

HA should maintain separate utility

allowance schedules for areas with

significant difference in utility costs.

2. HUD Response

Under the rule, the HA is not required

to seek HUD approval before adopting

the utility allowance schedule. The HA

must give HUD a copy of the utility

allowance schedule, and—if requested

by HUD—must provide any information
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23845

or procedures the HA used to prepare

the schedule (§ 982.517(a)(2)). At HUD’s

direction, the HA must revise the

schedule, to correct any errors, or as

necessary to update the schedule

(§ 982.517(c)(2)).

As in the past, the HA must review its

utility allowance schedule each year

(§ 982.517(c)(1)). Under the old rule, the

HA was required to revise the schedule

if there was a ‘‘substantial change’’ in

utility rates. Some HAs have failed to

keep their allowance schedules up to

date. The new rule establishes a more

objective and definite standard

triggering the requirement for revision

of the utility allowance schedule. The

new rule now provides that the HA

must revise the allowance for a

particular utility category if there is a

ten percent or more change in the utility

rate since the last revision

(§ 982.517(c)(1)).

An HA must maintain information

that supports its annual utility

allowance review and any revisions of

the utility allowance schedule

(§ 982.517(c)(1)).

Sometimes, there may be significant

differences in utility cost levels in

different parts of an HA jurisdiction.

This difference may occur because the

HA has a large operating area, such as

a State with different climatic regions,

or because there are different utility

suppliers for portions of the HA

jurisdiction. The rule does not seek to

specify when an HA should or must

issue separate schedules for different

portions of the HA jurisdiction. In

general, the HA retains discretion to

decide when it is necessary to set up

separate schedules. However, an HA’s

utility allowances must meet the

regulatory standard—that the

allowances must be based on utility

costs for households ‘‘in the same

locality’’ (§ 982.517(b)(1)).

At any regular or interim

reexamination of family income, the HA

must determine the appropriate utility

allowance from the current utility

allowance schedule (§ 982.517(d)(2)). At

the effective date of the reexamination,

the HA must make appropriate

adjustments in the housing assistance

payment, including adjustments

reflecting revision of the utility

allowance. In the certificate program,

changes in the utility allowance may

affect the amount of the assistance

payment to owner, the rent remaining to

be paid by the family (‘‘tenant rent’’),

utility reimbursement, and maximum

rent to owner for a new rental. In the

voucher program, changes in the utility

allowance only affect calculation of the

minimum rent.

C. Services Included in Utility

Allowance

1. Comments

The utility allowance schedule covers

tenant-paid utilities and other tenantpaid housing services. Comments state

that HUD should carefully review what

is included in the utility allowance.

Comments ask what other ‘‘services’’ are

covered.

Comments ask if the utility allowance

must include garbage service and sewer

service, though not mentioned in the

rule. Comments state that the utility

allowance should cover sewer and trash

removal expenses.

The rule allows a utility allowance for

air conditioning of the unit. Comments

ask if air conditioning is mandatory.

Comments ask if the HA must grant a

utility allowance for air conditioning if

air conditioning is not commonly used

for residential rentals in the HA area.

Comments recommend that HUD should

clarify that the utility allowance does

not include ‘‘non-essential utility

mediums’’ such as cable and satellite

television.

2. HUD Response

The HUD Office of Policy

Development and Research has found

that HAs throughout the United States

use a wide variety of utility allowance

schedules and formats. Many schedules

are internally inconsistent, or at wide

variance to the schedules of other

jurisdictions using the same utility

suppliers.

HUD believes that the use of a

common format will help HAs improve

the quality and consistency of HAadopted utility allowance schedules, so

that the schedules more accurately

represent utility consumption and costs

in different localities. The final rule

provides that the utility allowance

schedule must be prepared and

submitted on the form prescribed by

HUD (§ 982.517(b)(4)).

An HA’s utility allowance schedule,

and the utility allowance for an

individual family, must include the

utilities and services that are necessary

in the locality to provide housing that

complies with the housing quality

standards. However, the HA may not

provide any allowance for non-essential

utility costs, such as costs of cable or

satellite television. (§ 982.517(b)(2)(i))

The HA utility schedule must classify

covered utilities and other services

according to specified categories

(§ 982.517(b)(2)(ii)). The final rule

refines and supplements the list of

covered categories:

heating; air conditioning; cooking; water

heating; water; sewer; trash collection

(disposal of waste and refuse); other electric;

refrigerator (cost of tenant-supplied

refrigerator); range (cost of tenant-supplied

range); and other specified housing services.

The utility allowance must cover

tenant-paid fees or costs for trash

collection and sewage.

The housing quality standards do not

require air conditioning. The final rule

provides that the HA must provide a

utility allowance for tenant-paid airconditioning costs if the majority of

housing units in the market provide

centrally air-conditioned units or there

is appropriate wiring for tenantinstalled air conditioners

(§ 982.517(b)(2)(ii)).

D. Determining Utility Allowance: Unit

Size and Size of Family

1. Comments

The rule provides that a utility

allowance is based on the unit actually

leased by family, not on the family unit

size (appropriate size unit for family

under the HA ‘‘subsidy standards’’)

(§ 982.517(d)(1)). According to

comments, the utility allowance should

be based on the family unit size.

Comments note that an elderly family

that wants to stay in the same unit rent

may rent a unit larger than necessary

(larger than the family unit size). If the

HA uses the utility allowance for the

actual size unit, the rent exceeds FMR,

and the family must move.

Comments state that an HA should

have the option to give a utility

allowance based either on the number of

occupants or on the unit size. Other

comments state that the family should

receive a utility allowance for the larger

of family unit size or actual unit leased.

Comments state that the utility

allowance should be based on actual

need for the particular utility by the

actual family configuration. Comments

claim that utility expenses reflect the

size of family, not the size of the unit.

Comments state that using the utility

allowance for a smaller unit penalizes a

family for renting a smaller unit to

reduce family rent.

2. HUD Response

The final rule provides that the HA

must use the utility allowance for the

actual unit size rented. HUD has not

accepted the recommendation to use the

utility allowance for the family unit size

under the HA subsidy standards, or the

greater of the utility allowance for the

family unit size or actual unit size.

In occupancy of a particular unit, the

family needs to pay utilities for the

actual unit rented. In general, utility

costs will be higher if a family leases a

unit with more bedrooms. Furthermore,
23846 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

utility cost is primarily affected by the

character of the unit rather than the

character of the family.

For a regular tenancy in the certificate

program, the initial gross rent may not

exceed the FMR/exception rent limit.

The maximum gross rent includes the

appropriate utility allowance for the

actual unit rented by the family.

E. Reasonable Accommodation

The final rule adds a new provision

allowing the HA to establish a special

higher utility allowance, on a case-bycase basis, as a reasonable

accommodation for a disabled person.

The rule provides that on request from

a family that includes a person with

disabilities, the HA must approve a

utility allowance which is higher than

the applicable amount on the utility

allowance schedule if a higher utility

allowance is needed as a reasonable

accommodation in accordance with 24

CFR part 8 to make the program

accessible to and usable by the family

member with a disability (§ 982.517(e)).

F. Direct HA Payment of Tenant Utility

Cost

1. Comments

Comments state that there is a risk of

unit damage or harm to other residents

if the tenant does not pay the utility bill.

HUD should require the HA to pay

utility reimbursement directly to the

utility company, or should permit direct

payment with family consent.

Comments recommend that HUD

should eliminate utility reimbursement.

Comments state that the term ‘‘utility

reimbursement’’ should be used for the

voucher program, and indicates that the

family receives the same utility

reimbursement in both programs.

2. HUD Response

The rule provides that if the housing

assistance payment exceeds rent to

owner, the HA may pay the balance of

the payment either to the family or

directly to the utility supplier to pay the

utility bill (§ 982.514(b)). In the

certificate program, this case occurs

when there is a utility reimbursement

(because the utility allowance exceeds

the total tenant payment). In the

voucher program, this case occurs when

the amount of the voucher subsidy (as

calculated by the statutory formula)

exceeds the rent to owner; there is no

utility reimbursement (i.e., no payment

based on the difference between the

utility allowance and the family

contribution).

The rule does not, as suggested by

comment, require the HA to pay

certificate utility reimbursement

directly to the utility company. The rule

also does not require that the HA must

secure family assent for direct payment.

The HA has the election whether to

remit the payment to the family or the

utility supplier.

XIV. Reexamination of Family Income

A. Comments

Comments state that HUD should set

a uniform policy on interim

reexamination. Comments state that the

HA should be required to process any

request for reexamination because of

change in income or composition since

the last determination. Income of low

income families, particularly

employment income, fluctuates. The HA

must respond quickly to decrease in

family income. If a family reports a

decrease in income, HUD should require

an HA to promptly increase the

assistance payments.

Comments state that changes should

be effective for the month after the

action that results in the decrease. The

HA should reduce the family

contribution even if the family delays

reporting a decrease in income, or

cannot immediately verify loss of

income, e.g., because a former employer

will not verify unemployment.

Comments state that an increase in

the family contribution should not be

effective before the second month after

family income increases, or after 30

days notice to the family. A family

needs a delay to adjust and budget for

an increase in family income.

An HA asks for authority to require

interim re-examination when family

income increases, not just when adding

a new family member. Comment notes

that HAs are currently required to

process reductions no matter how small

the change in tenant contribution. The

HA should be permitted to limit the

number of interim adjustments each

year, or to set a minimum dollar limit.

For families that claim little or no

income, a comment recommends

reexamination more frequent than

annually.

B. HUD Response

At any time, the HA may conduct an

interim examination of family income

and composition (§ 982.516(b)(1)). At

any time, a family may ask the HA to

conduct a recertification if there is a

change in family income or composition

since the last determination

(§ 982.516(b)(2)).

Reexamination affects the amount of

the subsidy and the family share of rent.

The HA must conduct reexamination in

accordance with policies in the HA

administrative plan.

The proposed rule would have

provided that the HA must determine

‘‘whether a change should be made’’ in

response to a change of family income

or composition between annual

reexaminations. The final rule provides

that the HA ‘‘must make’’ an interim

determination effective ‘‘within a

reasonable time’’ after the family request

(§ 982.516(b)(2)). The rule has not

adopted the proposal that HAs be

allowed to limit the number of interim

reexaminations at the family’s request.

The final rule provides that an HA

must adopt policies prescribing when

and under what circumstances the

family must report a change in family

income or composition (§ 982.516(c)).

The rule clarifies that HAs have

authority to initiate an interim

reexamination when family income

increases (§ 982.516(b)(1)). However,

HAs are not required to initiate an

interim reexamination not requested by

the family.

The rule also provides that the HA

must adopt policies prescribing how to

determine the effective date of a change

in the housing assistance payment

because of an interim determination

(§ 982.516(d)(1)). At the effective date of

a regular or interim reexamination, the

HA must make appropriate adjustments

in the housing assistance payment and

family unit size (§ 982.516(d)(2)).

If a reexamination is requested by the

family, the HA must make the interim

reexamination effective within a

‘‘reasonable time’’ after the family

request (§ 982.516(b)(2)). Within this

broad standard, HAs have broad

authority to set local policies on when

to increase the assistance payment

because of a reduction of family income.

HUD does not wish to set a rigid

national standard on timing of changes

in the family contribution and

assistance payment as a result of an

interim reexamination.

The law provides that ‘‘reviews of

family income shall be made no less

frequently than annually’’ (42 U.S.C.

1437f(c)(3)(A)). The law does not

prescribe requirements for interim

reexaminations between the annual

review. HUD believes that HA’s should

have broad discretion to determine

policies on conducting interim

reexaminations. Over the years, the

interim reexamination policies adopted

in HA administrative plans have seldom

been a source of contention. HAs have

almost always acted responsibly in

adopting policies on when to hold an

interim reexamination, and when to

make effective a change in the family

share and housing assistance payment

as a result of the reexamination.
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23847

Common rules for the Section 8 and

public housing programs provide that

an HA must reexamine family income

and composition at least annually

(§ 5.617(a)). A family must submit

information or documentation necessary

to determine the family’s adjusted

income (§ 5.617(b)(2)). This rule

confirms that the HA must obtain

verification of factors affecting the

family’s adjusted income, or must

document why verification was not

available (§ 982.516(a)).

XV. Project-based Certificate (PBC)

Program: Rent to Owner

A. PBC: Comparability Procedures

During the term of a HAP contract,

PBC rents must be reasonable

(§ 983.256(a)(2)). Comparability applies

both to HA determination of initial rent

to owner (§ 983.256(a)(1)), and to regular

or special adjustments during the HAP

contract term (§ 983.254(b)(1) (regular);

§ 983.255(c)(2) (special)). For PBC

housing, the HA must redetermine that

the current rent to owner is reasonable

at least annually during the HAP

contract term (§ 983.256(a)(3)). The final

rule modifies procedures for analysis of

comparability.

The existing and proposed rule did

not specify the form of comparability

analysis for tenant-based or projectbased certificate assistance. For PBC,

but not for the tenant-based program,

the final rule provides that the HA must

use a standard HUD form to document

comparability of the initial rent

(§ 983.256(c)(1)(ii)) and adjusted rent

(§ 983.256(c)(2)(iii)). For both purposes,

HA records must show the calculation

of comparable rent (‘‘correlated subject

rent’’) on HUD Form 92273—‘‘Estimates

of Market Rent by Comparison.’’ Form

92273 lists property ‘‘characteristics,’’

and provides a format to enter the plus

or minus dollar value of the differences

(adjustments) between the subject and

the comparable units for each

characteristic. A separate Form 92273

must be prepared for each ‘‘unit type’’

in the PBC project: e.g., apartment, rowhouse, town house or single-family

detached.

In determining initial rent, the

comparability analysis must use at least

three comparable units in the private

unassisted market (§ 983.256(c)(1)(ii)).

However, the rule does not specify the

minimum number of comparables that

must be used in determining

comparability of the adjusted rent.

The existing and proposed rule do not

specify minimum qualifications of the

person who performs a comparability

analysis for determination of initial or

adjusted rent. For PBC only, the final

rule provides that the HA must use a

qualified ‘‘State-certified appraiser’’

(§ 983.256(c)(1)(i)) for determination of

initial rent. The term ‘‘State-certified

appraiser’’ is defined at § 983.2 (added

by rule published July 3, 1995), but was

not previously used in the rule. A Statecertified appraiser must meet minimum

certification requirements established

by the Appraisal Foundation. To assure

objectivity, the rule provides that the

appraiser may not have any direct or

indirect interest in the property or

otherwise (§ 983.256(c)(2)(iii)).

For determination of rent during the

term of a PBC HAP contract, the HA is

not required to use a State-certified

appraiser. The comparability study may

be prepared by HA staff or by another

qualified person (§ 983.256(c)(2)(iii)).

B. PBC: Approval of Rent; HA

Certification That Rent Is Reasonable

Under the old rule, all PBC rents were

approved by HUD. Under the new rule

HUD must approve initial rent for HAowned PBC units or PBC units financed

with a HUD-insured multifamily

mortgage (§ 983.253(b)). The HA

approves the initial rent to owners for

PBC units that are not financed with a

HUD-insured multifamily mortgage, and

are not owned by the HA (§ 983.253(a)).

In all cases, the HA must certify to

HUD that the initial PBC rent to owner

is reasonable (§ 983.256(c)(1)(iii)).

C. PBC: Rent to Owner: Annual

Adjustments

1. Adjustment by Published Factor

At each annual anniversary, rent to

owner is adjusted upon a timely request

by the owner. Adjusted rent is the lesser

of:

—The pre-adjustment rent to owner

multiplied by the applicable factor

published by HUD,

—The reasonable rent as shown by an

HA ‘‘comparability study’’; or

—The rent requested by the owner.

(§ 983.254(b)(1); § 983.256(c)(2)).

Previously, program rules provided

that the rent is adjusted by applying the

most recently published factor: the HUD

factor that is in effect on the contract

anniversary date (when the adjustment

is effective). For future HAP contracts,

the final rule provides that rent will be

adjusted by the published AAF factor in

effect 60 days before the HAP contract

anniversary (§ 983.254(b)(2)). This new

rule applies if the Agreement to enter

housing assistance payments contract is

entered on or after the effective date of

this rule. For earlier contracts, the

applicable factor remains the factor in

effect at the contract anniversary date—

since this date is specified in the

existing contract documents.

2. Adjustment Comparability:

Comparability Studies

By law and contract, the adjusted rent

of housing assisted under the certificate

program may not exceed the reasonable

rent for comparable unassisted units.

This limitation is now separately and

independently expressed both in 42

U.S.C. 1437f(c)(2) (A) and (C).

This final rule contains HUD’s

regulations for conducting

comparability studies under

§ 1437f(c)(2)(C) in the Section 8 PBC

program (§ 982.206(c)(2)). To apply the

comparability limitation under

§ 1437f(c)(2)(C), the HA must conduct

an adjustment comparability study if

requested by the owner of a Section 8

PBC project. If the owner requests a

comparability study under

§ 1437f(c)(2)(C), the comparability study

must be submitted to the owner at least

60 days before the HAP contract

anniversary. Unless the comparability

study is submitted by this deadline, the

rent to owner (formerly ‘‘contract rent’’)

is adjusted by applying the annual

adjustment factor.

The proposed rule would have

provided that rent reasonableness only

applies to PBC annual adjustments if the

requested rent (gross rent, including the

allowance for tenant-paid utility) is 110

percent or more of the FMR limit. Under

the final PBC rule, as in the rule for the

tenant-based certificate program, rent

reasonableness always applies at the

annual adjustment of rent to owner (see

§ 983.254(b)(1); § 983.256(c)(2)). Factoradjusted rent may never exceed the

comparable rent.

By law, adjusted rent for a unit

assisted in the certificate program ‘‘shall

not exceed’’ rent for a comparable

unassisted unit in the market area (42

U.S.C. 1437f(c)(2)(A)). Moreover, rent

adjustments may not result in ‘‘material

differences’’ between rents for assisted

and unassisted units (42 U.S.C.

1437f(c)(2)(C)). HUD has determined

that any excess over the reasonable rent

for comparable unassisted units is a

material difference, and should not be

permitted. Any excess rent is a waste of

scarce funds.

Under the proposed rule, the

adjustment system would have wholly

ignored rent reasonableness if the factoradjusted rent did not exceed 110

percent of the FMR. In such cases, the

proposed rule afforded no means of

limiting the discrepancy between the

factor-adjusted rent and the reasonable

rent for a unit. Under the final rule, the

comparability analysis must be

conducted without regard to the relation
23848 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

between the adjusted rent and the

published FMR. The FMR determines

the general level of market rents in the

area. By contrast, the comparability

study determines the rental value of the

particular unit, and is therefore a more

precise way of determining the

appropriate rent and subsidy for the

particular unit.

The HA must conduct a comparability

study to limit PBC rent increases over

the initial rent. The adjusted rent for a

contract unit may not exceed the

reasonable rent as shown by a

comparability study. A comparability

study analyzes rents charged for

comparable unassisted units

(§ 982.206(c)(2)(ii)).

The final rule provides that an

adjustment comparability study must be

prepared on the standard HUD

multifamily appraisal form (HUD Form

92273) (§ 982.206(c)(2)(iii)). The same

form is also used to determine

comparability of the initial rent at the

beginning of the PBC HAP contract

term. For determination of adjustment

comparability, the rule also provides

that a comparability study must show

how the reasonable rent was

determined. The appraisal must state

major differences between the contract

units and comparable unassisted units

(§ 982.206(c)(2)(iv)).

3. When Owner Requests Rent Increase;

HA Comparability Study

As indicated above, the proposed rule

would have required the HA to conduct

a comparability analysis only if the rent

requested by an owner is 110 percent or

more of the FMR limit. The proposed

rule would have also provided that the

HA must first notify the owner in

writing of its intention to conduct a rent

reasonableness study, and then also

notify owner of the study result 30 days

after owner requests an increase of the

rent.

The old rule did not specify when the

owner must submit a request for

adjustment of the rent. The proposed

rule would have provided:

—That rent will not be adjusted

retroactively—for the period before

owner’s request.

—That rent will not be adjusted for the

60 days following the owner’s request.

—That the adjustment for any

anniversary is lost unless requested

by the owner at least 60 days before

the following anniversary.

Comments question the need to notify

an owner that the HA intends to

conduct a comparability study.

Comments state that the notice

requirement is an administrative

burden, and will not improve the PBC

program. Under the final rule, HUD has

eliminated the regulatory directive

requiring HAs to provide notice of the

annual comparability study. (Of course,

HAs may elect to remind owners at

appropriate points in the annual cycle.)

Under the new rule, an owner must

request the adjustment (increase) for any

contract anniversary at least 120 days

before that contract anniversary

(§ 983.254(a)(1)). The annual adjustment

is wholly lost unless requested by this

deadline.

The final rule establishes a fixed

timetable both for owner’s request for

adjustment, and for the HA submission

of a statutory comparability study in

response to the owner request. The rule

provides that:

—A PBC owner must request a rent

increase at least 120 days before the

HAP contract anniversary. The

owner’s request for increase must be

submitted in writing, and ‘‘in the form

and manner required by the HA’’

(§ 983.254(a)(1)).

—If the owner properly requests a rent

increase by the 120 day deadline, the

HA must submit a comparability

study to the owner at least 60 days

before the contract anniversary

(§ 983.256(c)(2)(v)).

If the owner misses the 120 day

deadline, the owner does not receive

any increase in the rent at the annual

adjustment (§ 983.254(a)(2)). If the HA

misses the 60 day deadline, an increase

in rent by application of the published

factor is not subject to comparability

(§ 983.256(c)(2)(v)). In this case, the

owner receives the full annual

adjustment by application of the

published factor to the pre-adjustment

rent.

The HA may not grant a rent increase

unless the owner has complied with

obligations under the HAP contract. The

final rule (§ 983.254(a)(2)(ii)) prohibits

an increase in the rent unless:

during the year before the contract

anniversary, the owner complied with all

requirements of the HAP contract, including

compliance with the HQS for all contract

units.

4. Rent Decrease at Annual Adjustment

Rent may increase or decrease by

application of the published annual

adjustment factor (AAF) and

comparability at the contract

anniversary (see § 983.254(b)). The old

rent is multiplied by the published

factor. Rent to owner increases if the

factor is positive (a factor of more than

one) and if the increased rent is

reasonable. Rent decreases if the

published factor is negative (a factor of

less than one). The owner must submit

a written request for a ‘‘rent increase’’

(§ 983.254(a)(1)). The request must be

submitted by the 120 day deadline. A

rent decrease by application of the

published factor or comparability occurs

automatically, without any owner

request.

Rent may decrease at annual

adjustment: either by application of a

negative factor, or by application of

comparability. However, under the old

rule, rent could not be adjusted below

the initial rent—the contract rent (rent

to owner) at the beginning of the PBC

HAP contract term. The proposed rule

would have removed this limitation for

both tenant-based and PBC. For PBC

alone, the final rule retains this

limitation. The final rule provides that

the amount of the initial rent—if

correctly determined—is the limit on

any downward adjustment of the rent.

The PBC rule provides that, except as

necessary to correct errors in

establishing the initial rent in

accordance with HUD requirements, the

adjusted rent to owner must not be less

than the initial rent (§ 983.254(d)).

Comments state that the rule should

not allow an HA to decrease the rent by

applying a negative adjustment factor.

This recommendation is not adopted.

The final rule provides that rent to the

owner must be adjusted ‘‘up or down’’

by applying the published factor in

accordance with regulatory

requirements (§ 982.204(b)(4)). The

amount of rent should not be insulated

from rent reduction by application of

the factor, which is designed to reflect

the best currently available data on

market changes in residential rent and

utility cost levels. Furthermore, the rule

clarifies that rents will be reduced, by

application of a negative factor or by

comparability, regardless of whether

owner requests an adjustment of the

rent. Obviously, owners who expect a

reduction will not request a rent

adjustment.

D. PBC: Rent to Owner: Special

Adjustments

HUD may approve a ‘‘special

adjustment’’ of the rent paid to a PBC

project owner (§ 983.255(a)). A special

adjustment may only be granted if there

are ‘‘substantial and general increases’’

in owner costs for any of four specified

purposes: real property taxes, special

government assessments, utility rates or

costs of unregulated utilities

(§ 983.255(b); see 42 U.S.C.

1437f(c)(2)(B)).

The owner does not have any right to

receive a special adjustment

(§ 983.255(a)(2)). HUD has discretion to

grant or deny owner’s request for a

special adjustment (§ 983.255(a)(1)).
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23849

The owner must justify a special

adjustment. Comments recommended

that owners should be required to

submit sworn or certified financial

statements to justify requests for special

rent adjustments. Comments

recommended that special adjustment

requests should be automatically

approved if the HUD field office review

is not completed within 30 days.

The rule provides that a PBC special

adjustment may only be granted ‘‘if and

to the extent the owner demonstrates

that cost increases are not adequately

compensated by application of the

published annual adjustment factor at

the contract anniversary’’

(§ 983.255(c)(1)). The owner must

demonstrate that the rent to owner is

not sufficient for proper operation of the

housing. The owner must submit

financial information, as required by the

HA, that supports the grant or

continuance of a special adjustment

(§ 983.255(d)).

For PBC HAP contracts covering 20 or

more units, the owner must submit

audited financial information to support

the request for a special adjustment. In

establishing this 20 unit threshold, HUD

has balanced the benefit of additional

assurance provided by the audit against

the cost and burden for the owner. The

rule does not require submission of

sworn or certified information as

suggested by comment. However, any

program submission by an owner or

auditor is subject to Federal criminal

penalties for misrepresentation or fraud

in connection with Federal financial

assistance.

HUD declines to grant AN automatic

special adjustment rent increase if the

HUD field office review is not

completed within 30 days. HUD may

need a longer period for review and

determination on the owner’s request

and materials submitted by the HA and

owner. The expiration of an arbitrary

period does not show that owner needs

an adjustment that meets the statutory

and regulatory standard. Moreover, the

owner is never entitled to a special

adjustment. There is no contractual or

moral commitment to provide a special

adjustment under any circumstance.

If HUD finds that a special adjustment

is justified, special adjustments may be

made effective to cover past owner

costs. In general, it has been HUD’s

practice that a special adjustment is

made effective on the later of the first

day of the month following the date of:

(1) the owner’s request or (2) the tax rate

increase or other cost triggering the

special adjustment. This practice avoids

damage to the owner from necessary

delay in processing a request for special

adjustment.

E. PBC: Rent to Owner: Correcting

Mistakes

The proposed rule would have

provided that errors in establishing or

adjusting the rent are subject to ‘‘postaudit changes.’’ The final rule provides

that the HA may, ‘‘at any time,’’ correct

any errors in establishing or adjusting

rent in accordance with HUD

requirements (§ 983.259). The HA may

recover any excess payment from the

owner.

F. PBC: Rent to Owner: HA-Owned Units

A 1990 law provides that an HA that

administers the Section 8 program may

enter into a HAP contract with itself to

pay assistance for HA-owned units (42

U.S.C. 1437f(a)). The rule provides that

HUD must approve initial rents

(§ 983.253(b), and annual rent

adjustments (§ 983.254(c))) for HAowned PBC units.

XVI. Special Housing Types

A. General

Subpart M of the rule gathers

provisions on special housing types in

the tenant-based programs. The special

housing types are program variants

designed to meet special housing needs

within the structure of the Section 8

tenant-based programs. The special

housing types are:

—Single room occupancy (SRO)

housing;

—Congregate housing;

—Group home (replacing prior

provisions on Individual Group

Residences);

—Shared housing;

—Cooperative;

—Manufactured home.

A single individual or other family

has the choice whether to use a special

housing type offered in the HA program,

or to rent other eligible housing

(§ 982.601(c)). The HA may not restrict

the family’s freedom to choose among

available units in the local housing

market (§ 982.601(c)).

Except for program modifications

explicitly stated in subpart M, all of the

regulatory requirements for other

tenant-based assistance also apply to the

special housing types (§ 982.601(d)).

The rule separately states the

requirements for each special housing

type.

In the proposed rule, provisions on

special housing types were left largely

unchanged, with some technical

clarification and reorganization. In the

final rule, HUD has restated the rules to

follow a more consistent and parallel

organization that addresses the basic

questions about each special housing

type:

—Who may reside in the housing,

—Whether there is a separate assistance

contract and lease for each assisted

individual,

—How to determine the maximum rent

paid to an owner and the amount of

the housing assistance payment, and

—Special housing quality standards

(HQS).

For each special housing type, the

rule states modifications of the standard

program HQS.

B. HA Choice

1. HA Discretion to Offer Special

Housing Type

In the past, HA’s were generally

required to offer each of the special

housing types permitted under HUD

program rules. HAs were only given the

option whether to allow shared housing.

HUD has now decided to allow an HA

maximum discretion in deciding

whether to offer each of the special

housing types permitted under program

rules. With two exceptions as described

below, the HA may now choose whether

to offer any particular special housing

type in its program (§ 982.601(b)). This

decision rests wholly in the discretion

of the individual HA, and HUD does not

second-guess or review the HA decision.

The HA administrative plan must state

the HA policy choice whether to offer

particular special housing types in the

HA tenant-based program

(§ 982.54(d)(17)). HUD does not approve

the administrative plan.

2. Person With Disabilities: Reasonable

Accommodation

An HA’s Section 8 program must be

readily accessible to persons with

disabilities (Section 504 of the

Rehabilitation Act of 1973, and HUD’s

implementing regulation (24 CFR part

8)). The rule provides that an HA must

permit a family to use any special

housing type if needed as a reasonable

accommodation so that the program is

readily accessible for persons with

disabilities (in accordance with 24 CFR

part 8 (§ 982.601(b)(3)).

3. Manufactured Home

The HA must also allow a family to

rent a manufactured home (with the

space on which the home is located)

(§ 982.620(a)(2)).

The regulations also permit HAs to

provide Section 8 assistance for a family

that owns a manufactured home and

leases only a manufactured home space

(§ 982.620(a)(3) and §§ 982.622 to

982.624). For such families, the

assistance only covers the cost of space

rental. The HA may elect whether to

provide such space rental assistance in
23850 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

the tenant-based program

(§ 982.620(a)(3)).

Both for rental of a manufactured

home and space, or for manufactured

home space rental, the HA must comply

with special manufactured home

housing quality standards (HQS)

(§ 982.621). The basic Section 8 Housing

Quality Standards (HQS) describe the

physical characteristics of housing that

can be rented under the program (see

§ 982.401). HAs must use these HQS

standards, and must allow rental of

housing that meet the HQS standards.

The HQS for manufactured homes

describe the physical characteristics of

manufactured housing that can be

rented under the program (§ 982.621).

HAs must use these HQS standards, and

must allow families to rent

manufactured homes that meet the

standards. If the HA elects to offer space

rental assistance, the HA must also use

the physical HQS for manufactured

homes for such housing (§ 982.620(b)(1)

and § 982.621).

C. Family Choice

In an HA’s tenant-based program, all

families have freedom to shop for

eligible housing that is available for rent

in the local market (§ 982.353 (a) and

(f)). An HA may not restrict family

choice by requiring the family to rent

housing that qualifies as a special

housing type, or to rent any specific

unit.

If an HA has decided to offer a special

housing type in its program, a family

has the choice whether to rent housing

that qualifies as a special housing type

or as any specific special housing type,

or to rent other eligible housing in

accordance with requirements of the

program. The HA may not set aside

program funding for special housing

types in general, or for a specific special

housing type. (§ 982.601(c).)

D. Group Homes for Elderly or Disabled

The final rule substantially reforms

and simplifies the old rules on

‘‘Independent Group Residences’’ (IGR)

for persons who are elderly or disabled.

The proposed rule would have largely

codified and continued IGR

requirements under the old certificate

and voucher rules. Under the old rule,

an elderly or disabled participant who

cannot live independently may live in

group housing with necessary

supportive services. The IGR must be

approved or licensed by the State. A

State-recognized service agency

determines the supportive service needs

of IGR residents and coordinates

services for the residents. The State

approves the agreement between the

landlord and the agency that provides

supportive services.

Under the old IGR program rules, the

HA must determine that prospective

IGR residents are unable to live

independently. The HA must assure that

IGR residents receive necessary services.

In this respect, the treatment of IGRs

differs from all other housing that may

be selected by a certificate or voucher

holder under the HQS. For non-IGR

housing, the HA does not ask whether

the family has the capacity for

independent living.

In the final rule, HUD has reshaped

and simplified the old IGR

requirements. First, HUD eliminates the

requirement that group housing is only

available for individuals who cannot

live independently. Second, HUD

wholly eliminates the Federallyimposed supportive services

requirements.

The new rule dramatically simplifies

the role of the HA. The HA does not

assess the nature and character of the

occupant’s disability in order to match

the occupant with requirements for

occupancy in a group home, or to assure

that the occupant will benefit from

appropriate supportive services.

As in the past, the new rules provide

that a group home must be licensed by

the State. The State may or may not

require supportive services or other

protections or benefits for group home

residents.

An elderly or disabled Section 8

participant chooses whether to live in a

group home or in other housing that

satisfies the HUD housing quality

standards. The HA may not bar access

to group housing because the HA

believes that the participant can live

independently, and does not need

supportive services. Conversely, the HA

may not bar access to group housing

because the HA believes that the

participant needs supportive services

that are not available at the housing.

If a family seeks admission to certain

units, the owner—not the HA—

determines whether the family qualifies

to reside in the housing. In all Section

8 housing, the selection of tenants is the

function of the owner (42 U.S.C.

1437f(d)(1)(A)). The owner may

determine qualifications for occupancy.

For group housing, as for other

housing that meets the Section 8

housing quality standards, the HA has

no responsibility or authority to act as

a gatekeeper who determines whether

the assisted family has or lacks the

capacity to live independently. A

Section 8 family may choose to live in

a group home or other eligible housing.

The HA may not inquire into the nature

or extent of disability.

The existing and proposed rule would

have provided that IGR residents must

be ‘‘ambulatory’’ and capable of taking

appropriate actions for their own safety

in an emergency. These provisions have

been excised. Such safety concerns are

critical, but are better handled by State

and local authorities than by imposing

a layer of Federal regulatory

requirements enforced through local

housing authorities. Further, safety

should be a concern for residents of all

housing or all assisted housing, not just

for residents of Section 8 group homes.

In the final rule, HUD has retained

provisions confirming that residents of

a group home must not require

continual medical or nursing care. Since

the beginning of the Section 8 program,

HUD has construed the Section 8 statute

as precluding assistance in facilities that

provide continual medical or nursing

care. Section 8 was designed to provide

rental assistance, rather than as a

subsidy for nursing homes or other

medical facilities.

In a Section 8 group home, up to

twelve elderly or disabled individuals

live together in a single unit (which may

be an apartment or a home) (§ 982.610).

Group homes serve a vulnerable

population. The rule therefore provides,

as in the past, that group homes must be

licensed by the State (§ 982.612). The

State may devise and enforce its own

scheme of protections for elderly and

disabled group home residents.

However, such protections are not

required by HUD, and are not enforced

by the HA in administering Section 8

assistance for a group home resident.

In the proposed rule (as in the

existing regulation), the HQS for

Independent Group Residences would

have provided that sanitary facilities

must accommodate the needs of

‘‘physically handicapped occupants

with wheelchairs or other special

equipment.’’ The final rule provides that

sanitary facilities in a group home must

be accessible to and usable by the

residents, including residents with

disabilities. (§ 982.614(c)(1)(iv)). The

group home must contain sanitary

facilities readily accessible to and

usable by residents, including persons

with disabilities.

This special housing type is now

called a ‘‘group home,’’ rather than

‘‘Independent Group Residence’’ (or

IGR) (§ 982.4(b)).

E. Other Changes

1. Congregate Housing

The proposed rule would have

provided across-the-board that subsidy

for an elderly or disabled person in

congregate housing is controlled by the
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23851

zero bedroom FMR/exception rent limit.

The final rule provides that if there are

two or more rooms (not including

kitchen or sanitary facilities), the one

bedroom FMR/exception rent limit

determines the maximum subsidy

(§ 982.608(a)(2)). (As indicated above,

additional space is allowed if an HAapproved live-in aide also lives in the

unit to care for an elderly or disabled

member of the family.)

2. Shared Housing

In shared housing, an assisted family

shares a home or apartment with other

assisted or unassisted residents. The

unit includes both common and private

space. The assisted family has exclusive

right to use its private space. The final

rule amends the minimum private space

requirement in the HQS for shared

housing.

Under the HQS, all housing must

meet so-called ‘‘performance’’

requirements, the minimum program

requirements. In addition, housing must

also meet ‘‘acceptability’’ standards

unless HUD has approved acceptability

variations because of local conditions.

The final rule revises acceptability

requirements defining the minimum

private space for residents of shared

housing.

The existing acceptability criteria

would have provided that the private

space for each assisted family must

contain enough space ‘‘so that children

of opposite sex, other than very young

children are not required to occupy the

same bedroom.’’ This private space

acceptability requirement is now

deleted.

The amount of private space is now

solely governed by the performance

standard, requiring that the private

space for an assisted family must

contain at least one bedroom for each

two persons (§ 982.618(d)). The final

rule is revised to provide that the

number of bedrooms in the family’s

private space may not be less than the

‘‘family unit size’’—the appropriate

number of bedrooms for the family

under the HA subsidy standards

(§ 982.618(d)(2)(ii)).

The old rule provided that two

assisted individuals may share a one

bedroom unit in shared housing. The

new rule provides that a zero or one

bedroom unit may not be used for

shared housing (§ 982.618(2)(iii)). Such

units are too small for sharing by several

families—whether the families consist

of individual persons or of multi-person

families.

The rule is amended to clarify that the

assisted family may reside in a shared

housing unit with other assisted and

unassisted persons (§ 982.615(b)(2)).

However, as noted above, the assisted

family has the exclusive right to use of

its private space.

XVII. Live-in Aide for Disabled

Resident

The 1937 Act provides that an

assisted family may consist of one or

more elderly or disabled persons living

with one or more ‘‘persons . . .

essential to their care or well being’’ (42

U.S.C. 1437a(b)(3)(B); see

§ 982.201(c)(3)). The final rule is revised

(by adding a new § 982.316) to restate

and clarify authority for HA-approved

live-in aides in the certificate and

voucher programs (including live-in

aides for elderly or disabled persons

assisted in special housing types under

part 982, subpart M).

With approval of the HA, a live-in

aide resides with the family to provide

essential supportive services for an

elderly person or person with

disabilities (42 U.S.C. 1437a(b)(3)(B);

definition of ‘‘live-in aide’’ at 24 CFR

§ 5.403). The live-in aide is not a

member of the assisted family, but is

counted in determining the appropriate

unit size, and therefore the amount of

subsidy for the family (§ 982.402(b)(6)).

The new rule provides that a family

that consists of one or more elderly or

disabled persons may request that the

HA approve a live-in aide to reside in

the unit and provide necessary

supportive services for a family member

who is a person with disabilities

(§ 982.316(a)). The HA must approve a

live-in aide if needed as a reasonable

accommodation to make the program

accessible to and usable by persons with

disabilities in accordance with HUD

regulations at 24 CFR part 8

(implementing Section 504 of the

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

794)).

Under existing regulatory provisions,

occupancy by a live-in aide is counted

in determining the ‘‘family unit size’’—

the appropriate unit size for the family

size and composition under the HA

subsidy standards (§ 982.402(b)(6); see

definition of ‘‘family unit size’’ and

‘‘subsidy standards’’ in § 982.4). For

ordinary rental housing or for a special

housing type, the family unit size is

used to determine the maximum

subsidy. This rule confirms that

occupancy by an HA-approved live-in

aide is also counted in determining

family unit size for special housing

types: § 982.608(b) (congregate housing);

§ 982.613(c)(1)(ii) (group home);

§ 982.617(c)(3) (shared housing);

§ 982.619(d)(2) (cooperative);

§ 982.620(c)(2) (manufactured housing).

The final rule specifies circumstances

in which the HA may decline to

approve a particular person as a live-in

aide for a person with disabilities

(§ 982.316(b)). The rule provides that an

HA may refuse to approve, or may

withdraw such approval, if a proposed

live-in aide:

—Commits fraud, bribery or any other

corrupt or criminal act in connection

with any federal housing program;

—Commits drug-related criminal

activity or violent criminal activity, or

—Currently owes rent or other amounts

to the HA or to another HA in

connection with Section 8 or public

housing assistance under the 1937

Act.

XVIII. Streamlining of Part 982

As part of the Department’s effort to

reinvent its regulations, this rulemaking

includes changes to 24 CFR parts 5 and

982.

Part 982 is amended to remove some

provisions that are explanatory in

nature but that neither impose

obligations nor confer benefits on

program participants. The information

stated in such provisions either is

available elsewhere or may be made

available in HUD guidance documents.

In addition, part 982 is amended to

delete some provisions which duplicate

provisions in regulations for other

programs administered pursuant to the

United States Housing Act of 1937 (1937

Act). Cross-cutting provisions are

consolidated in HUD regulations at 24

CFR part 5 and cross-referenced in part

982. Part 5 contains general provisions

applicable to more than one of the

Department’s programs, and,

specifically, contains definitions of

terms used in HUD programs. It is the

Department’s intent to include in part 5

as many as possible of the definitions

that are used in more than one program,

removing the need to restate these

definitions in numerous program

regulations.

This rule moves some of the

definitions in part 982 to part 5. An

introductory paragraph is added to the

definitions section at § 982.4, listing the

definitions applicable to the certificate

and voucher programs that are found in

part 5. The remaining program

definitions are stated in full in part 982.

XIX. Other Changes

To reflect the consolidation of

provisions of the former part 813, which

had been referenced in § 982.4, into 24

CFR part 5 (which took place by a final

rule published on October 18, 1996),

this rule revises the cross references in

§ 982.4 to part 813 to correctly reference

part 5.

The revised § 982.205(c)(3) makes

clear that an HA has the authority, if the
23852 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

HA states this policy in its

administrative plan, to remove an

applicant’s name from a tenant-based

assistance waiting list if the applicant

has refused offers of the types of tenantbased assistance offered by the HA.

(Section 982.204(c)(1) is revised to

remove a duplicative ‘‘example’’ of the

same principle.) (Even if an HA operates

a waiting list that covers public housing,

as well as Section 8, this rule only

affects an applicant’s selection for

Section 8 assistance, but does not affect

the applicant’s selection for public

housing.)

In general, an HA may remove from

its waiting list the name of an applicant

family that does not timely respond to

HA requests for information or updates

(e.g., information on current family

income). However, the rule is now

amended to specify that in

communicating such HA requests to an

applicant, the HA must provide

reasonable accommodation, in

accordance with 24 CFR part 8, for a

family member who is a person with

disabilities. The HA may not remove the

applicant’s name without providing

such accommodation. The final rule

provides that if an applicant does not

respond to the HA request for

information or updates because of the

family member’s disability, the HA must

reinstate the applicant in the family’s

former position on the waiting list

(§ 982.204(c)(2)).

The rule is amended to provide that

an HA may give preference for

admission of families that include a

person with disabilities. However, the

HA may not give preference for

admission of persons with a specific

disability (§ 982.207(c)).

Ordinarily, the HA may not extend

the term of a certificate or voucher to

more than 120 days (§ 982.303(b)(1)).

The rule is amended to give the HUD

field office authority to approve an

additional term extension if needed as

a reasonable accommodation to make

the program accessible to and usable by

a person with a disability

(§ 982.303(b)(2)). This amendment

removes the need to obtain a

Headquarters regulation waiver for such

extensions.

XX. Findings and Certifications

A. Impact on the Environment

A Finding of No Significant Impact

(FONSI) with respect to the

environment was made in connection

with the proposed rule in accordance

with HUD regulations at 24 CFR part 50

that implement section 102(2)(C) of the

National Environmental Policy Act of

1969, 42 U.S.C. 4332. Since the final

rule does not contain additional

provisions or requirements affecting the

environment, a new FONSI is not

required, and the FONSI for the

proposed rule is still valid. The FONSI

is available for public inspection and

copying during regular business hours

(7:30 a.m. to 5:30 p.m.) in the Office of

the Rules Docket Clerk, room 10276, 451

Seventh Street, SW, Washington, DC

20410–0500.

B. Federalism Impact

The General Counsel, as the

Designated Official under section 6(a) of

Executive Order 12612, Federalism, has

determined that the policies contained

in this rule do not have significant

impact on States or their political

subdivisions, or the relationship

between the Federal government and

the States, or on the distribution of

power and responsibilities among the

various levels of government. As a

result, the rule is not subject to review

under the Order. The rule merely

completes the process of combining and

conforming the regulations for tenantbased rental assistance under the

Section 8 certificate and voucher

programs and continues the

Department’s efforts to streamline

regulations.

C. Unfunded Mandates Reform Act

The Secretary, in accordance with the

Unfunded Mandates Reform Act of

1995, 2 U.S.C. 1532, has reviewed this

rule before publication and by

approving it certifies that this rule does

not impose a Federal mandate that will

result in the expenditure by State, local,

and tribal governments, in the aggregate,

or by the private sector, of $100 million

or more in any one year.

D. Impact on Small Entities

The Secretary, in accordance with the

Regulatory Flexibility Act (5 U.S.C.

605(b)), has reviewed this rule before

publication and by approving it certifies

that this rule will not have a significant

impact on a substantial number of small

entities, because it does not place major

burdens on housing authorities or

housing owners. The rule just simplifies

the operation of two similar programs

by combining and conforming their

provisions.

E. Regulatory Review

The Office of Management and Budget

(OMB) reviewed this rule under

Executive Order 12866, Regulatory

Planning and Review. OMB determined

that this rule is a ‘‘significant regulatory

action,’’ as defined in section 3(f) of the

Order (although not economically

significant, as provided in section 3(f)(1)

of the Order). Any changes made as a

result of that review are clearly

identified in the docket file, which is

available for public inspection in the

office of the Department’s Rules Docket

Clerk, room 10276, 451 Seventh St. SW,

Washington, DC 20410–0500.

Catalog

The Catalog of Federal Domestic

Assistance numbers for the programs

affected by this rule are 14.855 and

14.857.

List of Subjects

24 CFR Part 5

Administrative practice and

procedure, Aged, Grant programs—

housing and community development,

Individuals with disabilities, Loan

programs—housing and community

development, Low- and moderateincome housing, Mortgage insurance,

Pets, Public housing, Rent subsidies,

Reporting and recordkeeping

requirements.

24 CFR Part 8

Administrative practice and

procedure, Civil Rights, Equal

employment opportunity, Grant

programs—housing and community

development, Housing, Individuals with

disabilities, Loan programs—housing

and community development, Reporting

and recordkeeping requirements.

24 CFR Part 882

Grant programs—housing and

community development, Housing,

Homeless, Lead poisoning, Low- and

moderate-income housing,

Manufactured homes, Rent subsidies,

Reporting and recordkeeping

requirements.

24 CFR Part 982

Grant programs—housing and

community development, Housing,

Low- and moderate-income housing,

Rent subsidies, Reporting and

recordkeeping requirements.

24 CFR Part 983

Grant programs—housing and

community development, Housing,

Low- and moderate-income housing,

Rent subsidies, Reporting and

recordkeeping requirements.

Accordingly, title 24 of the Code of

Federal Regulations parts 5, 8, 882, 982,

and 983 are amended as follows:

PART 5—GENERAL HUD

REQUIREMENTS; WAIVERS

1. The authority citation for part 5

continues to read as follows:
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23853

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

otherwise noted.

Subpart A—Generally Applicable

Definitions and Federal Requirements;

Waivers

2. In § 5.100, definitions for ‘‘Indian’’

and ‘‘Indian Housing Authority (IHA)’’

are removed; and definitions for

‘‘Housing agency (HA)’’, and ‘‘MSA’’,

are added in appropriate alphabetical

order, to read as follows:

§ 5.100 Definitions.

* * * * *

Housing agency (HA) means a State,

county, municipality or other

governmental entity or public body (or

agency or instrumentality thereof)

authorized to engage in or assist in the

development or operation of lowincome housing. (‘‘PHA’’ and ‘‘HA’’

mean the same thing.)

* * * * *

MSA means a metropolitan statistical

area.

* * * * *

Subpart B—Disclosure and Verification

of Social Security Numbers and

Employer Identification Numbers;

Procedures for Obtaining Income

Information

3. Section 5.214 is amended by:

a. Revising paragraph (1) in the

definition of ‘‘Assistance applicant’’;

b. Revising paragraph (1)(i) in the

definition of ‘‘Entity applicant’’;

c. Removing the definition of ‘‘HA’’;

d. Revising paragraph (1)(i) in the

definition of ‘‘Individual owner

applicant’’; and

e. Revising paragraph (1) in the

definition of ‘‘Participant’’, to read as

follows:

§ 5.214 Definitions.

* * * * *

Assistance applicant. * * *

(1) For any program under 24 CFR

parts 215, 221, 236, 290, or 891, or any

program under Section 8 of the 1937

Act: A family or individual that seeks

rental assistance under the program.

* * * * *

Entity applicant. * * *

(1) * * *

(i) The project-based assistance

programs under Section 8 of the 1937

Act;

* * * * *

Individual owner applicant. * * *

(1) * * *

(i) The project-based assistance

programs under Section 8 of the 1937

Act; or

* * * * *

Participant. * * *

(1) For any program under 24 CFR

Part 891, or Section 8 of the 1937 Act:

A family receiving rental assistance

under the program;

* * * * *

Subpart D—Definitions and Other

General Requirements for Assistance

Under the United States Housing Act

of 1937

4. In § 5.403, paragraph (a) is revised,

and in paragraph (b), the definition for

‘‘Annual contributions contract’’ is

added in appropriate alphabetical order,

to read as follows:

§ 5.403 Definitions.

(a) The terms displaced person,

elderly person, low income family, nearelderly person, person with disabilities,

and very low income family are defined

in section 3(b) of the 1937 Act (42

U.S.C. 1437a(b)). For purposes of

reasonable accommodation and program

accessibility for persons with

disabilities, the term ‘‘person with

disabilities’’ means ‘‘individual with

handicaps’’ as defined in 24 CFR 8.3.

(b) * * *

Annual contributions contract (ACC)

means the written contract between

HUD and a PHA under which HUD

agrees to provide funding for a program

under the 1937 Act, and the PHA agrees

to comply with HUD requirements for

the program.

* * * * *

Subpart E—Restrictions on Assistance

to Noncitizens

5. In § 5.520, paragraphs (c)(1)(ii) and

(c)(2)(i) are revised, to read as follows:

§ 5.520 Proration of assistance.

* * * * *

(c) * * *

(1) * * *

(ii) Step 1. Determine total tenant

payment in accordance with § 5.613.

(Annual income includes income of all

family members, including any family

member who has not established

eligible immigration status.

* * * * *

(2) * * *

(i) Step 1. Determine the amount of

the pre-proration voucher housing

assistance payment in accordance with

24 CFR 982.505. (Annual income

includes income of all family members,

including any family member who has

not established eligible immigration

status.

* * * * *

PART 8—NONDISCRIMINATION ON

THE BASIS OF HANDICAP IN

FEDERALLY ASSISTED PROGRAMS

AND ACTIVITIES OF THE

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

6. The authority citation for part 8

continues to read as follows:

Authority: 29 U.S.C. 794; 42 U.S.C. 3535(d)

and 5309.

7. In § 8.28, paragraph (a)(5) is revised

to read as follows:

§ 8.28 Housing certificate and housing

voucher programs.

(a) * * *

(5) If necessary as a reasonable

accommodation for a person with

disabilities, approve a family request for

an exception rent under § 982.504(b)(2)

for a regular tenancy under the Section

8 certificate program so that the program

is readily accessible to and usable by

persons with disabilities.

* * * * *

PART 882—SECTION 8 MODERATE

REHABILITATION PROGRAMS

8. The heading for part 882 is revised

to read as set forth above.

9. The authority citation for part 882

is revised to read as follows:

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

10. Section 882.101 is revised to read

as follows:

§ 882.101 Applicability.

(a) The provisions of this part apply

to the Section 8 Moderate Rehabilitation

program.

(b) This part states the policies and

procedures to be used by a PHA in

administering a Section 8 Moderate

Rehabilitation program. The purpose of

this program is to upgrade substandard

rental housing and to provide rental

subsidies for low-income families.

(c) Subpart H of this part only applies

to the Section 8 Moderate Rehabilitation

Single Room Occupancy Program for

Homeless Individuals.

11. Section 882.102 is revised to read

as follows:

§ 882.102 Definitions.

(a) The definitions in 24 CFR part 5

apply to this part.

(b) In addition, the following

definitions apply to this part:

ACC reserve account (or ‘‘project

account’’). The account established and

maintained in accordance with

§ 882.403(b).

Agreement to enter into Housing

Assistance Payments Contract

(‘‘Agreement’’). A written agreement

between the Owner and the PHA that,
23854 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

upon satisfactory completion of the

rehabilitation in accordance with

requirements specified in the

Agreement, the PHA will enter into a

Housing Assistance Payments Contract

with the Owner.

Annual Contributions Contract

(‘‘ACC’’). The written agreement

between HUD and a PHA to provide

annual contributions to the PHA to

cover housing assistance payments and

other expenses pursuant to the 1937

Act.

Assisted lease (or ‘‘lease’’). A written

agreement between an Owner and a

Family for the leasing of a unit by the

Owner to the Family with housing

assistance payments under a Housing

Assistance Payments Contract between

the Owner and the PHA.

Congregate housing. Housing for

elderly persons or persons with

disabilities that meets the HQS for

congregate housing.

Contract. See definition of Housing

Assistance Payments Contract.

Contract rent. The total amount of

rent specified in the Housing Assistance

Payments Contract as payable to the

Owner by the Family and by the PHA

to the Owner on the Family’s behalf.

Decent, safe, and sanitary. Housing is

decent, safe, and sanitary if it satisfies

the applicable housing quality

standards.

Drug-related criminal activity means

the illegal manufacture, sale,

distribution, use, or the possession with

intent to manufacture, sell, distribute or

use, of a controlled substance (as

defined in Section 102 of the Controlled

Substances Act (21 U.S.C. 802)).

Drug-trafficking. The illegal

manufacture, sale, or distribution, or the

possession with intent to manufacture,

sell or distribute, of a controlled

substance (as defined in Section 102 of

the Controlled Substances Act (21

U.S.C. 802)).

Gross rent. The total monthly cost of

housing an eligible Family, which is the

sum of the Contract Rent and any utility

allowance.

Group home. A dwelling unit that is

licensed by a State as a group home for

the exclusive residential use of two to

twelve persons who are elderly or

persons with disabilities (including any

live-in aide).

Housing Assistance Payment. The

payment made by the PHA to the Owner

of a unit under lease by an eligible

Family, as provided under the Contract.

The payment is the difference between

the Contract Rent and the tenant rent.

An additional payment (the ‘‘utility

reimbursement’’) is made by the PHA

when the utility allowance is greater

than the total tenant payment.

Housing Assistance Payments

Contract (‘‘Contract’’). A written

contract between a PHA and an Owner

for the purpose of providing housing

assistance payments to the Owner on

behalf of an eligible Family.

Housing quality standards (HQS). The

HUD minimum quality standards for

housing assisted under the Section 8

moderate rehabilitation program. See

§ 882.404 and 24 CFR 982.401. For SRO

housing, see 24 CFR 982.605; and for

the Section 8 moderate rehabilitation

SRO program under subpart H of this

part, see § 882.803(b). For congregate

housing HQS, see 24 CFR 982.609; for

group housing HQS, see 24 CFR

982.614.

Moderate rehabilitation.

Rehabilitation involving a minimum

expenditure of $1000 for a unit,

including its prorated share of work to

be accomplished on common areas or

systems, to:

(1) Upgrade to decent, safe and

sanitary condition to comply with the

Housing Quality Standards or other

standards approved by HUD, from a

condition below these standards

(improvements being of a modest nature

and other than routine maintenance); or

(2) Repair or replace major building

systems or components in danger of

failure.

Owner. Any person or entity,

including a cooperative, having the legal

right to lease or sublease existing

housing.

Single room occupancy housing

(SRO). A unit that contains no sanitary

facilities or food preparation facilities,

or contains either, but not both, types of

facilities.

Statement of Family responsibility.

An agreement in the form prescribed by

HUD, between the PHA and a Family to

be assisted under the Program, stating

the obligations and responsibilities of

the Family.

Violent criminal activity. Any

criminal activity that has as one of its

elements the use, attempted use, or

threatened use of physical force against

the person or property of another.

§§ 882.106, 882.108, 882.109, 882.110,

882.111, 882.118 [Removed and reserved]

12. In Subpart A, §§ 882.106, 882.108,

882.109, 882.110, 882.111 and 882.118

are removed and reserved.

§ 882.112 [Redesignated as § 882.414]

13. Section 882.112 is redesignated as

§ 882.414 in subpart D.

§ 882.217 [Redesignated as § 882.517]

14. Section 882.217 is redesignated as

§ 882.517 in subpart E.

Subpart B—[Removed and Reserved]

14a. Subpart B is removed and

reserved.

Subparts C, F, and G—[Removed and

Reserved]

15. Subparts C, F, and G are removed

and reserved.

16. Section 882.401 is revised to read

as follows:

§ 882.401 Eligible properties.

(a) Eligible properties. Except as

provided in paragraph (b) of this

section, housing suitable for moderate

rehabilitation as defined in § 882.402 is

eligible for inclusion under the

Moderate Rehabilitation Program.

Existing structures of various types may

be appropriate for this program,

including single-family houses, multifamily structures and group homes.

(b) Ineligible properties. (1) Nursing

homes, units within the grounds of

penal, reformatory, medical, mental and

similar public or private institutions,

and facilities providing continual

psychiatric, medical or nursing services

are not eligible for assistance under the

Moderate Rehabilitation Program.

(2) Housing owned by a State or unit

of general local government is not

eligible for assistance under this

program.

(3) High rise elevator projects for

families with children may not be

utilized unless HUD determines there is

no practical alternative. (HUD may

make this determination for a locality’s

Moderate Rehabilitation Program in

whole or in part and need not review

each building on a case-by-case basis.)

(4) Single room occupancy (SRO)

housing may not be utilized unless:

(i) The property is located in an area

in which there is a significant demand

for such units as determined by the

HUD Field Office; and

(ii) The PHA and the unit of general

local government in which the property

is located approve of such units being

utilized for such purpose.

(5) No Section 8 assistance may be

provided with respect to any unit

occupied by an Owner; however,

cooperatives will be considered as

rental housing for purposes of the

Moderate Rehabilitation Program.

§ 882.402 [Removed and reserved]

17. Section 882.402 is removed and

reserved.

18. Section 882.404 is revised to read

as follows:

§ 882.404 Housing quality standards.

(a) Compliance with housing quality

standards. Housing used in the Section
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23855

8 moderate rehabilitation program must

meet the housing quality standards in

24 CFR 982.401.

(b) Energy performance requirement.

Caulking and weatherstripping are

required as energy conserving

improvements.

(c) Special housing types. In 24 CFR

part 982, subpart M (Special Housing

Types), the following provisions on

HQS for special housing types apply to

the Section 8 moderate rehabilitation

program:

(1) 24 CFR 982.605 (HQS for SRO

housing). (For the Section 8 moderate

rehabilitation SRO program under

subpart H of this part 882, see also

§ 882.803(b).)

(2) 24 CFR 982.609 (HQS for

congregate housing).

(3) 24 CFR 982.614 (HQS for group

home).

19. Section 882.407 is revised to read

as follows:

§ 882.407 Other Federal requirements.

The moderate rehabilitation program

is subject to applicable federal

requirements in 24 CFR 5.105.

§ 882.411 [Amended]

20. In § 882.411, paragraph (c) is

amended by removing the phrase

‘‘under § 882.112’’ and adding in its

place ‘‘under § 882.414’’.

§ 882.413 [Amended]

21. Section 882.413 is amended by

removing paragraph (c).

§§ 882.501, 882.502, 882.503, 882.504,

882.505, 882.506, 882.508 [Removed and

reserved]

22. In Subpart E, §§ 882.501, 882.502,

882.503, 882.504, 882.505, 882.506, and

882.508 are removed and reserved.

§ 882.511 [Amended]

23. In § 882.511, the section heading

is revised, paragraphs (a) through (e) are

redesignated as paragraphs (b) through

(f) respectively, and a new paragraph (a)

is added, to read as follows:

§ 882.511 Lease and termination of

tenancy.

(a) Lease. The lease must include all

provisions required by HUD, and must

not include any provisions prohibited

by HUD.

* * * * *

24. Section 882.514 is amended by:

a. Amending paragraph (a)(1) to

remove ‘‘parts 812 and 813 of this

chapter, and’’;

b. Amending paragraph (d)(1)

introductory text to remove

‘‘(§ 882.504(e))’’;

c. Amending paragraph (d)(1)(iv) to

remove ‘‘and’’ at the end of the

paragraph and amending paragraph

(d)(1)(v) to remove the period at the end

of the paragraph and add ‘‘; and’’ in its

place.

d. Redesignating paragraph (d)(2)(vi)

as paragraph (d)(1)(vi); and

e. Revising paragraph (e), to read as

follows:

§ 882.514 Family participation.

* * * * *

(e) Continued participation of Family

when Contract is terminated. If an

Owner evicts an assisted family in

violation of the Contract or otherwise

breaches the Contract, and the Contract

for the unit is terminated, and if the

Family was not at fault and is eligible

for continued assistance, the Family

may continue to receive housing

assistance through the conversion of the

Moderate Rehabilitation assistance to

tenant-based assistance under the

Section 8 certificate or voucher

program. The Family must then be

issued a certificate or voucher, and

treated as any participant in the tenantbased programs under 24 CFR part 982,

and must be assisted by the PHA in

finding a suitable unit. All requirements

of 24 CFR part 982 will be applicable

except that the term of any housing

assistance payments contract may not

extend beyond the term of the initial

Moderate Rehabilitation Contract. If the

Family is determined ineligible for

continued assistance, the certificate or

voucher may be offered to the next

Family on the PHA’s waiting list. The

unit will remain under the Moderate

Rehabilitation ACC which provides for

such a conversion of the units; therefore

no amendment to the ACC will be

necessary to convert to the Section 8

tenant-based assistance programs.

* * * * *

25. Section 882.515 is amended by:

a. Removing the first sentence from

paragraph (b);

b. Redesignating paragraph (c) as

paragraph (d); and

c. Adding a new paragraph (c), to read

as follows:

§ 882.515 Reexamination of family income

and composition.

* * * * *

(c) Obligation to supply information.

The family must supply such

certification, release, information or

documentation as the PHA or HUD

determine to be necessary, including

submission of required evidence of

citizenship or eligible immigration

status, submission of social security

numbers and verifying documentation,

submission of signed consent forms for

the obtaining of wage and claim

information from State Wage

Information Collection Agencies, and

submissions required for an annual or

interim reexamination of family income

and composition. See 24 CFR part 5.

* * * * *

26. In § 882.802, the definition for

‘‘Eligible individual (‘‘individual’’) is

revised to read as follows:

§ 882.802 Definitions.

* * * * *

Eligible individual (‘‘individual’’). An

individual who is capable of

independent living and is authorized for

admission to assisted housing under 24

CFR part 5.

* * * * *

27. In § 882.803, paragraph (b) is

revised to read as follows:

§ 882.803 Project eligibility and other

requirements.

* * * * *

(b) Housing quality standards. (1)

Section 882.404 (HQS for Moderate

Rehabilitation) and 24 CFR 982.605

(HQS standards for SRO) are applicable

to the Section 8 Moderate Rehabilitation

SRO Program for Homeless Individuals

(except that § 882.404(c)(2) (congregate

housing) and (c)(3) (group home) are not

applicable).

(2) In accordance with § 882.404(a),

the SRO program must meet the HQS

standards in 24 CFR 982.401. However,

24 CFR 982.401(j) (lead-based paint) and

982.401(l) (site and neighborhood) do

not apply to this program.

(3)(i) The site must be adequate in

size, exposure and contour to

accommodate the number and type of

units proposed; adequate utilities and

streets must be available to service the

site. (The existence of a private disposal

system and private sanitary water

supply for the site, approved in

accordance with local law, may be

considered adequate utilities.)

(ii) The site must be suitable from the

standpoint of facilitating and furthering

full compliance with the applicable

provisions of title VI of the Civil Rights

Act of 1964 (42 U.S.C. 2000d–2000d–4),

title VIII of the Civil Rights Act of 1968

(42 U.S.C. 3601–19), E.O. 11063 (as

amended by E.O. 12259; 3 CFR, 1959–

1963 Comp., p. 652 and 3 CFR, 1980

Comp., p. 307), and HUD regulations

issued pursuant thereto.

(iii) The site must be accessible to

social, recreational, educational,

commercial and health facilities, and

other appropriate municipal facilities

and services.

* * * * *

28. In § 882.805, paragraph (d)(1)(i)(B)

is amended by removing reference to

‘‘§ 882.803(b)(2)’’ and adding in its place

reference to ‘‘24 CFR 982.605(b)(4)’’,
23856 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

and paragraph (c) is revised, to read as

follows:

§ 882.805 HA application process, ACC

execution, and pre-rehabilitation activities.

* * * * *

(c)(1) If an owner is proposing to

accomplish at least $3000 per unit of

rehabilitation by including work to

make the unit(s) accessible to a person

with disabilities occupying the unit(s)

or expected to occupy the unit(s), the

PHA may approve such units not to

exceed 5 percent of the units under its

Program, provided that accessible units

are necessary to meet the requirements

of 24 CFR part 8, which implements

section 504 of the Rehabilitation Act of

1973. The rehabilitation must make the

unit(s), and access and egress to the

unit(s), barrier-free with respect to the

disability of the individual in residence

or expected to be in residence.

(2) The PHA must take the

applications and determine the

eligibility of all tenants residing in the

approved units who wish to apply for

the Program. After eligibility of all the

tenants has been determined, the Owner

must be informed of any adjustment in

the number of units to be assisted. In

order to make the most efficient use of

housing assistance funds, an Agreement

may not be entered into covering any

unit occupied by a family which is not

eligible to receive housing assistance

payments. Therefore, the number of

units approved by the PHA for a

particular proposal must be adjusted to

exclude any unit(s) determined by the

PHA to be occupied by a family not

eligible to receive housing assistance

payments. Eligible Families must also

be briefed at this stage as to their rights

and responsibilities under the Program.

(3) Should the Owner agree with the

assessment of the PHA as to the work

that must be accomplished, the

preliminary feasibility of the proposal,

and the number of units to be assisted,

the Owner, with the assistance of the

PHA where necessary, must prepare

detailed work write-ups including

specifications and plans (where

necessary) so that a cost estimate may be

prepared. The work write-up will

describe how the deficiencies eligible

for amortization through the Contract

Rents are to be corrected including

minimum acceptable levels of

workmanship and materials. From this

work write-up, the Owner, with the

assistance of the PHA, must prepare a

cost estimate for the accomplishment of

all specified items.

(4) The owner is responsible for

selecting a competent contractor to

undertake the rehabilitation. The PHA

must propose opportunities for minority

contractors to participate in the

program.

(5) The PHA must discuss with the

Owner the various financing options

available. The terms of the financing

must be approved by the PHA in

accordance with standards prescribed

by HUD.

(6) Before execution of the Agreement,

the HA must:

(i)(A) Inspect the structure to

determine the specific work items that

need to be accomplished to bring the

units to be assisted up to the Housing

Quality Standards (see § 882.803(b)) or

other standards approved by HUD;

(B) Conduct a feasibility analysis, and

determine whether cost-effective energy

conserving improvements can be added;

(C) Ensure that the owner prepares the

work write-ups and cost estimates

required by paragraph (c)(3) of this

section;

(D) Determine initial base rents and

contract rents;

(ii) Assure that the owner has selected

a contractor in accordance with

paragraph (c)(4) of this section;

(iii) After the financing and a

contractor are obtained, determine

whether the costs can be covered by

initial contract rents, computed in

accordance with paragraph (d) of this

section; and, if a structure contains

more than 50 units to be assisted,

submit the base rent and contract rent

calculations to the appropriate HUD

field office for review and approval in

sufficient time for execution of the

Agreement in a timely manner;

(iv) Obtain firm commitments to

provide necessary supportive services;

(v) Obtain firm commitments for other

resources to be provided;

(vi) Determine that the $3,000

minimum amount of work requirement

and other requirements in paragraph

(c)(1) of this section are met;

(vii) Determine eligibility of current

tenants, and select the units to be

assisted, in accordance with paragraph

(c)(2) of this section;

(viii) Comply with the financing

requirements in paragraph (c)(5) of this

section;

(ix) Assure compliance with all other

applicable requirements of this subpart;

and

(x) If the HA determines that any

structure proposed in its application is

infeasible, or the HA proposes to select

a different structure for any other

reason, the HA must submit information

for the proposed alternative structure to

HUD for review and approval. HUD will

rate the proposed structure in

accordance with procedures in the

applicable notice of funding availability.

The HA may not proceed with

processing for the proposed structure or

execute an Agreement until HUD

notifies the HA that HUD has approved

the proposed alternative structure and

that all requirements have been met.

* * * * *

29. Section 882.806 is amended by:

a. Revising the section heading;

b. Amending paragraph (a)(2) to

remove the first sentence;

c. Amending paragraph (a)(2) to

remove the phrase ‘‘In addition, the’’

and in place of this language add ‘‘The’’;

d. Designating the text of paragraph

(a)(2) following the heading as

paragraph (a)(2)(ii);

e. Adding a new paragraph (a)(2)(i);

and

f. Revising paragraphs (a)(3) and (a)(4)

to read as follows:

§ 882.806 Agreement to enter into housing

assistance payments contract.

(a) * * *

(2) Timely performance of work. (i)

After execution of the Agreement, the

Owner must promptly proceed with the

rehabilitation work as provided in the

Agreement. If the work is not so

commenced, diligently continued, or

completed, the PHA will have the right

to rescind the Agreement, or take other

appropriate action.

* * * * *

(3) Inspections. The PHA must

inspect, as appropriate, during

rehabilitation to ensure that work is

proceeding on schedule and is being

accomplished in accordance with the

terms of the Agreement, particularly

that the work meets the acceptable

levels of workmanship and materials

specified in the work write-up.

(4) Changes. (i) The Owner must

submit to the PHA for approval any

changes from the work specified in the

Agreement which would alter the

design or the quality of the required

rehabilitation. The PHA may condition

its approval of such changes on a

reduction of the Contract Rents. If

changes are made without prior PHA

approval, the PHA may determine that

Contract Rents must be reduced or that

the Owner must remedy any deficiency

as a condition for acceptance of the

unit(s).

(ii) Contract rents may not be

increased except in accordance with

§§ 882.408(d) and 882.805(d)(2).

* * * * *

30. In § 882.807, paragraphs (a) and

(d) are revised to read as follows:

§ 882.807 Housing assistance payments

contract.

(a) Time of execution. Upon PHA

acceptance of the unit(s) and

certifications pursuant to § 882.507, the
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23857

Contract will be executed by the Owner

and the PHA. The effective date must be

no earlier than the PHA inspection

which provides the basis for acceptance

as specified in § 882.507(e).

* * * * *

(d) Unleased unit(s). At the time of

execution of the Contract, the Owner

will be required to submit a list of

dwelling unit(s) leased and not leased as

of the effective date of the Contract.

* * * * *

31. Section 882.808 is amended by:

a. Amending paragraph (d) to remove

reference to ‘‘882.112’’ and add in its

place reference to ‘‘882.414’’;

b. Amending paragraph (i)(1) to

remove reference to ‘‘part 813’’ and add

in its place reference to ‘‘part 5, subpart

F’’;

c. Amending paragraph (i)(3) to

remove reference to ‘‘Section

882.515(c)’’ and add in its place

reference to ‘‘Section 882.515(d)’’;

d. Amending paragraph (o) to remove

reference to ‘‘Section 882.217’’ and add

in its place reference to ‘‘Section

882.517’’; and

e. Revising paragraphs (b)(4), (c), and

(i)(2), to read as follows:

§ 882.808 Management.

* * * * *

(b) * * *

(4) Continued participation of

individual when contract is terminated.

Section 882.514(e) applies to this

program.

* * * * *

(c) Lease. Sections 882.403(d) and

882.511(a) apply to this program. In

addition, the lease must limit

occupancy to one eligible individual.

* * * * *

(i) * * *

(2) Interim reexaminations. The

individual shall supply such

certification, release, information, or

documentation as the PHA or HUD

determines to be necessary, including

submissions required for interim

reexaminations of individual income

and determinations as to whether only

one individual is occupying the unit. In

addition § 882.515(b) shall apply.

* * * * *

§ 882.810 [Removed and reserved]

32. Section 882.810 is removed and

reserved.

§ 882.406 [Redesignated as § 882.810]

33. Section 882.406 is redesignated as

§ 882.810 in subpart H, and newly

redesignated paragraph

§ 882.810(g)(1)(iii)(C) is further

amended by removing reference to ‘‘24

CFR 813.107’’ and adding in its place

reference to ‘‘24 CFR 5.613’’.

PART 982—SECTION 8 TENANTBASED ASSISTANCE: UNIFIED RULE

FOR TENANT-BASED ASSISTANCE

UNDER THE SECTION 8 RENTAL

CERTIFICATE PROGRAM AND THE

SECTION 8 RENTAL VOUCHER

PROGRAM

34. The authority citation for part 982

is revised to read as follows:

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

35. In part 982, the table of contents

is amended by adding an entry for

§ 982.316 under subpart G and adding

entries for subparts K and M, to read as

follows:

* * * * *

Subpart G—Leasing a Unit

* * * * *

Sec.

982.316 Live-in aide.

* * * * *

Subpart K—Rent and Housing Assistance

Payment

982.501 Overview.

982.502 Negotiating rent to owner.

982.503 Rent to owner: Reasonable rent.

982.504 Maximum subsidy: FMR/exception

rent limit.

982.505 Voucher tenancy or over-FMR

tenancy: How to calculate housing

assistance payment.

982.506 Over-FMR tenancy: HA approval.

982.507 Regular tenancy: How to calculate

housing assistance payment.

982.508 Regular tenancy: Limit on initial

rent to owner.

982.509 Regular tenancy: Annual

adjustment of rent to owner.

982.510 Regular tenancy: Special

adjustment of rent to owner.

982.511 Rent to owner: Effect of rent

control.

982.512 Rent to owner in subsidized

projects.

982.513 Other fees and charges.

982.514 Distribution of housing assistance

payment.

982.515 Family share: Family

responsibility.

982.516 Family income and composition:

Regular and interim examinations.

982.517 Utility allowance schedule.

* * * * *

Subpart M—Special Housing Types

982.601 Overview.

Single Room Occupancy (SRO)

982.602 SRO: General.

982.603 SRO: Lease and HAP contract.

982.604 SRO: Rent and housing assistance

payment.

982.605 SRO: Housing quality standards.

Congregate Housing

982.606 Congregate housing: Who may

reside in congregate housing.

982.607 Congregate housing: Lease and

HAP contract.

982.608 Congregate housing: Rent and

housing assistance payment; FMR/

exception rent limit.

982.609 Congregate housing: Housing

quality standards.

Group Home

982.610 Group home: Who may reside in a

group home.

982.611 Group home: Lease and HAP

contract.

982.612 Group home: State approval of

group home.

982.613 Group home: Rent and housing

assistance payment.

982.614 Group home: Housing quality

standards.

Shared Housing

982.615 Shared housing: Occupancy.

982.616 Shared housing: Lease and HAP

contract.

982.617 Shared housing: Rent and housing

assistance payment.

982.618 Shared housing: Housing quality

standards.

Cooperative

982.619 Cooperative housing.

Manufactured Home

982.620 Manufactured home: Applicability

of requirements.

982.621 Manufactured home: Housing

quality standards.

Manufactured Home Space Rental

982.622 Manufactured home space rental:

Rent to owner.

982.623 Manufactured home space rental:

Housing assistance payment.

982.624 Manufactured home space rental:

Utility allowance schedule.

36. Section 982.4 is revised to read as

follows:

§ 982.4 Definitions.

(a) Definitions found elsewhere:

(1) Statutory definitions. The terms

displaced person, elderly person, lowincome family, person with disabilities,

public housing agency, State, and very

low-income family are defined in

section 3(b) of the 1937 Act (42 U.S.C.

1437a(b)). For purposes of reasonable

accommodation and program

accessibility for persons with

disabilities, the term person with

disabilities means individual with

handicaps as defined in 24 CFR 8.3.

(2) General definitions. The terms

1937 Act, Housing agency (HA), HUD,

and MSA, are defined in 24 CFR part 5,

subpart A.

(3) Definitions under the 1937 Act.

The terms annual contributions contract

(ACC), and live-in aide are defined in 24

CFR part 5, subpart D.

(4) Definitions concerning family

income and rent. The terms adjusted

income, annual income, tenant rent,

total tenant payment, utility allowance,

and utility reimbursement are defined in

24 CFR part 5, subpart F.
23858 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

(b) In addition to the terms listed in

paragraph (a) of this section, the

following definitions apply:

Absorption. In portability (under

subpart H of this part 982): the point at

which a receiving HA stops billing the

initial HA for assistance on behalf of a

portability family. The receiving HA

uses funds available under the receiving

HA consolidated ACC.

Administrative fee. Fee paid by HUD

to the HA for administration of the

program. See § 982.152.

Administrative fee reserve (formerly

‘‘operating reserve’’). Account

established by HA from excess

administrative fee income. The

administrative fee reserve must be used

for housing purposes. See § 982.155.

Administrative plan. The plan that

describes HA policies for administration

of the tenant-based programs. See

§ 982.54.

Admission. The point when the

family becomes a participant in the

program. The date used for this purpose

is the effective date of the first HAP

contract for a family (first day of initial

lease term) in a tenant-based program.

Amortization payment. In a

manufactured home space rental: The

monthly debt service payment by the

family to amortize the purchase price of

the manufactured home.

Applicant (applicant family). A family

that has applied for admission to a

program but is not yet a participant in

the program.

Budget authority. An amount

authorized and appropriated by the

Congress for payment to HAs under the

program. For each funding increment in

an HA program, budget authority is the

maximum amount that may be paid by

HUD to the HA over the ACC term of the

funding increment.

Certificate. A document issued by an

HA to a family selected for admission to

the certificate program. The certificate

describes the program and the

procedures for HA approval of a unit

selected by the family. The certificate

also states obligations of the family

under the program.

Certificate program. The rental

certificate program.

Certificate or voucher holder. A

family holding a certificate or voucher

with unexpired search time.

Common space. In shared housing:

Space available for use by the assisted

family and other occupants of the unit.

Congregate housing. Housing for

elderly persons or persons with

disabilities that meets the HQS for

congregate housing. A special housing

type: see § 982.606 to § 982.609.

Contiguous MSA. In portability (under

subpart H of this part 982): An MSA that

shares a common boundary with the

MSA in which the jurisdiction of the

initial HA is located.

Continuously assisted. An applicant is

continuously assisted under the 1937

Act if the family is already receiving

assistance under any 1937 Act program

when the family is admitted to the

certificate or voucher program.

Contract authority. The maximum

annual payment by HUD to an HA for

a funding increment.

Cooperative (term includes mutual

housing). Housing owned by a nonprofit

corporation or association, and where a

member of the corporation or

association has the right to reside in a

particular apartment, and to participate

in management of the housing. A

special housing type: see § 982.619.

Domicile. The legal residence of the

household head or spouse as

determined in accordance with State

and local law.

Drug-related criminal activity. As

defined in 42 U.S.C. 1437f(f)(5).

Drug-trafficking. The illegal

manufacture, sale, or distribution, or the

possession with intent to manufacture,

sell, or distribute, of a controlled

substance as defined in section 102 of

the Controlled Substances Act (21

U.S.C. 802).

Exception rent. An amount that

exceeds the published FMR. See

§ 982.504(b). See also definition of

FMR/exception rent limit.

Fair market rent (FMR). The rent,

including the cost of utilities (except

telephone), as established by HUD for

units of varying sizes (by number of

bedrooms), that must be paid in the

housing market area to rent privately

owned, existing, decent, safe and

sanitary rental housing of modest (nonluxury) nature with suitable amenities.

See periodic publications in the Federal

Register in accordance with 24 CFR part

888.

Family self-sufficiency program (FSS

program). The program established by

an HA in accordance with 24 CFR part

984 to promote self-sufficiency of

assisted families, including the

coordination of supportive services (42

U.S.C. 1437u).

Family share. The portion of rent and

utilities paid by the family. For

calculation of family share, see

§ 982.515(a).

Family unit size. The appropriate

number of bedrooms for a family, as

determined by the HA under the HA

subsidy standards.

FMR/exception rent limit. The Section

8 existing housing fair market rent

published by HUD Headquarters, or any

exception rent. For a regular tenancy in

the certificate program, the initial rent

to owner plus any utility allowance may

not exceed the FMR/exception rent limit

(for the selected dwelling unit or for the

family unit size). For a tenancy in the

voucher program, the HA may adopt a

payment standard up to the FMR/

exception rent limit. For an over-FMR

tenancy in the certificate program, the

payment standard is the FMR/exception

rent limit.

Funding increment. Each commitment

of budget authority by HUD to an HA

under the consolidated annual

contributions contract for the HA

program.

Gross rent. The sum of the rent to

owner plus any utility allowance.

Group home. A dwelling unit that is

licensed by a State as a group home for

the exclusive residential use of two to

twelve persons who are elderly or

persons with disabilities (including any

live-in aide). A special housing type: see

§ 982.610 to § 982.614.

HAP contract. Housing assistance

payments contract.

Housing assistance payment. The

monthly assistance payment by an HA,

which includes:

(1) A payment to the owner for rent

to the owner under the family’s lease;

and

(2) An additional payment to the

family if the total assistance payment

exceeds the rent to owner.

Initial HA. In portability, the term

refers to both:

(1) An HA that originally selected a

family that later decides to move out of

the jurisdiction of the selecting HA; and

(2) An HA that absorbed a family that

later decides to move out of the

jurisdiction of the absorbing HA.

Initial payment standard. The

payment standard at the beginning of

the HAP contract term.

Initial rent to owner. The rent to

owner at the beginning of the HAP

contract term.

Jurisdiction. The area in which the

HA has authority under State and local

law to administer the program.

Lease. (1) A written agreement

between an owner and a tenant for the

leasing of a dwelling unit to the tenant.

The lease establishes the conditions for

occupancy of the dwelling unit by a

family with housing assistance

payments under a HAP contract

between the owner and the HA.

(2) In cooperative housing, a written

agreement between a cooperative and a

member of the cooperative. The

agreement establishes the conditions for

occupancy of the member’s cooperative

dwelling unit by the member’s family

with housing assistance payments to the

cooperative under a HAP contract

between the cooperative and the HA.
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23859

For purposes of this part 982, the

cooperative is the Section 8 ‘‘owner’’ of

the unit, and the cooperative member is

the Section 8 ‘‘tenant.’’

Lease addendum. In the lease

between the tenant and the owner, the

lease language required by HUD.

Manufactured home. A manufactured

structure that is built on a permanent

chassis, is designed for use as a

principal place of residence, and meets

the HQS. A special housing type: see

§ 982.620 and § 982.621.

Manufactured home space. In

manufactured home space rental: A

space leased by an owner to a family. A

manufactured home owned and

occupied by the family is located on the

space. See § 982.622 to § 982.624.

Mutual housing. Included in the

definition of ‘‘cooperative.’’

Notice of Funding Availability

(NOFA). For budget authority that HUD

distributes by competitive process, the

Federal Register document that invites

applications for funding. This document

explains how to apply for assistance and

the criteria for awarding the funding.

Over-FMR tenancy. In the certificate

program: A tenancy for which the initial

gross rent exceeds the FMR/exception

rent limit.

Owner. Any person or entity with the

legal right to lease or sublease a unit to

a participant.

Participant (participant family). A

family that has been admitted to the HA

program and is currently assisted in the

program. The family becomes a

participant on the effective date of the

first HAP contract executed by the HA

for the family (first day of initial lease

term).

Payment standard. In a voucher or

over-FMR tenancy, the maximum

subsidy payment for a family (before

deducting the family contribution). For

a voucher tenancy, the HA sets a

payment standard in the range from 80

percent to 100 percent of the current

FMR/exception rent limit. For an overFMR tenancy, the payment standard

equals the current FMR/exception rent

limit.

Portability. Renting a dwelling unit

with Section 8 tenant-based assistance

outside the jurisdiction of the initial

HA.

Premises. The building or complex in

which the dwelling unit is located,

including common areas and grounds.

Private space. In shared housing: The

portion of a contract unit that is for the

exclusive use of an assisted family.

Reasonable rent. A rent to owner that

is not more than rent charged:

(1) For comparable units in the

private unassisted market; and

(2) For comparable unassisted units in

the premises.

Receiving HA. In portability: An HA

that receives a family selected for

participation in the tenant-based

program of another HA. The receiving

HA issues a certificate or voucher and

provides program assistance to the

family.

Regular tenancy. In the certificate

program: A tenancy other than an overFMR tenancy.

Rent to owner. The total monthly rent

payable to the owner under the lease for

the unit. Rent to owner covers payment

for any housing services, maintenance

and utilities that the owner is required

to provide and pay for.

Set-up charges. In a manufactured

home space rental: Charges payable by

the family for assembling, skirting and

anchoring the manufactured home.

Shared housing. A unit occupied by

two or more families. The unit consists

of both common space for shared use by

the occupants of the unit and separate

private space for each assisted family. A

special housing type: see § 982.615 to

§ 982.618.

Single room occupancy housing

(SRO). A unit that contains no sanitary

facilities or food preparation facilities,

or contains either, but not both, types of

facilities. A special housing type: see

§ 982.602 to § 982.605.

Special admission. Admission of an

applicant that is not on the HA waiting

list or without considering the

applicant’s waiting list position.

Special housing types. See subpart M

of this part 982. Subpart M of this part

states the special regulatory

requirements for: SRO housing,

congregate housing, group homes,

shared housing, cooperatives (including

mutual housing), and manufactured

homes (including manufactured home

space rental).

Subsidy standards. Standards

established by an HA to determine the

appropriate number of bedrooms and

amount of subsidy for families of

different sizes and compositions.

Suspension. Stopping the clock on the

term of a family’s certificate or voucher,

for such period as determined by the

HA, from the time when the family

submits a request for HA approval to

lease a unit, until the time when the HA

approves or denies the request.

Tenant. The person or persons (other

than a live-in aide) who executes the

lease as lessee of the dwelling unit.

Tenant rent. In the certificate

program: The total tenant payment

minus any utility allowance. (This term

applies both to a regular tenancy and an

over-FMR tenancy.)

Utility hook-up charge. In a

manufactured home space rental: Costs

payable by a family for connecting the

manufactured home to utilities such as

water, gas, electrical and sewer lines.

Violent criminal activity. Any illegal

criminal activity that has as one of its

elements the use, attempted use, or

threatened use of physical force against

the person or property of another.

Voucher (rental voucher). A

document issued by an HA to a family

selected for admission to the voucher

program. This document describes the

program and the procedures for HA

approval of a unit selected by the

family. The voucher also states

obligations of the family under the

program.

Voucher program. The rental voucher

program.

Waiting list admission. An admission

from the HA waiting list.

37. In Section 982.53, paragraph (a) is

revised to read as follows:

§ 982.53 Equal opportunity requirements.

(a) The tenant-based program requires

compliance with all equal opportunity

requirements imposed by contract or

federal law, including the authorities

cited at 24 CFR 5.105(a) and title II of

the Americans with Disabilities Act, 42

U.S.C. 12101, et seq.

* * * * *

38. Section 982.54 is amended by:

a. Revising paragraph (d)(7);

b. Redesignating paragraphs (d)(15)

through (d)(19) as paragraphs (d)(18)

through (d)(22) respectively; and

c. Adding new paragraphs (d)(15)

through (d)(17), to read as follows:

§ 982.54 Administrative plan.

* * * * *

(d) * * *

(7) Providing information about a

family to prospective owners;

* * * * *

(15) For the certificate and voucher

programs, the method for determining

that rent to owner is a reasonable rent

(initially and during the term of a HAP

contract);

(16) Approval and administration of

over-FMR tenancies in the HA

certificate program;

(17) HA choice whether to offer

particular special housing types (see

§ 982.601(b));

* * * * *

§ 982.102 [Amended]

39. Section 982.102 is amended by

removing paragraph (d).

40. In § 982.152, a new paragraph

(a)(3) is added and paragraph (c)(1) is

revised to read as follows:
23860 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

§ 982.152 Administrative fee.

(a) * * *

(3) HA administrative fees may only

be used to cover costs incurred to

perform HA administrative

responsibilities for the program in

accordance with HUD regulations and

requirements.

* * * * *

(c) * * *

(1) A one-time preliminary fee, in the

amount of $500, is paid by HUD in the

first year an HA administers a tenantbased assistance program under the

1937 Housing Act. The fee is paid for

each new unit added to the HA program

by the initial funding increment.

* * * * *

§ 982.153 [Amended]

41. Section 982.153 is amended by

removing paragraph (b) and by

removing the paragraph designation

‘‘(a)’’.

42. Section 982.158 is amended by

removing ‘‘and’’ at the end of paragraph

(f)(6), by redesignating paragraph (f)(7)

as paragraph (f)(8), and by adding new

paragraph (f)(7) to read as follows:

§ 982.158 Program accounts and records.

* * * * *

(f) * * *

(7) Records to document the basis for

HA determination that rent to owner is

a reasonable rent (initially and during

the term of a HAP contract); and

* * * * *

43. In § 982.204, paragraph (c) is

revised to read as follows:

§ 982.204 Waiting list: Administration of

waiting list.

* * * * *

(c) Removing applicant names from

the waiting list. (1) The HA

administrative plan must state HA

policy on when applicant names may be

removed from the waiting list. The

policy may provide that the HA will

remove names of applicants who do not

respond to HA requests for information

or updates.

(2) An HA decision to withdraw from

the waiting list the name of an applicant

family that includes a person with

disabilities is subject to reasonable

accommodation in accordance with 24

CFR part 8. If the applicant did not

respond to the HA request for

information or updates because of the

family member’s disability, the HA must

reinstate the applicant in the family’s

former position on the waiting list.

* * * * *

44. In § 982.205, the section heading

and paragraph (c) are revised to read as

follows:

§ 982.205 Waiting list: Different programs.

* * * * *

(c) Other housing assistance: Effect of

application for, receipt or refusal. (1)

For purposes of this section, ‘‘other

housing assistance’’ means a federal,

State or local housing subsidy, as

determined by HUD, including public or

Indian housing.

(2) The HA may not take any of the

following actions because an applicant

has applied for, received, or refused

other housing assistance:

(i) Refuse to list the applicant on the

HA waiting list for tenant-based

assistance;

(ii) Deny any admission preference for

which the applicant is currently

qualified;

(iii) Change the applicant’s place on

the waiting list based on preference,

date and time of application, or other

factors affecting selection under the HA

selection policy; or

(iv) Remove the applicant from the

waiting list.

(3) Notwithstanding paragraph (c)(2)

of this section, the HA may remove the

applicant from the waiting list for

tenant-based assistance if the HA has

offered the applicant assistance under

both the certificate program and the

voucher program.

45. Section 982.206 is amended by

removing Example A and Example B

from paragraph (b)(1) and by revising

paragraph (a)(2) to read as follows:

§ 982.206 Waiting list: Opening and

closing; public notice.

(a) * * *

(2) The HA must give the public

notice by publication in a local

newspaper of general circulation, and

also by minority media and other

suitable means. The notice must comply

with HUD fair housing requirements.

* * * * *

46. In § 982.207, paragraph (c) is

redesignated as paragraph (d), and a

new paragraph (c) is added, to read as

follows:

§ 982.207 Waiting list: Use of preferences.

* * * * *

(c) The HA may give preference for

admission of families that include a

person with disabilities. However, the

HA may not give preference for

admission of persons with a specific

disability.

* * * * *

47. In § 982.302, paragraph (a) is

revised to read as follows:

§ 982.302 Issuance of certificate or

voucher; Requesting HA approval to lease

a unit.

(a) When an applicant family is

selected, or when a participant family

wants to move to a new unit with

continued tenant-based assistance (see

§ 982.314), the HA issues a certificate or

voucher to the family. The family may

search for a unit.

* * * * *

48. Section 982.303 is amended by:

a. Amending paragraph (b)(1) by

removing from the second sentence the

phrase ‘‘The initial term’’ and adding in

its place ‘‘Except as provided in

paragraph (b)(2)(ii) of this section, the

initial term’’; and

b. Revising paragraph (b)(2), to read as

follows:

§ 982.303 Term of certificate or voucher.

* * * * *

(b) Extensions of term. * * *

(2) If the family needs and requests an

extension of the initial certificate or

voucher term as a reasonable

accommodation, in accordance with 24

CFR part 8, to make the program

accessible to and usable by a family

member with a disability:

(i) The HA must extend the term of

the certificate or voucher up to 120 days

from the beginning of the initial term;

(ii) The HUD field office may approve

an additional extension of the term.

* * * * *

49. A new § 982.316 is added to

subpart G to read as follows:

§ 982.316 Live-in aide.

(a) A family that consists of one or

more elderly or disabled persons may

request that the HA approve a live-in

aide to reside in the unit and provide

necessary supportive services for a

family member who is a person with

disabilities. The HA must approve a

live-in aide if needed as a reasonable

accommodation in accordance with 24

CFR part 8 to make the program

accessible to and usable by the family

member with a disability. (See

§ 982.402(b)(6) concerning effect of livein aide on family unit size.)

(b) At any time, the HA may refuse to

approve a particular person as a live-in

aide, or may withdraw such approval, if:

(1) The person commits fraud, bribery

or any other corrupt or criminal act in

connection with any federal housing

program;

(2) The person commits drug-related

criminal activity or violent criminal

activity; or

(3) The person currently owes rent or

other amounts to the HA or to another

HA in connection with Section 8 or

public housing assistance under the

1937 Act.

50. Section 982.352 is amended by:

a. Revising paragraph (c)(7);

b. Redesignating paragraph (c)(9) as

paragraph (c)(12);
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c. Removing ‘‘or’’ after paragraph

(c)(8);

d. Adding new paragraphs (c)(9),

(c)(10), and (c)(11), to read as follows:

§ 982.352 Eligible housing.

* * * * *

(c) * * *

(7) Rental assistance payments under

Section 521 of the Housing Act of 1949

(a program of the Rural Development

Administration);

* * * * *

(9) Section 202 supportive housing for

the elderly;

(10) Section 811 supportive housing

for persons with disabilities;

(11) Section 202 projects for nonelderly persons with disabilities

(Section 162 assistance); or

* * * * *

§ 982.401 [Amended]

51. Section 982.401 is amended by

removing the last sentence from

paragraph (a)(1).

52. In § 982.402, paragraph (c) is

revised to read as follows:

§ 982.402 Subsidy standards.

* * * * *

(c) Effect of family unit size—

maximum subsidy. The family unit size,

as determined for a family under the HA

subsidy standards is used to determine

the maximum rent subsidy for the

family:

(1) Certificate program: Regular

tenancy. HUD establishes fair market

rents by number of bedrooms. For a

regular tenancy, the initial gross rent

(sum of the initial rent to owner plus

any utility allowance) may not exceed

either:

(i) The FMR/exception rent limit for

the family unit size; or

(ii) The FMR/exception rent limit for

the unit size rented by the family.

(2) Certificate program: Over-FMR

tenancy. For an over-FMR tenancy, the

HA establishes payment standards by

number of bedrooms. The payment

standard for the family must be the

lower of:

(i) The payment standard for the

family unit size; or

(ii) The payment standard for the unit

size rented by the family.

(3) Voucher program. For a voucher

tenancy, the HA establishes payment

standards by number of bedrooms. The

payment standards for the family must

be the lower of:

(i) The payment standards for the

family unit size; or

(ii) The payment standard for the unit

size rented by the family.

* * * * *

§ 982.451 [Amended]

53. Section 982.451 is amended by

removing paragraph (a); by

redesignating paragraphs (b) and (c) as

paragraphs (a) and (b).

54. In § 982.452, paragraph (b)(2) is

revised to read as follows:

§ 982.452 Owner responsibilities.

* * * * *

(b) * * *

(2) Maintaining the unit in accordance

with HQS, including performance of

ordinary and extraordinary

maintenance. For provisions on family

maintenance responsibilities, see

§ 982.404(a)(4).

55. A new subpart K is added, to read

as follows:

Subpart K—Rent and Housing

Assistance Payment

§ 982.501 Overview.

(a) There are three types of tenancy in

the Section 8 tenant-based programs:

(1) A regular tenancy under the

certificate program;

(2) An over-FMR tenancy under the

certificate program; and

(3) A tenancy under the voucher

program.

(b) Some requirements of this subpart

are the same for all three types of

tenancy. Some requirements only apply

to a specific type of tenancy. Unless

specifically stated, requirements of this

subpart are the same for all tenancies in

the tenant-based programs.

§ 982.502 Negotiating rent to owner.

The owner and the family negotiate

the rent to owner. At the family’s

request, the HA must help the family

negotiate the rent to owner.

§ 982.503 Rent to owner: Reasonable rent.

(a) HA determination. (1) The HA may

not approve a lease until the HA

determines that the initial rent to owner

is a reasonable rent.

(2) The HA must redetermine the

reasonable rent:

(i) Before any increase in the rent to

owner;

(ii) If there is a five percent decrease

in the published FMR in effect 60 days

before the contract anniversary (for the

unit size rented by the family) as

compared with the FMR in effect one

year before the contract anniversary; or

(iii) If directed by HUD.

(3) The HA may also redetermine the

reasonable rent at any other time.

(4) At all times during the assisted

tenancy, the rent to owner may not

exceed the reasonable rent as most

recently determined or redetermined by

the HA.

(b) Comparability. The HA must

determine whether the rent to owner is

a reasonable rent in comparison to rent

for other comparable unassisted units.

To make this determination, the HA

must consider:

(1) The location, quality, size, unit

type, and age of the contract unit; and

(2) Any amenities, housing services,

maintenance and utilities to be provided

by the owner in accordance with the

lease.

(c) Owner certification of rents

charged for other units. By accepting

each monthly housing assistance

payment from the HA, the owner

certifies that the rent to owner is not

more than rent charged by the owner for

comparable unassisted units in the

premises. The owner must give the HA

information requested by the HA on

rents charged by the owner for other

units in the premises or elsewhere.

§ 982.504 Maximum subsidy: FMR/

exception rent limit.

(a) Purpose. (1) Fair market rents

(FMRs) are published by HUD. In the

tenant-based programs, the FMR/

exception rent limit is used to

determine the maximum subsidy for a

family.

(2) For a regular tenancy under the

certificate program, the FMR/exception

rent limit is the maximum initial gross

rent under the assisted lease.

(3) For the voucher program, the

FMR/exception rent limit is the

maximum ‘‘payment standard’’

(maximum subsidy) for a family.

(4) For an over-FMR tenancy under

the certificate program, the FMR/

exception rent limit is the ‘‘payment

standard’’ (maximum subsidy) for a

family.

(b) Determining exception rent.—(1)

Area exception rent: HUD approval. (i)

At HUD’s sole discretion, HUD may

approve an area exception rent for all

units, or all units of a given size

(number of bedrooms), leased by

program families in a part of the fair

market rent area that is designated as an

‘‘exception rent area.’’ A HUD-approved

area exception rent applies to all HAs

with jurisdiction of the exception rent

area.

(ii) An area exception rent may not

exceed 120 percent of the FMR.

(iii) HUD will determine the area

exception rent by either of the two

following methods:

(A) Median rent method. In the

median rent method, HUD determines

the area exception rent by multiplying

the FMR times a fraction of which the

numerator is the median gross rent of

the exception rent area and the

denominator is the median gross rent of

the entire FMR area. In this method,

HUD uses median gross rent data from
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the most recent decennial United States

census, and the exception rent area may

be any geographic entity within the

FMR area (or any combination of such

entities) for which median gross rent

data is provided in decennial census

data products.

(B) 40th percentile rent method. In

this method, HUD determines that the

area exception rent equals the 40th

percentile of rents to lease standard

quality rental housing in the exception

rent area. HUD determines the 40th

percentile rent in accordance with the

methodology described in 24 CFR

888.113 for determining fair market

rents. An HA that asks HUD to approve

an area exception rent determined by

the 40th percentile rent method must

present statistically representative rental

housing survey data that justify

exception rent approval by HUD.

(iv) An area exception rent will not be

approved unless HUD determines that

an exception rent is needed either:

(A) To help families find housing

outside areas of high poverty; or

(B) Because certificate or voucher

holders have trouble finding housing for

lease under the program within the term

of the certificate or voucher.

(v) The total populations of exception

rent areas in an FMR area may not

include more than 50 percent of the

population of the fair market rent area.

(vi) At any time, HUD may withdraw

or modify any approved area exception

rent.

(2) Regular certificate tenancy:

Exception rent as reasonable

accommodation for person with

disabilities: HA approval. For a regular

tenancy in the certificate program, on

request from a family that includes a

person with disabilities, the HA must

approve an exception rent of up to 120

percent of the fair market rent if the

exception rent is needed as a reasonable

accommodation so that the program is

readily accessible to and usable by

persons with disabilities in accordance

with 24 CFR part 8.

§ 982.505 Voucher tenancy or over-FMR

tenancy: How to calculate housing

assistance payment.

(a) Use of payment standard. For a

voucher tenancy or for an over-FMR

tenancy under the certificate program, a

‘‘payment standard’’ is used to calculate

the monthly housing assistance

payment for a family. The ‘‘payment

standard’’ is the maximum monthly

subsidy payment for a family.

(b) Voucher program: Amount of

assistance.—(1) Voucher payment

standard: Maximum and minimum. (i)

The HA must adopt a payment standard

schedule that establishes payment

standards for the HA voucher program.

For each FMR area and for each

exception rent area, the HA must

establish voucher payment standard

amounts by unit size (zero-bedroom,

one-bedroom, and so on).

(ii) For a voucher tenancy, the

payment standard for each unit size may

not be:

(A) More than the current FMR/

exception rent limit; or

(B) Less than 80 percent of the current

FMR/exception rent limit, unless a

lower percent is approved by HUD.

(2) Voucher assistance formula. (i) For

a voucher tenancy, the housing

assistance payment for a family equals

the lesser of:

(A) The applicable payment standard

minus 30 percent of monthly adjusted

income; or

(B) The monthly gross rent minus the

minimum rent.

(ii) The minimum rent is the higher

of:

(A) 10 percent of monthly income

(gross income); or

(B) A higher minimum rent as

required by law.

(3) Voucher payment standard

schedule. (i) A voucher payment

standard schedule is a list of the

payment standard amounts used to

calculate the voucher housing assistance

payment for each unit size in an FMR

area. The payment standard schedule

for an FMR area includes payment

standard amounts for any HUDapproved exception rent area in the

FMR area.

(ii) The voucher payment standard

schedule establishes a single payment

standard for each unit size in an FMR

area and, if applicable, in a HUDapproved exception rent area within an

FMR area.

(iii) Payment standard amounts on the

payment standard schedule must be

within the maximum and minimum

limits stated in paragraph (b)(1)(ii) of

this section. Within these limits,

payment standard amounts on the

schedule may be adjusted annually, at

the discretion of the HA, if necessary to

assure continued affordability of units

in the HA jurisdiction.

(iv) To calculate the housing

assistance payment for a family, the HA

must use the applicable payment

standard from the HA payment standard

schedule for the fair market rent area

(including the applicable payment

standard for any HUD-approved

exception rent area) where the unit

rented by the family is located.

(4) Payment standard for certain

subsidized projects. For a voucher

tenancy in an insured or noninsured

Section 236 project, a Section 515

project of the Rural Development

Administration, or a Section 221(d)(3)

below market interest rate project, the

payment standard may not exceed the

basic rental charge (as defined in 12

U.S.C. 1715z–1(f)(1)), including the cost

for tenant-paid utilities.

(c) Over-FMR tenancy: Determining

amount of assistance.—(1) Payment

standard. For an over-FMR tenancy, the

payment standard for the unit size is the

FMR/exception rent limit.

(2) Over-FMR tenancy assistance

formula. For an over-FMR tenancy, the

housing assistance payment for a family

equals the lesser of:

(i) The applicable payment standard

minus the total tenant payment; or

(ii) The monthly gross rent minus the

minimum rent as required by law.

(d) Payment standard for family. (1)

This paragraph (d) applies to both a

voucher tenancy and an over-FMR

tenancy.

(2) The payment standard for a family

is the lower of:

(i) The payment standard for the

family unit size; or

(ii) The payment standard for the unit

size rented by the family.

(3) If the unit rented by a family is

located in an exception rent area, the

HA must use the appropriate payment

standard for the exception rent area.

(4) During the HAP contract term for

a unit, the amount of the payment

standard for a family is the higher of:

(i) The initial payment standard (at

the beginning of the lease term) minus

any amount by which the initial rent to

owner exceeds the current rent to

owner; or

(ii) The payment standard as

determined at the most recent regular

reexamination of family income and

composition effective after the

beginning of the HAP contract term.

(5) If there is a change in family size

or composition during the HAP contract

term, paragraph (d)(4)(i) of this section

does not apply at the next regular

reexamination following such change,

or thereafter during the term.

§ 982.506 Over-FMR tenancy: HA approval.

(a) HA discretion to approve. (1) At

the request of the family, the HA may

approve an over-FMR tenancy in

accordance with this section.

(2) Generally, the HA is not required

to approve any over-FMR tenancy.

However, the HA must approve an overFMR tenancy in accordance with this

section, if needed as a reasonable

accommodation so that the program is

readily accessible to and usable by

persons with disabilities in accordance

with 24 CFR part 8.

(b) Requirements.—(1) Ten percent

limit. The HA may not approve
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additional over-FMR tenancies if the

number of such tenancies currently is

ten percent or more of the number of

incremental certificate units under the

HUD-approved budget for the HA

certificate program. ‘‘Incremental units’’

means the number of budgeted

certificate units minus any units for

which HUD provided tenant-based

program funding designated for families

previously residing in housing with

Section 8 project-based assistance.

(2) Affordability of family share. The

HA may not approve an over-FMR

tenancy unless the HA determines that

the initial family share is reasonable. In

making this determination, the HA must

take into account other family expenses,

such as child care, unreimbursed

medical expenses, and other appropriate

family expenses as determined by the

HA.

(c) Amount of assistance. During an

over-FMR tenancy, the amount of the

housing assistance payment is

determined in accordance with

§ 982.505(c).

(d) HA administrative plan. (1) The

administrative plan must cover HA

policies on approval and administration

of over-FMR tenancies.

(2) The plan must state how the HA

decides whether to approve an overFMR tenancy at the family’s request

(within the program limit stated in

paragraph (b)(1) of this section). Such

policy may be based on first-come, firstserved; on an HA determined system of

preferences; or on discretionary case-bycase consideration of individual

requests.

§ 982.507 Regular tenancy: How to

calculate housing assistance payment.

The monthly housing assistance

payment equals the gross rent, minus

the higher of:

(a) The total tenant payment; or

(b) The minimum rent as required by

law.

§ 982.508 Regular tenancy: Limit on initial

rent to owner.

(a) FMR/exception rent limit. (1) The

initial gross rent for any unit may not

exceed the FMR/exception rent limit on

the date the HA approves the lease.

(2) The FMR/exception rent limit for

a family is the lower of:

(i) The FMR/exception rent limit for

the family unit size; or

(ii) The FMR/exception rent limit for

the unit size rented by the family.

(b) Reasonable rent. The initial rent to

owner may not exceed a reasonable rent

as determined in accordance with

§ 982.503.

§ 982.509 Regular tenancy: Annual

adjustment of rent to owner.

(a) When rent is adjusted. At each

annual anniversary date of the HAP

contract, the HA must adjust the rent to

owner at the request of the owner in

accordance with this section.

(b) Amount of annual adjustment. (1)

The adjusted rent to owner equals the

lesser of:

(i) The pre-adjustment rent to owner

multiplied by the applicable Section 8

annual adjustment factor, published by

HUD in the Federal Register, that is in

effect 60 days before the HAP contract

anniversary;

(ii) The reasonable rent (as most

recently determined or redetermined by

the HA in accordance with § 982.503);

or

(iii) The amount requested by the

owner.

(2) In making the annual adjustment,

the pre-adjustment rent to owner does

not include any previously approved

special adjustments.

(3) The rent to owner may be adjusted

up or down in accordance with this

section.

(4) Notwithstanding paragraph (b)(1)

of this section, the rent to owner for a

unit must not be increased at the annual

anniversary date unless:

(i) The owner requests the adjustment

by giving notice to the HA; and

(ii) During the year before the annual

anniversary date, the owner has

complied with all requirements of the

HAP contract, including compliance

with the HQS.

(5) The rent to owner will only be

increased for housing assistance

payments covering months commencing

on the later of:

(i) The contract anniversary date; or

(ii) At least sixty days after the HA

receives the owner’s request.

(6) To receive an increase resulting

from the annual adjustment for an

annual anniversary date, the owner

must request the increase at least sixty

days before the next annual anniversary

date.

§ 982.510 Regular tenancy: Special

adjustment of rent to owner.

(a) Substantial and general cost

increases. (1) At HUD’s sole discretion,

HUD may approve a special adjustment

of the rent to owner to reflect increases

in the actual and necessary costs of

owning and maintaining the unit

because of substantial and general

increases in:

(i) Real property taxes;

(ii) Special governmental assessments;

(iii) Utility rates; or

(iv) Costs of utilities not covered by

regulated rates.

(2) An HA may make a special

adjustment of the rent to owner only if

the adjustment has been approved by

HUD. The owner does not have any

right to receive a special adjustment.

(b) Reasonable rent. The adjusted rent

may not exceed the reasonable rent. The

owner may not receive a special

adjustment if the adjusted rent would

exceed the reasonable rent.

(c) Term of special adjustment. (1)

The HA may withdraw or limit the term

of any special adjustment.

(2) If a special adjustment is approved

to cover temporary or one-time costs,

the special adjustment is only a

temporary or one-time increase of the

rent to owner.

§ 982.511 Rent to owner: Effect of rent

control.

In addition to the rent reasonableness

limit under this subpart, the amount of

rent to owner also may be subject to rent

control limits under State or local law.

§ 982.512 Rent to owner in subsidized

projects.

(a) Subsidized rent. (1) The rent to

owner in an insured or noninsured

Section 236 project, a Section 515

project of the Rural Development

Administration, a Section 202 project or

a Section 221(d)(3) below market

interest rate project is the subsidized

rent.

(2) During the assisted tenancy, the

rent to owner must be adjusted to follow

the subsidized rent, and must not be

adjusted by applying the published

Section 8 annual adjustment factors. For

such units, special adjustments may not

be granted. The following sections do

not apply to a tenancy in a subsidized

project described in paragraph (a)(1) of

this section: § 982.509 (annual

adjustment) and § 982.510 (special

adjustment).

(b) HOME. For units assisted under

the HOME program, rents are subject to

requirements of the HOME program (24

CFR 92.252).

(c) Other subsidy: HA discretion to

reduce rent. In the case of a regular

tenancy, the HA may require the owner

to reduce the initial rent to owner

because of other governmental

subsidies, including tax credit or tax

exemption, grants or other subsidized

financing.

§ 982.513 Other fees and charges.

(a) The cost of meals or supportive

services may not be included in the rent

to owner, and the value of meals or

supportive services may not be included

in the calculation of reasonable rent.

(b) The lease may not require the

tenant or family members to pay charges
23864 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

for meals or supportive services. Nonpayment of such charges is not grounds

for termination of tenancy.

(c) The owner may not charge the

tenant extra amounts for items

customarily included in rent in the

locality, or provided at no additional

cost to unsubsidized tenants in the

premises.

§ 982.514 Distribution of housing

assistance payment.

The monthly housing assistance

payment is distributed as follows:

(a) The HA pays the owner the lesser

of the housing assistance payment or the

rent to owner.

(b) If the housing assistance payment

exceeds the rent to owner, the HA may

pay the balance of the housing

assistance payment either to the family

or directly to the utility supplier to pay

the utility bill on behalf of the family.

§ 982.515 Family share: Family

responsibility.

(a) The family share is calculated by

subtracting the amount of the housing

assistance payment from the gross rent.

(b) The HA may not use housing

assistance payments or other program

funds (including any administrative fee

reserve) to pay any part of the family

share. Payment of the family share is the

responsibility of the family.

§ 982.516 Family income and composition:

Regular and interim examinations.

(a) HA responsibility for

reexamination and verification. (1) The

HA’s responsibilities for reexamining

family income and composition are

specified in 24 CFR part 5, subpart F.

(2) The HA must obtain and

document in the tenant file third party

verification of the following factors, or

must document in the tenant file why

third party verification was not

available:

(i) Reported family annual income;

(ii) The value of assets;

(iii) Expenses related to deductions

from annual income; and

(iv) Other factors that affect the

determination of adjusted income.

(b) When HA conducts interim

reexamination. (1) At any time, the HA

may conduct an interim reexamination

of family income and composition.

(2) At any time, the family may

request an interim determination of

family income or composition because

of any changes since the last

determination. The HA must make the

interim determination within a

reasonable time after the family request.

(3) Interim examinations must be

conducted in accordance with policies

in the HA administrative plan.

(c) Family reporting of change. The

HA must adopt policies prescribing

when and under what conditions the

family must report a change in family

income or composition.

(d) Effective date of reexamination. (1)

The HA must adopt policies prescribing

how to determine the effective date of

a change in the housing assistance

payment resulting from an interim

redetermination.

(2) At the effective date of a regular or

interim reexamination, the HA must

make appropriate adjustments in the

housing assistance payment and family

unit size.

(e) Family member income. Family

income must include income of all

family members, including family

members not related by blood or

marriage. If any new family member is

added, family income must include any

income of the additional family

member. The HA must conduct a

reexamination to determine such

additional income, and must make

appropriate adjustments in the housing

assistance payment and family unit size.

(Information collection requirements

contained in this section have been approved

by the Office of Management and Budget

under control number 2577–0169.)

§ 982.517 Utility allowance schedule.

(a) Maintaining schedule. (1) The HA

must maintain a utility allowance

schedule for all tenant-paid utilities

(except telephone), for cost of tenantsupplied refrigerators and ranges, and

for other tenant-paid housing services

(e.g., trash collection (disposal of waste

and refuse)).

(2) The HA must give HUD a copy of

the utility allowance schedule. At

HUD’s request, the HA also must

provide any information or procedures

used in preparation of the schedule.

(b) How allowances are determined.

(1) The utility allowance schedule must

be determined based on the typical cost

of utilities and services paid by energyconservative households that occupy

housing of similar size and type in the

same locality. In developing the

schedule, the HA must use normal

patterns of consumption for the

community as a whole and current

utility rates.

(2)(i) An HA’s utility allowance

schedule, and the utility allowance for

an individual family, must include the

utilities and services that are necessary

in the locality to provide housing that

complies with the housing quality

standards. However, the HA may not

provide any allowance for non-essential

utility costs, such as costs of cable or

satellite television.

(ii) In the utility allowance schedule,

the HA must classify utilities and other

housing services according to the

following general categories: space

heating; air conditioning; cooking; water

heating; water; sewer; trash collection

(disposal of waste and refuse); other

electric; refrigerator (cost of tenantsupplied refrigerator); range (cost of

tenant-supplied range); and other

specified housing services. The HA

must provide a utility allowance for

tenant-paid air-conditioning costs if the

majority of housing units in the market

provide centrally air-conditioned units

or there is appropriate wiring for tenantinstalled air conditioners.

(3) The cost of each utility and

housing service category must be stated

separately. For each of these categories,

the utility allowance schedule must take

into consideration unit size (by number

of bedrooms), and unit types (e.g.,

apartment, row-house, town house,

single-family detached, and

manufactured housing) that are typical

in the community.

(4) The utility allowance schedule

must be prepared and submitted in

accordance with HUD requirements on

the form prescribed by HUD.

(c) Revisions of utility allowance

schedule. (1) An HA must review its

schedule of utility allowances each year,

and must revise its allowance for a

utility category if there has been a

change of 10 percent or more in the

utility rate since the last time the utility

allowance schedule was revised. The

HA must maintain information

supporting its annual review of utility

allowances and any revisions made in

its utility allowance schedule.

(2) At HUD’s direction, the HA must

revise the utility allowance schedule to

correct any errors, or as necessary to

update the schedule.

(d) Use of utility allowance schedule.

(1) The HA must use the appropriate

utility allowance for the size of dwelling

unit actually leased by the family (rather

than the family unit size as determined

under the HA subsidy standards).

(2) At reexamination, the HA must

use the HA current utility allowance

schedule.

(e) Higher utility allowance as

reasonable accommodation for a person

with disabilities. On request from a

family that includes a person with

disabilities, the HA must approve a

utility allowance which is higher than

the applicable amount on the utility

allowance schedule if a higher utility

allowance is needed as a reasonable

accommodation in accordance with 24

CFR part 8 to make the program

accessible to and usable by the family

member with a disability.
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23865

(Information collection requirements

contained in this section have been approved

by the Office of Management and Budget

under control number 2577–0169.)

56. In § 982.552, paragraph (a)(1) is

revised to read as follows:

§ 982.552 HA denial or termination of

assistance for family.

(a) * * *

(1) An HA may deny assistance for an

applicant or terminate assistance for a

participant under the programs because

of the family’s action or failure to act as

described in this section or § 982.553.

The provisions of this section do not

affect denial or termination of assistance

for grounds other than action or failure

to act by the family.

* * * * *

57. A new subpart M is added, to read

as follows:

Subpart M—Special Housing Types

§ 982.601 Overview.

(a) Special housing types. This

subpart describes program requirements

for special housing types. The following

are the special housing types:

(1) Single room occupancy (SRO)

housing;

(2) Congregate housing;

(3) Group home;

(4) Shared housing;

(5) Cooperative (including mutual

housing);

(6) Manufactured home.

(b) HA choice to offer special housing

type. (1) The HA may permit a family

to use any of the following special

housing types in accordance with

requirements of the program: single

room occupancy housing, congregate

housing, group home, shared housing or

cooperative housing.

(2) In general, the HA is not required

to permit use of any of these special

housing types in its program.

(3) The HA must permit use of any

special housing type if needed as a

reasonable accommodation so that the

program is readily accessible to and

usable by persons with disabilities in

accordance with 24 CFR part 8.

(4) For occupancy of a manufactured

home, see § 982.620(a).

(c) Family choice of housing and

housing type. The HA may not set aside

program funding for special housing

types, or for a specific special housing

type. The family chooses whether to

rent housing that qualifies as a special

housing type under this subpart, or as

any specific special housing type, or to

rent other eligible housing in

accordance with requirements of the

program. The HA may not restrict the

family’s freedom to choose among

available units in accordance with

§ 982.353.

(d) Applicability of requirements.

Except as modified by this subpart,

requirements in the other subparts of

this part apply to the special housing

types. Provisions in this subpart only

apply to a specific special housing type.

The housing type is noted in the title of

each section.

Single Room Occupancy (SRO)

§ 982.602 SRO: General.

(a) Who may reside in an SRO? A

single person may reside in an SRO

housing unit.

(b) When may a person rent an SRO

housing unit? A single person may rent

a unit in SRO housing only if:

(1) HUD determines there is

significant demand for SRO units in the

area;

(2) The HA and the unit of general

local government approve providing

assistance for SRO housing under the

program; and

(3) The unit of general local

government and the HA certify to HUD

that the property meets applicable local

health and safety standards for SRO

housing.

§ 982.603 SRO: Lease and HAP contract.

For SRO housing, there is a separate

lease and HAP contract for each assisted

person.

§ 982.604 SRO: Rent and housing

assistance payment.

(a) SRO FMR/exception rent limit. The

FMR/exception rent limit for SRO

housing is 75 percent of the zerobedroom FMR/exception rent limit.

(b) Regular tenancy: Limit on initial

gross rent. For a regular tenancy in the

certificate program, the initial gross rent

may not exceed the FMR/exception rent

limit for SRO housing.

(c) Voucher program: Payment

standard. The HA must adopt a

payment standard for persons who

occupy SRO housing with assistance

under the voucher program. The SRO

payment standard may not exceed the

FMR/exception rent limit for SRO

housing. While an assisted person

resides in SRO housing, the SRO

payment standard must be used to

calculate the housing assistance

payment.

(d) Over-FMR tenancy: Payment

standard. While the assisted person

resides in SRO housing with assistance

under an over-FMR tenancy in the

certificate program, the payment

standard for the person is the SRO FMR/

exception rent limit.

(e) Utility allowance. The utility

allowance for an assisted person

residing in SRO housing is 75 percent

of the zero bedroom utility allowance.

§ 982.605 SRO: Housing quality standards.

(a) HQS standards for SRO. The HQS

in § 982.401 apply to SRO housing.

However, the standards in this section

apply in place of § 982.401(b) (sanitary

facilities), § 982.401(c) (food preparation

and refuse disposal), and § 982.401(d)

(space and security). Since the SRO

units will not house children, the

housing quality standards in

§ 982.401(j), concerning lead-based

paint, do not apply to SRO housing.

(b) Performance requirements. (1)

SRO housing is subject to the additional

performance requirements in this

paragraph (b).

(2) Sanitary facilities, and space and

security characteristics must meet local

code standards for SRO housing. In the

absence of applicable local code

standards for SRO housing, the

following standards apply:

(i) Sanitary facilities. (A) At least one

flush toilet that can be used in privacy,

lavatory basin, and bathtub or shower,

in proper operating condition, must be

supplied for each six persons or fewer

residing in the SRO housing.

(B) If SRO units are leased only to

males, flush urinals may be substituted

for not more than one-half the required

number of flush toilets. However, there

must be at least one flush toilet in the

building.

(C) Every lavatory basin and bathtub

or shower must be supplied at all times

with an adequate quantity of hot and

cold running water.

(D) All of these facilities must be in

proper operating condition, and must be

adequate for personal cleanliness and

the disposal of human waste. The

facilities must utilize an approvable

public or private disposal system.

(E) Sanitary facilities must be

reasonably accessible from a common

hall or passageway to all persons

sharing them. These facilities may not

be located more than one floor above or

below the SRO unit. Sanitary facilities

may not be located below grade unless

the SRO units are located on that level.

(ii) Space and security. (A) No more

than one person may reside in an SRO

unit.

(B) An SRO unit must contain at least

one hundred ten square feet of floor

space.

(C) An SRO unit must contain at least

four square feet of closet space for each

resident (with an unobstructed height of

at least five feet). If there is less closet

space, space equal to the amount of the

deficiency must be subtracted from the

area of the habitable room space when

determining the amount of floor space
23866 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

in the SRO unit. The SRO unit must

contain at least one hundred ten square

feet of remaining floor space after

subtracting the amount of the deficiency

in minimum closet space.

(D) Exterior doors and windows

accessible from outside an SRO unit

must be lockable.

(3) Access. (i) Access doors to an SRO

unit must have locks for privacy in

proper operating condition.

(ii) An SRO unit must have immediate

access to two or more approved means

of exit, appropriately marked, leading to

safe and open space at ground level, and

any means of exit required by State and

local law.

(iii) The resident must be able to

access an SRO unit without passing

through any other unit.

(4) Sprinkler system. A sprinkler

system that protects all major spaces,

hard wired smoke detectors, and such

other fire and safety improvements as

State or local law may require must be

installed in each building. The term

‘‘major spaces’’ means hallways, large

common areas, and other areas specified

in local fire, building, or safety codes.

Congregate Housing

§ 982.606 Congregate housing: Who may

reside in congregate housing.

(a) An elderly person or a person with

disabilities may reside in a congregate

housing unit.

(b)(1) If approved by the HA, a family

member or live-in aide may reside with

the elderly person or person with

disabilities.

(2) The HA must approve a live-in

aide if needed as a reasonable

accommodation so that the program is

readily accessible to and usable by

persons with disabilities in accordance

with 24 CFR part 8. See § 982.316

concerning occupancy by a live-in aide.

§ 982.607 Congregate housing: Lease and

HAP contract.

For congregate housing, there is a

separate lease and HAP contract for

each assisted family.

§ 982.608 Congregate housing: Rent and

housing assistance payment; FMR/

exception rent limit.

(a) Unless there is a live-in aide:

(1) The FMR/exception rent limit for

a family that resides in a congregate

housing unit is the zero-bedroom FMR/

exception rent limit.

(2) However, if there are two or more

rooms in the unit (not including kitchen

or sanitary facilities), the FMR/

exception rent limit for a family that

resides in a congregate housing unit is

the one-bedroom FMR/exception rent

limit.

(b) If there is a live-in aide, the livein aide must be counted in determining

the family unit size.

§ 982.609 Congregate housing: Housing

quality standards.

(a) HQS standards for congregate

housing. The HQS in § 982.401 apply to

congregate housing. However, the

standards in this section apply in place

of § 982.401(c) (food preparation and

refuse disposal). Congregate housing is

not subject to the HQS acceptability

requirement in § 982.401(d)(2)(i) that

the dwelling unit must have a kitchen

area.

(b) Food preparation and refuse

disposal: Additional performance

requirements. The following additional

performance requirements apply to

congregate housing:

(1) The unit must contain a

refrigerator of appropriate size.

(2) There must be central kitchen and

dining facilities on the premises. These

facilities:

(i) Must be located within the

premises, and accessible to the

residents;

(ii) Must contain suitable space and

equipment to store, prepare, and serve

food in a sanitary manner;

(iii) Must be used to provide a food

service that is provided for the

residents, and that is not provided by

the residents; and

(iv) Must be for the primary use of

residents of the congregate units and be

sufficient in size to accommodate the

residents.

(3) There must be adequate facilities

and services for the sanitary disposal of

food waste and refuse, including

facilities for temporary storage where

necessary.

Group Home

§ 982.610 Group home: Who may reside in

a group home.

(a) An elderly person or a person with

disabilities may reside in a Stateapproved group home.

(b)(1) If approved by the HA, a livein aide may reside with a person with

disabilities.

(2) The HA must approve a live-in

aide if needed as a reasonable

accommodation so that the program is

readily accessible to and usable by

persons with disabilities in accordance

with 24 CFR part 8. See § 982.316

concerning occupancy by a live-in aide.

(c) Except for a live-in aide, all

residents of a group home, whether

assisted or unassisted, must be elderly

persons or persons with disabilities.

(d) Persons residing in a group home

must not require continual medical or

nursing care.

(e) Persons who are not assisted under

the tenant-based program may reside in

a group home.

(f) No more than 12 persons may

reside in a group home. This limit

covers all persons who reside in the

unit, including assisted and unassisted

residents and any live-in aide.

§ 982.611 Group home: Lease and HAP

contract.

For assistance in a group home, there

is a separate HAP contract and lease for

each assisted person.

§ 982.612 Group home: State approval of

group home.

A group home must be licensed,

certified, or otherwise approved in

writing by the State (e.g., Department of

Human Resources, Mental Health,

Retardation, or Social Services) as a

group home for elderly persons or

persons with disabilities.

§ 982.613 Group home: Rent and housing

assistance payment.

(a) Meaning of pro-rata portion. For a

group home, the term ‘‘pro-rata portion’’

means the ratio derived by dividing the

number of persons in the assisted

household by the total number of

residents (assisted and unassisted)

residing in the group home. The number

of persons in the assisted household

equals one assisted person plus any HAapproved live-in aide.

(b) Rent to owner: Reasonable rent

limit. (1) The rent to owner for an

assisted person may not exceed the prorata portion of the reasonable rent for

the group home.

(2) The reasonable rent for a group

home is determined in accordance with

§ 982.503. In determining reasonable

rent for the group home, the HA must

consider whether sanitary facilities, and

facilities for food preparation and

service, are common facilities or private

facilities.

(c) Maximum subsidy.—(1) Family

unit size. (i) Unless there is a live-in

aide, the family unit size is zero or one

bedroom.

(ii) If there is a live-in aide, the livein aide must be counted in determining

the family unit size.

(2) Regular tenancy: Limit on initial

gross rent. For a person who resides in

a group home under a regular tenancy

in the certificate program, the initial

gross rent may not exceed either:

(i) The FMR/exception rent limit for

the family unit size; or

(ii) The pro-rata portion of the FMR/

exception rent limit for the group home

size.

(3) Voucher tenancy: Payment

standard. For a voucher tenancy, the
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23867

payment standard for a person who

resides in a group home is the lower of:

(i) The payment standard for the

family unit size; or

(ii) The pro-rata portion of the

payment standard for the group home

size.

(4) Over-FMR tenancy: Payment

standard. For an over-FMR tenancy, the

payment standard for a person who

resides in a group home is the lower of:

(i) The FMR/exception rent limit for

the family unit size; or

(ii) The pro-rata portion of the FMR/

exception rent limit for the group home

size.

(d) Utility allowance. The utility

allowance for each assisted person

residing in a group home is the pro-rata

portion of the utility allowance for the

group home unit size.

§ 982.614 Group home: Housing quality

standards.

(a) Compliance with HQS. The HA

may not give approval to reside in a

group home unless the unit, including

the portion of the unit available for use

by the assisted person under the lease,

meets the housing quality standards.

(b) Applicable HQS standards. (1) The

HQS in § 982.401 apply to assistance in

a group home. However, the standards

in this section apply in place of

§ 982.401(b) (sanitary facilities),

§ 982.401(c) (food preparation and

refuse disposal), § 982.401(d) (space and

security), § 982.401(g) (structure and

materials) and § 982.401(l) (site and

neighborhood).

(2) The entire unit must comply with

the HQS.

(c) Additional performance

requirements. The following additional

performance requirements apply to a

group home:

(1) Sanitary facilities. (i) There must

be a bathroom in the unit. The unit must

contain, and an assisted resident must

have ready access to:

(A) A flush toilet that can be used in

privacy;

(B) A fixed basin with hot and cold

running water; and

(C) A shower or bathtub with hot and

cold running water.

(ii) All of these facilities must be in

proper operating condition, and must be

adequate for personal cleanliness and

the disposal of human waste. The

facilities must utilize an approvable

public or private disposal system.

(iii) The unit may contain private or

common sanitary facilities. However,

the facilities must be sufficient in

number so that they need not be shared

by more than four residents of the group

home.

(iv) Sanitary facilities in the group

home must be readily accessible to and

usable by residents, including persons

with disabilities.

(2) Food preparation and service. (i)

The unit must contain a kitchen and a

dining area. There must be adequate

space to store, prepare, and serve foods

in a sanitary manner.

(ii) Food preparation and service

equipment must be in proper operating

condition. The equipment must be

adequate for the number of residents in

the group home. The unit must contain

the following equipment:

(A) A stove or range, and oven;

(B) A refrigerator; and

(C) A kitchen sink with hot and cold

running water. The sink must drain into

an approvable public or private disposal

system.

(iii) There must be adequate facilities

and services for the sanitary disposal of

food waste and refuse, including

facilities for temporary storage where

necessary.

(iv) The unit may contain private or

common facilities for food preparation

and service.

(3) Space and security. (i) The unit

must provide adequate space and

security for the assisted person.

(ii) The unit must contain a living

room, kitchen, dining area, bathroom,

and other appropriate social,

recreational or community space. The

unit must contain at least one bedroom

of appropriate size for each two persons.

(iii) Doors and windows that are

accessible from outside the unit must be

lockable.

(4) Structure and material. (i) The

unit must be structurally sound to avoid

any threat to the health and safety of the

residents, and to protect the residents

from the environment.

(ii) Ceilings, walls, and floors must

not have any serious defects such as

severe bulging or leaning, loose surface

materials, severe buckling or noticeable

movement under walking stress,

missing parts or other significant

damage. The roof structure must be

firm, and the roof must be weathertight.

The exterior or wall structure and

exterior wall surface may not have any

serious defects such as serious leaning,

buckling, sagging, cracks or large holes,

loose siding, or other serious damage.

The condition and equipment of interior

and exterior stairways, halls, porches,

walkways, etc., must not present a

danger of tripping or falling. Elevators

must be maintained in safe operating

condition.

(iii) The group home must be

accessible to and usable by a resident

with disabilities.

(5) Site and neighborhood. The site

and neighborhood must be reasonably

free from disturbing noises and

reverberations and other hazards to the

health, safety, and general welfare of the

residents. The site and neighborhood

may not be subject to serious adverse

environmental conditions, natural or

manmade, such as dangerous walks or

steps, instability, flooding, poor

drainage, septic tank back-ups, sewage

hazards or mud slides, abnormal air

pollution, smoke or dust, excessive

noise, vibrations or vehicular traffic,

excessive accumulations of trash,

vermin or rodent infestation, or fire

hazards. The unit must be located in a

residential setting.

Shared Housing

§ 982.615 Shared housing: Occupancy.

(a) Sharing a unit. An assisted family

may reside in shared housing. In shared

housing, an assisted family shares a unit

with the other resident or residents of

the unit. The unit may be a house or an

apartment.

(b) Who may share a dwelling unit

with assisted family? (1) If approved by

the HA, a live-in aide may reside with

the family to care for a person with

disabilities. The HA must approve a

live-in aide if needed as a reasonable

accommodation so that the program is

readily accessible to and usable by

persons with disabilities in accordance

with 24 CFR part 8. See § 982.316

concerning occupancy by a live-in aide.

(2) Other persons who are assisted

under the tenant-based program, or

other persons who are not assisted

under the tenant-based program, may

reside in a shared housing unit.

(3) The owner of a shared housing

unit may reside in the unit. A resident

owner may enter into a HAP contract

with the HA. However, housing

assistance may not be paid on behalf of

an owner. An assisted person may not

be related by blood or marriage to a

resident owner.

§ 982.616 Shared housing: Lease and HAP

contract.

For assistance in a shared housing

unit, there is a separate HAP contract

and lease for each assisted family.

§ 982.617 Shared housing: Rent and

housing assistance payment.

(a) Meaning of pro-rata portion. For

shared housing, the term ‘‘pro-rata

portion’’ means the ratio derived by

dividing the number of bedrooms in the

private space available for occupancy by

a family by the total number of

bedrooms in the unit. For example, for

a family entitled to occupy three

bedrooms in a five bedroom unit, the

ratio would be 3/5.

(b) Rent to owner: Reasonable rent. (1)

The rent to owner for the family may
23868 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

not exceed the pro-rata portion of the

reasonable rent for the shared housing

dwelling unit.

(2) The reasonable rent is determined

in accordance with § 982.503.

(c) Maximum subsidy.—(1) Regular

tenancy: Limit on initial gross rent. For

a regular tenancy under the certificate

program, the initial gross rent may not

exceed either:

(i) The FMR/exception rent limit for

the family unit size; or

(ii) The pro-rata portion of the FMR/

exception rent limit for the shared

housing unit size.

(2) Voucher or over-FMR tenancy:

Payment standard. For a voucher

tenancy or an over-FMR tenancy, the

payment standard is the lower of:

(i) The payment standard for the

family unit size; or

(ii) The pro-rata portion of the

payment standard for the shared

housing unit size.

(3) Live-in aide. If there is a live-in

aide, the live-in aide must be counted in

determining the family unit size.

(d) Utility allowance. The utility

allowance for an assisted family

residing in shared housing is the prorata portion of the utility allowance for

the shared housing unit.

§ 982.618 Shared housing: Housing quality

standards.

(a) Compliance with HQS. The HA

may not give approval to reside in

shared housing unless the entire unit,

including the portion of the unit

available for use by the assisted family

under its lease, meets the housing

quality standards.

(b) Applicable HQS standards. The

HQS in § 982.401 apply to assistance in

shared housing. However, the HQS

standards in this section apply in place

of § 982.401(d) (space and security).

(c) Facilities available for family. The

facilities available for the use of an

assisted family in shared housing under

the family’s lease must include (whether

in the family’s private space or in the

common space) a living room, sanitary

facilities in accordance with

§ 982.401(b), and food preparation and

refuse disposal facilities in accordance

with § 982.401(c).

(d) Space and security: Performance

requirements. (1) The entire unit must

provide adequate space and security for

all its residents (whether assisted or

unassisted).

(2)(i) Each unit must contain private

space for each assisted family, plus

common space for shared use by the

residents of the unit. Common space

must be appropriate for shared use by

the residents.

(ii) The private space for each assisted

family must contain at least one

bedroom for each two persons in the

family. The number of bedrooms in the

private space of an assisted family may

not be less than the family unit size.

(iii) A zero or one bedroom unit may

not be used for shared housing.

Cooperative

§ 982.619 Cooperative housing.

(a) When cooperative housing may be

used. A family may reside in

cooperative housing if the HA

determines that:

(1) Assistance under the program will

help maintain affordability of the

cooperative unit for low-income

families; and

(2) The cooperative has adopted

requirements to maintain continued

affordability for low-income families

after transfer of a cooperative member’s

interest in a cooperative unit (such as a

sale of the resident’s share in a

cooperative corporation).

(b) Rent to owner. (1) The reasonable

rent for a cooperative unit is determined

in accordance with § 982.503. For

cooperative housing, the rent to owner

is the monthly carrying charge under

the occupancy agreement/lease between

the member and the cooperative.

(2) The carrying charge consists of the

amount assessed to the member by the

cooperative for occupancy of the

housing. The carrying charge includes

the member’s share of the cooperative

debt service, operating expenses, and

necessary payments to cooperative

reserve funds. However, the carrying

charge does not include down-payments

or other payments to purchase the

cooperative unit, or to amortize a loan

to the family for this purpose.

(3) Gross rent is the carrying charge

plus any utility allowance.

(4) For a regular tenancy under the

certificate program, rent to owner is

adjusted in accordance with § 982.509

(annual adjustment) and § 982.510

(special adjustments). For a cooperative,

adjustments are applied to the carrying

charge as determined in accordance

with this section.

(5) The occupancy agreement/lease

and other appropriate documents must

provide that the monthly carrying

charge is subject to Section 8 limitations

on rent to owner.

(c) Housing assistance payment. The

amount of the housing assistance

payment is determined in accordance

with subpart K of this part.

(d) Live-in aide. (1) If approved by the

HA, a live-in aide may reside with the

family to care for a person with

disabilities. The HA must approve a

live-in aide if needed as a reasonable

accommodation so that the program is

readily accessible to and usable by

persons with disabilities in accordance

with 24 CFR part 8. See § 982.316

concerning occupancy by a live-in aide.

(2) If there is a live-in aide, the livein aide must be counted in determining

the family unit size.

Manufactured Home

§ 982.620 Manufactured home:

Applicability of requirements.

(a) Assistance for resident of

manufactured home. (1) A family may

reside in a manufactured home with

assistance under the program.

(2) The HA must permit a family to

lease a manufactured home and space

with assistance under the program.

(3) The HA may provide assistance for

a family that owns the manufactured

home and leases only the space. The HA

is not required to provide such

assistance under the program.

(b) Applicability. (1) The HQS in

§ 982.621 always apply when assistance

is provided to a family occupying a

manufactured home (under paragraph

(a)(2) or (a)(3) of this section).

(2) Sections 982.622 to 982.624 only

apply when assistance is provided to a

manufactured home owner to lease a

manufactured home space.

(c) Live-in aide. (1) If approved by the

HA, a live-in aide may reside with the

family to care for a person with

disabilities. The HA must approve a

live-in aide if needed as a reasonable

accommodation so that the program is

readily accessible to and usable by

persons with disabilities in accordance

with 24 CFR part 8. See § 982.316

concerning occupancy by a live-in aide.

(2) If there is a live-in aide, the livein aide must be counted in determining

the family unit size.

§ 982.621 Manufactured home: Housing

quality standards.

A manufactured home must meet all

the HQS performance requirements and

acceptability criteria in § 982.401. A

manufactured home also must meet the

following requirements:

(a) Performance requirement. A

manufactured home must be placed on

the site in a stable manner, and must be

free from hazards such as sliding or

wind damage.

(b) Acceptability criteria. A

manufactured home must be securely

anchored by a tie-down device that

distributes and transfers the loads

imposed by the unit to appropriate

ground anchors to resist wind

overturning and sliding.
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23869

Manufactured Home Space Rental

§ 982.622 Manufactured home space

rental: Rent to owner.

(a) What is included. (1) Rent to

owner for rental of a manufactured

home space includes payment for

maintenance and services that the

owner must provide to the tenant under

the lease for the space.

(2) Rent to owner does not include the

costs of utilities and trash collection for

the manufactured home. However, the

owner may charge the family a separate

fee for the cost of utilities or trash

collection provided by the owner.

(b) Reasonable rent. (1) During the

assisted tenancy, the rent to owner for

the manufactured home space may not

exceed a reasonable rent as determined

in accordance with this section. Section

982.503 is not applicable.

(2) The HA may not approve a lease

for a manufactured home space until the

HA determines that the initial rent to

owner for the space is a reasonable rent.

At least annually during the assisted

tenancy, the HA must redetermine that

the current rent to owner is a reasonable

rent.

(3) The HA must determine whether

the rent to owner for the manufactured

home space is a reasonable rent in

comparison to rent for other comparable

manufactured home spaces. To make

this determination, the HA must

consider the location and size of the

space, and any services and

maintenance to be provided by the

owner in accordance with the lease

(without a fee in addition to the rent).

(4) By accepting each monthly

housing assistance payment from the

HA, the owner of the manufactured

home space certifies that the rent to

owner for the space is not more than

rent charged by the owner for unassisted

rental of comparable spaces in the same

manufactured home park or elsewhere.

The owner must give the HA

information, as requested by the HA, on

rents charged by the owner for other

manufactured home spaces.

§ 982.623 Manufactured home space

rental: Housing assistance payment.

(a) Fair market rent. The FMR for a

manufactured home space is determined

in accordance with 24 CFR 888.113(e).

Exception rents do not apply to rental

of a manufactured home space.

(b) Housing assistance payment: For

regular certificate tenancy. (1) Limit on

initial rent. For a regular tenancy, the

initial rent to owner for leasing a

manufactured home space may not

exceed the published FMR for a

manufactured home space.

(2) Formula. (i) During the term of a

regular tenancy, the amount of the

monthly housing assistance payment

equals the lesser of paragraphs

(b)(2)(i)(A) or (b)(2)(ii)(B) of this section:

(A) Manufactured home space cost

minus the higher of:

(1) The total tenant payment; or

(2) The minimum rent as required by

law.

(B) The rent to owner for the

manufactured home space.

(ii) ‘‘Manufactured home space cost’’

means the sum of:

(A) The amortization cost;

(B) The utility allowance; and

(C) The rent to owner for the

manufactured home space.

(c) Housing assistance payment: For

voucher tenancy or over-FMR tenancy.

(1) Payment standard. For a voucher

tenancy or an over-FMR tenancy, the

payment standard is used to calculate

the monthly housing assistance

payment for a family. The payment

standard for a family renting a

manufactured home space is the

published FMR for rental of a

manufactured home space. The amount

of the payment standard is determined

in accordance with § 982.505(d)(4) and

(d)(5).

(2) Subsidy calculation for voucher

tenancy. During the term of a voucher

tenancy, the amount of the monthly

housing assistance payment for a family

equals the lesser of paragraphs (c)(2)(i)

or (c)(2)(ii) of this section:

(i) An amount obtained by subtracting

30 percent of the family’s monthly

adjusted gross income from the sum of:

(A) The amortization cost;

(B) The utility allowance; and

(C) The payment standard.

(ii) The monthly gross rent for the

manufactured home space minus the

minimum rent. For a voucher tenancy,

the minimum rent is the higher of:

(A) 10 percent of monthly income

(gross income); or

(B) A higher minimum rent as

required by law.

(3) Subsidy calculation for over-FMR

tenancy. During the term of an overFMR tenancy, the amount of the

monthly housing assistance payment for

a family equals the lesser of paragraphs

(c)(3)(i) or (c)(3)(ii) of this section:

(i) An amount obtained by subtracting

the family’s total tenant payment from

the sum of:

(A) The amortization cost;

(B) The utility allowance; and

(C) The payment standard.

(ii) The monthly gross rent for the

manufactured home space minus the

minimum rent as required by law.

(d) Amortization cost. (1) In

calculating the subsidy payment for a

voucher tenancy, an over-FMR tenancy,

or a regular tenancy under the certificate

program, the amortization cost may

include debt service to amortize costs

(other than furniture costs) included in

the purchase price of the manufactured

home. The debt service includes the

payment for principal and interest on

the loan. The debt service amount must

be reduced by 15 percent to exclude

debt service to amortize the cost of

furniture, unless the HA determines that

furniture was not included in the

purchase price.

(2) The amount of the amortization

cost is the debt service established at

time of application to a lender for

financing purchase of the manufactured

home if monthly payments are still

being made. Any increase in debt

service due to refinancing after purchase

of the home is not included in the

amortization cost.

(3) Debt service for set-up charges

incurred by a family that relocates its

home may be included in the monthly

amortization payment made by the

family. In addition, set-up charges

incurred before the family became an

assisted family may be included in the

amortization cost if monthly payments

are still being made to amortize such

charges.

(e) Annual income. In determining a

family’s annual income, the value of

equity in the manufactured home

owned by the assisted family, and in

which the family resides, is not counted

as a family asset.

§ 982.624 Manufactured home space

rental: Utility allowance schedule.

The HA must establish utility

allowances for manufactured home

space rental. For the first twelve months

of the initial lease term only, the

allowances must include a reasonable

amount for utility hook-up charges

payable by the family if the family

actually incurs the expenses because of

a move. Allowances for utility hook-up

charges do not apply to a family that

leases a manufactured home space in

place. Utility allowances for

manufactured home space must not

cover costs payable by a family to cover

the digging of a well or installation of

a septic system.

PART 983—SECTION 8 PROJECTBASED CERTIFICATE PROGRAM

58. The authority citation for part 983

continues to read as follows:

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

59. In part 983, the table of contents

entries for subparts A and E are revised,

and the table of contents entries for

subpart F are added to read as follows:
23870 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

PART 983—SECTION 8 PROJECTBASED CERTIFICATE PROGRAM

SUBPART A—GENERAL INFORMATION

983.1 Purpose and applicability.

983.2 Additional definitions.

983.3 Information to be submitted to HUD

by the HA concerning its plan to attach

assistance to units.

983.4 HUD review of HA plans to attach

assistance to units.

983.5 Housing quality standards.

983.6 Site and neighborhood standards.

983.7 Eligible and ineligible properties and

HA-owned units.

983.8 Rehabilitation: Minimum expenditure

requirement.

983.9 Prohibition against new construction

or rehabilitation with U.S. Housing Act

of 1937 assistance and use of flexible

subsidy; pledge of Agreement or HAP

contract.

983.10 Displacement, relocation, and

acquisition.

983.11 Other Federal requirements.

983.12 Program accounts and records.

983.13 Special housing types.

* * * * *

SUBPART E—MANAGEMENT

983.201 Responsibilities of the HA.

983.202 Responsibilities of the owner.

983.203 Family participation.

983.204 Maintenance, operation and

inspections.

983.205 Overcrowded and underoccupied

units.

983.206 Assisted tenancy and termination

of tenancy.

983.207 Informal review or hearing

SUBPART F—RENT AND HOUSING

ASSISTANCE PAYMENT

983.251 Applicability.

983.252 Limits on initial rent to owner.

983.253 Initial rent: Who approves.

983.254 Annual adjustment of rent to

owner.

983.255 Special adjustment of rent to

owner.

983.256 Reasonable rent.

983.257 Other subsidy: Effect on rent to

owner.

983.258 Rent to owner: Effect of rent

control

983.259 Correction of rent.

983.260 Housing assistance payment:

Amount and distribution.

983.261 Family share: Family responsibility

to pay.

983.262 Other fees and charges.

60. Section 983.1 is revised to read as

follows:

§ 983.1 Purpose and applicability.

(a) This part 983 applies to the

Section 8 Project-based Certificate (PBC)

program, authorized under section

8(d)(2) of the 1937 Act (42 U.S.C.

1437f(d)(2)).

(b)(1) Except as otherwise expressly

modified or excluded by this part 983,

provisions of 24 CFR part 982 apply to

the PBC program.

(2) The following provisions of 24

CFR part 982 do not apply to the PBC

program:

(i) Provisions on tenant-based

assistance, on issuance or use of a

voucher or certificate; and on

portability;

(ii) Provisions on voucher tenancy or

over-FMR tenancy;

(iii) In subpart D, § 982.158(e)

(retention of lease, HAP contract and

family application);

(iv) In subpart E, § 982.202(b)(3)

(where family will live); § 982.204(d)

(family size); § 982.205(a) (waiting lists);

(v) Subpart G, except that the

following provisions of subpart G are

applicable to the PBC Program:

§ 982.308 (lease); § 982.311(a), (b), (c)

and (d)(1) (when assistance is paid);

§ 982.312 (absence from unit); and

§ 982.313 (security deposit);

(vi) Subpart H (where family can live

and move);

(vii) In subpart I, § 982.402(a)(3),

§ 982.402(c) and (d) (effect of family

unit size—subsidy and size of unit); and

§ 982.403 (termination of HAP contract

when unit is too big or too small);

(viii) In subpart J, § 982.451(a),

§ 982.451(b)(2) (term of HAP contract

same as lease); § 982.454 (termination of

HAP contract because of insufficient

funding); § 982.455 (termination of HAP

contract; termination notice);

(ix) Subpart K, except that the

following provisions of Subpart K are

applicable to the PBC Program:

§ 982.504 (for determination of the

FMR/exception rent limit); § 982.516

(family income and composition;

regular and interim examinations),

§ 982.517 (utility allowance schedule);

(x) In subpart M, all provisions

authorizing assistance for shared

housing (including § 982.615 through

§ 982.618); or assistance for a family

occupying a manufactured home

(including § 982.620 through § 982.624).

(3) This part does not apply to the

voucher program, or to an over-FMR

tenancy under the certificate program.

Every tenancy assisted in the PBC

program is a regular tenancy under the

certificate program.

§ 983.2 [Amended]

61. In § 983.2, the introductory text is

amended by removing the reference to

‘‘§ 982.3 of this chapter’’ and adding in

its place ‘‘24 CFR 982.4’’.

62. Section 983.3 is amended by

adding new paragraph (d), to read as

follows:

§ 983.3 Information to be submitted to

HUD by the HA concerning its plan to attach

assistance to units.

* * * * *

(d) Amount of assistance. The HA

must ensure that the amount of

assistance that is attached to units is

within the amounts available under the

ACC.

63. Section 983.5 is revised to read as

follows:

§ 983.5 Housing quality standards.

24 CFR 982.401 (housing quality

standards) applies to the PBC program.

For special housing types, housing

quality standards in 24 CFR part 982,

subpart M, apply to the PBC program.

64. Section 983.7 is amended as

follows:

a. By revising the introductory text of

paragraph (b);

b. By removing ‘‘or’’ at the end of

paragraph (b)(5) and by the removing

the period at the end of paragraph (b)(6)

and adding a semicolon in its place.

c. By removing paragraph (b)(7), and

by adding new paragraphs (b)(7) and

(b)(8);

d. By removing paragraph (d);

e. By redesignating paragraph (c) as

paragraph (d);

f. By removing paragraph (f);

g. By redesignating paragraph (g) as

paragraph (f); and

h. By adding paragraph (c), to read as

follows:

§ 983.7 Eligible and ineligible properties

and HA-owned units.

* * * * *

(b) An HA may not attach or pay PBC

assistance to units in the following

types of housing:

* * * * *

(7) College or other school

dormitories; or

(8) A manufactured home.

* * * * *

(c) An HA may not attach or pay PBC

assistance to units in any of the

following types of subsidized housing:

(1) Public housing;

(2) A unit subsidized by any other

form of Section 8 assistance (tenantbased or project-based);

(3) A unit subsidized with any local

or State rent subsidy;

(4) A Section 236 project (insured or

noninsured); or a unit subsidized with

Section 236 rental assistance payments;

(5) A Rural Development

Administration Section 515 project;

(6) A unit subsidized with rental

assistance payments under Section 521

of the Housing Act of 1949 (a Rural

Development Administration Program);

(7) Housing assisted under former

Section 23 of the United States Housing

Act of 1937 (before amendment by the

Housing and Community Development

Act of 1974);

(8) A Section 221(d)(3) project;
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23871

(9) A project with a Section 202 loan;

(10) A Section 202 project for nonelderly persons with disabilities

(Section 162 assistance);

(11) Section 202 supportive housing

for the elderly;

(12) Section 811 supportive housing

for persons with disabilities;

(13) A Section 101 rent supplement

project;

(14) A unit subsidized with tenantbased assistance under the HOME

program; or

(15) Any unit with any other

duplicative Federal State, or local

housing subsidy, as determined by

HUD. For this purpose, ‘‘housing

subsidy’’ does not include the housing

component of a welfare payment, a

social security payment received by the

family, or a rent reduction because of a

tax credit.

* * * * *

§ 983.10 [Amended]

65. In § 983.10, paragraph (g)(1)(iii)(B)

is amended by removing the reference to

‘‘24 CFR 813.107’’ and adding in its

place ‘‘24 CFR 5.613’’.

66. Section 983.12 is revised to read

as follows:

§ 983.12 Program accounts and records.

(a) During the term of each assisted

lease, and for at least three years

thereafter, the HA must keep:

(1) A copy of the executed lease; and

(2) The application from the family.

(b) During the HAP contract term, and

for at least three years thereafter, the HA

must keep a copy of:

(1) The HAP contract; and

(2) Records to document the basis for

determination of the initial rent to

owner, and for the HA determination

that rent to owner is a reasonable rent

(initially and during the term of the

HAP contract).

67. Section 983.13 is revised to read

as follows:

§ 983.13 Special housing types.

(a) Applicability. For applicability of

rules on special housing types at 24 CFR

part 982, subpart M, see § 983.1(b)(2)(x).

In the PBC program, the HA may not

provide assistance for shared housing or

for manufactured homes.

(b) Group homes. A group home may

include one or more group home units.

There must be a single PBC HAP

contract for units in the group home. A

separate lease is executed for each

elderly person or person with

disabilities who resides in a group

home.

§ 983.14 [Removed]

68. Section 983.14 is removed.

69. In § 983.51, the introductory text

of paragraph (d) is revised to read as

follows:

§ 983.51 HA unit selection policy,

advertising, and owner application

requirements.

* * * * *

(d) Owner application. The owner’s

application submitted to the HA must

contain the following:

* * * * *

§ 983.52 [Amended]

70. Section 983.52 is amended by:

a. Removing the second and third

sentences from paragraph (a);

b. Removing the reference to ‘‘§ 982.8

of this chapter’’ from paragraph (a) and

adding in its place ‘‘§ 983.8’’; and

c. Removing the reference to

‘‘§ 983.12’’ from paragraph (c) and

adding in its place reference to

‘‘§ 983.202’’.

§ 983.55 [Amended]

71. Section 983.55 is amended by

removing from paragraphs (a) and (b)

the reference to ‘‘§ 983.12’’ and by

adding in its place a reference to

‘‘§ 983.202’’.

§ 983.101 [Amended]

72. Section 983.101 is amended by

removing from paragraph (b)(3) the

reference to ‘‘§ 983.12’’ each place it

appears and by adding in its place a

reference to ‘‘§ 983.202’’.

§ 983.103 [Amended]

73. Section 983.103 is amended by

removing from paragraph (d) the

reference to ‘‘§ 983.203’’ and by adding

in its place a reference to ‘‘§ 983.253’’.

§ 983.151 [Amended]

74. Section 983.151 is amended by

removing the last sentence from

paragraph (b)(3).

75. Section 983.201 is revised to read

as follows:

§ 983.201 Responsibilities of the HA.

The HA must:

(a) Inspect the project before, during

and upon completion of new

construction or rehabilitation; and

(b) Ensure that the amount of

assistance that is attached to units is

within the amounts available under the

ACC.

§ 983.202 [Amended]

76. Section 983.202 is amended by

removing from the second sentence the

phrase ‘‘disclosing information and

submitting certifications as required by

24 CFR part 12 and implementing

instructions,’’ and by removing the

additional phrase ‘‘that accessibility’’

and adding in place of this latter phrase

the term ‘‘accessibility’’.

§ 983.203 [Amended]

77. Section 983.203 is amended by:

a. Removing from paragraph (a)(1) the

phrase ‘‘and 24 CFR 5.410 through

5.430’’;

b. Removing from paragraph (b) the

next to the last sentence, which is in

parentheses;

c. Removing from paragraph (d)(6) the

parenthetical phrase ‘‘(under

§ 983.208)’’ and adding in its place

‘‘(under § 983.207)’’; and

d. Removing from paragraph (g)(1)

reference to ‘‘§ 983.207’’ and adding in

its place ‘‘§ 983.206’’.

78. In § 983.204, a new paragraph (e)

is added to read as follows:

§ 983.204 Maintenance, operation and

inspections.

* * * * *

(e) Enforcement of HQS. 24 CFR part

982 and this part 983 do not create any

right of the family, or any party other

than HUD or the HA, to require

enforcement of the HQS requirement by

HUD or the HA, or to assert any claim

against HUD or the HA, for damages,

injunction or other relief, for alleged

failure to enforce the HQS.

§ 983.205 [Removed]

§§ 983.206 through 983.208 [Redesignated

as §§ 983.205 through 983.207]

79. In subpart E, § 983.205 is removed

and §§ 983.206 through 983.208 are

redesignated as §§ 983.205 through

983.207, respectively.

80. In newly redesignated § 983.205,

paragraph (a) is revised to read as

follows:

§ 983.205 Overcrowded and

underoccupied units.

(a) 24 CFR 982.403, Terminating HAP

contract: When unit is too big or too

small, does not apply.

* * * * *

81. Newly redesignated § 983.207 is

revised to read as follows:

§ 983.207 Informal review or hearing.

24 CFR 982.554 (Informal review for

applicants) and 24 CFR 982.555

(Informal hearing for participants) are

applicable.

82. In part 983, a new subpart F is

added, to read as follows:

SUBPART F—RENT AND HOUSING

ASSISTANCE PAYMENT

§ 983.251 Applicability.

(a) This subpart describes how to

determine the amount of the rent to

owner and the housing assistance

payment in the PBC program.
23872 Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations

(b) In subpart K of 24 CFR part 982

(rent and housing assistance payment

for tenant-based program), the following

are the only sections that apply to the

PBC program under this Part: § 982.504

(for determination of the FMR/exception

rent limit); § 982.516 (regular and

interim examinations of family income

and composition); and § 982.517 (utility

allowance schedule).

§ 983.252 Limits on initial rent to owner.

(a) Reasonable rent. The initial rent to

owner for a unit may not exceed the

reasonable rent as determined by the

HA in accordance with § 983.256.

(b) FMR/exception rent limit. The

initial gross rent for a unit (rent to

owner plus utility allowance) may not

exceed the FMR/exception rent limit on

the date the Agreement is executed. The

FMR/exception rent limit is determined

by the HA in accordance with 24 CFR

982.504.

§ 983.253 Initial rent: Who approves.

(a) For units that are not HUD-insured

or HA-owned. The HA approves the

initial rent to owners for PBC units that

are not financed with a HUD-insured

multifamily mortgage, and are not

owned by the HA.

(b) For units that are insured or HAowned. For HA-owned PBC units or

PBC units financed with a HUD insured

multifamily mortgage, the initial rents

must be approved by HUD.

§ 983.254 Annual adjustment of rent to

owner.

(a) Owner request for adjustment and

compliance with contract. At each

annual anniversary date of the HAP

contract, the HA must adjust the rent to

owner in accordance with the following

requirements:

(1) The owner must request a rent

increase (including a comparability

study to determine the amount of such

increase) by written notice to the HA at

least 120 days before the HAP contract

anniversary. The request must be

submitted in the form and manner

required by the HA.

(2) The HA may not increase the rent

at the annual anniversary unless:

(i) The owner requested the increase

by the 120 day deadline; and

(ii) During the year before the contract

anniversary, the owner complied with

all requirements of the HAP contract,

including compliance with the HQS for

all contract units.

(b) Amount of annual adjustment. (1)

The adjusted rent to owner equals the

lesser of:

(i) The pre-adjustment rent to owner

multiplied by the applicable Section 8

annual adjustment factor published by

HUD in the Federal Register;

(ii) The reasonable rent as determined

by the HA in accordance with § 983.256;

or

(iii) The rent requested by owner.

(2) For a HAP contract under an

Agreement executed on or after June 1,

1998, the applicable factor is the

published annual adjustment factor in

effect 60 days before the HAP contract

anniversary. For a HAP contract under

an Agreement executed before June 1,

1998, the applicable factor is the

published annual adjustment factor in

effect on the contract anniversary date.

(3) In making the annual adjustment,

the pre-adjustment rent to owner does

not include any previously approved

special adjustments.

(4) The rent to owner may be adjusted

up or down in accordance with this

section.

(c) Rent adjustments for HA-owned

units. For HA-owned PBC units, the HA

must request HUD approval of the

annual adjustment. The HA may not

increase the rent at the annual

anniversary until and unless HUD has

reviewed the HA comparability study,

and has approved the adjustment.

(d) Initial rent. Except as necessary to

correct errors in establishing the initial

rent in accordance with HUD

requirements, the adjusted rent to owner

must not be less than the initial rent.

(Information collection requirements in this

section have been approved by the Office of

Management and Budget under control

number 2577–0169.)

§ 983.255 Special adjustment of rent to

owner.

(a) HUD discretion. (1) At HUD’s sole

discretion, HUD may approve a special

adjustment of the rent to owner. An HA

may only make a special adjustment of

the rent to owner if the adjustment has

been approved by HUD.

(2) The owner does not have any right

to receive a special adjustment.

(b) Purpose of special adjustment. A

special adjustment may only be

approved to reflect increases in the

actual and necessary costs of owning

and maintaining the contract units

because of substantial and general

increases in:

(1) Real property taxes;

(2) Special governmental assessments;

(3) Utility rates; or

(4) Costs of utilities not covered by

regulated rates.

(c) Limits on special adjustment. (1) A

special adjustment may only be

approved if and to the extent the owner

demonstrates that cost increases are not

adequately compensated by application

of the published annual adjustment

factor at the contract anniversary (see

§ 983.254). The owner must demonstrate

that the rent to owner is not sufficient

for proper operation of the housing.

(2) The adjusted rent may not exceed

the reasonable rent as determined by a

comparability study in accordance with

§ 983.256.

(d) Financial information. The owner

must submit financial information, as

requested by the HA, that supports the

grant or continuance of a special

adjustment. For HAP contracts of more

than twenty units, such financial

information must be audited.

(e) Term of special adjustment. (1)

The HA may withdraw or limit the term

of any special adjustment.

(2) If a special adjustment is approved

to cover temporary or one-time costs,

the special adjustment is only a

temporary or one-time increase of the

rent to owner.

(Information collection requirements in this

section have been approved by the Office of

Management and Budget under control

number 2577–0169.)

§ 983.256 Reasonable rent.

(a) Requirement. (1) The HA may not

enter an agreement to enter into housing

assistance payments contract until the

HA determines that the initial rent to

owner under the HAP contract is a

reasonable rent.

(2) During the term of a HAP contract,

the rent to owner may not exceed the

reasonable rent as determined by the

HA.

(3) At least annually during the HAP

contract term, the HA must redetermine

that the current rent to owner does not

exceed a reasonable rent.

(b) Comparability. The HA must

determine whether the rent to owner is

a reasonable rent in comparison to rent

for other comparable unassisted units.

To make this determination, the HA

must consider:

(1) The location, quality, size, unit

type, and age of the contract unit; and

(2) Any amenities, housing services,

maintenance and utilities to be provided

by the owner in accordance with the

lease.

(c) Appraisal. (1) Determining initial

rent. (i) To determine that the initial

rent to owner is reasonable, the HA

must use a qualified State-certified

appraiser who has no direct or indirect

interest in the property or otherwise.

(ii) For each unit type, the appraiser

must submit a completed comparability

analysis on Form HUD–92273

(Estimates of Market Rent by

Comparison—the form is available at

the Department of Housing and Urban

Development, HUD Custom Service

Center, 451 7th Street, SW, Room B–

100, Washington, DC 20410) for HA

review and approval. The appraisal
Federal Register/ Vol. 63, No. 83 /Thursday, April 30, 1998 /Rules and Regulations 23873

must use at least three comparable units

in the private unassisted market.

(iii) The HA must certify to HUD that

the initial rent to owner for a unit does

not exceed the reasonable rent.

(2) Annual Adjustment:

Comparability study. (i) In determining

the annual adjustment of rent to owner

(in accordance with § 983.254), the

adjusted rent to owner must not exceed

a reasonable rent as determined by an

HA ‘‘comparability study.’’

(ii) The comparability study is an

analysis of rents charged for comparable

units. The HA comparability study must

determine the reasonable rent for the

contract units as compared with rents

for comparable unassisted units. The

adjusted rent for a contract unit may not

exceed the reasonable rent as shown by

the comparability study.

(iii) The comparability study must

include a completed comparability

analysis for each unit type on Form

HUD–92273 (Estimates of Market Rent

by Comparison). The comparability

study may be prepared by HA staff or

by another qualified appraiser. The

appraiser may not have any direct or

indirect interest in the property or

otherwise.

(iv) The comparability study must

show how the reasonable rent was

determined, including major differences

between the contract units and

comparable unassisted units.

(v) If the owner requests a rent

increase by the 120 day deadline (in

accordance with § 983.254(a)), the HA

must submit a comparability study to

the owner at least 60 days before the

HAP contract anniversary. If the HA

does not submit the comparability study

to the owner by this deadline, an

increase of rent by application of the

annual adjustment factor (in accordance

with § 983.254(b)) is not subject to the

reasonable rent limit.

(d) Owner certification of rents

charged for other units. By accepting

each monthly housing assistance

payment from the HA, the owner

certifies that the rent to owner is not

more than rent charged by the owner for

comparable unassisted units in the

premises. The owner must give the HA

information requested by the HA on

rents charged by the owner for other

units in the premises or elsewhere.

(Information collection requirements in this

section have been approved by the Office of

Management and Budget under control

number 2577–0169.)

§ 983.257 Other subsidy: Effect on rent to

owner.

(a) HOME. For units assisted under

the HOME program, rents are subject to

requirements of the HOME program (24

CFR 92.252).

(b) Combining subsidy. The HA may

only approve or assist a project in

accordance with HUD regulations and

guidelines designed to ensure that

participants do not receive excessive

compensation by combining HUD

program assistance with assistance from

other Federal, State or local agencies, or

with low income housing tax credits.

(See 42 U.S.C. 3545(d) and section 3545

note.)

(c) Other subsidy: HA discretion to

reduce rent. The HA may reduce the

initial rent to owner because of other

governmental subsidies, including tax

credit or tax exemption, grants or other

subsidized financing.

(d) Prohibition of other subsidy. For

provisions prohibiting PBC assistance to

units in certain types of subsidized

housing, see § 983.7(c).

§ 983.258 Rent to owner: Effect of rent

control.

In addition to the rent reasonableness

limit, and other rent limits under this

rule, the amount of rent to owner also

may be subject to rent control limits

under State or local law.

§ 983.259 Correction of rent.

At any time during the life of the HAP

contract, the HA may revise the rent to

owner to correct any errors in

establishing or adjusting rent to owner

in accordance with HUD requirements.

The HA may recover any excess

payment from the owner.

§ 983.260 Housing assistance payment:

Amount and distribution.

(a) Amount. The monthly housing

assistance payment equals the gross

rent, minus the higher of:

(1) The total tenant payment; or

(2) The minimum rent as required by

law.

(b) Distribution. The monthly housing

assistance payment is distributed as

follows:

(1) The HA pays the owner the lesser

of the housing assistance payment or the

rent to owner.

(2) If the housing assistance payment

exceeds the rent to owner, the HA may

pay the balance of the housing

assistance payment either to the family

or directly to the utility supplier to pay

the utility bill.

§ 983.261 Family share: Family

responsibility to pay.

(a) The family share is calculated by

subtracting the amount of the housing

assistance payment from the gross rent.

(b) The HA may not use housing

assistance payments or other program

funds (including any administrative fee

reserve) to pay any part of the family

share. Payment of the family share is the

responsibility of the family.

§ 983.262 Other fees and charges.

(a) The cost of meals or supportive

services may not be included in the rent

to owner, and the value of meals or

supportive services may not be included

in the calculation of reasonable rent.

(b) The lease may not require the

tenant or family members to pay charges

for meals or supportive services. Nonpayment of such charges is not grounds

for termination of tenancy.

(c) The owner may not charge the

tenant extra amounts for items

customarily included in rent in the

locality or provided at no additional

cost to the unsubsidized tenants in the

premises.

Dated: April 13, 1998.

Andrew M. Cuomo,

Secretary.

[FR Doc. 98–10374 Filed 4–29–98; 8:45 am]

BILLING CODE 4210–32–P