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[Federal Register Volume 89, Number 233 (Wednesday, December 4, 2024)]
[Rules and Regulations]
[Pages 96096-96098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28297]

[[Page 96096]]

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 883

[Docket No. FR-6378-F-02]
RIN 2502-AJ68

Updated Terminology for State Housing Agency Housing Assistance 
Payments Contracts

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, Department of Housing and Urban Development (HUD).

ACTION: Final rule.

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SUMMARY: This final rule revises HUD's regulations for Housing 
Assistance Payments contracts that were initially issued and 
administered by a State Housing Finance Agency. This final rule 
clarifies the meaning of the terms ``HFA (Housing Finance Agency)'' and 
``State Agency (Agency)'' when HUD either assumes contract 
administration responsibilities or assigns the contract administration 
responsibilities to a Performance-Based Contract Administrator. This 
final rule also clarifies how reserve accounts may be transferred 
following assumption of contract administration duties by a new party. 
These regulatory changes conform with longstanding HUD policy and 
practice. This final rule adopts HUD's July 17, 2024, proposed rule 
without change.

DATES: Effective January 3, 2025.

FOR FURTHER INFORMATION CONTACT: Jennifer Larson, Director, Office of 
Asset Management and Portfolio Oversight, U.S. Department of Housing 
and Urban Development, 451 7th Street SW, Washington, DC 20410, 
telephone number 202-402-3823 (this is not a toll-free number). HUD 
welcomes and is prepared to receive calls from individuals who are deaf 
or hard of hearing, as well as individuals with speech or communication 
disabilities. To learn more about how to make an accessible telephone 
call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

SUPPLEMENTARY INFORMATION:

I. Background

A. Section 8 Project-Based Rental Assistance Program

    The Section 8 Project-Based Rental Assistance (Section 8 PBRA) 
program was enacted as part of the Housing and Community Development 
Act of 1974,\1\ which amended the United States Housing Act of 1937.\2\ 
Under the Section 8 PBRA program, either HUD or a public housing agency 
(PHA) acting pursuant to an annual contributions contract (ACC) with 
HUD provides rental assistance payments via a Housing Assistance 
Payments (HAP) Contract to project owners who, in turn, rent units 
covered by the HAP Contract to families who meet program eligibility 
rules. Either HUD or a PHA acting pursuant to an ACC serves as the 
contract administrator, which is responsible for performing multiple 
functions, from maintaining a reserve for replacement account and a 
residual receipts account to processing annual rent adjustments and 
periodic contract renewals. Pursuant to the United States Housing Act 
of 1937 and HUD regulations, a housing finance agency (HFA) meets the 
definition of a PHA and, as such, may serve as a Performance-Based 
Contract Administrator (PBCA).
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    \1\ Public Law 93-383, 88 Stat. 633 (1974).
    \2\ 42 U.S.C. 1437f.
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B. Regulatory and Operational History of the 24 CFR Part 883 Section 8 
PBRA Program

    On April 15, 1975, HUD published 24 CFR part 883, establishing 
policies and procedures under which HFAs could select proposals for 
funding under the Section 8 New Construction and Substantial 
Rehabilitation Programs.\3\ Pursuant to 24 CFR part 883, HFAs provided 
permanent financing and assumed the risk of default and foreclosure on 
selected project proposals. In selecting a project for permanent 
financing, HFAs and project owners could enter into HAP Contracts with 
initial mortgage terms of up to 40 years,\4\ with the HFA serving as 
the HAP Contract administrator. Significantly for purposes of this 
rulemaking, in January of 1980, HUD issued a new regulation under 24 
CFR part 883 that introduced a limit on annual distributions of project 
surplus cash for some project owners, a requirement for such owners to 
establish a residual receipts account, and a requirement to maintain a 
reserve for replacement account to address physical condition 
issues.\5\ As HAP Contract administrators, the HFAs controlled the 
residual receipts and reserve for replacement accounts required by 24 
CFR part 883.
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    \3\ 40 FR 16934.
    \4\ The terms ``HFA'' and ``State Agency'' appear in both part 
883 and corresponding HAP Contracts.
    \5\ 45 FR 6889 (Jan. 30, 1980).
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    In the 1990s, HAP Contracts between HFAs and project owners began 
to reach the end of the contracted term and expire. Where a HAP 
Contract expires and is not renewed, families eligible for Section 8 
PBRA are at risk of displacement from their housing because there is no 
longer an agreement in place that allows project owners to receive 
Section 8 PBRA rental assistance for the applicable units. To authorize 
the renewal of expiring HAP Contracts, including HAP Contracts issued 
pursuant to 24 CFR part 883 (Part 883 HAP Contracts), Congress enacted 
the Multifamily Assisted Housing Reform and Affordability Act of 1997 
(MAHRA).\6\ As implemented by HUD, MAHRA allows the issuance of HAP 
Contracts that incorporate and renew nearly all provisions of an 
expired, original HAP Contract. Relevant to the purposes of this final 
rule, the provisions incorporated into renewed Part 883 HAP Contracts 
include references to the terms ``HFA'' and ``State Agency.''
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    \6\ 42 U.S.C. 1437f.
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    Beginning in May of 1999, HUD began using PBCAs to streamline the 
renewal and administration of expiring HAP Contracts, including Part 
883 HAP Contracts, by assigning administration and servicing tasks to 
PBCAs, which qualify as PHAs under the United States Housing Act of 
1937 and act in accordance with an ACC that sets forth requirements and 
performance-based incentive standards. As Part 883 HAP Contracts 
expired, HUD began terminating ACCs with the HFAs of the expiring Part 
883 HAP Contracts, with HUD then either taking over administration of 
the Part 883 HAP Contracts itself or assigning administration of the 
contracts to PBCAs. Relevant to the purpose of this final rule, 
references to the terms ``HFA'' and ``State Agency'' remained in both 
24 CFR part 883 and the renewed Part 883 HAP Contracts that were now 
administered by either HUD or a PBCA.
    As of the second quarter of 2023, there were approximately 2,690 
Part 883 HAP Contracts in effect throughout the country. Of these 
contracts, the vast majority are now administered either by a PBCA or 
HUD, with only sixty-five (65) Part 883 HAP Contracts still being 
administered by an HFA. For the Part 883 HAP Contracts that were 
previously administered by an HFA but that are now administered by a 
PBCA or HUD, the terms ``HFA'' and ``State Agency'' still appear in the 
Part 883 HAP Contracts, along with references to the same terms in 24 
CFR part 883. The references to these terms in the contracts and part 
883 create confusion because HUD or a PBCA now administers these Part 
883 HAP Contracts rather than an HFA or State

[[Page 96097]]

Agency. This confusion is especially problematic with regard to the 
administration of project owners' restricted financial accounts (i.e., 
the residual receipts and reserve for replacement accounts) because of 
unclear expectations regarding which entity must issue approvals to 
withdraw funds. HUD issues this final rule to eliminate this confusion.

C. Residual Receipts and Reserve for Replacement Project Accounts

    Both the residual receipts account and the reserve for replacement 
account are project accounts. The project owner must make deposits to 
the residual receipts account and the reserve for replacement accounts, 
consistent with HUD requirements, and must receive prior approval 
before withdrawing funds from either account. When a HAP Contract 
associated with the project is administered by an HFA, the project 
owner requests fund withdrawal approval from the HFA. Once an ACC 
between the HFA and HUD expires, HUD must review such fund withdrawal 
requests; therefore, the HFA must release the funds in the accounts 
upon the request of the project owner. The project owner, in turn, must 
ensure that the residual receipts and reserve for replacement accounts 
funds are placed in accounts that meet HUD requirements, after which 
time any fund withdrawals will be made only with HUD approval.

II. The Proposed Rule

    On July 17, 2024, HUD published for public comment a proposed rule 
entitled ``Updated Terminology for State Housing Agency Housing 
Assistance Payments Contracts.'' \7\ The proposed rule proposed to 
amend the definitions of two terms defined in 24 CFR 883.302: ``HFA 
(Housing Finance Agency)'' and ``State Agency (Agency).'' In the 
proposed rule, HUD proposed that the definitions found in 24 CFR 
883.302 for these terms continue to apply while an ACC between HUD and 
an HFA is in effect. When an ACC between HUD and the HFA expires and is 
not renewed, HUD proposed that the definitions of the terms ``HFA 
(Housing Finance Agency)'' and ``State Agency (Agency)'' then be 
defined the same as ``Contract Administrator'' is defined at 24 CFR 
880.201. In addition to the proposed definition changes to 24 CFR 
883.302, HUD also proposed to make a conforming change to 24 CFR 
883.701. In the proposed rule, HUD also proposed to amend 24 CFR 
883.306 and add a new Sec.  883.702 to make clear that project owners 
are required to request the withdrawal of funds from residual receipts 
and reserve for replacement accounts administered by HFAs when the ACC 
between HUD and the HFA is terminated or expires.
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    \7\ 89 FR 58092.
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III. This Final Rule

    HUD is publishing this final rule without change from the proposed 
rule. HUD received a single public comment in response to the proposed 
rule that noted that the commenter has had no problem with PHFA. HUD 
appreciates the comment. As noted, HUD is revising the referenced 
terminology for clarity and accuracy.
    HUD believes that the revision in 24 CFR 883.302 to the definitions 
of ``HFA (Housing Finance Agency)'' and ``State Agency (Agency)'' is 
necessary to eliminate the confusion that results when a renewed Part 
883 HAP Contract is administered by HUD or a PBCA, rather than the 
former HFA. In addition, the conforming change to 24 CFR 883.701 makes 
clear that, for the purposes of 24 CFR part 883, subpart G, all 
references to ``contract administrator'' in 24 CFR part 880, subpart F, 
shall be construed to refer to ``Agency'' only while the ACC between 
the State Agency and HUD is in effect. The changes to 24 CFR 883.306 
and the addition of a new Sec.  883.702 are necessary to clarify that 
project owners are required to request the withdrawal of funds from 
residual receipts and reserve for replacement accounts administered by 
HFAs when the ACC between HUD and the HFA is terminated or expires.

V. Findings and Certifications

Regulatory Review--Executive Orders 12866, 13563, and 14094

    Pursuant to Executive Order 12866 (Regulatory Planning and Review), 
a determination must be made whether a regulatory action is significant 
and, therefore, subject to review by the Office of Management and 
Budget (OMB) in accordance with the requirements of the order. 
Executive Order 13563 (Improving Regulations and Regulatory Review) 
emphasizes the importance of quantifying both costs and benefits, 
reducing costs, harmonizing rules, and promoting flexibility. The order 
also directs Executive agencies to analyze regulations that are 
``outmoded, ineffective, insufficient, or excessively burdensome, and 
to modify, streamline, expand, or repeal them in accordance with what 
has been learned.'' Executive Order 13563 further directs that, where 
relevant, feasible, and consistent with regulatory objectives, and to 
the extent permitted by law, agencies are to identify and consider 
regulatory approaches that reduce burdens and maintain flexibility and 
freedom of choice for the public. Executive Order 14094 (Modernizing 
Regulatory Review) amends section 3(f) of Executive Order 12866, among 
other things.
    This final rule clarifies that HUD or a PBCA may assume the HAP 
Contract administrator responsibilities when the ACC between HUD and an 
HFA expires. This final rule also clarifies how residual receipts and 
reserve for replacement accounts may be transferred following 
assumption of contract administration duties by a new party. These 
regulatory changes conform with longstanding HUD policy and practice. 
This rulemaking was determined to not be a ``significant regulatory 
action'' as defined in section 3(f) of Executive Order 12866, as 
amended by Executive Order 14094, and is not an economically 
significant regulatory action and therefore was not subject to OMB 
review.

Unfunded Mandates Reform Act

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

Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment has been made in accordance with HUD regulations at 24 CFR 
part 50, which implement section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI is 
available through the Federal eRulemaking Portal at http://www.regulations.gov. The FONSI is also available for public inspection 
during regular business hours in the Regulations Division, Office of 
General Counsel, Department of Housing and Urban Development, 451 7th 
Street SW, Room 10276, Washington, DC 20410-0500. Due to security 
measures at the HUD Headquarters building, you must schedule an 
appointment in advance to review the FONSI by calling the Regulations 
Division at 202-708-3055 (this is not a toll-free number). HUD welcomes 
and is prepared to receive calls from individuals who are deaf or hard 
of hearing, as well as individuals with speech or communication

[[Page 96098]]

disabilities. To learn more about how to make an accessible telephone 
call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
As discussed above, the changes in this final rule are limited to 
clarifying that HUD or a PBCA may assume the HAP Contract administrator 
responsibilities when the ACC between HUD or an HFA expires. The 
rulemaking also clarifies how residual receipts and reserve for 
replacement accounts may be transferred following assumption of 
contract administration duties by a new party. These regulatory changes 
conform with longstanding HUD policy and practice. Accordingly, the 
undersigned certifies that this final rule will not have a significant 
economic impact on a substantial number of small entities.

Executive Order 13132, Federalism

    Executive Order 13132 (Federalism) prohibits an agency from 
publishing any rule that has federalism implications if the rule 
either: (1) imposes substantial direct compliance costs on State and 
local governments and is not required by statute, or (2) the rule 
preempts State law, unless the agency meets the consultation and 
funding requirements of section 6 of the Executive order. This final 
rule does not have federalism implications and does not impose 
substantial direct compliance costs on State and local governments or 
preempt State law within the meaning of the Executive order.

List of Subjects in 24 CFR Part 883

    Accounting, Administrative practice and procedure, Government 
contracts, Grant programs-housing and community development, Low and 
moderate income housing, Public assistance programs, Public housing, 
Rent subsidies, Reporting and recordkeeping requirements, State and 
local governments.

    For the reasons stated in the preamble, HUD amends 24 CFR part 883 
as follows:

PART 883--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--STATE 
HOUSING AGENCIES

0
1. The authority citation for part 883 continues to read as follows:

    Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-
13619.

0
2. In Sec.  883.302, redesignate the definition of ``HFA (Housing 
Finance Agency)'' in alphabetical order and revise it, and revise the 
definition of ``State Agency (Agency)''.
    The revisions read as follows:

Sec.  883.302  Definitions.

* * * * *
    HFA (Housing Finance Agency). While the Annual Contributions 
Contract between the State Agency and HUD is in effect, ``Housing 
Finance Agency'' and ``HFA'' means a State Agency that provided 
permanent financing for newly constructed or substantially 
rehabilitated housing processed under this part and financed without 
Federal mortgage insurance or a Federal guarantee except coinsurance 
under section 244 of the National Housing Act. When the Annual 
Contributions Contract between the State Agency and HUD is no longer in 
effect, ``Housing Finance Agency'' and ``HFA,'' as used in this part 
and in the Housing Assistance Payments Contract, means ``Contract 
Administrator,'' as defined in 24 CFR 880.201.
* * * * *
    State Agency (Agency). While the Annual Contributions Contract 
between the State Agency and HUD is in effect, ``State Agency'' and 
``Agency'' means an agency that has been notified by HUD that it is 
authorized to apply for a set-aside and/or to use the Fast Track 
Procedures of this part. When the Annual Contributions Contract between 
the State Agency and HUD is no longer in effect, ``State Agency'' and 
``Agency,'' as used in this part and in the Housing Assistance Payments 
Contract, mean ``Contract Administrator,'' as defined in 24 CFR 
880.201.
* * * * *

0
3. In Sec.  883.306, add a sentence to the end of paragraph (e) to read 
as follows:

Sec.  883.306  Limitation on distributions.

* * * * *
    (e) * * * Upon termination of the Annual Contributions Contract 
between HUD and the HFA, the Owner must request withdrawal of any funds 
that were placed in such an account at the direction of the HFA and 
immediately deposit such funds into an interest-bearing residual 
receipts account that complies with the requirements of 24 CFR 
880.601(e)(2)(i).
* * * * *

Sec.  883.701  [Amended]

0
4. In Sec.  883.701, add the words ``while the Annual Contributions 
Contract between the State Agency and HUD is in effect'' to the end of 
the second sentence following ``Agency''.

0
5. Add Sec.  883.702 to read as follows:

Sec.  883.702  Replacement reserve.

    For projects that are required to maintain a replacement reserve 
account to fund capital repairs and building system replacements, while 
the Annual Contributions Contract (ACC) between the State Agency and 
HUD is in effect, funds in that replacement reserve account may be 
drawn and used only in accordance with State Agency guidelines and with 
the approval of, or as directed by, the State Agency. Upon termination 
of the ACC, the Owner must request withdrawal of any funds in the 
replacement reserve account and immediately deposit such funds into an 
interest-bearing replacement reserve account that complies with the 
requirements of 24 CFR 880.602(a)(1)(iv).

Julia R. Gordon,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2024-28297 Filed 12-3-24; 8:45 am]
BILLING CODE 4210-67-P
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