3706 Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

Office of the Assistant Secretary for

Public and Indian Housing

24 CFR Part 970

[Docket No. R–95–1407; FR–2463–F–06]

RIN 2577–AA58

Public Housing Program; Demolition

or Disposition of Public Housing

Projects

AGENCY: Office of the Assistant

Secretary for Public and Indian

Housing, HUD.

ACTION: Final rule.

SUMMARY: This rule makes final the

interim rule which implemented section

121 of the Housing and Community

Development Act of 1987. Section 121

amended section 18 of the United States

Housing Act of 1937, which governs the

demolition and disposition of public

and Indian housing. Section 121

combined two of the previous

demolition criteria, so that demolition

may be approved if the project is

obsolete due to its physical condition,

location, or other factors which make it

unusable for housing, and no reasonable

program of modifications, such as

rehabilitation, is feasible to return the

project to useful life. Section 121 also

provided that projects may not be

demolished or disposed of unless the

public housing agency (PHA) has

developed a plan for the provision of a

replacement unit for each unit involved.

The plan must include a schedule for its

completion (not to exceed six years);

and HUD must agree, upon approving

the plan, to commit the funds necessary

to carry out the plan over the approved

schedule, to the extent such funding is

not provided from other sources (e.g.,

State or local programs or proceeds of

disposition), and HUD’s commitment is

subject to the availability of future

appropriations. Section 121 repealed a

previous statutory provision which

made section 18 inapplicable to

conveyance of units under

homeownership programs. This rule

continues that inapplicability to units

under certain established

homeownership programs, including

disposition of a public housing project

in accordance with an approved

homeownership program under title III

of the United States Housing Act of

1937, as provided by section 412(b) of

the National Affordable Housing Act

(‘‘NAHA’’).

Section 412(a) of NAHA amended

section 18 of the U.S. Housing Act of

1937 to require that tenant councils,

resident management corporation, and

tenant cooperative, if any, be given

appropriate opportunities to purchase

the project or portion of the project

covered by the demolition or

disposition application. Therefore, a

separate Federal Register document was

published on October 6, 1992, at 57 FR

46074, that set forth the procedures and

requirements for providing the

opportunity to purchase to tenant

councils, resident management

corporations, and tenant cooperatives.

This document was open to public

comment and is being made final by this

rule.

This rule also contains a provision

that states that in the case of scatteredsite housing of a public housing agency,

the net proceeds of a disposition that is

less than the full disposition shall be

used for the payment of development

cost for the project and for the

retirement of outstanding obligations

issued to finance original development

or modernization of the project, in an

amount that bears the same ratio to the

total of such costs and obligations as the

number of units disposed of bears to the

total number of units of the project at

the time of disposition. This is a direct

statutory requirement in compliance

with section 512 of NAHA and,

therefore, is contained in this final rule.

Section 116 of the Housing and

Community Development Act of 1992

modified section 412(a) and provided

for the use of 5-year project-based and

tenant-based assistance in certain

instances. It also provided that a very

limited number of units could be

demolished before the replacement

requirements must be met. The section

116 provisions are considered selfexecuting and, therefore, are contained

in this final rule.

EFFECTIVE DATE: February 17, 1995.

FOR FURTHER INFORMATION CONTACT:

William J. Flood, Acting Director, Office

of Construction, Rehabilitation and

Management, Office of Public and

Indian Housing, Department of Housing

and Urban Development, 451 Seventh

Street, S.W., Washington, D.C. 20410,

telephone (202) 708–1800. A

telecommunications device for deaf

persons (TDD) is available at (202) 472–

6725. (These are not toll-free telephone

numbers.)

SUPPLEMENTARY INFORMATION: The

information collection requirements

contained in this rule have been

submitted to the Office of Management

and Budget (OMB) for review under the

Paperwork Reduction Act of 1980 and

have been assigned OMB control

number 2577–0075.

Background

Section 121 of the Housing and

Community Development Act of 1987

(Pub. L. 100–242) (‘‘1987 Act’’)

amended section 18 of the United States

Housing Act of 1937 (42 U.S.C. 1437p)

(‘‘1937 Act’’)—the statutory provision

governing the demolition and

disposition of public and Indian

housing. On August 17, 1988, the

Department published an interim rule

(53 FR 30984) which implemented the

1987 Act amendments and became

effective on October 6, 1988.

Below is a discussion of the public

comments received on the interim rule,

as well as the changes made by the

interim rule as a result of the public

comments.

Following that is a discussion of the

remaining provisions of the final rule

that were not discussed in the interim

rule section of this preamble. This

section also includes a discussion of the

statutory changes made by section

412(a) of the National Affordable

Housing Act (Pub.L. 101–625)

(‘‘NAHA’’), as amended by section

116(a) of the 1992 Act, and the public

comments received on the October 6,

1992 Federal Register notice which

implemented section 412(a).

Interim Rule

Section 121 of the 1987 Act combined

two of the criteria for demolition of

public housing units, by requiring both

that the project or portion of the project

be obsolete as to physical condition,

location, or other factors, making it

unusable for housing purposes, and that

no reasonable program of modifications

is feasible to return the project or

portion of the project to useful life. One

factor that the Department will take into

consideration in determining whether

the program of modifications is

reasonable is where the costs of such

program exceed 90 percent of total

development cost (TDC). (The use of a

percentage of TDC to establish the

reasonable cost for demolition was set

forth previously in HUD Handbook

7486.1.) Before this statutory change,

either criterion could be the basis for

demolition of a project or portion of a

project. The regulatory amendment for

implementation of this statutory

requirement can be found in § 970.6 of

both the interim rule and this final rule.

The 1987 Act made no change in the

alternative demolition criterion

applicable to demolition of only a

portion of a project; i.e., where

demolition will help to assure the useful

life of the remaining portion of the

project. An example of this would be

selective demolition of units to reduce
Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations 3707

1The Department has interpreted the phrase ‘‘unit

of general local government’’ to mean the chief

executive officer, e.g., the mayor or the county

executive, as discussed later in this preamble.

2Replacement housing under this provision is

limited. When section 121 of the 1987 Act was

enacted, all Certificate Program funding was

appropriated with 15 years of budget authority and,

therefore, was readily available with a 15-year term.

However, since 1989, Certificate Program funding

has been appropriated with only a 5-year term,

except for the special appropriations for Public

Housing Demo/Dispo replacement housing. The last

such special appropriation was in FY 1990.

project density incident to the

modernization of the rest of the project.

The 1987 Act made no change in the

disposition criteria.

Section 121 of the 1987 Act also

mandated detailed requirements for a

replacement housing plan for the

provision of a decent, safe, sanitary, and

affordable rental dwelling unit—on a

one-for-one basis—for each public

housing dwelling unit to be demolished

or disposed of. The replacement

housing plan must contain a schedule

for completing the plan, within a period

consistent with the size of the proposed

demolition or disposition, but the

schedule may in no event exceed six

years. Questions have been raised

regarding the meaning of ‘‘completion.’’

‘‘Completion’’ does not mean that the

replacement housing must be built or

rehabilitated within the six years. For

replacement units developed under the

public housing development program,

the completion of the plan would be

when units have reached the stage of

notice to proceed for conventional units

and contract of sale for Turnkey units.

Other replacement plan requirements

contained in the 1987 Act are (1) that

the plan be approved by the unit of

general local government 1 in which the

project is located; (2) that the plan

ensure that the rent paid by the tenant

after relocation will not exceed that

permitted under the Act; and (3) that

there be no action to demolish or

dispose of any unit until the tenant has

been relocated to decent, safe, sanitary,

and affordable housing that is, to the

maximum extent practicable, of the

tenant’s choice. (Some persons

displaced by a demolition or disposition

activity are also covered by the Uniform

Relocation Act, as described later.) The

rule also allows replacement with units

of different sizes, after analysis of local

needs as determined by the PHA, to

accommodate changes in local priority

needs. However, at least the same total

number of individuals and families

must be accommodated. The regulatory

amendments for implementation of

these statutory requirements can be

found in §§ 970.4(d) and 970.11 of both

the interim rule and this final rule.

Approval of an application for

demolition or disposition requires a

commitment for the funds necessary to

carry out the plan. To the extent funding

is not provided from other sources (e.g.,

from State or local programs or the

proceeds of disposition), HUD approval

of the application for demolition or

disposition will be conditioned on

HUD’s agreement to commit the funds—

subject to availability of future

appropriations—necessary to carry out

the plan in accordance with its

approved schedule. Because of the

responsibility imposed on HUD to

commit the funds necessary to carry out

the plan, a high degree of certainty with

respect to State and local commitments

is necessary. Therefore, in order for

HUD to determine HUD’s commitment,

at the time of application the PHA must

provide written documentation of

commitment of State or local funding

for the replacement housing if that is

what is contemplated in the

replacement housing plan.

The statutory requirements for the

plan enumerate the following types of

eligible replacement housing, to be used

singularly or in any combination: (1)

The development of additional public

housing dwelling units (by acquisition

with or without rehabilitation or new

construction); (2) the use of 15-year

project-based assistance under section 8,

when appropriated; 2 (3) the use of not

less than 15-year project-based

assistance under other Federal

programs; (4) the acquisition with or

without rehabilitation or development

of dwelling units assisted under a State

or local government program that

provides for project-based assistance

that is, in terms of eligibility,

contribution to rent, and length of

assistance contract (not less than 15

years), comparable to assistance under

section 8(b)(1) of the 1937 Act; or (5)

any combination of such methods; or (6)

the use of 15-year tenant-based

assistance under section 8 (excluding

rental vouchers under section 8(o)),

including Section 8 Rental Certificates

with 15-year funding subject to the

special additional statutory constraints

discussed below.

However, section 116(b) of the 1992

Act modifies the replacement housing

plan requirements by permitting, where

15-year project-based assistance under

section 8, 15-year project-based

assistance under other Federal

programs, and 15-year tenant-based

assistance under section 8 (excluding

vouchers) is not available, and where an

application proposes demolition or

disposition of 200 or more units, the use

of available project-based assistance

under section 8 having a term of not less

than 5 years, the use of available

project-based assistance under other

Federal programs having a term of not

less than 5 years, and the use of tenantbased assistance under section 8

(excluding vouchers) having a term of

not less than 5 years, respectively.

Note: In the case of 15-year project based

assistance under other Federal programs, the

Department has determined that low-income

housing credits under Section 42 of the

Internal Revenue Service Code is a Federal

program providing 15-year project-based

assistance and, therefore, qualifies as a

source of replacement housing. Any

replacement housing plan proposing the use

of these credits must assure that the lowincome housing units in the low-income

housing credit project which are designated

as replacement housing will be reserved for

low-income families for the requisite period.

Units which at the time of allocation of the

credit are also receiving Federal assistance

under Section 8 (except tenant-based

assistance) or Section 23 of the Act, or

Section 236, 221(d)(3) BMIR or Section

221(d)(5) of the National Housing Act, or

Section 101 of the Housing Act of 1965, or

other similar Federal program, are not

eligible as replacement housing under this

paragraph.

However, in the case of an application

proposing demolition or disposition of

200 or more units, not less than 50

percent of the dwelling units for

replacement housing shall be provided

through the acquisition or development

of additional public housing dwelling

units or through project-based

assistance, and not more than 50

percent of the additional dwelling units

shall be provided through tenant-based

assistance under section 8 (excluding

vouchers) having a term of not less than

5 years.

Section 116(b) also provides that, in

any 5-year period, a PHA may demolish

not more than the lesser of 5 dwelling

units or 5 percent of the total dwelling

units owned and operated by the PHA,

without providing an additional

dwelling unit for each public housing

dwelling unit to be demolished, but

only if the space occupied by the

demolished unit is used for meeting the

service of other needs of the public

housing residents. It should be noted

that this provision applies only to

demolition and not to disposition.

The provisions of section 116(b) are

considered self-executing also.

Accordingly, this final rule contains

revisions to § 970.11(a) and creates a

new § 970.11(j).

The following statutory limitations on

the use of fifteen-year section 8 tenantbased assistance should be kept in

mind:

With the exception of applications for

demolition or disposition of 200 or more
3708 Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations

units that propose the use of tenantbased assistance under Section 8 having

a term of not less than five years for the

replacement of not more than 50 percent

of the units to be demolished or

disposed of, the use of Section 8 tenantbased assistance (Existing Housing

rental certificates) for replacement

housing requires a two-part finding by

HUD that (1) project-based assistance

(including public housing, as well as

other types of project-based assistance)

is not feasible under the program

standards or under any combination of

these programs, and (2) private rental

housing is actually available to those

who would be assisted under the plan

and that the supply of such housing is

sufficient for the total number of rental

certificates and rental vouchers

available in the community and is likely

to remain available for the full 15-year

term of the assistance. This two-part

finding must be based on objective

information, such as the following

statutory data elements: Rates of

participation by landlords in the section

8 program; size, conditions and rent

levels of available rental housing as

compared to section 8 standards; the

supply of vacant existing housing

meeting the section 8 housing quality

standards with rents at or below the fair

market rent, or the likelihood of

adjusting the fair market rent; the

number of eligible families waiting for

public housing or housing assistance

under section 8; and the extent of

discrimination against the types of

individuals or families to be served by

the assistance.

To justify the two-part finding, the

PHA must provide sufficient

information to support both parts of the

finding—why any and all combinations

of project-based assistance are not

feasible and how the conditions for

tenant-based assistance will be met,

based on the pertinent facts of the

particular local situation.

The determination as to the lack of

feasibility of project-based assistance

must be based on the standards for

feasibility stated in the regulations

pertaining to each type of eligible

project-based program identified in

§ 970.11, including public housing, as

well as the other types of eligible

Federal, State and local programs. Thus,

a finding of lack of feasibility may be

made only if the applicable feasibility

standards could not be met under any

of the eligible programs, or any

combination of them. For example, with

regard to the feasibility of additional

public housing development, relevant

factors would include local needs for

new construction or rehabilitation,

availability of suitable properties for

acquisition or sites for construction, and

HUD determinations under cost

containment policies.

The second part of the finding—

availability of housing for tenant-based

assistance—is a matter of whether the

facts concerning local need and housing

supply justify such a finding. Above are

listed the statutory data elements on

which a finding should be based. HUD

may require additional data as may be

relevant in particular circumstances.

Note: The statutory limitations discussed

above do not apply to applications for

demolition or disposition of 200 or more

units that propose the use of tenant-based

assistance under section 8 having a term of

not less than 5 years for replacement of not

more than 50 percent of the units to be

demolished or disposed of.

Section 121 of the 1987 Act prohibits

the use of rental vouchers for

replacement housing. However, the

Department has determined that rental

vouchers may be an acceptable

relocation housing resource, provided

the displaced tenant is given referrals to

suitable/comparable replacement

housing (comparable housing, if the

URA applies) where the rent paid by the

tenant following relocation will not

exceed the amount permitted under

section 3(a) of the 1937 Act. (See

§ 970.5(b)). The PHA can meet its

relocation housing obligation by

providing a housing voucher and

referrals to units that fall within the

voucher payment standard and are

owned by a person who agrees to rent

to a voucher holder. The rule also makes

the PHA responsible for payment of

moving expenses and the provision of

appropriate advisory services, including

timely information notices, counseling,

and the inspection of housing to which

persons relocate.

The statutory restrictions on types of

housing assistance that may be counted

as replacement units do not apply to

relocation. For example, tenants may

relocate to other existing public housing

units, or to privately owned housing,

with rental certificate or rental voucher

assistance, as qualified above. The

purpose of relocation is to assure that all

displaced families obtain other suitable/

comparable housing at affordable rents,

while the purpose of one-for-one

replacement is to assure that the total

low-income housing stock available is

not diminished.

Public Comments

As a result of the interim rule

published on August 17, 1988, at 53 FR

30984, public comments were received

from six commenters: Three legal

services organizations, one public

housing agency, one community

development organization, and one

national association.

The commenters raised a variety of

issues concerning the applicability of

part 970, including whether (1) the 1987

Act amendments are applicable

retroactively, (2) ‘‘units approved for

deprogramming’’ before the effective

date of the 1987 Act should be

exempted, and (3) the exemption for

homeownership sales to tenants should

be retained. Below is a discussion of

these issues, as well as some others

raised by the commenters, and the

Department’s responses to them.

Retroactivity

Some commenters argued that the

1987 Act amendments should be

applicable retroactively to cases where

demolition or disposition was approved

by HUD but not completed by the PHA

before February 5, 1988, the effective

date of the 1987 Act. These commenters

maintained that even before the 1987

Act, section 18 of the 1937 Act required

replacement housing in all instances of

demolition or disposition of housing

units, and that the 1987 amendments

did not change the statutory

requirements for replacement, but

merely corrected an erroneous

interpretation by HUD in the thenexisting regulations.

The effect of acceptance of this

argument would be to revoke those pre1987 Act approvals, requiring the PHA

to meet all added requirements under

the 1987 Act and obtain a new HUD

approval. The Department does not

believe this effect to be defensible and

disagrees with the commenters for the

reasons set forth below.

HUD’s first regulation on the

demolition and disposition of public

housing was published as a final rule

(24 CFR part 870) on November 9, 1979

(44 FR 65368). At that time, the

statutory language on this issue afforded

HUD considerable administrative

discretion as to regulatory policy. (See

sections 6(f) and 14(f) of the 1937 Act).

Neither these statutory provisions nor

their legislative history contain any

mention of replacement housing (except

in connection with relocation), thus

allowing HUD administrative rule

making discretion on this issue. HUD

exercised that discretion by providing in

the 1979 regulation that ‘‘If there is a

local need for low-income housing, the

PHA’s request for demolition or

disposition of dwelling units shall

include a plan for replacement housing

on a one-for-one basis or as approved by

HUD to be warranted by current and

projected needs for low-income housing

and subject to HUD’s findings as to the

availability of funds.’’ Thus, subject to
Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations 3709

the need for low-income housing and

the availability of funds, HUD’s original

regulation required, as a matter of

policy, replacement housing as a

condition for HUD approval in all cases

of either demolition or disposition of

dwelling units. However, the Housing

and Urban-Rural Recovery Act of 1983

(‘‘1983 Act’’) repealed former sections

6(f) and 14(f) and substituted a new

section 18 that was more detailed and

prescriptive. HUD decided to impose a

replacement housing requirement only

where required by the statute, and both

the statute and the rule allowed the

PHA discretion as to the provision of

replacement housing with one

exception. The only circumstance under

which the statute and the rule required

replacement housing was where the

justification for disposition is that it will

allow acquisition, development or

rehabilitation of other units which will

be more efficiently or effectively

operated as lower income housing and

will preserve the lower income housing

stock available in the community. (See

section 18(a)(2)(A)(i), U.S. Housing Act

of 1937, 42 U.S.C.1437p.) No

replacement housing requirement was

prescribed under the other two

alternative criteria for disposition, and

no replacement requirement was

prescribed at all for demolition,

regardless of which of the demolition

criteria was applicable.

The argument for retroactive

application of the 1987 amendments is

not persuasive. Indeed, in Project

B.A.S.I.C. v. Kemp, 907 F.2d 1242 (1st

Cir., July 6, 1990) the Court of Appeals

for the First Circuit rejected the

retroactive operation of the statute. The

Fifth Circuit was in accord in Walker v.

HUD, 912 F.2d 819 (5th Cir., September

27, 1990).

To preclude any further

misconceptions on this point, the final

rule adds clarifying language under

§ 970.2(b). A demolition or disposition

application that received written HUD

approval before February 5, 1988, may

be carried out according to the terms

and conditions of the approval and the

regulations in effect at the date of

approval, without the necessity for

meeting any additional requirements

under the 1987 Act or for seeking any

additional HUD approval.

Applicability to Units Approved for

Deprogramming

Several commenters objected to the

inclusion in the interim rule’s listing of

exceptions in § 970.2(g) of ‘‘units

deprogrammed before February 5, 1988’’

(the effective date of the 1987 Act). In

a subsequent notice, however, this

provision was corrected to read ‘‘units

approved for deprogramming before

February 5, 1988’’. (See 53 FR 40220,

October 14, 1988).

The final rule removes the ‘‘units

approved for deprogramming’’

exception. The term ‘‘units approved for

deprogramming’’ refers to HUD

approval of a formal written request by

a PHA to permanently remove a unit

from both its public housing inventory

and its ACC. (See 24 CFR 990.102). The

exception for ‘‘units approved for

deprogramming prior to February 5,

1988’’ was intended to exclude from the

coverage of the interim rule, units

which HUD had approved for

demolition or disposition, prior to the

effective date of the 1987 Act

amendments. Because the term ‘‘units

approved for deprogramming’’ is

misinterpreted by some to include units

temporarily removed for non-dwelling

use, as well as, units approved for

demolition or disposition, utilizing this

term has caused unnecessary confusion

in the administration of HUD’s

demolition or disposition regulations.

Therefore, the exception which

references ‘‘units approved for

deprogramming’’ is being deleted. A

new § 970.2(b) of the final rule more

clearly states the intended exception

which is that demolitions and

dispositions approved by HUD prior to

February 5, 1988, are exempt from the

requirements of the 1987 Act.

Demolitions or dispositions that were

approved by HUD before February 5,

1988, but not carried out by that date,

may be carried out according to the

terms of such approval, without

reference to subsequent amendments to

this part and without obtaining any

further HUD approval. Conversions and

reconfigurations of interior space are

exempted by § 970.2(a)(5).

Other commenters argued for some

degree of flexibility. One urged that the

exception from the replacement housing

requirement be extended to include

units that were uninhabitable as of

February 5, 1988, and defined such

housing as housing stock that was not

suitable and usable for housing

purposes and that was not being used by

the PHA as part of its housing stock as

of February 5, 1988. Another commenter

suggested that HUD be authorized to

waive the replacement requirement in

special situations, such as where there

is an urgent need for demolition, but

special problems preclude replacement.

While arguments for some degree of

flexibility have considerable merit the

statute does not provide for such

flexibility.

Exemption for Homeownership Sales to

Residents

Some commenters argued that the

1987 Act amendments make the

disposition provisions applicable to

homeownership sales to tenants,

because the 1987 Act removed the

paragraph that specifically excepted

such sales. One commenter asserted that

Congress intended to make only the

replacement housing provisions

applicable to homeownership sales.

There is nothing to suggest that

Congress intended to make

homeownership sales subject to the

disposition provisions, including not

only the replacement housing provision,

but also the justifiability provisions

under the statutory criteria, the local

government approval provision, and the

tenant consultation provision. This

means that the issue is not germane to

any of the following homeownership

units whose sales were approved (even

if not completed) before February 5,

1988:

—All existing Turnkey III units, because

approval for sale was incident to

approval for development.

(Development of additional Turnkey

III units was suspended before

enactment of the 1987 Act, so there is

no issue as to post-February 5, 1988

approvals for Turnkey III sales.)

—All Mutual Help units approved for

development before February 5, 1988,

whether in existence or in the process

of development as of that date. (Like

Turnkey III, approval of sales of

Mutual Help units were incident to

approvals for development.)

—All units approved for sale under the

Public Housing Homeownership

Demonstration, because all such

approvals were made before the

effective date of the 1987 Act.

—All units approved for sale under the

section 5(h) Homeownership Program

before the effective date of the 1987

Act. (This refers to the regular Section

5(h) Homeownership Program under

which a number of PHAs have chosen

to initiate homeownership sales to

tenants over the 15 years since this

statutory option was added in 1974,

as distinguished from the

demonstration that was undertaken by

HUD under the authority of section

5(h).)

The Department believes that it was

not the intent of Congress to make the

disposition requirements applicable to

homeownership sales via resident

management corporations under the

new Public Housing Homeownership

and Management Opportunities

program established by section 123 of

the 1987 Act (section 21 of the 1937
3710 Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations

Act), because the legislative provisions

for that program contain separate

requirements on replacement, rights of

tenants in occupancy, public hearings,

and use of sale proceeds.

HUD does not believe that Congress

intended to make the disposition

requirements applicable to future

approvals for sale of Mutual Help units.

Since approval for sale to eligible

homebuyers is incident to approval for

development, imposing the disposition

requirements would seriously hinder, if

not entirely preclude, development of

new Mutual Help projects that have

been expressly authorized by Congress

as the principal vehicle for additional

units under the Indian Housing

Program. Also, we do not believe that

Congress intends to treat future

approvals for homeownership sales

under the Section 5(h) Program as

dispositions subject to part 970.

Property that would be suitable for

homeownership could not satisfy the

disposition criteria, so that the effect of

interpreting the disposition

requirements of section 18 as applicable

to the Section 5(h) Program would be de

facto repeal of the program. This would

be contrary to the Conference Report

language regarding section 123(d) of the

1987 Act, which states that ‘‘any

homeownership program in existence

prior to enactment may be continued

under existing requirements * * *’’

[H.R. Rep. No. 100–426, 100th Cong., 1st

Sess. p. 175 (Conference Report on S.

825)] Also, it should be noted that the

National Affordable Housing Act

subjects 5(h) proposals to replacement

housing requirements contained in the

HOPE for Public and Indian Housing

Homeownership (HOPE 1) program.

This represents further evidence of

congressional intent that 5(h) sales not

be subject to the disposition

requirements of section 18. However,

proposals by a PHA to demolish units

that are the subject of these various

homeownership programs would have

to satisfy the demolition requirements of

section 18 and part 970.

In keeping with section 412(b) of

NAHA, the provisions of this rule do

not apply to the disposition of a public

housing project in accordance with an

approved homeownership program

under title III of the 1937 Act, as added

by section 411 of that legislation, (HOPE

1). In the case of a homeownership

proposal under HOPE 1 or section 5(h)

from a PHA involving partial or total

demolition of units, Section 18 and this

rule apply. HOPE for Homeownership of

Single Family Homes (Hope 3)

proposals involving public housing

units approved prior to the 1992 Act are

likewise covered by the requirements of

section 18. [The 1992 Act took

scattered-site single family public

housing from under the requirements of

HOPE 3 and moved it to HOPE 1.]

Criteria for Demolition or Disposition

None of the commenters objected to

the change in the disposition criteria

under the interim rule. Some, however,

objected to the language in place before

the 1988 interim rule regarding the

criteria for demolition which did not

change because of the 1987 Act

amendments. The language to which the

commenters objected is § 970.6(a)(2),

which lists adverse neighborhood

conditions among the three types of

‘‘major problems indicative of

obsolescence.’’ Section 970.6(a)(2) was

included in the interim rule merely to

provide the context for the change that

combined ‘‘obsolescence as to physical

condition, etc.’’ with ‘‘no reasonable

program of modifications, etc.’’ as

necessary criteria to justify demolition.

Although the language in question is not

open to public comment, the next

paragraph provides clarification on this

issue.

Concern for this issue reflects a

misreading of the fundamental rationale

of the whole of paragraph (a) of this

section. The commenters mistakenly

assume that demolition is necessarily

justified when any of the problems

listed in subparagraphs (a)(1) through

(3) are found to exist. That is not the

case. The provision is not intended as

a simplistic formula, and no such

formula would be adequate for the kind

of complex analysis that is called for in

making these types of determinations.

The Department believes that Congress

intended a common-sense viability

determination, based on a thorough

examination of all of the facts that are

pertinent to both obsolescence and the

feasibility of rehabilitation.

One commenter objected to

§ 970.6(b)—the alternative criterion that

applies in cases of partial demolition

only; i.e., to permit demolition of a

portion of a project where demolition

will help assure the useful life of the

remaining portion of the project. [Where

demolition of all units of a project is

proposed, the only option is the

criterion of paragraph (a). Where partial

demolition is proposed, the PHA has the

choice of seeking approval under either

paragraph (a) or (b)]. This commenter,

expressing concern about possible

abuse, urged further amendment of the

regulation to add guidelines for

interpreting the alternative criterion in

paragraph (b).

The Department believes that

Congress intended to give PHAs

reasonable discretion in making the

judgments required to determine when

partial demolition may be justified to

‘‘help assure the useful life of the

remaining portion of the project.’’

However, the Department is considering

providing some guidance on this

provision in the revision to the

Demolition/Disposition/Conversion

Handbook (HUD 7486.1).

Tenant Consultation

While not making specific

recommendations for changes in the

requirements for tenant consultation

(see § 970.4(a)), some commenters

expressed concern about this subject.

Neither the interim nor the final rule

changes this provision of the old

regulation. However, in view of the

comments, the Department takes this

opportunity to clarify that this

regulatory requirement remains

unchanged by the later statutory

requirements set forth in the NAHA or

the 1992 Act.

Neither the interim rule nor this final

rule changes the requirement that the

tenants of the project affected and any

tenant organizations for the project or

on a PHA-wide basis must be consulted

in the developmental stage of the PHA’s

proposal, with fair notice and

opportunity to submit comments and

recommendations, including any

recommendations for alternative

strategies. While the PHA retains the

authority to make the final decision

whether to submit a demolition or

disposition proposal, ‘‘consultation’’

implies a requirement for the PHA to

give full and serious consideration to

tenant comments and recommendations

before making a decision. Where a

building, or group of buildings, at the

development is vacant, the PHA is

responsible for consulting with any

remaining residents or resident

organizations, as well as any PHA-wide

resident organizations. If the

development is totally vacant, the PHA

is still responsible for consulting with

PHA-wide resident organizations on the

issue of whether to demolish or dispose

of the property.

Recognizing the variety of local

circumstances in a program that

encompasses PHAs of different sizes in

many different kinds of communities

throughout a diverse country, the

regulation allows flexibility as to the

exact methods that may be employed to

satisfy the tenant consultation

requirements, provided that there is

genuine compliance with the essential

elements stated in § 970.4(a).

Note: Section 412(a) of NAHA, as amended

by the 1992 Act, amended section 18 of the

U.S. Housing Act of 1937, to require that

tenant councils, resident management
Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations 3711

corporation, and tenant cooperative, of the

project or portion of the project covered by

the application, if any, be given appropriate

opportunities to purchase the project or

portion of the project covered by the

demolition or disposition application.

Therefore, a separate Federal Register

document was published in the Federal

Register on October 6, 1992, at 57 FR 46074,

that sets forth the procedures and

requirements for affording the opportunity to

purchase to tenant councils, resident

management corporations, or tenant

cooperatives. This document was open to

public comment and is being made final by

this rule. Further discussion of this

document (and the public comments

received on it) is set forth later in this

preamble. The requirements of section 412(a)

are separate and distinct from the tenant

consultation requirements discussed

immediately above.

Relocation Assistance

Two commenters recommended that

§ 970.5 be amended to make it clear

that, when offering a displaced tenant

the choice of using a Section 8 rental

voucher or rental certificate, the PHA

must inform the tenant that rent due to

the owner under the lease following

relocation may exceed the Section 8 fair

market rent. The Department has

included language to clarify its policy.

The Department has determined that

rental vouchers may be an acceptable

relocation housing resource, provided

the PHA ensures that referrals are made

to units where the monthly amount the

family must pay to the owner to cover

the family’s portion of the rent due to

the owner will not exceed the amount

determined in accordance with 24 CFR

813.107. (See § 970.5(b)). Such referral

may be to other public housing units or

units made affordable with a Section 8

rental certificate or voucher. If the PHA

provides referrals to suitable/

comparable relocation housing

(comparable housing when the

displacement is subject to the URA) and

a tenant with a rental voucher elects to

rent a housing unit with a rent to owner

that exceeds the voucher payment

standard as determined by the Housing

Voucher program, the tenant will be

responsible for the difference between

the voucher payment standard and the

rent to owner. Furthermore, § 970.5(e)(2)

requires the PHA to provide

‘‘counseling and advisory services to

assure that full choices and real

opportunities exist for tenants displaced

* * *.’’ That language, which remains

unchanged from the old regulation,

requires the PHA to give displaced

tenants full and fair information about

all relocation options, including use of

rental vouchers where that option is

available. As in all other matters, this

implies a duty of good faith and

diligence on the part of the PHA. There

is no evidence to support the

commenters’ assertions that ‘‘tenants

will only select rental vouchers if they

are presented (or pushed) by the PHA as

the only alternative’’.

A more complete discussion of the

Uniform Relocation Assistance and Real

Property Acquisition Policies Act of

1970 (URA) requirements is set forth

later in this preamble.

One commenter objected to the

statement that tenants become eligible

for relocation assistance as of the date

of receipt of official notice to move,

asserting that tenants sometimes vacate

before official notice as a result of PHA

pressure or reduction of services. This

commenter recommended that tenants

be entitled to relocation benefits at any

time if the PHA is encouraging tenants

to move or fails to maintain the

property. The commenter is referred to

the definition of ‘‘displaced person’’

under § 970.5(i) and the definition of

‘‘initiation of negotiations’’ under

§ 970.5(k) to determine eligibility for

relocation assistance. A person becomes

eligible for relocation assistance when

HUD approves the demolition or

disposition under this part. Also, a

person forced to vacate the property by

an action associated with the planned

demolition or disposition of the

property, may qualify as a ‘‘displaced

person’’ who is eligible for relocation

assistance, even if the action occurs

before HUD approval of the demolition

or disposition. A person who is

dissatisfied with the PHA’s

determination of eligibility may appeal

to HUD under § 970.5(g). If HUD

determines that the PHA’s action

resulted from the demolition or

disposition of the property, the PHA

would be required to provide the

appropriate relocation assistance.

Note: If the PHA’s action was found to be

an ‘‘action to demolish or dispose of’’ the

property under § 970.12, then the PHA would

be required to cease those actions (e.g., stop

vacating a development). If tenants believe

that the PHA’s actions are contrary to its

lease obligations, they may pursue the

remedies available to them under the lease.

Actual Availability of Replacement

Housing

One commenter expressed concern

over the fact that HUD cannot approve

demolition or disposition until there is

a commitment of funds for the necessary

replacement units, and recommended

that HUD propose to Congress options

for PHAs that ‘‘desperately need to get

rid of units but for which no funds are

immediately available’’. The commenter

also suggested that Congress be updated

regularly on the yearly needs and costs

for pending and approved demolition

projects, so that adequate funding may

be appropriated.

The commenter’s concern that the

Department cannot approve

applications for demolition or

disposition until the funds are

committed is unfounded. The

Department processes requests for

demolition or disposition under section

18. However, under section 18,

applications are approved subject to the

availability of funds for replacement

housing. As a point of clarification,

section 513 of the National Affordable

Housing Act of 1990 requires the

Department to report to Congress each

year on its replacement housing needs

beginning in FY 1992.

One commenter recommended a

requirement that the replacement

housing be available for occupancy

before the demolition or disposition is

carried out. This recommendation has

not been incorporated into the final

rule, which conditions HUD approval

and PHA action on commitment of

funds for the replacement units, rather

than availability of the units for

occupancy. Once the decision has been

properly approved, requiring that the

actual demolition or disposition be

delayed until replacement units are

available for occupancy would be

unwarranted. The old units may be a

blight on the neighborhood, vacant and

substandard, and perhaps a threat to

public health and safety or a financial

drain on the PHA. In some cases,

selective demolition may be an essential

part of a comprehensive modernization

plan. One of the disposition criteria was

developed in contemplation of the kind

of case where the existing property will

be sold to obtain funds to finance the

replacement units. Where the

replacement units are to be produced by

new construction, several years will

probably be required before the new

units will be available for occupancy.

The commenter’s recommendation may

reflect the misconception that

replacement units are always needed for

relocation. However, past experience

indicates that replacement units do not

normally serve as the source for

relocation of the affected residents. The

affected residents are usually relocated

to other units within the PHA’s

inventory or provided with Section 8

assistance. There is no statutory or

regulatory requirement that the

relocated residents be placed in the

replacement housing.

This Final Rule

In addition to the regulatory

amendments being made as a result of

the public comments discussed above,
3712 Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations

the following additional revisions are

made in this final rule. These revisions

include modifications and new

requirements originating out of the

URA, the NAHA, and the 1992 Act.

Section 970.2, Applicability, is

revised to except, from coverage of the

disposition requirements of section 18

and part 970, homeownership sales

under (1) section 21 of the 1937 Act (as

added by section 123 of the 1987 Act);

(2) the Turnkey III/IV and Mutual Help

Homeownership Opportunity Programs;

and (3) other homeownership programs

established under sections 5(h) or

6(c)(4)(D) of the 1937 Act and in

existence before February 5, 1988, the

effective date of the 1987 Act. (Section

21 pertains to homeownership programs

through resident management

corporations.) Thus, the demolition/

disposition regulations will be

inapplicable to all conveyances under

existing homeownership programs. In

addition, in keeping with section 412(b)

of NAHA, the provisions of Part 970 do

not apply to the disposition of a public

housing project in accordance with an

approved homeownership program

under title III of the 1937 Act, as added

by section 411 of that legislation, (Hope

1 for Public and Indian Housing

Homeownership). However, in the case

of a homeownership proposal under

HOPE 1 or section 5(h) from a PHA

involving partial or total demolition of

units, Section 18 and this rule apply.

Hope 3 proposals involving public

housing units approved prior to the

1992 Act are likewise covered by the

requirements of section 18. [The 1992

Act took homeownership for scatteredsite single family public housing from

under the requirements of HOPE 3 and

moved it to HOPE 1.]

Section 970.2 is also revised to except

easements, rights-of-way, and transfers

of utility systems incident to the normal

operations of the development.

A correction is made to § 970.4(b) to

be redesignated as § 970.4(c) the

paragraph regarding the requirements of

the environmental and historic

preservation statutes. Furthermore, this

section requires that where the site for

the replacement housing is known at the

time of application for the demolition or

disposition, the site must comply with

these requirements. However, the

amendment to this section clarifies that

where the site(s) of the replacement

housing is not known at the time of

application (whether federally or nonfederally funded), the PHA shall follow

the requirements of 24 CFR 50.3(i), as

set forth in the rule text at § 970.4(c).

In addition, paragraphs (d), (e), (f),

and (g) are added to § 970.4(c) regarding

assurances and certifications for

commitment of funds to carry out the

replacement housing plan, compliance

with the offering to resident

organizations, relocation of residents,

and site and neighborhood standards.

[Note: In sec. 970.4 of the final rule as it

existed prior to the 1988 interim rule,

paragraph (c) required a certification from the

chief executive officer that the proposed

activity was consistent with the housing

assistance plan (HAP). The requirements

regarding the HAP were replaced by the

Comprehensive Housing Affordability

Strategy (CHAS). However, under 24 CFR

91.1(b)(3), all public housing programs,

except HOPE 1, are excluded from the

requirements of the CHAS.] Therefore, the

previous requirement for consistency with

the HAP has been dropped.

Paragraph (c) of § 970.5 of this final

rule is added to set forth the

requirements of the URA. Effective

April 2, 1989, the URA was amended to,

among other things, expand coverage. It

now covers all persons displaced as a

direct result of publicly or privately

undertaken rehabilitation, demolition or

acquisition for a Federal or federally

assisted project. Therefore, demolition

of any public housing property that is

owned by PHAs and that is subject to

the Annual Contributions Contract

under the 1937 Act, or the disposition

of the property to a Federal agency or

to any person or entity that acquires the

property for a federally assisted project,

would make the transaction subject to

the URA and make any person

displaced as a result of such action

eligible for relocation assistance at URA

levels. Families and individuals who are

not eligible for relocation assistance at

URA levels are eligible for the relocation

assistance described in section 970.5(e).

Required relocation assistance is

described in HUD Handbook 1378,

Tenant Assistance, Relocation and Real

Property Acquisition.

Section 970.8, paragraph (f) is revised

to clarify that approval of the

replacement housing plan shall be

provided by the unit of general local

government which shall be the chief

executive officer of the jurisdiction in

which the project is located (e.g., the

mayor or the county executive).

In § 970.9, paragraph (b)(1) is

amended to state that net proceeds (after

payment of HUD-approved costs of

disposition and relocation) shall be used

for the retirement of outstanding

obligations, if any, issued to finance

original development or modernization

of the project. This is in recognition of

the possibility that such obligations may

not have been forgiven. (See 42 U.S.C.

1437b.) (If project debt has been

forgiven, there will be no outstanding

obligations.) Reference to the payment

of development costs has been removed

because development cost is contained

in the outstanding obligation, and

double payment should not be implied.

A new paragraph (c) is added to

§ 970.9 which states that in the case of

scattered-site housing of a public

housing agency, the net proceeds of a

disposition shall be used in an amount

that bears the same ratio to the total of

such costs and obligations as the

number of units disposed of bears to the

total number of units of the project at

the time of disposition. This is a direct

statutory requirement in compliance

with section 512 of the National

Affordable Housing Act (Pub. L. 101–

625) and, therefore, is contained in this

final rule. An example of how this

provision would be applied in cases

where debt has not been forgiven is: If

a development project of ten units that

cost $100,000 has one unit disposed of

for $10,000, then there would be no net

proceeds after paying off the

proportional cost ($100,000 divided by

10 = $10,000/unit) of the project. If,

however, the unit was disposed of and

net proceeds were $12,000, there would

be $2,000 available that the PHA would

use for the provision of housing

assistance for low-income families.)

Where debt has been forgiven, all the

net proceeds may be used by the PHA

for the provision for low-income

housing.

Section 970.11(a) is revised to clarify

that in the event that the replacement

housing will be located outside the

political boundaries of the locality of

the PHA, all relevant program

requirements must be satisfied,

including approval of the replacement

housing plan by the unit of general local

government in which the project being

demolished or disposed is located, and

the execution of such agreements as

may be necessary between the PHA and

the locality in which the replacement

housing will be located. In the case of

new public housing, this would require

a Cooperation Agreement between the

PHA and the locality in which the

replacement housing would be located.

It is expected that replacement housing

would be operated or administered by

the PHA. However, in instances where

the PHA can make arrangements for

another PHA to develop, operate or

administer the new public housing, the

section 8 assisted housing, or other

replacement housing such as a State or

Local program Section 8 assisted

housing that is outside the PHA’s area

of operation, the PHA must ensure that

the families that would have been

eligible to occupy the replacement

housing if it had been replaced in the

same locality as the project being
Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations 3713

demolished or disposed, will be the

same families that benefit from the

replacement housing. In addition to the

Cooperation Agreement for public

housing, and in the case of Section 8

replacement housing or other

replacement housing, other agreements

may be necessary in order to assure that

this and other program requirements are

satisfied.

Section 970.11(c) is revised to reflect

the requirement that when demolition

or disposition of dwelling units is

proposed, the PHA application for HUD

approval must contain documentation

of approval by the unit of general local

government in which the project

proposed for demolition or disposition

is located, which approval shall be

provided by the chief executive officer

of the jurisdiction in which the project

is located (e.g., the mayor or county

executive). Section 970.3 has been

revised to add to the list of definitions,

a definition for ‘‘chief executive officer

of a State or unit of general local

government.’’

Since October 1988 when the interim

rule became effective, the Department

has interpreted the phrase ‘‘unit of

general local government’’ to mean the

local governing body, e.g., the City

Council or the Board of Aldermen.

Consequently, in order to comply with

this requirement, a PHA requesting

permission to demolish or dispose of

one or more dwelling units was required

to provide the Department with a copy

of a resolution from the City Council or

the appropriate local governing body

approving the replacement housing

plan. However, experience has

demonstrated that obtaining the

approval of the local governing body has

proven to be an extremely time

consuming and difficult process,

particularly when the replacement

housing is public housing development.

In some communities the local

governing body has strenuously

objected to putting public housing in

the community. The effect of local

governing body opposition to a

replacement housing plan has been to

delay approval of demolition or

disposition applications for extended

periods of time. After a review of the

problem and research of the legislative

history on this point, the Department

has determined that it is permissible to

allow the chief executive officer, e.g.,

the mayor or the county executive, to

approve the replacement housing plan.

Section 970.11(h) of the interim rule

is revised by the final rule for technical

and clarifying reasons. The purpose of

this provision is to assure that the

replacement sites will satisfy standards

related to nondiscrimination and

housing opportunities. In some

instances the time for compliance with

the site and neighborhood standards is

during the demolition or disposition

application and review process, and in

other instances compliance is deferred.

The requirements regarding site and

neighborhood standards will be as

follows:

(1) If funds have been committed to

provide replacement units under the

Public Housing Development Program

or the Section 8 project-based assistance

program, except when the PHA plans to

build back on the same site, the site and

neighborhood standards applicable for

those programs will apply and be

assessed at the appropriate time as

required by that program rule or

handbook and not at the time of the

demolition or disposition application.

The PHA must certify to HUD at the

time of the demolition or disposition

application, that once the site is

identified, the PHA will comply with

the site and neighborhood standards

applicable for those programs.

(2) If funds have been committed to

provide replacement units under the

Public Housing Development Program

or the Section 8 project-based assistance

program and the PHA plans to build

back on the same site, the PHA shall

comply with the site and neighborhood

standards applicable for those programs

when the demolition or disposition

application is submitted to HUD. A

complete site and neighborhood

standards review shall be done by HUD

subsequent to the submission of the

demolition or disposition application

but prior to approval.

(3) If the replacement housing units

are to be provided under a State or local

program, and the site is known

(including building back on the same

site), the PHA is required to comply

with site and neighborhood standards

comparable to 24 CFR part 882 when

the demolition or disposition

application is submitted to HUD. A

complete site and neighborhood

standards review shall be done by HUD

subsequent to the submission of the

demolition or disposition application

but prior to approval.

However, if the site is not known, the

PHA shall include in the application for

demolition or disposition a certification

that it will comply with site and

neighborhood standards comparable to

24 CFR part 882 once the site is known.

In the case of replacement housing

funded by State or local government

funds, the PHA must demonstrate in the

application that it has a commitment for

funding the replacement housing.

(4) If the replacement housing units

are to be provided out of the proceeds

of the disposition of public housing

property, and the site is known

(including building back on the same

site), the PHA is required to comply

with site and neighborhood standards

comparable to 24 part 941 (or under 24

CFR part 882 in the case of use of

Section 8 assistance) when the

demolition or disposition application is

submitted to HUD. A complete site and

neighborhood standards review shall be

done by HUD subsequent to the

submission of the demolition or

disposition application but prior to

approval.

However, if the site is not known, the

PHA shall include in the application for

demolition or disposition a certification

that it will comply with site and

neighborhood standards comparable to

24 CFR part 941 or under 24 CFR part

882 once the site is known.

Section 970.12 of the August 1988

interim rule is not made final by this

final rule. Comments received on

§ 970.12 will be considered in the

development of a separate proposed

rulemaking on the issue of required and

permitted actions prior to approval of an

application for demolition or

disposition. Until a final rule is issued

on § 970.12, the provisions of the

August 1988 interim rule remain

effective.

Changes Required by Section 412(a) of

the National Affordable Housing Act—

Resident Organization Opportunity to

Purchase

Section 412(a) of the National

Affordable Housing Act (‘‘NAHA’’),

Pub.L. 101–625, amended section 18 of

the U.S. Housing Act of 1937 to require

that ‘‘tenant councils, resident

management corporation, and tenant

cooperative, if any,’’ be given

appropriate opportunities to purchase

the project or portion of the project

covered by the demolition or

disposition application.

Section 116(a) of the Housing and

Community Development Act of 1992

(the ‘‘1992 Act’’) amended section 18 of

the U.S. Housing Act of 1937 to require

PHAs to limit the opportunity to

purchase the development or portion of

the development proposed for

demolition or disposition only to the

resident organization(s) at the affected

development. This provision clarifies an

ambiguity regarding the breadth of the

offer (as discussed below in the public

comments to the October 6, 1992

Notice) and is considered self-executing.

Accordingly, the Department issued

Notice PIH 93–17 (PHA) on April 2,

1993 to inform program administrators

and participants of this clarification and

its immediate effect. This final rule
3714 Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations

accommodates this clarification in the

new § 970.13.

Section 418 of NAHA permitted the

Department to establish by notice the

requirements necessary to carry out this

provision. Therefore, the Department

published a notice of guidelines on

October 6, 1992, at 57 FR 46075 and

solicited public comments on the

provisions set forth in that notice. The

Department received public comments

from five organizations: Two large

national associations, one housing

finance corporation, one public school

system, and a HUD field office. Below

is a listing of the issues raised by the

commenters. Each issue is followed by

a discussion of the Department’s

resolution of the issue.

Comment: There should be a

distinction provided between real

property that is developed with

dwelling units and is occupied and real

property that is vacant and abandoned

(which should be excluded from the

section 412(a) requirements. [a public

school system]

Response: Section 412(a) does not

apply in the case of totally vacant or

abandoned development. There would

be no residents to organize and,

consequently, no organization to receive

the offer. However, if the development

is only partially vacant, the PHA is

required to offer the property under

application to the existing resident

group, or where no group exists, the

PHA must make a reasonable effort to

allow the residents of the affected

development to organize. The PHA has

the same responsibility where only a

building, or group of buildings, is

vacant within the development.

Comment: There is no rationale for

limiting the area of land to be acquired

by a public body to less than two acres.

[a public school system]

Response: On the basis of experiences

in the program, the limitation of two

acres was selected to reduce the

possibility of injustice from profitmotivated actions. However, the

Department’s experience is rather

limited. The threshold was established

based upon experience for the last six

years. It is inappropriate to allow more

flexibility in this area without (1) more

time to see the impact of the existing

provision, and (2) a better

understanding of the number of PHAs

affected by the provision.

Comment: Financial capabilities of

resident councils, resident management

corporations, resident cooperatives or

other similar legal instrumentalities

should be assessed independent of

possible future Federal grants, because

such organizations may flounder when

these resources are gone. [a public

school system]

If the units being sold will continue

as rental units, the plan for the use of

the property should include financial

operations/solvency of the

development. [a HUD field office]

Response: The long-term financial

capability of a possible resident group

as a purchaser should be considered by

the PHA when it reviews the group’s

proposal. Absent any prior experience

under the new resident purchase

requirement, the Department sees no

reason to require the PHA to give more

weight to one factor over another.

Comment: The guidelines should

include realistic but firm timetables for

plan implementation which should be

enforced. [a public school system]

Response: The requirements related to

providing resident organizations the

opportunity to organize are very new.

To date only one resident organization

has prepared a proposal for PHA

consideration. Based on this experience,

there is no reason to require strict

timetables.

Comment: Another case, regarding

applicability, which does not present an

appropriate opportunity for resident

purchase is when the housing authority

plans to redevelop the real estate with

replacement public housing. [a housing

finance corporation]

Response: The PHA is required to

consult with residents and resident

organizations under § 970.4 regarding

any proposals to demolish or dispose of

any property. This consultation should

include advisements of any PHA plans

to reuse the property and a complete

discussion of any replacement housing

plans. It is clear that Congress wanted

resident organizations to be given the

opportunity to purchase the property.

Comment: It is an incorrect

interpretation that is a violation of the

statute to afford notice and opportunity

to purchase to city-wide resident groups

or, in the case where there is no

organized resident group at the affected

project, to allow 45 days for a resident

organization to be formed. A process

that is already lengthy is made more

protracted and burdensome by the time

periods created by the Department. The

statutory reference to tenant groups, ‘‘if

any,’’ refers to groups already in

existence. [two national associations]

HUD cannot avoid the cost/benefit

analysis of Executive Order 12291, by

designating the document as a

guideline. No cost/benefit analysis or

regulatory review was performed prior

to the issuance of the notice. The

benefits of imposing a ‘‘notice’’ do not

outweigh the cost to PHAs as a result of

the long delays and increased liabilities

they will have to face before being

permitted to submit an application. A

PHA is permitted to demolish or sell

only its very worst projects which are

often extremely unsafe. [one national

association]

Response: The Department has

examined the notice and the process for

permitting resident organizations to

form and recognizes that the additional

time periods may be burdensome.

However, the Department still believes

that as a matter of policy, residents

should have the opportunity to form a

resident organization. In response to the

concerns raised by the commenter,

however, this rule abbreviates the

process considerably. The process can

be further truncated into the already

established requirement for tenant

consultation under 24 CFR 970.4(a).

Therefore, where the affected

development does not have an existing

resident council, resident management

corporation or resident cooperative at

the time of the PHA proposal to

demolish or dispose of the development

or a portion of the development, the

PHA shall make a reasonable effort to

inform residents of the development of

the opportunity to organize and

purchase the property proposed for

demolition or disposition. Examples of

‘‘reasonable effort’’ at a minimum

include at least one of the following

activities: Convening a meeting, sending

letters to all residents, publishing an

announcement in the resident

newsletter, where available, or hiring a

consultant to provide technical

assistance to the residents. The

Department will not approve any

application that cannot demonstrate that

the PHA has allowed at least 45 days for

the residents to organize a resident

organization. The PHA should initiate

its efforts to inform the residents of their

right to organize as an integral part of

the resident consultation requirement

under 24 CFR 970.4(a).

While the Department is concerned

about the costs and the benefits as they

relate to the PHAs, the Department also

has similar regard and concerns for the

residents who are also beneficiaries of

the public housing program. Therefore,

we believe that giving residents the

opportunity to purchase projects that

the PHA has deemed unusable for

public housing purposes could benefit

the residents both socially and

economically. Furthermore, under

Executive Order 12866 (which replaced

Executive Order 12291), only

‘‘significant regulatory actions’’ are

required to have an assessment of the

costs and benefits of the action prior to

promulgation. This final rule does not
Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations 3715

meet the definition of ‘‘significant

regulatory action.’’

Comment: The guidelines should not

have been made effective upon

publication but should have permitted

public comment before taking effect.

The guidelines are in violation of HUD’s

part 10 which requires the Department

to follow APA procedures for

rulemaking. The guidelines should be

withdrawn and a new proposed rule

issued, incorporating the provisions of

the Housing and Community

Development Act of 1992. The term

‘‘notice’’ in section 418 of NAHA refers

to ‘‘notice and public comment’’ and not

the Federal Register format. [two

national associations]

Response: Section 418 of the National

Affordable Housing Act, Public Law

101–625, permitted the Department to

establish by notice the requirements

necessary to carry out the provision in

a more timely manner. It is clear that the

Congress intended that the Department

establish the requirements and

procedures for offerings to resident

organizations as soon as possible. The

determination as to the meaning of

‘‘notice’’ was made after substantial

consideration.

Comment: The fact that the statute

and the guidelines give resident groups

the right to demand to purchase a

project, but impose no requirement on

the purchasing group to use the project

for housing purposes, raises serious

constitutional and policy questions. The

U.S. Constitution prohibits the Federal

Government from appropriating private

property unless just compensation is

provided and the taking is pursuant to

a public purpose. Without a use

restriction, it is questionable whether

forcing a PHA to transfer its project to

a resident group, and thereby suffer the

loss of a competitive price, serves a

valid public purpose when the end

result is not increased housing

opportunity. [one national association]

The guidelines should require some

type of guarantee by the resident group

purchasers that the units will be utilized

as housing for low-income households.

[one national association]

If a PHA may consider an offer that

proposes a purchase of less than fair

market value with demonstrated

commensurate public benefit,

‘‘demonstrated commensurate public

benefit’’ should be defined. [a HUD field

office]

Response: There is nothing in the

statute or the legislative history which

would lead the Department to believe

that Congress intended that resident

organizations be restricted in the use of

the property. Therefore, the Department

did not impose such a restriction. The

final rule gives the PHA the authority to

establish the terms of sale and to

approve or disapprove of the resident

organization’s proposal. With this kind

of authority, the PHA is not being forced

to transfer its property to a resident

organization.

Examples of ‘‘demonstrated

commensurate public benefit’’ will be

provided in the new handbook for

demolition/disposition activities.

Comment: The Department’s

‘‘federalism’’ certification under

Executive Order 12612 incorrectly rules

that PHAs are not units of local

government. There are serious

federalism implications because the

guidelines intrude in to the day-to-day

management decisions of PHA directors,

who are State or local officials. The

guidelines threaten the balance of power

between the respective levels of

government because they direct State or

local officials to incur increased costs

related to delay and maintenance of

blighted or unsafe buildings. [one

national association]

Response: The Department recognizes

that overall section 18 places significant

requirements on PHAs; however, the

requirement that offerings be made to

resident organizations is mandated by

statute. The Department has determined

that these requirements do not have

‘‘federalism implications’’ because they

do not have substantial direct effects on

the States (including their political

subdivisions), or on the distribution of

power and responsibilities among the

various levels of government.

Comment: The guidelines cannot be

applied to pending applications because

HUD does not have the power to

promulgate rules with retroactive effect.

Congressional enactments and

administrative rule will not be

construed to have retroactive effect

unless their language requires this

result. [one national association]

Response: ‘‘Pending’’ does not mean

‘‘approved.’’ Section 18 prohibits

approval by the Secretary unless all of

the requirements of the section are met.

Note: Other comments received from the

HUD field office were technical corrections

related to appropriate cross-references and

definitions. These technical comments were

reviewed and accommodated where

indicated.

The regulatory provisions

implementing section 412 of NAHA, as

those provisions have been revised to

accommodate the public comments

discussed above, can be found at a new

§ 970.13 added by this rule.

Applicability to the Native American

Program

As a result of section 201(b)(1) of the

1937 Act, the provisions of title I of the

1937 Act apply to low-income housing

developed or operated pursuant to a

contract between the Secretary and an

Indian housing authority. Therefore, the

demolition and disposition provisions

under part 970 (as it is revised by the

1988 interim rule) extend to Indian

housing authorities and have been

incorporated in part 905, the regulations

for the Indian Housing Program.

However, under section 201(b)(2) no

provision of title I, or amendment to

title I, that is enacted after the date of

enactment of the Indian Housing Act of

1988 (June 29, 1988) shall apply to

public housing developed or operated

pursuant to a contract between the

Secretary and an Indian housing

authority unless the provision explicitly

provides for applicability. Therefore,

absent such a provision, section 116 of

the 1992 Act does not extend to Indian

housing authorities.

This issue, as well as finalizing the

1988 interim rule in part 905 and

sections 412 and 512 of NAHA, as they

apply to Indian housing units, will be

addressed in a separate final rule.

Other Matters

Environmental Review

A Finding of No Significant Impact

with respect to the environment has

been made in accordance with HUD

regulations at 24 CFR part 50, which

implement section 102(2)(C) of the

National Environmental Policy Act of

1969. The Finding of No Significant

Impact is available for public inspection

during regular business hours in the

Office of the Rules Docket Clerk, Office

of the General Counsel, Department of

Housing and Urban Development, Room

10276, 451 Seventh Street, S.W.,

Washington, D.C. 20410.

Executive Order 12866

This rule was reviewed by the Office

of Management and Budget (OMB)

under Executive Order 12866 on

Regulatory Planning and review, issued

by the President on September 30, 1993.

Any changes made in the rule

subsequent to its submission to OMB

are identified in the docket file, which

is available for public inspection in the

Office of the Rules Docket Clerk,

Department of Housing and Urban

Development, Room 10276, 451 Seventh

Street, SW, Washington, DC 20410.

Executive Order 12612, Federalism

The General Counsel, as the

Designated Official under section 6(a) of
3716 Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations

1 In keeping with section 412(b) of the National

Affordable Housing Act (Pub.L. 101–625), the

provisions of this part do not apply to the

disposition of a public housing project in

accordance with an approved homeownership

program under title III of the United States Housing

Act of 1937, as added by section 411 of that

legislation, (HOPE 1 for Public and Indian Housing

Homeownership). In the case of a HOPE 1 proposal

from a PHA involving partial or total demolition of

units, this part does apply. HOPE 3 proposals

involving public housing units approved prior to

the 1992 Act are likewise covered by the

requirements of section 18. [The 1992 Act took

scattered-site single family public housing from

under the requirements of HOPE 3 and moved it to

HOPE 1.]

Executive Order 12612, Federalism, has

determined that this rule does not have

‘‘federalism implications’’ because it

does not have substantial direct effects

on the States (including their political

subdivisions), or on the distribution of

power and responsibilities among the

various levels of government. This rule

pertains to certain PHAs that are subject

to Annual Contributions Contracts

(ACCs) under the U.S. Housing Act of

1937 and the requirements that they

must meet in order to demolish or

dispose of public housing.

Executive Order 12606, the Family

The General Counsel, as the

Designated Official under Executive

Order 12606, the Family, has

determined that this rule does not have

potential significant impact on family

formation, maintenance, and general

well-being because it redefines previous

demolition and disposition criteria so as

to hold applications for demolition and

disposition to more stringent

requirements.

Information Collection

The collection of information

requirements contained in this rule have

been submitted to OMB for review

under section 3504(h) of the Paperwork

Reduction Act of 1980 and have been

assigned OMB control number 2577–

0075.

Regulatory Flexibility Act

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 does have a significant

economic impact on a substantial

number of small entities because the

1987 Act provides for substantial

contributions of funds by the Federal

government to assist in bearing the costs

associated with the policy changes

reflected in the rule. This cost sharing

is, of course, available both to large and

small PHAs whose demolition and

disposition decisions are affected by the

rule.

Semi-Annual Agenda of Regulations

This rule was listed as item number

1899 in the Department’s Semiannual

Agenda of Regulations published on

November 14, 1994 (59 FR 57632,

57673) in accordance with Executive

Order 12866 and the Regulatory

Flexibility Act.

List of Subjects in 24 CFR Part 970

Grant programs—housing and

community development, Public

housing, Reporting and recordkeeping

requirements.

Accordingly, the interim rule

amending 24 CFR part 970 which was

published at 53 FR 30984 on August 17,

1988, is adopted as a final rule with the

following changes:

PART 970—PUBLIC HOUSING

PROGRAM—DEMOLITION OR

DISPOSITION OF PUBLIC HOUSING

PROJECTS

1. The authority citation for part 970

continues to read as follows:

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

2. Section 970.2 is revised to read as

follows:

§ 970.2 Applicability.

(a) This part applies to public housing

projects that are owned by public

housing agencies (PHAs) and that are

subject to Annual Contributions

Contracts (ACCs) under the Act. It also

applies to Section 23 bond-financed

projects that have received

modernization (i.e., Comprehensive

Improvement Assistance Program

(CIAP) or Comprehensive Grant funds

(CGP)). This part does not apply to the

following:

(1) PHA-owned Section 8 housing, or

housing leased under section 10(c) or

section 23 of the Act, except for section

23 bond-financed projects that have

received modernization funding under

the CIAP or the Comprehensive Grant

Programs;

(2) Demolition or disposition before

the End of the Initial Operating Period

(EIOP), as determined under the ACC, of

property acquired incident to the

development of a public housing

project; (however, this exception shall

not apply to dwelling units);

(3) The conveyance of public housing

for the purpose of providing

homeownership opportunities for lower

income families under section 21 of the

Act, the Turnkey III/IV or Mutual Help

Homeownership Opportunity Programs,

or other homeownership programs

established under sections 5(h) or

6(c)(4)(D) of the Act and in existence

before February 5, 1988, the date of

enactment of the 1987 Act. (Where a

plan submitted by the PHA for

homeownership includes a component

of demolition, the plan must meet the

requirements of section 18 and this

part.);

(4) The leasing of dwelling or

nondwelling space incident to the

normal operation of the project for

public housing purposes, as permitted

by the ACC;

(5) The reconfiguration of the interior

space of buildings (e.g., moving or

removing interior walls to change the

design, sizes, or number of units)

without ‘‘demolition’’, as defined in

§ 970.3. (This includes the conversion of

bedroom size, occupancy type, changing

the status of unit from dwelling to

nondwelling.);

(6) Easements, rights-of-way and

transfers of utility systems incident to

the normal operation of the

development for public housing

purposes, as permitted by the ACC;

(7) A whole or partial taking by a

public or quasi-public entity through

the exercise of its power of eminent

domain; however, HUD requirements

with respect to the replacement housing

requirement for one-for-one dwelling

units shall be followed (see HUD

Handbook 7486.1, Demolition,

Disposition and Conversion);

(8) Disposition of a public housing

project in accordance with an approved

homeownership program under title III

of the United States Housing Act of

1937 (42 U.S.C. 1437p) (Hope 1); 1

(9) Demolition after conveyance of a

public housing project to a non-PHA

entity in accordance with an approved

homeownership program under title III

of the United States Housing Act of

1937 (42 U.S.C. 1437p) (HOPE 1); and

(10) Units leased for non-dwelling

purposes for one year or less.

(b) Demolition or disposition that was

approved by HUD before February 5,

1988, but not carried out by that date,

may be carried out according to the

terms of such approval, without

reference to subsequent amendments to

this part and without obtaining any

further HUD approval.

3. Section 970.3 is amended by

adding in alphabetical order a definition

for ‘‘Chief Executive Officer of a unit of

general local government’’, to read as

follows:

§ 970.3 Definitions.

* * * * *

Chief Executive Officer of a unit of

general local government means the

elected official or the legally designated

official, who has the primary

responsibility for the conduct of that

entity’s governmental affairs. Examples
Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations 3717

of the ‘‘chief executive officer of a unit

of general local government’’ are: the

elected mayor of a municipality; the

elected county executive of a county;

the chairperson of a county commission

or board in a county that has no elected

county executive; and the official

designated pursuant to law by the

governing body of a unit of general local

government.

* * * * *

4. Section 970.4 is amended by:

a. Removing paragraphs (b) and (c);

b. Redesignating paragraphs (d) and

(e) as paragraphs (b) and (c),

respectively;

c. Revising newly redesignated

paragraph (c); and

d. Adding new paragraphs (d), (e), (f),

and (g), to read as follows:

§ 970.4 General requirements for HUD

approval of applications for demolition or

disposition.

* * * * *

(c) Demolition or disposition

(including any related replacement

housing plan) will meet the

requirements of the National

Environmental Policy Act of 1969 (42

U.S.C. 4321), the National Historic

Preservation Act of 1966 (16 U.S.C.

469), and related laws, as stated in the

Department’s regulations at part 50 of

this title. Where the site of the

replacement housing is unknown at the

time of submission of the application for

demolition or disposition, the

application shall contain an certification

that the applicant agrees to assist HUD

to comply with part 50 of this title and

that the applicant shall:

(1) Supply HUD with all available,

relevant information necessary for HUD

to perform for each property any

environmental review required by part

50 of this title;

(2) Carry out mitigating measures

required by HUD or select alternate

eligible property; and

(3) Not acquire, rehabilitate, convert,

lease, repair or construct property, or

commit HUD or local funds to such

program activities with respect to any

eligible property, until HUD approval is

received.

(d) The public housing agency has

developed a replacement housing plan,

in accordance with § 970.11, and has

obtained a commitment for the funds

necessary to carry out the plan over the

approved schedule of the plan. To the

extent such funding is not provided

from other sources (e.g., State or local

programs or proceeds of disposition),

HUD approval of the application for

demolition or disposition is conditioned

on HUD’s agreement to commit the

necessary funds (subject to availability

of future appropriations).

(e) The PHA has complied with the

offering to resident organizations, as

required under § 970.13.

(f) The PHA has prepared a

certification regarding relocation of

residents, in accordance with

§ 970.5(h)(1). If relocation is required,

the PHA must submit a relocation plan

in accordance with § 970.5.

(g) The PHA has made the appropriate

certifications regarding site and

neighborhood standards, in accordance

with § 970.11(h) (2) and (4).

5. Section 970.5 is revised to read as

follows;

§ 970.5 Displacement and relocation.

(a) Relocation of displaced tenants on

a nondiscriminatory basis. Tenants who

are to be displaced as a result of

demolition or disposition must be

offered opportunities to relocate to other

comparable/suitable (see HUD

Handbook 1378, Tenant Assistance,

Relocation and Real Property

Acquisition) decent, safe, sanitary, and

affordable housing (at rents no higher

than permitted under the Act,) which is,

to the maximum extent practicable,

housing of their choice, on a

nondiscriminatory basis, without regard

to race, color, religion (creed), national

origin, handicap, age, familial status, or

sex, in compliance with applicable

Federal and State laws.

(b) Relocation resources. Relocation

may be to other publicly assisted

housing. Housing assisted under Section

8 of the Act, including housing available

for lease under the Section 8 Housing

Voucher Program, may also be used for

relocation, provided the PHA ensures

that displaced tenants are provided

referrals to comparable/suitable

relocation dwelling units where the

family’s share of the rent to owner

following relocation will not exceed the

total tenant payment, as calculated in

accordance with § 813.107 of this title.

If the PHA provides referrals to suitable/

comparable relocation housing

(comparable housing if the

displacement is subject to the URA) and

a tenant with a rental voucher elects to

lease a housing unit where the family’s

share of rent to owner exceeds the

amount calculated in accordance with

§ 813.107 of this title, the tenant will be

responsible for the difference between

the voucher payment standard and the

rent to owner. If there are no units with

rents at or below the voucher payment

standard to which the PHA may refer

families, then the PHA cannot use

vouchers as a relocation housing source.

(c) Applicability of URA rules. (1) The

displacement of any person (household,

business or nonprofit organization) as a

direct result of acquisition,

rehabilitation, or demolition for a

Federal or federally assisted project

(defined in paragraph (j) of this section)

is subject to the Uniform Relocation

Assistance and Real Property

Acquisition Policies Act of 1970, as

amended, (URA) (42 U.S.C. 4601–4655)

and implementing regulations at 49 CFR

part 24. Therefore, if the PHA

demolishes the property, or disposes of

it to a Federal agency or to a person or

entity that is acquiring the property for

a federally assisted project, the

demolition or acquisition is subject to

the URA, and any person displaced (as

described in paragraph (i) of this

section) as a result of such action is

eligible for relocation assistance at the

levels described in, and in accordance

with the requirements of 49 CFR part

24.

(2) As described in § 970.11, public

housing units that are demolished must

be replaced. Any person displaced (see

paragraph (i) of this section) as a direct

result of acquisition, demolition or

rehabilitation for a project receiving

Federal financial assistance (e.g., ACC)

that provides the required replacement

housing, must be provided relocation

assistance at the levels described in, and

in accordance with the requirements of

49 CFR part 24.

(d) Applicability of antidisplacement

plan. If CDBG funds (part 570 of this

title), or HOME funds (part 91 of this

title) are used to pay any part of the cost

of the demolition or the cost of a project

(defined in paragraph (j) of this section)

for which the property is acquired, the

transaction is subject to the Residential

Antidisplacement and Relocation

Assistance Plan, as described in the

cited regulations.

(e) Relocation assistance for other

displaced persons. Whenever the

displacement of a residential tenant

(family, individual or other household)

occurs in connection with the

disposition of the real property, but the

conveyance is not for a Federal or

federally assisted project (and is,

therefore, not covered by the URA), the

displaced tenant shall be eligible for the

following relocation assistance:

(1) Advance written notice of the

expected displacement. The notice shall

be provided as soon as feasible, describe

the assistance to be provided and the

procedures for obtaining the assistance;

and contain the name, address and

phone number of an official responsible

for providing the assistance;

(2) Other advisory services, as

appropriate, including counseling and

referrals to suitable, decent, safe, and

sanitary replacement housing. Minority
3718 Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations

persons also shall be given, if possible,

referrals to suitable decent, safe and

sanitary replacement dwellings that are

not located in an area of minority

concentration;

(3) Payment for actual reasonable

moving expenses, as determined by the

PHA;

(4) The opportunity to relocate to a

suitable, decent, safe and sanitary

dwelling unit at a rent that does not

exceed that permitted under section 3(a)

of the 1937 Act. All or a portion of the

assistance may be provided under

section 8 of the 1937 Act; and

(5) Such other Federal, State or local

assistance as may be available.

(f) Temporary relocation. Residential

tenants who will not be required to

move permanently, but who must

relocate temporarily (e.g., to permit

property repairs), shall be provided:

(1) Reimbursement for all reasonable

out-of-pocket expenses incurred in

connection with the temporary

relocation, including the cost of moving

to and from the temporary housing, any

increase in monthly rent/utility costs,

and the cost of reinstalling telephone

and cable TV service.

(2) Appropriate advisory services,

including reasonable advance written

notice of:

(i) The date and approximate duration

of the temporary relocation;

(ii) The suitable, decent, safe and

sanitary housing to be made available

for the temporary period;

(iii) The terms and conditions under

which the tenant may lease and occupy

a suitable, decent, safe and sanitary

dwelling in the building/complex

following completion of the repairs; and

(iv) The provision for reimbursement

of out-of-pocket expenses (see paragraph

(f)(1) of this section).

(g) Appeals. A person who disagrees

with the PHA’s determination

concerning whether the person qualifies

as a ‘‘displaced person’’ or the amount

of the relocation assistance for which

the person is eligible, may file a written

appeal of that determination with the

PHA. A person who is dissatisfied with

the PHA’s determination on his or her

appeal may submit a written request for

review of the PHA’s determination to

the HUD Field Office.

(h) Responsibility of PHA. (1) The

PHA shall certify that it will comply

with the URA, implementing

regulations at 49 CFR part 24, and the

requirements of this section, and shall

ensure such compliance,

notwithstanding any third party’s

contractual obligation to the PHA to

comply with these provisions.

(2) The cost of required relocation

assistance is an eligible project cost in

the same manner and to the same extent

as other project costs. (See definition of

‘‘project’’ in paragraph (j) of this

section.) Such costs may also be paid for

with funds available from other sources.

(3) The PHA shall maintain records in

detail sufficient to demonstrate such

compliance. The PHA shall maintain

data on the race, ethnic, gender, and

handicap status of displaced persons.

(i) Definition of displaced person. (1)

General definition. For purposes of this

section, the term ‘‘displaced person’’

means any person (household, business,

nonprofit organization, or farm) that

moves from real property, or moves

personal property from real property,

permanently, as a direct result of

acquisition, rehabilitation, or

demolition for a Federal or federally

assisted project.

(2) Persons who qualify. The term

‘‘displaced person’’ includes, but may

not be limited to:

(i) A person who moves permanently

from the real property after the PHA, or

the person acquiring the property,

issues a vacate notice to the person, or

refuses to renew an expiring lease in

order to evade the responsibility to

provide relocation assistance, if the

move occurs on or after the date of HUD

approval of the demolition or

disposition;

(ii) Any person who moves

permanently, including a person who

moves before the date of HUD approval

of the demolition or disposition, if HUD

or the PHA determines that the

displacement resulted from the

demolition or disposition of the

property and is subject to the provisions

of this section; or

(iii) A tenant-occupant of a dwelling

who moves permanently from the

building/complex on or after the date

HUD approves the demolition or

disposition, if the move occurs before

the tenant is provided written notice

offering him or her the opportunity to

lease and occupy a suitable, decent,

safe, and sanitary dwelling in the same

building/complex, under reasonable

terms and conditions, upon completion

of the project. Such reasonable terms

and conditions shall include a monthly

rent and estimated average monthly

utility costs that do not exceed that

permitted under section 3(a) of the 1937

Act.

(iv) A tenant-occupant of a dwelling

who is required to relocate temporarily

and does not return to the building/

complex, if either:

(A) The tenant is not offered payment

for all reasonable out-of-pocket

expenses incurred in connection with

such temporary relocation (including

the cost of moving to and from the

temporarily occupied unit, any increase

in rent/utility costs, and the cost of

reinstalling telephone and cable TV

service).

(B) Other conditions of the temporary

relocation are not reasonable.

(v) A tenant-occupant of a dwelling

who moves from the building/complex

permanently after he or she has been

required to move to another unit in the

same building/complex if either:

(A) The tenant is not offered

reimbursement for all reasonable out-ofpocket expenses incurred in connection

with the move; or

(B) Other conditions of the move are

not reasonable.

(3) Persons not eligible.

Notwithstanding the provisions of

paragraphs (i)(1) and (i)(2) of this

section, a person does not qualify as a

‘‘displaced person’’ (and is not eligible

for relocation assistance under this

section), if:

(i) The person has been evicted for

serious or repeated violation of the

terms and conditions of the lease or

occupancy agreement, violation of

applicable Federal, State or local law, or

other good cause, and the PHA

determines that the eviction was not

undertaken for the purpose of evading

the obligation to provide relocation

assistance;

(ii) The person moved into the

property after the submission of the

application for the demolition or

disposition and, before commencing

occupancy, received written notice of

the project, its possible impact on the

person (e.g., the person may be

displaced, temporarily relocated, or

suffer a rent increase) and the fact that

he or she would not qualify as a

‘‘displaced person’’ (or for assistance

under this section) as a result of the

project;

(iii) The person is ineligible under 49

CFR 24.2(g)(2); or

(iv) HUD determines that the person

was not displaced as a direct result of

an action covered by this section.

(j) Definition of project. For purposes

of this section, the term ‘‘project’’ means

one or more activities (e.g., real property

acquisition, demolition or construction)

paid for in whole or in part with Federal

financial assistance. Two or more

activities that are integrally related, each

essential to the other(s), are considered

one project, whether or not all of the

component activities are federally

assisted.

(k) Definition of initiation of

negotiations. For purposes of providing

the appropriate notices and determining

the formula for computing a

replacement housing payment under the

URA to a tenant displaced from a
Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations 3719

dwelling as a direct result of demolition

or private owner acquisition, the term

‘‘initiation of negotiations’’ means HUD

approval of the demolition or

disposition under this part.

6. Section 970.6 is revised to read as

follows:

§ 970.6 Specific criteria for HUD approval

of demolition requests.

In addition to other applicable

requirements of this part, HUD will not

approve an application for demolition

unless HUD determines that one of the

following criteria is met:

(a) In the case of demolition of all or

a portion of a project, the project, or

portion of the project, is obsolete as to

physical condition, location, or other

factors, making it unusable for housing

purposes and no reasonable program of

modifications, is feasible to return the

project or portion of the project to useful

life. The Department generally shall not

consider a program of modifications to

be reasonable if the costs of such

program exceed 90 percent of total

development cost (TDC). Major

problems indicative of obsolescence

are—

(1) As to physical condition:

Structural deficiencies (e.g. settlement

of earth below the building caused by

inadequate structural fills, faulty

structural design, or settlement of

floors), substantial deterioration (e.g.,

severe termite damage or damage caused

by extreme weather conditions), or other

design or site problems (e.g., severe

erosion or flooding);

(2) As to location: physical

deterioration of the neighborhood;

change from residential to industrial or

commercial development; or

environmental conditions as determined

by HUD environmental review in accord

with part 50 of this title, which

jeopardize the suitability of the site or

a portion of the site and its housing

structures for residential use;

(3) Other factors which have seriously

affected the marketability, usefulness, or

management of the property.

(b) In the case of demolition of only

a portion of a project, the demolition

will help to assure the useful life of the

remaining portion of the project (e.g., to

reduce project density to permit better

access by emergency, fire, or rescue

services).

7. In § 970.7, paragraph (a)(2) is

revised to read as follows:

§ 970.7 Specific criteria for HUD approval

of disposition requests.

(a) * * *

(2) Disposition will allow the

acquisition, development, or

rehabilitation of other properties that

will be more efficiently or effectively

operated as lower income housing

projects, and that will preserve the total

amount of lower income housing stock

available to the community. A PHA

must be able to demonstrate to the

satisfaction of HUD that the additional

units are being provided in connection

with the disposition of the property.

* * * * *

8. Section 970.8 is amended by:

a. Revising paragraphs (f) and (g);

b. Redesignating existing paragraphs

(h), (i), (j), (k), (l), and (m), as paragraphs

(k), (l), (m), (n), (o), and (p),

respectively; and

c. Adding new paragraphs (h), (i), and

(j), to read as follows:

§ 970.8 PHA application for HUD approval.

* * * * *

(f) A replacement housing plan, as

required under § 970.11, and approved

by the unit of general local government

which approval shall be provided by the

chief executive officer of the jurisdiction

in which the project is located (e.g., the

mayor or the county executive),

indicating approval of the replacement

plan.

(g) Evidence of compliance with the

offering to resident organizations, as

required under § 970.13.

(h) A certification regarding relocation

of residents, in accordance with

§ 970.5(h)(1).

(i) Appropriate certifications

regarding site and neighborhood

assessment, in accordance with

§§ 970.11(h) (2), (3), and (4).

(j) Appropriate certification regarding

compliance with environmental

authorities, where required in

accordance with § 970.4(c).

* * * * *

9. In § 970.9, paragraphs (b)

introductory text and (b)(1) are revised,

and a new paragraph (c) is added, to

read as follows:

§ 970.9 Disposition of property; use of

proceeds.

* * * * *

(b) Net proceeds, including any

interest earned on the proceeds, (after

payment of HUD-approved costs of

disposition and relocation under

paragraph (a) of this section) shall be

used, subject to HUD approval, as

follows:

(1) For the retirement of outstanding

obligations, if any, issued to finance

original development or modernization

of the project; and

* * * * *

(c) In the case of scattered-site

housing of a public housing agency, the

net proceeds of a disposition shall be

used for the retirement of outstanding

obligations issued to finance original

development or modernization of the

project, in an amount that bears the

same ratio to the total of such costs and

obligations as the number of units

disposed of bears to the total number of

units of the project at the time of

disposition. For example, in cases

where debt has not been forgiven, if a

development project of ten units that

cost $100,000 has one unit disposed of

for $10,000, then there would be no net

proceeds after paying off the

proportional cost ($100,000 divided by

10=$10,000/unit) of the project. If,

however, the unit was disposed of and

net proceeds were $12,000, there would

be $2,000 available that the PHA would

use for the provision of housing

assistance for lower income families.

Where debt has been forgiven, all the

net proceeds may be used by the PHA

for the provision of low income housing

assistance.

10. Section 970.11 is revised to read

as follows:

§ 970.11 Replacement housing plan.

(a) One-for-one replacement. HUD

may not approve an application or

furnish assistance under this part unless

the PHA submitting the application for

demolition or disposition also submits a

plan for the provision of an additional

decent, safe, sanitary, and affordable

rental dwelling unit (at rents no higher

than permitted under the Act) for each

public housing dwelling unit to be

demolished or disposed of under the

application, except as provided in

paragraph (j) of this section. A

replacement housing plan may provide

for the location of the replacement

housing outside the political boundaries

of the locality of the PHA, provided all

relevant program requirements are

satisfied including the approval of the

replacement housing plan by the unit of

general local government in which the

project being demolished or disposed is

located. In order to assure that all

program requirements are satisfied, the

PHA must enter into any necessary

agreements, including where applicable,

the execution of a Cooperation

Agreement between the PHA and the

locality in which the replacement

housing will be located, prior to

submission of the replacement housing

plan to HUD for approval. In addition,

the PHA must ensure that such

agreements provide that the families

selected for occupancy in the

replacement housing will be families

who would have been eligible for

occupancy in the replacement housing

if it had been replaced in the same

locality as the project being demolished
3720 Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations

or disposed. The plan must include any

one or combination of the following:

(1) The acquisition or development of

additional public housing dwelling

units;

(2) The use of 15-year project-based

assistance under section 8, to the extent

available, or if such assistance is not

available, in the case of an application

proposing demolition or disposition of

200 or more dwelling units in a

development, the use of available

project-based assistance under section 8

having a term of not less than 5 years;

(3) The use of not less than 15-year

project-based assistance under other

Federal programs, to the extent

available, or if such assistance is not

available, in the case of an application

proposing the demolition or disposition

of 200 or more dwelling units in a

development, the use of available

project-based assistance under other

Federal programs having a term of not

less than 5 years. (NOTE: In the case of

15-year project based assistance under

other Federal programs, the Department

has determined that low-income

housing credits under Section 42 of the

Internal Revenue Service Code is a

Federal program providing 15-year

project-based assistance and, therefore,

qualifies as a source of replacement

housing. Any replacement housing plan

proposing the use of these credits must

assure that the low-income housing

units in the low-income housing credit

project which are designated as

replacement housing will be reserved

for low-income families for the requisite

period. Units which at the time of

allocation of the credit are also receiving

Federal assistance under Section 8

(except tenant-based assistance) or

Section 23 of the Act, or Section 236,

221(d)(3) BMIR or Section 221(d)(5) of

the National Housing Act (12 U.S.C.

1701 et seq.), or Section 101 of the

Housing and Urban Development Act of

1965 (12 U.S.C. 1701s), or other similar

Federal program, are not eligible as

replacement housing under paragraph

(a)(3) of this section.);

(4) The acquisition or development of

dwelling units assisted under a State or

local government program that provides

for project-based rental assistance

comparable in terms of eligibility,

contribution to rent, and length of

assistance contract (not less than 15

years) to assistance under section

(8)(b)(1) of the Act; or

(5)(i) The use of 15-year tenant-based

assistance under section 8 of the Act,

(excluding rental vouchers under

section 8(o)), under the conditions

described in paragraph (b) of this

section, to the extent available, or if

such assistance is not available, in the

case of an application proposing the

demolition or disposition of 200 or more

dwelling units in a development, the

use of tenant-based assistance under

section 8 (excluding rental vouchers

under section 8(o)) having a term of not

less than 5 years.

(ii) However, in the case of an

application proposing demolition or

disposition of 200 or more units, not

less than 50 percent of the dwelling

units for replacement housing shall be

provided through the acquisition or

development of additional public

housing dwelling units or through

project-based assistance, and not more

than 50 percent of the additional

dwelling units shall be provided

through tenant-based assistance under

section 8 (excluding vouchers) having a

term of not less than 5 years. The

requirements of § 970.11(b) do not apply

to applications for demolition or

disposition of 200 or more units that

propose the use of tenant-based

assistance under section 8 having a term

of not less than 5 years for the

replacement of not more than 50 percent

of the units to be demolished or

disposed of.

(b) Conditions for use of tenant-based

assistance. Fifteen-year tenant-based

assistance under section 8 may be

approved under the replacement plan

only if provisions listed in paragraphs

(b)(1) through (3) of this section are met.

(1) There is a finding by HUD that

replacement with project-based

assistance (including public housing, as

well as other types of project-based

assistance under paragraph (a) of this

section) is not feasible under the

feasibility standards established for

project-based assistance; that the supply

of private rental housing actually

available to those who would receive

tenant-based assistance under the plan

is sufficient for the total number of

rental certificates and rental vouchers

available in the community after

implementation of the plan; and that

this available housing supply is likely to

remain available for the full 15-year

term of the assistance;

(2) HUD’s findings under paragraph

(b)(1) of this section are based on

objective information, which must

include rates of participation by

landlords in the Section 8 program; size,

condition, and rent levels of available

rental housing as compared to Section 8

standards; the supply of vacant existing

housing meeting the Section 8 housing

quality standards with rents at or below

the fair market rent or the likelihood of

adjusting the fair market rent; the

number of eligible families waiting for

public housing or housing assistance

under Section 8; the extent of

discrimination practiced against the

types of individuals or families to be

served by the assistance; an assessment

of compliance with civil rights laws and

related program requirements; and such

additional data as HUD may determine

to be relevant in particular

circumstances; and

(3) To justify a finding under

paragraph (b)(1) of this section, the PHA

must provide sufficient information to

support both parts of the finding—why

project-based assistance is infeasible

and how the conditions for tenant-based

assistance will be met, based on the

pertinent data from the local housing

market, as prescribed in paragraph (b)(2)

of this section. The determination as to

the lack of feasibility of project-based

assistance must be based on the

standards for feasibility stated in the

respective regulations which govern

each type of eligible project-based

program identified in paragraph (a) of

this section, including public housing

under paragraph (a)(1) of this section as

well as the other types of eligible

Federal, State and local programs of

project-based assistance under

paragraphs (a)(2) through (4) of this

section. A finding of lack of feasibility

may thus be made only if the applicable

feasibility standards cannot be met

under any of those project-based

programs, or any combination of them.

For example, with regard to additional

public housing development, feasibility

would be determined by reference to

part 941 of this chapter and any other

applicable regulations and

requirements, to include consideration

of such factors as local needs for new

construction or rehabilitation,

availability of suitable properties for

acquisition or sites for construction, and

HUD determinations under cost

containment policies. With regard to

Section 8 programs involving

rehabilitation, an example of a major

feasibility factor would be the prospects

for participation of private owners

willing to meet the rehabilitation

requirements.

(c) Approval of unit of general local

government. The plan must be approved

by the unit of general local government

in which the project proposed for

demolition or disposition is located,

which approval shall be provided by the

chief executive officer (e.g., the mayor

or the county executive).

(d) Schedule for replacement housing

plan. (1) The plan must include a

schedule for carrying out all its terms

within a period consistent with the size

of the proposed demolition or

disposition, except that the schedule for

completing the plan shall in no event

exceed 6 years from the date specified
Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations 3721

to begin plan implementation, which is

the date of HUD approval of the

demolition or disposition application.

(2) Where demolition or disposition

will occur in phases, the schedule shall

provide for completing the plan within

six years from the date of the HUD

approval letter for a specific demolition

or disposition action requested.

‘‘Completion’’ does not mean that the

replacement housing must be built or

rehabilitated within the six years. For

replacement units developed under the

public housing development program,

the completion of the plan would be

units that have reached the stage of

notice to proceed for conventional units

and contract of sale for Turnkey units.

(e) Housing the same number of

individuals and families. The plan must

include a method which ensures that at

least the same total number of

individuals and families will be

provided housing, allowing for

replacement with units of different sizes

to accommodate changes in local

priority needs, as determined by the

PHA and reviewed and approved by

HUD as a part of the demolition or

disposition application.

(f) Relocation plan. Where existing

occupants will be displaced, the plan

must include a relocation plan in

accordance with §§ 970.5 and 970.8(d).

(g) Assurances regarding relocation.

The plan must prevent the taking of any

action to demolish or dispose of any

unit until the tenant of the unit is

relocated in accordance with § 970.5.

This does not preclude actions

permitted under § 970.12, actions

required under this part for

development and submission of the

PHA’s application for HUD approval of

demolition or disposition, or actions

required to carry out a relocation plan

which has been approved by HUD in

accordance with §§ 970.5 and 970.8(d).

(h) Site and neighborhood standards

assessment. With respect to replacement

housing, PHAs must comply with site

and neighborhood standards, as follows:

(1) If units under the Public Housing

Development Program or the Section 8

project-based assistance program have

been requested as replacement housing

in the PHA’s application, except when

the PHA plans to build back on the

same site, the site and neighborhood

standards applicable for those programs

will apply and be assessed at the

appropriate time as required by that

program rule or handbook and not at the

time of the demolition or disposition

application. The PHA must certify to

HUD at the time of application for

demolition or disposition, that once the

site is identified, the PHA will comply

with the site and neighborhood

standards applicable for those programs.

(2) If units under the Public Housing

Development Program or the Section 8

project-based assistance program have

been requested as replacement housing

in the PHA’s application and the PHA

plans to build back on the same site, the

PHA shall comply with the site and

neighborhood standards applicable for

those programs when the demolition or

disposition application is submitted to

HUD. A complete site and neighborhood

standards review shall be done by HUD

subsequent to the submission of the

demolition or disposition application

but prior to approval.

(3)(i) If the replacement housing units

are to be provided under a State or local

program, and the site is known

(including building back on the same

site), the PHA is required to comply

with site and neighborhood standards

comparable to part 882 of this title when

the demolition or disposition

application is submitted to HUD. A

complete site and neighborhood

standards review shall be done by HUD

subsequent to the submission of the

demolition or disposition application

but prior to approval.

(ii) However, if the site is not known,

the PHA shall include in the application

for demolition or disposition a

certification that it will comply with site

and neighborhood standards

comparable to part 882 of this title once

the site is known.

(iii) In the case of replacement

housing funded by State or local

government funds, the PHAs must

demonstrate in the application that it

has a commitment for funding the

replacement housing.

(4)(i) If the replacement housing units

are to be provided out of the proceeds

of the disposition of public housing

property, and the site is known

(including building back on the same

site), the PHA is required to comply

with site and neighborhood standards

comparable to part 941 of this chapter

(or under part 882 of this title in the

case of use of Section 8 assistance)

when the demolition or disposition

application is submitted to HUD. A

complete site and neighborhood

standards review shall be done by HUD

subsequent to the submission of the

demolition or disposition application

but prior to approval.

(ii) However, if the site is not known,

the PHA shall include in the application

for demolition or disposition a

certification that it will comply with site

and neighborhood standards

comparable to part 941 of this chapter

or under part 882 of this title once the

site is known.

(i) Assurances regarding accessibility.

The plan must contain assurances that

any replacement units acquired, newly

constructed or rehabilitated will meet

the applicable accessibility

requirements set forth in § 8.25 of this

title.

(j) Exception for replacement housing

in cases of demolition. In any 5-year

period, a public housing agency may

demolish not more than the lesser of 5

dwelling units or 5 percent of the total

dwelling units owned and operated by

the public housing agency, without

providing an additional dwelling unit

for each public housing unit to be

demolished, but only if the space

occupied by the demolished unit is used

for meeting the service or other needs of

public housing residents. If the PHA

elects to use this exception, it shall meet

all other requirements of this part

except § 970.11.

(Approved by the Office of Management and

Budget under control number 2577–0075.)

11. Existing § 970.13 is redesignated

as § 970.14, and a new § 970.13 is

added, to read as follows:

§ 970.13 Resident organization

opportunity to purchase.

(a) Applicability. (1) This section

applies to applications for demolition or

disposition of a development which

involve dwelling units, nondwelling

spaces (e.g. administration and

community buildings, maintenance

facilities), and excess land.

(2) The requirements of this section

do not apply to the following cases

which it has been determined do not

present appropriate opportunities for

resident purchase:

(i) The PHA has determined that the

property proposed for demolition is an

imminent threat to the health and safety

of residents;

(ii) The local government has

condemned the property proposed for

demolition;

(iii) A local government agency has

determined and notified the PHA that

units must be demolished to allow

access to fire and emergency equipment;

(iv) The PHA has determined that the

demolition of selected portions of the

development in order to reduce density

is essential to ensure the long term

viability of the development or the PHA

(but in no case should this be used

cumulatively to avoid Section 412

requirements);

(v) A public body has requested to

acquire vacant land that is less than 2

acres in order to build or expand its

services (e.g., a local government wishes

to use the land to build or establish a

police substation); or
3722 Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations

(vi) PHA seeks disposition outside the

public housing program to privately

finance or otherwise develop a facility

to benefit low-income families (e.g., day

care center, administrative building,

other types of low-income housing).

(3) In the situations listed in

paragraph (a) of this section, the PHA

may proceed to submit its request to

demolish or dispose of the property, or

the portion of the property, to HUD, in

accordance with Section 18 of the

United States Housing Act of 1937 and

24 CFR part 970 without affording an

opportunity for purchase by a resident

organization. However, resident

consultation would be required in

accordance with § 970.4(a). The PHA

must submit written documentation, on

official stationery, with date and

signatures to justify paragraphs (a)(2)(i),

(ii), (iii), (iv), and (v) of this section.

Examples of such documentation

include:

(i) A certification from a local agency,

such as the fire or health department,

that a condition exists in the

development that is an imminent threat

to residents; or

(ii) A copy of the condemnation order

from the local health department. If,

however, at some future date, the PHA

proposes to sell the remaining property

described in paragraphs (a)(2)(i) through

(iii) of this section, the PHA will be

required to comply with this section.

(b) Opportunity for residents to

organize. Where the affected

development does not have an existing

resident council, resident management

corporation or resident cooperative at

the time of the PHA proposal to

demolish or dispose of the development

or a portion of the development, the

PHA shall make a reasonable effort to

inform residents of the development of

the opportunity to organize and

purchase the property proposed for

demolition or disposition. Examples of

‘‘reasonable effort’’ at a minimum

include one of the following activities:

convening a meeting, sending letters to

all residents, publishing an

announcement in the resident

newsletter, where available, or hiring a

consultant to provide technical

assistance to the residents. The

Department will not approve any

application that cannot demonstrate that

the PHA has allowed at least 45 days for

the residents to organize a resident

organization. The PHA should initiate

its efforts to inform the residents of their

right to organize as an integral part of

the resident consultation requirement

under § 970.4(a).

(c) Established Organizations. Where

there are duly formed resident councils,

resident management corporation, or

resident cooperative at the affected

development, the PHA shall follow the

procedures beginning in paragraph (d)

of this section. Where the affected

development is fully or partially

occupied, the residents must be given

the opportunity to form under the

procedures in paragraph (b) of this

section.

(d) Offer of sale to resident

organizations. (1) The PHA shall make

the formal offer for sale which must

include, at a minimum, the information

listed in this paragraph (d). All

contacted organizations shall have 30

days to express an interest in the offer.

The PHA must offer to sell the property

proposed for demolition or disposition

to the resident management corporation,

the resident council or resident

cooperative of the affected development

under at least as favorable terms and

conditions as the PHA would offer it for

sale to another purchaser:

(i) An identification of the

development, or portion of the

development, in the proposed

demolition or disposition, including the

development number and location, the

number of units and bedroom

configuration, the amount of space and

use for non-dwelling space, the current

physical condition (e.g., fire damaged,

friable asbestos, lead-based paint test

results), and occupancy status (e.g.,

percent occupancy).

(ii) In the case of disposition, a copy

of the appraisal of the property and any

terms of sale.

(iii) A PHA disclosure and description

of plans proposed for reuse of land, if

any, after the proposed demolition or

disposition.

(iv) An identification of available

resources (including its own and HUD’s)

to provide technical assistance to the

resident management corporation,

resident council or resident cooperative

of the affected development to enable

the organization to better understand its

opportunity to purchase the

development, the development’s value

and potential use.

(v) Any and all terms of sale that the

PHA requires for the Section 18 action.

(If the resident management

corporation, resident council or resident

cooperative of the affected development

submits a proposal that is other than the

terms of sale (e.g., purchase at less than

fair market value with demonstrated

commensurate public benefit or for the

purposes of homeownership), the PHA

may consider accepting the offer).

(vi) A date by which the resident

management corporation, resident

council or resident cooperative of the

affected development must respond to

the HA’s offer to sell the property

proposed for demolition or disposition,

which shall be no less than 30 days

from the date of the official offering of

the PHA. The response from the

resident management corporation,

resident council or resident cooperative

of the affected development shall be in

the form of a letter expressing its

interest in accepting the PHAs written

offer.

(vii) A statement that the resident

council, resident management

corporation, and resident cooperative of

the affected development will be given

60 days to develop and submit a

proposal to the PHA to purchase the

property and to obtain a firm financial

commitment. It shall explain that the

PHA shall approve the proposal from

the resident council, resident

management corporation or resident

cooperative of the affected development,

if it meets the terms of sale. However,

the statement shall indicate that the

PHA can consider accepting an offer

from the resident council, resident

management corporation or resident

cooperative of the affected development

that is other than the terms of sale; e.g.,

purchase at less than fair market value

with demonstrated commensurate

public benefit or for the purposes of

homeownership. The statement shall

explain that if the PHA receives more

than one proposal from a resident

council, resident management

corporation or resident cooperative at

the affected development, the PHA shall

select the proposal that meets the terms

of sale. In the event that two proposals

from the affected development meet the

terms of sale, the PHA shall chose the

best proposal.

(2) After the 30 day time frame for the

resident council, resident management

corporation, or resident cooperative of

the affected development to respond to

the notification letter has expired, the

PHA is to prepare letters to those

organizations that responded

affirmatively inviting them to submit a

formal proposal to purchase the

property. The organization has 60 days

from the date of its affirmative response

to prepare and submit a proposal to the

PHA that provides all the information

requested in paragraph (g) of this

section and meets the terms of sale.

(e) PHA Review of Proposals. The

PHA has up to 60 days from the date of

receipt of the proposal(s) to review them

and determine whether they meet the

terms of sale set forth in its offer. If the

resident management corporation,

resident council or resident cooperative

of the affected development submits a

proposal that is other than the terms of

sale (e.g., purchase at less than the fair

market value with demonstrated
Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations 3723

commensurate public benefit or for the

purposes of homeownership), the PHA

may consider accepting the offer. If the

terms of sale are met, within 14 days of

the PHA’s final decision, the PHA shall

notify the resident management

corporation, resident council or resident

cooperative of the affected development

of that fact and that the proposal has

been accepted or rejected.

(f) Appeals. The resident management

corporation, resident council or resident

cooperative of the affected development

has the right to appeal the PHA’s

decision to the HUD field office. A letter

requesting an appeal has to be made

within 30 days of the decision by the

PHA. The request should include copies

of the proposal and any related

correspondence. The field office will

render a final decision within 30 days.

A letter communicating the decision is

to be prepared and sent to the PHA and

the resident management corporation,

resident council or resident cooperative

of the affected development.

(g) Contents of Proposal. (1) The

proposal from the resident management

corporation, resident council or resident

cooperative of the affected development

shall at a minimum include the

following:

(i) The length of time the organization

has been in existence;

(ii) A description of current or past

activities which demonstrate the

organization’s organizational and

management capability or the planned

acquisition of such capability through a

partner or other outside entities;

(iii) A statement of financial

capability;

(iv) A description of involvement of

any non-resident organization (nonprofit, for profit, governmental or other

entities), if any, the proposed division of

responsibilities between these two, and

the non-resident organization’s financial

capabilities;

(v) A plan for financing the purchase

of the property and a firm commitment

for funding resources necessary to

purchase the property and pay for any

necessary repairs;

(vi) A plan for the use of the property;

(vii) The proposed purchase price in

relation to the appraised value;

(viii) Justification for purchase at less

than the fair market value in accordance

with § 970.9, if appropriate;

(ix) Estimated time schedule for

completing the transaction;

(x) The response to the PHA’s terms

of sale;

(xi) A resolution from the resident

organization approving the proposal;

and

(xii) A proposed date of settlement,

generally not to exceed six months from

the date of PHA approval of the

proposal, or such period as the PHA

may determine to be reasonable.

(2) If the proposal is to purchase the

property for homeownership under 5(h)

or HOPE 1, then the requirements of

Section 18 of the United States Housing

Act of 1937 and 24 CFR part 970 do not

apply, but the applicable requirements

shall be those under the HOPE 1

guidelines, as set forth at 57 FR 1522, or

the section 5(h) regulation, as set forth

in parts 905 and 906 of this chapter. In

order for a PHA to consider a proposal

to purchase under section 412, using

homeownership opportunities under

section 5(h) or HOPE 1, the resident

council, resident management

corporation or resident cooperative of

the affected development shall meet the

provisions of this rule, including

paragraphs (g)(1)(i) through (g)(1)(xii) of

this section.

(3) If the proposal is to purchase the

property for other than the

aforementioned homeownership

programs or for uses other than

homeownership, then the proposal must

meet all the disposition requirements of

Section 18 of the United States Housing

Act of 1937 and 24 CFR part 970.

(h) PHA obligations. (1) Prepare and

disperse the formal offer of sale to the

resident council, resident management

corporation and resident cooperative of

the affected development.

(2) Evaluate proposals received and

make the selection based on the

considerations set forth in paragraph (b)

of this section. Issuance of letters of

acceptance and rejection.

(3) Prepare certifications, where

appropriate, as discussed in paragraph

(i)(3) of this section.

(4) The PHA shall comply with its

obligations under § 970.4(a) regarding

tenant consultation and provide

evidence to HUD that it has met those

obligations. The PHA shall not act in an

arbitrary manner and shall give full and

fair consideration to any qualified

resident management corporation,

resident council or resident cooperative

of the affected development and accept

the proposal if it meets the terms of sale.

(i) PHA application submission

requirements for proposed demolition or

disposition. (1) If the proposal from the

resident organization is rejected by the

PHA, and either there is no appeal by

the organization or the appeal has been

denied, the PHA shall submit its

demolition or disposition application to

HUD in accordance with Section 18 of

the United States Housing Act of 1937

and part 970 of this chapter. The

demolition or disposition application

must include complete documentation

that the requirements of this section

have been met. PHAs must submit

written documentation that the resident

council, resident management

corporation and tenant cooperative of

the affected development have been

apprised of their opportunity to

purchase under this section. This

documentation shall include:

(i) A copy of the signed and dated

PHA notification letter(s) to each

organization informing them of the

PHA’s intention to submit an

application for demolition or

disposition, the right to purchase; and

(ii) The responses from each

organization.

(2) If the PHA accepts the proposal of

the resident organization, the PHA shall

submit a disposition application in

accordance with Section 18 of the

United States Housing Act of 1937 and

part 970 of this chapter, with

appropriate justification for a negotiated

sale and for sale at less than fair market

value, if applicable.

(3) HUD will not process an

application for demolition or

disposition unless the PHA provides the

Department with one of the following:

(i) Where no resident management

corporation, resident council or resident

cooperative exists in the affected

development and the residents of the

affected development have not formed a

new organization in accordance with

paragraph (b) of this section, a

certification from either the executive

director or the board of commissioners

stating that no such organization(s)

exists and documentation that a

reasonable effort to inform residents of

their opportunity to organize has been

made; or

(ii) Where a resident management

corporation, resident council or resident

cooperative exists in the affected

development one of the following,

either paragraph (i)(3)(ii)(A) or

paragraph (i)(3)(ii)(B) of this section:

(A) A board resolution or its

equivalent from each resident council,

resident management corporation or

resident cooperative stating that such

organization has received the PHA

letter, and that it understands the offer

and waives its opportunity to purchase

the project, or portion of the project,

covered by the demolition or

disposition application. The response

should clearly state that the resolution

was adopted by the entire organization

at a formal meeting; or

(B) A certification from the executive

director or board of commissioners of

the PHA that the thirty (30) day

timeframe has expired and no response

was received to its offer.

(Approved by the Office of Management and

Budget under control number 2577–0075.)
3724 Federal Register / Vol. 60, No. 11 / Wednesday, January 18, 1995 / Rules and Regulations

Dated: January 5, 1995.

Joseph Shuldiner,

Assistant Secretary for Public and Indian

Housing.

[FR Doc. 95–1113 Filed 1–17–95; 8:45 am]

BILLING CODE 4210–33–P