6218 Federal Register / Vol. 66, No. 13 / Friday, January 19, 2001 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

24 CFR Parts 5, 92, 200, 236, 574, 582,

583, 891, 982

[Docket No. FR–4608–F–02]

RIN 2501–AC72

Determining Adjusted Income in HUD

Programs Serving Persons with

Disabilities: Requiring Mandatory

Deductions for Certain Expenses; and

Disallowance for Earned Income

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

SUMMARY: This final rule amends HUD’s

regulations in part 5, subpart F, to

include additional HUD programs in the

list of programs that must make certain

deductions in calculating a family’s

adjusted income. These deductions

primarily address expenses related to a

person’s disability, for example medical

expenses or attendant care expenses.

The purpose of this amendment is to

expand the benefits of these deductions

to persons with disabilities served by

HUD programs not currently covered by

part 5, subpart F. Second, this rule adds

a new regulatory section to part 5 to

require for some but not all of these

same programs the disallowance of

increases in income as a result of

earnings by persons with disabilities.

HUD believes that making these

deductions and disallowance available

to persons with disabilities through as

many HUD programs as possible will

assist persons with disabilities in

obtaining and retaining employment,

which is an important step toward

economic self-sufficiency.

This rule follows publication of a

August 21, 2000 proposed rule, and

takes into consideration public

comments received on the rule.

DATES: Effective Date: February 20,

2001.

FOR FURTHER INFORMATION CONTACT: For

the HOME Investment Partnerships

Program, contact Mary Kolesar, Office of

Community Planning and Development,

Department of Housing and Urban

Development, 451 Seventh Street, SW.,

Washington, DC 20410, telephone (202)

708–2470.

For the Housing Choice Voucher

Program, contact Patricia Arnaudo,

Office of Public and Indian Housing,

Department of Housing and Urban

Development, 451 Seventh Street, SW.,

Washington, DC 20410, telephone (202)

708–0744.

For the Housing Opportunities for

Persons with AIDS Program, contact

David Vos, Office of Community

Planning and Development, Department

of Housing and Urban Development,

451 Seventh Street, SW., Washington,

DC 20410, telephone (202) 708–1934.

For the Rent Supplement Program,

contact, Willie Spearmon, Office of

Housing, Department of Housing and

Urban Development, 451 Seventh Street,

SW., Washington, DC 20410; telephone

(202) 708–3000.

For the Rental Assistance Payment

(RAP) Program, contact Willie

Spearmon, Office of Housing,

Department of Housing and Urban

Development, 451 Seventh Street, SW.,

Washington, DC 20410; telephone (202)

708–3000.

For the Section 202 Supportive

Housing Program for the Elderly

(including Section 202 Direct Loans for

Housing for the Elderly and Persons

with Disabilities), contact Aretha

Williams, Office of Housing,

Department of Housing and Urban

Development, 451 Seventh Street, SW.,

Washington, DC 20410, telephone (202)

708–2866.

For Section 8 Project-Based, contact

Willie Spearmon, Office of Housing,

Department of Housing and Urban

Development, 451 Seventh Street, SW.,

Washington, DC 20410; telephone (202)

708–3000.

For the Section 811 Supportive

Housing Program for Persons with

Disabilities, contact Gail Williamson,

Office of Housing, Department of

Housing and Urban Development, 451

Seventh Street, SW., Washington, DC

20410, telephone (202) 708–2866.

For the Shelter Plus Care Program,

contact the State Assistance Division,

Office of Community Planning and

Development, Department of Housing

and Urban Development, 451 Seventh

Street, SW., Washington, DC 20410,

telephone (202) 708–2140.

For the Supportive Housing Program

(McKinney-Vento Act Homeless

Assistance), contact Clifford Taffet,

Office of Community Planning and

Development, Department of Housing

and Urban Development, 451 Seventh

Street, SW., Washington, DC 20410,

telephone (202) 708–1234.

For all of the above telephone

numbers, persons with hearing or

speech-impairments may call 1–800–

877–8339 (Federal Information Relay

Service TTY). (Other than the ‘‘800’’

number, the telephone numbers are not

toll-free numbers.)

SUPPLEMENTARY INFORMATION:

I. Background

HUD’s FY 1999 Appropriations Act,

which included the Quality Housing

and Work Responsibility Act of 1998 (as

title V of the FY 1999 HUD

Appropriations Act) (the entire FY 1999

Appropriations Act, including title V, is

Public Law 105–276, approved October

21, 1998, and frequently referred to as

the ‘‘Public Housing Reform Act’’)

enacted landmark measures in HUD

programs, including many of the

reforms sought by Secretary Cuomo,

such as transforming public housing,

creating additional housing assistance

vouchers, merging the Section 8

certificate and voucher programs, and

enabling more families to obtain FHA

mortgages to become homeowners.

Since the Public Housing Reform Act

became law, HUD has published many

rules and notices implementing the

important changes in HUD programs

required by the Act. While the majority

of these changes are applicable to HUD’s

public housing and Section 8 programs,

HUD has been able to extend,

administratively at times, the benefits of

some of these landmark measures to

HUD programs not specifically

identified by the statute.

On August 21, 2000 (65 FR 50842),

HUD published a proposed rule that

proposed to extend the benefits of (1)

deducting certain expenses as provided

by the Public Housing Reform Act

(currently applicable only to public

housing and Section 8 housing (tenantbased and project-based)); and (2)

disregarding certain increases in earned

income as provided by the Public

Housing Reform Act (currently

applicable only to public housing) to

persons with disabilities served by the

following HUD programs—HOME

Investment Partnerships, Housing

Opportunities for Persons with AIDS,

Supportive Housing, and Housing

Choice Voucher.

HUD proposed these benefit

extensions to persons with disabilities

because HUD believes that these

deductions and the disregard of earned

income constitute an important step in

helping persons with disabilities find

employment and retain employment.

HUD is aware that the lack of accessible,

affordable housing continues to be a

barrier to the ability of persons with

disabilities to take advantage of

economic opportunities in many

communities across the country. The

availability of accessible, affordable

housing and the location of that housing

can be the key to persons with

disabilities in obtaining employment.

The August 21, 2000 proposed rule

provides more detailed information on

the two amendments made by the

proposed rule (the extension of certain

mandatory deductions of expenses, and

the disregard of earned income) and

HUD refers the reader to the earlier

Federal Register / Vol. 66, No. 13 / Friday, January 19, 2001 / Rules and Regulations 6219

rulemaking for more detailed

information.

II. Discussion of Public Comments on

the Proposed Rule

The public comment period for the

August 21, 2000, proposed rule closed

on October 20, 2000. HUD received 26

comments. The commenters represented

a broad cross-section of affected entities.

Commenters included a wide spectrum

of individuals and entities affected by or

interested in this rulemaking. The

majority of the commenters expressed

support for the rule’s proposals.

Notwithstanding widespread support of

the rule’s proposals, commenters raised

certain concerns about the rule,

primarily with respect to HUD’s

proposal to expand the earned income

disregard. The following presents a

discussion of the significant comments

and questions raised by the commenters

and HUD’s responses to these comments

and questions.

A. Mandatory Expense Deduction From

Gross Income

Comment: This proposal is a positive

step in helping persons with disabilities

become economically self sufficient. The

following comments reflect the types of

comments submitted in support for this

proposal.

The expense deduction will help

people with disabilities to obtain and

keep employment.

The expense deduction will increase

the opportunity for persons with

disabilities to access many HUD

programs.

The expense deduction will have a

positive effect on persons with

disabilities.

The expense deduction creates

incentives for residents in HUD-assisted

programs to return to the work force by

adjusting their rent to reflect increased

expenses.

Many poor people must spend a large

portion of their income on required

services. The rule represents a positive

step by ensuring that money spent on

care for persons with disabilities and

child care expenses is not counted as

income.

The more uniform standard of income

deductions as proposed by the rule will

simplify program administration at the

local level.

HUD Response. HUD appreciates the

comments in support of the proposal to

deduct certain expenses from gross

income.

Comment. The rule should allow for

the deduction of expenses incurred to

prevent institutionalization of a person

with disabilities.

HUD Response. The rule provides for

deduction of unreimbursed reasonable

attendant care expenses. (See

§ 5.611(a)(3)(ii).)

Comment. Since the intention of the

rule is self-sufficiency, the rule should

not limit the exclusion of certain

expenses only to the extent they exceed

three percent of gross income. The rule

would better serve families if it allows

for a complete exclusion of the listed

expenses.

HUD Response. The three percent cap

is imposed by statute, and therefore

cannot be revised by HUD through

regulation. (See 42 U.S.C. 1437a(b)(5).)

Comment. The definition of ‘‘adjusted

income’’ in § 5.611 provides the basis

for determining the amount of rent to be

charged to an eligible household after

the initial determination of eligibility is

made. As amended by the proposed

rule, § 5.611 ensures that adjustments to

income for persons with disabilities

would be taken into account in

determining rent. However, if § 5.609 is

not similarly amended, some persons

with disabilities whose gross incomes

slightly exceed the program limits, but

who would be eligible for substantial

deductions for expenses of care, would

be excluded from program eligibility.

HUD Response. The statutory

provision for these deductions relates to

adjusted income, not income for

eligibility purposes. There is no

indication of Congressional intent to

adjust eligibility limits, which most

applicants are considerably below in

any event, for such purposes.

B. Mandatory Earned Income Disregard

Comment: This proposal is a positive

step in helping persons with disabilities

become economically self sufficient. The

following comments reflect the types of

comments submitted in support for this

proposal.

Persons with disabilities often have

difficulty transitioning to employment.

The earned income disregard will

support these families in their quest for

independence, and ease the transition to

self-sufficiency.

The earned income disregard concept

has worked well in conjunction with the

Temporary Assistance for Needy

Families (TANF) program. It should be

equally valuable in helping persons

with disabilities residing in HUDassisted housing move toward selfsufficiency.

Counting all income from earnings is

tantamount to removing any incentive

to work and be a contributing citizen

when it would result in the loss or

significant reduction in housing

assistance benefits.

The more residents who work, the

greater the income to HUD and those

involved in operating HUD assisted

housing.

The earned income disregard helps

qualified families negotiate the

transition from public assistance to

employment. Any negative budget

impacts caused by the disregard will be

short-term in nature and will be offset

by increased rental income (or lower

subsidy levels) as families are able to

stay successfully employed.

HUD Response. HUD appreciates the

comments in support of this proposal.

Comment. Broader application of the

earned income disregard may diminish

funds available for other programs. A

mandatory earned income disregard

will, in some cases, limit housing

choice. It will force agencies to disallow

earned income that would otherwise

enable families to qualify for better

housing under the Section 8 voucher

program. The impact of this proposed

policy on the Housing Choice Voucher

Program must be considered before

finalizing the rule. The final rule needs

to address all these concerns.

HUD Response. HUD took these

concerns into consideration in

developing the proposed rule, and

determined that any fiscal impact will

not be significant and will be shortterm. HUD believes that the long term

benefits of this proposal—helping

persons with disabilities obtain and

retain employment—outweigh any

initial short term impact. As several

commenters pointed out, this proposal

will help persons with disabilities move

toward self-sufficiency, which will

increase available funds for other

families.

Comment. The earned income

disregard should be coordinated with

other federal agencies (e.g., SSA, HHS,

DOL) to ensure that there are no

overlaps or inconsistencies with other

applicable programs. The rule does not

take into account the way the earned

income disregard interfaces other

federal programs affecting persons with

disabilities.

HUD Response. HUD undertook this

coordination when developing its

proposed and final rules on ‘‘Changes in

Admissions and Occupancy

Requirements,’’ published on April 30,

1999 (64 FR 23460) and March 29, 2000

(61 FR 16692), which implemented the

earned income disregard for public

housing (see 24 CFR 960.255). The

earned income disregard in § 5.617 is

modeled on § 960.255.

Comment. HUD should evaluate the

effectiveness of the earned income

disregard as an incentive for

employment based on the historical

6220 Federal Register / Vol. 66, No. 13 / Friday, January 19, 2001 / Rules and Regulations

experience of the public housing

program before extending it to

additional programs. Empirical studies

are needed to validate the effectiveness

of rent-based work incentives such as

the mandatory earned income disregard.

HUD Response. HUD believes that at

this time the expansion of earned

income disregard to persons with

disabilities is an appropriate incentive

for employment, and has determined

that the costs of implementation of this

expanded benefit to persons with

disabilities are not significant.

Comment. The Public Housing

Reform Act specifically directs that the

earned income disregard be applied to

public housing. HUD must articulate in

the final rule a sufficient justification for

interpreting the statute so broadly as to

allow extension of the earned income

disregard to other programs as

contemplated by the rule. The proposed

rule did not provide this justification.

HUD Response. Section 3(b) of the

U.S. Housing Act of 1937 gives the

Secretary the authority to define

‘‘income’’ and therefore through this

definition of income allows the

Secretary to apply the earned income

disregard to HUD’s housing voucher

program. For the HOME Program,

section 104(9) and (1) of the CranstonGonzalez National Affordable Housing

Act (42 U.S.C. 12704) states that the

varying median income definitions of

low-and very low-income families shall

be determined by the Secretary. For the

HOPWA program, Section 859(a) of the

Cranston-Gonzalez National Affordable

Housing Act (42 U.S.C. 12908) cites to

section 8 of the U.S. Housing Act of

1937 to the end that rental assistance

‘‘shall be provided to the extent

practicable in the manner provided for

under section.’’ This provision refers to

rental assistance, not income, and vests

in the administrator discretion whether

it would be practicable to follow the

temporary ineligibility of section 8

income disregards. For the Supportive

Housing for the Homeless program, the

authorizing statute contains no income

limitations. Section 426(d) of the

McKinney-Vento Homeless Assistance

Act (42 U.S.C. 11386) states that assisted

tenants may be required to pay an

occupancy charge in an amount

determined by the recipient providing

the project, which may not exceed the

amount determined under section 3(a)

of the U.S. Housing of Act of 1937.

Therefore, HUD can amend the

regulations for this program to provide

for use by the housing provider of

earned income disregards in

establishing its occupancy charges.

Comment. Several commenters

requested that HUD extend the earned

income disregard to programs other than

the four programs provided in the

August 21, 2000 proposed rule. Their

comments included the following:

The earned income disregard should

be extended to all Section 8

participants, including those receiving

Moderate Rehabilitation and Project

Based assistance.

The earned income disregard should

be extended to all Section 8 program

participants, regardless of how the

actual program title is styled. Program

administration will be much easier if

the earned income disregard is made

applicable to all Section 8 programs.

The earned income disregard should

be extended to persons participating in

the Section 811 program.

The earned income disregard should

be extended to all households served

under Section 202.

The earned income disregard should

be extended to Shelter Plus Care

recipients.

The earned income disregard should

be extended to all persons with

disabilities, regardless of the program

under which they are participating.

The income disregard should be

extended to all persons with disabilities

in all types of HUD housing.

HUD Response. As discussed in the

preamble to the August 21, 2000,

proposed rule, HUD extended the

earned income disregard to persons

with disabilities in four programs (the

HOME Investment Partnerships

Program, the Housing Opportunities for

Persons with AIDS, Supportive Housing

Program, and the Housing Choice

Voucher Program) because HUD had the

requisite statutory authority to do so. At

this time, HUD does not have the

statutory authority to extend the earned

income disregard to other programs but

is seeking such authority.

Comment. The rule does not contain

a suitable implementation strategy.

There are many questions with regard to

implementation of the earned income

disregard. HUD should postpone the

effective date of any proposed extension

of the earned income disregard until

HUD can provide additional guidance to

PHAs.

HUD Response. As is appropriate for

rules, the rule establishes the

requirements for application of the

earned income disregard. The specifics

of how this is to be implemented by

public housing agencies (PHAs) will be

set out in guidance issued by HUD.

HUD issued guidance to PHAs on this

subject in connection with the

publication of the final rule on

Admissions and Occupancy. HUD

expects to issue further guidance.

Comment. The Federal government

should not substitute its own judgment

for that of local housing providers since

only at the local level can the costs and

benefits of the mandatory income

disregard be effectively weighed.

Whether or not to incorporate the

income disregard into specific programs

is a matter best reserved to local

discretion.

HUD Response. Consistent with the

Public Housing Reform Act, HUD has

left considerable discretion to PHAs on

the manner of implementation of

various requirements imposed by the

statute. However, it is primarily the

responsibility of Congress and HUD to

determine which categories of families

will be eligible for certain benefits.

Determining whether persons with

disabilities will be eligible for the

earned income disregard is a

determination that should be made by

HUD to ensure consistency and fairness

in application across the nation, and not

a decision that should be made solely at

the local level.

Comment. Notwithstanding its

beneficial effect on program

participants, an expanded earned

income disregard will have a negative

fiscal impact on local housing

providers. HUD should raise

administrative allowances to

compensate agencies for the increased

cost of managing earned income

disregard provisions. The expanded

earned income disregard will force

housing providers to incur greater

administrative costs. HUD should

therefore include provisions in the rule

to ‘‘make them whole.’’ Additionally,

the use of a selective earned income

disregard based on disability and

specific program participation status

places an undue administrative burden

on housing providers since they must

compute the earned income disregard in

some cases, but not in others. Agencies

that administer both Section 8 and

Public Housing Programs will find it

very difficult to train staff to compute

rent one way for Section 8 and another

way for Public Housing.

HUD Response. HUD believes that

any negative fiscal impact on local

housing providers will not be

significant. HUD recognizes that with

the start-up of implementation of any

new requirement or responsibility, there

is an increase in administrative burden,

but as the processes for implementation

are established and once those processes

are underway, the administrative

burden lessens.

Comment. The proposed earned

income disregard will likely result in

some individuals in a building receiving

a benefit while others do not. This will

Federal Register / Vol. 66, No. 13 / Friday, January 19, 2001 / Rules and Regulations 6221

lead to friction between tenants and

increase management difficulty.

HUD Response. HUD believes that

any friction that may be voiced by

tenants will be minimal. As HUD noted

in the preamble to the August 21, 2000

proposed rule, estimates concerning

unemployment indicate that the

unemployment rate among persons with

significant disabilities is in the range of

70% to 75%, among the highest of

disadvantaged groups in the nation.

HUD believes that the amendments

made by this rule may help to lower this

rate for persons residing in HUD

assisted housing.

Comment. HUD’s earned income

disregard policy needs to go further by

expanding the amount of income that is

excluded and graduating the level of the

disregard to allow for a transitional

period. The earned income disregard

should incorporate a transition period

and be applicable to other forms of

public assistance. The time period

under which earned income may be

disregarded is too short since many

persons with disabilities cycle in and

out of employment. The 48 month, once

in a lifetime exclusion contained in the

rule should be modified to address the

cyclical employment pattern of many

persons with disabilities.

HUD Response. The amount of

income that is eligible for exclusion is

established by statute (see 42 U.S.C.

1437a(b)(5)). The 48 month period arose

from considerable public comment on

the comparable regulatory provision for

public housing (§ 960.255) in the rule on

Admissions and Occupancy (see 61 FR

16704). Given the considerable public

comment on the period of time in which

earned income may be disregarded,

HUD declines to modify that period at

this time.

Comment. The rule should allow

child support paid by a non-custodial

parent who earns income or is engaged

in educational activities to be excluded

from income.

HUD Response. The commenter

makes a valid point, but such a change

is outside the scope of this rulemaking

and needs to be addressed in separate

rulemaking.

Comment. While the earned income

disregard is an incentive for persons to

become employed who are not working,

the rule is a disincentive for persons

working part-time to become employed

full-time. Social Security payment

restrictions also compound this

problem. More needs to be done to

provide income disallowances to help

part-time workers become employed

full-time.

HUD Response. HUD recognizes that

the earned income disregard provided

by statute will not serve as an incentive

to all families in all situations. The

statutory earned income disregard is

limited to income increases as a result

of employment of a member of the

family who was previously unemployed

for one or more years. (See section 3(d)

of the U.S. Housing Act of 1937; 42

U.S.C. 1437a(d).) HUD, however,

recognizes that some part-time

employment should not be considered

‘‘previous employment’’ and has

defined by regulation the term

‘‘previously unemployed’’ to include a

person who has earned, in the twelve

months previous to employment no

more than would be received for 10

hours of work per week for 50 weeks at

the established minimum wage. (See

§ 5.617 of this rule, and § 960.255 of the

public housing regulations.)

Comment. In determining if a person

with a disability is previously

unemployed for the mandatory period

prior to beginning employment, the rule

should specifically include time during

which the person received public

assistance.

HUD Response. Consistent with the

statutory language, the rule includes

increases in annual incomes resulting

during or within six months after

receiving assistance, benefits or services

under any state program for temporary

assistance for needy families funded

under part A of title IV of the Social

Security Act, as determined by the

responsible entity in consultation with

the local agencies administering

temporary assistance for needy families

(TANF) and welfare-to-work programs.

(See § 5.617 of this rule, and § 960.255

of the public housing regulations.)

Comment. The earned income

disregard should contain a grandfather

clause to allow individuals that are

employed at the time of their admission

to subsidized housing to take advantage

of the offset. The earned income

disregard should not be available to

persons who are employed at the time

they enter assisted housing.

HUD Response. The statute

establishes the requirements for

eligibility of the earned income

disregard and the rule in defining

‘‘qualified family’’ and ‘‘previously

unemployed’’ reflects the statutory

eligibility requirements. (See § 5.617(a).)

Comment. The definition of

‘‘qualified family’’ in the rule is

inconsistent with other regulatory

provisions. Section 5.617(b) should be

changed to make clear that it includes

a family with any adult member with a

disability, not just the head of

household or spouse, as eligible for the

income disregard.

HUD Response. HUD believes that

there is no ambiguity here. The

definition of ‘‘qualified family’’ in

§ 5.617 makes no reference to the head

of household or spouse, but simply ‘‘a

family member.’’ Section 960.255, upon

which § 5.617 is modeled, also does not

refer to the head of household or

spouse. HUD believes both regulations

are clear and no further modification is

needed.

Comment. HUD’s income disregard

program should dovetail with the Plan

to Achieve Self-Sufficiency (PASS)

program so that persons with

disabilities continue to receive the

disregard benefit even after they are no

longer participating in PASS. The

income disregard should apply to all

families with a member participating in

the PASS program. The earned income

disregard should apply as long as any

household member, not just a family

member with a disability, is receiving

TANF benefits. The earned income

disregard should specifically allow

eligibility when any family member

receives any type of government

support, not limited to TANF. The

earned income disregard should be

applicable to those families receiving

‘‘welfare to work’’ funds.

HUD Response. The contours of the

earned income disregard are established

by statute. The statute, however,

includes as eligible for the earned

income disregard a family whose annual

income increases, during or within six

months, after receiving assistance,

benefits or services under any state

program for temporary assistance for

needy families funded under part A of

title IV of the Social Security Act, as

determined by the responsible entity in

consultation with the local agencies

administering temporary assistance for

needy families (TANF) and welfare-towork programs.

C. Specific Issue for Comment

Expansion of the earned income

disregard to all families. In the August

21, 2000 proposed rule, HUD advised

that although this rule limited the

extension of the earned income

disregard to persons with disabilities,

HUD is analyzing the extension of the

earned income disregard to all families

served by HUD and HUD specifically

solicited comment on this issue. (See 65

FR 50844, column one.)

Comment. A few commenters

submitted comments on this issue and

their comments were as follows:

The Public Housing Reform Act does

not limit the earned income disregard

strictly to persons with disabilities. If

HUD is going to extend the income

disregard to other programs, it should

6222 Federal Register / Vol. 66, No. 13 / Friday, January 19, 2001 / Rules and Regulations

not be restricted solely to persons with

disabilities.

The earned income disregard should

be extended to all families not only

families with persons with disabilities.

However, application of the earned

income disregard to all families may

diminish the availability of funds for

expanding the number of families

participating in the Section 8 or other

HUD programs. For this reason, we urge

HUD to seek the necessary

appropriations from Congress to ensure

the expansion of this disregard to all

programs.

The earned income disregard should

be extended to all households served

under HOPWA.

HUD Response. HUD appreciates the

comments on this issue, and is

continuing to study this matter.

III. Findings and Certifications

Environmental Impact

In accordance with 24 CFR 50.19(c)(1)

of HUD’s regulations, this rule does not

direct, provide for assistance or loan

and mortgage insurance for, or

otherwise govern or regulate, real

property acquisition, disposition,

leasing, rehabilitation, alteration,

demolition, or new construction, or

establish, revise, or provide for

standards for construction or

construction materials, or manufactured

housing. Therefore, this rule is

categorically excluded from the

requirements of the National

Environmental Policy Act (42 U.S.C.

4321 et seq.).

Regulatory Planning and Review

The Office of Management and Budget

has reviewed this proposed rule under

Executive Order 12866 (captioned

‘‘Regulatory Planning and Review’’) and

determined that this rule is a

‘‘significant regulatory action’’ as

defined in section 3(f) of the Order

(although not an economically

significant regulatory action under the

Order). Any changes made to this rule

as a result of that review are identified

in the docket file, which is available for

public inspection during regular

business hours (7:30 a.m. to 5:30 p.m.)

at the Office of the General Counsel,

Rules Docket Clerk, Room 10276, U.S.

Department of Housing and Urban

Development, 451 Seventh Street, SW.,

Washington, DC 20410–0500.

Regulatory Flexibility Act

The Secretary has reviewed this rule

before publication and by approving it

certifies, in accordance with the

Regulatory Flexibility Act (5 U.S.C.

605(b)), that this rule would not have a

significant economic impact on a

substantial number of small entities.

This rule is limited to expanding

existing mandatory expense deductions

and earned income disregard to the

calculation of income for persons with

disabilities in other HUD programs by

which the program participants will

benefit, and the owners of the housing

assisted by these programs will benefit

from the uniformity in the program

administration this rule presents.

Executive Order 13132, Federalism

This rule does not have federalism

implications and does not impose

substantial direct compliance costs on

State and local governments or preempt

State law within the meaning of

Executive Order 13132 (entitled

‘‘Federalism’’).

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates

Reform Act of 1995 (2 U.S.C. 1531–

1538) (UMRA) requires Federal agencies

to assess the effects of their regulatory

actions on State, local, and tribal

governments and on the private sector.

This rule does not impose, within the

meaning of the UMRA, any Federal

mandates on any State, local, or tribal

governments or on the private sector.

List of Subjects

24 CFR Part 5

Administrative practice and

procedure, Aged, Claims, Drug abuse,

Drug traffic control, Grant programs—

housing and community development,

Grant programs—Indians, Individuals

with disabilities, Loan programs—

housing and community development,

Low and moderate income housing,

Mortgage insurance, Pets, Public

housing, Rent subsidies, Reporting and

recordkeeping requirements.

24 CFR Part 92

Administrative practice and

procedure, Grant programs—housing

and community development, Grant

programs—Indians, Low and moderate

income housing, Manufactured homes,

Rent subsidies, Reporting and

recordkeeping requirements.

24 CFR Part 200

Administrative practice and

procedure, Claims, Equal employment

opportunity, Fair housing, Home

improvement, Housing standards, Lead

poisoning, Loan programs—housing and

community development, Mortgage

insurance, Organization and functions

(Government agencies), Penalties,

Reporting and recordkeeping

requirements, Social security,

Unemployment compensation, Wages.

24 CFR Part 236

Grant programs—housing and

community development, Low and

moderate income housing, Mortgage

insurance, Rent subsidies, Reporting

and recordkeeping requirements.

24 CFR Part 574

AIDS/HIV, Community facilities,

Disabled, Grant programs—health

programs, Grant programs—housing and

community development, Grant

programs—social programs, Homeless,

Housing, Low and moderate income

housing, Nonprofit organizations, Rent

subsidies, Reporting and recordkeeping

requirements, Technical assistance.

24 CFR Part 582

Homeless, Rent subsidies, Reporting

and recordkeeping requirements.

24 CFR Part 583

Homeless, Rent subsidies, Reporting

and recordkeeping requirements.

4 CFR Part 891

Aged, Civil rights, Grant programs—

housing and community development,

Individuals with disabilities, Loan

programs—housing and community

development, Low and moderate

income housing, Mental health

programs, Rent subsidies, Reporting and

recordkeeping requirements.

24 CFR Part 982

Grant programs—Housing and

community development, Housing, Rent

subsidies.

Accordingly, HUD amends parts 5, 92,

200, 236, 574, 582, 583, 891 and 982 of

title 24 of the Code of Federal

Regulations as follows:

PART 5—GENERAL HUD PROGRAM

REQUIREMENTS; WAIVERS

1. The authority citation for part 5

continues to read as follows:

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

otherwise noted.

2. The heading for subpart F is revised

to read as follows:

Subpart F—Section 8 and Public

Housing, and Other HUD Assisted

Housing Serving Persons with

Disabilities: Family Income and Family

Payment; Occupancy Requirements

for Section 8 Project-Based Assistance

3. Section 5.601 is revised to read as

follows:

§ 5.601 Purpose and applicability.

This subpart states HUD requirements

on the following subjects:

(a) Determining annual and adjusted

income of families who apply for or

Federal Register / Vol. 66, No. 13 / Friday, January 19, 2001 / Rules and Regulations 6223

receive assistance in the Section 8

(tenant-based and project-based) and

public housing programs;

(b) Determining payments by and

utility reimbursements to families

assisted in these programs;

(c) Additional occupancy

requirements that apply to the Section

8 project-based assistance programs.

These additional requirements concern:

(1) Income-eligibility and incometargeting when a Section 8 owner

admits families to a Section 8 project or

unit;

(2) Owner selection preferences; and

(3) Owner reexamination of family

income and composition;

(d) Determining adjusted income, as

provided in § 5.611(a) and (b), for

families who apply for or receive

assistance under the following

programs: HOME Investment

Partnerships Program (24 CFR part 92);

Rent Supplement Payments Program (24

CFR part 200, subpart W); Rental

Assistance Payments Program (24 CFR

part 236, subpart D); Housing

Opportunities for Persons with AIDS (24

CFR part 574); Shelter Plus Care

Program (24 CFR part 582); Supportive

Housing Program (McKinney Act

Homeless Assistance) (24 CFR part 583);

Section 202 Supportive Housing

Program for the Elderly (24 CFR 891,

subpart B); Section 202 Direct Loans for

Housing for the Elderly and Persons

with Disabilities (24 CFR part 891,

subpart E) and the Section 811

Supportive Housing for Persons with

Disabilities (24 CFR part 891, subpart

C). Unless specified in the regulations

for each of the programs listed in

paragraph (d) of this section or in

another regulatory section of this part 5,

subpart F, the regulations in part 5,

subpart F, generally are not applicable

to these programs; and

(e) Determining earned income

disregard for persons with disabilities,

as provided in § 5.617, for the following

programs: HOME Investment

Partnerships Program (24 CFR part 92);

Housing Opportunities for Persons with

AIDS (24 CFR part 574); Supportive

Housing Program (McKinney Act

Homeless Assistance) (24 CFR part 583);

and the Housing Choice Voucher

Program (24 CFR part 982).

4. In § 5.603, paragraph (a)(1) is

revised and a new definition of

‘‘responsible entity’’ is added to

paragraph (b) to read as follows:

§ 5.603 Definitions.

* * * * *

(a) Terms found elsewhere in part 5.

(1) Subpart A. The terms 1937 Act,

elderly person, public housing, public

housing agency (PHA), responsible

entity and Section 8 are defined in

§ 5.100.

* * * * *

(b) * * *

Responsible entity. For § 5.611, in

addition to the definition of

‘‘responsible entity’’ in § 5.100, and for

§ 5.617, in addition to only that part of

the definition of ‘‘responsible entity’’ in

§ 5.100 which addresses the Section 8

program covered by § 5.617 (public

housing is not covered by § 5.617),

‘‘responsible entity’’ means:

(1) For the HOME Investment

Partnerships Program, the participating

jurisdiction, as defined in 24 CFR 92.2;

(2) For the Rent Supplement

Payments Program, the owner of the

multifamily project;

(3) For the Rental Assistance

Payments Program, the owner of the

Section 236 project;

(4) For the Housing Opportunities for

Persons with AIDS (HOPWA) program,

the applicable ‘‘State’’ or ‘‘unit of

general local government’’ or ‘‘nonprofit

organization’’ as these terms are defined

in 24 CFR 574.3, that administers the

HOPWA Program;

(5) For the Shelter Plus Care Program,

the ‘‘Recipient’’ as defined in 24 CFR

582.5;

(6) For the Supportive Housing

Program, the ‘‘recipient’’ as defined in

24 CFR 583.5;

(7) For the Section 202 Supportive

Housing Program for the Elderly, the

‘‘Owner’’ as defined in 24 CFR 891.205;

(8) For the Section 202 Direct Loans

for Housing for the Elderly and Persons

with Disabilities), the ‘‘Borrower’’ as

defined in 24 CFR 891.505; and

(9) For the Section 811 Supportive

Housing Program for Persons with

Disabilities, the ‘‘owner’’ as defined in

24 CFR 891.305.

* * * * *

5. Revise § 5.611 to read as follows:

§ 5.611 Adjusted income.

Adjusted income means annual

income (as determined by the

responsible entity, defined in § 5.100

and § 5.603) of the members of the

family residing or intending to reside in

the dwelling unit, after making the

following deductions:

(a) Mandatory deductions. In

determining adjusted income, the

responsible entity must deduct the

following amounts from annual income:

(1) $480 for each dependent;

(2) $400 for any elderly family or

disabled family;

(3) The sum of the following, to the

extent the sum exceeds three percent of

annual income:

(i) Unreimbursed medical expenses of

any elderly family or disabled family;

and

(ii) Unreimbursed reasonable

attendant care and auxiliary apparatus

expenses for each member of the family

who is a person with disabilities, to the

extent necessary to enable any member

of the family (including the member

who is a person with disabilities) to be

employed. This deduction may not

exceed the earned income received by

family members who are 18 years of age

or older and who are able to work

because of such attendant care or

auxiliary apparatus; and

(4) Any reasonable child care

expenses necessary to enable a member

of the family to be employed or to

further his or her education.

(b) Additional deductions. (1) For

public housing, a PHA may adopt

additional deductions from annual

income. The PHA must establish a

written policy for such deductions.

(2) For the HUD programs listed in

§ 5.601(d), the responsible entity shall

calculate such other deductions as

required and permitted by the

applicable program regulations.

6. A new § 5.617 is added to read as

follows:

§ 5.617 Self-sufficiency incentives for

persons with disabilities—Disallowance of

increase in annual income.

(a) Applicable programs. The

disallowance of increase in annual

income provided by this section is

applicable only to the following

programs: HOME Investment

Partnerships Program (24 CFR part 92);

Housing Opportunities for Persons with

AIDS (24 CFR part 574); Supportive

Housing Program (24 CFR part 583); and

the Housing Choice Voucher Program

(24 CFR part 982).

(b) Definitions. The following

definitions apply for purposes of this

section.

Disallowance. Exclusion from annual

income.

Previously unemployed includes a

person with disabilities who has earned,

in the twelve months previous to

employment, no more than would be

received for 10 hours of work per week

for 50 weeks at the established

minimum wage.

Qualified family. A disabled family

residing in housing assisted under one

of the programs listed in paragraph (a)

of this section or receiving tenant-based

rental assistance under one of the

programs listed in paragraph (a) of this

section:

(1) Whose annual income increases as

a result of employment of a family

member who is a person with

6224 Federal Register / Vol. 66, No. 13 / Friday, January 19, 2001 / Rules and Regulations

disabilities and who was previously

unemployed for one or more years prior

to employment;

(2) Whose annual income increases as

a result of increased earnings by a

family member who is a person with

disabilities during participation in any

economic self-sufficiency or other job

training program; or

(3) Whose annual income increases,

as a result of new employment or

increased earnings of a family member

who is a person with disabilities, during

or within six months after receiving

assistance, benefits or services under

any state program for temporary

assistance for needy families funded

under Part A of Title IV of the Social

Security Act, as determined by the

responsible entity in consultation with

the local agencies administering

temporary assistance for needy families

(TANF) and Welfare-to-Work (WTW)

programs. The TANF program is not

limited to monthly income

maintenance, but also includes such

benefits and services as one-time

payments, wage subsidies and

transportation assistance—provided that

the total amount over a six-month

period is at least $500.

(c) Disallowance of increase in annual

income.—(1) Initial twelve month

exclusion. During the cumulative twelve

month period beginning on the date a

member who is a person with

disabilities of a qualified family is first

employed or the family first experiences

an increase in annual income

attributable to employment, the

responsible entity must exclude from

annual income (as defined in the

regulations governing the applicable

program listed in paragraph (a) of this

section) of a qualified family any

increase in income of the family

member who is a person with

disabilities as a result of employment

over prior income of that family

member.

(2) Second twelve month exclusion

and phase-in. During the second

cumulative twelve month period after

the date a member who is a person with

disabilities of a qualified family is first

employed or the family first experiences

an increase in annual income

attributable to employment, the

responsible entity must exclude from

annual income of a qualified family fifty

percent of any increase in income of

such family member as a result of

employment over income of that family

member prior to the beginning of such

employment.

(3) Maximum four year disallowance.

The disallowance of increased income

of an individual family member who is

a person with disabilities as provided in

paragraph (c)(1) or (c)(2) is limited to a

lifetime 48 month period. The

disallowance only applies for a

maximum of twelve months for

disallowance under paragraph (c)(1) and

a maximum of twelve months for

disallowance under paragraph (c)(2),

during the 48 month period starting

from the initial exclusion under

paragraph (c)(1) of this section.

(d) Inapplicability to admission. The

disallowance of increases in income as

a result of employment of persons with

disabilities under this section does not

apply for purposes of admission to the

program (including the determination of

income eligibility or any income

targeting that may be applicable).

PART 92—HOME INVESTMENT

PARTNERSHIPS PROGRAM

7. The authority citation for part 92

continues to read as follows:

Authority: 42 U.S.C. 3535(d) and 12701–

12839.

8. In § 92.203, a new paragraph (d)(3)

is added to read as follows:

§ 92.203 Income determinations.

* * * * *

(d) * * *

(3) The participating jurisdiction must

follow the requirements in § 5.617 when

making subsequent income

determinations of persons with

disabilities who are tenants in HOMEassisted rental housing or who receive

tenant-based rental assistance.

PART 200—INTRODUCTION TO FHA

PROGRAMS

9. The authority citation for part 200

continues to read as follows:

Authority: 12 U.S.C. 1701–1715z–18; 42

U.S.C. 3535(d).

10. Section 200.1303 is revised to read

as follows;

§ 200.1303 Annual income exclusions for

the Rent Supplement Program.

(a) The exclusions to annual income

described in 24 CFR 5.609(c) apply to

those rent supplement contracts

governed by the regulations at 24 CFR

part 215 in effect immediately before

May 1, 1996 (contained in the April 1,

1995 edition of 24 CFR, parts 200 to

219), in lieu of the annual income

exclusions described in 24 CFR

215.21(c) (contained in the April 1, 1995

edition of 24 CFR, parts 200 to 219).

(b) The mandatory deductions

described in 24 CFR 5.611(a) also apply

to the rent supplement contracts

described in paragraph (a) of this

section in lieu of the deductions

provided in the definition of ‘‘adjusted

income’’ in 24 CFR 215.1 (as contained

in the April 1, 1995 edition of 24 CFR,

parts 200 to 219).

(c) The definition of ‘‘persons with

disabilities’’ in paragraph (c) of this

section replaces the terms ‘‘disabled

person’’ and ‘‘handicapped person’’

used in the regulations in 24 CFR part

215, subpart A (as contained in the

April 1, 1995 edition of 24 CFR, parts

200 to 219). Person with disabilities, as

used in this part, has the same meaning

as provided in 24 CFR 891.305.

PART 236—MORTGAGE INSURANCE

AND INTEREST REDUCTION

PAYMENT FOR RENTAL PROJECTS

11. The authority citation for part 236

continues to read as follows:

Authority: 12 U.S.C. 1701–1715z–1; 42

U.S.C. 3535(d).

Subpart D—Rental Assistance

Payments

12. Section 236.710 is revised to read

as follows;

§ 236.710 Qualified tenant.

(a) The benefits of rental assistance

payments are available only to an

individual or a family who is renting a

dwelling unit in a project that is subject

to a contract entered into under the

requirements of this subpart or who is

occupying such a dwelling unit as a

cooperative member. To qualify for the

benefits of rental assistance payments,

the individual or family must satisfy the

definition of Qualified Tenant found in

§ 236.2 of subpart A (contained in the

April 1, 1995 edition of 24 CFR, parts

220 to 499; see the Savings clause at

§ 236.1(c)).

(b) To receive rental assistance under

this subpart, the income of the

individual or family must be

determined to be too low to permit the

individual or family to pay the

approved Gross Rent with 30 percent of

the individual’s or family’s Adjusted

Monthly Income, as defined in § 236.2

of subpart A (contained in the April 1,

1995 edition of 24 CFR, parts 220 to

499). Determination of the Adjusted

Monthly Income must include the

deductions required for adjusted income

in 24 CFR 5.611(a) in lieu of the

deductions provided in the definition of

‘‘adjusted income’’ in 24 CFR 236.2

(contained in the April 1, 1995 edition

of 24 CFR, parts 220 to 499; see the

Savings clause at § 236.1(c)).

(c) For requirements concerning the

disclosure and certification of Social

Security Numbers, see 24 CFR part 5,

subpart B. For requirements regarding

Federal Register / Vol. 66, No. 13 / Friday, January 19, 2001 / Rules and Regulations 6225

the signing and submitting of consent

forms for the obtaining of wage and

claim information from State Wage

Information Collection Agencies, see 24

CFR part 5, subpart B. For restrictions

on financial assistance to noncitizens

with ineligible immigration status, see

24 CFR part 5, subpart E.

(d) The definition of ‘‘persons with

disabilities’’ in paragraph (d) of this

section replaces the terms ‘‘disabled

person’’ and ‘‘handicapped person’’

used in the regulations in 24 CFR part

236, subpart A (contained in the April

1, 1995 edition of 24 CFR, parts 220 to

499; see the Savings clause at

§ 236.1(c)). Person with disabilities, as

used in this part, has the same meaning

as provided in 24 CFR 891.305.

PART 574—HOUSING

OPPORTUNITIES FOR PERSONS WITH

AIDS

13. The authority citation for part 574

continues to read as follows:

Authority: 42 U.S.C. 3535(d) and 12901–

12912.

14. Paragraphs (d)(1) and (d)(3) of

§ 574.310 are revised to read as follows:

§ 574.310 General standards for eligible

housing activities.

* * * * *

(d) Resident rent payment. ***

(1) 30 percent of the family’s monthly

adjusted income (adjustment factors

include the age of the individual,

medical expenses, size of family and

child care expenses and are described in

detail in 24 CFR 5.609). The calculation

of the family’s monthly adjusted income

must include the expense deductions

provided in 24 CFR 5.611(a), and for

eligible persons, the calculation of

monthly adjusted income also must

include the disallowance of earned

income as provided in 24 CFR 5.617, if

applicable;

* * * * *

(3) If the family is receiving payments

for welfare assistance from a public

agency and a part of the payments,

adjusted in accordance with the family’s

actual housing costs, is specifically

designated by the agency to meet the

family’s housing costs, the portion of

the payment that is designated for

housing costs.

* * * * *

PART 582—SHELTER PLUS CARE

15. The authority citation for part 582

continues to read as follows:

Authority: 42 U.S.C. 3535(d) and 11403–

11407b.

16. Section 582.310 is revised to read

as follows:

§ 582.310 Resident rent.

(a) Amount of rent. Each participant

must pay rent in accordance with

section 3(a)(1) of the U.S. Housing Act

of 1937 (42 U.S.C. 1437a(a)(1)), except

that in determining the rent of a person

occupying an intermediate care facility

assisted under title XIX of the Social

Security Act, the gross income of this

person is the same as if the person were

being assisted under title XVI of the

Social Security Act.

(b) Calculating income. (1) Income of

participants must be calculated in

accordance with 24 CFR 5.609 and 24

CFR 5.611(a).

(2) Recipients must examine a

participant’s income initially, and at

least annually thereafter, to determine

the amount of rent payable by the

participant. Adjustments to a

participant’s rental payment must be

made as necessary.

(3) As a condition of participation in

the program, each participant must

agree to supply the information or

documentation necessary to verify the

participant’s income. Participants must

provide the recipient information at any

time regarding changes in income or

other circumstances that may result in

changes to a participant’s rental

payment.

PART 583—SUPPORTIVE HOUSING

PROGRAM

17. The authority citation for part 583

continues to read as follows:

Authority: 42 U.S.C. 3535(d) and 11389.

18. In § 583.315, paragraph (a) is

revised to read as follows:

§ 583.315 Resident rent.

(a) Calculation of resident rent. Each

resident of supportive housing may be

required to pay as rent an amount

determined by the recipient which may

not exceed the highest of:

(1) 30 percent of the family’s monthly

adjusted income (adjustment factors

include the number of people in the

family, age of family members, medical

expenses and child care expenses). The

calculation of the family’s monthly

adjusted income must include the

expense deductions provided in 24 CFR

5.611(a), and for persons with

disabilities, the calculation of the

family’s monthly adjusted income also

must include the disallowance of earned

income as provided in 24 CFR 5.617, if

applicable;

(2) 10 percent of the family’s monthly

gross income; or

(3) If the family is receiving payments

for welfare assistance from a public

agency and a part of the payments,

adjusted in accordance with the family’s

actual housing costs, is specifically

designated by the agency to meet the

family’s housing costs, the portion of

the payment that is designated for

housing costs.

* * * * *

PART 891—SUPPORTIVE HOUSING

FOR THE ELDERLY AND PERSONS

WITH DISABILITIES

19. The authority citation for part 891

continues to read as follows:

Authority: 12 U.S.C. 1701q, 42 U.S.C.

1437f, 3535(d) and 8013.

20. In § 891.105, the definitions of

Annual Income, Total Tenant Payment,

and Utility Allowance are revised and a

new definition of Adjusted Income is

added to read as follows:

§ 891.105 Definitions.

* * * * *

Adjusted income as defined in part 5,

subpart F of subtitle A of this title.

Annual income as defined in part 5,

subpart F of subtitle A of this title. In

the case of an individual residing in an

intermediate care facility for the

developmentally disabled that is

assisted under title XIX of the Social

Security Act and this part, the annual

income of the individual shall exclude

protected personal income as provided

under that Act. For purposes of

determining the total tenant payment,

the income of such individuals shall be

imputed to be the amount that the

household would receive if assisted

under title XVI of the Social Security

Act.

* * * * *

Total tenant payment means the

monthly amount defined in, and

determined in accordance with part 5,

subpart F of subtitle A of this title.

Utility allowance is defined in part 5,

subpart F of this subtitle A of this title

and is determined or approved by HUD.

* * * * *

21. In part 891, revise the heading of

subpart E to read as follows:

Subpart E—Loans for Housing for the

Elderly and Persons with Disabilities

22. In § 891.520, the definitions of

Gross Rent, Tenant Rent, Total Tenant

Payment, Utility Allowance, and Utility

Reimbursement are revised and a new

definition of Adjusted Income is added

to read as follows:

6226 Federal Register / Vol. 66, No. 13 / Friday, January 19, 2001 / Rules and Regulations

§ 891.520 Definitions applicable to 202/8

projects.

* * * * *

Adjusted income as defined in part 5,

subpart F of subtitle A of this title.

* * * * *

Gross rent is defined in part 5, subpart

F of subtitle A of this title.

* * * * *

Tenant rent means the monthly

amount defined in, and determined in

accordance with part 5, subpart F of

subtitle A of this title.

Total tenant payment means the

monthly amount defined in, and

determined in accordance with part 5,

subpart F of subtitle A of this title.

Utility allowance is defined in part 5,

subpart F of subtitle A of this title and

is determined or approved by HUD.

Utility reimbursement is defined in

part 5, subpart F of subtitle A of this

title.

* * * * *

PART 982—SECTION 8 TENANT

BASED ASSISTANCE: HOUSING

CHOICE VOUCHER PROGRAM

23. The authority citation for part 982

continues to read as follows:

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

24. In § 982.201, paragraph (b)(3) is

revised to read as follows:

§ 982.201 Eligibility and targeting.

* * * * *

(b) * * *

(3) The annual income (gross income)

of an applicant family is used both for

determination of income-eligibility

under paragraph (b)(1) of this section

and for targeting under paragraph

(b)(2)(i) of this section. In determining

annual income of an applicant family

which includes persons with

disabilities, the determination must

include the disallowance of increase in

annual income as provided in 24 CFR

5.617, if applicable.

* * * * *

Dated: January 10, 2001.

Andrew Cuomo,

Secretary.

[FR Doc. 01–1536 Filed 1–18–01; 8:45 am]

BILLING CODE 4210–33–P