59892 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 983 

[Docket No. FR–4636–F–02] 

RIN 2577–AC25 

Project-Based Voucher Program 

AGENCY: Office of the Assistant 

Secretary for Public and Indian 

Housing, HUD. 

ACTION: Final rule. 

SUMMARY: This rule replaces the current 

project-based certificate (PBC) 

regulations with a comprehensive new 

project-based voucher program. This 

rule is based on statutory authorities 

enacted in 1998 and 2000, and follows 

a proposed rule and public comment. 

DATES: Effective date: November 14, 

2005. 

FOR FURTHER INFORMATION CONTACT: 

David Vargas, Director, Office of 

Voucher Programs, Department of 

Housing and Urban Development, 451 

Seventh Street, SW., Room 4210, 

Washington, DC 20410; telephone (202) 

708–2815 (this is not a toll-free 

number). Persons with hearing or 

speech impairments may access these 

numbers via TTY by calling the federal 

Information Relay Service at (800) 877– 

8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The project-based voucher law was 

initially enacted in 1998, as part of the 

statutory merger of the certificate and 

voucher tenant-based assistance 

programs. (See section 545 of the 

Quality Housing and Work 

Responsibility Act of 1998 (Pub L. 105– 

276) approved October 21, 1998) 

(QHWRA) amending 42 U.S.C. 

1437f(o).) Under QHWRA, a public 

housing agency (PHA), as defined under 

section 3(b)(6) of the U.S. Housing Act 

of 1937, 42 U.S.C. 1437a(b)(6), has the 

option to use a portion of its available 

tenant-based voucher funds for projectbased rental assistance. The projectbased voucher law replaced an authority 

for project-based rental assistance in the 

former Section 8 certificate program. 

In 2000, Congress substantially 

revised the project-based voucher law. 

(Section 8(o)(13) of the United States 

Housing Act of 1937, 42 U.S.C. 

1473f(o)(13), as amended by section 232 

of the Fiscal Year 2001 Departments of 

Veterans Affairs and Housing and Urban 

Development and Independent Agencies 

Appropriations Act (Pub. L. 106–377, 

114 S-tat. 1441, approved October 27, 

2000)). The statutory basis for projectbased housing is codified at 42 U.S.C. 

1437f(o)(13) under the heading, ‘‘PHA 

project-based assistance.’’ 

Significant changes made by QHWRA 

and the FY 2001 Appropriations Act 

include: 

• A PHA may project-base up to 20 

percent of the PHA’s voucher funding. 

• A PHA may provide project-based 

assistance for existing housing that does 

not need rehabilitation, as well as for 

newly constructed or rehabilitated 

housing. 

• Project-based assistance must be 

consistent with the ‘‘PHA Plan.’’ 

• Project-basing must be consistent 

with the statutory goals of 

‘‘deconcentrating poverty and 

expanding housing and economic 

opportunities.’’ 

• After one year of assistance, a 

family may move from a project-based 

voucher unit. When a slot is available, 

the family may switch to the PHA’s 

tenant-based voucher program or 

another comparable program. 

• Except for units designated for 

families that are elderly, disabled, or 

receiving supportive services, no more 

than 25 percent of units in a building 

may have project-based voucher 

assistance. 

• A PHA may enter into a housing 

assistance payments (HAP) contract for 

a term of up to 10 years. However, the 

PHA’s contractual commitment is 

subject to availability of appropriated 

funds. 

• At the end of the contract term, the 

PHA may extend the HAP contract with 

an owner for a period appropriate to 

achieve long-term affordability or to 

expand housing opportunities. 

Extensions are subject to availability of 

appropriated funds. 

• Generally, project-based voucher 

rents (rent to owner plus the allowance 

for tenant-paid utilities) may not exceed 

the lower of the reasonable rent, or 110 

percent of the applicable Fair Market 

Rent (FMR) (or any exception payment 

standard approved by the Secretary), or, 

if applicable, the tax credit rent. This 

limit applies both to the initial rent and 

rent adjustments over the term of the 

HAP contract. 

• There are special provisions for 

establishing the project-based voucher 

rent for a unit in a tax credit building 

located outside a ‘‘qualified census 

tract.’’ These provisions are found at 42 

U.S.C. 1437f(o)(13)(H). 

• Admission to project-based units is 

subject to the overall voucher ‘‘incometargeting’’ requirement. Under 42 U.S.C. 

1437f(o)(13)(J), the income targeting 

provisions of section 16(b) of the U.S. 

Housing Act of 1937 apply. Under these 

provisions, at least 75 percent of the 

families admitted to the PHA tenantbased and project-based voucher 

programs each year must be families 

with annual incomes below 30 percent 

of median income for the area. HUD’s 

regulations define such families as 

‘‘extremely low-income families’’ at 24 

CFR 5.603. 

• All units must be inspected for 

housing quality standards (HQS) 

compliance before the PHA enters into 

a HAP contract with an owner. After the 

initial inspection, the PHA is not 

required to re-inspect each unit 

annually. Instead, the PHA may inspect 

a representative sample of units at the 

annual re-inspection. 

• If a family moves out, the PHA may 

continue payments to the owner for up 

to 60 days. The PHA has discretion 

whether to provide such vacancy 

payments. 

On January 16, 2001, (66 FR 3605), 

HUD published a Federal Register 

notice with guidance on the changes 

made to the project-based voucher 

(PBV) program in the FY 2001 

Appropriations Act. By ‘‘project-based 

voucher program,’’ this regulation 

means the program statutorily codified 

at 42 U.S.C. 1437f(o)(13), which allows 

PHAs to attach to dwelling units up to 

20 percent of the funding available for 

tenant-based assistance. The HUD 

guidance notice described the law, 

identified statutory requirements that 

are effective immediately, and provided 

guidance on how to implement the law 

and existing program regulations. 

II. The Proposed Rule 

HUD published a proposed rule for 

comment on March 18, 2004 (69 FR 

12950). A summary overview of the 

proposed rule can be found at 69 FR 

12950–12953. The proposed rule text 

begins at 69 FR 12954. The comment 

period for this proposed rule closed on 

May 17, 2004. Forty-seven commenters 

submitted comments during the 

comment period on a wide variety of 

issues related to this proposed rule. The 

commenters included a variety of 

entities, including PHAs, professional 

and trade organizations, and 

individuals. In response to the 

comments, this final rule makes certain 

changes to the proposed rule as 

described in the following section of the 

preamble. In addition, a summary of the 

issues raised by the public commenters 

and HUD’s responses is found at section 

IV of this preamble. 

III. This Final Rule 

This final rule implements the 

project-based voucher program. As of its 

effective date, this rule supersedes the 

January 2001 notice. The following 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59893 

changes to the proposed rule are made 

by this final rule. Section IV of this 

preamble summarizes the public 

comments and HUD’s responses to 

them. 

Subpart A—General 

1. Section 983.1 

This final rule makes a technical 

correction in § 983.1(c), ‘‘Specific 24 

CFR part 982 provisions that do not 

apply to PBV assistance.’’ References to 

§ 982.551–982.555 are removed. It is not 

necessary to mention these sections as 

excepted from the sections that do not 

apply, because the same result is 

obtained by simply not mentioning 

them. 

2. Section 983.3 

In the PBV definitions under 

§ 983.3(b), the definition of ‘‘baseline 

units’’ is deleted. Instead, the rule uses 

the concept of ‘‘budget authority’’ to 

indicate the amount of appropriated 

funds available to a PHA for its housing 

choice voucher program. 

The definition of ‘‘HUD’’ is removed 

because it is unnecessary to restate it in 

this part. ‘‘HUD’’ is defined in 24 CFR 

5.100. 

The definition of PHA-owned unit is 

revised to clarify that ‘‘PHA owned’’

includes any interest by the PHA in the 

building in which a unit is located. This 

change is necessary because HUD’s 

experience to date has been that the 

definition has been misunderstood and 

applied differently in different 

geographical areas. Also, in the 

proposed rule, this definition crossreferenced a non-applicable portion of 

part 982. 

The definition of ‘‘proposal selection 

date’’ is revised to reference the PHA’s 

administrative plan. Section 983.51(b) 

of this rule requires that the PHA’s 

procedures for selecting proposals be 

stated in the administrative plan. 

The definition of ‘‘rent to owner’’ is 

amended. Examples of non-housing 

services that are not included in rent are 

added, and the adjective ‘‘reasonable’’ is 

removed. The rent reasonableness test is 

an overall limitation on the amount of 

rent to owner under the rule, and it is 

not necessary to include it in the 

definition. 

A number of terms defined in the 

proposed rule are removed because 

those terms are defined in 24 CFR part 

982 and are applicable to this rule under 

§ 983.3(a)(2)(ii). These terms are: Fair 

market rent (FMR); family; gross rent; 

group home; HAP contract; owner; 

participant; reasonable rent; tenant; and 

tenant rent. 

Definitions were removed and 

replaced with cross references for 

‘‘utility allowance’’ and ‘‘utility 

reimbursement.’’ Both of these terms are 

defined at 24 CFR 5.603. 

3. Section 983.5 

The final rule makes two minor 

technical corrections. Section 

983.5(a)(4) is amended to change ‘‘rental 

assistance payments’’ to ‘‘housing 

assistance payments.’’ Section 

983.5(b)(2) is amended to change 

‘‘project-basing’’ to ‘‘project-based 

vouchers’’ (a similar change is made in 

§ 983.6(c)). 

4. Section 983.6 

In paragraphs (a) and (c) of this 

section dealing with the amount of 

project-based assistance available to a 

PHA, the phrase ‘‘baseline units’’ is 

removed. Instead, the amount of projectbased funding is expressed as a 

percentage of the amount of budget 

authority allocated to the PHA. 

5. Section 983.7 

The Notice of Proposed Rulemaking 

(NPRM) proposed that voucher program 

funds could not be used to pay for 

relocation costs under the Uniform 

Relocation Act in connection with 

assistance under this part. This final 

rule allows administrative fee reserves 

to be used for this purpose provided 

that payment of relocation benefits is 

consistent with state and local law and 

HUD regulations on the use of reserves, 

including 24 CFR 982.155, and that all 

other program administrative expenses 

have been satisfied. 

6. Section 983.10 

This final rule revises § 983.10(b) to 

clarify that PHAs may renew PBC HAP 

contracts for terms of up to five years, 

to an aggregate total including the 

original term and all extensions, of 15 

years, depending on the availability of 

appropriated funds. 

Subpart B—Selection of PBV Owner 

Proposals 

7. Section 983.51 

The final rule makes several editorial 

changes to this section. In addition, 

§ 983.51(b)(2) is revised to allow PHAs 

to select owner proposals without a 

separate competition for projects that 

were competitively selected under 

another program within three years of 

the PBV proposal selection date. The 

prior competitive selection cannot have 

considered future PBV assistance, 

because such a consideration could give 

such projects an unfair advantage by 

wrongly affecting the original 

competition and thereby tainting the 

process. Also, the non-competitive 

selection of a project for low income 

housing tax credits (LIHTCs) does not 

satisfy the requirement of a prior 

competition. 

8. Section 983.52 

This section adds additional detail to 

the general description of housing types 

to which assistance may be attached 

under this program. Existing housing is 

defined to exclude housing for which 

new construction or rehabilitation has 

been started. The rule cross-references 

subpart D as applicable to newly 

constructed and rehabilitated housing. 

9. Section 983.53 

This section makes an editorial 

change to combine § 983.53(a)(2) and 

(a)(4). Substantively, § 983.53(b) is 

revised to give PHAs the responsibility 

to make an initial determination (and 

HUD approves such determination as 

the statute requires) as to whether 

assistance may be attached to a high-rise 

elevator project that may be occupied by 

families with children because there is 

no practical alternative. PHAs may 

make this initial determination for its 

entire project-based program, a portion 

of it, or case-by-case, and HUD may 

approve the determination on the same 

basis. 

10. 983.56 

The NPRM proposed that the overall 

cap of 25 percent of the total number of 

dwelling units in the building include 

units receiving any type of federal, 

project-based assistance. This final rule 

limits the units that count against the 

cap to units receiving PBV assistance 

under this program, revising paragraph 

(a)(1) accordingly and removing 

paragraph (a)(2). Additionally, 

§ 983.56(b)(2)(B) is revised. In the 

proposed rule, this exception to the 25 

percent cap on project-basing units was 

limited to families in a housing voucher 

Family Self-Sufficiency (FSS) program 

under section 23 of the 1937 Act, 42 

U.S.C. 1437u. 

This final rule revises this exemption 

to include units that are made available 

to families that are receiving any type of 

supportive services that the PHA 

specifies as qualifying services in its 

PHA administrative plan. If a family at 

the time of initial tenancy is receiving, 

and while the resident of an excepted 

unit has received, FSS supportive 

services or any other supportive services 

as defined in the PHA administrative 

plan, and successfully completes the 

FSS contract of participation or the 

supportive services requirement, the 

unit continues to count as an excepted 

unit for as long as the family resides in 

the unit. If a family in an excepted unit 

fails to complete the FSS contract of 

59894 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

participation or fails to complete 

another program of supportive services, 

such failure results in termination of 

assistance by the PHA, and is grounds 

for lease termination by the owner. The 

PHA is responsible for monitoring and 

ensuring compliance with this 

requirement. At the time of initial lease 

execution between the family and the 

owner, the family and the PHA sign a 

statement of family responsibility, and 

HUD will include this requirement in 

this statement, thus ensuring that the 

family is aware that the PHA will 

terminate assistance if the family fails to 

meet its obligation. 

If the unit at the time of such 

termination is an excepted unit outside 

the 25 percent cap, the exception 

continues to apply to the unit as long as 

the unit is made available to another 

family receiving qualifying services. A 

family is deemed to be receiving 

supportive services if it has at least one 

family member receiving at least one 

qualifying service. 

The section also is revised to clarify 

that, generally, a PHA may not require 

participation in medical or disabilityrelated services. The one exception is 

that a PHA may require current drug 

and alcohol abusers to receive drug and 

alcohol treatment. This requirement is 

in accordance with HUD’s overall policy 

to ensure that drug and alcohol abusers 

do not interfere with other residents’

health, safety, or right to reasonable 

enjoyment of the premises of assisted 

housing. See, for example, 24 CFR 5.858 

and 5.860. 

11. Section 983.57 

The NPRM proposed at § 983.57(b)(1) 

that a proposed site for project-based 

assistance be ‘‘consistent with the goal 

of deconcentrating poverty and 

expanding housing and economic 

opportunities.’’ This final rule revises 

proposed § 983.57(b)(1) and adds seven 

factors that the PHA must consider in 

determining whether a proposed PBV 

site is consistent with these goals. 

Under this final rule, the housing site 

must be consistent with the 

deconcentration goals stated in the PHA 

plan and with civil rights laws and 

regulations, including HUD’s rules on 

accessibility at 24 CFR 8.4(b)(5). These 

include whether the site is in an 

Enterprise Zone, Economic Community, 

or Renewal Community (EZ/EC/RC); 

whether the concentration of assisted 

units will be or has decreased as a result 

of public housing demolition; whether 

the census tract is undergoing 

significant revitalization; whether 

government funding has been invested 

in the area; whether new market rate 

units are being developed in the area, 

which are likely to positively impact the 

poverty rate in the area; if the poverty 

rate in the area is greater than 20 

percent, whether in the past five years 

there has been an overall decline in the 

poverty rate; and whether there are 

meaningful opportunities for 

educational and economic advancement 

in the area. Housing under the PBV 

program may be selected only if 

consistent with the goal of 

deconcentrating poverty and expanding 

housing and economic opportunities. 

12. Section 983.58 

Section 983.58(c) is revised to 

indicate that in the case of existing 

housing, the responsible entity must 

determine whether or not PBV 

assistance is categorically excluded 

from review under the National 

Environmental Policy Act and whether 

or not the assistance is subject to review 

under the laws and authorities listed in 

24 CFR 58.5. The responsible entity 

must either complete the environmental 

review requirements of 24 CFR part 58, 

or HUD must perform the review under 

part 50, or the project must be 

determined to be exempt or 

categorically excluded. Section 

983.58(d)(ii) of this final rule clarifies 

that in the case of review by the 

responsible entity under part 58, that 

entity makes the determination whether 

the project to be assisted is exempt or 

categorically excluded, and that if the 

project is exempt or categorically 

excluded, no further environmental 

review is needed. 

Subpart C—Dwelling Units 

There are no substantive changes to 

this subpart made in this final rule. 

There are some minor editorial changes. 

Subpart D—Requirements for 

Rehabilitated and Newly Constructed 

Units 

13. Section 983.155 

The NPRM proposed that the PHA 

and HUD could set requirements for the 

evidence of completion of a housing 

project under this program at 

§ 983.155(b), along with additional 

documentation that could be required 

under proposed § 983.155(b)(2). In the 

final rule, reference to HUD is removed 

so that the PHA alone sets these 

requirements. 

Subpart E—Housing Assistance 

Payments Contract 

14. Section 983.202 

This final rule removes an 

unnecessary sentence from 

§ 983.202(b)(2). This is an editorial 

change that does not alter the overall 

intent of the section. The sentence 

stated that HUD provides funds to PHAs 

to make housing assistance payments to 

owners. This sentence is redundant as 

the same idea is stated in the first two 

sentences of the paragraph. 

15. Section 983.203 

This final rule conforms § 983.203(h) 

to the change to the exception to the 25 

percent cap, making the exception 

generally applicable to families 

receiving supportive services, rather 

than only to families with a contract of 

participation under the statutory FSS 

program at 42 U.S.C. 1437u (see also 

§ 983.57, redesignated from proposed 

§ 983.56). 

16. Section 983.205 

The NPRM proposed that extensions 

of the HAP contract be in one-year 

increments. The final rule revises 

§ 983.205(a) to allow for extensions of 

up to five years. 

17. Section 983.206 

In § 983.206(b), on ‘‘amendments to 

add contract units,’’ this final rule 

removes ‘‘compliance with Davis-Bacon 

wage rates during construction’’ as an 

example of the legal requirements for a 

HAP amendment and replaces it with 

‘‘rents are reasonable.’’

18. Section 983.209 

This final rule adds ‘‘spouse’’ to the 

list of prohibited family relationships 

between the owner of a PBV unit and 

the resident(s) of this unit at 

§ 983.209(e). 

Subpart F—Occupancy 

19. Section 983.251 

This section relates to protection of 

in-place families; that is, families that 

are eligible to participate in the program 

as of the date the proposal is selected, 

and which reside in a unit that will be 

placed under a project-based assistance 

contract. This final rule finalizes similar 

protections for in-place families that 

were originally proposed, with the one 

difference that § 983.251(b)(2) is revised 

to require that such families be placed 

on the PHA’s waiting list, with an 

absolute preference for referral to 

owners and placement in units that 

become available. 

This final rule adds a new 

§ 983.251(d), entitled ‘‘Preference for 

services offered,’’ and redesignates 

proposed § 983.251(d) as § 983.251(e). 

This new section allows PHAs to grant 

a preference to families with disabilities 

that require the services offered at a 

particular project. The preference may 

be applied to those families, including 

individuals, whose disabilities 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59895 

significantly interfere with their ability 

to obtain and maintain themselves in 

housing; who, without such services, 

will not in the future be able to maintain 

themselves in housing; and for whom 

such services cannot be provided in a 

non-segregated setting. Disabled 

residents cannot be required to accept 

the particular services offered. The 

project may be advertised as being for a 

particular type of disability; however, 

the project must be open to all 

otherwise eligible persons with 

disabilities who may benefit from the 

services offered. 

Section 983.252, relating to 

information to be provided to families, 

is slightly revised for consistency and to 

make changes. Paragraph (c) is revised 

to include alternative formats for 

persons with disabilities. A new 24 CFR 

983.252(d) is added regarding 

information for families with limited 

English proficiency. 

Section 983.253 is revised in this final 

rule. Section 983.253(a)(2), stating that 

the owner ‘‘may apply its own 

admission standards,’’ is replaced with 

a statement that, like current 24 CFR 

983.203(c)(4)(i), the owner is 

responsible for having written tenant 

selection procedures. These procedures 

must be consistent with the purpose of 

improving housing opportunities for 

very low-income families and be 

reasonably related both to program 

eligibility requirements and to the 

applicant family’s ability to perform its 

obligations under the lease. 

20. Section 983.255 

The NPRM proposed in § 983.255(a) 

that a PHA has no obligation but ‘‘may 

opt to screen applicants for family 

behavior and suitability for tenancy.’’

This final rule specifies that a PHA may 

deny admission based on this screening. 

Proposed § 983.255(b)(2)(vi) gave the 

owner broad latitude to screen a 

family’s background for a variety of 

factors, including ‘‘other factors 

determined by the owner.’’ This 

paragraph is removed from the final 

rule. The owner may screen for factors 

‘‘such as’’ the factors listed in 

§ 983.255(b)(2)(i)–(v). A variety of minor 

revisions are made to proposed 

§ 983.255 on information that a PHA 

must provide. These include the 

provision to the owner of any prior 

address of the applicant (rather than any 

immediately prior address) and 

information relating to drug trafficking 

by family members. This section also 

provides that the PHA may give the 

owner certain information about an 

applicant family, and that the PHA must 

disclose to the family a description of 

the PHA’s policy regarding such 

information. The requirement that this 

disclosure must be included specifically 

in the information package given to a 

family is removed, although the 

underlying requirement to give the 

disclosure to the family is retained. 

21. Section 983.256 

This final rule strengthens the PHA’s 

ability to ensure that the lease meets the 

requirements of state and local law. 

Proposed § 983.256(b)(4) would have 

allowed the PHA to require revisions to 

the lease, if necessary. This final rule 

allows the PHA to decline to approve 

the tenancy if the lease does not meet 

the requirements of law. 

This final rule adds an item to 

§ 983.256(c), entitled ‘‘Required 

information.’’ New § 983.256(c)(6) 

requires the lease to specify ‘‘the 

amount of any charges for food, 

furniture, or supportive services.’’

The final rule revises § 983.256(f). The 

NPRM had proposed that, under certain 

conditions, leases could be for a term of 

less than one year. This final rule 

eliminates that option. 

22. Section 983.257 

The final rule refines the section on 

owner termination of tenancy and 

eviction by specifying in a new 

§ 983.257(b) that the owner shall not 

terminate a lease under the PBV 

program without good cause as meant in 

24 CFR 982.310 (except for 24 CFR 

982.310(d)(1)(iii) and (iv), and under the 

eviction provisions of 24 CFR 5.858–

5.861). Otherwise, an owner may renew 

or non-renew a lease upon expiration, 

but if the owner does not renew without 

good cause, the family must be provided 

tenant-based assistance and the unit 

must be removed from the coverage of 

the HAP contract. A new § 983.257(c) is 

added to make the section consistent 

with § 983.56 and clarify that, if a family 

is living in a unit excepted from the 25 

percent per-building cap on projectbasing because of the family’s 

participation in an FSS or other 

supportive services program, failure of 

the family without good cause to 

complete its FSS or supportive services 

program is grounds for lease termination 

by the owner. 

23. Section 983.258 

This section provides that the owner 

may collect a security deposit from the 

tenant, and that the deposit may be used 

when the tenant moves out to reimburse 

the owner for any unpaid rent, damages 

to the unit, or other money that the 

tenant owes to the owner. This final rule 

makes only minor editorial revisions. 

24. Section 983.260 

This final rule makes a minor 

technical change to this section to make 

the second sentence of paragraph (a) 

into a new stand-alone paragraph at 

§ 983.260(d). This change is made 

because this sentence is actually a 

separate consideration from the 

remainder of paragraph (a). Paragraph 

(a) generally concerns termination of the 

lease at the family’s option after one 

year of occupancy; the new § 983.260(d) 

concerns termination before one year of 

occupancy, which is treated differently. 

25. Section 983.261 

This section governs referrals to units 

that are excepted from the 25 percent 

cap on project basing. Under 

§ 983.56(b), units in a multifamily 

building that are occupied by the 

elderly, families with disabilities, or 

families receiving supportive services 

are exempt from the overall 25 percent 

cap. This final rule revises § 983.261 in 

accordance with § 983.56 to expand the 

exemption from families with a contract 

of participation in the statutory FSS 

program under 42 U.S.C. 1437u to units 

made available to all families receiving 

supportive services as stated in 

§ 983.57(b)(2)(ii). A family is ‘‘receiving 

supportive services’’ if it has at least one 

member receiving at least one such 

service. If a family successfully 

completes its supportive services 

program, the unit remains an excepted 

unit as long as the family resides in the 

unit. If a family fails to complete its FSS 

or other supportive services 

participation, or no longer has a member 

qualifying as elderly or disabled, the 

family must vacate the unit in a 

reasonable time established by the PHA 

and the PHA shall cease paying housing 

assistance on behalf of the nonqualifying family. In the case of a 

partially assisted building, the owner 

has the choice of substituting a different 

unit in accordance with 983.206(a) or 

terminating the lease. The assistance for 

a family that is not in compliance with 

its obligations, such as non-completion 

of its FSS program without good cause, 

shall be terminated by the PHA. 

Subpart G—Rent to Owner 

26. Section 983.301 

The proposed rule would have 

provided for annual redeterminations of 

the rent to owner (at § 983.301(a)(3)), 

and for the amount of rent to owner 

(except for certain tax credit units) to be 

up to the lowest of the payment 

standard amount for the bedroom size 

minus any utility allowance, the 

reasonable rent, or the rent requested by 

the owner. This final rule significantly 

59896 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

revises these provisions in response to 

public comments, which are described 

below at section IV of this preamble. 

Under this final rule, the rent to owner 

is established at the beginning of the 

HAP contract term. The rent to owner, 

for non-LIHTC units, may not exceed 

the lowest of an amount determined by 

the PHA, not to exceed 110 percent of 

the applicable FMR or HUD-approved 

exception payment standard for the unit 

size less any utility allowance; the 

reasonable rent; or the rent requested by 

the owner. The tax credit rent is similar, 

except that the first of the three amounts 

is the tax credit rent minus any utility 

allowance. The tax-credit rent provision 

applies to certain tax credit projects not 

located in a qualified census tract. A 

‘‘qualified census tract’’ is defined as 

any census tract or equivalent area 

defined by the Census Bureau in which: 

(1) At least 50 percent of households 

have an income of less than 60 percent 

of Area Median Gross Income; or (2) the 

poverty rate is at least 25 percent and 

where the census tract is designated as 

a qualified census tract by HUD. The 

rent must be redetermined at the 

owner’s request or whenever there is a 

five percent or greater decrease in the 

published FMRs. The owner must 

request any rent increase at the annual 

anniversary of the HAP by written 

notice to the PHA. 

Under final § 983.301(f), when 

determining the initial rent to the 

owner, the most recently published fair 

market rent (FMR) and utility allowance 

schedule applies, rather than, as 

proposed, the payment standard amount 

on the PHA’s payment standard 

schedule. 

27. Sections 983.302 and 983.303 

These sections apply to 

redeterminations of the rent to owner. 

This final rule revises these sections so 

that, consistent with § 983.301, the time 

for redetermination is upon the owner’s 

request and when there is a five percent 

or greater decrease in the published 

FMR. 

28. Section 983.304 

This section addresses limitations on 

the rent to owner for units that have 

subsidies under programs in addition to 

the PBV program. Proposed 

§ 983.304(b)(2) would have provided 

that the rent to owner could not exceed 

the amounts allowed in these programs, 

enumerated under proposed 

§ 983.304(b)(1). This final rule adds tax 

credit projects to this list. In addition, 

in order to provide paragraph 

designations for all sections, the 

proposed undesignated introductory 

section is redesignated § 983.304(a) in 

this final rule, and the following 

sections are redesignated (b)–(f), 

accordingly. 

Subpart H—Payment to Owner 

29. Section 983.354 

This section provides that meals and 

supportive services, generally, may not 

be charged as part of the rent to the 

owner, and that an owner may not use 

non-payment of such charges as grounds 

for termination of tenancy. The 

exception to this general rule is that in 

an assisted living development, owners 

may charge families or their members 

for meals or supportive services. In the 

case of such a development, the final 

rule adds a proviso that non-payment of 

such charges may be grounds for the 

owner to terminate the lease. The HAP 

payment may not be used for the costs 

of meals and supportive services. 

IV. Responses to Public Comments 

Comments Addressed to the Rule 

Generally 

Comment: One commenter questioned 

why the provisions applicable to the 

project-based voucher program do not 

also apply to the former PBC program. 

Another commenter stated that HUD 

should combine the certificate and 

voucher programs and stop having 

multiple versions of one program in 

operation. 

HUD Response: The Department is 

required by its regulations on 

rulemaking at 24 CFR 10.2 to publish 

regulations to implement, interpret, and 

prescribe law and policy for future 

effect. Thus, these regulations cannot be 

made retroactive to apply to the former 

program. 

Comment: A commenter stated that 

PHAs are currently being funded from 

quarter to quarter based on actual 

utilization, and that, as a result, would 

likely have to hold or set aside some of 

their tenant-based funding in order to 

facilitate project-based voucher 

development proposals. ‘‘The proposed 

rule should more specifically address 

the allocation of funding for the PBV 

program as it relates to this issue.’’

HUD Response: HUD does not agree 

that this rule should address funding 

issues as it relates to the PBV program. 

In Calendar Year 2005, PHAs were 

provided with a specified amount of 

funding that was determined at the 

beginning of the calendar year and was 

not subject to quarterly or other 

utilization changes. PHAs are charged 

with managing their resources within 

program requirements to ensure that 

they do not incur costs beyond their 

annual funding allocation. If a PHA 

elects to project-base any of its voucher 

units, it must manage its resources to 

ensure that the agreement to enter into 

a HAP contract agreement and HAP 

contract commitments will be honored. 

Comment: One commenter stated that 

PHAs should be able to give preferences 

to ‘‘CHDOs, HOME, HOPE VI, LIHTC 

properties’’ and similar projects, and to 

housing providers with a history of 

‘‘responsible practices and proper 

reporting.’’

HUD Response: CHDOs most likely 

refers to community housing 

development organizations that are 

eligible to participate in certain HUD 

Community Development Block Grant 

programs. The requirements for CHDOs 

are stated at 570.204(c). HOME probably 

refers to the HOME Investment 

Partnerships Act, 42 U.S.C. 12701 note. 

HOPE VI is the popular name for the 

program for revitalization of public 

housing now codified at 42 U.S.C. 

1437v. 

The final rule provides that in cases 

where a federal, state, or local housing 

assistance, community development, or 

supportive services program that 

requires a competitive selection of 

proposals has already competitively 

selected proposals, a second 

competition for PBV is not required. 

The original competition, however, 

cannot have considered the possibility 

of future PBV assistance, but the 

selection must have been based on the 

project’s merits at the time of the 

competition. However, the PHA, if it is 

in accordance with its administrative 

plan, can give a preference to CHDOs, 

HOME, and LIHTC projects. 

Comment: A commenter stated ‘‘we 

remain concerned about the need for 

HUD’s continued involvement in a 

given PHA’s administration of the PBV 

program.’’ This commenter stated that 

PHAs are independent governmental 

agencies and can police themselves with 

respect to the proper and needed use of 

public funds. This commenter cited 

proposed § 983.51 (referenced by the 

commenter as ‘‘dealing with PHAowned units’’) and § 983.55 (subsidy 

layering) as particular concerns. 

Because many PHAs are heavily 

involved in real estate development and 

subsidy layering reviews—‘‘perhaps 

even better than a HUD staff person who 

is not intimate with the local real estate 

development market’’—PHAs should be 

allowed to make determinations in both 

those areas. 

HUD Response: Congress specifically 

set in place safeguards against possible 

program abuse regarding PHA-owned 

units by requiring HUD to ensure that 

Housing Quality Standards (HQS) 

inspections and rent determinations are 

conducted by outside entities. To 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59897 

protect against possible PHA bias or 

abuse, and to ensure fairness, HUD has 

promulgated program regulations to 

carry out Congress’ intent. The Office of 

Public and Indian Housing will be 

issuing a separate regulation to delegate 

subsidy layering reviews (see response 

to comments on § 983.55). 

Comment: Five commenters 

commented on the relationship between 

24 CFR part 982 and part 983. Four 

commenters stated that HUD should add 

a general provision that in the event of 

a conflict between parts 982 and 983, 

part 983 shall prevail over any 

inconsistent provisions of part 982 with 

respect to the PBV program. Another 

commenter stated that in the event that 

HUD has missed something in part 982 

that is not applicable to the PBV 

program, there should be leeway for 

HUD to determine, short of a regulatory 

waiver, that the provision is 

inapplicable to the PBV program. 

HUD Response: 24 CFR 982 is the 

regulation for the tenant-based voucher 

program. The rule identifies the 

provisions in 24 CFR 982 that do not 

apply to PBV assistance under part 983. 

HUD believes it has accurately crossreferenced part 982 in the 983 

regulation, but if HUD determines that 

any errors have been made, HUD will 

publish corrections in the Federal 

Register. 

Comment: A commenter stated that 

there is a disincentive to participation 

in the PBV program because PHAs want 

to designate a portion of their Section 8 

allocation to leverage investment or 

LIHTCs. However, while these units are 

undergoing construction or substantial 

rehabilitation, they are counted 

adversely in the PHA’s lease-up rate 

calculation. This commenter 

recommends a grace period for such 

PHAs during construction or substantial 

rehabilitation. This grace period should 

be provided as long as there is a welldefined construction plan in place with 

specific time frames that are 

documented and submitted to HUD. 

HUD Response: During construction 

or substantial rehabilitation, units that 

will have PBV assistance attached 

pursuant to an agreement do not require 

the setting aside of vouchers and budget 

authority committed for those units. 

Rather such set asides are required only 

after completion of the project. 

However, the PHA must ensure that 

budget authority is available for those 

units upon execution of the HAP 

contract. If a PHA is leased up to its 

budget authority, it must ensure that 

through the turnover of vouchers it will 

have the necessary units and dollars to 

meet its contractual commitments when 

the project is ready to be occupied. 

PHAs are responsible for monitoring 

their leasing and turnover to ensure that 

they do not over-lease units or expend 

more budget authority than is available. 

Comment: A commenter also stated 

that ‘‘Agencies should be able to lease 

the necessary number of vouchers 

through monthly turnover by the time 

they are needed for occupancy under 

the PBV program. To allow for this, 

HUD should not consider budget 

authority committed to PBV assistance 

for this reason to be unutilized.’’ This 

change should also be reflected in 

HUD’s Section Eight management 

assessment (SEMAP). HUD should 

change its procedures for determining 

agencies’ lease-up rates and 

corresponding budget authority. 

Similarly, another commenter stated 

that, should a PHA set aside vouchers 

to project-base, the vouchers set-aside 

should not count against SEMAP or any 

other indicator. PHAs should be able to 

set-aside vouchers based on projections 

of the expected availability of vouchers 

due to turnover, attrition, or expected 

allocation of additional vouchers. 

HUD Response: See response to 

comment above. 

Comment: One commenter stated that 

HUD should increase the total number 

of vouchers available. ‘‘This is the best 

and most successful housing subsidy 

program in the country.’’

HUD Response: The appropriations 

for the voucher program, as well as the 

percentage of voucher funding that may 

be project-based, are both set by 

Congress. 

Comment: A commenter stated that 

‘‘The rule proposed is still inconsistent 

with the congressional intent to simplify 

the process for project-basing vouchers 

* * *. Regrettably, the proposed rule 

continues to make the program too 

cumbersome to be appealing to many 

housing agencies.’’

HUD Response: HUD disagrees that 

the proposed rule makes the program 

too cumbersome. The proposed rule has 

simplified and deregulated many 

aspects of the PBV program, such as 

competition and HQS inspections. The 

rule also eliminates any HUD approval 

actions during the development process 

resulting in a decrease in the necessity 

for HUD-approved exceptions and 

regulatory waivers. The final rule also 

simplifies the selection of proposals 

even further than originally proposed. 

Comment: A commenter stated 

generally that transitional housing is 

important because it assists the 

homeless with skills necessary to 

become good tenants to whom landlords 

would be willing to rent. Accordingly, 

the PBV rule should be modified so that 

it will work with transitional housing 

serving homeless persons and persons 

with special needs. 

HUD Response: The final rule 

provides that transitional housing is 

ineligible housing under the projectbased voucher program. The statute 

governing the project-based voucher 

program specifically provides that lowincome families assisted under the 

program may move after the family has 

occupied a unit for 12 months. If a 

transitional housing agreement requires 

a family to move prior to 12 months, the 

law governing the project-based voucher 

program does not give families the right 

to a tenant-based voucher prior to 12 

months. Thus, in the situation 

described, a family would not be 

entitled to tenant-based assistance 

under the law governing the projectbased voucher program. 

Also, if a transitional housing 

agreement requires a family to move 

some time after the initial 12 months, a 

PHA would be required under the law 

to provide such a family with tenantbased assistance. If the project-based 

voucher contract with the owner 

extends beyond the transitional housing 

agreement, the PHA would also be 

required to refill the units vacated by 

the previous transitional housing 

participant. Given the scarcity of 

funding, such a result is undesirable. 

Additionally, if a family must leave after 

the initial 12-month lease in accordance 

with the transitional housing 

requirements, the PHA may not have a 

voucher or other form of assistance 

readily available. Since the participant 

would be required to move, the 

participant would have to do so without 

the benefit of subsidy since the PBV law 

only requires PHAs, after the initial 12 

months, to issue a voucher or other form 

of assistance if available. The 

Department believes that transitional 

housing is inconsistent with the projectbased voucher program. Thus, the final 

rule makes transitional housing an 

ineligible housing type under the 

project-based voucher program. 

Subpart A (Proposed §§ 983.1–983.10) 

Comment: In reference to proposed 24 

CFR 983.2(c)(6)(iv), one commenter 

stated that the proposed rule incorrectly 

identifies 24 CFR §§ 982.551–.555 as 

being under part 982, subpart K. These 

sections are codified under subpart L. 

HUD Response: HUD agrees and this 

final rule includes this technical 

correction. 

Comment: A number of commenters 

questioned the definition of ‘‘existing 

housing’’ in § 983.3, seeking specificity 

about dollar amounts of repair that 

would distinguish substantial 

rehabilitation from existing housing. 

59898 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

Five commenters suggested that there be 

a ‘‘safe harbor’’ dollar amount of repairs 

that constitute existing housing. One of 

these commenters asked, if existing 

housing requires less than $1,000 of 

rehabilitation, and ‘‘rehabilitation’’ is 

any unit that requires $3,000 or more, 

how are units requiring $1,000–$3,000 

worth of work categorized? 

HUD Response: In this final rule, 

HUD has retained the language 

contained in the proposed rule. HUD 

has decided not to accept the suggestion 

of specifying a dollar amount since costs 

attributable to repairs and rehabilitation 

are market-driven and may vary widely 

depending upon individual market 

areas. Such decisions are properly left 

up to the PHAs. 

Comment: Commenters objected to 

the definition of ‘‘comparable rental 

assistance’’ in proposed § 983.3, stating 

that the definition should define 

comparable rental assistance as gross 

rent that costs the family no more that 

30 percent of their adjusted income, 

rather than 40 percent. One of these 

commenters stated that setting the 

standard at 40 percent violates the 

statute, and argued that the standard 

should be 30 percent, subject to a 

limited exception if the gross rent is 

greater than the PHA’s payment 

standard. 

HUD Response: The final rule defines 

comparable rental assistance as ‘‘a 

subsidy or other means to enable a 

family to obtain decent housing in the 

PHA jurisdiction renting at a gross rent 

that requires the tenant to pay no more 

than 40 percent of its adjusted monthly 

gross income for rent.’’ Section 8(o)(3) of 

the United States Housing Act of 1937 

governing the voucher program provides 

that at any time a family initially 

receives voucher assistance, the family 

rent contribution is limited to 40 

percent of adjusted income. The 

definition of comparable rental 

assistance contained within the final 

rule does not violate the statute. 

Comment: A commenter stated that 

the lobbying restriction in proposed 

§ 983.4 is obsolete. 

HUD Response: HUD reviewed the 

lobbying restrictions in § 983.4 and 

determined that they are not obsolete 

and therefore continue to apply to the 

project-based voucher program. 

Comment: A commenter stated that 

§ 983.5, which describes the projectbased program, should specify when 

PBVs count toward the PHA’s 

utilization rate. This commenter states 

that ‘‘the Agreement to enter into a 

Housing Assistance Payment (HAP) 

contract is the appropriate trigger for 

SEMAP purposes.’’

HUD Response: HUD has considered 

this comment. Currently SEMAP does 

not exclude units under an Agreement 

from total units for SEMAP scoring 

purposes under the leasing indicator. 

Since units and dollars that are 

committed under an agreement do not 

have to be set aside during the 

development or rehabilitation phase of 

a project, these units will not be 

excluded from the SEMAP leasing 

indicator. PHAs must monitor their 

leasing and turnover to ensure that they 

do not over-lease units or expend more 

budget authority than available. If a 

PHA is fully leased, it may have to 

withhold issuance of vouchers for a 

number of months based on attrition 

rates to ensure that units and dollars 

will be available at the time the HAP 

contract is executed. 

Comment: A commenter stated that 

§ 983.5(b), which references Section 8 

administrative fees, should be revised. 

This commenter stated that PHAs that 

own PBV developments are restricted to 

a significantly lower administrative fee 

than private owners. However, PHAs 

must also contract for services at 

increasing administrative costs. This 

creates a disincentive to participation. 

Therefore, PHAs should be entitled to 

the same administrative fee as private 

owners. 

HUD Response: HUD has considered 

this comment, but is not adopting it for 

the following reasons. The United States 

Housing Act of 1937 requires that a unit 

of state or local government or another 

entity approved by HUD perform certain 

functions for PHA-owned units. The act 

also authorizes HUD to decrease the 

administrative fees for PHA-owned 

units. In the case of PHA-owned units, 

some activities for which an owner is 

compensated from rental income under 

other HUD project-based programs 

result in a reduced administrative fee. 

For example, income-certification and 

re-examination are tasks for which 

PHAs are reimbursed as an owner 

through rental income under the PBV 

program. 

Comment: Two commenters 

expressed concerns about the 20 percent 

cap on project basing. One of these 

commenters stated that the cap is too 

high and would force consumers ‘‘to use 

their vouchers in projects, at least for a 

period of time,’’ and will not have the 

option of using them with private 

landlords. The commenter stated that 

this does nothing to increase the amount 

of affordable, accessible housing and 

that the proposed regulation promotes 

segregation, loss of affordable units, and 

subjects tenants to impossible 

compliance regulations like workfare. 

This commenter recommends full 

funding of the Section 8 program in its 

present form, as well as additional 

changes in regulations to allow those 

with very low incomes to qualify for 

housing under LIHTC programs, such as 

the 80/20 program, HPD programs, and 

the Mitchell-Llama programs. 

Another of these commenters stated 

that the 20 percent cap is a ‘‘significant 

restriction’’ on a PHA’s ability to 

project-base vouchers and that HUD 

should pursue statutory changes to 

make the same flexibility that exists in 

the Moving to Work (MTW) program 

available to all PHAs. 

HUD Response: The commenter refers 

to various assisted housing programs. 

The 80/20 program is a form of bondfinanced tax credit that derives its name 

from the requirement that no more than 

80 percent of the units in an LIHTC 

project financed with tax-exempt 

private activity bonds are to be occupied 

by individuals or families at market-rate 

rents, while the other 20 percent must 

be rented to low-income (no more than 

50 percent of median) households. HPD 

is the New York City Department of 

Housing Preservation and Development. 

Mitchell-Lama is a New York State 

program of moderate- and middleincome rental and limited-equity 

cooperative developments. MTW is a 

HUD demonstration program codified 

under 42 U.S.C. 1437 note, which 

allows PHAs to design and test ways to 

promote self-sufficiency among assisted 

families, achieve programmatic 

efficiency and reduce costs, and 

increase housing choice for low-income 

households. 

HUD must work under the current 

statutory framework that restricts 

project-based assistance to 20 percent of 

a PHA’s budget authority under the 

voucher program. 

Comment: Four commenters stated 

that proposed § 983.7(a)(2), which 

provides that relocation costs may not 

be paid out of voucher program funds, 

should not prohibit PHAs from using 

funds in the Section 8 administrative fee 

reserve account to pay relocation costs. 

HUD Response: HUD has considered 

this comment and decided to adopt it. 

Provided payment of relocation benefits 

is consistent with state and local law, 

and provided the use of the 

administrative fee reserve is consistent 

with 24 CFR 982.155, PHAs may use 

their administrative fee reserves to pay 

for relocation assistance after all other 

program administrative expenses are 

satisfied. Program participants should 

also be mindful that HUD and Congress 

have from time to time restricted the use 

of administrative fee reserves. 

Comment: Proposed §§ 983.9 and 

983.53(a) prohibit voucher funding to be 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59899 

used with cooperative housing and 

shared housing. Two commenters stated 

that they object to this exclusion of 

cooperative housing. These commenters 

stated that this ‘‘is an arbitrary 

exclusion, not required by statute, and 

represents a change from the Initial 

Guidance.’’ These commenters also state 

that the exclusion is against HUD’s 

‘‘regulations and policies for other 

project-based Section 8 programs, as 

well as tenant-based Section 8,’’ and 

that there are numerous examples of 

cooperative projects that have been good 

housing providers. One of these 

commenters stated that ‘‘denying 

project-based Section 8 to* * * co-ops 

would make the projects unfeasible and 

be unfair to the low-income seniors who 

benefit from the creation of this 

affordable housing.’’ This commenter 

also states that cooperatives have been 

proven to have lower operating costs 

than comparable rentals, and, therefore, 

it is in the government and public 

interest to encourage Section 8 in 

cooperatives. 

Another commenter similarly 

objected to the exclusion of shared 

housing. The commenter stated that 

‘‘[shared housing] can be an extremely 

effective supportive transitional housing 

model that is being extensively used 

around the country.’’

HUD Response: HUD considered 

these comments, but did not adopt them 

for the following reasons. Cooperative 

housing is not a permitted housing type 

under the project-based voucher 

program. Cooperative housing is 

considered homeownership and Section 

8(y) of the United States Housing Act, 

which governs homeownership under 

the voucher program, limits the form of 

subsidy PHAs may use to provide 

homeownership assistance to tenantbased assistance. The comment 

regarding shared housing is also rejected 

since there are provisions to allow the 

use of group homes and congregate 

housing that are similar to shared 

housing. Additionally, to permit shared 

housing under the PBV program would 

require PHAs to refer families to an 

owner to occupy a unit with families 

that are not acquainted with each other, 

which may not be a desirable housing 

situation. This would result in many 

families refusing to share housing and 

as a result have families living in 

oversized units in violation of program 

guidelines. 

Subpart B (Proposed §§ 983.51–983.59) 

Comment: A number of commenters 

submitted comments regarding 

proposed § 983.51, which requires 

competitive selection of proposals for 

project-basing with an exception for 

proposals already selected pursuant to a 

competitive government housing 

assistance, supportive services, or 

community development program. 

More than ten commenters supported 

the exception to competitive selection 

for units that have been previously 

competed. Four commenters stated that 

this proposal would save time and 

money and avoid needless duplication. 

Some commenters opposed requiring 

any competition. One commenter stated 

that the competitive selection 

procedure, including the requirement 

for prior competitive selection, is too 

rigid. This commenter stated that these 

Reform Act requirements do not apply 

to PHAs. Since there is no statutory 

requirement for a competitive process, 

PHAs should be given discretion in how 

they award vouchers. Another 

commenter stated that selection should 

be allowed based on a request from a 

developer or owner; based on a HOPE 

VI site or similar endeavor having PHA 

participation; or public notice inviting 

competitive proposals. Another 

commenter stated that proposals subject 

to previous competitive selection 

should be exempt from additional 

environmental, site selection, and 

subsidy layering reviews; however, the 

rule should allow PHAs to use PBVs 

without any competition because 

‘‘agencies that need to lay out annual 

budgets and support their annual 

program operations would be placed in 

a compromising position. Agencies 

could thus face financial disincentives 

and opt out of using this important 

program.’’ Another commenter stated 

that there should be no competition, but 

PHAs should develop and provide a 

clear set of guidelines to applicants. 

This commenter stated that the statute 

does not require competitive selection, 

but does require that HAP contracts be 

consistent with the agency’s plan. This 

commenter stated that competitive 

selection is neither practical nor 

necessary, given the limited number of 

vouchers that will be available. Most 

affordable housing developments have 

funding from a variety of sources, and 

adding yet another competitive funding 

cycle complicates the process of 

financing affordable housing units, and 

adds unnecessary time and costs. 

Some commenters criticized specific 

aspects of the competition provisions. 

Two commenters, while agreeing 

generally with the proposal on 

competitive selection, stated that the 

rule should make clear whether the 

PHA must include in its administrative 

plan its intent to make PBVs available 

based on a prior competition. Another 

commenter supported the prior 

competition exemption and also stated 

that the rule should give PHAs some 

discretion in establishing the 

competitive criteria whereby they will 

select units for project basing. A 

commenter stated that a news release 

and web publication should be 

sufficient to satisfy the advertising 

requirement in proposed § 983.51(c). A 

commenter, while agreeing with 

competitive selection generally, stated 

that the prior competition exception 

would appear to allow subsidy layering. 

HUD Response: No response is 

necessary to the supportive comments. 

As to other comments, HUD believes 

that many commenters misunderstand 

the nature of the competitive selection 

of proposals. The purpose of the notice 

is to provide interested parties a fair 

opportunity to participate in the 

program. The final rule clarifies that 

PHAs must publish a general notice in 

accordance with 983.51(c) to inform the 

public that the PHA is soliciting 

proposals for the PBV program. The 

notice must indicate that the PHA’s 

selection policy is available for viewing 

at the PHA’s office. In addition, the 

PHA’s selection criteria must be stated 

in the PHA’s administrative plan. HUD 

will clarify that PHAs may target 

particular units in desirable 

neighborhoods or key ‘‘turning point’’

buildings in established revitalizing 

areas. One commenter suggested 

allowing PHAs to substitute 

environmental, site selection, and 

subsidy layering reviews conducted 

under previous competitions for the 

project-based voucher program. In 

response to the suggestion, HUD 

believes it would be impractical and 

infeasible for HUD to monitor 

requirements under individual state and 

local programs to assure consistency 

with federal statutory and regulatory 

requirements. HUD, therefore, is not 

adopting that comment. Site and 

neighborhood, site selection standards, 

environmental reviews, and subsidy 

layering requirements continue to 

apply. 

Comment: Proposed § 983.51(e) 

prohibits PHAs from using PBV 

assistance with public housing units. A 

number of commenters suggested that 

this language was overbroad and should 

be clarified. Two commenters stated 

that the language ‘‘could be read too 

broadly to include non-public housing 

units in a HOPE VI or public housing 

mixed finance project that contains both 

public housing units and non-public 

housing units.’’ Three commenters 

stated that the definition of ‘‘public 

housing’’ in the U.S. Housing Act 

includes units receiving both capital 

and operating assistance. Therefore, 

under this rule, PHAs could not use 

59900 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

PBVs in HOPE VI developments. The 

commenters object to this result. One 

commenter stated that using PBV 

assistance in conjunction with HOPE VI 

and replacement housing factor (RHF) 

funds is especially important in areas 

where there has been a significant 

amount of public housing demolition. 

Therefore, more replacement housing 

could be produced. In many markets, 

PBVs alone do not provide enough of an 

incentive to develop affordable housing. 

This commenter and another 

commenter stated that pairing PBV with 

capital funds would provide enough 

operating and capital subsidy to develop 

long-term affordable housing, and 

suggests that the first sentence of 

proposed § 983.51(e) be revised to read: 

‘‘Under no circumstances may PBV 

assistance be used with a unit receiving 

public housing operating funds.’’

Another commenter agreed and stated 

that ‘‘Congress made substantial 

changes to the PBV program in Section 

232 of the 2001 HUD Appropriations 

Act, with the intent of making the 

program more flexible and workable. 

One of the important changes Congress 

made was to repeal a former statutory 

prohibition of project-based assistance 

for units to be constructed or 

rehabilitated with funds under the 

United States Housing Act of 1937.’’

Proposed § 983.51(e) could be read to 

reinstate the bar on providing PBV 

assistance for units to be constructed or 

rehabilitated with U.S. Housing Act 

funds notwithstanding Congress’ repeal 

of that bar. 

HUD Response: The Department 

believes that Congress’ adoption of 

disparate or parallel statutory provisions 

for the public housing and voucher 

programs affirms that public housing 

and voucher programs are intended to 

operate as separate, and mutually 

exclusive, subsidy systems under the 

U.S. Housing Act of 1937. It is not 

permissible by law to combine voucher 

funds with public housing funds. For 

HOPE VI funds that predate FY 2000, it 

is generally permissible to combine 

these funds in accordance with the 

terms of the relevant HOPE VI 

appropriations act if the HOPE VI funds 

were not used to develop or operate 

public housing units. It is not 

permissible in any case to combine 

HOPE VI funds appropriated on and 

after FY 2000 (Section 24 funds), 

because Section 24 funds are public 

housing funds. If Capital Funds or 

Section 24 funds are used in the 

development of affordable housing, proration must occur. For example, if a 

project receives $2,000 in non-public 

housing HOPE VI funds and $1,000 in 

Capital Funds and there are 60 units in 

the development, 20 of the units (onethird) are being funded with capital 

funds and, therefore, cannot be 

combined with project-based vouchers. 

Provided that the remaining 40 units 

(two-thirds) are not receiving any Public 

Housing funds, the units may be 

assisted under the PBV program. 

Comment: Proposed § 983.53 provides 

that certain types of housing are 

ineligible for PBV assistance. A number 

of commenters commented on this 

section. One commenter stated that 

there may be situations where location 

of a facility, especially supportive 

housing, on the grounds of a medical or 

mental institution is appropriate (see 

proposed § 983.53(a)(2)). If the intent of 

the rule is to prevent subsidizing of 

hospital rooms, that can be 

accomplished another way. 

HUD Response: HUD has considered 

this comment and is not adopting it for 

the following reasons. To allow projectbased assistance units on the grounds of 

medical or mental institutions would be 

inappropriate since the residency 

requirements for such housing facilities 

are usually limited to patients of the 

medical or mental institution. Housing 

for medical and mental institutions is 

generally funded privately or by local or 

state governments. The PBV program is 

not intended to be used to substitute for 

financing of housing that already exists 

for individuals who are residents of 

mental or medical facilities with federal 

funds appropriated to assist low-income 

families. 

Comment: Five commenters stated 

that the PHA, not HUD, should 

determine when there is no practical 

alternative for a high-rise elevator 

project that may be occupied by families 

with children (see proposed 

§ 983.53(b)). This could be particularly 

important where a PHA has a better 

understanding of the preservation needs 

of the community. Another commenter 

stated that the term ‘‘high-rise’’ should 

be defined because even two, three, or 

four story buildings that provide 

excellent family housing may have 

elevators. Another commenter stated 

that some existing high-rise 

developments provide good housing 

and should be preserved. The limitation 

on high-rise buildings with elevators 

should apply only to new construction. 

Another commenter stated that in 

Baltimore, high-rise buildings with 

elevators may be a significant source of 

housing. ‘‘We believe that that high-rise 

elevator buildings with one and two 

bedroom apartments * * * should be 

eligible.’’

HUD Response: While the statute 

gives the authority to make the 

determination about high-rise elevator 

projects to the Secretary, HUD is also 

mindful of the commenters’ concerns. 

Therefore, this final rule revises the rule 

so that PHAs may make an initial 

determination, but HUD must approve a 

PHA’s finding that there is no practical 

alternative. 

Comment: Proposed § 983.58(c)(2) 

makes the release of PBV funds 

contingent on an environmental review 

being performed. A number of 

commenters stated that it is unclear 

what ‘‘release of funds’’ means because 

the funds will have already been 

allocated to the PHA. 

HUD Response: Under part 58, HUD 

may allocate funds to the PHA, but the 

PHA may not commit or expend these 

funds until an environmental finding is 

completed by the responsible entity 

(RE). If the finding is that of an exempt 

activity (§ 58.34) or a finding of activity 

that is categorically excluded and not 

subject to § 58.5, then the PHA does not 

have to submit a request for release of 

funds (RROF) and certification, and no 

further approval from HUD is needed by 

the PHA for the draw down of funds to 

carry out exempt activities and projects. 

However, the RE must document in 

writing its determination that each 

activity or project is exempt and meets 

the conditions specified for such 

exemption. 

In those cases where the RE 

determines that an environmental 

review is required, the RE will perform 

such review and execute the 

certification portion of the RROF by 

completing only Parts 1 and 2 of HUD 

form 7015.15 and by forwarding the 

form to the PHA, which must complete 

Part 3 before providing the form to HUD 

for approval. The PHA must await HUD 

approval from the Field Office Public 

Housing Director as the HUD 

Authorizing Officer; the approval is 

obtained either on HUD form 7015.16—

Authority to Use Grant Funds or by a 

letter dispatched to the PHA. Once 

received, the PHA may then draw down 

funds under the voucher annual 

contributions contract for the projectbased voucher project. 

Comment: One commenter 

commented on proposed § 983.53(d), 

which prohibits PHAs from attaching 

PBV assistance to units occupied by 

ineligible families. This commenter 

stated that the PHA should be given the 

flexibility, between the time the 

Agreement and HAP contract are 

executed, to move the family to another 

unit and free the unit for an eligible 

family. 

HUD Response: It is HUD’s policy to 

minimize displacement and what the 

commenter proposes is unnecessary. 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59901 

Section 983.206 allows PHAs to add 

units to the HAP contract when an 

ineligible family moves out. 

Comment: Proposed § 983.54 

prohibits PBV assistance from being 

attached to units that have other forms 

of Section 8 and other types of federal 

assistance. Two commenters stated that 

the rule should make clear that in 

mixed-finance projects, this prohibition 

applies only to the same units that are 

receiving subsidies. 

HUD Response: This final rule 

clarifies that the use of PBV assistance 

in mixed-finance projects that are not 

classified as ineligible housing is 

authorized. Section 983.54 discusses 

prohibited types of housing under the 

project-based voucher program. Since 

the type of units the commenter 

mentions is not listed, the unit type is 

not an ineligible housing type. 

Comment: Two commenters stated 

that § 983.54(a), for clarification, should 

add the word ‘‘unit’’ after ‘‘public 

housing.’’

HUD Response: The comment is 

accepted. The final rule is revised to 

include this clarification and also to 

specify that the unit is a ‘‘dwelling 

unit.’’

Comment: A commenter stated that an 

exception to the general rule should be 

made for holders of enhanced vouchers 

who received those vouchers when a 

mortgage on an older, assisted 236 

project, which may have had a high 

tenant rent contribution, was prepaid. 

PHAs should have the flexibility to 

replace these enhanced vouchers with 

PBVs to reduce these tenants’ rent 

contribution to 30 percent of adjusted 

income. 

HUD Response: The comment relates 

to an issue that is beyond the scope of 

this rule. Section 8(t) of the United 

States Housing Act of 1937 explicitly 

limits enhanced voucher assistance to 

tenant-based assistance under section 

8(o) of the Act. 

Comment: One commenter stated that 

proposed § 983.54(a), barring a PHA 

from attaching project-based assistance 

to ‘‘public housing units,’’ is a carryover of current § 983.7(c)(1) that 

predates the QHWRA. In QHWRA, 

Congress authorized PHAs to provide 

capital funds only and changed the 

definition of public housing to include 

units in a mixed-finance project that 

receive capital or operating assistance. 

Section 983.7(c)(1) was intended to bar 

project-based assistance from being 

attached to units that were receiving 

operating assistance. It was not intended 

to bar using project-based assistance 

with units that were constructed or 

rehabilitated with capital funds under 

the 1937 Act. HUD should clarify that 

§ 983.54(a) and the last sentence of 

§ 983.54(e) apply only to public housing 

units receiving operating subsidies 

under section 9(e) of the 1937 Act, 42 

U.S.C. 1437(g)(e). Two other 

commenters agreed, stating that the rule 

should clarify that project-based 

assistance can be used with HOPE VI or 

capital funds. 

HUD Response: HUD has considered 

these comments with the result that this 

final rule retains the proposed rule 

language, but clarifies when projectbased voucher assistance may be 

combined with HOPE VI funds. The 

Department believes that Congress’

adoption of disparate or parallel 

statutory provisions for the public 

housing and voucher programs affirms 

that the public housing and voucher 

programs are intended to operate as 

separate, and mutually exclusive, 

subsidy systems under the U.S. Housing 

Act of 1937. It is impermissible to 

combine voucher funds with public 

housing funds. For HOPE VI funds that 

predate FY 2000, it is generally 

permissible to combine these funds in 

accordance with the terms of the 

relevant HOPE VI appropriations act if 

the HOPE VI funds were not used to 

develop or operate public housing units. 

It is not permissible in any case to 

combine PBV and HOPE VI funds 

appropriated on and after FY 2000 

(Section 24 funds), because Section 24 

funds are public housing funds. If 

Capital Funds or Section 24 funds are 

used in the development of affordable 

housing, pro-ration must occur. For 

example, if a project receives $2,000 in 

HOPE VI funds and $1,000 in Capital 

Funds and there are 60 units in the 

development, 20 of the units (one-third) 

are being funded with capital funds and, 

therefore, cannot be combined with 

project-based vouchers. Provided that 

the remaining 40 units (two-thirds) are 

not receiving any public housing funds, 

the units may be assisted under the PBV 

program. 

Comment: One commenter asked that 

HUD not make projects that receive 

‘‘operating support’’ ineligible for PBV. 

‘‘Sometimes projects need additional 

operating cash flows due to unexpected 

increases in operating costs and 

expenses.’’ Another commenter stated 

that, as part of a plan to end long-term 

homelessness, ‘‘we urge that the rule be 

amended to permit replacement of 

temporary subsidy with PBVs, or to 

clarify that such replacement is 

permissible.’’ This commenter also 

stated that there may be situations, 

especially in supportive housing, where 

operating cost subsidy is required, 

despite rent subsidy, to ensure 

affordable rents and achieve project rent 

payment standards. This commenter 

suggested that HUD delete § 983.54(d) or 

revise it to permit operating subsidy 

where other governmental operating 

cost subsidy is required and 

demonstrated through the subsidy 

layering review to be necessary to the 

project. This commenter recommended 

that a new § 983.54(m) be added to read: 

‘‘For purposes of paragraphs (c), (d), 

and (l), rental or operating costs 

subsidies intended to terminate upon 

implementation of a HAP contract shall 

not be considered ‘‘governmental rent 

subsidy,’’ ‘‘governmental subsidy,’’ or 

‘‘housing subsidy.’’

HUD Response: HUD considered 

these comments, but did not adopt 

them. With respect to the public 

housing program, it is statutorily 

impermissible to combine Public 

Housing Operating funds with PBV 

funds. Supportive housing programs 

that receive operating funds are also 

ineligible under the PBV program since 

rent is generally included as an 

operating expense. 

Comment: A number of commenters 

objected to § 983.55, which requires a 

subsidy layering review to be conducted 

by HUD or an approved entity before a 

PHA may enter into a HAP contract. 

Commenters objected both to the overall 

requirement of a subsidy layering 

review and to the conduct of the review 

by HUD. 

One commenter stated that subsidy 

layering should not be required as rent 

caps and other guidance should suffice. 

If subsidy layering is to be required, the 

rule should be amended to allow the 

PHA to conduct the review and receive 

just compensation. One commenter 

stated that there should be an exception 

for projects that provide extensive 

support services, such as projects that 

serve the homeless. Another commenter 

stated that if the PHA determines that 

there is no other government subsidy 

involved, no subsidy layering review 

should be required. Another commenter 

stated that the rule should permit 

additional governmental subsidy when 

necessary for the success of the project. 

One commenter questioned whether 

subsidy layering analysis applies to 

every application that shows public 

capital investments in the form of loans 

or grants, and stated that such an 

analysis should not be required where 

the bulk of public financing is through 

loans and there is no tax-credit 

financing. 

HUD Response: Because prevention of 

excessive subsidy is statutorily required, 

this final rule retains the requirement 

for subsidy layering reviews. 

Comment: One commenter stated that 

HUD should not be involved in subsidy 

59902 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

layering reviews. Other commenters 

stated that section 911 of the Housing 

and Community Development Act of 

1992 (42 U.S.C. 3545 note) requires that, 

where low-income housing tax credits 

are involved, the state tax credit 

allocating agency must do the review. 

Still another commenter stated that 

while use of PBV must be consistent 

with subsidy layering, the rule ‘‘could 

be misconstrued to create additional 

bureaucratic barriers’’ and that the rule 

should clarify that it does not supersede 

authority of Housing Credit Agencies 

(HCAs) and Housing Finance Agencies 

(HFAs) to conduct the review when they 

are involved because of tax credits. 

When there is such an agency already 

involved, HUD should not have to 

determine individually whether it is an 

appropriate independent agency to do 

the review. Two commenters stated that 

a subsidy layering review for this 

program should not be required when 

another office or agency is authorized to 

perform a subsidy layering review or 

has recently performed such a review in 

connection with other assistance. One 

commenter stated that the rule should 

clarify what are approved entities and 

what entities may conduct a layering 

review. This should include entities 

already approved or required to perform 

such reviews in HUD programs. 

HUD Response: The issue of entities 

that can perform subsidy layering 

reviews is addressed in statute and 

guidance published as Federal Register 

notices, and, hence, is not appropriate 

for treatment in this rule. Pursuant to 

Section 911 of the Housing and 

Community Development Act of 1992, 

as amended, 42 U.S.C. 3545 note, HUD 

has issued guidelines in the form of 

Federal Register notices on February 25, 

1994 (59 FR 9332), and December 15, 

1994 (59 FR 64748). Under these 

notices, the Office of Public and Indian 

Housing performs subsidy layering 

reviews for programs under its 

jurisdiction with input from field 

offices. HUD may invite HCAs to 

perform subsidy layering reviews in 

connection with projects receiving lowincome housing tax credits, by 

publishing a Federal Register notice 

along with the guidelines that HCAs 

must follow in conducting subsidy 

layering reviews. PIH may publish 

revised guidelines as a Federal Register 

notice in the near future. 

Comment: A number of commenters 

commented on the Family SelfSufficiency (FSS) program exemption to 

the 25 percent cap on project-basing, 

with most commenters stating that the 

exemption is too narrowly limited to 

statutory FSS programs under section 23 

of the 1937 Act, 42 U.S.C. 1437u. Many 

commenters expressed the view that 

there should be a broader definition of 

services that qualify for the exemption 

to the cap. Commenters stated that 

‘‘other tools are available than FSS, such 

as local self-sufficiency programs 

* * *,’’ and that a broader definition of 

qualifying services is a better alternative 

than the FSS program alone. Some of 

these commenters cited specific local 

programs as ones that should qualify for 

the exception to the cap. Along these 

lines, three commenters suggested that 

the term ‘‘families receiving supportive 

services’’ be defined as ‘‘families 

receiving services essential for 

maintaining or achieving independent 

living, such as, but not limited to, 

counseling, education, job training, 

health care, mental health services, 

alcohol or other substance abuse 

services, child care services, or service 

coordination and case management 

services.’’ One commenter stated, in 

addition, that HUD should remove 

§ 983.56(b)(2)(ii) and replace it with the 

phrase ‘‘Families receiving supportive 

services.’’ Another commenter stated 

that the limitation of supportive services 

to the FSS program is arbitrary and 

impractical. First, families in selfsufficiency programs other than FSS in 

many cases receive services that are as 

comprehensive or more comprehensive 

than FSS. Second, funding for FSS 

coordinators has been shrinking in real 

terms in recent years. One commenter 

stated that ‘‘* * * service programs run 

by many of the faith-based organizations 

we are partnering with would not 

qualify for this exception.’’ Two 

commenters stated that it is inconsistent 

with statute to limit ‘‘families receiving 

supportive services’’ to ‘‘FSS families,’’

because the statute refers to the broader 

concept of ‘‘supportive services.’’

HUD Response: HUD has considered 

these comments and adopted the 

suggestion to allow for services other 

than those services associated with the 

statutory FSS program under 42 U.S.C. 

1437u. Under the Final Rule, PHAs are 

authorized to establish the type of 

services and the extent to which 

services will be provided to allow 

exceptions to the 25 percent limit. PHAs 

must state in their administrative plans 

what these services are. The final rule 

also clarifies that PHAs are responsible 

for determining that units are made 

available to families that are receiving 

the services in order for the unit to be 

and to remain excepted from the cap 

(see § 983.56(b)(2)(ii)(C)) and ensuring 

that assistance is terminated if families 

living in exempted units fail without 

good cause to complete their FSS or 

supportive services obligation. 

Comment: One commenter stated that 

the narrow definition of social services 

that qualify for the exception to the cap 

‘‘will exclude many chronically 

homeless individuals and families—

who may neither participate in the FSS 

program nor qualify as ‘disabled’ under 

the Section 8 statute due to a primary 

diagnosis of alcoholism or substance 

abuse. Such a result would be clearly 

contrary to the Administration’s 

commitment to prioritize this 

vulnerable population within all HUD 

programs.’’

HUD Response: See response above. 

Comment: Two commenters stated 

that HUD should provide more 

flexibility with respect to the FSS 

exception to the 25 percent cap on 

project basing and make clear that the 

PHA can make its own determination 

what constitutes adequate supportive 

services. 

HUD Response: See response above. 

Comment: Two commenters stated 

that the proposed rule improperly 

imposes a work requirement by 

allowing PHAs to terminate assistance 

to a family not in compliance with its 

FSS contract of participation. ‘‘The 

statute is silent about any such 

condition of continued occupancy.’’

HUD Response: Since the family is 

receiving PBV assistance for a unit 

outside the statutory 25 percent cap 

because of its participation in 

supportive services, the family 

necessarily loses that right if it fails with 

respect to its FSS contract or its 

supportive services program. Therefore, 

this final rule provides that assistance to 

such a family can be terminated. 

However, as long as the unit continues 

to be made available to qualifying 

families, the unit can continue to 

receive assistance and benefit another 

family participating in supportive 

services. 

Comment: A number of commenters 

stated that other forms of project-based 

subsidy should not count toward the 25 

percent limit, because the statute 

applies only the 25 percent limit to 

project-based vouchers. Other 

commenters stated that this limitation 

would impede the preservation of 

affordable housing and constrain the 

development of supportive housing 

units. Two commenters stated that if 

HUD continues to include ‘‘other federal 

project-based assistance’’ as counting 

against the 25 percent cap on assisted 

units, the rule should make it clear that 

the term does not include units 

receiving only mortgage or production 

subsidies (such as § 236, § 221(d)(3), 

LIHTCs, or HOME funds). 

HUD Response: HUD has considered 

these comments and adopts them in this 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59903 

final rule. This final rule limits the 

number of project-based units in a 

building to 25 percent of the total units 

in the building and not to 25 percent of 

the unassisted units. 

Comment: One commenter stated that 

limiting the size of a multifamily 

building to no more than a specified 

number of units is another alternative to 

the 25 percent cap. 

HUD Response: The 25 percent cap is 

provided for by a clear and 

unambiguous statute, 42 U.S.C. 

1437f(o)(13)(D)(i), and cannot be 

changed by this rule. 

Comment: Two commenters stated 

that they support the exception to the 25 

percent per building cap on projectbased units for elderly and disabled 

families. One commenter stated that 

‘‘we would encourage HUD to also 

provide an exception to developments 

for units that provide families with 

service-enhanced housing which 

includes families who were previously 

homeless.’’ Another commenter 

similarly stated that ‘‘We suggest 

including in the list of examples of 

‘‘excepted units’’ housing developments 

created through HUD’s initiatives to 

provide permanent supportive housing 

to address the needs of chronically 

homeless individuals.’’

HUD Response: HUD has considered 

these comments, but has not adopted 

them. The statute explicitly provides for 

certain exceptions to the limitation on 

the number of dwelling units that may 

be assisted in any one building. The 

commenters’ suggestion is not included 

in the statutorily permissible exceptions 

because inclusion of the type of 

developments suggested would expand 

the exceptions allowed under the law. 

Nonetheless, the final rule expands the 

definition of supportive services to 

include services other than those under 

the FSS program. 

Comment: Two commenters stated 

that if HUD follows the 

recommendation to expand the 

definition of ‘‘supportive services’’ that 

qualify for the exception to the 25 

percent cap on project-based units in a 

building, the rule should make it clear 

that when an owner has entered into a 

contract with a public agency other than 

a PHA to provide supportive services, it 

is that public agency which has the 

primary responsibility for monitoring 

the delivery of those services. As with 

the competition for project-based 

vouchers in § 983.51(b)(2), the rule 

should permit PHAs to rely on the 

established selection procedures and 

monitoring expertise of other agencies. 

HUD Response: HUD has considered 

this comment, but is not adopting it. 

Under the Project-Based Voucher 

program, HUD’s contractual relationship 

is with public housing agencies. The 

Department can neither impose nor 

enforce requirements on entities with 

which the Department has no legally 

enforceable agreement. 

Comment: One commenter suggested 

that the rule add additional language to 

three sections. The additions are as 

follows: 

A new § 983.56(b)(4): ‘‘(4) Monitoring 

of supportive services. (i) The PHA may 

determine that the monitoring and 

reporting requirements specified in 

§ 983.203(d)(ii) and certified by the 

owner in § 983.209(b)(i) suffice to 

establish the units as ‘‘excepted units’’

for purposes of this section. 

‘‘(ii) Where the owner has not entered 

into contracts with public agencies to 

deliver supportive services or where the 

PHA has reasonably determined that the 

monitoring and reporting requirements 

specified in § 983.203(d)(ii) and 

certified by the owner in § 983.209(b)(i) 

do not suffice to establish units as 

‘excepted units’ for purposes of 

§ 983.56(b)(2)(B), the PHA may require 

the owner to submit such 

documentation as is reasonably required 

to establish the units as excepted units 

for purposes of this section.’’

New §§ 983.283(d)(i) and (ii), to be 

added at the end (before the semicolon) 

of § 983.203(d): ‘‘including (i) the public 

agencies other than the PHA, if any, 

with whom the owner and/or its 

affiliates and/or its subcontractors 

intends to contract to provide funding 

for or direct supportive services for any 

units receiving PBV assistance; and (ii) 

a description of the monitoring and 

reporting requirements regarding the 

delivery and efficacy of the supportive 

services under any contracts identified 

under (i).’’

The following, to be added at the end 

(before the period) of § 983.209(b): 

‘‘* * * and the owner and/or its 

affiliates and/or its subcontractors are in 

compliance with any existing contracts 

with public agencies to provide funding 

for or direct supportive services for any 

units receiving PBV assistance.’’

HUD Response: HUD has considered 

these comments and has determined 

that, because of the variety of local 

circumstances and supportive services 

that may be provided, it is preferable for 

PHAs, which know the local area and 

the needs of residents, to administer the 

details of this aspect of the statute and 

regulations. 

Comment: The site selection 

standards in proposed § 983.57 would 

require that project-based assistance ‘‘be 

consistent with the goal of expanding 

housing opportunities’’ and that projects 

using PBV be sited to ‘‘promote greater 

choice of housing opportunities and 

avoid undue concentration of assisted 

persons in areas containing a high 

proportion of low-income persons.’’ One 

commenter stated that this standard 

would prevent affordable housing from 

being developed in areas previously 

dominated by urban blight, thus 

attracting residents. Properties outside 

areas with a high concentration of lowincome persons are mostly unaffordable 

or unwilling to accept government 

subsidy. Conversely, another 

commenter stated an objection to the 

proposed rule’s elimination of any 

standard for deconcentration and 

expansion of housing and economic 

opportunity, and suggested that HUD 

adopt an alternative standard, based on 

waiver requests, that allows PBV units 

in mixed-income projects and 

neighborhoods undergoing 

‘‘gentrification’’ while ensuring that the 

PHA also creates PBV units in non-poor 

neighborhoods. Another commenter 

stated that the rule should allow 

projects to be sited in areas of poverty 

concentration where it would allow 

access to supportive services. ‘‘It is the 

supportive services that will ultimately 

help lift a family out of poverty rather 

than the location of the housing outside 

an area of concentrated poverty.’’

HUD Response: The requirement that 

project-based voucher contracts be 

consistent with the goal of 

deconcentrating poverty and expanding 

housing and economic opportunities is 

a clear statutory mandate and, therefore, 

cannot be changed as suggested by these 

commenters. In addition, these are 

factors under SEMAP scoring. This final 

rule provides guidelines that PHAs must 

consider in selecting project-based 

voucher proposals to ensure that, in 

selecting projects under the program, 

the statutory goal of deconcentrating 

poverty and expanding housing and 

economic opportunities is satisfied. 

Comment: Two commenters 

questioned whether the site and 

neighborhood standards in proposed 

§ 983.57(d) should apply to the PBV 

program. Four commenters stated that 

some of the site and neighborhood 

standards do not seem meant to apply 

to existing buildings. One commenter 

stated that the PHA should determine 

whether in the context of its affordable 

housing goals it makes sense to provide 

PBVs to the project. Also, the rule 

should be clearer on whether the PHA 

or HUD makes the determination that 

site and neighborhood standards are 

met. Two commenters stated that the 

PHA should make the determination. 

One commenter stated that the proposed 

rule is unclear about the process for 

satisfying site and neighborhood 

59904 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

standards, and that units may be lost 

because landlords in low poverty areas 

will not wait to rent their units on the 

private market while a review process is 

underway. 

HUD Response: HUD has considered 

the comments, but does not adopt them. 

The standard for existing housing is 

reasonable and not as stringent as the 

standard for New Construction. The 

requirements of proposed § 983.57(d) 

(§ 983.58(d) of this final rule) are 

applicable to existing housing under the 

PBV program. The rule details the 

requirements that must be considered in 

determining whether site and 

neighborhood standards are satisfied. 

Comment: Several commenters 

questioned proposed § 983.58 on 

environmental reviews. Commenters 

stated that environmental review 

requirements should not apply to 

existing units because actions such as 

demolition, rehabilitation, and 

construction are not taking place. A 

commenter stated that properties for 

which an environmental review was 

previously done under another program 

should be exempt from environmental 

reviews in the PBV program. Another 

commenter stated that the section is 

overbroad as drafted, because it appears 

to prohibit PBV contracts being 

executed with owners who have 

purchased properties prior to HUD 

completing its environmental review. A 

commenter stated that where a PBV 

contract is for existing units and will 

have an initial HAP term of 5 years or 

less, parts 50 and 58 should not apply. 

A commenter stated that ‘‘to apply these 

requirements to existing public 

accommodations will make it even more 

difficult for landlords in strong markets 

to participate in the Special Mobility 

Program * * *.’’ Moreover, the delays 

in waiting for approvals will result in 

lost units. 

HUD Response: Existing housing as 

used in the PBV regulation is normally 

categorically excluded from the 

requirements for an environmental 

assessment and finding of no significant 

impact under the National 

Environmental Policy Act (NEPA). 

However, existing housing is subject to 

the applicable federal environmental 

laws and authorities listed at 24 CFR 

58.5. 

The responsible entity will conduct 

the environmental review in accordance 

with 24 CFR part 58 (or HUD will 

complete an environmental review 

under 24 CFR part 50 where HUD has 

determined to do the environmental 

review). In the case of existing housing 

that is reviewed under part 58, the 

responsible entity must determine 

whether or not PBV assistance is 

categorically excluded from review 

under NEPA and whether or not the 

assistance is subject to review under the 

laws and authorities listed in 24 CFR 

58.5. 

Assistance to a project previously 

approved under another HUD program 

for which an environmental review was 

completed under 24 CFR part 58 is 

considered supplemental assistance and 

is categorically excluded and not subject 

to further review under the related laws 

in 24 CFR 58.5, if the approval is made 

by the same responsible entity that 

conducted the environmental review on 

the original project and re-evaluation of 

the environmental findings is not 

required under 24 CFR 58.47. This 

exemption is limited to contracts for the 

same units that previously had an 

environmental review completed under 

part 58. 

In accordance with the NEPA and the 

Council on Environmental Quality’s 

implementing regulations, the 

Department does place limitations on 

actions before completion of the 

environmental review. The final rule is 

clear at § 983.58(d) that the PHA may 

not enter an Agreement or a HAP 

contract with an owner, and its 

contractors may not acquire, 

rehabilitate, convert, lease, repair, 

dispose of, demolish, or construct real 

property or commit or expend program 

or local funds for PBV activities under 

part 983, until an environmental review 

is complete. However, there is no intent 

to prohibit an owner from acquiring a 

property before the owner enters the 

PHA’s property selection process under 

the PBV program. 

Comment: A commenter stated that in 

proposed § 983.59 and elsewhere, there 

are provisions regarding the selection of 

PHA-owned units that are problematic, 

because the rule establishes up-front 

procedural hurdles that could be 

addressed in a less burdensome way by 

monitoring PHA performance. For 

example, initial rents must be based on 

an appraisal by a licensed and certified 

appraiser. Also, HUD has to approve in 

advance an independent entity that will 

perform rent reasonableness and 

housing quality standards (HQS) 

determinations. Another commenter 

stated that the PHA should be allowed 

to attach PBVs to PHA-owned units 

without a request for proposals or 

review by another entity. Similarly, a 

commenter stated it supported removing 

the requirement for independent 

appraisal of PHA-owned units, and 

stated that PHAs should have the option 

of allowing an owner to submit an 

independent appraisal of the requested 

rents as part of the project selection 

process. 

Similarly, a commenter stated that ‘‘in 

a variety of ways, the proposed rule 

makes it extremely difficult for PHAs to 

expand the supply of publicly-owned 

affordable housing through use of 

project-based vouchers.’’ This 

commenter cites language primarily 

from the proposed § 983.59, as well as 

from proposed language concerning the 

competitive selection of units. A 

commenter stated that ‘‘* * * the best 

way to protect tenants and the public is 

not through front-end procedural 

barriers * * * but rather through 

subsequent monitoring of the outcomes. 

PHAs * * * should be trusted to 

comply with the law unless they are 

shown to have violated the trust.’’ This 

commenter suggested changes to 

§§ 983.51(e) and 983.59. The change to 

983.51(e) would exempt units owned by 

the PHA from the review of the 

selection process, and would provide 

that the ‘‘selection of PHA-owned units 

will be deemed approved by the HUD 

field office if the field office fails to act 

within 30 days of receipt of the required 

information concerning the selection 

process.’’ The changes to § 983.59 

would be to permit agencies of local 

government (in cases where the PHA is 

not part of the local government) to 

determine rent reasonableness and HQS 

compliance without HUD approval, and 

to permit PHAs to select an independent 

entity other than a unit of local 

government to perform the same 

function, also without HUD approval. 

HUD Response: HUD has considered 

these comments, but does not adopt 

them. The proposed regulation 

governing PHA-owned units is not 

intended to reject the use of 

performance standards nor to impose a 

more administratively burdensome 

process than necessary, but rather to 

protect, to the extent possible, taxpayer 

dollars by ensuring that such dollars are 

appropriated fairly and without undue 

influence and favoritism. It should also 

be noted that the law requires that an 

independent agency inspect units and 

determine the reasonableness of rents in 

the case of PHA-owned housing under 

the tenant-based program. The law 

establishes these same requirements for 

the project-based component of the 

voucher program. 

Subpart C (§§ 983.101–983.103) 

Comment: Proposed § 983.101 

requires units to comply with HQS and 

lead-based paint regulations at 24 CFR 

part 35. A commenter stated, as to 

proposed § 983.101(c), that lead paint 

requirements at 24 CFR part 35, 

particularly at 24 CFR 35.720(c) and 

35.730, which involve reporting by local 

health officials, could be problematic in 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59905 

the PBV program. This commenter 

stated that the rule should be revised to 

require PHAs to give the local health 

department the addresses of all PBV 

units, and to require the PHA to notify 

each unit owner of their obligations. 

Also, unit owners need to be informed 

of their obligation to verify with the 

health department when they learn the 

information (about elevated lead levels) 

from a source other than local health 

officials. 

HUD Response: These comments 

relate to matters beyond the scope of 

this rulemaking. Since the proposed 

rule did not involve the lead paint 

regulations, those regulations were not 

made available for public comment. A 

separate public rulemaking procedure 

would be required to address lead paint 

issues. 

Comment: One commenter stated that 

HUD needs to define what qualifies as 

a unit generally complying with HQS. 

Two commenters stated that instead of 

requiring PHAs to inspect all units for 

HQS compliance prior to unit selection 

and again prior to HAP execution, the 

rule should give PHAs discretion to do 

only one inspection. One commenter 

also stated that if a project has a Real 

Estate Assessment Center (REAC) score 

higher than 60, it should not be 

necessary to do an inspection after each 

turnover. One commenter stated that it 

is unclear what steps a PHA must take 

to ensure that existing units comply 

with § 504 of the Rehabilitation Act of 

1973 and the Fair Housing Act. One 

commenter stated that the requirement 

for inspection of a sample of units at 

least annually seems to conflict with the 

SEMAP requirement of inspecting each 

unit under contract at least annually. 

HUD Response: HUD disagrees with 

the comments relating to a definition of 

general compliance with HQS, and with 

the comment relating to Public Housing 

Assessment System (PHAS) scores. Only 

in the case of selecting existing units, 

and for the purpose of defining them as 

existing units, must the PHA ensure that 

all of the units substantially comply 

with HQS. HUD has elected not to 

define what qualifies as a unit 

substantially complying with HQS since 

the units must comply fully with HQS 

prior to HAP execution. The law also 

requires that units be inspected for 

compliance with HQS, regardless of 

PHAS score. Furthermore, compliance 

of existing units under Section 504 of 

the Rehabilitation Act of 1973 and the 

Fair Housing Act is defined in 24 CFR 

Section 8 subpart C. HUD agrees with 

the comment regarding SEMAP. SEMAP 

scoring for inspections will be adjusted 

to remove all PBV units as reflected in 

the Public Housing Information Center 

(PIC) from the annual inspection 

indicator. 

Comment: Proposed § 983.103(d) 

requires an annual inspection of a 

random sample of 20 percent of all PBV 

units in each building of a project. Some 

commenters stated that inspections 

should be of a random sample of units 

in a project, rather than units in a 

building. One commenter stated that the 

section should be revised to require 

inspection of at least two units or 20 

percent of the units, whichever is more. 

Alternatively, this section should 

restrict the random sample method to 

multifamily buildings. An inspection of 

only one unit in a small building does 

not provide enough of a sample. One 

commenter supported this section as 

proposed. 

HUD Response: HUD considered the 

comments regarding random 

inspections of a project rather than a 

building, but is not adopting them. The 

statute requires annual compliance with 

inspection requirements except that the 

agency shall not be required to make 

annual inspections of each assisted unit 

in the development. HUD believes that 

the sample should be drawn on a 

building basis in order to get a good 

cross-section of the condition of the 

units in a project. HUD has interpreted 

the law by requiring at least 20 percent 

of the units in a building be inspected 

annually. A development or project 

could consist of several buildings and a 

random sample of the project or 

development would not necessarily 

ensure an inspection in each building. 

In response to the issue of sample size, 

HUD believes that the inspection of at 

least one unit in buildings where five or 

fewer PBV units are located is, due to 

the small number of units involved, an 

adequate sample. 

Subpart D—Requirements for 

Rehabilitated and Newly Constructed 

Units (§§ 983.151–983.156) 

Comment: Proposed § 983.152(c)(1)(ii) 

requires that the location of contract 

units be described in the agreement to 

enter into a HAP contract. One 

commenter stated that because units can 

float, it seeks confirmation that this 

provision requires identification of the 

building, not the exact unit. 

HUD Response: The ‘‘location of the 

contract units on site’’ does refer to the 

location of the contract units in a 

building in which PBV units will be 

located and must be described in the 

HAP contract. Floating units are 

addressed in § 983.206. 

Comment: Proposed §§ 983.153(a) and 

983.55 require a subsidy layering review 

prior to execution of the Agreement by 

the owner and the PHA. Commenters 

stated that subsidy layering analysis 

should be done prior to the Agreement 

only when some kind of governmental 

assistance is being provided to the 

project. ‘‘For instance, we do not think 

subsidy layering would apply where a 

PHA chose to use PBVs in a project that 

already has an FHA insured mortgage’’

and no new assistance. A commenter 

stated that subsidy layering 

requirements should be clarified and 

explained with a ‘‘clear road map’’ so as 

not to ‘‘chill’’ PHAs and developers. 

HUD Response: The Final Rule retains 

the requirement for subsidy layering 

reviews because it is statutory. Section 

102(d) of the Department of Housing 

and Urban Development Reform Act of 

1989 (codified at 42 U.S.C. 3545) 

requires that the Secretary certify that 

‘‘assistance within the jurisdiction of 

the Department’’ to any housing project 

shall not be more than is necessary to 

provide affordable housing after taking 

into account ‘‘other government 

assistance.’’

Comment: Proposed § 983.154(b)(3) 

requires the owner and the owner’s 

contractors and subcontractors to 

comply with applicable federal labor 

standards, and requires the PHA to 

monitor that compliance. One 

commenter stated that the rule should 

allow PHAs to work with other agencies 

that have an interest in the project to 

monitor compliance with the DavisBacon Act. 

HUD Response: HUD considered this 

comment but did not adopt it because, 

although a PHA can subcontract any of 

its functions, the PHA is still ultimately 

responsible for monitoring to ensure 

that the owner and owner’s contractors 

and subcontractors comply with 

applicable federal labor standards (see 

HUD handbook 1344.1, Federal Labor 

Standards Compliance in Housing and 

Community Development Programs). 

Comment: Two commenters stated 

that the conflict-of-interest provision in 

§ 983.154(e) is too vague and needs 

additional definition. 

HUD Response: The provisions of 24 

CFR Section 982 subpart D apply to the 

project-based voucher program in 

accordance with Section 983.2(a). 

Specifically, Section 982.161 details 

conflict of interest provisions. 

Comment: Proposed § 983.155(a) 

states that the Agreement must state the 

completion deadline and that the owner 

must provide evidence of completion. 

Three commenters stated that the 

completion deadline should be between 

the owner and PHA, not HUD. If the 

project is not completed, the owner will 

not get the PBVs. HUD should leave the 

completion determinations to the PHA. 

59906 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

HUD Response: HUD agrees with 

commenters that the completion 

deadline should be arranged between 

the owner and the PHA. Although HUD 

may specify additional documentation 

that must be submitted by the owner to 

evidence completion of the housing, the 

additional documentation must be 

submitted to the PHA, not to HUD. 

Subpart E—Housing Assistance 

Payments Contract (§§ 983.201–

983.209) 

Comment: One commenter stated that 

in the Special Mobility Program, 

landlords commit to a number of 

Section 8 units, but they may not know 

which specific units will be available. 

The requirement in proposed 

§ 983.203(c) to identify the location of 

each contract unit may be difficult to 

meet. This commenter stated that the 

rule should be modified to allow HQS 

inspection and HAP amendment to 

occur as units become available, with 

adjustments to lease terms as needed. 

HUD Response: The regulation as 

proposed resolves this issue, since it 

allows floating units. In § 983.206(a), at 

the discretion of the PHA, the HAP 

contract may be amended to substitute 

a different unit with the same number 

of bedrooms in the same building for a 

previously covered contract unit. HQS 

and rent reasonableness must be 

determined for the new units. Section 

983.206(b), allows for amendment of the 

contract within 3 years of initial 

execution to add additional units in a 

building. Leases and HAP contracts do 

not run concurrently as in the tenantbased program. 

Comment: A number of commenters 

disagreed with the provision for oneyear extensions of HAP contracts in 

proposed § 983.205(b). These 

commenters stated that the length of 

extensions should be up to the PHA, 

and should be for up to the length of the 

initial term. Commenters stated that the 

statute allows longer extensions, and 

that the one-year limitation violates the 

statute. One commenter suggested that 

§ 983.205(b) should be revised as 

follows: 

In the initial contract, the PHA and owner 

may agree that, subject to appropriations, 

they will extend the term of the HAP contract 

prior to its expiration for a duration agreed 

upon by the parties if the PHA determines an 

extension is appropriate to continue 

providing affordable housing for low-income 

families and the owner has complied with 

the contract during the initial term. 

Subsequent extensions are subject to the 

same limitations. 

Two commenters stated that annual 

extensions are too administratively 

burdensome. One commenter also stated 

that contractors need an assurance of a 

longer term. Some commenters stated 

that one-year extensions could impede 

the ability of owners to obtain financing, 

and that the minimum extension should 

be five years. One commenter stated that 

the limitation increases the risk to 

investors who are risk-averse. Three 

commenters stated that the limitation 

may also interfere with using LIHTCs. 

One commenter also suggested that 

§ 983.305(b) be revised to be extendable 

‘‘for up to an additional 10 years.’’

One commenter stated that (as of the 

time of the comment) annual 

contributions contracts (ACCs) are only 

being extended for 3 months. This 

places the PHA in an awkward position 

to enter even into a one-year HAP with 

an owner. 

HUD Response: HUD has considered 

all of the comments and agrees that 

renewal terms should be more than one 

year. Accordingly, PHAs will be 

allowed to approve extensions after the 

initial term on a five-year or shorter 

basis as determined by the PHA. 

Comment: Proposed § 983.205(d) 

allows the owner to terminate a contract 

if the rent falls below the initial rent. In 

this case, families are given tenantbased assistance. A number of 

commenters disagreed with this 

provision. 

Five commenters stated that instead 

of allowing the owner to terminate the 

contract if rent falls below initial rent, 

as provided in proposed § 983.205(d), 

the rule should not allow PHAs to 

reduce rents below initial rents. Two of 

these commenters stated also that the 

proposed rule is contrary to the 

statutory provision on rent adjustment 

and will discourage participation in the 

program. The statute delegates the 

determination of rent to PHA and 

owner, outside of HUD’s rulemaking 

power. Two commenters stated that the 

initial guidance provided by HUD 

requires rent adjustments only at the 

request of owner, and that an arbitrary 

reduction in rent based on a change in 

payment standard can create financial 

stress for the property. One commenter 

stated that the rule should clarify 

whether, if the HAP contract is 

terminated under § 983.205(d), the 

tenants are eligible to receive enhanced 

or regular vouchers. Two commenters 

stated that although the rule protects 

tenants if rents are reduced and the 

owner opts out, it may endanger the 

project because converting the 

assistance to tenant-based removes a 

unit and would limit the units available 

for the intended population and 

threaten the viability of the project. The 

rule should remove disincentives for the 

owner to participate and protect funders 

by modifying § 983.301(a)(3) to provide 

that rents are redetermined at the 

request of the owner, and deleting 

§§ 983.205(d) and 983.302(c). 

HUD Response: HUD has considered 

all of the comments and has addressed 

changes to rent adjustments in 

§ 983.302. However, HUD believes that 

the law is very specific for setting rents 

and that HUD lacks the ability to limit 

rent reductions. Should the owner 

terminate the HAP contract in 

accordance with § 983.205(d), families 

are eligible to receive the same regular 

(not enhanced) tenant-based vouchers 

for which they are eligible, at their 

request, after living in a project-based 

unit for 12 months. 

Comment: One commenter stated that 

the proposed rule provides that units do 

not float. PBV units should be permitted 

to float within a building or 

development so long as the PHA meets 

HUD requirements. This commenter 

suggests new language for 983.206(a): 

At the discretion of the PHA and subject 

to all PBV requirements, the HAP contract 

may permit PBV units to float within a 

building or development. The owner must 

maintain the same number of units and the 

same number of bedrooms. Prior to attaching 

PBV subsidy to a unit within a building or 

development, all PBV requirements must be 

met, including an inspection confirming that 

the unit meets HQS standards and a rent 

reasonableness determination. 

One commenter supported a 

provision to amend the HAP contract by 

allowing units to ‘‘float.’’ It should be 

made clear that this should only be 

done at turnover or where families lose 

assistance due to being over income to 

prevent displacement, and there should 

be safeguards against replacement of 

accessible units with non-accessible 

ones. One commenter stated that the 

rule should not require HAP contract 

amendments when, because of 

administrative burden, units are added 

or substituted. Another commenter 

stated that allowing units to be 

substituted ‘‘is a great enhancement.’’

However, the commenter stated that the 

restriction of substitutions to 3 years 

after HAP execution (§ 983.206(b)) 

should be removed, to allow the PHA to 

help an additional family in cases where 

the assistance drops to zero but the 

family prefers to stay in the unit and 

pay market rent. 

HUD Response: HUD believes the 

flexibility sought by the commenters 

already exists and therefore is not 

adopting the proposed change to 

§ 983.206(a). In § 983.206(a), at the 

discretion of the PHA, the HAP contract 

may be amended to substitute a 

different unit with the same number of 

bedrooms in the same building for a 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59907 

previously covered contract unit. 

Further restrictions regarding ‘‘floating’’

units is not necessary since substituting 

units must be in compliance with all 

PBV requirements. HUD believes that 

units cannot be assisted without a 

contractual agreement obligating the 

assistance necessitating a revision to the 

HAP contract. Section 983.206(a) does 

not restrict the substitution of units to 

three years. The three-year limit applies 

only to adding new units to the original 

PBV contract. 

Comment: Proposed § 983.206(c) 

states that even if contract units are 

placed under the HAP contract in stages 

commencing on different dates, there is 

a single annual anniversary for all 

contract units under the HAP contract. 

Five commenters stated that in order to 

protect against displacement and 

transition to lower-income families over 

time, HUD should change its position 

that there is a single anniversary date for 

all units under HAP contract within the 

full term of the contract. One of these 

commenters stated that some proposals 

may require a complex transition of 

units into the program over time. The 

PHA and owner should be able to 

structure the admission requirements in 

the PHA’s administrative plan in a 

manner to best serve both current 

residents and those on the PHA waiting 

list. 

HUD Response: HUD does not accept 

that in order to protect against 

displacement and transition to lowerincome families over time, HUD must 

change its position on a single 

anniversary date for all units under one 

HAP contract. The commenter did not 

elaborate on how the same anniversary 

date for all units under the same 

contract would displace and transition 

lower-income families. Once units are 

accepted into the program, they are 

placed under a HAP contract. Eligible 

current residents are given priority for 

admission in accordance with 

983.251(b). 

Comment: Proposed § 983.209 

requires the owner to certify to certain 

matters. Three commenters stated that 

the owner may not be able to certify that 

each unit receiving assistance is 

occupied by a family referred by the 

PHA because some families receiving 

assistance due to displacement 

provisions will not have been referred 

by the PHA. 

HUD Response: In response to these 

comments, HUD will clarify that only 

families referred by the PHA may be 

assisted. Section 983.251(b) protects inplace families by providing a priority for 

admission to the PBV program. 

However, these families must also be 

determined eligible by the PHA and 

referred to the owner by the PHA. 

Comment: One commenter stated that 

the prohibition on renting to the 

owner’s relatives in proposed 

§ 983.209(e) should be subject to an 

exception when necessary to make a 

reasonable accommodation, as in 

current 24 CFR 982.306(d). 

HUD Response: The comment was not 

adopted. HUD intentionally 

differentiates in this case between the 

tenant-based voucher and project-based 

voucher programs. To allow an owner of 

a project-based voucher development to 

rent to close family relatives (whether 

disabled or not) creates a systematic 

incentive to owners to misuse the 

program. Persons requesting a 

reasonable accommodation in policies 

in order to effectively participate in the 

housing choice voucher program are not 

harmed by restricting the exception to 

renting to relatives to the tenant-based 

program. 

Subpart F—Occupancy (§§ 983.251–

983.261) 

Comment: Proposed § 983.251 

regulates how families are selected for 

the PBV program. Commenters stated 

that the PHA and the owner should be 

able to structure the admission 

requirements to best serve both current 

residents and those on the waiting list. 

While generally supporting the antidisplacement provision 

(§ 983.251(b)(2)), the commenters stated 

that this provision should be revised in 

the final rule to allow discretion in 

providing current families with PBV 

assistance. A commenter also stated that 

owners and PHAs should be given the 

flexibility to lease units on a rolling 

basis in compliance with the PHA’s 

waiting list policy. Owners should be 

able to contract for the maximum 

number of units needed to 

accommodate the greatest number of 

eligible households in a way that can be 

financially supported over time. 

HUD Response: HUD does not agree 

with these comments. Eligible in-place 

families should not be penalized if units 

in the building are selected to receive 

project-based assistance. However, 

project-based assistance is limited to 25 

percent of the units in a building which 

means that not all of the eligible 

families in the building can receive 

project-based voucher assistance. 

However, eligible in-place families must 

be given an absolute preference on the 

waiting list for units that become 

available. 

Comment: Regarding proposed 

983.251(a)(1), one commenter stated 

that public housing families should 

have the choice to move to PBV units 

without having to put themselves on a 

separate Section 8 waiting list. 

HUD Response: The comment was not 

accepted because the statute governing 

the project-based voucher program 

requires that PHAs select families to 

receive project-based assistance from its 

waiting list. 

Comment: A number of commenters 

stated that they support protection for 

in-place families provided in 

§ 983.251(b). One of these commenters 

stated that this provision would help 

prevent families from becoming 

homeless. Another commenter stated 

that an eligible family should have a 

choice between a voucher or relocation 

benefits. Another commenter stated that 

eligibility should be determined at the 

HAP execution stage, so that a family 

could become eligible during 

construction, and that HUD should 

consider making the residency 

determination at the proposal 

acceptance stage. Since the units can 

float, any ineligible units can be 

switched at the time of execution of the 

HAP contract. This commenter also 

stated that HUD should disregard inplace families when assessing a PHA’s 

compliance with income-targeting 

requirements since these tenants are 

already in occupancy and constitute a 

continuing tenancy. Another commenter 

stated that it supports the minimizing 

displacement provision; however, 

because existing units will now be 

eligible for PBV, the ‘‘inclusion of 

minimizing displacement should be 

available to the families of existing units 

selected for PBV.’’ Another commenter, 

while expressing general support, also 

stated that some in-place families might 

not be appropriate for the project. For 

example, the in-place family may be a 

single individual and the project may be 

for chronically mentally ill homeless 

individuals. Another commenter stated 

that it supports approving existing 

housing with tenants in place. 

Otherwise, the supply of housing would 

be limited, and issues of preference 

usually get resolved on turnover. ‘‘The 

benefits outweigh the slowing down of 

assistance to those on the waiting list.’’

HUD Response: The suggestion 

regarding a choice between a voucher 

and relocation benefits was not adopted. 

This is because relocating an in-place 

family in these circumstances would be 

inconsistent with HUD’s policy to 

minimize displacement. An in-place 

family cannot otherwise be placed 

ahead of others on a PHA’s waiting list 

unless a PHA develops such a 

preference. The comment regarding 

establishing eligibility at the time of 

HAP execution would not be consistent 

with HUD policy to minimize 

59908 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

displacement and protect in-place 

tenants. Providing such protection is 

appropriate only when a decision is 

made to provide PBV assistance. It is for 

this reason that HUD determined that an 

in-place family must be eligible on the 

proposal selection date. The suggestion 

involving choosing appropriate in-place 

families cannot be considered because it 

would be inconsistent with civil rights 

laws. Specifically, the PHA’s 

administrative plan cannot provide for a 

selection preference for the program 

based on a specific disability. 

Comment: Two commenters stated 

that priority for in-place families for 

assistance needs to be balanced against 

the needs of the families on the waiting 

list, and suggests limiting the number of 

prioritized in-place families to 20 to 30 

percent of the total. One commenter 

advocated ‘‘allowing owners some 

discretion in determining which 

families are eligible for PBV assistance, 

consistent with administrative plan and 

waiting list policies.’’ Another 

commenter stated that the section 

clarifying that PHAs must offer 

assistance to eligible in-place tenants 

who occupy proposed contract units 

will facilitate the use of PBVs to 

preserve existing housing. However, the 

rule should give PHAs the flexibility, 

between the time the Agreement and 

HAP are executed, to substitute new 

tenants as the in-place tenants. Also, 

PHAs should be allowed to select units 

with ineligible tenants and move the 

tenants to appropriate units. A 

commenter stated that the PHA should 

have flexibility to offer tenant-based 

vouchers to in-place families. Also, the 

rule should clarify whether in-place 

families have priority for the program or 

the particular project they occupy. A 

commenter stated that from a practical 

perspective, it will not ordinarily be 

necessary to use occupied units in 

partially assisted developments because 

of turnover. While there may be 

meritorious cases for using an occupied 

unit, a PHA could use this provision to 

steer assistance toward favored sites and 

tenants. 

HUD Response: The suggestion to 

provide priority for only 20 to 30 

percent of in-place families is contrary 

to HUD policy to minimize 

displacement. The law requires that 

PHAs determine eligibility of families 

under the project-based voucher 

program and PHA selection of families 

from the waiting list. The PHA must 

give in-place families that are eligible 

for assistance a selection preference to 

minimize displacement. When such 

families move out of the PBV unit, the 

unit will then become available for a 

waiting list family. 

Comment: Proposed § 983.251(c) 

governs the selection of families from 

the PBV waiting list. One commenter 

stated that the rule should allow for 

preferences for persons with disabilities 

for units in which disabled individuals 

will be receiving specialized services if 

the persons are recognized by Congress 

as a protected class because of their 

disabilities. Placing preferences for 

these recognized classes would 

minimize the need for waivers. Another 

commenter stated that HUD, in 

supportive housing with ‘‘wraparound 

services,’’ should allow PHAs and 

owners to select the applicants who 

need the services and allow preferences 

based on eligibility for services offered 

at specific complexes. Another 

commenter stated that ‘‘in some 

circumstances, supportive housing 

projects that serve people with 

disabilities that grant preference to 

applicants who are eligible for the 

supportive services offered may be 

entirely appropriate * * *’’

HUD Response: HUD agrees with the 

commenters. HUD is revising this final 

rule to allow a selection preference for 

disabled persons in need of the services 

offered at a particular PBV project. 

Comment: Proposed § 983.251(c)(3) 

provides for project or building-specific 

waiting lists. Three commenters stated 

that they support project-specific 

waiting lists. One commenter stated that 

it supported selection criteria for 

individual projects. Two commenters 

stated that ‘‘we applaud the proposed 

rule’s clear statement that a PHA may 

maintain project-specific waiting lists, a 

policy that is essential for permanent 

supportive housing to operate 

efficiently.’’ Another commenter stated 

that it supports separate waiting lists for 

PBV units. 

HUD Response: HUD agrees with the 

commenters. The rule gives PHAs the 

ability to establish project-specific 

waiting lists. 

Comment: Two commenters objected 

to the income-targeting provision in 

proposed § 983.251(c)(6). One stated 

that the PBV program will create 

disincentives for PHAs because this 

section would require that 75 percent of 

families be extremely low-income. This 

will result in higher assistance 

payments and fewer families being 

served. Another commenter stated that 

income targeting should be removed 

entirely. It is not in line with upcoming 

budget reductions and does not allow 

PHAs to make decisions on how to 

spend their funding. 

HUD Response: HUD has considered 

these comments but declines to adopt 

them for the following reason. Section 

8(o)(13)(J) makes the statutory 

requirements governing income 

targeting applicable to the project-based 

voucher program. The income targeting 

requirements are program-wide 

requirements. PHAs need not apply the 

requirements on a project-by-project 

basis. 

Comment: Commenters stated that 

§ 983.251(c) should be revised to allow 

for preferences based on eligibility for 

supportive services being offered, while 

at the same time preserving, for persons 

with disabilities, the principle that 

participation in supportive services is 

voluntary. Two commenters agreed with 

preferences based on eligibility for 

supportive services and stated that the 

civil rights concepts embodied in 

Section 504 and part 982 regulations 

should be preserved in this rule. 

These commenters recommended an 

additional paragraph be added to 

proposed § 983.251(c) providing that ‘‘in 

appropriate circumstances to be 

determined by the PHA in its PHA plan 

* * * the PHA may adopt preferences 

on its project-specific lists for families 

who are eligible for the services to be 

offered in conjunction with an 

individual project, building, or set of 

units. However, the owner must permit 

occupancy by any qualified person with 

a disability who could benefit from the 

housing or services provided, regardless 

of the person’s disability.’’

HUD Response: HUD agrees. The final 

rule allows a selection preference for 

disabled persons in need of the services 

offered at the PBV project. 

Comment: Proposed § 983.251(c)(5) 

provides that ‘‘the PHA may place 

families referred by the PBV owner on 

its PBV waiting list.’’ One commenter 

stated that this section should clarify 

that the PHA may not provide ownerreferred families with any admission 

rights not enjoyed by other families. 

Otherwise, the owners would become 

the gatekeepers for the PBV program. 

This, the commenter argued, would be 

inappropriate. Another commenter 

stated that this section and proposed 

§ 981.251(c)(3) (providing for separate 

project or building waiting lists) 

essentially negate (c)(1) (providing for 

selection from the PHA waiting list), 

and allow landlords to make referrals to 

a site-based list that can have its own 

preferences. This appears inconsistent 

with the statute and would allow 

individuals referred by the landlord to 

jump over the community-wide waiting 

list. Unlike public housing, there is no 

provision for civil rights monitoring of 

these lists. This commenter 

recommended certain revisions: 

In proposed § 983.251(c)(3), strike the 

last sentence reading, ‘‘In either case, 

the waiting list may establish criteria or 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59909 

preferences for occupancy of particular 

units.’’

Revise proposed § 983.251(c)(5) to 

read, ‘‘Subject to its waiting list policies 

and selection preferences specified in 

the PHA administrative plan, the PHA 

may place families referred by the PBV 

owner on its PBV waiting list.’’

HUD Response: HUD has considered 

these comments and believes that the 

commenters misunderstood HUD’s 

intent. The PHA must administer its 

waiting list in accordance with its 

administrative plan that governs 

admission policies. The PHA may 

establish preferences for selecting 

families from its waiting list. The law 

governing the PBV program requires 

that families be selected from the PHA’s 

waiting list and allows the PHA to place 

on its waiting list families referred by an 

owner. The statute further provides that 

a PHA may maintain a separate waiting 

list for a particular project. 

Comment: Proposed § 983.251(c)(7) 

provides that in selecting families to 

occupy PBV units with special 

accessibility features for persons with 

disabilities, the PHA must first refer to 

the owner those families that require 

such features (see 24 CFR 8.26 and 

100.202). A commenter stated that this 

section should also include material 

regarding the owner’s duties in 

connection with families that require 

accessibility features. 

HUD Response: This commenter’s 

suggestion was not adopted since a 

requirement to provide materials 

regarding owner’s duties in connection 

with families that require accessibility 

features is beyond the scope of this 

rulemaking. 

Comment: A commenter stated that 

the waiting list system should allow 

owner referrals during times of underutilization and PHA referrals to owners 

during times of over-utilization. 

Another commenter stated that the rule 

should remove the requirement to use 

the PHA’s waiting list when the project 

serves homeless or special needs 

populations, as such populations are not 

well-served by using PHA waiting lists. 

HUD Response: The rule retains the 

proposed rule language. The statute 

requires that the PHA maintain waiting 

lists for project-based units. However, 

the PHA may use separate waiting lists 

for PBV units in individual projects or 

buildings or may use a single waiting 

list for the PHA’s whole PBV program. 

PHAs may also give a selection 

preference for homeless individuals and 

homeless families. 

Comment: Commenters stated that 

there is nothing in the rule to cover 

tenants who become over-income. This 

commenter states that there should be a 

6-month grace period as in the tenantbased program, citing § 982.455 (which 

provides that the HAP contract 

terminates 180 days after the last 

housing assistance payment to the 

owner). Income changes may be 

temporary, or the family could relocate 

to a unit with higher gross rent for 

which they are eligible. One commenter 

states that a sentence should be added 

to proposed § 983.259 that reads ‘‘if a 

family is over-income, subsidy shall be 

suspended for six months.’’

HUD Response: HUD disagrees that 

there should be a 6-month grace period 

for families that no longer require 

housing assistance in a PBV unit. The 

provisions of Section 982.455 do not 

apply to the PBV program. If a unit is 

occupied by a family for which housing 

assistance is no longer required, the 

PHA has the option of removing this 

unit from the HAP contract or 

substituting the unit with a comparable 

unit in the building for occupancy by 

another eligible family in need rather 

than hold off on the use of the 

assistance for six months. 

Comment: Proposed § 983.254(b) 

provides that if any contract units have 

been vacant for a period of 120 or more 

days since owner notice of vacancy, the 

PHA may give notice to the owner 

amending the HAP contract to reduce 

the number of contract units by 

subtracting the number of contract units 

(by number of bedrooms) that have been 

vacant for such a period. One 

commenter stated that HUD should 

clarify that this reduction is not the 

same as termination of the HAP, but 

merely an adjustment to the payment. In 

addition, HUD should make clear that 

the PHA would still have the duty to 

fully utilize its Section 8 funding in 

some manner, such as in the tenantbased program. The commenter based 

this argument on 42 U.S.C. 1439(a) and 

42 U.S.C. 1437f(o)(K). One commenter 

stated that it should be more clearly 

stated that the PHA may not reduce the 

units under HAP contract if the units 

have been vacant 120 days or more due 

to the PHA’s failure to refer a sufficient 

number of families to owner. 

HUD Response: HUD has considered 

the comment, but is not adopting it for 

the following reasons. HUD believes 

that the regulation is clear upon 

scrutiny. A reduction in the number of 

units under the PBV HAP contract is not 

synonymous with termination of the 

HAP contract. Funding utilization is the 

responsibility of the PHA regardless of 

whether the vouchers are project-based 

or tenant-based. Since the owner can 

refer families to the PHA’s waiting list 

for PBV, HUD disagrees that units 

should not be removed from the HAP 

contract if the units have been vacant 

120 days or more due to the PHA’s 

failure to refer a sufficient number of 

families to the owner. Additionally, 

subject to a PHA’s policy on vacancy 

payments, an owner is not receiving 

subsidy on units that remain 

unoccupied and the PHA can remove 

such units from the HAP contract. 

Comment: Proposed § 983.256(c)(3) 

states that the lease must state ‘‘the term 

of the lease (initial term and any 

provision for renewal).’’ One commenter 

stated that this section should be 

revised to require a renewal provision in 

the lease or tenancy addendum. 

HUD Response: The lease used in the 

PBV program is comparable to lease 

requirements in the tenant-based 

program. HUD does not require specific 

renewal provisions in the lease or 

tenancy addendum since this is a matter 

of local rental practice and is up to the 

owner. 

Comment: Proposed § 983.257 states 

that ‘‘Section 982.310 of this chapter 

applies with the exception that 

§ 982.310(d)(1)(iii) and (iv) does not 

apply to the PBV program. (In the PBV 

program, ‘‘good cause’’ does not include 

a business or economic reason or desire 

to use the unit for personal, family, or 

a non-residential rental purpose.)’’ Two 

commenters stated that ‘‘we do not 

understand why in the PBV program it 

would not be good cause to terminate a 

tenancy for business or economic 

reasons similar to the voucher 

program.’’

HUD Response: In the tenant-based 

program, each HAP contract is for a 

specific unit. In the project-based 

program, most HAP contracts will be for 

more than one unit. Since HAP 

contracts under the PBV program will 

be for multiple units, the owner cannot 

claim a business or economic reason to 

terminate a tenancy since the unit is 

obligated, under any HAP contract, to be 

an assisted unit for the term of the 

contract. The regulation provides, 

however, that if the owner terminates a 

lease without good cause, the unit must 

be removed from the housing assistance 

payments contract. 

Comment: Two commenters stated 

that HUD should use 24 CFR part 247 

(which applies to section 221(d)(3) and 

(d)(5) below market interest rate 

projects; projects under section 236 of 

the National Housing Act; and projects 

under section 202 of the Housing Act of 

1959) as the rule for termination. Part 

247 requires good cause for termination, 

and the proposed section does not. 

Under the proposal, an owner can in 

effect capriciously remove a tenant from 

the PBV program and force the tenant 

into the tenant-based program. One 

59910 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

commenter also stated that as an 

alternative, if HUD does not adopt the 

standard in 24 CFR part 247, HUD 

should add a clause in § 983.256 of this 

final rule that would require owners to 

offer lease renewal unless they have 

good cause to do otherwise. One 

commenter also stated that good cause 

should be required for termination of 

tenancy. 

HUD Response: The final rule clarifies 

provisions on lease termination in 

response to comments. As a general 

matter, 24 CFR 982.310 (other than 

paragraphs (d)(1)(iii) and (iv)) applies 

and describes the events that constitute 

good cause for lease termination. Final 

§ 983.257(b) describes the owner’s 

options upon lease expiration: To renew 

the lease; refuse to renew for ‘‘good 

cause’’ as defined; or refuse to renew 

without good cause, in which case the 

PHA would provide the family with a 

tenant-based voucher and remove the 

unit from the HAP contract. In this latter 

case, the unit would be removed from 

the PBV HAP contract. HUD believes 

that these changes clarify the issue. 

Comment: Proposed § 983.259 

provides that if the PHA determines that 

a family is occupying a wrong-size unit, 

the PHA must offer the family the 

opportunity to receive continued 

housing assistance in another unit. This 

assistance may be in the form of another 

Section 8 project-based unit, tenantbased voucher assistance, or other 

comparable project-based or tenantbased assistance. 

Two commenters stated that wrongsize unit termination provision is unfair 

to the project when the fault is with the 

family and not the owner. The owner 

should be able to evict the family under 

these circumstances. The same should 

apply when the PHA offers the family 

other comparable assistance and the 

family fails to act on the offer. 

Referring to relocation from a wrongsize unit, a commenter stated that 

tenants should have more choice of the 

replacement assistance to be provided 

and the right to reject a unit for good 

cause, and that the rule should require 

the PHA to offer an appropriately sized 

affordable unit. Also, if an appropriate 

alternate unit is identified, the tenant 

should have an opportunity to reject the 

unit for good cause. This commenter 

asks that current § 983.205(b), which 

provides many of these features, be 

retained in this rule. 

HUD Response: HUD considered but 

did not adopt these comments for the 

following reasons. Although the owner 

may evict a family in accordance with 

the lease, the PHA must terminate 

assistance for any unit occupied by an 

ineligible family once sufficient time is 

provided on a tenant-based voucher, or 

another form of comparable assistance is 

offered to the family and then refused. 

HUD disagrees that a family should 

have the right to reject the offer of 

another PBV or comparable unit for 

cause, as that would prolong the time 

until the unit could be made available 

to another needy family. However, the 

regulation in Section 983.259(c)(2) does 

not preclude the PHA from establishing 

a policy on unit offers when offering 

another form of continued housing 

assistance. 

Comment: Proposed § 983.260 gives 

the family a right to move with tenantbased assistance after one year in the 

project-based unit. One commenter 

stated that the occupancy period before 

the option to move should be extended 

to two years, because many projectbased programs have a supportive 

services option that goes beyond one 

year. In addition, other project-based 

units should be given as a moving 

option. Finally, the rule should include 

tenant protection so that tenants don’t 

pay more rent than they would in the 

voucher program. Another commenter 

stated that this provision should be 

changed in the case of transitional 

supportive housing so that the tenant is 

encouraged to complete the tenant’s 

services plan before moving. Also, the 

PHA should be able to substitute other 

comparable housing. Another 

commenter stated that it supported the 

option to move after 12 months, 

however, there should be stronger 

language requiring owners to fulfill their 

PBV commitments before issuing 

vouchers to families that wish to move, 

and the PHA must have sufficient 

funding to fill the vacated unit. One 

commenter stated that it supports the 

ability of a family to leave with a tenantbased voucher because it will be an 

incentive to participate in transitional 

housing programs. 

HUD Response: The right of tenants to 

move after one year is statutory and 

cannot be revised in the manner 

suggested. Transitional housing is not a 

factor because, as noted above, 

transitional housing often has 

requirements incompatible with this 

aspect of the PBV program, and hence 

is not eligible for assistance under this 

program. 

Comment: Three commenters stated 

that the provision allowing families to 

move after 12 months should be 

eliminated. It will complicate waiting 

lists, contradict PHA preferences, and 

restrict capacity for assistance. Owners 

may be reluctant to participate knowing 

they could lose their tenants in a year, 

and families could circumvent the 

tenant-based waiting list. It adversely 

impacts the PHA and allows applicants 

to jump the waiting list. 

HUD Response: Tenant mobility after 

12 months is a statutory requirement 

and cannot be eliminated. However, 

when the family moves out of a unit 

with project-based assistance, the PHA 

is required to refer other families to the 

owner to be selected to occupy vacated 

units. 

Comment: Proposed § 983.260(a) 

would have provided that ‘‘if the family 

terminates the assisted lease before the 

end of one year, the family relinquishes 

the opportunity for continued tenantbased assistance.’’ A commenter stated 

that there should be good cause 

exceptions allowing family to move 

within the first year. 

HUD Response: The comment is not 

adopted. The statute provides only for 

continued assistance under the tenantbased voucher program or other 

comparable assistance after the family 

has occupied the dwelling unit under a 

PBV HAP contract for 12 months. This 

final rule places this statement in a new 

§ 983.260(d). 

Comment: Commenters stated that, to 

follow § 504 and HUD’s ADA 

regulations and avoid unnecessary 

concentration and isolation of persons 

with disabilities, the rule should adopt 

project size limits for persons with 

disabilities similar to the 811 program 

Notice of Funding Availability (NOFA). 

These commenters suggested a new 

§ 983.263 be added setting size limits for 

buildings serving disabled persons. 

Independent living projects would be 

capped at 24 PBV units serving persons 

with disabilities. Group homes serving 

persons with disabilities would be 

capped at six PBV units. The language 

would also include criteria for the HUD 

field office to grant exceptions to these 

limits. 

HUD Response: HUD disagrees with 

comments that would unduly restrict 

the PBV program by limiting the size of 

buildings or group homes occupied by 

persons with disabilities. 

Comment: Proposed § 983.261(c) 

provides that a family residing in an 

excepted unit that no longer meets the 

criteria for a ‘‘qualifying family’’ in 

connection with the 25 percent per 

building cap exception must vacate the 

unit within a reasonable period of time 

established by the PHA. Four 

commenters stated that the rule should 

also state that a family in an excepted 

unit (that is, a unit excepted from the 25 

percent cap on project basing) not in 

compliance with its FSS obligations can 

be evicted. 

HUD Response: The law requires that 

excepted units must be made available 

to families that receive services. If the 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59911 

family no longer qualifies for the 

excepted unit because it is in noncompliance with its obligations to 

receive supportive services, the PHA 

may terminate assistance on that basis. 

(See final § 983.261(c)). If a family at the 

time of initial tenancy is receiving, and 

while the resident of an excepted unit 

has received, FSS supportive services or 

any other supportive services as defined 

in the PHA administrative plan, and 

successfully completes the FSS contract 

of participation or the supportive 

services requirement, the unit continues 

to count as an excepted unit for as long 

as the family resides in the unit. (See 

final § 983.261(d)). 

Subpart G—Rent to Owner (§§ 983.301–

983.305) 

Comment: A commenter stated that 

‘‘we do not favor the proposed rent 

limits,’’ that is, the higher of 110 percent 

FMR or the HUD-approved exception 

rent. These limits are too restrictive, and 

will limit project basing to the lower 

end of the market and interfere with 

income mixing. Another commenter 

agreed and stated that while there are 

sharp reductions in payment standards 

due to budgetary concerns, FMRs are 

not falling. The program will not attract 

quality developers and favorable 

financing. Two commenters stated that 

the statute allows for a different 

payment standard, as well as a higher 

payment standard, as long as the rent 

reasonableness test is met. Two other 

commenters stated that they object to 

§ 983.301(b)(1) as unjustifiably 

eliminating flexibility to use a higher 

range of payment standard in particular 

cases. Such a rule will reduce the 

willingness of landlords to enter the 

program and thus have the opposite 

effect of encouraging PHAs to set higher 

payment standards across the board, 

potentially increasing overall costs. One 

of these commenters stated that 

§§ 983.205(d) and 983.302(c) should be 

deleted, and §§ 983.301(a)(3) and 

983.301(b) should be revised to read as 

follows (new material is in italics): 

§ 983.301(a)(3): The rent to owner is 

redetermined at the request of the owner 

and not more frequently than the 

annual contract anniversary in 

accordance with this section and 

§ 983.302. 

§ 983.301(b): ‘‘Amount of rent to 

owner. Except for certain tax credit units 

as provided in paragraph (c) of this 

section, the rent to owner must not 

exceed the lowest of: 

(1) 110 percent of the fair market rent 

for the unit bedroom size minus any 

utility allowance; 

(2) The reasonable rent; or 

(3) The rent requested by the owner; 

except that the rent to owner never is 

required to be less than the initial 

approved rent to owner. 

Another commenter also stated that 

the rents should be required to be 

redetermined only at the request of the 

owner and that the requirement to 

annually redetermine rent be removed. 

HUD Response: The final rule 

provides that the rent to owner may be 

established in accordance with the 

statutory maximum. Thus, the final rule 

provides at Section 983.301(b): 

Amount of rent to owner. Except for 

certain tax credit units as provided in 

paragraph (c) of this section, the rent to 

owner must not exceed the lowest of: 

(1) An amount determined by the 

PHA, not to exceed 110 percent of the 

applicable fair market rent (or any 

exception payment standard approved 

by the Secretary) for the unit bedroom 

size minus any utility allowance; 

(2) The reasonable rent; or 

(3) The rent requested by the owner. 

Comment: One commenter stated that 

the rent provisions take away the PHA’s 

flexibility to set rents by limiting the 

rents to the existing tenant-based 

payment standard. By statute, PHAs 

have authority to raise the rent to the 

higher of 110 percent of FMR or the 

PHA’s payment standard. Two 

commenters stated that in economically 

robust areas the maximum rent of 110 

percent of FMR is more appropriate, and 

rent reasonableness checks will keep a 

PHA from overpaying. Three other 

commenters made similar comments. 

HUD Response: The commenters’

concerns have been addressed in the 

HUD response immediately above. 

Comment: One commenter stated that 

proposed § 983.301(a)(3) should be 

rewritten to state: ‘‘The rent to owner is 

determined at the request of the owner 

and not more frequently than the annual 

contract anniversary in accordance with 

this section and § 983.302.’’

HUD Response: The final rule 

addresses the commenter’s concern. It 

provides that the rent to owner shall be 

redetermined when the owner requests 

an increase in the rent to owner at the 

annual anniversary of the HAP contract 

or when there is a 5 percent decrease in 

the published FMR. 

Comment: Two commenters stated 

that limiting rents to the PHA payment 

standard means that if the payment 

standard is reduced, rents must be 

reduced. This provision of the rule 

seems contrary to the statutory 

provision on rent adjustments 

(8)(o)(13)(I)). If this provision remains it 

would likely discourage owner 

willingness to accept PBV contracts. In 

addition, lack of rent stability would 

make it hard to leverage additional 

financing. 

A number of commenters stated that 

§ 983.301(b) should state that the PHA 

may establish a separate payment 

standard for a PBV project. 

HUD Response: HUD agrees and is 

adopting an FMR-based standard as 

described in the above responses. 

Comment: Proposed § 983.301(c) 

provides for a different rent-to-owner 

calculation for certain LIHTC units. 

Three commenters stated that the higher 

rent for LIHTC units appears to apply 

only when there are LIHTC units not 

receiving PBV assistance. This appears 

to prohibit the higher tax credit rent for 

buildings that are 100 percent PBV. 

These commenters stated that for 

projects for the elderly, persons with 

disabilities, and families receiving 

supportive services, HUD should 

determine what the maximum tax credit 

rent would be and set the rent 

accordingly. One commenter stated that 

the rule runs counter to the 

Department’s existing treatment of 

Section 8 assistance in conjunction with 

LIHTCs. As currently proposed, the rule 

would lead to concentration in qualified 

census tracts. Low-income families need 

services and those services must be 

supported by project rents. This 

commenter recommends that HUD 

adhere to its existing treatment of 

Section 8 assistance with LIHTCs in PIH 

notices 2003–32 and 2002–22. 

HUD Response: HUD has determined 

that it is inappropriate to allow owners 

to collect higher rents from voucher 

families than they are allowed to collect 

from tax credit families. HUD has 

determined that allowing higher rents 

would result in a duplicative subsidy. 

Accordingly, LIHTC projects under 24 

CFR 983.304(c)(1)(v) will be treated in 

the same manner as Section 236 and 

Section 221(d)(3) below-market interest 

rate (BMIR) projects. HUD believes that 

the rule text, as drafted, accurately 

reflects the language of § 8(o)(13)(H) of 

the 1937 Act (42 U.S.C. 1437f(o)(13)(H)). 

Comment: One commenter stated that 

proposed § 983.301(f)(2) (providing that 

the PHA may not apply different 

payment standard and utility allowance 

amounts in the project-based and 

tenant-based programs) is inconsistent 

with the statute. 

HUD Response: HUD considered the 

comment regarding utility allowance 

schedules, but is not adopting it. The 

final rule provides that the PHAs may 

not establish rents under the PBV 

program that differ from the PHAs’

tenant-based payment standards. The 

statute governing the PBV program is 

silent on utility allowance schedules. 

Utility allowance schedules are 

59912 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

determined based on community rates 

and average consumption. It is therefore 

not necessary to establish separate 

utility allowance schedules for the PBV 

program. 

Comment: Proposed § 983.302 

provides for an annual redetermination 

of the rent to owner prior to the annual 

anniversary of the HAP contract. A 

number of commenters stated that 

§ 982.302(c) should be deleted from the 

rule because it is contrary to statute and 

would discourage owners, lenders, and 

investors from program participation. 

This section states that if the annual 

redetermination shows that the rent to 

the owner has decreased, the actual rent 

to the owner must be decreased 

regardless of whether the owner has 

requested an adjustment. 

HUD Response: HUD disagrees with 

the interpretation that the proposed 

§ 983.302(c) is contrary to the statute. 

HUD believes that any rent adjustments 

under the statute may not exceed the 

maximum permitted under the law (i.e., 

an amount determined by the PHA, not 

to exceed 110 percent of the applicable 

FMR (or any exception payment 

standard approved by the Secretary)) 

and that the statute does not limit 

adjustments to upward adjustments. 

Nonetheless, to accommodate the 

commenter’s concerns, the final rule 

provides that upon an owners request 

for a rent adjustment or when there is 

a 5 percent or greater decrease in the 

published FMR, rents shall be 

redetermined. 

Comment: In proposed § 983.301(c)(3) 

on LIHTC rents, the word ‘‘chargeable’’

would be better than the word 

‘‘charged’’ in the phrase ‘‘the ‘tax credit 

rent’ is the rent charged for comparable 

units of the same bedroom size* * *’’

HUD Response: The comment was 

considered but not adopted. The use of 

the word ‘‘charged’’ appropriately 

conveys the definition of tax credit rent 

that the owner is collecting for the unit. 

Comment: Proposed § 983.303 

provides that the rent to owner must not 

exceed the reasonable rent as 

determined by the PHA. Three 

commenters, while agreeing that rents 

are subject to the rent reasonableness 

test, stated that the rule establishes 

numerous times at which the PHA must 

determine rent reasonableness. This, the 

three commenters argued, is unduly 

burdensome and will inhibit 

participation in the program by lenders 

and investors. HUD should require only 

an annual determination, they argued. 

Another commenter stated that a rent 

comparability study should be 

conducted initially and then once every 

5 years, except where an upward rent 

adjustment is proposed. No statutory 

section requires annual 

redeterminations of rent during a 

contract unless rents are increased. One 

commenter stated that PHAs should be 

required only once a year to determine 

rent reasonableness and at the time a 

new PBV contract is executed. Another 

commenter stated that two comparables, 

rather than three, should be required. 

Another commenter stated that rent, 

once determined to be reasonable, 

should not be redetermined at no less 

than 3-year intervals. Another 

commenter stated that the requirement 

that rents be redetermined annually will 

result in reduced rent to the owner if the 

payment standard is reduced. This is 

contrary to section 8(o)(13)(I) of the 

1937 Act, which delegates rent 

determinations to the PHA and to the 

owner. Furthermore, this provision will 

make it difficult to use PBV with HOME 

funds because it is inconsistent with 

HOME regulations. 

HUD Response: The final rule retains 

the requirements concerning rent 

reasonableness determinations. Section 

8(o)(10)(A) of the United States Housing 

Act of 1937 requires that rents under the 

program be reasonable. The implication 

is that rents must be reasonable at all 

times. The circumstances under which 

a PHA is required to redetermine rent 

reasonableness under the PBV program 

are not overly burdensome. The final 

rule also retains the requirement that 

three comparables must be used. Three 

comparables, as opposed to two, will 

more accurately reflect market rental 

conditions. 

Comment: Proposed § 983.304 

provides that in the case of projects with 

HOME funds or other subsidies, the 

PBV rent may not exceed the rent 

permitted under the other subsidy 

program. Four commenters stated 

objections to this section. This section 

would appear to authorize PHAs to 

continue an ongoing subsidy layering 

review that would create uncertainty 

with respect to rent levels and 

discourage participation by private 

lenders and investors. Two commenters 

stated that an owner interested in 

preservation should be able to seek a 

waiver to allow a Section 236 subsidy 

in a partially assisted Section 8 project 

to be allocated to the units with no 

Section 8 assistance. These commenters 

state that in § 983.304(b)(2) the words 

‘‘subsidized’’ and ‘‘(basic rent)’’ should 

be deleted. One commenter stated that 

§ 983.304(d) lacks clarity and suggests a 

revision to § 983.304(d)(the new 

material is in italics): 

‘‘At its discretion, a PHA may reduce the 

initial rent to owner to reflect the 

assumptions used in the award of other 

subsidy, including tax credit or tax 

exemption, grants, or other subsidized 

financing.’’

HUD Response: Rents at projects 

receiving other forms of subsidy (e.g. 

Section 236) combined with projectbased voucher assistance are restricted 

to the rent restrictions of the applicable 

subsidized program. Thus, the PBV rent 

may not exceed the subsidized rent 

established under the procedures for 

other subsidized programs. 

Subpart H—Payment to Owner 

Comment: Proposed § 983.351(b) 

provides for monthly payments to the 

owner for each unit that complies with 

HQS and is leased to and occupied by 

an eligible family. Four commenters 

stated that this provision should also 

indicate that the PHA will include any 

vacancy payments that it has previously 

agreed to provide in its monthly 

assistance payment to the owner. 

HUD Response: HUD has considered 

this comment and is not adopting it. 

Section 983.351 is titled ‘‘PHA payment 

to owner for occupied unit (emphasis 

added).’’ Units for which an owner is 

receiving vacancy payments are not 

occupied and are discussed in Section 

983.352. 

Comment: Proposed § 983.352(b) 

provides for vacancy payments at the 

discretion of the PHA. One commenter 

stated that vacancy payments should be 

mandatory for all PHAs. 

HUD Reponse: The statute governing 

the PBV program requires that if the 

HAP contract allows for vacancy 

payments, that such payments may be 

made at a PHA’s discretion. 

Findings and Certifications 

Executive Order 12866, Regulatory 

Planning and Review 

The Office of Management and Budget 

(OMB) reviewed this rule under 

Executive Order 12866 (entitled 

‘‘Regulatory Planning and Review’’). 

OMB determined that this rule is a 

‘‘significant regulatory action,’’ as 

defined in section 3(f) of the Order 

(although not economically significant, 

as provided in section 3(f)(1) of the 

Order). Any changes made to the rule 

subsequent to its submission to OMB 

are identified in the docket file, which 

is available for public inspection 

between the hours of 8 a.m. and 5 p.m. 

in the Office of Regulations, Room 

10276, Department of Housing and 

Urban Development, 451 Seventh Street, 

SW., Washington, DC 20410. 

Regulatory Flexibility Act 

The undersigned, in accordance with 

the Regulatory Flexibility Act (RFA) (5 

U.S.C. 605(b)), has reviewed and 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59913 

approved this rule, and in so doing 

certifies that this rule will not have a 

significant economic impact on a 

substantial number of small entities. 

This final rule is exclusively concerned 

with PHAs that administer tenant-based 

housing assistance under section 8 of 

the United States Housing Act of 1937. 

Specifically, the rule would give PHAs 

the option of project-basing up to 20 

percent of their annual budget authority 

under the tenant-based program. Under 

the definition of ‘‘Small governmental 

jurisdiction’’ in section 601(5) of the 

RFA, the provisions of the RFA are 

applicable only to those few PHAs that 

are part of a political jurisdiction with 

a population of under 50,000 persons. 

The number of entities potentially 

affected by this rule is therefore not 

substantial. 

Environmental Impact 

A Finding of No Significant Impact 

with respect to the environment was 

made at the proposed rule stage in 

accordance with HUD regulations at 24 

CFR part 50, which implement section 

102(2)(C) of the National Environmental 

Policy Act of 1969 (42 U.S.C. 4332). 

This Finding of No Significant Impact 

remains applicable and is available for 

public inspection between the hours of 

8 a.m. and 5 p.m. weekdays in the 

Office of Regulations, Office of General 

Counsel, Room 10276, Department of 

Housing and Urban Development, 451 

Seventh Street, SW., Washington, DC 

20410. Due to security measures at the 

HUD Headquarters building, please 

schedule an appointment to review the 

public comments by calling the 

Regulations Division at (202) 708–3055 

(this is not a toll-free number). 

Executive Order 13132, Federalism 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits, to the extent 

practicable and permitted by law, an 

agency from promulgating a regulation 

that has federalism implications and 

either imposes substantial direct 

compliance costs on state and local 

governments and is not required by 

statute, or preempts state law, unless the 

relevant requirements of section 6 of the 

Executive Order are met. This final rule 

does not have federalism implications 

and does not impose substantial direct 

compliance costs on state and local 

governments or preempt state law 

within the meaning of the Executive 

Order. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (Pub. L. 104–4; 

approved March 22, 1995) (UMRA) 

establishes requirements for federal 

agencies to assess the effects of their 

regulatory actions on state, local, and 

tribal governments, and on the private 

sector. This final rule would not impose 

any federal mandates on any state, local, 

or tribal governments, or on the private 

sector, within the meaning of the 

UMRA. 

Catalog of Federal Domestic Assistance 

The Catalog of Federal Domestic 

Assistance number applicable to the 

program affected by this rule is 14.871. 

List of Subjects in 24 CFR Part 983 

Grant programs—housing and 

community development, Low- and 

moderate-income housing, Public 

housing, Rent subsidies, Reporting and 

recordkeeping requirements. 

■ For the reasons stated in the preamble, 

HUD amends 24 CFR part 983 to read 

as follows: 

■ 1. Revise 24 CFR part 983 to read as 

follows: 

PART 983—PROJECT–BASED 

VOUCHER (PBV) PROGRAM 

Subpart A—General 

Sec. 

983.1 When the PBV rule (24 CFR part 983) 

applies. 

983.2 When the tenant-based voucher rule 

(24 CFR part 982) applies. 

983.3 PBV definitions. 

983.4 Cross-reference to other Federal 

requirements. 

983.5 Description of the PBV program. 

983.6 Maximum amount of PBV assistance. 

983.7 Uniform Relocation Act. 

983.8 Equal opportunity requirements. 

983.9 Special housing types. 

983.10 Project-based certificate (PBC) 

program. 

Subpart B—Selection of PBV Owner 

Proposals 

983.51 Owner proposal selection 

procedures. 

983.52 Housing type. 

983.53 Prohibition of assistance for 

ineligible units. 

983.54 Prohibition of assistance for units in 

subsidized housing. 

983.55 Prohibition of excess public 

assistance. 

983.56 Cap on number of PBV units in each 

building. 

983.57 Site selection standards. 

983.58 Environmental review. 

983.59 PHA-owned units. 

Subpart C—Dwelling Units 

983.101 Housing quality standards. 

983.102 Housing accessibility for persons 

with disabilities. 

983.103 Inspecting units. 

Subpart D—Requirements for Rehabilitated 

and Newly Constructed Units 

983.151 Applicability. 

983.152 Purpose and content of the 

Agreement to enter into HAP contract. 

983.153 When Agreement is executed. 

983.154 Conduct of development work. 

983.155 Completion of housing. 

983.156 PHA acceptance of completed 

units. 

Subpart E—Housing Assistance Payments 

Contract 

983.201 Applicability. 

983.202 Purpose of HAP contract. 

983.203 HAP contract information. 

983.204 When HAP contract is executed. 

983.205 Term of HAP contract. 

983.206 HAP contract amendments (to add 

or substitute contract units). 

983.207 Condition of contract units. 

983.208 Owner responsibilities. 

983.209 Owner certification. 

Subpart F—Occupancy 

983.251 How participants are selected. 

982.252 PHA information for accepted 

family. 

983.253 Leasing of contract units. 

983.254 Vacancies. 

983.255 Tenant screening. 

983.256 Lease. 

983.257 Owner termination of tenancy and 

eviction. 

983.258 Security deposit: amounts owed by 

tenant. 

983.259 Overcrowded, under-occupied, and 

accessible units. 

983.260 Family right to move. 

983.261 When occupancy may exceed 25 

percent cap on the number of PBV units 

in each building. 

Subpart G—Rent to owner 

983.301 Determining the rent to owner. 

983.302 Redetermination of rent to owner. 

983.303 Reasonable rent. 

983.304 Other subsidy: effect on rent to 

owner. 

983.305 Rent to owner: effect of rent control 

and other rent limits. 

Subpart H—Payment to Owner 

983.351 PHA payment to owner for 

occupied unit. 

983.352 Vacancy payment. 

983.353 Tenant rent; payment to owner. 

983.354 Other fees and charges. 

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

Subpart A—General 

§ 983.1 When the PBV rule (24 CFR part 

983) applies. 

Part 983 applies to the project-based 

voucher (PBV) program. The PBV 

program is authorized by section 

8(o)(13) of the U.S. Housing Act of 1937 

(42 U.S.C. 1437f(o)(13)). 

§ 983.2 When the tenant-based voucher 

rule (24 CFR part 982) applies. 

(a) 24 CFR Part 982. Part 982 is the 

basic regulation for the tenant-based 

voucher program. Paragraphs (b) and (c) 

of this section describe the provisions of 

part 982 that do not apply to the PBV 

program. The rest of part 982 applies to 

the PBV program. For use and 

59914 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

applicability of voucher program 

definitions at § 982.4, see § 983.3. 

(b) Types of 24 CFR part 982 

provisions that do not apply to PBV. 

The following types of provisions in 24 

CFR part 982 do not apply to PBV 

assistance under part 983. 

(1) Provisions on issuance or use of a 

voucher; 

(2) Provisions on portability; 

(3) Provisions on the following special 

housing types: shared housing, 

cooperative housing, manufactured 

home space rental, and the 

homeownership option. 

(c) Specific 24 CFR part 982 

provisions that do not apply to PBV 

assistance. Except as specified in this 

paragraph, the following specific 

provisions in 24 CFR part 982 do not 

apply to PBV assistance under part 983. 

(1) In subpart E of part 982: paragraph 

(b)(2) of § 982.202 and paragraph (d) of 

§ 982.204; 

(2) Subpart G of part 982 does not 

apply, with the following exceptions: 

(i) Section 982.10 (owner temination 

of tenancy) applies to the PBV Program, 

but to the extent that those provisions 

differ from § 983.257, the provisions of 

§ 983.257 govern; and 

(ii) Section 982.312 (absence from 

unit) applies to the PBV Program, but to 

the extent that those provisions differ 

from § 983.256(g), the provisions of 

§ 983.256(g) govern; and 

(iii) Section 982.316 (live-in aide) 

applies to the PBV Program; 

(3) Subpart H of part 982; 

(4) In subpart I of part 982: 

§ 982.401(j); paragraphs (a)(3), (c), and 

(d) of § 982.402; § 982.403; § 982.405(a); 

and § 982.406; 

(5) In subpart J of part 982: § 982.455; 

(6) Subpart K of Part 982: subpart K 

does not apply, except that the 

following provisions apply to the PBV 

Program: 

(i) Section 982.503 (for determination 

of the payment standard amount and 

schedule for a Fair Market Rent (FMR) 

area or for a designated part of an FMR 

area). However, provisions authorizing 

approval of a higher payment standard 

as a reasonable accommodation for a 

particular family that includes a person 

with disabilities do not apply (since the 

payment standard amount does not 

affect availability of a PBV unit for 

occupancy by a family or the amount 

paid by the family); 

(ii) Section 982.516 (family income 

and composition; regular and interim 

examinations); 

(iii) Section 982.517 (utility allowance 

schedule); 

(7) In subpart M of part 982: 

(i) Sections 982.603, 982.607, 982.611, 

982.613(c)(2); and 

(ii) Provisions concerning shared 

housing (§ 982.615 through § 982.618), 

cooperative housing (§ 982.619), 

manufactured home space rental 

(§ 982.622 through § 982.624), and the 

homeownership option (§ 982.625 

through § 982.641). 

§ 983.3 PBV definitions. 

(a) Use of PBV definitions. (1) PBV 

terms (defined in this section). This 

section defines PBV terms that are used 

in this part 983. For PBV assistance, the 

definitions in this section apply to use 

of the defined terms in part 983 and in 

applicable provisions of 24 CFR part 

982. (Section 983.2 specifies which 

provisions in part 982 apply to PBV 

assistance under part 983.) 

(2) Other voucher terms (terms 

defined in 24 CFR 982.4). (i) The 

definitions in this section apply instead 

of definitions of the same terms in 24 

CFR 982.4. 

(ii) Other voucher terms are defined 

in § 982.4, but are not defined in this 

section. Those § 982.4 definitions apply 

to use of the defined terms in this part 

983 and in provisions of part 982 that 

apply to part 983. 

(b) PBV definitions. 1937 Act. The 

United States Housing Act of 1937 (42 

U.S.C. 1437 et seq.). 

Activities of daily living. Eating, 

bathing, grooming, dressing, and home 

management activities. 

Admission. The point when the 

family becomes a participant in the 

PHA’s tenant-based or project-based 

voucher program (initial receipt of 

tenant-based or project-based 

assistance). After admission, and so long 

as the family is continuously assisted 

with tenant-based or project-based 

voucher assistance from the PHA, a shift 

from tenant-based or project-based 

assistance to the other form of voucher 

assistance is not a new admission. 

Agreement to enter into HAP contract 

(Agreement). The Agreement is a 

written contract between the PHA and 

the owner in the form prescribed by 

HUD. The Agreement defines 

requirements for development of 

housing to be assisted under this 

section. When development is 

completed by the owner in accordance 

with the Agreement, the PHA enters 

into a HAP contract with the owner. The 

Agreement is not used for existing 

housing assisted under this section. 

HUD will keep the public informed 

about changes to the Agreement and 

other forms and contracts related to this 

program through appropriate means. 

Assisted living facility. A residence 

facility (including a facility located in a 

larger multifamily property) that meets 

all the following criteria: 

(1) The facility is licensed and 

regulated as an assisted living facility by 

the state, municipality, or other political 

subdivision; 

(2) The facility makes available 

supportive services to assist residents in 

carrying out activities of daily living; 

and 

(3) The facility provides separate 

dwelling units for residents and 

includes common rooms and other 

facilities appropriate and actually 

available to provide supportive services 

for the residents. 

Comparable rental assistance. A 

subsidy or other means to enable a 

family to obtain decent housing in the 

PHA jurisdiction renting at a gross rent 

that is not more than 40 percent of the 

family’s adjusted monthly gross income. 

Contract units. The housing units 

covered by a HAP contract. 

Development. Construction or 

rehabilitation of PBV housing after the 

proposal selection date. 

Excepted units (units in a multifamily 

building not counted against the 25 

percent per-building cap). See 

§ 983.56(b)(2)(i). 

Existing housing. Housing units that 

already exist on the proposal selection 

date and that substantially comply with 

the HQS on that date. (The units must 

fully comply with the HQS before 

execution of the HAP contract.) 

Household. The family and any PHAapproved live-in aide. 

Housing assistance payment. The 

monthly assistance payment for a PBV 

unit by a PHA, which includes: 

(1) A payment to the owner for rent 

to owner under the family’s lease minus 

the tenant rent; and 

(2) An additional payment to or on 

behalf of the family, if the utility 

allowance exceeds the total tenant 

payment, in the amount of such excess. 

Housing quality standards (HQS). The 

HUD minimum quality standards for 

housing assisted under the program. See 

24 CFR 982.401. 

Lease. A written agreement between 

an owner and a tenant for the leasing of 

a PBV dwelling unit by the owner to the 

tenant. The lease establishes the 

conditions for occupancy of the 

dwelling unit by a family with housing 

assistance payments under a HAP 

contract between the owner and the 

PHA. 

Multifamily building. A building with 

five or more dwelling units (assisted or 

unassisted). 

Newly constructed housing. Housing 

units that do not exist on the proposal 

selection date and are developed after 

the date of selection pursuant to an 

Agreement between the PHA and owner 

for use under the PBV program. 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59915 

Partially assisted building. A building 

in which there are fewer contract units 

than residential units. 

PHA-owned unit. A dwelling unit 

owned by the PHA that administers the 

voucher program. PHA-owned means 

that the PHA or its officers, employees, 

or agents hold a direct or indirect 

interest in the building in which the 

unit is located, including an interest as 

titleholder or lessee, or as a stockholder, 

member or general or limited partner, or 

member of a limited liability 

corporation, or an entity that holds any 

such direct or indirect interest. 

Premises. The building or complex in 

which the contract unit is located, 

including common areas and grounds. 

Program. The voucher program under 

section 8 of the 1937 Act, including 

tenant-based or project-based assistance. 

Proposal selection date. The date the 

PHA gives written notice of PBV 

proposal selection to an owner whose 

proposal is selected in accordance with 

the criteria established in the PHA’s 

administrative plan. 

Qualifying families (for purpose of 

exception to 25 percent per-building 

cap). See § 983.56(b)(2)(ii). 

Rehabilitated housing. Housing units 

that exist on the proposal selection date, 

but do not substantially comply with 

the HQS on that date, and are 

developed, pursuant to an Agreement 

between the PHA and owner, for use 

under the PBV program. 

Rent to owner. The total monthly rent 

payable by the family and the PHA to 

the owner under the lease for a contract 

unit. Rent to owner includes payment 

for any housing services, maintenance, 

and utilities to be provided by the 

owner in accordance with the lease. 

(Rent to owner must not include charges 

for non-housing services including 

payment for food, furniture, or 

supportive services provided in 

accordance with the lease.) 

Responsible entity (RE) (for 

environmental review). The unit of 

general local government within which 

the project is located that exercises land 

use responsibility or, if HUD determines 

this infeasible, the county or, if HUD 

determines that infeasible, the state. 

Single-family building. A building 

with no more than four dwelling units 

(assisted or unassisted). 

Site. The grounds where the contract 

units are located, or will be located after 

development pursuant to the 

Agreement. 

Special housing type. Subpart M of 24 

CFR part 982 states the special 

regulatory requirements for single-room 

occupancy (SRO) housing, congregate 

housing, group homes, and 

manufactured homes. Subpart M 

provisions on shared housing, 

cooperative housing, manufactured 

home space rental, and the 

homeownership option do not apply to 

PBV assistance under this part. 

State-certified appraiser. Any 

individual who satisfies the 

requirements for certification as a 

certified general appraiser in a state that 

has adopted criteria that currently meet 

or exceed the minimum certification 

criteria issued by the Appraiser 

Qualifications Board of the Appraisal 

Foundation. The state’s criteria must 

include a requirement that the 

individual has achieved a satisfactory 

grade upon a state-administered 

examination consistent with and 

equivalent to the Uniform State 

Certification Examination issued or 

endorsed by the Appraiser 

Qualifications Board of the Appraisal 

Foundation. Furthermore, if the 

Appraisal Foundation has issued a 

finding that the policies, practices, or 

procedures of the state are inconsistent 

with Title XI of the Financial 

Institutions Reform, Recovery, and 

Enforcement Act of 1989 (12 U.S.C. 

3331–3352), the individual must 

comply with any additional standards 

for state-certified appraisers imposed by 

HUD. 

Tenant-paid utilities. Utility service 

that is not included in the tenant rent 

(as defined in 24 CFR 982.4), and which 

is the responsibility of the assisted 

family. 

Total tenant payment. The amount 

described in 24 CFR 5.628. 

Utility allowance. See 24 CFR 5.603. 

Utility reimbursement. See 24 CFR 

5.603. 

Wrong-size unit. A unit occupied by 

a family that does not conform to the 

PHA’s subsidy guideline for family size, 

by being is too large or too small 

compared to the guideline. 

§ 983.4 Cross-reference to other Federal 

requirements. 

The following provisions apply to 

assistance under the PBV program. 

Civil money penalty. Penalty for 

owner breach of HAP contract. See 24 

CFR 30.68. 

Debarment. Prohibition on use of 

debarred, suspended, or ineligible 

contractors. See 24 CFR 5.105(c) and 24 

CFR part 24. 

Definitions. See 24 CFR part 5, 

subpart D. 

Disclosure and verification of income 

information. See 24 CFR part 5, subpart 

B. 

Environmental review. See 24 CFR 

parts 50 and 58 (see also provisions on 

PBV environmental review at § 983.58). 

Fair housing. Nondiscrimination and 

equal opportunity. See 24 CFR 5.105(a) 

and section 504 of the Rehabilitation 

Act. 

Fair market rents. See 24 CFR part 

888, subpart A. 

Fraud. See 24 CFR part 792. PHA 

retention of recovered funds. 

Funds. See 24 CFR part 791. HUD 

allocation of voucher funds. 

Income and family payment. See 24 

CFR part 5, subpart F (especially § 5.603 

(definitions), § 5.609 (annual income), 

§ 5.611 (adjusted income), § 5.628 (total 

tenant payment), § 5.630 (minimum 

rent), § 5.603 (utility allowance), § 5.603 

(utility reimbursements), and § 5.661 

(section 8 project-based assistance 

programs: approval for police or other 

security personnel to live in project). 

Labor standards. Regulations 

implementing the Davis-Bacon Act, 

Contract Work Hours and Safety 

Standards Act (40 U.S.C. 3701–3708), 29 

CFR part 5, and other federal laws and 

regulations pertaining to labor standards 

applicable to an Agreement covering 

nine or more assisted units. 

Lead-based paint. Regulations 

implementing the Lead-based Paint 

Poisoning Prevention Act (42 U.S.C. 

4821–4846) and the Residential Leadbased Paint Hazard Reduction Act of 

1992 (42 U.S.C. 4851–4856). See 24 CFR 

part 35, subparts A, B, H, and R. 

Lobbying restriction. Restrictions on 

use of funds for lobbying. See 24 CFR 

5.105(b). 

Noncitizens. Restrictions on 

assistance. See 24 CFR part 5, subpart E. 

Program accessibility. Regulations 

implementing Section 504 of the 

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

794). See 24 CFR parts 8 and 9. 

Relocation assistance. Regulations 

implementing the Uniform Relocation 

Assistance and Real Property 

Acquisition Policies Act of 1970 (URA) 

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

24. 

Section 3—Training, employment, 

and contracting opportunities in 

development. Regulations implementing 

Section 3 of the Housing and Urban 

Development Act of 1968 (12 U.S.C. 

1701u). See 24 CFR part 135. 

Uniform financial reporting 

standards. See 24 CFR part 5, subpart H. 

Waiver of HUD rules. See 24 CFR 

5.110. 

§ 983.5 Description of the PBV program. 

(a) How PBV works. (1) The PBV 

program is administered by a PHA that 

already administers the tenant-based 

voucher program under an annual 

contributions contract (ACC) with HUD. 

In the PBV program, the assistance is 

‘‘attached to the structure.’’ (See 

description of the difference between 

‘‘project-based’’ and ‘‘tenant-based’’

rental assistance at 24 CFR 982.1(b).) 

59916 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

(2) The PHA enters into a HAP 

contract with an owner for units in 

existing housing or in newly 

constructed or rehabilitated housing. 

(3) In the case of newly constructed or 

rehabilitated housing, the housing is 

developed under an Agreement between 

the owner and the PHA. In the 

Agreement, the PHA agrees to execute a 

HAP contract after the owner completes 

the construction or rehabilitation of the 

units. 

(4) During the term of the HAP 

contract, the PHA makes housing 

assistance payments to the owner for 

units leased and occupied by eligible 

families. 

(b) How PBV is funded. (1) If a PHA 

decides to operate a PBV program, the 

PHA’s PBV program is funded with a 

portion of appropriated funding (budget 

authority) available under the PHA’s 

voucher ACC. This pool of funding is 

used to pay housing assistance for both 

tenant-based and project-based voucher 

units and to pay PHA administrative 

fees for administration of tenant-based 

and project-based voucher assistance. 

(2) There is no special or additional 

funding for project-based vouchers. 

HUD does not reserve additional units 

for project-based vouchers and does not 

provide any additional funding for this 

purpose. 

(c) PHA discretion to operate PBV 

program. A PHA has discretion whether 

to operate a project-based voucher 

program. HUD approval is not required. 

§ 983.6 Maximum amount of PBV 

assistance. 

(a) The PHA may select owner 

proposals to provide project-based 

assistance for up to 20 percent of the 

amount of budget authority allocated to 

the PHA by HUD in the PHA voucher 

program. PHAs are not required to 

reduce the number of PBV units 

selected under an Agreement or HAP 

contract if the amount of budget 

authority is subsequently reduced. 

(b) All PBC and project-based voucher 

units for which the PHA has issued a 

notice of proposal selection or which 

are under an Agreement or HAP 

contract for PBC or project-based 

voucher assistance count against the 20 

percent maximum. 

(c) The PHA is responsible for 

determining the amount of budget 

authority that is available for projectbased vouchers and for ensuring that the 

amount of assistance that is attached to 

units is within the amounts available 

under the ACC. 

§ 983.7 Uniform Relocation Act. 

(a) Relocation assistance for displaced 

person. (1) A displaced person must be 

provided relocation assistance at the 

levels described in and in accordance 

with the requirements of the Uniform 

Relocation Assistance and Real Property 

Acquisition Policies Act of 1970 (URA) 

(42 U.S.C. 4201–4655) and 

implementing regulations at 49 CFR part 

24. 

(2) The cost of required relocation 

assistance may be paid with funds 

provided by the owner, or with local 

public funds, or with funds available 

from other sources. Relocation costs 

may not be paid from voucher program 

funds; however, provided payment of 

relocation benefits is consistent with 

state and local law, PHAs may use their 

administrative fee reserve to pay for 

relocation assistance after all other 

program administrative expenses are 

satisfied. Use of the administrative fee 

reserve in this manner must be 

consistent with legal and regulatory 

requirements, including the 

requirements of 24 CFR 982.155 and 

other official HUD issuances. 

(b) Real property acquisition 

requirements. The acquisition of real 

property for a PBV project is subject to 

the URA and 49 CFR part 24, subpart B. 

(c) Responsibility of PHA. The PHA 

must require the owner to comply with 

the URA and 49 CFR part 24. 

(d) Definition of initiation of 

negotiations. In computing a 

replacement housing payment to a 

residential tenant displaced as a direct 

result of privately undertaken 

rehabilitation or demolition of the real 

property, the term ‘‘initiation of 

negotiations’’ means the execution of 

the Agreement between the owner and 

the PHA. 

§ 983.8 Equal opportunity requirements. 

(a) The PBV program requires 

compliance with all equal opportunity 

requirements under federal law and 

regulation, including the authorities 

cited at 24 CFR 5.105(a). 

(b) The PHA must comply with the 

PHA Plan civil rights and affirmatively 

furthering fair housing certification 

submitted by the PHA in accordance 

with 24 CFR 903.7(o). 

§ 983.9 Special housing types. 

(a) Applicability. (1) For applicability 

of rules on special housing types at 24 

CFR part 982, subpart M, see § 983.2. 

(2) In the PBV program, the PHA may 

not provide assistance for shared 

housing, cooperative housing, 

manufactured home space rental, or the 

homeownership option. 

(b) Group homes. A group home may 

include one or more group home units. 

A separate lease is executed for each 

elderly person or person with 

disabilities who resides in a group 

home. 

§ 983.10 Project-based certificate (PBC) 

program. 

(a) What is it? ‘‘PBC program’’ means 

project-based assistance attached to 

units pursuant to an Agreement 

executed by a PHA and owner before 

January 16, 2001, and in accordance 

with: 

(1) The regulations for the PBC 

program at 24 CFR part 983, codified as 

of May 1, 2001 and contained in 24 CFR 

part 983 revised as of April 1, 2002; and 

(2) Section 8(d)(2) of the 1937 Act, as 

in effect before October 21, 1998 (the 

date of enactment of Title V of Public 

Law 105–276, the Quality Housing and 

Work Responsibility Act of 1998, 

codified at 42 U.S.C. 1437 et seq.). 

(b) What rules apply? Units under the 

PBC program are subject to the 

provisions of 24 CFR part 983 codified 

as of May 1, 2001, except that 24 CFR 

983.151(c) on renewals does not apply. 

Consistent with the PBC HAP, at the 

sole option of the PHA, HAP contracts 

may be renewed for terms for an 

aggregate total (including the initial and 

any renewal terms) of 15 years, subject 

to the availability of appropriated funds. 

Subpart B—Selection of PBV Owner 

Proposals 

§ 983.51 Owner proposal selection 

procedures. 

(a) Procedures for selecting PBV 

proposals. The PHA administrative plan 

must describe the procedures for owner 

submission of PBV proposals and for 

PHA selection of PBV proposals. Before 

selecting a PBV proposal, the PHA must 

determine that the PBV proposal 

complies with HUD program regulations 

and requirements, including a 

determination that the property is 

eligible housing (§§ 983.53 and 983.54), 

complies with the cap on the number of 

PBV units per building (§ 983.56), and 

meets the site selection standards 

(§ 983.57). 

(b) Selection of PBV proposals. The 

PHA must select PBV proposals in 

accordance with the selection 

procedures in the PHA administrative 

plan. The PHA must select PBV 

proposals by either of the following two 

methods. 

(1) PHA request for PBV Proposals. 

The PHA may not limit proposals to a 

single site or impose restrictions that 

explicitly or practically preclude owner 

submission of proposals for PBV 

housing on different sites. 

(2) Selection of a proposal for housing 

assisted under a federal, state, or local 

government housing assistance, 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59917 

community development, or supportive 

services program that requires 

competitive selection of proposals (e.g., 

HOME, and units for which 

competitively awarded LIHTCs have 

been provided), where the proposal has 

been selected in accordance with such 

program’s competitive selection 

requirements within three years of the 

PBV proposal selection date, and the 

earlier competitive selection proposal 

did not involve any consideration that 

the project would receive PBV 

assistance. 

(c) Public notice of PHA request for 

PBV proposals. If the PHA will be 

selecting proposals under paragraph 

(b)(1) of this section, PHA procedures 

for selecting PBV proposals must be 

designed and actually operated to 

provide broad public notice of the 

opportunity to offer PBV proposals for 

consideration by the PHA. The public 

notice procedures may include 

publication of the public notice in a 

local newspaper of general circulation 

and other means designed and actually 

operated to provide broad public notice. 

The public notice of the PHA request for 

PBV proposals must specify the 

submission deadline. Detailed 

application and selection information 

must be provided at the request of 

interested parties. 

(d) PHA notice of owner selection. 

The PHA must give prompt written 

notice to the party that submitted a 

selected proposal and must also give 

prompt public notice of such selection. 

Public notice procedures may include 

publication of public notice in a local 

newspaper of general circulation and 

other means designed and actually 

operated to provide broad public notice. 

(e) PHA-owned units. A PHA-owned 

unit may be assisted under the PBV 

program only if the HUD field office or 

HUD-approved independent entity 

reviews the selection process and 

determines that the PHA-owned units 

were appropriately selected based on 

the selection procedures specified in the 

PHA administrative plan. Under no 

circumstances may PBV assistance be 

used with a public housing unit. 

(f) Public review of PHA selection 

decision documentation. The PHA must 

make documentation available for 

public inspection regarding the basis for 

the PHA selection of a PBV proposal. 

§ 983.52 Housing type. 

The PHA may attach PBV assistance 

for units in existing housing or for 

newly constructed or rehabilitated 

housing developed under and in 

accordance with an Agreement. 

(a) Existing housing—A housing unit 

is considered an existing unit for 

purposes of the PBV program, if at the 

time of notice of PHA selection, the 

units substantially comply with HQS. 

Units for which new construction or 

rehabilitation was started in accordance 

with Subpart D of this part do not 

qualify as existing housing. 

(b) Subpart D of this part applies to 

newly constructed and rehabilitated 

housing. 

§ 983.53 Prohibition of assistance for 

ineligible units. 

(a) Ineligible unit. The PHA may not 

attach or pay PBV assistance for units in 

the following types of housing: 

(1) Shared housing; 

(2) Units on the grounds of a penal, 

reformatory, medical, mental, or similar 

public or private institution; 

(3) Nursing homes or facilities 

providing continuous psychiatric, 

medical, nursing services, board and 

care, or intermediate care. However, the 

PHA may attach PBV assistance for a 

dwelling unit in an assisted living 

facility that provides home health care 

services such as nursing and therapy for 

residents of the housing; 

(4) Units that are owned or controlled 

by an educational institution or its 

affiliate and are designated for 

occupancy by students of the 

institution; 

(5) Manufactured homes; 

(6) Cooperative housing; and 

(7) Transitional Housing. 

(b) High-rise elevator project for 

families with children. The PHA may 

not attach or pay PBV assistance to a 

high-rise elevator project that may be 

occupied by families with children 

unless the PHA initially determines 

there is no practical alternative, and 

HUD approves such finding. The PHA 

may make this initial determination for 

its project-based voucher program, in 

whole or in part, and need not review 

each project on a case-by-case basis, and 

HUD may approve on the same basis. 

(c) Prohibition against assistance for 

owner-occupied unit. The PHA may not 

attach or pay PBV assistance for a unit 

occupied by an owner of the housing. 

(d) Prohibition against selecting unit 

occupied by an ineligible family. Before 

a PHA selects a specific unit to which 

assistance is to be attached, the PHA 

must determine whether the unit is 

occupied and, if occupied, whether the 

unit’s occupants are eligible for 

assistance. The PHA must not select or 

enter into an Agreement or HAP 

contract for a unit occupied by a family 

ineligible for participation in the PBV 

program. 

§ 983.54 Prohibition of assistance for units 

in subsidized housing. 

A PHA may not attach or pay PBV 

assistance to units in any of the 

following types of subsidized housing: 

(a) A public housing dwelling unit; 

(b) A unit subsidized with any other 

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

(c) A unit subsidized with any 

governmental rent subsidy (a subsidy 

that pays all or any part of the rent); 

(d) A unit subsidized with any 

governmental subsidy that covers all or 

any part of the operating costs of the 

housing; 

(e) A unit subsidized with Section 236 

rental assistance payments (12 U.S.C. 

1715z–1). However, the PHA may attach 

assistance to a unit subsidized with 

Section 236 interest reduction 

payments; 

(f) A unit subsidized with rental 

assistance payments under Section 521 

of the Housing Act of 1949, 42 U.S.C. 

1490a (a Rural Housing Service 

Program). However, the PHA may attach 

assistance for a unit subsidized with 

Section 515 interest reduction payments 

(42 U.S.C. 1485); 

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

(assistance under Section 162 of the 

Housing and Community Development 

Act of 1987, 12 U.S.C. 1701q note); 

(h) Section 811 project-based 

supportive housing for persons with 

disabilities (42 U.S.C. 8013); 

(i) Section 202 supportive housing for 

the elderly (12 U.S.C. 1701q); 

(j) A Section 101 rent supplement 

project (12 U.S.C. 1701s); 

(k) A unit subsidized with any form 

of tenant-based rental assistance (as 

defined at 24 CFR 982.1(b)(2)) (e.g., a 

unit subsidized with tenant-based rental 

assistance under the HOME program, 42 

U.S.C. 12701 et seq.); 

(l) A unit with any other duplicative 

federal, state, or local housing subsidy, 

as determined by HUD or by the PHA 

in accordance with HUD requirements. 

For this purpose, ‘‘housing subsidy’’

does not include the housing 

component of a welfare payment; a 

social security payment; or a federal, 

state, or local tax concession (such as 

relief from local real property taxes). 

§ 983.55 Prohibition of excess public 

assistance. 

(a) Subsidy layering requirements. 

The PHA may provide PBV assistance 

only in accordance with HUD subsidy 

layering regulations (24 CFR 4.13) and 

other requirements. The subsidy 

layering review is intended to prevent 

excessive public assistance for the 

housing by combining (layering) 

59918 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

housing assistance payment subsidy 

under the PBV program with other 

governmental housing assistance from 

federal, state, or local agencies, 

including assistance such as tax 

concessions or tax credits. 

(b) When subsidy layering review is 

conducted. The PHA may not enter an 

Agreement or HAP contract until HUD 

or an independent entity approved by 

HUD has conducted any required 

subsidy layering review and determined 

that the PBV assistance is in accordance 

with HUD subsidy layering 

requirements. 

(c) Owner certification. The HAP 

contract must contain the owner’s 

certification that the project has not 

received and will not receive (before or 

during the term of the HAP contract) 

any public assistance for acquisition, 

development, or operation of the 

housing other than assistance disclosed 

in the subsidy layering review in 

accordance with HUD requirements. 

§ 983.56 Cap on number of PBV units in 

each building. 

(a) 25 percent per building cap. 

Except as provided in paragraph (b) of 

this section, the PHA may not select a 

proposal to provide PBV assistance for 

units in a building or enter into an 

Agreement or HAP contract to provide 

PBV assistance for units in a building, 

if the total number of dwelling units in 

the building that will receive PBV 

assistance during the term of the PBV 

HAP is more than 25 percent of the 

number of dwelling units (assisted or 

unassisted) in the building. 

(b) Exception to 25 percent per 

building cap. (1) When PBV units are 

not counted against cap. In the 

following cases, PBV units are not 

counted against the 25 percent per 

building cap: 

(i) Units in a single-family building; 

(ii) Excepted units in a multifamily 

building. 

(2) Terms (i) ‘‘Excepted units’’ means 

units in a multifamily building that are 

specifically made available for 

qualifying families. 

(ii) ‘‘Qualifying families’’ means: 

(A) Elderly or disabled families; or 

(B) Families receiving supportive 

services. PHAs must include in the PHA 

administrative plan the type of services 

offered to families for a project to 

qualify for the exception and the extent 

to which such services will be provided. 

It is not necessary that the services be 

provided at or by the project, if they are 

approved services. To qualify, a family 

must have at least one member receiving 

at least one qualifying supportive 

service. A PHA may not require 

participation in medical or disabilityrelated services other than drug and 

alcohol treatment in the case of current 

abusers as a condition of living in an 

excepted unit, although such services 

may be offered. If a family at the time 

of initial tenancy is receiving, and while 

the resident of an excepted unit has 

received, FSS supportive services or any 

other supportive services as defined in 

the PHA administrative plan, and 

successfully completes the FSS contract 

of participation or the supportive 

services requirement, the unit continues 

to count as an excepted unit for as long 

as the family resides in the unit. If a 

family in an excepted unit fails without 

good cause to complete its FSS contract 

of participation or if the family fails to 

complete the supportive services 

requirement as outlined in the PHA 

administrative plan, the PHA will take 

the actions provided under § 983.261(d), 

and the owner may terminate the lease 

in accordance with § 983.257(c). Also, at 

the time of initial lease execution 

between the family and the owner, the 

family and the PHA must sign a 

statement of family responsibility. The 

statement of family responsibility must 

contain all family obligations including 

the family’s participation in a service 

program under this section. Failure by 

the family without good cause to fulfill 

its service obligation will require the 

PHA to terminate assistance. If the unit 

at the time of such termination is an 

excepted unit, the exception continues 

to apply to the unit as long as the unit 

is made available to another qualifying 

family. 

(C) The PHA must monitor the 

excepted family’s continued receipt of 

supportive services and take appropriate 

action regarding those families that fail 

without good cause to complete their 

supportive services requirement. The 

PHA administrative plan must state the 

form and frequency of such monitoring. 

(3) Set-aside for qualifying families. (i) 

In leasing units in a multifamily 

building pursuant to the PBV HAP, the 

owner must set aside the number of 

excepted units made available for 

occupancy by qualifying families. 

(ii) The PHA may refer only 

qualifying families for occupancy of 

excepted units. 

(c) Additional, local requirements 

promoting partially assisted buildings. 

A PHA may establish local requirements 

designed to promote PBV assistance in 

partially assisted buildings. For 

example, a PHA may: 

(1) Establish a per-building cap on the 

number of units that will receive PBV 

assistance or other project-based 

assistance in a multifamily building 

containing excepted units or in a singlefamily building, 

(2) Determine not to provide PBV 

assistance for excepted units, or 

(3) Establish a per-building cap of less 

than 25 percent. 

§ 983.57 Site selection standards. 

(a) Applicability. The site selection 

requirements in paragraph (d) of this 

section apply only to site selection for 

existing housing and rehabilitated PBV 

housing. The site selection requirements 

in paragraph (e) of this section apply 

only to site selection for newly 

constructed PBV housing. Other 

provisions of this section apply to 

selection of a site for any form of PBV 

housing, including existing housing, 

newly constructed housing, and 

rehabilitated housing. 

(b) Compliance with PBV goals, civil 

rights requirements, and HQS. The PHA 

may not select a proposal for existing, 

newly constructed, or rehabilitated PBV 

housing on a site or enter into an 

Agreement or HAP contract for units on 

the site, unless the PHA has determined 

that: 

(1) Project-based assistance for 

housing at the selected site is consistent 

with the goal of deconcentrating poverty 

and expanding housing and economic 

opportunities. The standard for 

deconcentrating poverty and expanding 

housing and economic opportunities 

must be consistent with the PHA Plan 

under 24 CFR part 903 and the PHA 

Administrative Plan. In developing the 

standards to apply in determining 

whether a proposed PBV development 

will be selected, a PHA must consider 

the following: 

(i) Whether the census tract in which 

the proposed PBV development will be 

located is in a HUD-designated 

Enterprise Zone, Economic Community, 

or Renewal Community; 

(ii) Whether a PBV development will 

be located in a census tract where the 

concentration of assisted units will be or 

has decreased as a result of public 

housing demolition; 

(iii) Whether the census tract in 

which the proposed PBV development 

will be located is undergoing significant 

revitalization; 

(iv) Whether state, local, or federal 

dollars have been invested in the area 

that has assisted in the achievement of 

the statutory requirement; 

(v) Whether new market rate units are 

being developed in the same census 

tract where the proposed PBV 

development will be located and the 

likelihood that such market rate units 

will positively impact the poverty rate 

in the area; 

(vi) If the poverty rate in the area 

where the proposed PBV development 

will be located is greater than 20 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59919 

percent, the PHA should consider 

whether in the past five years there has 

been an overall decline in the poverty 

rate; 

(vii) Whether there are meaningful 

opportunities for educational and 

economic advancement in the census 

tract where the proposed PBV 

development will be located. 

(2) The site is suitable from the 

standpoint of facilitating and furthering 

full compliance with the applicable 

provisions of Title VI of the Civil Rights 

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

and HUD’s implementing regulations at 

24 CFR part 1; Title VIII of the Civil 

Rights Act of 1968 (42 U.S.C. 3601–

3629); and HUD’s implementing 

regulations at 24 CFR parts 100 through 

199; Executive Order 11063 (27 FR 

11527; 3 CFR, 1959–1963 Comp., p. 652) 

and HUD’s implementing regulations at 

24 CFR part 107. The site must meet the 

section 504 site selection requirements 

described in 24 CFR 8.4(b)(5). 

(3) The site meets the HQS site 

standards at 24 CFR 982.401(l). 

(c) PHA PBV site selection policy. (1) 

The PHA administrative plan must 

establish the PHA’s policy for selection 

of PBV sites in accordance with this 

section. 

(2) The site selection policy must 

explain how the PHA’s site selection 

procedures promote the PBV goals. 

(3) The PHA must select PBV sites in 

accordance with the PHA’s site 

selection policy in the PHA 

administrative plan. 

(d) Existing and rehabilitated housing 

site and neighborhood standards. A site 

for existing or rehabilitated housing 

must meet the following site and 

neighborhood standards. The site must: 

(1) Be adequate in size, exposure, and 

contour to accommodate the number 

and type of units proposed, and 

adequate utilities and streets must be 

available to service the site. (The 

existence of a private disposal system 

and private sanitary water supply for 

the site, approved in accordance with 

law, may be considered adequate 

utilities.) 

(2) Promote greater choice of housing 

opportunities and avoid undue 

concentration of assisted persons in 

areas containing a high proportion of 

low-income persons. 

(3) Be accessible to social, 

recreational, educational, commercial, 

and health facilities and services and 

other municipal facilities and services 

that are at least equivalent to those 

typically found in neighborhoods 

consisting largely of unassisted, 

standard housing of similar market 

rents. 

(4) Be so located that travel time and 

cost via public transportation or private 

automobile from the neighborhood to 

places of employment providing a range 

of jobs for lower-income workers is not 

excessive. While it is important that 

housing for the elderly not be totally 

isolated from employment 

opportunities, this requirement need not 

be adhered to rigidly for such projects. 

(e) New construction site and 

neighborhood standards. A site for 

newly constructed housing must meet 

the following site and neighborhood 

standards: 

(1) The site must be adequate in size, 

exposure, and contour to accommodate 

the number and type of units proposed, 

and adequate utilities (water, sewer, gas, 

and electricity) and streets must be 

available to service the site. 

(2) The site must not be located in an 

area of minority concentration, except 

as permitted under paragraph (e)(3) of 

this section, and must not be located in 

a racially mixed area if the project will 

cause a significant increase in the 

proportion of minority to non-minority 

residents in the area. 

(3) A project may be located in an area 

of minority concentration only if: 

(i) Sufficient, comparable 

opportunities exist for housing for 

minority families in the income range to 

be served by the proposed project 

outside areas of minority concentration 

(see paragraph (e)(3)(iii), (iv), and (v) of 

this section for further guidance on this 

criterion); or 

(ii) The project is necessary to meet 

overriding housing needs that cannot be 

met in that housing market area (see 

paragraph (e) (3)(vi)) of this section for 

further guidance on this criterion). 

(iii) As used in paragraph (e)(3)(i) of 

this section, ‘‘sufficient’’ does not 

require that in every locality there be an 

equal number of assisted units within 

and outside of areas of minority 

concentration. Rather, application of 

this standard should produce a 

reasonable distribution of assisted units 

each year, that, over a period of several 

years, will approach an appropriate 

balance of housing choices within and 

outside areas of minority concentration. 

An appropriate balance in any 

jurisdiction must be determined in light 

of local conditions affecting the range of 

housing choices available for lowincome minority families and in relation 

to the racial mix of the locality’s 

population. 

(iv) Units may be considered 

‘‘comparable opportunities,’’ as used in 

paragraph (e)(3)(i) of this section, if they 

have the same household type (elderly, 

disabled, family, large family) and 

tenure type (owner/renter); require 

approximately the same tenant 

contribution towards rent; serve the 

same income group; are located in the 

same housing market; and are in 

standard condition. 

(v) Application of this sufficient, 

comparable opportunities standard 

involves assessing the overall impact of 

HUD-assisted housing on the 

availability of housing choices for lowincome minority families in and outside 

areas of minority concentration, and 

must take into account the extent to 

which the following factors are present, 

along with other factors relevant to 

housing choice: 

(A) A significant number of assisted 

housing units are available outside areas 

of minority concentration. 

(B) There is significant integration of 

assisted housing projects constructed or 

rehabilitated in the past 10 years, 

relative to the racial mix of the eligible 

population. 

(C) There are racially integrated 

neighborhoods in the locality. 

(D) Programs are operated by the 

locality to assist minority families that 

wish to find housing outside areas of 

minority concentration. 

(E) Minority families have benefited 

from local activities (e.g., acquisition 

and write-down of sites, tax relief 

programs for homeowners, acquisitions 

of units for use as assisted housing 

units) undertaken to expand choice for 

minority families outside of areas of 

minority concentration. 

(F) A significant proportion of 

minority households has been 

successful in finding units in nonminority areas under the tenant-based 

assistance programs. 

(G) Comparable housing opportunities 

have been made available outside areas 

of minority concentration through other 

programs. 

(vi) Application of the ‘‘overriding 

housing needs’’ criterion, for example, 

permits approval of sites that are an 

integral part of an overall local strategy 

for the preservation or restoration of the 

immediate neighborhood and of sites in 

a neighborhood experiencing significant 

private investment that is demonstrably 

improving the economic character of the 

area (a ‘‘revitalizing area’’). An 

‘‘overriding housing need,’’ however, 

may not serve as the basis for 

determining that a site is acceptable, if 

the only reason the need cannot 

otherwise be feasibly met is that 

discrimination on the basis of race, 

color, religion, sex, national origin, age, 

familial status, or disability renders sites 

outside areas of minority concentration 

unavailable or if the use of this standard 

in recent years has had the effect of 

59920 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

circumventing the obligation to provide 

housing choice. 

(4) The site must promote greater 

choice of housing opportunities and 

avoid undue concentration of assisted 

persons in areas containing a high 

proportion of low-income persons. 

(5) The neighborhood must not be one 

that is seriously detrimental to family 

life or in which substandard dwellings 

or other undesirable conditions 

predominate, unless there is actively in 

progress a concerted program to remedy 

the undesirable conditions. 

(6) The housing must be accessible to 

social, recreational, educational, 

commercial, and health facilities and 

services and other municipal facilities 

and services that are at least equivalent 

to those typically found in 

neighborhoods consisting largely of 

unassisted, standard housing of similar 

market rents. 

(7) Except for new construction, 

housing designed for elderly persons, 

travel time, and cost via public 

transportation or private automobile 

from the neighborhood to places of 

employment providing a range of jobs 

for lower-income workers, must not be 

excessive. 

§ 983.58 Environmental review. 

(a) HUD environmental regulations. 

Activities under the PBV program are 

subject to HUD environmental 

regulations in 24 CFR parts 50 and 58. 

(b) Who performs the environmental 

review? (1) Under 24 CFR part 58, a unit 

of general local government, a county or 

a state (the ‘‘responsible entity’’ or 

‘‘RE’’) is responsible for the federal 

environmental review under the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4321 et seq.) and related 

applicable federal laws and authorities 

in accordance with 24 CFR 58.5 and 

58.6. 

(2) If a PHA objects in writing to 

having the RE perform the federal 

environmental review, or if the RE 

declines to perform it, then HUD may 

perform the review itself (24 CFR 58.11). 

24 CFR part 50 governs HUD 

performance of the review. 

(c) Existing housing. In the case of 

existing housing under this part 983, the 

RE that is responsible for the 

environmental review under 24 CFR 

part 58 must determine whether or not 

PBV assistance is categorically excluded 

from review under the National 

Environmental Policy Act and whether 

or not the assistance is subject to review 

under the laws and authorities listed in 

24 CFR 58.5. 

(d) Limitations on actions before 

completion of the environmental review. 

(1) The PHA may not enter into an 

Agreement or HAP contract with an 

owner, and the PHA, the owner, and its 

contractors may not acquire, 

rehabilitate, convert, lease, repair, 

dispose of, demolish, or construct real 

property or commit or expend program 

or local funds for PBV activities under 

this part, until one of the following 

occurs: 

(i) The responsible entity has 

completed the environmental review 

procedures required by 24 CFR part 58, 

and HUD has approved the 

environmental certification and request 

for release of funds; 

(ii) The responsible entity has 

determined that the project to be 

assisted is exempt under 24 CFR 58.34 

or is categorically excluded and not 

subject to compliance with 

environmental laws under 24 CFR 

58.35(b); or 

(iii) HUD has performed an 

environmental review under 24 CFR 

part 50 and has notified the PHA in 

writing of environmental approval of 

the site. 

(2) HUD will not approve the release 

of funds for PBV assistance under this 

part if the PHA, the owner, or any other 

party commits funds (i.e., enters an 

Agreement or HAP contract or otherwise 

incurs any costs or expenditures to be 

paid or reimbursed with such funds) 

before the PHA submits and HUD 

approves its request for release of funds 

(where such submission is required). 

(e) PHA duty to supply information. 

The PHA must supply all available, 

relevant information necessary for the 

RE (or HUD, if applicable) to perform 

any required environmental review for 

any site. 

(f) Mitigating measures. The PHA 

must require the owner to carry out 

mitigating measures required by the RE 

(or HUD, if applicable) as a result of the 

environmental review. 

§ 983.59 PHA-owned units. 

(a) Selection of PHA-owned units. The 

selection of PHA-owned units must be 

done in accordance with § 983.51(e). 

(b) Inspection and determination of 

reasonable rent by independent entity. 

In the case of PHA-owned units, the 

following program services may not be 

performed by the PHA, but must be 

performed instead by an independent 

entity approved by HUD. 

(1) Determination of rent to owner for 

the PHA-owned units. Rent to owner for 

PHA-owned units is determined 

pursuant to §§ 983.301 through 983.305 

in accordance with the same 

requirements as for other units, except 

that the independent entity approved by 

HUD must establish the initial contract 

rents based on an appraisal by a 

licensed, state-certified appraiser; and 

(2) Inspection of PHA-owned units as 

required by § 983.103(f). 

(c) Nature of independent entity. The 

independent entity that performs these 

program services may be the unit of 

general local government for the PHA 

jurisdiction (unless the PHA is itself the 

unit of general local government or an 

agency of such government) or another 

HUD-approved public or private 

independent entity. 

(d) Payment to independent entity 

and appraiser. (1) The PHA may only 

compensate the independent entity and 

appraiser from PHA ongoing 

administrative fee income (including 

amounts credited to the administrative 

fee reserve). The PHA may not use other 

program receipts to compensate the 

independent entity and appraiser for 

their services. 

(2) The PHA, independent entity, and 

appraiser may not charge the family any 

fee for the appraisal or the services 

provided by the independent entity. 

Subpart C—Dwelling Units 

§ 983.101 Housing quality standards. 

(a) HQS applicability. Except as 

otherwise provided in this section, 24 

CFR 982.401 (housing quality standards) 

applies to the PBV program. The 

physical condition standards at 24 CFR 

5.703 do not apply to the PBV program. 

(b) HQS for special housing types. For 

special housing types assisted under the 

PBV program, housing quality standards 

in 24 CFR part 982 apply to the PBV 

program. (Shared housing, cooperative 

housing, manufactured home space 

rental, and the homeownership option 

are not assisted under the PBV 

program.) 

(c) Lead-based paint requirements. (1) 

The lead-based paint requirements at 

§ 982.401(j) of this chapter do not apply 

to the PBV program. 

(2) The Lead-based Paint Poisoning 

Prevention Act (42 U.S.C. 4821–4846), 

the Residential Lead-based Paint Hazard 

Reduction Act of 1992 (42 U.S.C. 4851–

4856), and implementing regulations at 

24 CFR part 35, subparts A, B, H, and 

R, apply to the PBV program. 

(d) HQS enforcement. Parts 982 and 

983 of this chapter do not create any 

right of the family or any party, other 

than HUD or the PHA, to require 

enforcement of the HQS requirements or 

to assert any claim against HUD or the 

PHA for damages, injunction, or other 

relief for alleged failure to enforce the 

HQS. 

(e) Additional PHA quality and design 

requirements. This section establishes 

the minimum federal housing quality 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59921 

standards for PBV housing. However, 

the PHA may elect to establish 

additional requirements for quality, 

architecture, or design of PBV housing, 

and any such additional requirements 

must be specified in the Agreement. 

§ 983.102 Housing accessibility for 

persons with disabilities. 

(a) Program accessibility. The housing 

must comply with program accessibility 

requirements of section 504 of the 

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

794) and implementing regulations at 24 

CFR part 8. The PHA shall ensure that 

the percentage of accessible dwelling 

units complies with the requirements of 

section 504 of the Rehabilitation Act of 

1973 (29 U.S.C. 794), as implemented by 

HUD’s regulations at 24 CFR part 8, 

subpart C. 

(b) Design and construction. Housing 

first occupied after March 13, 1991, 

must comply with design and 

construction requirements of the Fair 

Housing Amendments Act of 1988 and 

implementing regulations at 24 CFR 

100.205, as applicable. 

§ 983.103 Inspecting units. 

(a) Pre-selection inspection. (1) 

Inspection of site. The PHA must 

examine the proposed site before the 

proposal selection date. 

(2) Inspection of existing units. If the 

units to be assisted already exist, the 

PHA must inspect all the units before 

the proposal selection date, and must 

determine whether the units 

substantially comply with the HQS. To 

qualify as existing housing, units must 

substantially comply with the HQS on 

the proposal selection date. However, 

the PHA may not execute the HAP 

contract until the units fully comply 

with the HQS. 

(b) Pre-HAP contract inspections. The 

PHA must inspect each contract unit 

before execution of the HAP contract. 

The PHA may not enter into a HAP 

contract covering a unit until the unit 

fully complies with the HQS. 

(c) Turnover inspections. Before 

providing assistance to a new family in 

a contract unit, the PHA must inspect 

the unit. The PHA may not provide 

assistance on behalf of the family until 

the unit fully complies with the HQS. 

(d) Annual inspections. (1) At least 

annually during the term of the HAP 

contract, the PHA must inspect a 

random sample, consisting of at least 20 

percent of the contract units in each 

building to determine if the contract 

units and the premises are maintained 

in accordance with the HQS. Turnover 

inspections pursuant to paragraph (c) of 

this section are not counted toward 

meeting this annual inspection 

requirement. 

(2) If more than 20 percent of the 

annual sample of inspected contract 

units in a building fail the initial 

inspection, the PHA must reinspect 100 

percent of the contract units in the 

building. 

(e) Other inspections. (1) The PHA 

must inspect contract units whenever 

needed to determine that the contract 

units comply with the HQS and that the 

owner is providing maintenance, 

utilities, and other services in 

accordance with the HAP contract. The 

PHA must take into account complaints 

and any other information coming to its 

attention in scheduling inspections. 

(2) The PHA must conduct follow-up 

inspections needed to determine if the 

owner (or, if applicable, the family) has 

corrected an HQS violation, and must 

conduct inspections to determine the 

basis for exercise of contractual and 

other remedies for owner or family 

violation of the HQS. (Family HQS 

obligations are specified in 24 CFR 

982.404(b).) 

(3) In conducting PHA supervisory 

quality control HQS inspections, the 

PHA should include a representative 

sample of both tenant-based and projectbased units. 

(f) Inspecting PHA-owned units. (1) In 

the case of PHA-owned units, the 

inspections required under this section 

must be performed by an independent 

agency designated in accordance with 

§ 983.59, rather than by the PHA. 

(2) The independent entity must 

furnish a copy of each inspection report 

to the PHA and to the HUD field office 

where the project is located. 

(3) The PHA must take all necessary 

actions in response to inspection reports 

from the independent agency, including 

exercise of contractual remedies for 

violation of the HAP contract by the 

PHA owner. 

Subpart D—Requirements for 

Rehabilitated and Newly Constructed 

Units 

§ 983.151 Applicability. 

This Subpart D applies to PBV 

assistance for newly constructed or 

rehabilitated housing. This Subpart D 

does not apply to PBV assistance for 

existing housing. Housing selected 

under this subpart cannot be selected as 

existing housing, as defined in § 983.52, 

at a later date. 

§ 983.152 Purpose and content of the 

Agreement to enter into HAP contract. 

(a) Requirement. The PHA must enter 

into an Agreement with the owner. The 

Agreement must be in the form required 

by HUD headquarters (see § 982.162 of 

this chapter). 

(b) Purpose of Agreement. In the 

Agreement the owner agrees to develop 

the contract units to comply with the 

HQS, and the PHA agrees that, upon 

timely completion of such development 

in accordance with the terms of the 

Agreement, the PHA will enter into a 

HAP contract with the owner for the 

contract units. 

(c) Description of housing. (1) At a 

minimum, the Agreement must describe 

the following features of the housing to 

be developed (newly constructed or 

rehabilitated) and assisted under the 

PBV program: 

(i) Site; 

(ii) Location of contract units on site; 

(iii) Number of contract units by area 

(size) and number of bedrooms and 

bathrooms; 

(iv) Services, maintenance, or 

equipment to be supplied by the owner 

without charges in addition to the rent 

to owner; 

(v) Utilities available to the contract 

units, including a specification of utility 

services to be paid by owner (without 

charges in addition to rent) and utility 

services to be paid by the tenant; 

(vi) Indication of whether or not the 

design and construction requirements of 

the Fair Housing Act and implementing 

regulations at 24 CFR 100.205 and the 

accessibility requirements of section 504 

of the Rehabilitation Act of 1973 (29 

U.S.C. 794) and implementing 

regulations at 24 CFR 8.22 and 8.23 

apply to units under the Agreement. If 

these requirements are applicable, any 

required work item resulting from these 

requirements must be included in the 

description of work to be performed 

under the Agreement, as specified in 

paragraph (c)(i)(viii) of this section. 

(vii) Estimated initial rents to owner 

for the contract units; 

(viii) Description of the work to be 

performed under the Agreement. If the 

Agreement is for rehabilitation of units, 

the work description must include the 

rehabilitation work write up and, where 

determined necessary by the PHA, 

specifications, and plans. If the 

Agreement is for new construction, the 

work description must include the 

working drawings and specifications. 

(2) At a minimum, the housing must 

comply with the HQS. The PHA may 

elect to establish additional 

requirements for quality, architecture, or 

design of PBV housing, over and above 

the HQS, and any such additional 

requirement must be specified in the 

Agreement. 

59922 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

§ 983.153 When Agreement is executed. 

(a) Prohibition of excess subsidy. The 

PHA may not enter the Agreement with 

the owner until the subsidy layering 

review is completed (see § 983.55). 

(b) Environmental approval. The PHA 

may not enter the Agreement with the 

owner until the environmental review is 

completed and the PHA has received 

the environmental approval (see 

§ 983.58). 

(c) Prompt execution of Agreement. 

The Agreement must be executed 

promptly after PHA notice of proposal 

selection to the selected owner. 

§ 983.154 Conduct of development work. 

(a) Development requirements. The 

owner must carry out development 

work in accordance with the Agreement 

and the requirements of this section. 

(b) Labor standards. (1) In the case of 

an Agreement for development of nine 

or more contract units (whether or not 

completed in stages), the owner and the 

owner’s contractors and subcontractors 

must pay Davis-Bacon wages to laborers 

and mechanics employed in 

development of the housing. 

(2) The HUD prescribed form of 

Agreement shall include the labor 

standards clauses required by HUD, 

such as those involving Davis-Bacon 

wage rates. 

(3) The owner and the owner’s 

contractors and subcontractors must 

comply with the Contract Work Hours 

and Safety Standards Act, Department 

of Labor regulations in 29 CFR part 5, 

and other applicable federal labor 

relations laws and regulations. The PHA 

must monitor compliance with labor 

standards. 

(c) Equal opportunity. (1) Section 3—

Training, employment, and contracting 

opportunities. The owner must comply 

with Section 3 of the Housing and 

Urban Development Act of 1968 (12 

U.S.C. 1701u) and the implementing 

regulations at 24 CFR part 135. 

(2) Equal employment opportunity. 

The owner must comply with federal 

equal employment opportunity 

requirements of Executive Orders 11246 

as amended (3 CFR, 1964–1965 Comp., 

p. 339), 11625 (3 CFR, 1971–1975 

Comp., p. 616), 12432 (3 CFR, 1983 

Comp., p. 198) and 12138 (3 CFR, 1977 

Comp., p. 393). 

(d) Eligibility to participate in federal 

programs and activities. The Agreement 

and HAP contract shall include a 

certification by the owner that the 

owner and other project principals 

(including the officers and principal 

members, shareholders, investors, and 

other parties having a substantial 

interest in the project) are not on the 

U.S. General Services Administration 

list of parties excluded from federal 

procurement and nonprocurement 

programs. 

(e) Disclosure of conflict of interest. 

The owner must disclose any possible 

conflict of interest that would be a 

violation of the Agreement, the HAP 

contract, or HUD regulations. 

§ 983.155 Completion of housing. 

(a) Completion deadline. The owner 

must develop and complete the housing 

in accordance with the Agreement. The 

Agreement must specify the deadlines 

for completion of the housing and for 

submission by the owner of the required 

evidence of completion. 

(b) Required evidence of completion. 

(1) Minimum submission. At a 

minimum, the owner must submit the 

following evidence of completion to the 

PHA in the form and manner required 

by the PHA: 

(i) Owner certification that the work 

has been completed in accordance with 

the HQS and all requirements of the 

Agreement; and 

(ii) Owner certification that the owner 

has complied with labor standards and 

equal opportunity requirements in 

development of the housing. 

(2) Additional documentation. At the 

discretion of the PHA, the Agreement 

may specify additional documentation 

that must be submitted by the owner as 

evidence of housing completion. For 

example, such documentation may 

include: 

(i) A certificate of occupancy or other 

evidence that the units comply with 

local requirements (such as code and 

zoning requirements); and 

(ii) An architect’s certification that the 

housing complies with: 

(A) HUD housing quality standards; 

(B) State, local, or other building 

codes; 

(C) Zoning; 

(D) The rehabilitation work write-up 

(for rehabilitated housing) or the work 

description (for newly constructed 

housing); or 

(E) Any additional design or quality 

requirements pursuant to the 

Agreement. 

§ 983.156 PHA acceptance of completed 

units. 

(a) PHA determination of completion. 

When the PHA has received owner 

notice that the housing is completed: 

(1) The PHA must inspect to 

determine if the housing has been 

completed in accordance with the 

Agreement, including compliance with 

the HQS and any additional 

requirement imposed by the PHA under 

the Agreement. 

(2) The PHA must determine if the 

owner has submitted all required 

evidence of completion. 

(3) If the work has not been completed 

in accordance with the Agreement, the 

PHA must not enter into the HAP 

contract. 

(b) Execution of HAP contract. If the 

PHA determines that the housing has 

been completed in accordance with the 

Agreement and that the owner has 

submitted all required evidence of 

completion, the PHA must submit the 

HAP contract for execution by the 

owner and must then execute the HAP 

contract. 

Subpart E—Housing Assistance 

Payments Contract 

§ 983.201 Applicability. 

Subpart E applies to all PBV 

assistance under part 983 (including 

assistance for existing, newly 

constructed, or rehabilitated housing). 

§ 983.202 Purpose of HAP contract. 

(a) Requirement. The PHA must enter 

into a HAP contract with the owner. The 

HAP contract must be in the form 

required by HUD headquarters (see 24 

CFR 982.162). 

(b) Purpose of HAP contract. (1) The 

purpose of the HAP contract is to 

provide housing assistance payments for 

eligible families. 

(2) The PHA makes housing 

assistance payments to the owner in 

accordance with the HAP contract. 

Housing assistance is paid for contract 

units leased and occupied by eligible 

families during the HAP contract term. 

§ 983.203 HAP contract information. 

The HAP contract must specify: 

(a) The total number of contract units 

by number of bedrooms; 

(b) Information needed to identify the 

site and the building or buildings where 

the contract units are located. The 

information must include the project’s 

name, street address, city or county, 

state and zip code, block and lot number 

(if known), and any other information 

necessary to clearly identify the site and 

the building; 

(c) Information needed to identity the 

specific contract units in each building. 

The information must include the 

number of contract units in the 

building, the location of each contract 

unit, the area of each contract unit, and 

the number of bedrooms and bathrooms 

in each contract unit; 

(d) Services, maintenance, and 

equipment to be supplied by the owner 

without charges in addition to the rent 

to owner; 

(e) Utilities available to the contract 

units, including a specification of utility 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59923 

services to be paid by the owner 

(without charges in addition to rent) and 

utility services to be paid by the tenant; 

(f) Features provided to comply with 

program accessibility requirements of 

Section 504 of the Rehabilitation Act of 

1973 (29 U.S.C. 794) and implementing 

regulations at 24 CFR part 8; 

(g) The HAP contract term; 

(h) The number of units in any 

building that will exceed the 25 percent 

per building cap (as described in 

§ 983.56), which will be set-aside for 

occupancy by qualifying families 

(elderly or disabled families and 

families receiving supportive services); 

and 

(i) The initial rent to owner (for the 

first 12 months of the HAP contract 

term). 

§ 983.204 When HAP contract is executed. 

(a) PHA inspection of housing. (1) 

Before execution of the HAP contract, 

the PHA must inspect each contract unit 

in accordance with § 983.103(b). 

(2) The PHA may not enter into a HAP 

contract for any contract unit until the 

PHA has determined that the unit 

complies with the HQS. 

(b) Existing housing. In the case of 

existing housing, the HAP contract must 

be executed promptly after PHA 

selection of the owner proposal and 

PHA inspection of the housing. 

(c) Newly constructed or rehabilitated 

housing. (1) In the case of newly 

constructed or rehabilitated housing the 

HAP contract must be executed after the 

PHA has inspected the completed units 

and has determined that the units have 

been completed in accordance with the 

Agreement and the owner has furnished 

all required evidence of completion (see 

§§ 983.155 and 983.156). 

(2) In the HAP contract, the owner 

certifies that the units have been 

completed in accordance with the 

Agreement. Completion of the units by 

the owner and acceptance of units by 

the PHA is subject to the provisions of 

the Agreement. 

§ 983.205 Term of HAP contract. 

(a) Ten-year initial term. The PHA 

may enter into a HAP contract with an 

owner for an initial term of up to ten 

years for each contract unit. The length 

of the term of the HAP contract for any 

contract unit may not be less than one 

year, nor more than ten years. 

(b) Extension of term. Within one year 

before expiration, the PHA may agree to 

extend the term of the HAP contract for 

an additional term of up to five years if 

the PHA determines an extension is 

appropriate to continue providing 

affordable housing for low-income 

families. Subsequent extensions are 

subject to the same limitations. Any 

extension of the term must be on the 

form and subject to the conditions 

prescribed by HUD at the time of the 

extension. 

(c) Termination by PHA—insufficient 

funding. (1) The HAP contract must 

provide that the term of the PHA’s 

contractual commitment is subject to 

the availability of sufficient 

appropriated funding (budget authority) 

as determined by HUD or by the PHA 

in accordance with HUD instructions. 

For purposes of this section, ‘‘sufficient 

funding’’ means the availability of 

appropriations, and of funding under 

the ACC from such appropriations, to 

make full payment of housing assistance 

payments payable to the owner for any 

contract year in accordance with the 

terms of the HAP contract. 

(2) The availability of sufficient 

funding must be determined by HUD or 

by the PHA in accordance with HUD 

instructions. If it is determined that 

there may not be sufficient funding to 

continue housing assistance payments 

for all contract units and for the full 

term of the HAP contract, the PHA has 

the right to terminate the HAP contract 

by notice to the owner for all or any of 

the contract units. Such action by the 

PHA shall be implemented in 

accordance with HUD instructions. 

(d) Termination by owner—reduction 

below initial rent. The owner may 

terminate the HAP contract, upon notice 

to the PHA, if the amount of the rent to 

owner for any contract unit, as adjusted 

in accordance with § 983.302, is 

reduced below the amount of the initial 

rent to owner (rent to owner at the 

beginning of the HAP contract term). In 

this case, the assisted families residing 

in the contract units will be offered 

tenant-based voucher assistance. 

§ 983.206 HAP contract amendments (to 

add or substitute contract units). 

(a) Amendment to substitute contract 

units. At the discretion of the PHA and 

subject to all PBV requirements, the 

HAP contract may be amended to 

substitute a different unit with the same 

number of bedrooms in the same 

building for a previously covered 

contract unit. Prior to such substitution, 

the PHA must inspect the proposed 

substitute unit and must determine the 

reasonable rent for such unit. 

(b) Amendment to add contract units. 

At the discretion of the PHA, and 

provided that the total number of units 

in a building that will receive PBV 

assistance or other project-based 

assistance will not exceed 25 percent of 

the number of dwelling units (assisted 

or unassisted) in the building or the 20 

percent of authorized budget authority 

as provided in § 983.6, a HAP contract 

may be amended during the three-year 

period immediately following the 

execution date of the HAP contract to 

add additional PBV contract units in the 

same building. An amendment to the 

HAP contract is subject to all PBV 

requirements (e.g., rents are reasonable), 

except that a new PBV request for 

proposals is not required. The 

anniversary and expiration dates of the 

HAP contract for the additional units 

must be the same as the anniversary and 

expiration dates of the HAP contract 

term for the PBV units originally placed 

under HAP contract. 

(c) Staged completion of contract 

units. Even if contract units are placed 

under the HAP contract in stages 

commencing on different dates, there is 

a single annual anniversary for all 

contract units under the HAP contract. 

The annual anniversary for all contract 

units is the annual anniversary date for 

the first contract units placed under the 

HAP contract. The expiration of the 

HAP contract for all the contract units 

completed in stages must be concurrent 

with the end of the HAP contract term 

for the units originally placed under 

HAP contract. 

§ 983.207 Condition of contract units. 

(a) Owner maintenance and 

operation. (1) The owner must maintain 

and operate the contract units and 

premises in accordance with the HQS, 

including performance of ordinary and 

extraordinary maintenance. 

(2) The owner must provide all the 

services, maintenance, equipment, and 

utilities specified in the HAP contract 

with the PHA and in the lease with each 

assisted family. 

(3) At the discretion of the PHA, the 

HAP contract may also require 

continuing owner compliance during 

the HAP term with additional housing 

quality requirements specified by the 

PHA (in addition to, but not in place of, 

compliance with the HUD-prescribed 

HQS). Such additional requirements 

may be designed to assure continued 

compliance with any design, 

architecture, or quality requirement 

specified in the Agreement. 

(b) Remedies for HQS violation. (1) 

The PHA must vigorously enforce the 

owner’s obligation to maintain contract 

units in accordance with the HQS. The 

PHA may not make any HAP payment 

to the owner for a contract unit covering 

any period during which the contract 

unit does not comply with the HQS. 

(2) If the PHA determines that a 

contract unit is not in accordance with 

the housing quality standards (or other 

HAP contract requirement), the PHA 

may exercise any of its remedies under 

59924 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

the HAP contract for all or any contract 

units. Such remedies include 

termination of housing assistance 

payments, abatement or reduction of 

housing assistance payments, reduction 

of contract units, and termination of the 

HAP contract. 

(c) Maintenance and replacement—

Owner’s standard practice. Maintenance 

and replacement (including 

redecoration) must be in accordance 

with the standard practice for the 

building concerned as established by 

the owner. 

§ 983.208 Owner responsibilities. 

The owner is responsible for 

performing all of the owner 

responsibilities under the Agreement 

and the HAP contract. 24 CFR 982.452 

(Owner responsibilities) applies. 

§ 983.209 Owner certification. 

By execution of the HAP contract, the 

owner certifies that at such execution 

and at all times during the term of the 

HAP contract: 

(a) All contract units are in good and 

tenantable condition. The owner is 

maintaining the premises and all 

contract units in accordance with the 

HQS. 

(b) The owner is providing all the 

services, maintenance, equipment, and 

utilities as agreed to under the HAP 

contract and the leases with assisted 

families. 

(c) Each contract unit for which the 

owner is receiving housing assistance 

payments is leased to an eligible family 

referred by the PHA, and the lease is in 

accordance with the HAP contract and 

HUD requirements. 

(d) To the best of the owner’s 

knowledge, the members of the family 

reside in each contract unit for which 

the owner is receiving housing 

assistance payments, and the unit is the 

family’s only residence. 

(e) The owner (including a principal 

or other interested party) is not the 

spouse, parent, child, grandparent, 

grandchild, sister, or brother of any 

member of a family residing in a 

contract unit. 

(f) The amount of the housing 

assistance payment is the correct 

amount due under the HAP contract. 

(g) The rent to owner for each contract 

unit does not exceed rents charged by 

the owner for other comparable 

unassisted units. 

(h) Except for the housing assistance 

payment and the tenant rent as provided 

under the HAP contract, the owner has 

not received and will not receive any 

payment or other consideration (from 

the family, the PHA, HUD, or any other 

public or private source) for rental of the 

contract unit. 

(i) The family does not own or have 

any interest in the contract unit. 

Subpart F—Occupancy 

§ 983.251 How participants are selected. 

(a) Who may receive PBV assistance? 

(1) The PHA may select families who 

are participants in the PHA’s tenantbased voucher program and families 

who have applied for admission to the 

voucher program. 

(2) Except for voucher participants 

(determined eligible at original 

admission to the voucher program), the 

PHA may only select families 

determined eligible for admission at 

commencement of PBV assistance. 

(b) Protection of in-place families. (1) 

The term ‘‘in-place family’’ means an 

eligible family residing in a proposed 

contract unit on the proposal selection 

date. 

(2) In order to minimize displacement 

of in-place families, if a unit to be 

placed under contract that is either an 

existing unit or one requiring 

rehabilitation is occupied by an eligible 

family on the proposal selection date, 

the in-place family must be placed on 

the PHA’s waiting list (if the family is 

not already on the list) and, once its 

continued eligibility is determined, 

given an absolute selection preference 

and referred to the project owner for an 

appropriately sized PBV unit in the 

project. (However, the PHA may deny 

assistance for the grounds specified in 

24 CFR 982.552 and 982.553.) 

Admission of such families is not 

subject to income-targeting under 24 

CFR 982.201(b)(2)(i), and such families 

must be referred to the owner from the 

PHA’s waiting list. A PHA shall give 

such families priority for admission to 

the PBV program. This protection does 

not apply to families that are not eligible 

to participate in the program on the 

proposal selection date. 

(c) Selection from PHA waiting list. (1) 

Applicants who will occupy PBV units 

must be selected by the PHA from the 

PHA waiting list. The PHA must select 

applicants from the waiting list in 

accordance with the policies in the PHA 

administrative plan. 

(2) The PHA may use a separate 

waiting list for admission to PBV units 

or may use the same waiting list for both 

tenant-based assistance and PBV 

assistance. If the PHA chooses to use a 

separate waiting list for admission to 

PBV units, the PHA must offer to place 

applicants who are listed on the waiting 

list for tenant-based assistance on the 

waiting list for PBV assistance. 

(3) The PHA may use separate waiting 

lists for PBV units in individual projects 

or buildings (or for sets of such units) 

or may use a single waiting list for the 

PHA’s whole PBV program. In either 

case, the waiting list may establish 

criteria or preferences for occupancy of 

particular units. 

(4) The PHA may merge the waiting 

list for PBV assistance with the PHA 

waiting list for admission to another 

assisted housing program. 

(5) The PHA may place families 

referred by the PBV owner on its PBV 

waiting list. 

(6) Not less than 75 percent of the 

families admitted to a PHA’s tenantbased and project-based voucher 

programs during the PHA fiscal year 

from the PHA waiting list shall be 

extremely low-income families. The 

income-targeting requirements at 24 

CFR 982.201(b)(2) apply to the total of 

admissions to the PHA’s project-based 

voucher program and tenant-based 

voucher program during the PHA fiscal 

year from the PHA waiting list for such 

programs. 

(7) In selecting families to occupy 

PBV units with special accessibility 

features for persons with disabilities, 

the PHA must first refer families who 

require such accessibility features to the 

owner (see 24 CFR 8.26 and 100.202). 

(d) Preference for services offered. In 

selecting families, PHAs may give 

preference to disabled families who 

need services offered at a particular 

project in accordance with the limits 

under this paragraph. The prohibition 

on granting preferences to persons with 

a specific disability at 24 CFR 

982.207(b)(3) continues to apply. 

(1) Preference limits. (i) The 

preference is limited to the population 

of families (including individuals) with 

disabilities that significantly interfere 

with their ability to obtain and maintain 

themselves in housing; 

(ii) Who, without appropriate 

supportive services, will not be able to 

obtain or maintain themselves in 

housing; and 

(iii) For whom such services cannot 

be provided in a nonsegregated setting. 

(2) Disabled residents shall not be 

required to accept the particular 

services offered at the project. 

(3) In advertising the project, the 

owner may advertise the project as 

offering services for a particular type of 

disability; however, the project must be 

open to all otherwise eligible persons 

with disabilities who may benefit from 

services provided in the project. 

(e) Offer of PBV assistance. (1) If a 

family refuses the PHA’s offer of PBV 

assistance, such refusal does not affect 

the family’s position on the PHA 

waiting list for tenant-based assistance. 

(2) If a PBV owner rejects a family for 

admission to the owner’s PBV units, 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59925 

such rejection by the owner does not 

affect the family’s position on the PHA 

waiting list for tenant-based assistance. 

(3) The PHA may not take any of the 

following actions against an applicant 

who has applied for, received, or 

refused an offer of PBV assistance: 

(i) Refuse to list the applicant on the 

PHA waiting list for tenant-based 

assistance; 

(ii) Deny any admission preference for 

which the applicant is currently 

qualified; 

(iii) Change the applicant’s place on 

the waiting list based on preference, 

date, and time of application, or other 

factors affecting selection under the 

PHA selection policy; 

(iv) Remove the applicant from the 

waiting list for tenant-based voucher 

assistance. 

§ 983.252 PHA information for accepted 

family. 

(a) Oral briefing. When a family 

accepts an offer of PBV assistance, the 

PHA must give the family an oral 

briefing. The briefing must include 

information on the following subjects: 

(1) A description of how the program 

works; and 

(2) Family and owner responsibilities. 

(b) Information packet. The PHA must 

give the family a packet that includes 

information on the following subjects: 

(1) How the PHA determines the total 

tenant payment for a family; 

(2) Family obligations under the 

program; and 

(3) Applicable fair housing 

information. 

(c) Providing information for persons 

with disabilities. (1) If the family head 

or spouse is a disabled person, the PHA 

must take appropriate steps to assure 

effective communication, in accordance 

with 24 CFR 8.6, in conducting the oral 

briefing and in providing the written 

information packet, including in 

alternative formats. 

(2) The PHA shall have some 

mechanism for referring to accessible 

PBV units a family that includes a 

person with mobility impairment. 

(d) Providing information for persons 

with limited English proficiency. The 

PHA should take reasonable steps to 

assure meaningful access by persons 

with limited English proficiency in 

accordance with obligations contained 

in Title VI of the Civil Rights Act of 

1964 and Executive Order 13166. 

§ 983.253 Leasing of contract units. 

(a) Owner selection of tenants. (1) 

During the term of the HAP contract, the 

owner must lease contract units only to 

eligible families selected and referred by 

the PHA from the PHA waiting list. 

(2) The owner is responsible for 

adopting written tenant selection 

procedures that are consistent with the 

purpose of improving housing 

opportunities for very low-income 

families and reasonably related to 

program eligibility and an applicant’s 

ability to perform the lease obligations. 

(3) An owner must promptly notify in 

writing any rejected applicant of the 

grounds for any rejection. 

(b) Size of unit. The contract unit 

leased to each family must be 

appropriate for the size of the family 

under the PHA’s subsidy standards. 

§ 983.254 Vacancies. 

(a) Filling vacant units. (1) The owner 

must promptly notify the PHA of any 

vacancy or expected vacancy in a 

contract unit. After receiving the owner 

notice, the PHA must make every 

reasonable effort to refer promptly a 

sufficient number of families for the 

owner to fill such vacancies. 

(2) The owner must lease vacant 

contract units only to eligible families 

on the PHA waiting list referred by the 

PHA. 

(3) The PHA and the owner must 

make reasonable good faith efforts to 

minimize the likelihood and length of 

any vacancy. 

(b) Reducing number of contract 

units. If any contract units have been 

vacant for a period of 120 or more days 

since owner notice of vacancy (and 

notwithstanding the reasonable good 

faith efforts of the PHA to fill such 

vacancies), the PHA may give notice to 

the owner amending the HAP contract 

to reduce the number of contract units 

by subtracting the number of contract 

units (by number of bedrooms) that have 

been vacant for such period. 

§ 983.255 Tenant screening. 

(a) PHA option. (1) The PHA has no 

responsibility or liability to the owner 

or any other person for the family’s 

behavior or suitability for tenancy. 

However, the PHA may opt to screen 

applicants for family behavior or 

suitability for tenancy and may deny 

admission to an applicant based on such 

screening. 

(2) The PHA must conduct any such 

screening of applicants in accordance 

with policies stated in the PHA 

administrative plan. 

(b) Owner responsibility. (1) The 

owner is responsible for screening and 

selection of the family to occupy the 

owner’s unit. 

(2) The owner is responsible for 

screening of families on the basis of 

their tenancy histories. An owner may 

consider a family’s background with 

respect to such factors as: 

(i) Payment of rent and utility bills; 

(ii) Caring for a unit and premises; 

(iii) Respecting the rights of other 

residents to the peaceful enjoyment of 

their housing; 

(iv) Drug-related criminal activity or 

other criminal activity that is a threat to 

the health, safety, or property of others; 

and 

(v) Compliance with other essential 

conditions of tenancy; 

(c) Providing tenant information to 

owner. (1) The PHA must give the 

owner: 

(i) The family’s current and prior 

address (as shown in the PHA records); 

and 

(ii) The name and address (if known 

to the PHA) of the landlord at the 

family’s current and any prior address. 

(2) When a family wants to lease a 

dwelling unit, the PHA may offer the 

owner other information in the PHA 

possession about the family, including 

information about the tenancy history of 

family members or about drug 

trafficking and criminal activity by 

family members. 

(3) The PHA must give the family a 

description of the PHA policy on 

providing information to owners. 

(4) The PHA policy must provide that 

the PHA will give the same types of 

information to all owners. 

§ 983.256 Lease. 

(a) Tenant’s legal capacity. The tenant 

must have legal capacity to enter a lease 

under state and local law. ‘‘Legal 

capacity’’ means that the tenant is 

bound by the terms of the lease and may 

enforce the terms of the lease against the 

owner. 

(b) Form of lease. (1) The tenant and 

the owner must enter a written lease for 

the unit. The lease must be executed by 

the owner and the tenant. 

(2) If the owner uses a standard lease 

form for rental to unassisted tenants in 

the locality or the premises, the lease 

must be in such standard form, except 

as provided in paragraph (b)(4) of this 

section. If the owner does not use a 

standard lease form for rental to 

unassisted tenants, the owner may use 

another form of lease, such as a PHA 

model lease. 

(3) In all cases, the lease must include 

a HUD-required tenancy addendum. 

The tenancy addendum must include, 

word-for-word, all provisions required 

by HUD. 

(4) The PHA may review the owner’s 

lease form to determine if the lease 

complies with state and local law. The 

PHA may decline to approve the 

tenancy if the PHA determines that the 

lease does not comply with state or local 

law. 

59926 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

(c) Required information. The lease 

must specify all of the following: 

(1) The names of the owner and the 

tenant; 

(2) The unit rented (address, 

apartment number, if any, and any other 

information needed to identify the 

leased contract unit); 

(3) The term of the lease (initial term 

and any provision for renewal); 

(4) The amount of the tenant rent to 

owner. The tenant rent to owner is 

subject to change during the term of the 

lease in accordance with HUD 

requirements; 

(5) A specification of what services, 

maintenance, equipment, and utilities 

are to be provided by the owner; and 

(6) The amount of any charges for 

food, furniture, or supportive services. 

(d) Tenancy addendum. (1) The 

tenancy addendum in the lease shall 

state: 

(i) The program tenancy requirements 

(as specified in this part); 

(ii) The composition of the household 

as approved by the PHA (names of 

family members and any PHA-approved 

live-in aide). 

(2) All provisions in the HUDrequired tenancy addendum must be 

included in the lease. The terms of the 

tenancy addendum shall prevail over 

other provisions of the lease. 

(e) Changes in lease. (1) If the tenant 

and the owner agree to any change in 

the lease, such change must be in 

writing, and the owner must 

immediately give the PHA a copy of all 

such changes. 

(2) The owner must notify the PHA in 

advance of any proposed change in 

lease requirements governing the 

allocation of tenant and owner 

responsibilities for utilities. Such 

changes may be made only if approved 

by the PHA and in accordance with the 

terms of the lease relating to its 

amendment. The PHA must redetermine 

reasonable rent, in accordance with 

§ 983.303(c), based on any change in the 

allocation of responsibility for utilities 

between the owner and the tenant, and 

the redetermined reasonable rent shall 

be used in calculation of rent to owner 

from the effective date of the change. 

(f) Initial term of lease. The initial 

lease term must be for at least one year. 

(g) Lease provisions governing tenant 

absence from the unit. The lease may 

specify a maximum period of tenant 

absence from the unit that may be 

shorter than the maximum period 

permitted by PHA policy. (PHA 

termination of assistance actions due to 

family absence from the unit is subject 

to 24 CFR 982.312, except that the HAP 

contract is not terminated if the family 

is absent for longer than the maximum 

period permitted.) 

§ 983.257 Owner termination of tenancy 

and eviction. 

(a) In general. 24 CFR 982.310 applies 

with the exception that 

§ 982.310(d)(1)(iii) and (iv) do not apply 

to the PBV program. (In the PBV 

program, ‘‘good cause’’ does not include 

a business or economic reason or desire 

to use the unit for an individual, family, 

or non-residential rental purpose.) 24 

CFR 5.858 through 5.861 on eviction for 

drug and alcohol abuse apply to this 

part. 

(b) Upon lease expiration, an owner 

may: 

(1) Renew the lease; 

(2) Refuse to renew the lease for good 

cause as stated in paragraph (a) of this 

section; 

(3) Refuse to renew the lease without 

good cause, in which case the PHA 

would provide the family with a tenantbased voucher and the unit would be 

removed from the PBV HAP contract. 

(c) If a family resides in a projectbased unit excepted from the 25 percent 

per-building cap on project-basing 

because of participation in an FSS or 

other supportive services program, and 

the family fails without good cause to 

complete its FSS contract of 

participation or supportive services 

requirement, such failure is grounds for 

lease termination by the owner. 

§ 983.258 Security deposit: amounts owed 

by tenant. 

(a) The owner may collect a security 

deposit from the tenant. 

(b) The PHA may prohibit security 

deposits in excess of private market 

practice, or in excess of amounts 

charged by the owner to unassisted 

tenants. 

(c) When the tenant moves out of the 

contract unit, the owner, subject to state 

and local law, may use the security 

deposit, including any interest on the 

deposit, in accordance with the lease, as 

reimbursement for any unpaid tenant 

rent, damages to the unit, or other 

amounts which the tenant owes under 

the lease. 

(d) The owner must give the tenant a 

written list of all items charged against 

the security deposit and the amount of 

each item. After deducting the amount 

used to reimburse the owner, the owner 

must promptly refund the full amount 

of the balance to the tenant. 

(e) If the security deposit is not 

sufficient to cover amounts the tenant 

owes under the lease, the owner may 

seek to collect the balance from the 

tenant. However, the PHA has no 

liability or responsibility for payment of 

any amount owed by the family to the 

owner. 

§ 983.259 Overcrowded, under-occupied, 

and accessible units. 

(a) Family occupancy of wrong-size or 

accessible unit. The PHA subsidy 

standards determine the appropriate 

unit size for the family size and 

composition. If the PHA determines that 

a family is occupying a: 

(1) Wrong-size unit, or 

(2) Unit with accessibility features 

that the family does not require, and the 

unit is needed by a family that requires 

the accessibility features, the PHA must 

promptly notify the family and the 

owner of this determination, and of the 

PHA’s offer of continued assistance in 

another unit pursuant to paragraph (b) 

of this section. 

(b) PHA offer of continued assistance. 

(1) If a family is occupying a: 

(i) Wrong-size unit, or 

(ii) Unit with accessibility features 

that the family does not require, and the 

unit is needed by a family that requires 

the accessibility features, the PHA must 

offer the family the opportunity to 

receive continued housing assistance in 

another unit. 

(2) The PHA policy on such 

continued housing assistance must be 

stated in the administrative plan and 

may be in the form of: 

(i) Project-based voucher assistance in 

an appropriate-size unit (in the same 

building or in another building); 

(ii) Other project-based housing 

assistance (e.g., by occupancy of a 

public housing unit); 

(iii) Tenant-based rental assistance 

under the voucher program; or 

(iv) Other comparable public or 

private tenant-based assistance (e.g., 

under the HOME program). 

(c) PHA termination of housing 

assistance payments. (1) If the PHA 

offers the family the opportunity to 

receive tenant-based rental assistance 

under the voucher program, the PHA 

must terminate the housing assistance 

payments for a wrong-sized or 

accessible unit at expiration of the term 

of the family’s voucher (including any 

extension granted by the PHA). 

(2) If the PHA offers the family the 

opportunity for another form of 

continued housing assistance in 

accordance with paragraph (b)(2) of this 

section (not in the tenant-based voucher 

program), and the family does not 

accept the offer, does not move out of 

the PBV unit within a reasonable time 

as determined by the PHA, or both, the 

PHA must terminate the housing 

assistance payments for the wrong-sized 

or accessible unit, at the expiration of a 

reasonable period as determined by the 

PHA. 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59927 

§ 983.260 Family right to move. 

(a) The family may terminate the 

assisted lease at any time after the first 

year of occupancy. The family must give 

the owner advance written notice of 

intent to vacate (with a copy to the 

PHA) in accordance with the lease. 

(b) If the family has elected to 

terminate the lease in this manner, the 

PHA must offer the family the 

opportunity for continued tenant-based 

rental assistance, in the form of either 

assistance under the voucher program or 

other comparable tenant-based rental 

assistance. 

(c) Before providing notice to 

terminate the lease under paragraph (a) 

of this section, a family must contact the 

PHA to request comparable tenant-based 

rental assistance if the family wishes to 

move with continued assistance. If 

voucher or other comparable tenantbased rental assistance is not 

immediately available upon termination 

of the family’s lease of a PBV unit, the 

PHA must give the family priority to 

receive the next available opportunity 

for continued tenant-based rental 

assistance. 

(d) If the family terminates the 

assisted lease before the end of one year, 

the family relinquishes the opportunity 

for continued tenant-based assistance. 

§ 983.261 When occupancy may exceed 25 

percent cap on the number of PBV units in 

each building. 

(a) Except as provided in § 983.56(b), 

the PHA may not pay housing assistance 

under the HAP contract for contract 

units in excess of the 25 percent cap 

pursuant to § 983.56(a). 

(b) In referring families to the owner 

for admission to excepted units, the 

PHA must give preference to elderly or 

disabled families; or to families 

receiving supportive services. 

(c) If a family at the time of initial 

tenancy is receiving and while the 

resident of an excepted unit has 

received FSS supportive services or any 

other service as defined in the PHA 

administrative plan, and successfully 

completes the FSS contract of 

participation or the supportive services 

requirement, the unit continues to count 

as an excepted unit for as long as the 

family resides in the unit. 

(d) A family (or the remaining 

members of the family) residing in an 

excepted unit that no longer meets the 

criteria for a ‘‘qualifying family’’ in 

connection with the 25 percent per 

building cap exception (e.g., a family 

that does not successfully complete its 

FSS contract of participation or the 

supportive services requirement as 

defined in the PHA administrative plan 

or the remaining members of a family 

that no longer qualifies for elderly or 

disabled family status) must vacate the 

unit within a reasonable period of time 

established by the PHA, and the PHA 

shall cease paying housing assistance 

payments on behalf of the nonqualifying family. If the family fails to 

vacate the unit within the established 

time, the unit must be removed from the 

HAP contract unless the project is 

partially assisted, and it is possible for 

the HAP contract to be amended to 

substitute a different unit in the 

building in accordance with 

§ 983.206(a); or the owner terminates 

the lease and evicts the family. The 

housing assistance payments for a 

family residing in an excepted unit that 

is not in compliance with its family 

obligations (e.g., a family fails, without 

good cause, to successfully complete its 

FSS contract of participation or 

supportive services requirement) shall 

be terminated by the PHA. 

Subpart G—Rent to Owner 

§ 983.301 Determining the rent to owner. 

(a) Initial and redetermined rents. (1) 

The amount of the initial and 

redetermined rent to owner is 

determined in accordance with this 

section and § 983.302. 

(2) The amount of the initial rent to 

owner is established at the beginning of 

the HAP contract term. For rehabilitated 

or newly constructed housing, the 

Agreement states the estimated amount 

of the initial rent to owner, but the 

actual amount of the initial rent to 

owner is established at the beginning of 

the HAP contract term. 

(3) The rent to owner is redetermined 

at the owner’s request for a rent increase 

in accordance with this section and 

§ 983.302. The rent to owner is also 

redetermined at such time when there is 

a five percent or greater decrease in the 

published FMR in accordance with 

§ 983.302. 

(b) Amount of rent to owner. Except 

for certain tax credit units as provided 

in paragraph (c) of this section, the rent 

to owner must not exceed the lowest of: 

(1) An amount determined by the 

PHA, not to exceed 110 percent of the 

applicable fair market rent (or any 

exception payment standard approved 

by the Secretary) for the unit bedroom 

size minus any utility allowance; 

(2) The reasonable rent; or 

(3) The rent requested by the owner. 

(c) Rent to owner for certain tax credit 

units. (1) This paragraph (c) applies if: 

(i) A contract unit receives a lowincome housing tax credit under the 

Internal Revenue Code of 1986 (see 26 

U.S.C. 42); 

(ii) The contract unit is not located in 

a qualified census tract; 

(iii) In the same building, there are 

comparable tax credit units of the same 

unit bedroom size as the contract unit 

and the comparable tax credit units do 

not have any form of rental assistance 

other than the tax credit; and 

(iv) The tax credit rent exceeds the 

applicable fair market rental (or any 

exception payment standard) as 

determined in accordance with 

paragraph (b) of this section. 

(2) In the case of a contract unit 

described in paragraph (c)(1) of this 

section, the rent to owner must not 

exceed the lowest of: 

(i) The tax credit rent minus any 

utility allowance; 

(ii) The reasonable rent; or 

(iii) The rent requested by the owner. 

(3) The ‘‘tax credit rent’’ is the rent 

charged for comparable units of the 

same bedroom size in the building that 

also receive the low-income housing tax 

credit but do not have any additional 

rental assistance (e.g., additional 

assistance such as tenant-based voucher 

assistance). 

(4) A ‘‘qualified census tract’’ is any 

census tract (or equivalent geographic 

area defined by the Bureau of the 

Census) in which: 

(i) At least 50 percent of households 

have an income of less than 60 percent 

of Area Median Gross Income (AMGI); 

or 

(ii) Where the poverty rate is at least 

25 percent and where the census tract 

is designated as a qualified census tract 

by HUD. 

(d) Rent to owner for other tax credit 

units. Except in the case of a tax credit 

unit described in paragraph (c)(1) of this 

section, the rent to owner for all other 

tax credit units is determined pursuant 

to paragraph (b) of this section. 

(e) Reasonable rent. The PHA shall 

determine reasonable rent in accordance 

with § 983.303. The rent to owner for 

each contract unit may at no time 

exceed the reasonable rent. 

(f) Use of FMRs and utility allowance 

schedule in determining the amount of 

rent to owner. (1) Amounts used. (i) 

Determination of initial rent (at 

beginning of HAP contract term). When 

determining the initial rent to owner, 

the PHA shall use the most recently 

published FMR in effect and the utility 

allowance schedule in effect at 

execution of the HAP contract. At its 

discretion, the PHA may use the 

amounts in effect at any time during the 

30-day period immediately before the 

beginning date of the HAP contract. 

(ii) Redetermination of rent to owner. 

When redetermining the rent to owner, 

the PHA shall use the most recently 

59928 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

published FMR and the PHA utility 

allowance schedule in effect at the time 

of redetermination. At its discretion, the 

PHA may use the amounts in effect at 

any time during the 30-day period 

immediately before the redetermination 

date. 

(2) Exception payment standard and 

PHA utility allowance schedule. (i) Any 

HUD-approved exception payment 

standard amount under 24 CFR 

982.503(c) applies to both the tenantbased and project-based voucher 

programs. HUD will not approve a 

different exception payment standard 

amount for use in the PBV program. 

(ii) The PHA may not establish or 

apply different utility allowance 

amounts for the PBV program. The same 

PHA utility allowance schedule applies 

to both the tenant-based and PBV 

programs. 

(g) PHA-owned units. For PHA-owned 

PBV units, the initial rent to owner and 

the annual redetermination of rent at the 

annual anniversary of the HAP contract 

are determined by the independent 

entity approved by HUD in accordance 

with § 983.59. The PHA must use the 

rent to owner established by the 

independent entity. 

§ 983.302 Redetermination of rent to 

owner. 

(a) The PHA must redetermine the 

rent to owner: 

(1) Upon the owner’s request; or 

(2) When there is a five percent or 

greater decrease in the published FMR 

in accordance with § 983.301. 

(b) Rent increase. (1) The PHA may 

not make any rent increase other than 

an increase in the rent to owner as 

determined pursuant to § 983.301. 

(Provisions for special adjustments of 

contract rent pursuant to 42 U.S.C. 

1437f(b)(2)(B) do not apply to the 

voucher program.) 

(2) The owner must request an 

increase in the rent to owner at the 

annual anniversary of the HAP contract 

by written notice to the PHA. The length 

of the required notice period of the 

owner request for a rent increase at the 

annual anniversary may be established 

by the PHA. The request must be 

submitted in the form and manner 

required by the PHA. 

(3) The PHA may not approve and the 

owner may not receive any increase of 

rent to owner until and unless the 

owner has complied with all 

requirements of the HAP contract, 

including compliance with the HQS. 

The owner may not receive any 

retroactive increase of rent for any 

period of noncompliance. 

(c) Rent decrease. If there is a 

decrease in the rent to owner, as 

established in accordance with 

§ 983.301, the rent to owner must be 

decreased, regardless of whether the 

owner requested a rent adjustment. 

(d) Notice of rent redetermination. 

Rent to owner is redetermined by 

written notice by the PHA to the owner 

specifying the amount of the 

redetermined rent (as determined in 

accordance with §§ 983.301 and 

983.302). The PHA notice of the rent 

adjustment constitutes an amendment of 

the rent to owner specified in the HAP 

contract. 

(e) Contract year and annual 

anniversary of the HAP contract. (1) The 

contract year is the period of 12 

calendar months preceding each annual 

anniversary of the HAP contract during 

the HAP contract term. The initial 

contract year is calculated from the first 

day of the first calendar month of the 

HAP contract term. 

(2) The annual anniversary of the 

HAP contract is the first day of the first 

calendar month after the end of the 

preceding contract year. The adjusted 

rent to owner amount applies for the 

period of 12 calendar months from the 

annual anniversary of the HAP contract. 

(3) See § 983.206(c) for information on 

the annual anniversary of the HAP 

contract for contract units completed in 

stages. 

§ 983.303 Reasonable rent. 

(a) Comparability requirement. At all 

times during the term of the HAP 

contract, the rent to owner for a contract 

unit may not exceed the reasonable rent 

as determined by the PHA. 

(b) Redetermination. The PHA must 

redetermine the reasonable rent: 

(1) Whenever there is a five percent or 

greater decrease in the published FMR 

in effect 60 days before the contract 

anniversary (for the unit sizes specified 

in the HAP contract) as compared with 

the FMR in effect one year before the 

contract anniversary; 

(2) Whenever the PHA approves a 

change in the allocation of 

responsibility for utilities between the 

owner and the tenant; 

(3) Whenever the HAP contract is 

amended to substitute a different 

contract unit in the same building; and 

(4) Whenever there is any other 

change that may substantially affect the 

reasonable rent. 

(c) How to determine reasonable rent. 

(1) The reasonable rent of a contract unit 

must be determined by comparison to 

rent for other comparable unassisted 

units. 

(2) In determining the reasonable rent, 

the PHA must consider factors that 

affect market rent, such as: 

(i) The location, quality, size, unit 

type, and age of the contract unit; and 

(ii) Amenities, housing services, 

maintenance, and utilities to be 

provided by the owner. 

(d) Comparability analysis. (1) For 

each unit, the PHA comparability 

analysis must use at least three 

comparable units in the private 

unassisted market, which may include 

comparable unassisted units in the 

premises or project. 

(2) The PHA must retain a 

comparability analysis that shows how 

the reasonable rent was determined, 

including major differences between the 

contract units and comparable 

unassisted units. 

(3) The comparability analysis may be 

performed by PHA staff or by another 

qualified person or entity. A person or 

entity that conducts the comparability 

analysis and any PHA staff or contractor 

engaged in determining the housing 

assistance payment based on the 

comparability analysis may not have 

any direct or indirect interest in the 

property. 

(e) Owner certification of 

comparability. By accepting each 

monthly housing assistance payment 

from the PHA, the owner certifies that 

the rent to owner is not more than rent 

charged by the owner for comparable 

unassisted units in the premises. The 

owner must give the PHA information 

requested by the PHA on rents charged 

by the owner for other units in the 

premises or elsewhere. 

(f) Determining reasonable rent for 

PHA-owned units. (1) For PHA-owned 

units, the amount of the reasonable rent 

must be determined by an independent 

agency approved by HUD in accordance 

with § 983.58, rather than by the PHA. 

Reasonable rent must be determined in 

accordance with this section. 

(2) The independent entity must 

furnish a copy of the independent entity 

determination of reasonable rent for 

PHA-owned units to the PHA and to the 

HUD field office where the project is 

located. 

§ 983.304 Other subsidy: effect on rent to 

owner. 

(a) General. In addition to the rent 

limits established in accordance with 

§ 983.301 and 24 CFR 982.302, the 

following restrictions apply to certain 

units. 

(b) HOME. For units assisted under 

the HOME program, rents may not 

exceed rent limits as required by the 

HOME program (24 CFR 92.252). 

(c) Subsidized projects. (1) This 

paragraph (c) applies to any contract 

units in any of the following types of 

federally subsidized project: 

(i) An insured or non-insured Section 

236 project; 

Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 59929 

(ii) A formerly insured or non-insured 

Section 236 project that continues to 

receive Interest Reduction Payment 

following a decoupling action; 

(iii) A Section 221(d)(3) below market 

interest rate (BMIR) project; 

(iv) A Section 515 project of the Rural 

Housing Service; 

(v) A project receiving low-income 

housing tax credits; 

(vi) Any other type of federally 

subsidized project specified by HUD. 

(2) The rent to owner may not exceed 

the subsidized rent (basic rent) or tax 

credit rent as determined in accordance 

with requirements for the applicable 

federal program listed in paragraph 

(c)(1) of this section. 

(d) Combining subsidy. Rent to owner 

may not exceed any limitation required 

to comply with HUD subsidy layering 

requirements. See § 983.55. 

(e) Other subsidy: PHA discretion to 

reduce rent. At its discretion, a PHA 

may reduce the initial rent to owner 

because of other governmental 

subsidies, including tax credit or tax 

exemption, grants, or other subsidized 

financing. 

(f) Prohibition of other subsidy. For 

provisions that prohibit PBV assistance 

to units in certain types of subsidized 

housing, see § 983.54. 

§ 983.305 Rent to owner: effect of rent 

control and other rent limits. 

In addition to the limitation to 110 

percent of the FMR in § 983.301(b)(1), 

the rent reasonableness limit under 

§§ 983.301(b)(2) and 983.303, the rental 

determination provisions of § 983.301(f), 

the special limitations for tax credit 

units under § 983.301(c), and other rent 

limits under this part, the amount of 

rent to owner also may be subject to rent 

control or other limits under local, state, 

or federal law. 

Subpart H—Payment to Owner 

§ 983.351 PHA payment to owner for 

occupied unit. 

(a) When payments are made. (1) 

During the term of the HAP contract, the 

PHA shall make housing assistance 

payments to the owner in accordance 

with the terms of the HAP contract. The 

payments shall be made for the months 

during which a contract unit is leased 

to and actually occupied by an eligible 

family. 

(2) Except for discretionary vacancy 

payments in accordance with § 983.352, 

the PHA may not make any housing 

assistance payment to the owner for any 

month after the month when the family 

moves out of the unit (even if household 

goods or property are left in the unit). 

(b) Monthly payment. Each month, the 

PHA shall make a housing assistance 

payment to the owner for each contract 

unit that complies with the HQS and is 

leased to and occupied by an eligible 

family in accordance with the HAP 

contract. 

(c) Calculating amount of payment. 

The monthly housing assistance 

payment by the PHA to the owner for 

a contract unit leased to a family is the 

rent to owner minus the tenant rent 

(total tenant payment minus the utility 

allowance). 

(d) Prompt payment. The housing 

assistance payment by the PHA to the 

owner under the HAP contract must be 

paid to the owner on or about the first 

day of the month for which payment is 

due, unless the owner and the PHA 

agree on a later date. 

(e) Owner compliance with contract. 

To receive housing assistance payments 

in accordance with the HAP contract, 

the owner must comply with all the 

provisions of the HAP contract. Unless 

the owner complies with all the 

provisions of the HAP contract, the 

owner does not have a right to receive 

housing assistance payments. 

§ 983.352 Vacancy payment. 

(a) Payment for move-out month. If an 

assisted family moves out of the unit, 

the owner may keep the housing 

assistance payment payable for the 

calendar month when the family moves 

out (‘‘move-out month’’). However, the 

owner may not keep the payment if the 

PHA determines that the vacancy is the 

owner’s fault. 

(b) Vacancy payment at PHA 

discretion. (1) At the discretion of the 

PHA, the HAP contract may provide for 

vacancy payments to the owner (in the 

amounts determined in accordance with 

paragraph (b)(2) of this section) for a 

PHA-determined period of vacancy 

extending from the beginning of the first 

calendar month after the move-out 

month for a period not exceeding two 

full months following the move-out 

month. 

(2) The vacancy payment to the owner 

for each month of the maximum twomonth period will be determined by the 

PHA, and cannot exceed the monthly 

rent to owner under the assisted lease, 

minus any portion of the rental payment 

received by the owner (including 

amounts available from the tenant’s 

security deposit). Any vacancy payment 

may cover only the period the unit 

remains vacant. 

(3) The PHA may make vacancy 

payments to the owner only if: 

(i) The owner gives the PHA prompt, 

written notice certifying that the family 

has vacated the unit and containing the 

date when the family moved out (to the 

best of the owner’s knowledge and 

belief); 

(ii) The owner certifies that the 

vacancy is not the fault of the owner 

and that the unit was vacant during the 

period for which payment is claimed; 

(iii) The owner certifies that it has 

taken every reasonable action to 

minimize the likelihood and length of 

vacancy; and 

(iv) The owner provides any 

additional information required and 

requested by the PHA to verify that the 

owner is entitled to the vacancy 

payment. 

(4) The owner must submit a request 

for vacancy payments in the form and 

manner required by the PHA and must 

provide any information or 

substantiation required by the PHA to 

determine the amount of any vacancy 

payment. 

§ 983.353 Tenant rent; payment to owner. 

(a) PHA determination. (1) The tenant 

rent is the portion of the rent to owner 

paid by the family. The PHA determines 

the tenant rent in accordance with HUD 

requirements. 

(2) Any changes in the amount of the 

tenant rent will be effective on the date 

stated in a notice by the PHA to the 

family and the owner. 

(b) Tenant payment to owner. (1) The 

family is responsible for paying the 

tenant rent (total tenant payment minus 

the utility allowance). 

(2) The amount of the tenant rent as 

determined by the PHA is the maximum 

amount the owner may charge the 

family for rent of a contract unit. The 

tenant rent is payment for all housing 

services, maintenance, equipment, and 

utilities to be provided by the owner 

without additional charge to the tenant, 

in accordance with the HAP contract 

and lease. 

(3) The owner may not demand or 

accept any rent payment from the tenant 

in excess of the tenant rent as 

determined by the PHA. The owner 

must immediately return any excess 

payment to the tenant. 

(4) The family is not responsible for 

payment of the portion of the rent to 

owner covered by the housing 

assistance payment under the HAP 

contract. The owner may not terminate 

the tenancy of an assisted family for 

nonpayment of the PHA housing 

assistance payment. 

(c) Limit of PHA responsibility. (1) 

The PHA is responsible only for making 

housing assistance payments to the 

owner on behalf of a family in 

accordance with the HAP contract. The 

PHA is not responsible for paying the 

tenant rent, or for paying any other 

claim by the owner. 

59930 Federal Register / Vol. 70, No. 197 / Thursday, October 13, 2005 / Rules and Regulations 

(2) The PHA may not use housing 

assistance payments or other program 

funds (including any administrative fee 

reserve) to pay any part of the tenant 

rent or to pay any other claim by the 

owner. The PHA may not make any 

payment to the owner for any damage to 

the unit, or for any other amount owed 

by a family under the family’s lease or 

otherwise. 

(d) Utility reimbursement. (1) If the 

amount of the utility allowance exceeds 

the total tenant payment, the PHA shall 

pay the amount of such excess as a 

reimbursement for tenant-paid utilities 

(‘‘utility reimbursement’’) and the 

tenant rent to the owner shall be zero. 

(2) The PHA either may pay the utility 

reimbursement to the family or may pay 

the utility bill directly to the utility 

supplier on behalf of the family. 

(3) If the PHA chooses to pay the 

utility supplier directly, the PHA must 

notify the family of the amount paid to 

the utility supplier. 

§ 983.354 Other fees and charges. 

(a) Meals and supportive services. (1) 

Except as provided in paragraph (a)(2) 

of this section, the owner may not 

require the tenant or family members to 

pay charges for meals or supportive 

services. Non-payment of such charges 

is not grounds for termination of 

tenancy. 

(2) In assisted living developments 

receiving project-based assistance, 

owners may charge tenants, family 

members, or both for meals or 

supportive services. These charges may 

not be included in the rent to owner, 

nor may the value of meals and 

supportive services be included in the 

calculation of reasonable rent. Nonpayment of such charges is grounds for 

termination of the lease by the owner in 

an assisted living development. 

(b) Other charges by owner. The 

owner may not charge the tenant or 

family members extra amounts for items 

customarily included in rent in the 

locality or provided at no additional 

cost to unsubsidized tenants in the 

premises. 

Dated: September 29, 2005. 

Paula O. Blunt, 

General Deputy Assistant Secretary for Public 

and Indian Housing. 

[FR Doc. 05–20035 Filed 10–12–05; 8:45 am] 

BILLING CODE 4210–33–P