27564 Federal Register / Vol. 75, No. 94 / Monday, May 17, 2010 / Notices 

1Section 3(b)(2) of the United States Housing Act 

of 1937 (42 U.S.C. 1437a(b)(2)) (1937 Act) provides 

for assisted housing for ‘‘low-income families’’ and 

‘‘very low-income families,’’ and defines these terms 

as families whose incomes are below 80 percent 

and 50 percent, respectively, of the median family 

income for the area with adjustments for family 

size. These income limits are referred to as ‘‘Section 

8 income limits’’ because of the historical and 

statutory links with that program, although the 

same income limits are also used as eligibility 

criteria by several other Federal programs. The 1937 

Act specifies conditions under which Section 8 

income limits are to be adjusted either on a 

designated area basis or because of unusually high 

or low family incomes or housing-cost-to-income 

relationships. Section 8 income limits are 

calculated using Section 8 Fair Market Rent (FMR) 

area definitions, which in turn are based on Office 

of Management and Budget metropolitan statistical 

area definitions. 

Information on Services for Individuals 

With Disabilities 

For information on facilities or 

services for individuals with disabilities 

or to request special assistance at the 

meeting, please write or call the 

individual listed in the FOR FURTHER

INFORMATION CONTACT section above as 

soon as possible. 

Authority: 44 CFR 351.10(a) and 351.11(a). 

Timothy W. Manning, 

Deputy Administrator, Protection and 

National Preparedness, Federal Emergency 

Management Agency. 

[FR Doc. 2010–11673 Filed 5–14–10; 8:45 am] 

BILLING CODE 9110–21–P 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–5323–N–03] 

Final Notice on Ending the ‘‘HoldHarmless’’ Policy in Calculating 

Section 8 Income Limits Under the 

United States Housing Act of 1937 

AGENCY: Office of the Assistant 

Secretary for Policy Development and 

Research, HUD. 

ACTION: Final notice. 

SUMMARY: Today’s notice announces 

that HUD will allow Section 8 income 

limits to decrease beginning with the 

Fiscal Year (FY) 2010 income limits, but 

will limit all annual decreases to no 

more than 5 percent and limit all annual 

increases to 5 percent or twice the 

change in national median family 

income, whichever is greater. This 

notice follows notices of September 14, 

2009, and October 7, 2009, that solicited 

public comment on HUD’s proposal to 

discontinue its ‘‘hold-harmless’’ policy. 

HUD’s hold-harmless policy maintained 

Section 8 income limits for certain areas 

at previously published levels when 

reductions would otherwise have 

resulted from changes in median family 

income estimates, housing cost 

adjustment data, median family income 

update methodology, income limit 

methodology, or metropolitan area 

definitions. HUD has also decided that 

rents used in its HOME Investment 

Partnerships program (HOME) will 

continue to be held harmless and that 

income limits for rural housing 

programs will continue their current 

hold-harmless policy, based on different 

area definitions. 

DATES: Effective Date: May 17, 2010. 

FOR FURTHER INFORMATION CONTACT: For 

technical information on the 

methodology used to develop income 

limits and median family income 

estimates, please call the HUD USER 

information line at 800–245–2691 or 

access the information on the HUD Web 

site, http://www.huduser.org/portal/ 

datasets/il.html. That Web site lists 

current and historical income limits. 

Furthermore, HUD maintains an 

interactive on-line documentation 

system for income limits and median 

family income estimates. The 

documentation system provides 

interested users with their income limits 

prior to the application of the holdharmless policy in areas currently being 

held harmless. The FY 2009 

documentation system may be accessed 

at http://www.huduser.org/portal/ 

datasets/il/index_il2009.html. 

Questions may be addressed to Mark 

Stanton or Marie Lihn, Economic and 

Market Analysis Division, Office of 

Economic Affairs, Office of Policy 

Development and Research, telephone 

number 202–708–0590. Persons with 

hearing or speech impairments may 

access this number through TTY by 

calling the toll-free Federal Information 

Relay Service at 800–877–8339. 

Electronic Data Availability: This 

Federal Register notice is available 

electronically from the HUD news page: 

http://www.hud.gov/offices/adm/ 

hudclips/index.cfm. Federal Register 

notices also are available electronically 

from the U.S. Government Printing 

Office Web site: http:// 

www.gpoaccess.gov/fr/index.html. This 

Federal Register notice also will be 

posted on the following HUD Web site: 

http://www.huduser.org/portal/ 

datasets/il.html. 

SUPPLEMENTARY INFORMATION: 

I. Background: The September 14, 2009, 

Notice 

On September 14, 2009, HUD 

published a notice in the Federal 

Register (74 FR 47016) seeking public 

comment on the impact of eliminating 

the hold-harmless policy for Section 8 

income limits while continuing this 

policy for rents in the HOME program.1

In the September 14, 2009, notice, HUD 

stated that through FY 2009, it would 

continue its policy of maintaining 

Section 8 income limits for HUD rental 

subsidy programs at the previously 

published level in cases where HUD’s 

estimate of area median family income 

or housing cost adjustment data, or 

changes in calculation methodology, 

would lead to a lower income limit than 

was previously published. This holdharmless policy was implemented to 

avoid jeopardizing the financial 

feasibility of existing housing projects in 

instances where program rents were tied 

to Section 8 income limits. Under the 

hold-harmless policy, Section 8 income 

limits would be maintained until such 

a time as income limit calculations 

produced increases. 

The primary Federal housing 

programs that rely on Section 8 income 

limits other than the Section 8 Voucher 

program are multifamily tax subsidy 

projects (MTSPs) financed with lowincome housing tax credits (LIHTCs) 

under section 42 of the Internal Revenue 

Code of 1986 (IRC) and tax-exempt 

private activity bonds under section 142 

of the IRC. Under these programs, 

maximum rents for units in MTSPs are 

generally 30 percent of the HUDpublished Section 8 income limit for a 

four-person household, adjusted by the 

number of bedrooms in a unit. MTSPs 

use of Section 8 income limits to 

determine rents was HUD’s principal 

reason for establishing the holdharmless policy; otherwise, when 

Section 8 income limits fall, the 

maximum rent that private owners can 

charge low-income tenants in the 

MTSPs falls, which may place a 

financial strain on existing MTSPs. 

MTSP rents, however, are now 

protected from falling under the 

Housing and Economic Recovery Act of 

2008 (Pub. L. 110–289, approved July 

30, 2008) (HERA). 

HERA eliminates the need for HUD to 

continue its hold-harmless policy for 

the benefit of MTSPs. Specifically, 

Section 3009 of HERA amended IRC 

section 142(d) (26 U.S.C. 142 (note)) by 

implementing a statutory project-level 

hold-harmless provision for existing 

MTSPs. The provision applies to all 

MTSP projects and is not limited to 

projects benefiting from the HUD holdharmless policy. As a result of this 

provision, determinations of area 

median gross income with respect to the 

project may not be less than the 

determination with respect to the 

project made for the preceding year. 

Section 3009 also provides additional 


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Federal Register / Vol. 75, No. 94 / Monday, May 17, 2010 / Notices 27565 

relief for MTSPs in areas where HUD 

modified its methodology to include 

additional data in its calculation of area 

median gross income. For these ‘‘HUD 

hold-harmless impacted projects,’’ the 

area median gross income will be the 

greater of the amount determined 

without regard to this provision or the 

2008 determination, plus any increase 

after 2008. MTSP income limits as 

specified by Section 3009 are available 

at http://www.huduser.org/portal/ 

datasets/mtsp.html. 

Since other Federal programs use 

Section 8 income levels to determine 

program eligibility, the September 14, 

2009, notice requested public comment 

on whether HUD should discontinue its 

hold-harmless policy. Other Federal 

programs that use the Section 8 income 

levels include, but may not be limited 

to, the Department of Treasury’s taxexempt Mortgage Revenue Bond 

program for Homeownership Financing; 

the Department of Agriculture’s Rental 

and Ownership Assistance programs; 

the Federal Deposit Insurance 

Corporation’s Disposition of 

Multifamily Housing to Non-profit and 

Public Agencies and the Disposition of 

Single Family Housing; the Federal 

Housing Finance Agency’s Rental 

Program Funding Priorities and 

Homeownership Funding Priorities; the 

Veterans Administration’s Eligibility for 

Disability Income Support Payments; 

and the HUD-administered, 

governmentwide Uniform Relocation 

Act (42 U.S.C. 4601, et seq.) to 

determine the extent of replacement 

housing assistance. Applicable income 

limits are modified to meet the 

requirements of each of these programs, 

but each starts with the Section 8 very 

low-income limit that incorporates high 

and low housing cost adjustments and 

the State nonmetropolitan median as the 

basis for a minimum. 

Finally, the September 14, 2009, 

notice stated that determinations of 

Difficult Development Areas (DDAs) 

under section 42 of the IRC would be 

affected by the decision to discontinue 

the hold-harmless policy. HUD also 

requested public comment on whether 

the hold-harmless policy should be 

maintained with respect to Section 8 

income limits used for calculating 

HOME program rents. HUD noted that 

maintaining the hold-harmless policy 

for HOME program rents would prevent 

such rents from falling in areas where 

incomes may be falling, while 

discontinuing the hold-harmless policy 

with respect to eligibility requirements 

would help target HOME funds for use 

by families with lower incomes and 

greater need. 

The September 14, 2009, notice was 

corrected by a notice published on 

October 7, 2009, (74 FR 51615), which 

also extended the public comment 

deadline to November 6, 2009. As 

discussed later in today’s notice, HUD 

has considered the comments filed in 

response to these Federal Register 

publications. 

II. Discussions With Federal Programs 

HUD’s Office of Policy Development 

and Research discussed whether to 

eliminate its hold-harmless policy for 

Section 8 income limits with each HUD 

program director and all other Federal 

agencies that use Section 8 income 

limits for rent and income eligibility. 

For its HOME program, which is not 

included within the statutory holdharmless provision provided by HERA, 

HUD determined that rents will be held 

harmless, but that income limits will be 

allowed to fluctuate with the market. In 

discussions with the Internal Revenue 

Service, it was clarified that existing 

MTSPs would be protected from future 

rent declines and that it was appropriate 

to allow declines in income eligibility 

for both multi-family and single family 

tax credits. The Department of 

Agriculture’s Rural Housing Service 

requested that HUD continue its holdharmless policy, which is based on 

some unique area definitions. No other 

Federal agency provided HUD with 

substantive comment regarding its plans 

to modify the hold-harmless policy. 

Additional details about the specific 

income limits used by each of these 

programs can be found at: http:// 

www.huduser.org/portal/datasets/il/ 

il09/IncomeLimit

sBriefingMaterial_FY09.pdf. 

III. Overview of Key Public Comment 

Concerns 

By the close of the public comment 

period on November 6, 2009, HUD 

received a total of 32 public comments. 

Most were opposed to the elimination of 

hold harmless for Section 8 income 

limits. The most common reason 

expressed for the opposition to the 

elimination of the hold-harmless policy 

was that many affordable housing 

developments use Section 8 income 

limits to set rents and the possibility of 

lower rents for these projects would be 

detrimental to existing and future 

project development; existing projects 

would be at risk for financial default, 

while future projects would have 

difficulty securing financing. One 

commenter noted that few tenants 

would benefit from discontinuing the 

hold-harmless policy, based on the 

impact to Section 8 tenants as cited by 

HUD in its notice. Many commenters, 

while preferring that HUD publish only 

one hold-harmless income limit per 

area, recognized the need for income 

limits that are not held harmless in 

programs where HUD provides direct 

rental assistance. As a result, these 

commenters recommended that HUD 

issue two sets of income limits; one for 

direct rental subsidies, and one for all 

affordable housing programs, regardless 

of the ‘‘placed-in-service’’ date. HUD 

considered these comments, but finds 

that it has no authority to establish 

income limits for all affordable housing 

programs such as those funded with 

city/county levy, State housing trust 

funds, or other sources that may be 

contractually tied to Section 8 income 

limits. HUD’s authority to produce 

individual program income limits 

covers: Section 8 programs; MTSP 

income limits for HUD Hold-Harmless 

Impacted Projects as defined in HERA; 

the HOME and Community 

Development Block Grant (CDBG) 

programs, which use parallel language 

in establishing income limit 

methodology, rather than incorporating 

Section 8 income limits by reference; 

and, through statutory consultation 

requirements, the Department of 

Agriculture’s Rural Housing Service 

programs. To ensure clarity in future 

estimates, HUD will reference the 

specific programs for which the 

different published income limits will 

apply. 

Some commenters noted the impact of 

HUD’s proposed policy on the purchase 

of single-family homes using tax-exempt 

mortgage revenue bonds. This program 

is governed by Section 143 of the IRC 

and was not amended by HERA. Section 

8 income limits are used to determine 

income eligibility for this program. One 

commenter noted that this is not the 

time to limit the pool of eligible families 

who can take on the rigors of 

homeownership, which elimination of 

the hold-harmless policy may do. 

Commenters from a rural State 

questioned HUD’s reliance on American 

Community Survey (ACS) income data, 

noting instances where some counties 

are not covered by the 3-year ACS data. 

These commenters assert that small 

rural states are disproportionately 

impacted by data changes. To address 

these concerns, HUD has decided to 

impose a cap on the annual decreases in 

income limits of a maximum of 5 

percent or, in the case of increases, 5 

percent or twice the change in national 

median family income, whichever is 

greater. Additionally, beginning with 

income data used to develop FY 2011 

income limits, HUD will use 5-year 


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ACS, data which will cover even the 

smallest areas. 

Nine of the 24 comments filed by 

State or regional agencies or developers 

or their representatives were from the 

Northwest/Alaska region (HUD Region 

10). Commenters included State housing 

finance commissions, housing and 

community service organizations, and 

legal service agencies. The commenters 

did not identify unique regional, State, 

or local programs that would be affected 

more than other states or regions. They 

claimed, however, that properties 

funded with HOME, CDBG, city/county 

levy, or State housing trust funds will 

face serious cash flow issues if the holdharmless policy is eliminated. These 

commenters requested that HUD do 

whatever necessary, including seeking 

legislation, to give all these programs 

the same hold-harmless income limit, 

irrespective of the ‘‘placed-in-service’’ 

date. As noted, however, HUD is 

required to implement Section 3009 of 

HERA, which gives MTSPs different 

income limits based on the placed-inservice date. Projects that were held 

harmless in 2007 or 2008 are eligible for 

increases in income limits based on 

increases in the median family income. 

Projects that were not held harmless in 

2007 or 2008 or were placed-in-service 

after that date do not qualify for this 

increase. HUD’s authority to produce 

individual program income limits 

covers: Section 8 programs; MTSP 

income limits in HUD Hold-Harmless 

Impacted Projects as defined in HERA; 

the HOME and CDBG programs, which 

use parallel language in establishing 

income limit methodology rather than 

incorporating Section 8 income limits 

by reference; and, through statutory 

consultation requirements, the 

Department of Agriculture’s Rural 

Housing Service programs. 

A joint comment was filed by several 

public interest and trade groups 

recommending that HUD delay 

eliminating hold harmless for the 

Section 8 income limits, because 

legislative and regulatory changes are 

required for programs not protected by 

HERA to mitigate the impact on the 

financial stability of new projects and 

protect those in planning phases. The 

commenters asserted that HUD must 

amend its regulations to allow rent 

stabilization in the HOME program. The 

commenters also stated that eliminating 

the hold-harmless policy would, for the 

Mortgage Revenue Bond program, 

which provides below-market interest 

rate mortgages to moderate-income firsttime homebuyers, and the 

Neighborhood Stabilization Program 

(NSP), which assists households within 

a range of incomes, place grantees in 

violation of the respective programs’ 

requirements if income limits decline. 

Moreover, the commenters noted that 

the elimination of hold harmless would 

be exacerbated by applying it when 

incomes are declining and 

recommended that HUD delay any 

policy change until the income data no 

longer reflect declines from the 

recession, which the commenters 

estimated will be by the FY 2012 

income limits. As noted in this notice, 

however, HUD has determined that 

rents used in the HOME program will 

continue to be held harmless, 

precluding a need for regulatory change. 

The NSP program relies on elements of 

both the HOME and CDBG program for 

continued affordability. To the extent 

that an NSP grantee chooses to apply 

HOME rents, they will be held harmless 

under the HOME program. HUD will 

review issuing appropriate transition 

guidance for CDBG grantees, including 

NSP grantees that choose to develop 

their own continued affordability 

policies. The possible destabilization of 

neighborhoods that fall out of 

compliance when income limits fall will 

be limited by the cap of the maximum 

of 5 percent, and by changes in program 

implementation that limit the eligibility 

determination to a specific date, thereby 

preventing areas from falling out of 

compliance. 

Another commenter opposed the 

elimination of the hold-harmless policy 

because there will not be a minimal 

impact from the elimination for the 

Section 8 rental assistance program, as 

stated in the original and revised 

Federal Register notices on this policy. 

The commenter noted that changes in 

the boundaries of its metropolitan area 

magnify the impact of change in this 

change of policy. HUD will address this 

issue by the implementation of caps and 

floors on the annual percentage change 

in income limits. 

Several other commenters strongly 

supported the elimination of the income 

limits hold-harmless policy. One 

commenter noted that it has worked 

hard to formally decouple the LIHTC 

program from the HUD Section 8 

income limits. A second stated that the 

core users of income limits are Housing 

Choice Voucher, Section 8 projectbased, and Public Housing programs 

and that this change will have little 

impact on these programs. Both 

commenters stated that the current 

hold-harmless policy does not protect 

tenants from artificially high rents and 

stressed that renters’ interests also 

should be considered. The commenter 

also stated that income limits should be 

relatively stable because the ACS is 

capable of producing frequent updates. 

In the past, most major changes 

occurred from rebenchmarking income 

data from the decennial census. With 

income data collected annually by the 

ACS, this should not occur. Both 

commenters suggest mediating the 

impact of eliminating the hold-harmless 

policy by limiting annual changes; one 

proposed a cap in changes of up to plus 

or minus 5 percent, while the second 

recommended an amount equal to 

double the change in the median family 

income. 

IV. Discussion of Public Comments 

Comment: The hold-harmless policy 

should be eliminated because doing so 

will have little to no impact on existing 

program participants or housing 

providers. One commenter stated that 

the Housing Choice Voucher, Section 8 

project-based, and Public Housing 

programs are the core users of the 

income limits, and that the only impact 

of the elimination of the hold-harmless 

policy on those programs will be to 

lower the eligible income eligibility for 

applicants being admitted to the 

program in a given year and only in 

those jurisdictions that experience a 

measured decline in income. It will 

have little to no impact on existing 

program participants or housing 

providers. 

HUD Response: HUD agrees that the 

hold-harmless policy should be 

eliminated in order to provide better 

income targeting for affordable housing. 

Comment: Eliminating the holdharmless policy will allow target 

thresholds to be set more accurately. 

According to one commenter, the holdharmless policy has inflated income 

limits making eligibility and targeting 

levels artificially high. Elimination of 

the policy would allow voucher, 

project-based Section 8 and public 

housing eligibility and targeting 

thresholds to be established more 

accurately, thereby better directing 

assistance to families with the income 

level that Congress intended to help. 

HUD Response: HUD agrees that 

elimination of the hold-harmless policy 

will allow a more accurate targeting of 

assistance to the families that Congress 

intends to help. 

Comment: The hold-harmless policy 

should be eliminated because it is no 

longer needed due to the enactment of 

HERA. The commenter stated that, 

given HERA, HUD’s policy of 

maintaining artificially high income 

limits can no longer be justified. The 

hold-harmless policy increases the 

number of households eligible for 

Public Housing and Section 8 Voucher 

programs, and more importantly, 

undercuts the statutory mandate that 


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Federal Register / Vol. 75, No. 94 / Monday, May 17, 2010 / Notices 27567 

these programs be targeted to those 

households with the lowest incomes, 

which are most in need of housing 

assistance. Discontinuing the holdharmless policy will make it more likely 

that Federal housing programs will 

target persons and communities with 

the most need as Congress has intended, 

the commenter stated. 

HUD Response: HUD agrees that 

HERA eliminated the principal basis for 

the income limits hold-harmless policy. 

It is HUD’s intent to target affordable 

housing resources using the most 

accurate information. Eliminating the 

hold-harmless policy will prevent 

income limits in certain areas from 

being established at artificially high 

levels and, as a result, ensure that HUD 

can better target affordable housing 

resources. 

Comment: The hold-harmless policy 

should be eliminated because 

manipulating calculations of Area 

Median Income (AMI) is ill advised. One 

commenter stated that the holdharmless policy used in calculating 

income limits under Section 8 should be 

eliminated because the efforts to 

mitigate the negative impacts of the use 

of AMI, by manipulating data, only 

serve to complicate operations 

unnecessarily. When the impact of the 

mitigations result in calculations of AMI 

that are higher than what is derived 

from the data from the Census and the 

ACS, low-income tenants wind up 

bearing a heavier rent burden without 

the benefit of any of the artificially 

inflated income. These side effects raise 

serious questions about the 

appropriateness of the hold-harmless 

policy as a remedy, the commenter 

stated. 

HUD Response: HUD agrees that the 

hold-harmless policy can be detrimental 

to low-income renters in MTSPs where 

tenant rents are based on income limits 

rather than individual tenant incomes 

and who must pay rents based on 

artificially inflated income limits. 

Comment: The hold-harmless policy 

should be maintained in order to avoid 

an increased administrative burden. 

Several commenters stated that the 

hold-harmless policy should be 

maintained in order to avoid increased 

administrative burden for owners, 

property managers, and State and local 

agencies. If HUD discontinued the holdharmless policy, projects funded from 

multiple sources will have two sets of 

income and rent limits. Some 

commenters stated that implementation 

of MTSP and HERA special income 

limits for tax-credit and bond-financed 

properties, and a separation from 

Section 8 income limits, while well 

intentioned, would create a massive 

administrative problem affecting public 

funders, owners, property managers, 

and residents of affordable housing. 

Another commenter stated that for 

years, housing advocates have worked 

to make other HUD programs 

compatible with the IRS Section 42 Tax 

Credit Program and that requiring 

alternative income limits would impede 

these efforts. 

HUD Response: HUD does not agree 

that the removal of the hold-harmless 

policy would create substantially more 

administrative burden for MTSPs. 

Project managers and MTSP compliance 

monitors would still need to observe 

HUD’s annual releases of new income 

limits to determine if they are eligible 

for income limit and rent increases. The 

comparison point will be different. 

Rather than looking at HUD’s previous 

year’s income limits for their area, 

project managers and MTSP compliance 

monitors will need to compare the new 

income limits to the income limits 

projects are operating under currently to 

see if they are eligible for an increase in 

income limits and rents. This 

information should be readily available. 

The statutory hold-harmless provision 

in HERA prevents income limits and 

rents from ever falling below the highest 

levels the project ever operated under. 

Eliminating the Section 8 income limit 

hold-harmless policy does not mean 

that rents for MTSPs will decline over 

the life of a project. 

Comment: If the hold-harmless 

provision is eliminated, fewer affordable 

housing projects will be built. Several 

commenters stated that without holdharmless protection, the result will be 

fewer overall projects being built, and 

an underwriting volatility that is 

counterproductive to HUD’s overall 

mission to build affordable housing. 

Reducing the rent-supported 

underwriting structure of these 

developments would make it virtually 

impossible to finance many new 

projects. These commenters stressed 

that eliminating the provision will make 

it more difficult for lenders to 

underwrite affordable housing, which 

will reduce the amount of affordable 

housing, and that the hold-harmless 

policy has enabled banks and investors 

to finance the development of mixedincome communities that include units 

to serve the very low-income. 

HUD Response: Maintaining Section 8 

Income Limits at artificially high levels 

is not a sustainable way to encourage 

development of affordable housing. 

Furthermore, rents for the HOME 

program and rents for MTSPs will not 

be allowed to decline once the projects 

are placed-in-service, so underwriters 

need not worry about rents decreasing 

in operating projects. Other programs 

with rents tied to the Section 8 income 

limits will have to institute their own 

regulatory changes to prevent rent 

decreases over the life of a project, or 

will have to allow declines 

commensurate with the market. HUD 

will limit any decline in income limits 

to the maximum of 5 percent or, in the 

case of increase, 5 percent or twice the 

change in national median family 

income, whichever is greater, to reduce 

the potential administrative impact in 

determining income eligibility and to 

further provide greater certainty 

regarding revenue stream concerns. 

Comment: Eliminating the holdharmless policy would threaten the 

economic viability of thousands of 

properties nationwide that have rent 

limits contractually tied to Section 8 

income limits. According to several 

commenters, suspension of the holdharmless policy for Section 8 income 

limits would create unintended negative 

consequences for low-income housing 

tax-credit, bond, and other affordable 

housing projects that mix Federal, State, 

and/or local funding to create affordable 

rental housing serving the lowest 

incomes. Several commenters stated 

that they understood HUD’s reasons for 

changing its hold-harmless policy for 

the Section 8 program and its desire to 

have a separate set of limits for Section 

8 that accurately reflect area incomes. 

However, properties funded with 

HOME, city and county funds, and State 

Housing Trust Funds have rent limits 

contractually tied to Section 8 income 

limits. CDBG affordable rent policies are 

set at the local level, by each grantee, 

and are likely to be tied to the Section 

8 income limits. If HUD changes the 

hold-harmless policy, these commenters 

stated, the result would be decreased 

rental income for properties that remain 

tied to Section 8 program limits and 

properties using Section 8 income limits 

would face serious cash flow problems. 

Such a decrease in rental income would 

result in insufficient cash flow so 

owners will defer maintenance on 

buildings, causing the rate of foreclosure 

to increase. 

HUD Response: HUD has decided to 

hold-harmless the rents for properties 

funded with HOME, but not the income 

limits to determine eligibility. HUD will 

consider issuing transition guidance for 

CDBG grantees that have linked rents to 

Section 8 income limits. HUD’s 

authority to produce individual program 

income limits covers Section 8 

programs; MTSP income limits in ‘‘HUD 

Hold-Harmless Impacted Projects,’’ as 

defined in HERA; the HOME and CDBG 

programs, which use parallel language 

in establishing income limit 


srobinson on DSKHWCL6B1PROD with NOTICES
27568 Federal Register / Vol. 75, No. 94 / Monday, May 17, 2010 / Notices 

methodology rather than incorporating 

Section 8 income limits by reference; 

and, through statutory consultation 

requirements, the Department of 

Agriculture’s Rural Housing Service 

programs. Administrators of city, 

county, or State housing subsidy 

programs using Section 8 income limits 

to establish eligibility and/or rents 

should establish their own holdharmless policies, if needed and 

desired. HUD wants to serve more lowincome residents and target its funds 

appropriately, while serving the 

affordable housing market. 

Comment: Eliminating the holdharmless policy will put many 

affordable multifamily properties that 

receive HOME and CDBG funds at risk. 

One commenter stated that many of the 

assets in the current housing stock of 

affordable multifamily properties could 

be put at risk as a result of the proposed 

policy change because the change 

would affect the level of income used to 

qualify tenants and the maximum rents 

charged in both tax-credit and other 

projects that receive HOME and CDBG 

funds. These projects are required to 

adhere to the more restrictive income 

guidelines and rent levels issued by 

HUD’s Office of Community Planning 

and Development. 

HUD Response: HUD has evaluated 

the impact of this policy on its programs 

and for projects funded by HOME and 

CDBG funds. HUD believes that holding 

the HOME rents harmless and issuing 

appropriate transition guidance, if 

necessary, for CDBG projects will 

sufficiently protect these projects. 

Comment: This notice disregards the 

negative impact this proposal will have 

on the future development of MTSPs. 

Despite the fact that existing MTSPs are 

protected by HERA, the ability to 

develop and rehabilitate new housing 

through MTSPs will be negatively 

impacted by HUD discontinuing its 

hold-harmless policy, stated one 

commenter. According to the 

commenter, MTSP underwriting is 

based on the maximum rent potential, 

which is derived from the HUD verylow (50 percent) income limits. 

Currently, developers are assured that 

their rent potential will not decrease 

arbitrarily. Rents are also affected by 

increased utility costs. Removing the 

hold-harmless policy would impact 

future development and add more risk 

to a development scenario where rents 

often do decrease as utility costs 

increase. 

HUD Response: An MTSP unit 

determines maximum rents based on 

income limits, irrespective of the market 

rate for rent or utilities or the tenant’s 

actual income. Currently, the rent 

potential is based on the determination 

of what people can afford. Incomes do 

go up and down and rents do go up and 

down. This is not arbitrary, but is driven 

by market forces. Utilities rates go up 

and down as well, though these costs 

may or may not be included in all 

project rents. The decrease of rents 

when utilities increase is not a certainty 

and is of no concern for the MTSPs 

since the rents are not based on either 

factor; they are based on incomes. 

HUD acknowledges that the 

uncertainty in the projected revenue 

stream is increased in the planning 

phase by eliminating the hold-harmless 

policy. Developers will have to manage 

this risk. HUD will limit the uncertainty 

in the projected revenue stream by 

imposing a cap on annual decreases to 

the maximum of 5 percent or, in the 

case of increases, 5 percent or twice the 

change in national median family 

income, whichever is greater. This cap, 

along with the use of the 5-year ACS 

data beginning with the FY 2011 

Section 8 income limits, will dampen 

the annual changes and should reduce 

risk. Once the project is placed-inservice, HERA eliminates the risk of 

declining income limits. 

Comment: MTSP projects should be 

held to the same hold-harmless 

standard for both incomes and rents. 

New development projects are 

underwritten to the lowest rents among 

all proposed funding sources, thus no 

one program will benefit from having a 

higher hold-harmless rent if other 

program rents are not held to that same 

standard, stated two commenters. 

Having different income and rent 

standards also makes it more difficult 

for project owners and agency staff to do 

long-term compliance monitoring. For 

new development projects, both 

incomes and rents should be held 

harmless according to the limits in place 

when the reservation of tax credits or 

the award of Federal funds is made for 

the project, whichever is later in time, 

stated one commenter. Both 

commenters stated that maintaining 

income limits at levels in place the year 

the project is underwritten prevents 

projects from becoming infeasible, due 

to declines in rents that may occur 

between the time the funds are reserved 

for a project and the project’s loan 

closing or placed-in-service date. 

HUD Response: Different income and 

rent standards were created by HERA. 

The hold-harmless policy HUD is 

instituting for HOME rents is 

comparable to MTSPs that are not HUD 

Hold-Harmless Impacted Projects as 

defined in HERA. These HERA-defined 

rents are higher, and HUD has no 

authority to go back and grant these 

rents to projects funded under HOME. 

HUD’s authority to produce individual 

program income limits covers: Section 8 

programs; MTSP income limits in HUD 

Hold-Harmless Impacted Projects as 

defined in HERA; the HOME and CDBG 

programs, which use parallel language 

in establishing income limit 

methodology rather than incorporating 

Section 8 income limits by reference; 

and, through statutory consultation 

requirements, the Department of 

Agriculture’s Rural Housing Service 

programs. For rental housing subsidy 

programs that rely on Section 8 income 

limits for establishing eligibility and/or 

unit rents that are administered by State 

and local governments, administrators 

should establish a hold-harmless policy 

if desirable to do so. While HUD agrees 

that it makes sense for the income/rent 

level of a new MTSP to be established 

at the time of the loan’s closing and not 

subject to the risk of changes between 

the loan closing and the placed-inservice date, HUD has no authority over 

this policy. HUD advises developers to 

underwrite MTSPs under a ‘‘worst-case 

scenario’’ of a 5 percent decline from 

current income limits and maximum 

rents to ensure that if such a change 

occurs, the project will be able to go 

forward. Such an approach has the 

added benefit of widening the pool of 

eligible low-income renters, should the 

income limits either not decline, or 

decline by an amount smaller than 5 

percent. 

Comment: The term ‘‘existing MTSPs’’ 

is unclear, and it is unclear if future 

MTSP developments will be protected 

by HERA. According to the commenter, 

it is not clear if the term ‘‘existing 

MTSPs’’ refers only to current 

developments, or if once a new MTSP 

is developed or rehabilitated, such 

developments are then considered 

‘‘existing’’ and will have their income 

limits held harmless and not have to be 

concerned with future rent cap 

reductions. A second commenter asked 

if future MTSPs will be protected by 

HERA. The commenter saw no 

indication that future developments 

would be similarly protected. 

HUD Response: As new MTSPs come 

online, their unit rents and income 

limits are based on the currently 

applicable Section 8 income limits. For 

a given area, these income limits and 

rents may be lower than they were the 

previous year, but, going forward, a 

project’s individual income limits will 

never decline; they will be held 

harmless for the life of the project at the 

highest level ever attained by the 

project. HUD views this as the clear 

intent of Congress in enacting the HERA 

hold-harmless provision. 


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Comment: HUD’s hold-harmless 

policy has provided certainty and 

predictability to housing finance 

agencies and programs. According to 

one commenter, an income limit 

decrease from one year to the next for 

single-family, first-time homebuyers 

served by housing finance agencies 

would be disruptive and result in 

confusion and misunderstanding on the 

part of homebuyers, Realtors, and 

originating lenders. The hold-harmless 

policy has provided certainty and 

predictability to housing finance 

agencies and programs, stated the 

commenter. 

HUD Response: HUD is limiting the 

impact of any decrease in income limits 

to the maximum of 5 percent, to make 

such fluctuations less problematic. 

However, HUD is committed to 

removing the hold-harmless policy to 

improve targeting of all funds for 

affordable housing to those that are 

intended for it by Congress. Should 

median incomes continue to decline, 

AMIs will ultimately reach their natural 

level; HUD’s current plan to cap 

decreases at the maximum of 5 percent 

only slows this process, it does not stop 

it. Housing finance agencies should 

explore their options with respect to 

implementing their own hold-harmless 

rent policies. 

Comment: Neither the intent nor the 

effect of the hold-harmless policy has 

been to maintain artificially high 

income limits. The hold-harmless policy 

smoothes a generally upward trend of 

successive median family income 

estimates, preventing a pattern of 

temporary declines followed by large 

increases, stated a commenter. In turn, 

for some programs, this ensures that 

rent levels do not fluctuate significantly, 

either up or down, on a year-to-year 

basis, which is desirable and a reason to 

maintain the hold-harmless policy, 

stated the commenter. 

HUD Response: HUD agrees that the 

intent of its hold-harmless policy was 

not to maintain artificially high income 

limits, but that the effect, in some cases, 

has been just that. HUD will limit 

annual decreases to 5 percent and limit 

annual increases to 5 percent or twice 

the change in national median family 

income, whichever is greater, to limit 

changes up or down in Section 8 

income limits. The current holdharmless policy allows for any increase, 

and there have been increases over 5 

percent from time to time. Large 

increases are no better for the affordable 

housing program than large decreases. 

The use of 5-year ACS data beginning in 

FY 2011 will further smooth the trend 

in income limit changes. 

Comment: Investment in affordable 

housing properties will decline. 

According to some commenters, banks 

and investors will not invest in 

affordable housing properties where 

rental income may decline after their 

initial investment. Predictability and 

stability in income and expense 

projections are key underwriting 

considerations. Investors and lenders 

will not underwrite ventures where 

rental income may decline 

unpredictably, stated the commenters. 

Another commenter stated that without 

the assurance of stable rental income, 

banks and investors will no longer be 

willing to invest in the affordable 

housing industry, which will result in 

far fewer units being developed. 

HUD Response: Rental income will 

not decline over time; HOME and MTSP 

rents will not decline over the life of the 

project. HUD does not want to limit the 

production of affordable housing. HUD’s 

goal with this change is to provide more 

manageable rent increases (by capping 

increases to the maximum of 5 percent, 

or twice the change in national median 

family income) and to allow decreases 

in income limits used to determine 

eligibility for programs (also of no more 

than the maximum of 5 percent). 

Comment: Eliminating the holdharmless policy would detrimentally 

affect the extremely poor. One 

commenter wrote that eliminating the 

hold-harmless policy would harm the 

extremely poor by causing them to live 

in a financially more tenuous and 

volatile project. Because eliminating the 

hold-harmless policy would put the 

financial stability of MTSPs at risk, the 

commenter stated, discontinuing the 

hold-harmless policy for future MTSPs 

would likely be disastrous for high-cost, 

high-poverty cities. Another commenter 

stated that HUD’s approach supports 

only projects that receive direct 

governmental rental subsidies, where 

lower incomes lead to lower tenantshare rents. In those cases, HUD will 

have to offset lower tenant share rents 

by larger Federal rental subsidies to 

preserve the fiscal operations and 

quality maintenance of the properties. 

The MTSP programs do not have such 

a rental subsidy fallback option. 

HUD Response: HUD disagrees that 

extremely low-income tenants (defined 

as those at 30 percent of the median 

family income) will be required to take 

up tenancy in financially more tenuous 

and volatile projects because extremely 

low-income tenants are already priced 

out of MTSPs and, for the most part, 

require Section 8 vouchers for 

assistance. Additionally, as already 

stated, MTSPs will not be made more 

tenuous or volatile by HUD’s proposed 

policy. 

Comment: HUD cannot impose 

independent hold-harmless policies on 

the HOME program. Commenters stated 

that HUD cannot impose independent 

hold-harmless policies on rent income 

limitations or maximum rents in the 

HOME program without going through 

the official rule-making process. The 

regulations governing income targeting 

and maximum rent in rental programs 

for the HOME program at 24 CFR part 

92 provide specific formulae and 

specific conditions under which the 

formulae may be altered, and a holdharmless policy is not listed as 

legitimate grounds for alteration, stated 

a commenter. 

HUD Response: HUD does not believe 

that a regulatory change is required in 

order to institute a hold-harmless policy 

for HOME rents. 

Comment: A hold-harmless policy 

that is independent of the Section 8 

income limits cannot be applied to the 

Treasury Department’s Tax-Exempt 

Mortgage Revenue Bond Program 

without a legislative change. According 

to one commenter, allowing income 

limits to decline from one year to the 

next would cause problems in particular 

states, including confusion and 

resentment among potential buyers and 

administrative burdens for State 

agencies. Moreover, the commenter 

stated, section 143(f) of the IRC specifies 

that the 115 percent limitation on 

incomes of mortgagors under the MRB 

program be based on area median gross 

income, taking into account the 

regulations prescribed under Section 8 

of the United States Housing Act of 

1937. Therefore, a hold-harmless policy 

that is independent of the Section 8 

income limits cannot be applied to the 

MRB program without a legislative 

change. 

HUD Response: This issue was 

discussed with the IRS, and HUD was 

advised that the intent of Congress is 

better followed by allowing Section 8 

income limits to decline. Once a 

borrower closes a loan financed with 

bonds issued under section 143 of the 

IRC, the borrower is not subject to 

eligibility reconsideration, because the 

borrower’s income has increased or the 

applicable income limit has decreased. 

The intent of this program is to target a 

certain income category, and the holdharmless policy obfuscates this income 

category. 

Comment: It would be premature to 

remove a general hold-harmless policy 

from the income limits for the NSP. The 

commenter stated that after foreclosed 

properties have been purchased and 

repaired using NSP grants, these 


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properties must be used to assist 

households with incomes at or below 

120 percent of the area median income. 

There is an additional requirement that 

25 percent of the funds be used for 

households with incomes at or below 50 

percent of area median income. If 

income limits decline after the 120 

percent and 50 percent criteria for the 

NSP program have been properly 

documented, as could happen in the 

absence of a hold-harmless policy, NSP 

grantees in certain areas would be in 

violation of the NSP requirements. None 

of the issues that a temporary decline in 

income limits would cause in the NSP 

have been addressed in Federal Register 

notices or materials posted on the HUD 

Web site, stated the commenter. 

HUD Response: As the commenter 

noted, most of this money has been 

allocated and the rest will be shortly. 

HUD will review issuing transition 

guidance for CDBG programs, including 

NSP, which will appropriately ensure 

eligibility over the life of a project to 

which assistance has already been 

provided. 

Comment: Small states are impacted 

disproportionately by data changes. One 

commenter stated that the proposed 

change to the hold-harmless policy will 

create some unintended consequences. 

The commenter noted that the slightest 

change in sample sizes, counts, and 

methodological updates have a greater 

impact on small states, like her own. 

HUD changes its methodologies for 

calculating income limits with 

regularity. These changes can turn a 

steady stream of income levels into a 

dramatic shift, thereby lowering eligible 

income levels for housing programs 

from year to year, stated the commenter. 

HUD Response: A careful reading of 

HUD’s methodology documentation will 

show that HUD is doing everything 

justifiable to smooth out survey error 

fluctuations in its estimation and update 

processes. For example, the ACS data 

used in the income limit process is 

generally an update factor. As such, 

large changes are already limited. A 

survey estimate must pass stringent 

statistical tests before it is used. In 

addition, beginning with FY 2009 

income limits, 3-year ACS data is used 

in this update process, so the sample 

size is not that small (estimates are 

available for areas as small as 20,000 

persons). For the FY 2011 income 

limits, 5-year data will be used, which 

will further limit any fluctuations and 

will be the most comprehensive survey 

covering all geography for which 

income limits are set. Also, HUD will 

limit annual decreases to the maximum 

of 5 percent or, in the case of increases, 

5 percent or twice the change in 

national median family income, 

whichever is greater, so that large 

changes from year to year will be 

extremely rare. 

Comment: Many State and local 

governments have already incorporated 

HUD’s AMIs into their own programs. A 

commenter stated that the existing holdharmless policy with respect to AMI 

should be maintained because many 

State and local governments have 

incorporated HUD’s AMIs into their 

own programs. Owners sign long-term 

contracts to limit rents to specified 

percentages of the established AMI. 

According to the commenter, such 

programs were designed by cities with 

the understanding that owners would 

not be faced with rent rollbacks when 

AMI estimates decreased. It is not clear 

how such provisions, which rely on 

HUD AMI, can be adjusted for rent 

reductions. The simplest way to 

maintain governmentally assisted rental 

properties is to maintain the existing 

hold-harmless policy with respect to 

changes in AMI, concluded the 

commenter. 

HUD Response: State and local 

government program rents are 

calculated by the city or State agency 

that is administering the program. These 

rents can and should be held harmless 

for the life of a project, just as HUD is 

doing for the HOME program and HERA 

does for the MTSP program. The city or 

State agencies may impose their own 

hold-harmless rules when calculating 

rents. 

Comment: HUD should ask Congress 

to enact legislation. Several commenters 

recommended that HUD ask Congress to 

enact legislation that would allow HUD 

to publish income limits that extend the 

hold-harmless provisions just granted to 

LIHTC projects under HERA, to all 

multifamily affordable housing units 

that utilize Federal funding, except 

units that receive direct HUD Section 8 

rental subsidy. 

HUD Response: HUD believes that all 

Federal rental subsidy programs that set 

rents according to some version of the 

Section 8 income limits are covered by 

an appropriate hold-harmless 

arrangement, so that such legislation is 

not necessary. MTSP programs are 

covered by the hold-harmless provisions 

of HERA; HUD will hold rents in HOME 

projects harmless and review issuing 

appropriate transition guidance for the 

CDBG program. HUD has a holdharmless agreement with the 

Department of Agriculture’s Rural 

Housing Service program that will 

continue. 

Comment: HUD should consider a 

policy that slows adjustments. One 

commenter stated that changes in 

Census geography or HUD methodology 

may still lead to significant swings in 

HUD’s estimates of area median income 

from year to year. If HUD chooses to 

implement a policy to mediate the 

impact of any potential swings in 

income limits, the commenter 

encouraged HUD to consider a policy 

that slows adjustments. Such a policy, 

if properly designed, would provide 

owners, program administrators, and 

tenants with a measure of security. A 

second commenter stated that there is a 

reasonable case for special protections 

against volatility in the income limits 

used for certain purposes, such as 

setting HOME rent caps. The commenter 

encouraged HUD to establish balanced 

protections that prevent both rent 

declines, which would harm owners in 

the HOME program, and sharp 

increases, which would harm tenants. 

HUD Response: HUD agrees that large 

increases or decreases in Section 8 

income limits should be avoided and, 

therefore, it will impose a cap on annual 

decreases to the maximum of 5 percent 

or, in the case of increases, 5 percent or 

twice the change in national median 

family income, whichever is greater. 

The hold-harmless policy did not limit 

large increases and this did prove 

harmful to tenants. 

Comment: HUD should impose only 

two sets of income limits. Several 

commenters suggested that if HUD will 

not continue to use the hold-harmless 

provision, it should consider imposing 

two sets of income limits: Section 8 

Rental Subsidy limits that apply only to 

units with direct rental subsidy and 

Multifamily Subsidy Program Limits 

that apply to all other affordable 

housing programs that employ the holdharmless provision. Imposing two sets 

of limits would simplify income limits 

for residents, property managers, and 

developers and fulfill the purpose of the 

HERA legislation. 

HUD Response: HUD believes that the 

elimination of the hold-harmless policy 

for Section 8 income limits does fulfill 

the intent of HERA. In HERA, it was the 

intent of Congress to grant MTSPs 

project-level hold-harmless income 

limits to determine income eligibility 

and maximum rents, and it was the 

intent of Congress to eliminate the 

Section 8 income limit hold-harmless 

policy so that MTSPs that go into 

service in the future can be based on 

higher or lower income limits, as 

warranted by data. 

Comment: HUD should publish 

income limits and apply them to all 

affordable housing programs with the 

exception of units with Section 8 rental 

subsidy. Several commenters, in 

connection with the previous comment, 


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stated that HUD should publish 

Multifamily Subsidy Income Limits or 

HERA HUD Hold-Harmless Impacted 

Projects Income Limits for any given 

county or metropolitan area and apply 

such limits to all affordable housing 

programs, with the exception of units 

with Section 8 rental subsidy. The 

commenters stated that this proposal 

would prevent properties funded with 

HOME, CDBG, city/county levy, State 

Housing Trust funds, and other sources 

contractually tied to Section 8 limits 

from facing the serious cash flow issues 

that will occur if HUD eliminates the 

hold-harmless policy, as currently 

proposed. 

HUD Response: Congress did not 

grant all existing and future MTSPs the 

ability to use the HERA HUD HoldHarmless Impacted Projects income 

limits, and it is outside HUD’s authority 

to do so. HUD has no authority to 

establish income limits specifically for 

use by State or local government rental 

subsidy programs. For rental housing 

subsidy programs that rely on Section 8 

income limits for establishing eligibility 

and/or unit rents that are administered 

by State and local governments, 

administrators should establish a holdharmless policy if it is desirable to do 

so. 

Comment: HUD should create a 

streamlined waiver process. One 

commenter stated that HUD should 

create a streamlined waiver process to 

permit HOME-participating 

jurisdictions to quickly re-assist projects 

in cases where lower rents necessitate 

that projects receive more subsidy to 

remain financially stable. Increases in 

operating expenses over time, coupled 

with lower rent revenues resulting from 

loss of establishing hold-harmless 

income limits to current and lower 

levels, may result in new projects 

needing more subsidies to avoid 

becoming a troubled project. 

HUD Response: The HOME rents will 

not decline over the life of the project, 

so this action is not necessary. 

Comment: HUD should adopt a holdharmless policy geared to HOME 

projects, which will be harmed if the 

hold-harmless policy is eliminated. The 

commenter wrote that HUD should 

adopt a hold-harmless policy to ensure 

that HOME rental projects have 

adequate rental revenues, but still 

require the sponsors of these projects to 

target vacant units to those households 

that fall within the Section 8 income 

limits. Another commenter stated that 

thousands of affordable housing 

developments assisted through the 

HOME program would be immediately 

placed in financial jeopardy. HOME 

projects are contractually bound by 

long-term commitments to maintain rent 

at levels tied to the AMI. Nearly all 

HOME developments use the 65 percent 

of AMI standard to set maximum rents. 

Without the hold-harmless provision, 

stated the commenter, HOME properties 

face the prospect of shrinking rental 

income revenue whenever area median 

income estimates are reduced. Owners 

of HOME projects will find it 

impractical to operate such critical 

development projects with reduced 

rental income. This change will have a 

chilling effect on future participation in 

the program. 

HUD Response: Rental income for 

HOME projects will not decline. HOME 

rents will be held harmless over the life 

of the project. 

Comment: Because the impact of 

removing the hold-harmless policy is so 

broad, the policy should not be changed 

until potential problems for specific 

programs have been resolved. The 

programs affected by removing the holdharmless policy include HOME, the 

Treasury Department’s Tax-exempt 

Mortgage Revenue Bond program, the 

MTSPs not covered by the HERAdefined ‘‘HUD Hold-Harmless Impacted 

Projects’’ provisions, and the NSP 

established under both HERA and the 

American Recovery and Reinvestment 

Act of 2009. For the potential magnitude 

of the impact on various programs, the 

hold-harmless policy should not be 

changed until potential problems have 

been fully examined and resolved, one 

commenter stated. One commenter 

urged HUD to eliminate the holdharmless policy only for Section 8 

assistance and other direct rental 

subsidy programs or to postpone any 

decision to eliminate the hold-harmless 

policy until there has been more 

opportunity to consider and address its 

potentially negative consequences. 

Another commenter stated that HUD 

should have published how the 

proposed changes would affect actual 

jurisdictions, as it did on December 16, 

2005, so that a more informed comment 

could be made. A 30 percent reduction 

in the AMI is not a modest decrease that 

will have a minimum impact on 

families. The commenter urged HUD to 

continue the hold-harmless provision 

for areas greatly impacted. 

HUD Response: HUD has analyzed the 

impact of this change on the HOME 

program, the NSP program, the singlefamily mortgage credit program (Section 

143 of the IRC), and the MTSPs not 

covered by HERA-defined ‘‘HUD HoldHarmless Impacted Projects’’ provisions 

(and this includes the Tax Credit 

Program under Section 42 and TaxExempt Bonds program for multifamily 

units under Section 142), and discussed 

the impact throughout this notice. In 

short, project rents are protected from 

declines for the life of the project. 

Income eligibility for these programs 

can go down each year, but by no more 

than the maximum of 5 percent, or up 

by no more than 5 percent or twice the 

change in national median family 

income, whichever is greater. HUD 

provided a State-by-State listing of areas 

that are currently held harmless. 

Comment: There are concerns about 

removing the hold-harmless policy at 

this particular time. The unusual 

macroeconomic conditions that 

currently prevail are likely to exacerbate 

problems for many housing programs in 

2011, one commenter stated. If HUD 

continues to apply its current 

methodology, 2010 income limits will 

be based on the 2006–2008 ACS 

estimates, and the 2011 estimates will 

be based on the 2007–2009 ACS 

estimates. FY 2009 was an atypical year, 

combining a severe recession with a 

general deflationary trend. A weak 

Consumer Price Index (CPI) adjustment, 

combined with new income data from a 

recession year, will likely produce 

widespread declines in the next release 

of 3-year ACS estimates and, therefore, 

in 2011 income limits. As a result, 

removing the hold-harmless policy will 

produce large declines in 2011 income 

limits that will find many industry 

stakeholders unprepared, the 

commenter concluded. 

HUD Response: For clarification, it 

should be noted that the CPI is only 

used to adjust the timing of the ACS 

data; update factors are not generated 

using CPI. The Census Bureau adjusts 

the 3-year data used in the FY 2010 

income limits to 2008. It is assumed this 

is a midpoint of the year, so HUD 

adjusts the data using the CPI to make 

the income limit data represent the end 

of the year. The 3-year ACS data 

released in 2011 will likely show 

declines, since the impact of the 

recession in 2009 would be an 

important component of that data; 

however, HUD will be using 5-year data 

(2005–2009) for the FY 2011 income 

limits, so that the declines from 2009 

will be mitigated. In addition, HUD will 

impose a cap of the maximum of 5 

percent to limit reductions from year to 

year. 

Comment: HOME Program income 

limits should be held harmless in order 

to maintain compatibility with MTSP 

program limits. On the issue of whether 

the hold-harmless policy should be 

maintained for HOME rents but 

discontinued for HOME eligibility 

requirements, HOME is often combined 

with MTSPs. Conflicting eligibility 

requirements between HOME and 


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2For a discussion of the special methodology, 

please see the FY 2009 MTSP Briefing Materials 

document available at http://www.huduser.org/ 

portal/datasets/mtsp/mtsp09/MTSP_Briefing.pdf. 

MTSPs have a strong tendency to create 

confusion. HOME income limits, should 

be held harmless in order to maintain 

compatibility with MTSP income limits, 

stated a commenter. 

HUD Response: Because of the special 

provisions in HERA for HUD HoldHarmless Impacted Projects, HOME 

income limits will not be able to mimic 

the HERA Special MTSP income limits. 

For new projects, income limits will not 

be held harmless for either of these 

programs, so initially, they will be the 

same. Going forward, projects 

containing both HOME funds and MTSP 

financing will have to make a 

determination about how to evaluate 

eligibility for both incoming families 

and ongoing eligibility. These projects 

should consider specifying eligibility 

rules at the outset of the project. 

V. Policy Decision 

Accordingly, HUD will eliminate the 

hold-harmless policy in estimating 

Section 8 income limits. Decreases to 

the Section 8 income limits from FY 

2010 forward will be limited to the 

maximum of 5 percent; increases will be 

limited to 5 percent or twice the change 

in national median family income 

increase or decrease, whichever is 

greater. This means, for example, that if 

the national estimate of median family 

income increased by 3 percent from the 

previous year, local income limits could 

change by up to 6 percent. The income 

limits for MTSPs will continue to follow 

the formulas set out in HERA. 

Specifically, HERA provides that area 

median gross income with respect to 

any project will be held harmless and 

not be less than the area median income 

for the preceding calendar year for 

which such determination is made. In 

addition, a different income limit 

determination formula specified by 

HERA for projects in areas held 

harmless in calendar years 2007 or 2008 

applies if these limits would be higher 

than the limits calculated for MTSPs 

using HUD’s regular methodology.2

Rents used in the HOME program will 

continue to be held harmless, although 

the income limits used to determine 

eligibility for HOME projects may 

decrease up to the maximum of 5 

percent or increase up to 5 percent or 

twice the change in national median 

family income, per year, whichever is 

greater. The income limits for Rural 

Housing Service programs will continue 

their current hold-harmless policy, 

based on different area definitions; these 

income limits are provided directly to 

the Department of Agriculture. 

VI. Findings and Certifications 

Environmental Review 

This notice involves a discretionary 

establishment of income limits and 

exclusions with regard to eligibility for 

or calculation of HUD housing 

assistance or rental assistance which 

does not constitute a development 

decision affecting the physical 

condition of specific project areas or 

building sites. Accordingly, under 24 

CFR 5019(c)(6), this notice is 

categorically excluded from 

environmental review under the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4321). 

Dated: May 10, 2010. 

Raphael W. Bostic, 

Assistant Secretary for Policy Development 

and Research. 

[FR Doc. 2010–11638 Filed 5–14–10; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–5376–N–34] 

Monthly Report of Excess Income and 

Annual Report of Uses of Excess 

Income 

AGENCY: Office of the Chief Information 

Officer, HUD. 

ACTION: Notice. 

SUMMARY: The proposed information 

collection requirement described below 

has been submitted to the Office of 

Management and Budget (OMB) for 

review, as required by the Paperwork 

Reduction Act. The Department is 

soliciting public comments on the 

subject proposal. 

Project owners are permitted to retain 

Excess Income for projects under terms 

and conditions established by HUD. 

Owners must request to retain some or 

all of their Excess Income. The request 

must be submitted through http:// 

www.pay.gov at least 90 days before the 

beginning of each fiscal year, or 90 days 

before any other time during a fiscal 

year that the owner plans to begin 

retaining excess income for that fiscal 

year. HUD uses the information to 

ensure that required excess rents are 

remitted to the Department and/or 

retained by the owner. 

DATES: Comments Due Date: June 16, 

2010. 

ADDRESSES: Interested persons are 

invited to submit comments regarding 

this proposal. Comments should refer to 

the proposal by name and/or OMB 

approval Number (2502–0086) and 

should be sent to: HUD Desk Officer, 

Office of Management and Budget, New 

Executive Office Building, Washington, 

DC 20503; fax: 202–395–5806. 

FOR FURTHER INFORMATION CONTACT: 

Leroy McKinney Jr., Reports 

Management Officer, QDAM, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Washington, DC 20410; e-mail Leroy 

McKinney Jr. at 

Leroy.McKinneyJr@hud.gov or telephone 

(202) 402–5564. This is not a toll-free 

number. Copies of available documents 

submitted to OMB may be obtained 

from Mr. McKinney. 

SUPPLEMENTARY INFORMATION: This 

notice informs the public that the 

Department of Housing and Urban 

Development has submitted to OMB a 

request for approval of the Information 

collection described below. This notice 

is soliciting comments from members of 

the public and affecting agencies 

concerning the proposed collection of 

information to: (1) Evaluate whether the 

proposed collection of information is 

necessary for the proper performance of 

the functions of the agency, including 

whether the information will have 

practical utility; (2) evaluate the 

accuracy of the agency’s estimate of the 

burden of the proposed collection of 

information; (3) enhance the quality, 

utility, and clarity of the information to 

be collected; and (4) minimize the 

burden of the collection of information 

on those who are to respond; including 

through the use of appropriate 

automated collection techniques or 

other forms of information technology, 

e.g., permitting electronic submission of 

responses. 

This notice also lists the following 

information: 

Title of Proposal: Monthly Report of 

Excess Income and Annual Report of 

Uses of Excess Income. 

OMB Approval Number: 2502–0086. 

Form Numbers: None—form HUD– 

93104 has been retired. 

Description of the Need for the 

Information and its Proposed Use: 

Project owners are permitted to retain 

Excess Income for projects under terms 

and conditions established by HUD. 

Owners must submit a written request 

to retain some or all of their Excess 

Income. The request must be submitted 

at least 90 days before the beginning of 

each fiscal year, or 90 days before any 

other time during a fiscal year that the 

owner plans to begin retaining excess 

income for that fiscal year. HUD uses 

the information to ensure that required 

excess rents are remitted to the 


srobinson on DSKHWCL6B1PROD with NOTICES