66978 Federal Register / Vol. 75, No. 209 / Friday, October 29, 2010 / Proposed Rules 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Parts 91 and 92 

[Docket No. FR–5246–P–02] 

RIN 2506–AC30 

Housing Trust Fund 

AGENCY: Office of the Assistant 

Secretary for Community Planning and 

Development, HUD. 

ACTION: Proposed rule. 

SUMMARY: The Housing and Economic 

Recovery Act of 2008 establishes a 

Housing Trust Fund (HTF) to be 

administered by HUD. The purpose of 

the HTF is to provide grants to State 

governments to increase and preserve 

the supply of rental housing for 

extremely low- and very low-income 

families, including homeless families, 

and to increase homeownership for 

extremely low- and very low-income 

families. This proposed rule submits, for 

public comment, the regulations that 

will govern the HTF. 

DATES: Comment due date: December 

28, 2010. 

ADDRESSES: Interested persons are 

invited to submit comments regarding 

this rule to the Regulations Division, 

Office of General Counsel, Department 

of Housing and Urban Development, 

451 7th Street, SW., Room 10276, 

Washington, DC 20410–0500. 

Communications must refer to the above 

docket number and title. There are two 

methods for submitting public 

comments. All submissions must refer 

to the above docket number and title. 

• Submission of Comments by Mail. 

Comments may be submitted by mail to 

the Regulations Division, Office of 

General Counsel, Department of 

Housing and Urban Development, 451 

7th Street, SW., Room 10276, 

Washington, DC 20410–0001. 

• Electronic Submission of 

Comments. Interested persons may 

submit comments electronically through 

the Federal eRulemaking Portal at 

http://www.regulations.gov. HUD 

strongly encourages commenters to 

submit comments electronically. 

Electronic submission of comments 

allows the commenter maximum time to 

prepare and submit a comment, ensures 

timely receipt by HUD, and enables 

HUD to make them immediately 

available to the public. Comments 

submitted electronically through the 

http://www.regulations.gov Web site can 

be viewed by other commenters and 

interested members of the public. 

Commenters should follow the 

instructions provided on that site to 

submit comments electronically. 

Note: To receive consideration as public 

comments, comments must be submitted 

through one of the two methods specified 

above. Again, all submissions must refer to 

the docket number and title of the rule. 

No Facsimile Comments. Facsimile 

(FAX) comments are not acceptable. 

Public Inspection of Public 

Comments. All properly submitted 

comments and communications 

submitted to HUD will be available for 

public inspection and copying between 

8 a.m. and 5 p.m. weekdays at the above 

address. Due to security measures at the 

HUD Headquarters building, an advance 

appointment to review the public 

comments must be scheduled by calling 

the Regulations Division at 202–708– 

3055 (this is not a toll-free number). 

Individuals with speech or hearing 

impairments may access this number 

through TTY by calling the Federal 

Information Relay Service at 800–877– 

8339. Copies of all comments submitted 

are available for inspection and 

downloading at http:// 

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Marcia Sigal, Office of Community 

Planning and Development, Department 

of Housing and Urban Development, 

451 7th Street, SW., Room 7162, 

Washington, DC 20410; telephone 

number 202–402–3002 (this is not a tollfree number). Persons with hearing or 

speech impairments may access this 

number through TTY by calling the tollfree Federal Information Relay Service 

at 800–877–8389. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Housing and Economic Recovery 

Act of 2008 (Pub. L. 110–289, approved 

July 30, 2008) (HERA) was major 

housing legislation enacted to reform 

and improve the regulation of Fannie 

Mae and Freddie Mac, the governmentsponsored enterprises (GSEs), 

strengthen neighborhoods hardest hit by 

the foreclosure crisis, enhance mortgage 

protection and disclosures, and 

maintain the availability of affordable 

home loans. The reform of the GSEs is 

provided in the Federal Housing 

Finance Regulatory Reform Act of 2008, 

which is found in Division A, Title I of 

HERA. Section 1131 of the GSE-reform 

portion of HERA amended the Federal 

Housing Enterprises Financial Safety 

and Soundness Act of 1992 (12 U.S.C. 

4501 et seq.) (FHEFSSA) to add a new 

section 1337 entitled ‘‘Affordable 

Housing Allocations’’ and a new section 

1338 entitled ‘‘Housing Trust Fund.’’ 

Section 1337 of FHEFSSA provides 

for the HTF to be funded with amounts 

allocated by Fannie Mae and Freddie 

Mac. Proceeds equal to 4.2 basis points 

(.042%) of the GSEs’ new mortgage 

purchases were to be partially diverted 

to fund the HTF. However, because the 

GSEs experienced significant declines 

in their respective capital reserves in 

2008, under the authority granted to the 

Federal Housing Finance Agency 

(FHFA), the GSE’s oversight agency, by 

Section 1367 of FHEFSSA, Fannie Mae 

and Freddie Mac were placed in 

conservatorship in September 2008. 

Under Section 1337 of FHEFSSA, the 

Director of the FHFA has the authority 

to suspend Fannie Mae’s and Freddie 

Mac’s contributions to the HTF if such 

contributions were to have an adverse 

impact on the financial stability of the 

GSEs. Shortly after being placed in 

conservatorship, the GSEs were 

instructed by the FHFA to suspend such 

contributions. However, Section 1338 of 

FHEFSSA provides that the HTF may be 

funded with amounts appropriated, 

transferred, or credited to the HTF 

under other provisions of law. 

Accordingly, HUD is proceeding with 

regulatory implementation of the HTF 

in anticipation of future funding 

through sources other than GSE 

proceeds. 

Congress authorized the HTF with the 

stated purpose of: (1) Increasing and 

preserving the supply of rental housing 

for extremely low-income (ELI) families 

with incomes between 0 and 30 percent 

of area median income and very lowincome (VLI) families with incomes 

between 30 and 50 percent of area 

median income, including homeless 

families, and (2) increasing 

homeownership for ELI and VLI 

families. HUD’s periodic reports to 

Congress on worst-case needs for 

affordable rental housing document that 

shortages of affordable rental housing 

for ELI and VLI families have grown 

increasingly more severe. A household 

defined as experiencing worst-case 

housing needs means that the 

household has an income at or below 50 

percent of the area median income, 

receives no housing assistance, and has 

a severe rent burden (paying more than 

half of its income for rent) and/or lives 

in severely inadequate conditions (e.g., 

incomplete plumbing). 

As of 2007, the combined number of 

ELI and VLI renters with worst-case 

housing needs was 5.9 million, or 37 

percent of all ELI and VLI renters (15.9 

million). Furthermore, 51 percent of ELI 

and VLI renters who lack housing 

assistance have worst-case housing 

needs. When the 2007 data are broken 

down further, worst-case needs 

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occurred to 47 percent of all ELI renters 

and 73 percent of ELI renters lacking 

housing assistance. By comparison, 24 

percent of all VLI renters and 28 percent 

of VLI renters lacking housing 

assistance have worst-case housing 

needs. ELI renters are particularly 

burdened with severe housing 

problems. 

There is a shortage of low-cost rental 

units, as builders and housing providers 

are unable to construct, finance, and 

operate a sufficient supply of rental 

housing affordable to ELI and VLI 

households. The result is that in 2007, 

for every 100 ELI renters nationwide, 

only 44 rental units were both 

affordable and available for rent or 

currently occupied by households in 

this income range. HUD notes that more 

than half of the 3.8 million ELI renters 

who occupied affordable units in 2007 

were able to do so only because they 

reported receiving government rental 

assistance, such as from the public 

housing, project-based Section 8 or 

Section 202/811 programs, and the 

housing choice voucher program. Other 

units that would have been affordable 

may have been occupied by higherincome households. For every 100 VLI 

and ELI renters, on average, there were 

only 74 affordable units available. The 

HTF will provide funds to produce 

additional units affordable to ELI and 

VLI households with the greatest need, 

thus increasing the supply and reducing 

the most critical component of the 

existing shortage. 

Housing Trust Fund—Formula 

Allocation 

Section 1338 of FHEFSSA directs 

HUD to establish, through regulation, 

the formula for distribution of amounts 

made available for the HTF. The statute 

specifies that only certain factors are to 

be part of the formula, and assigns 

priority to certain factors. HUD’s 

proposed formula for the allocation of 

HTF funds was submitted for public 

comment in a proposed rule published 

on December 4, 2009 (74 FR 63938). The 

allocation formula will be renumbered 

and published with the final program 

rule in §§ 92.710–92.714. 

Housing Trust Fund—Administration of 

the Fund 

In addition to the statutory direction 

to establish by regulation a formula for 

the allocation of HTF funds, section 

1338 of FHEFSSA directs HUD to 

establish and manage the HTF, the 

purpose of which is to provide grants to 

States for use to: (1) Increase and 

preserve the supply of rental housing for 

ELI and VLI families, including 

homeless families; and (2) increase 

homeownership for ELI and VLI 

families. Section 1338 of FHEFSSA also 

directs HUD to establish regulations to 

administer the HTF, and this rule 

proposes the regulations that will 

govern the HTF. 

II. This Proposed Rule 

New 24 CFR Part 92 Subpart N 

HUD proposes to codify the HTF 

regulations in a new subpart N of 24 

CFR part 92. Part 92 contains the 

regulations for HUD’s HOME 

Investment Partnerships program 

(HOME program). Established by the 

National Affordable Housing Act of 

1992, the HOME program is the largest 

Federal block grant program that 

produces affordable housing for VLI 

households. The HOME program is 

similar in most aspects to the proposed 

HTF. Each year, the HOME program 

allocates approximately $2 billion to 

States and more than 600 localities 

nationwide. Since it inception in 1992, 

the HOME program has produced 

approximately one million units of 

affordable rental and homeownership 

units. Both programs provide funding 

through a formula allocation for rental 

housing production and 

homeownership. The HOME program 

provides formula grants that 

communities use, often in partnership 

with local nonprofit groups, to fund a 

wide range of activities that build, buy, 

and/or rehabilitate affordable housing 

units for rent or homeownership. The 

HTF will operate in substantially the 

same manner, with formula grants to 

States used to develop affordable 

housing units for rent or 

homeownership. In addition, the grant 

activities in both programs require the 

same grantee administration and HUD 

oversight functions. 

While the HTF provides new 

resources targeted to producing 

affordable housing primarily for ELI 

households, an entirely new or different 

set of program regulations is not 

necessary in order to implement the 

statutory requirements of the HTF. 

Many of the program requirements 

applicable to the HOME program are 

applicable to the HTF. Further, each 

State is a participating jurisdiction in 

the HOME program, and all States and 

their designated housing entities will be 

the HTF grantees. Accordingly, it is 

HUD’s position that codifying the HTF 

regulations in part 92 is a logical step 

that will enable HUD to: (1) Provide a 

coordinated ‘‘menu’’ of production 

programs that State and local 

governments can use to address the 

affordable housing needs of low-, very 

low- and extremely low-income 

households, including those with 

special needs, in their communities, and 

(2) simplify and streamline program 

requirements for grantees, and avoid 

making grantees create new or separate 

structures to administer HTF funds. 

Additionally, HUD believes that many 

grantees will use HTF funds in 

combination with HOME program funds 

to develop mixed-income housing, and 

many of the applicable requirements are 

the same for both programs (e.g., 

administrative requirements; 

monitoring, site and neighborhood 

standards; and affirmative marketing). 

This approach is expected to expedite 

the expenditure of HTF funds and 

deliver more affordable housing sooner 

to households and communities. 

HUD is specifically soliciting input 

from HTF grantees and interested 

parties on HUD’s proposed coordination 

of HOME program and HTF regulations, 

as well as on additional or alternative 

ways to better coordinate and use HTF 

funds with funding from other Federal, 

State, local programs, or private sources 

typically used to produce mixed-income 

affordable housing developments. 

The Department is embarking on a 

number of initiatives to incorporate and 

promote energy efficiency, transitoriented development, and other 

sustainability features in the 

development of units and projects 

assisted with HUD funds. These efforts 

will help reduce the impact of the 

property on the environment and 

promote a healthier environment for 

building occupants, as well as reduce 

the costs of utilities to help make these 

units affordable. In addition, facilitating 

the inclusion of affordable housing for 

ELI and VLI households in transitoriented development will help ensure 

that affordable housing is located in 

areas that are within walking distance of 

transit facilities and more easily 

accessible to essential area destinations 

such as jobs, and educational, retail, and 

health services. The HTF implements 

the Department’s commitment to further 

sustainable affordable housing available 

for ELI households, by requiring energy 

and water-efficiency features in all HTFassisted units. In addition, the proposed 

rule includes specific funding 

commitment definitions that address the 

need to commit HTF funds early in the 

development process of a TransitOriented Development (TOD) project. 

HUD’s efforts to promote energyefficient homes directly reflect the 

Department’s energy goal contained in 

its Fiscal Year (FY) 2010–15 Strategic 

Plan to ‘‘promote energy-efficient 

buildings and location-efficient 

communities that are healthy, 

affordable, and diverse.’’ The proposed 

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energy and water efficiency 

requirements for the HTF are similar to 

those of several HUD energy-efficiency 

and green initiatives, such as the 

‘‘Green’’ Community Housing 

Development Organization Notice Of 

Funding Availability (HOME 

Competitive Reallocation of CHDO 

Funds to Provide for Energy Efficient 

and Environmentally Friendly Housing 

for Low-Income Families), the Self-Help 

Homeownership Opportunity Program 

(SHOP) NOFA, and the Neighborhood 

Stabilization Program (NSP)–2 NOFA. 

Fostering the development of 

sustainable, transit-oriented, mixed-use 

communities with HTF funds is 

consistent with the Livability Principles 

established by the Partnership for 

Sustainable Communities, an 

interagency collaboration between HUD, 

the Department of Transportation 

(DOT), and the Environmental 

Protection Agency (EPA). This 

partnership aims to coordinate Federal 

housing, transportation, and other 

infrastructure investments to provide 

communities with the resources they 

need to build more livable and 

sustainable communities, promote 

equitable development, and improve 

access to affordable housing. Each of the 

three agencies is responsible for 

incorporating the Livability Principles 

into its policies and programs, to the 

maximum extent feasible. 

Energy-efficiency and transit-oriented 

development definitions and property 

standards for the HTF can be found in 

Sections 92.702 and 92.741–92.745, 

respectively. The following sections 

highlight key provisions of the HTF 

regulations established in accordance 

with section 1338 of FHEFSSA. 

General Provisions 

Sections 92.701–92.703 of new 

subpart N sets forth the general 

provisions applicable to the HTF. 

Section 92.701 provides an overview 

of the statutory basis for the HTF, and 

identifies which subparts of part 92 are 

applicable to the HTF. To the extent that 

other sections or subparts of part 92 are 

applicable to the HTF, § 92.701 provides 

that references to ‘‘HOME’’ mean ‘‘HTF’’ 

and that references to ‘‘participating 

jurisdictions’’ mean ‘‘HTF grantees.’’ 

Definitions 

Section 92.702 incorporates terms 

defined in the HOME program 

regulations (24 CFR 92.2) and defines 

terms that are specifically applicable to 

the HTF. Key definitions applicable to 

the HTF include the following: 

Commitment. The definition of 

‘‘commitment’’ implements the statutory 

requirement that HTF funds must be 

used or committed within 2 years of the 

formula allocation (grant award). 

Grantees must commit funds to a 

specific project pursuant to legally 

binding agreements that meet the 

requirements of written agreements in 

§ 92.774. To facilitate TOD projects, the 

definition of ‘‘commitment’’ permits a 

unit of general local government to 

acquire the land for a TOD project in 

advance of having specific project plans. 

The definition of transit-oriented 

commitment would allow the 

acquisition of property without the 

requirement of having a specific project. 

The unit of general local government 

has 36 months from the date of 

acquisition of the property for a TOD 

project to commit additional funds to a 

specific project on the property. To 

discourage the use of this provision for 

acquisition of property for any purpose 

other than the development of HTFassisted units as part of transit-oriented 

development, the local government 

where the development is to take place 

is required to hold title to the property. 

If no commitment to a specific HTFassisted project occurs within 36 

months from date of the acquisition of 

the property, the amount of HTF funds 

used to pay for the property, or the 

current value of the property, whichever 

is greater, must be repaid to the 

grantee’s HTF account. The amount 

repaid will be prorated in proportion to 

the amount of HTF funds to total funds 

used to purchase the land. 

Energy Efficiency. Several definitions 

are included in this rule that will help 

facilitate the development of energyefficient residential units, including 

definitions of ENERGY STAR-Qualified 

New Homes and WaterSense-labeled 

products. 

Grantee. The statute allows a State or 

State-designated entity to receive the 

HTF formula allocations. Each State 

may decide which agency within the 

State will be the HTF grantee. For 

example, in many States, there are 

multiple State agencies, as well as a 

State housing finance agency, that 

administer housing programs. 

Recipient. An HTF recipient means an 

entity that receives HTF funds solely as 

a developer or owner of HTF-assisted 

housing. Section 1338(c)(9) of FHEFSSA 

requires an eligible recipient of a grant 

from a State’s HTF formula allocation to 

have demonstrated experience and 

capacity to conduct an eligible activity, 

as evidenced by its ability to: (i) Own, 

construct, rehabilitate, manage, or 

operate an affordable multifamily rental 

housing development; (ii) design, 

construct, rehabilitate, or market 

affordable housing for homeownership; 

or (iii) provide forms of assistance, such 

as down payments, closing costs, or 

interest-rate buy-downs for purchasers. 

Section 1338(c)(9) of FHEFSSA also 

requires an eligible recipient to 

demonstrate the ability and financial 

capacity to undertake, comply, and 

manage the eligible activity; 

demonstrate its familiarity with the 

requirements of any other Federal, State, 

or local housing program that will be 

used in conjunction with such grant 

amounts to ensure compliance with all 

applicable requirements and regulations 

of such programs; and make such 

assurances to the grantee that it will 

comply with the HTF requirements. 

These conditions of eligibility imposed 

on recipients are incorporated in the 

definition of ‘‘recipient’’ found in 

§ 92.702. 

State. The term ‘‘State’’ means any 

State of the United States, the District of 

Columbia, the Commonwealth of Puerto 

Rico, the Commonwealth of the 

Northern Mariana Islands, Guam, the 

Virgin Islands, and American Samoa. 

(See 1338 (a)(1) of FHEFSSA.) 

State-Designated Entity. The statute 

permits a State to use a ‘‘Statedesignated entity’’ to receive its formula 

allocation. Permissible designees for the 

HTF State-designated entity are: A State 

housing finance agency, a Tribally 

designated housing entity (as such term 

is defined in section 4 of the Native 

American Housing Assistance and SelfDetermination Act of 1997 (25 U.S.C. 

4103)), or any other qualified 

instrumentality of the State. (See 

1338(c)(2) of FHEFSSA.) 

Subgrantee. An HTF grantee may 

choose to distribute HTF funds through 

one or more subgrantees. A subgrantee 

may be a State agency or a unit of 

general local government. All local 

governments that are HTF subgrantees 

must have an approved consolidated 

plan under 24 CFR part 91. 

Allocation Formula 

Reallocations 

Section 92.714 describes the 

conditions under which HUD will 

reallocate HTF funds. Consistent with 

the statute, funds will be reallocated by 

formula in the following fiscal year. (See 

section 1338(c)(10) and (d) of 

FHEFSSA.) 

Participation and Submission 

Requirements; Distribution of 

Assistance 

Section 92.720 requires the State to 

notify HUD of its intent to participate in 

the HTF program and to have a 

consolidated plan that contains its HTF 

allocation plan required by FHEFSSA. 

(See section 1338(c)(8) of FHEFSSA.) 

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Allocation Plan 

Section 1338(c)(5)(A) of FHEFSSA 

provides that for a grantee to receive an 

HTF grant, the grantee must submit an 

HTF allocation plan, which must: (1) 

Describe the distribution of the grant; (2) 

be based on priority housing needs, as 

determined by the grantee in accordance 

with the HTF regulations; (3) comply 

with the statutory requirements 

regarding activities eligible for HTF 

funding; and (4) include performance 

goals that comply with HUD’s HTF 

regulations. HUD has chosen to 

implement the requirement for an HTF 

allocation plan by amending its 

regulations in 24 CFR part 91 to include 

these requirements in the consolidated 

plans of grantees and, where applicable, 

subgrantees. The decision to include the 

HTF allocation plan in the consolidated 

plan is consistent with the statutory 

requirement in section 105(a) of the 

Cranston-Gonzalez National Affordable 

Housing Act (12 U.S.C. 12705) that HUD 

may only provide assistance directly to 

a jurisdiction if the jurisdiction submits 

a comprehensive housing affordability 

strategy (the basic framework of the 

consolidated plan) to HUD and the 

strategy is approved by HUD. 

Sections 91.220 and 91.320 of the 

consolidated plan regulation are 

amended to reflect the HTF allocation 

plan requirements. 

In addition, section 1338(c)(5)(B) of 

FHEFSSA directs each State, in 

establishing its HTF allocation plan, to: 

(1) Notify the public of the 

establishment of the plan; (2) provide an 

opportunity for public comments 

regarding the plan, (3) consider any 

public comments received on the plan, 

and (4) make the completed plan 

available to the public. Section 

1338(c)(8)(B) of FHEFSSA requires 

grantees to comply with the 

requirements of laws related to public 

participation, including laws related to 

consolidated plans. Rather than 

establish new citizen participation 

requirements, § 92.720 directs States to 

include the HTF allocation plan in the 

consolidated plan and follow the citizen 

participation requirements found in the 

consolidated plan regulations in 24 CFR 

part 91. 

Section 1338(c)(5)(C) of FHEFSSA 

also provides that a State’s allocation 

plan must disclose the requirements 

that the State will impose on eligible 

recipients that apply for grants under 

the State’s formula allocation. Section 

1338(c)(5)(C) provides that such 

requirements must include: (1) A 

description of the eligible activities to 

be conducted using such assistance; and 

(2) a certification from the eligible 

recipient that any housing units assisted 

will comply with HTF requirements 

under this section. The statutory 

requirements are implemented in 

§§ 91.220 and 91.320. 

In the case of HTF-assisted rental 

housing projects, the plan must provide 

priority to projects that have Federal, 

State, or local project-based rental 

assistance so that rents are affordable to 

ELI families, and take into consideration 

the duration of the HTF-assisted units’ 

affordability period. (See 1338 (g)(2)(D) 

of FHEFSSA.) The HTF allocation plan 

must consider the merits of the 

application in meeting the priority 

housing needs of the State. The rule 

provides flexibility to allow each 

grantee to include incentives and 

priorities in its HTF allocation plan that 

are appropriate to the communities 

where housing developed with HTF 

funds will be located. For example, 

incentives to promote green building, 

the use of renewable building materials, 

or sustainable development, as defined 

by the grantee, may be included in its 

HTF allocation plan. 

HUD specifically requests comments 

on how it may provide incentives to 

encourage the use of HTF funds to 

develop housing affordable to ELI 

households that is also accessible to 

transit and employment centers. HUD is 

also seeking comments on what program 

structure or features will encourage or 

assist States in allocating HTF funding 

in accordance with metropolitan and 

regional land use and transportation 

plans. Similarly, HUD is interested in 

hearing about how it can provide 

incentives to HTF grantees and 

recipients to incorporate ‘‘green 

building’’ and ‘‘sustainability’’ features 

in the development of HTF-assisted 

projects, such as the use of renewable 

building materials or other techniques 

that reduce the impact of the property 

or site on the environment and promote 

a healthier environment for building 

occupants. In addition, HUD 

specifically requests comments on how 

it could include standards or minimum 

requirements in the HTF regulations for 

specific ‘‘green building’’ or sustainable 

development features. 

Distribution of Assistance: HTF 

Grantees, Subgrantees, and Recipients 

Section 92.725 describes the way HTF 

funds will flow to the communities and 

recipients, as well as the participation 

and submission requirements for 

grantees receiving an HTF allocation. 

For each year that funds are made 

available for the HTF, a formula grant 

will be provided to each State. The State 

or State-designated entity is responsible 

for distributing HTF funds throughout 

the State according to its assessment of 

the priority housing needs, as identified 

in the State’s approved consolidated 

plan, and in accordance with any 

priorities that may be established by 

HUD in allocating grants to the States in 

accordance with the formula. HUD will 

issue notices in the future as necessary 

to communicate policy priorities for the 

HTF. 

FHEFSSA allows a State to choose to 

be the HTF grantee (to receive and 

administer its grant) or to choose a 

qualified State-designated entity to be 

the HTF grantee. In addition, the HTF 

grantee may choose to directly fund 

projects (in accordance with the 

grantee’s HTF allocation plan in its 

consolidated plan), or a grantee may 

choose one or more subgrantees (to 

administer the HTF funds and fund 

projects). A subgrantee may be a State 

agency or a unit of general local 

government that has submitted a 

consolidated plan under 24 CFR part 91. 

The subgrantee must include an HTF 

allocation plan in its consolidated plan 

(see 24 CFR 91.220(l)(4)) and must 

select projects by eligible recipients in 

accordance with its HTF allocation 

plan. 

Eligible recipients of HTF funds must 

meet statutorily prescribed criteria, as 

promulgated through this rulemaking. 

An HTF recipient means an 

organization, agency, or other entity 

(including a for-profit entity or a 

nonprofit entity) that receives HTF 

assistance from a grantee to be an owner 

or developer of an HTF-assisted project. 

In order to qualify as an eligible 

recipient, the entity must demonstrate 

its ability and financial capacity to 

manage the eligible activity in 

compliance with all applicable HTF 

requirements. In addition, the entity 

must demonstrate familiarity with the 

requirements of other Federal, State, or 

local housing programs that may be 

used in conjunction with HTF funds to 

ensure compliance with all applicable 

requirements and regulations of such 

programs. An eligible HTF recipient 

must have demonstrated experience in 

housing construction or rehabilitation of 

rental housing or housing for 

homeownership; if it is to be the owner, 

it must demonstrate experience in the 

management and operation of affordable 

multifamily rental housing. 

Income Targeting 

Based on tabulations of American 

Housing Survey data, HUD estimates 

that during 2007, there were about 9.2 

million ELI renter households 

nationwide, but only about 4.2 million 

units with rents affordable and available 

to this income group. As a result, 64.5 

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1The establishment of a minimum of 80 percent 

of HTF funds to be used for rental housing is 

derived by reading two provisions of the statute. 

Section 1338(c)(10) provides that of the aggregate 

amount allocated to a State or State-designated 

entity under section 1338, not more than 10 percent 

shall be used for activities under section 

1338(c)(7)(B), which are the homeownership 

activities. Therefore, under section 1338, not more 

than 10 percent of funds can be used for 

homeownership, leaving 90 percent available for 

the production, preservation, and rehabilitation of 

rental housing. Section 1338(c)(10)(D)(iii) limits the 

amount that a State or State-designated entity may 

use for administrative costs for carrying out the 

HTF program, to a maximum of 10 percent. 

Therefore, the minimum amount available for 

activities under section 1338(c)(7)(A) (rental 

housing production) is 80 percent. 

percent of ELI renters were severely 

rent-burdened (paid more than 50 

percent of their income for rent) or lived 

in severely inadequate housing. HUD 

notes that more than half (51 percent) of 

the 3.8 million ELI renters who 

occupied affordable units in 2007 were 

able to do so only because they reported 

receiving government rental assistance, 

such as from the public housing, 

project-based Section 8 or Section 202/ 

811 program, and the housing choice 

voucher program. 

By contrast, of the 6.7 million renters 

with incomes between 30 and 50 

percent of area median income (VLI 

renters), only 23.6 percent had severe 

rent burdens in 2007. Furthermore, 

there were about 7.8 million units with 

rents affordable and available to VLI 

renters, and about one million of these 

units were assisted. 

FHEFSSA requires that not less than 

80 percent of the HTF grant shall be 

used to produce rental housing 1 and, of 

this amount, section 1338(c)(7)(A) of 

FHEFSSA requires that not less than 75 

percent shall be used for the benefit 

only of ELI families or families with 

incomes at or below the poverty line (as 

such term is defined in section 673 of 

the Omnibus Budget Reconciliation Act 

of 1981 (42 U.S.C. 9902), including any 

revision required by such section), 

whichever is the greater, applicable to a 

family of the size involved, and not 

more than 25 percent be used for the 

benefit only of VLI families. 

Under the rulemaking authority of 

section 1338(g) of FHEFFSA, which 

provides that ‘‘The Secretary shall issue 

regulations to carry out this section 

[section 1338],’’ the Secretary has the 

discretion to elaborate upon, clarify, 

define and, in some instances, add to 

the statutory program requirements and 

criteria. With respect to the allocation of 

funds for ELI families or families with 

incomes below the poverty line, the 

Secretary has the discretion to direct 

grantees, in any given year, to use more 

than 75 percent of the HTF funds for the 

benefit only of ELI families or families 

with incomes at or below the poverty 

line, whichever is greater. For the first 

year in which HTF funds are made 

available, the rule provides that of the 

amount made available for rental and 

homeownership housing, grantees are to 

expend 100 percent of HTF funds to 

provide rental and homeownership 

housing for ELI households. The 

Secretary shall publish subsequent 

income targeting requirements when 

HUD’s allocation amounts to States are 

published. Sections 92.736 and 92.737 

set forth the income targeting 

requirements, as required by section 

1338(c)(7) of FHEFSSA, for HTFassisted rental units and 

homeownership units, respectively. 

HUD recognizes that subsidizing the 

development and operations of rental 

units targeted to ELI households can be 

extremely challenging. The resources 

available to develop rental units 

targeted to ELI households are scarce, 

and the financing mechanisms that are 

often required to develop financially 

viable and sustainable projects with 

units targeted to ELI households are 

complex and dependent on multiple 

sources of both public and private 

funding. In implementing the HTF, 

HUD’s goal is to provide resources and 

a program structure that will help States 

and local governments, as well as 

private and nonprofit developers to 

develop energy-efficient rental housing 

that is affordable to ELI households. 

Toward that end, Section 8 projectbased vouchers may be made available 

through appropriations. If Section 8 

project-based vouchers are made 

available, HTF grantees will allocate the 

vouchers concurrently with HTF 

funding to specific projects. These 

Section 8 project-based vouchers will be 

administered in accordance with the 

rules applicable to that program. The 

vouchers will help pay for the operating 

costs of units constructed with HTF 

funds. However, an HTF-assisted unit 

that has a Section 8 project-based 

voucher attached to it may not also 

receive HTF operating cost assistance. 

HUD is interested in hearing from 

developers of affordable rental housing 

for ELI families about the ways to 

reduce the cost of subsidizing this 

housing. What specific measures can the 

Department undertake to help reduce 

the cost of producing rental units 

targeted to ELI families? Similarly, what 

approaches will help to reduce 

operating costs and reduce the need for 

ongoing operating subsidies? For 

example, to what extent do energyefficiency measures reduce the costs of 

operations of these units—for both the 

tenants and project owners? To what 

extent do tax abatements significantly 

reduce operating costs? If HTF funds are 

used to pay for the entire development 

cost of these rental units, would the 

absence of debt significantly impact the 

financial viability of HTF-assisted units? 

If grantees choose to undertake 

homeownership activities for ELI 

households, HUD expects that grantees 

will ensure that the underwriting for 

these units and homebuyer counseling 

address the precarious financial 

conditions that ELI households usually 

experience. Shared equity models and 

other types of homeownership program 

designs, such as lease purchase models, 

may be more appropriate for HTFassisted homeownership activities. The 

Department is seeking comments from 

the public about appropriate and 

effective approaches for homeownership 

programs for ELI households. What 

specific measures can the Department 

undertake to help reduce the cost of 

homeownership targeted to ELI 

families? Similarly, what approaches 

will help to reduce operating costs for 

ELI homeowners? For example, to what 

extent do energy-efficiency measures 

reduce the costs of operations of these 

units? 

Eligible and Prohibited Activities 

Sections 92.730–92.735 reflect the 

statutory requirements that govern 

eligible and prohibited activities, 

eligible project costs, and planning and 

administrative costs. Allowable and 

prohibited fees are also addressed in 

these sections. 

Eligible Activities 

Section 92.730 describes the HTFeligible activities. Section 1338(c)(7) of 

FHEFSSA provides that HTF funds may 

be used for assistance for the 

production, preservation, rehabilitation, 

and operating costs of rental housing. 

The Department views the HTF as 

primarily a production program meant 

to add units to the supply of affordable 

housing for ELI and VLI households. 

While the statute allows HTF funds to 

be used for operating costs, it does not 

provide a limit. In order to achieve the 

goal of using HTF funds primarily for 

the production of new affordable units, 

the Department proposes to limit the 

amount of HTF funds that may be used 

for operating cost assistance to 20 

percent of each annual grant. In 

establishing this limit, the Department 

assumes that HTF funds will be 

combined with other sources to produce 

and preserve affordable units, mostly in 

mixed-income projects. The Department 

also considered various analyses with 

different scenarios, including different 

operating cost assistance caps and 

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different local development practices. 

HUD anticipates that project-based 

vouchers will be made available to 

subsidize operating costs in HTFassisted units. However, if vouchers or 

other forms of project-based assistance 

are not available for the HTF-assisted 

unit, it may be necessary to use HTF 

funds for operating cost assistance. This 

limit would make sufficient funds 

available to pay for operating cost 

assistance if needed, while ensuring that 

additional affordable units continue to 

be produced with HTF funds. The 20 

percent limit applies to each annual 

grant. Therefore, grantees will have 

discretion in how they allocate funds to 

each project’s development and 

operating costs. Grantees may apply the 

20 percent limit to all projects or adjust 

it accordingly, as long as no more than 

20 percent of each annual grant is used 

for operating cost assistance. 

Analyses of the use of HTF funds for 

both development and operating 

subsidy show that the use of HTF funds 

for operating cost assistance could very 

quickly consume each State’s formula 

allocation and would deter the use of 

HTF funds for production of additional 

units, as well as preservation and 

rehabilitation of units, targeted to ELI 

households—the primary purpose of the 

HTF. If Section 8 Project-Based 

Vouchers are made available to HTF 

projects for HTF-assisted units, limiting 

the amount of HTF funds available for 

operating cost assistance will not hinder 

implementation of the HTF. 

Nonetheless, HUD is seeking 

comments regarding how imposing this 

or any restriction on the use of HTF 

funds for operating cost assistance 

might enhance or hinder the ability of 

a grantee to maximize the number of 

units affordable to ELI families 

produced, by new construction or 

acquisition, with HTF funds. 

Section 1338(c)(7)(B) provides that 

the production, preservation, and 

rehabilitation of housing for 

homeownership, including forms of 

down payment assistance, closing cost 

assistance, and assistance for interest 

rate buy-downs, are eligible activities. 

HTF funds may be used only for units 

that will be the principal residence of 

eligible families who are first-time 

homebuyers. 

Section 1338(c)(10)(A) of FHEFSSA 

provides that not more than 10 percent 

of the annual grant may be used for 

homeownership activities. If a grantee 

chooses to implement a homeownership 

program with HTF funds, the 

regulations require the grantee to 

perform due diligence and underwriting 

analysis such that the affordability of 

the homeownership units is sustainable 

for ELI households. In light of the 

distressed housing market conditions in 

many jurisdictions, program techniques 

such as shared equity, lease-purchase, 

and first options to re-purchase HTFassisted homeownership units in default 

might be practical features to include in 

HTF homeownership programs. 

Forms of Assistance 

Section 92.730(b) provides that HTF 

funds may be invested as equity 

investments, interest-bearing loans or 

advances, non-interest-bearing loans or 

advances, interest subsidies, deferred 

payment loans, grants, or other forms of 

assistance that HUD may determine to 

be consistent with the goals and 

objectives of the HTF. 

Section 92.730(c) requires that only 

the actual cost of development and 

operation of HTF units can be charged 

to the program, and describes the 

methods for allocating costs and 

determining HTF units in multiunit 

projects. An HTF-assisted unit that has 

a Section 8 project-based voucher 

attached to it may not also receive HTF 

operating cost assistance. 

Terminated Project 

Section 92.730(d) provides that an 

HTF-assisted project that is terminated 

before completion, either voluntarily or 

otherwise, constitutes an ineligible 

activity, and any HTF funds invested in 

the project must be repaid to the 

grantee’s HTF account. 

Prohibited Activities 

Prohibited activities are set forth in 

§ 92.735. Section 1338(c)(10)(D) of 

FHEFSSA provides that HTF funds may 

not be used for: Political activities; 

advocacy; lobbying, whether directly or 

through other parties; counseling 

services; travel expenses; and preparing 

or providing advice on tax returns. The 

prohibited use of funds for political 

activities includes influencing the 

selection, nomination, election, or 

appointment of one or more candidates 

to any Federal, State, or local office as 

codified in section 501 of the Internal 

Revenue Code of 1986 (26 U.S.C. 501). 

This statutory section further provides 

that, subject to the exception in section 

1338(c)(10)(D)(iii), HTF funds may not 

be used for administrative, outreach, or 

other costs of the grantee, or any other 

recipient of such grant amounts. The 

statutory exception to this prohibition is 

that a grantee may use up to 10 percent 

of the State’s HTF grant for 

administrative costs of carrying out its 

program(s) using the HTF, including 

homeownership counseling. 

Eligible Project Costs 

Section 92.731 sets forth the eligible 

project costs, which include 

development hard costs, refinancing 

costs in conjunction with rehabilitation, 

acquisition of standard projects, 

development related soft costs, 

architectural and engineering fees, 

project audit costs, staff overhead 

related to the development of the units, 

settlement costs, impact fees, the cost to 

address and meet environmental and 

historic preservation property 

standards, operating costs, relocation 

costs, repayment of construction or 

other loans, and certain types of costs 

for construction undertaken before HTF 

funds were committed to the project. 

Operating cost assistance, as defined 

in § 92.731(e), may include the cost of 

utilities, insurance, taxes, and 

scheduled payments to a replacement 

reserve. The eligible amount of HTF 

funds per unit for operating costs is 

determined based on the deficit 

remaining after the monthly rent 

payment for the HTF-assisted unit is 

applied to the HTF-assisted unit’s share 

of monthly operating costs. The written 

agreement between the grantee and the 

recipient must set forth the maximum 

amount of the operating assistance to be 

provided to the HTF-assisted rental 

project. The grantee may provide 

operating cost assistance necessary for 

the project for up to 2 years from one 

HTF grant. However, the written 

agreement may provide for renewal of 

operating cost assistance during the 

period of affordability of the project, 

subject to funding availability. 

Administration and Planning Costs 

As noted earlier, the administrative 

costs allowed in the HTF program 

cannot exceed 10 percent of the annual 

grant. Similar to the HOME program 

requirements at § 92.207, eligible 

administrative and planning costs are 

found in § 92.732. 

HTF and Public Housing 

Section 1338(c)(7)(A) of FHEFSSA 

provides that HTF assistance may be 

used for the production, preservation, 

and rehabilitation of housing, including 

housing identified in section 

1335(a)(1)(B) of FHEFSSA (12 U.S.C. 

4565(a)(1)(B)). (Note: The statute 

incorrectly references section 

1335(a)(2)(B)). The programs identified 

in that section include housing projects 

subsidized under the project-based and 

tenant-based rental assistance programs 

under section 8 of the United States 

Housing Act of 1937 (1937 Act); the 

program under section 236 of the 

National Housing Act; the below-market 

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interest rate mortgage program under 

section 221(d)(4) of the National 

Housing Act (note: Section 1335(a)(1)(B) 

of FHEFSSA incorrectly references the 

below-market interest rate mortgage 

program; the correct statutory reference 

is section 221(d)(3)/(d)(5) of the 

National Housing Act.); the supportive 

housing for the elderly program under 

section 202 of the Housing Act of 1959; 

the supportive housing program for 

persons with disabilities under section 

811 of the Cranston-Gonzalez National 

Affordable Housing Act; the permanent 

supportive housing projects subsidized 

under programs under Title IV of the 

McKinney-Vento Homeless Assistance 

Act (42 U.S.C. 11361 et seq.); the rural 

rental housing program under section 

515 of the Housing Act of 1949; the lowincome housing tax credit under section 

42 of the Internal Revenue Code of 1986, 

as amended; and comparable State and 

local affordable housing programs. 

Although this list is not necessarily 

exhaustive, it is HUD’s determination 

that the HTF funds are not eligible to be 

used in existing public housing units. 

Moreover, the 1937 Act provides annual 

formula funding for public housing. 

Accordingly, § 92.734 prohibits the use 

of HTF funds for public housing. 

Prohibited Activities and Fees 

The section on prohibited activities 

and fees mirrors the HOME program 

regulation at § 92.214, except that the 

HTF section is expanded to expressly 

cover political activities, advocacy, and 

lobbying, which are ineligible under 

FHEFSSA. 

Program Requirements 

Site and Neighborhood Standards 

Section 92.726 applies the site and 

neighborhood standards for the HOME 

program, at § 92.202, to the HTF. If 

Section 8 project-based vouchers are 

made available, the Section 8 

requirements related to site and 

neighborhood standards will apply to an 

HTF-assisted unit that has a Section 8 

project-based voucher attached to it. 

Income Determinations 

Section 92.727 defines ‘‘annual 

income’’ and describes the process for 

determining the annual income of 

tenants and homebuyers for eligibility 

in HTF-assisted housing. Income from 

all family members must be included 

when determining income eligibility. As 

in the HOME program, grantees may use 

the definition of annual income in 24 

CFR 5.609 (Section 8 program 

definitions) or the Internal Revenue 

Service (IRS) definition of annual 

income from IRS Form 1040. Section 

92.727(e) provides that a State must 

follow HUD’s regulations in 24 CFR 

5.617 when making income 

determinations for persons with 

disabilities who are tenants in HTFassisted rental housing. For 

homebuyers, the grantee must 

determine annual income by examining 

source documentation for the entire 

household, or obtain written statements 

verifying incomes from the household 

or administrators of government 

programs from which the household 

receives assistance. 

Project Requirements 

Sections 92.740–92.750 establish 

requirements applicable to HTF-assisted 

housing projects. 

Maximum Per-Unit Subsidy 

Section 92.740(a) establishes 

maximum per-unit subsidy, 

underwriting, and subsidy layering 

requirements. The grantee must 

establish maximum limitations on the 

amount of HTF funds the grantee may 

invest on a per-unit basis. 

Underwriting and Subsidy Layering 

Section 92.740(b) requires the grantee 

to perform subsidy layering analysis 

before committing HTF funds to a 

project. The grantee must determine that 

costs are reasonable, examine the 

sources and uses of funds, and ensure 

that the amounts available and their use 

are necessary to provide quality 

affordable rental or homeownership 

housing for ELI households for the 

affordability period (30 years). 

Furthermore, developers or owners of 

HTF-assisted projects may not receive 

undue returns on their investments. 

Property Standards 

As described below, the HTF requires 

energy and water efficiency features in 

all HTF-assisted units. Each grantee can 

include incentives and priorities in its 

HTF allocation plan to further promote 

sustainable development that is 

appropriate to the communities where 

housing developed with HTF funds will 

be located. 

Applicable property standards are 

established at §§ 92.741 through 92.745. 

This rule requires, at minimum, that all 

HTF-assisted units that are newly 

constructed or undergoing gut 

rehabilitation must be certified that they 

meet the guidelines for ENERGY STARQualified New Homes (for residential 

buildings up to 3 stories) or exceed, by 

20 percent, the energy efficiency 

requirements of the American Society of 

Heating, Refrigerating, and AirConditioning Engineers (ASHRAE) 

Standard 90.1–2007, Appendix G: 

Performance Rating Method (for 

residential buildings over 3 stories), as 

defined in § 92.741. A Home Energy 

Rater (HER) must inspect the units to 

certify that the units meet the ENERGY 

STAR guidelines. HUD is aware that 

Home Energy Raters may not be 

available in all places; therefore, the 

requirement for ENERGY STAR 

certification will become effective 6 

months from the effective date of this 

rule. ENERGY STAR-labeled products 

must be installed when older obsolete 

products are replaced as part of the 

rehabilitation work for HTF-assisted 

units, as applicable in § 92.742. All 

water-usage products installed in HTFassisted units must also be certified to 

meet the WaterSense requirements, in 

accordance with § 92.741 and § 92.742. 

The specific property standards 

addressed by §§ 92.741 through 92.745 

are as follows: § 92.741 contains the 

property standards for new construction 

and gut rehabilitation, § 92.742 

establishes the standards for housing 

undergoing other rehabilitation, 

§ 92.743 contains the property standards 

for existing housing that is acquired 

with HTF funds, § 92.744 establishes 

property standards for manufactured 

housing, and § 92.745 establishes 

ongoing property standards for rental 

housing during the period of 

affordability. 

HUD requests comments from 

interested parties on how additional 

minimum property standards may be 

imposed to increase the efficiency and 

reduce the operating costs of HTFassisted units. 

Qualification as Affordable Housing 

Sections 92.746 and 92.748 establish 

an affordability period of not less than 

30 years for rental housing and 

homeownership units assisted with HTF 

funds. As stated earlier, the Department 

expects that HTF funds will be 

combined with the other sources of 

private funding and financing typically 

used for the development of affordable 

housing, such as Low-Income Housing 

Tax Credits (LIHTCs). The affordability 

period for HTF-assisted units is 

designed to work in conjunction with 

the 30-year affordability period for 

LIHTC projects. Grantees may also 

establish longer affordability periods in 

their HTF allocation plans. 

Section 92.746(b) establishes the 

maximum rent (including utilities) for 

HTF-assisted units at 30 percent of the 

annual income of a family whose 

income equals 30 percent of the area 

median income, or 30 percent of the 

poverty line, whichever is greater. It is 

necessary to establish fixed rents for 

underwriting purposes and required 

subsidy layering analyses. HUD 

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recognizes that some ELI tenants living 

in HTF-assisted units may be rentburdened if required to pay HTF rents. 

As stated earlier in this preamble, 

Section 8 Project-Based Vouchers may 

be made available to HTF-assisted units; 

these vouchers alleviate cost burdens for 

ELI tenants. When project-based 

assistance from other HUD programs is 

provided to HTF units, the rents are 

based on the rent requirements of that 

program. 

Section 92.746(e) requires that HTF 

project owners verify the initial and 

continued eligibility of tenants living in 

HTF-assisted rental units and 

establishes the methods by which HTF 

project owners must verify tenant 

income. Furthermore, this section 

specifies that when Section 8 ProjectBased Vouchers or any other Federal 

rental assistance programs are used in 

conjunction with an HTF-assisted rental 

unit, the income verification rules and 

procedures of those programs will apply 

instead of the requirements set forth in 

this subsection. 

Section 92.747 establishes tenant 

protection, lease, and selection 

requirements, and incorporates the 

requirements of section 1338(c)(8) of 

FHEFSSA. 

Section 92.748(d) establishes the HTF 

requirements for homebuyers. HTF 

assistance to homebuyers may be 

provided only to first-time homebuyers 

and must be for the principal residence 

of the homebuyer. Before purchasing the 

housing, in accordance with section 

1338(c)(7)(B)(iv) of FHEFSSA, the 

homebuyer must have completed 

homeownership counseling from an 

organization that meets the 

requirements of section 1132 of the 

Federal Housing Regulatory Reform Act 

of 2008. 

Section 92.748(f) establishes the 

resale requirements, as required by 

section 1338(c)(7)(B)(iii), for 

homeownership units assisted by the 

HTF. Upon resale, each HTF-assisted 

homeownership unit must be sold to an 

income-eligible family. Each grantee 

that has an HTF homeownership 

program must include resale restriction 

policies in its HTF allocation plan. HTF 

grantees may adopt their HOME 

program resale restriction policies, 

modified for income-eligible 

households. The grantee may also 

include purchase options and right of 

first refusal to purchase the HTFassisted units upon foreclosure, in order 

to preserve affordability. 

Section 92.749 defines the modest 

housing requirements in section 

1338(c)(7)(B)(ii) of FHEFSSA for HTFassisted homeownership units. For 

newly constructed housing, the value of 

the housing may not exceed 95 percent 

of the median purchase price for singlefamily housing in the area. HUD intends 

to provide these purchase limits for 

each area or the grantee can determine 

95 percent of the area median purchase 

price in accordance with the 

methodology set forth in § 92.749(e). 

In the event of foreclosure of HTFassisted rental or homeownership units, 

or transfer of deed in lieu of foreclosure, 

the affordability period required by 

§§ 92.746 and 92.748 is terminated. In 

order to preserve the affordability of the 

housing, the grantee may include 

purchase options in the HTF written 

agreement, such as ‘‘right of first refusal’’ 

to purchase the HTF-assisted units in 

default. The termination of the 

affordability restrictions on the project 

does not terminate the grantee’s 

repayment obligation under § 92.773. 

Faith-Based Organizations 

Section 92.750 provides for the 

eligibility of faith-based organizations to 

apply for and use HTF funds under the 

same requirements as other recipients. 

Other Federal Requirements 

Sections 92.760–92.764 set forth the 

other Federal requirements that are 

applicable to the use of HTF funds, 

including nondiscrimination 

requirements. For example, the rule 

requires the grantee to establish 

affirmative marketing requirements, as 

required in the HOME program, and 

grantees must comply with Federal 

lead-based paint and relocation 

requirements. These sections also 

include the funding accountability and 

transparency requirements of the 

Federal Funding Accountability and 

Transparency Act of 2006 (31 U.S.C. 

6101 note), which must be met in 

accordance with section 1338(i) of 

FHEFSSA. 

Program Administration 

Sections 92.770–92.779 establish the 

conditions and requirements by which 

States are to administer their HTF 

funds. Section 92.770 describes two 

HTF accounts that make up the HTF: 

The HTF Treasury account, which is for 

HTF funds allocated or reallocated to a 

grantee under the HTF formula, and the 

HTF local account, which is for deposits 

of HTF funds disbursed from the HTF 

Treasury account, any program income, 

and any repayments required to be 

made. Section 92.771 provides that 

allocation and reallocation of HTF funds 

will be made available pursuant to an 

HTF grant agreement. 

Section 92.772 establishes the 

requirements applicable to program 

disbursement and the establishment of 

the information system consistent with 

section 1338(e) of FHEFSSA. This 

statutory section provides that (1) HUD 

must require each grantee to develop 

and maintain a system to ensure that 

each recipient of assistance use HTF 

funds in accordance with the statute, 

the regulations, and any requirements or 

conditions under which HTF funds 

were provided; and (2) establish 

minimum requirements for agreements 

between the grantee and recipients. This 

statutory section further provides that 

the minimum requirements must 

include: (1) Appropriate periodic 

financial and project reporting, record 

retention, and audit requirements for 

the duration of the assistance to the 

recipient, to ensure compliance with the 

limitations and requirements of the 

statute and regulations; and (2) any 

other requirements that the Secretary 

determines are necessary to ensure 

appropriate administration and 

compliance. These statutory 

requirements are reflected in §§ 92.776– 

92.779. 

Specifically, § 92.774(b) requires that 

before disbursing any HTF funds to any 

entity, the grantee must enter into a 

written agreement with that entity. The 

written agreement must ensure 

compliance with the requirements of 

this subpart. Requirements for the HTF 

written agreement and required 

provisions are specified in § 92.774(c). 

Where HOME program funds are used 

together with HTF funds, a single 

written agreement meeting the 

requirements of both § 92.504 and this 

subpart may be used to enforce 

requirements for both programs. 

Section 1338(g)(2) of FHEFSSA 

requires that HUD ensure that the use of 

HTF grants by States or State-designated 

entities is audited not less than annually 

to ensure compliance with statutory and 

HUD’s regulatory requirements. Section 

1338(g)(2) also authorizes HUD to audit, 

provide for an audit, or otherwise verify 

a grantee’s activities to ensure 

compliance with all HTF requirements. 

Section 1338(g)(2) further provides that 

any financial statement submitted by a 

grantee or recipient to HUD shall be 

reviewed by an independent certified 

public accountant in accordance with 

Statements on Standards for Accounting 

and Review Services, issued by the 

American Institute of Certified Public 

Accountants. These requirements are 

reflected in § 92.776. 

Performance Review and Sanctions 

Review of Subgrantees and Recipients 

Grantees will report on their progress 

and performance in meeting the 

requirements of the HTF in HUD’s 

Integrated Disbursement & Information 

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System (IDIS) and the consolidated 

plan. For example, grantees will report 

on the incomes of HTF beneficiaries in 

IDIS, and will also demonstrate 

compliance with the deadlines for the 

commitment and expenditure of funds 

by data entered into IDIS. As stated 

earlier, this proposed rule would add 

the annual HTF allocation plan as a 

subsection to the strategic plan and 

annual action plan. Performance 

benchmarks will be established in the 

HTF allocation plan in conjunction with 

the strategic and annual plans, and 

subsequent reporting on performance 

will be reported to the public and HUD 

through the submissions and reports 

associated with those plans. 

Section 1338(e)(2)(B) of FHEFSSA is 

directed to the misuse of funds and 

provides that if HUD determines, after 

reasonable notice and opportunity for 

hearing, that a grantee has failed to 

comply substantially with any provision 

of the HTF statutory requirements or 

HUD’s regulatory requirements, and 

until HUD is satisfied that there is no 

longer any such failure to comply, HUD 

shall: (1) Reduce the amount of 

assistance to the grantee by an amount 

equal to the amount of grant amounts 

that were not used; (2) require the 

grantee to repay HUD any amount of the 

grant that was not used; (3) limit the 

availability of assistance to the grantee 

to activities or recipients not affected by 

such failure to comply; or (4) terminate 

any assistance under this section to the 

grantee. These statutory requirements 

are reflected in § 92.782. 

Section 1338(e)(1)(B) provides that if 

any recipient of assistance of HTF funds 

is determined to have used any such 

amounts in a manner that is materially 

in violation of the HTF statutory 

requirements, HUD’s HTF regulatory 

requirements, or any requirements or 

conditions under which such amounts 

were provided, the grantee shall require, 

within 12 months after the 

determination of the misuse, that the 

recipient must reimburse the grantee for 

the misused amounts and return to the 

grantee any such amounts that remain 

unused or uncommitted for use. Section 

1338(e)(1)(B) provides that if a grantee 

makes this determination, the grantee 

must first provide notification of the 

determination to HUD for review and 

concurrence. This statutory section 

authorizes HUD to reverse the 

determination if it disagrees. These 

statutory requirements are reflected in 

§ 92.783. 

Consolidated Plan Revisions 

As noted earlier in this preamble, this 

rule also makes conforming changes to 

the consolidated plan regulations at 24 

Part 91 to require information related to 

the HTF to be included in strategic and 

5-year State or local government 

strategic and annual action plans. 

III. 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’’). 

This proposed rule was determined to 

be a ‘‘significant regulatory action,’’ as 

defined in section 3(f) of the Order but 

not economically significant, as 

provided in section 3(f)(1) of the Order. 

The reasons for the determination are as 

follows: 

As discussed above in this preamble, 

HERA charged HUD to establish through 

regulation, the formula for the 

distribution of HTF grants to States, and 

to follow that rule with one that 

implements the programmatic 

requirements for the HTF. Consistent 

with that statutory direction, on 

December 4, 2009 (74 FR 63938), HUD 

published a proposed rule submitting 

for public comment the proposed 

formula for allocating HTF funds. As the 

first rule to be issued in the rulemaking 

process for the HTF, the formula 

allocation constituted, on behalf of the 

entire HTF rulemaking, an economically 

significant regulatory action under 

Executive Order 12866. The preamble to 

the December 2009 rule summarized the 

economic impacts of the HTF program, 

as proposed to be implemented through 

the formula issued for public comment 

on December 4, 2009. (For a discussion 

of the economic impact, please see 74 

FR 63940–63941.) HUD’s full economic 

analysis for the allocation rule is 

available for inspection on HUD’s Web 

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

publications/pubasst/riaforhtf.html. 

This proposed rule follows the 

December 4, 2009, allocation formula 

rule by submitting for public comment 

the program requirements that will 

govern the HTF. The economic impacts 

of the rulemakings implementing the 

HTF are largely limited to the 

procedures governing the allocation and 

distribution of grant funds set forth in 

the December 4, 2009, proposed rule. 

This proposed rule does not revise the 

HTF allocation formula or otherwise 

affect the allocation of HTF funds. To 

the extent that this proposed rule has an 

economic impact, it derives from the 

December 2009 allocation formula 

proposed rule. That economic 

assessment may be revised to account 

for any new impacts resulting from 

changes made at the final rule stage. 

The docket file is available for public 

inspection between the hours of 8 a.m. 

and 5 p.m. weekdays in the Regulations 

Division, Office of General Counsel, 

Department of Housing and Urban 

Development, 451 7th Street, SW., 

Room 10276, Washington, DC 20410– 

0500. Due to security measures at the 

HUD Headquarters building, please 

schedule an appointment to review the 

docket file by calling the Regulations 

Division at 202–708–3055 (this is not a 

toll-free number). Persons with hearing 

or speech impairments may access the 

above telephone number via TTY by 

calling the toll-free Federal Information 

Relay Service at 800–877–8339. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) generally requires an 

agency to conduct a regulatory 

flexibility analysis of any rule subject to 

notice and comment rulemaking 

requirements, unless the agency certifies 

that the rule will not have a significant 

economic impact on a substantial 

number of small entities. 

Under the HTF program, HUD makes 

grants to the relatively large entities of 

States or their designated housing 

entities for the purposes of preserving 

and increasing the supply of rental 

housing and increasing homeownership 

for eligible families. Therefore, the 

primary focus on the rule is on these 

large entities. The States and Statedesignated housing entities may, in 

turn, make funding available to 

recipients, which may include smaller 

entities (such as nonprofit or for-profit 

organizations), but the funding made 

available to recipients is provided under 

application procedures and 

requirements established by the States 

or State-designated housing entities, not 

HUD; however, the grantees must 

ensure their recipients’ adherence to the 

statutory requirements and regulatory 

requirements promulgated by HUD. 

Additionally, the regulatory text 

largely reflects statutory requirements of 

FHEFFSA. Where HUD has exercised 

the discretion to elaborate on the 

statutory requirements, HUD has strived 

to closely model these procedures on 

existing development programs, which 

are familiar to entities likely to be 

participants under the new HTF 

program. For example, as noted earlier 

in this preamble, the HTF program 

adopts several definitions used under 

the HOME program. The organization of 

the HTF regulations is modeled after 

those for the HOME program, and HUD 

has elected to adopt many existing 

HOME program requirements. Given 

that HTF funding is statutorily provided 

for the benefit of the States and is to be 

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allocated to the States, HUD has 

determined that the rule will not have 

a significant economic impact on a 

substantial number of small entities. 

Notwithstanding HUD’s 

determination that this rule will not 

have a significant effect on a substantial 

number of small entities, HUD 

specifically invites comments regarding 

any less burdensome alternatives to this 

rule that will meet HUD’s objectives as 

described in this preamble. 

Environmental Impact 

A Finding of No Significant Impact 

(FONSI) with respect to the 

environment has been made in 

accordance with HUD regulations at 24 

CFR part 50, which implement section 

102(2)(C) of the National Environmental 

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

4332(2)(C)). The Finding of No 

Significant Impact is available for public 

inspection between the hours of 8 a.m. 

and 5 p.m. weekdays in the Regulations 

Division, Office of General Counsel, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Room 10276, Washington, DC 20410. 

Due to security measures at the HUD 

Headquarters building, please schedule 

an appointment to review the FONSI by 

calling the Regulations Division at 202– 

708–3055 (this is not a toll-free 

number). Individuals with speech or 

hearing impairments may access this 

number via TTY by calling the Federal 

Information Relay Service at 800–877– 

8339. 

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 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 (UMRA) (2 U.S.C. 

1531–1538) establishes requirements for 

Federal agencies to assess the effects of 

their regulatory actions on State, local, 

and Tribal governments and the private 

sector. This rule does not impose any 

Federal mandate on any State, local, or 

Tribal government or the private sector 

within the meaning of UMRA. 

Paperwork Reduction Act 

The information collection 

requirements contained in this rule have 

been submitted to the Office of 

Management and Budget (OMB) under 

the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3520). In accordance 

with the Paperwork Reduction Act, an 

agency may not conduct or sponsor, and 

a person is not required to respond to, 

a collection of information, unless the 

collection displays a currently valid 

OMB control number. 

The burden of the information 

collections in this rule is estimated as 

follows: 

REPORTING AND RECORDKEEPING BURDEN

Reg. section Paperwork requirement Recordkeeping 

hours 

Reporting 

hours 

Number of 

jurisdictions Total hours 

§ 91.215 .............................. Strategic Planning—Draft Housing Section of 

Localities Plan.

10 ........................ 62 620 

§ 91.220 .............................. Allocation Planning—Draft the localities allocation plan.30 ........................ 62 1,860 

§ 92.725 .............................. Distribution of Assistance ............................... 2 ........................ 56 112 

§ 92.726 .............................. Site and Neighborhood Standards ................. 2 ........................ 56 112 

§ 92.727 .............................. Income Determinations ................................... 1 ........................ 4,573 4,573 

§ 92.730, § 92.731, 

§ 92.736, § 92.737, 

§ 92.740, § 92.746, and 

§ 92.748.

Documentation required by HUD to be included in project file to determine project 

eligibility (i.e., eligible activities and costs, 

income targeting, subsidy limits, qualification as affordable housing).

5 ........................ 415 2,075 

§ 92.741, § 92.742, 

§ 92.743, § 92.744, and 

§ 92.745.

Property Standards (new construction, rehabilitation, acquisition, manufactured housing, rental housing).1 ........................ 415 415 

§ 92.747 .............................. Tenant Protections and Selection (including 

lease requirement).

1 ........................ 4,573 4,573 

§ 92.748 .............................. Qualification as Affordable Housing: Homeownership.1 ........................ 58 58 

§ 92.720 .............................. Public Participation ......................................... 4 ........................ 56 224 

§ 92.760 .............................. Other Federal Requirements and Nondiscrimination (including minority and 

women business enterprise and minority 

outreach efforts).

5 ........................ 415 2,075 

§ 92.760 .............................. Affirmative Marketing ...................................... 10 ........................ 415 4,150 

§ 92.762 .............................. Displacement, Relocation, and Acquisition 

(including tenant assistance policy).

5 ........................ 457 2,285 

§ 92.761 .............................. Lead-based paint ............................................ 1 ........................ 208 208 

§ 92.778 .............................. Debarment and Suspension ........................... 1 ........................ 25 25 

§ 92.771 .............................. HTF Grant Agreement (HUD 40101) .............. 1 ........................ 56 56 

§ 92.774 .............................. Grantee Written Agreements .......................... 10 ........................ 415 4,150 

§ 92.725 .............................. Distribution of Assistance—State Designation 

of Local Recipients.

........................ 2 52 78 

§ 92.731 .............................. Eligible Project Costs—Refinancing ............... ........................ 1 25 25 

§ 92.772 .............................. Program Disbursement and Information System (IDIS)......................... 1 415 415 

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REPORTING AND RECORDKEEPING BURDEN—Continued 

Reg. section Paperwork requirement Recordkeeping 

hours 

Reporting 

hours 

Number of 

jurisdictions Total hours 

Total Annual Respondents and Burden Hours ........................................ 90 4 12,809 28,089 

Total Estimated Burden Hours 

In accordance with 5 CFR 

1320.8(d)(1), HUD is soliciting 

comments from members of the public 

and affected agencies concerning this 

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. 

Interested persons are invited to 

submit comments regarding the 

information collection requirements in 

this rule. Comments must refer to the 

proposal by name and docket number 

(FR–5246) and must be sent to: 

HUD Desk Officer, Office of 

Management and Budget, New 

Executive Office Building, 

Washington, DC 20503, Fax: 202– 

395–6947, and 

Reports Liaison Officer, Office of 

Community Planning and 

Development, Department of Housing 

and Urban Development, 451 Seventh 

Street, SW., Room 7233, Washington, 

DC 20410. 

List of Subjects 

24 CFR Part 91 

Aged, Grant programs-housing and 

community development, Homeless, 

Individuals with disabilities, Low- and 

moderate-income housing, Reporting 

and recordkeeping requirements. 

24 CFR Part 92 

Administrative practice and 

procedure, Grant programs-housing and 

community development, Low- and 

moderate-income housing, 

Manufactured homes, Rent subsidies, 

Reporting and recordkeeping 

requirements. 

For the reasons stated in the 

preamble, HUD proposes to amend 24 

CFR part 91 and amend 24 CFR part 92 

as follows: 

PART 91—CONSOLIDATED 

SUBMISSIONS FOR COMMUNITY 

PLANNING AND DEVELOPMENT 

PROGRAMS 

1. The authority citation for part 91 

continues to read as follows: 

Authority: 42 U.S.C. 3535(d), 3601–3619, 

5301–5315, 11331–11388, 12701–12711, 

12741–12756, 12901–12912, and 12 U.S.C. 

1301 et seq. 

2. In § 91.2, remove the word ‘‘and’’ at 

the end of paragraph (a)(3), remove the 

period at the end of paragraph (a)(4) and 

add ‘‘; and’’ in its place, and add 

paragraph (a)(5) to read as follows: 

§ 91.2 Applicability. 

(a) * * * 

(5) The Housing Trust Fund (HTF) 

program (see 24 CFR part 92). 

* * * * * 

3. Revise the first sentence of 

§ 91.10(a) to read as follows: 

§ 91.10 Consolidated program year. 

(a) Each of the following programs 

shall be administered by a jurisdiction 

on a single consolidated program year, 

established by the jurisdiction: CDBG, 

ESG, HOME, HOPWA, and HTF. * * * 

* * * * * 

4. Revise § 91.215(b)(2) to read as 

follows: 

§ 91.215 Strategic plan. 

* * * * * 

(b) * * * 

(2) The affordable housing section 

shall include specific objectives that 

describe proposed accomplishments the 

jurisdiction hopes to achieve and must 

specify the number of extremely lowincome, low-income, and moderateincome families to whom the 

jurisdiction will provide affordable 

housing as defined in 24 CFR 92.252 for 

rental housing, 24 CFR 92.254 for 

homeownership, and 24 CFR 92.746 and 

24 CFR 92.748 (if the jurisdiction 

receives HTF funds from the State) over 

a specific time period. 

* * * * * 

5. Add § 91.220(l)(4) to read as 

follows: 

§ 91.220 Action plan. 

* * * * * 

(l) * * * 

(4) Housing Trust Fund. If the 

jurisdiction receives HTF funds from 

the State, under 92.725, the action plan 

must include the HTF allocation plan 

(consistent with the State’s HTF 

requirements) that describes the 

distribution of the HTF funds, and 

establishes the application requirements 

and the criteria for selection of 

applications submitted by eligible 

recipients that meet the jurisdiction’s 

priority housing needs. The plan must 

include the following: 

(i) The plan must identify priority 

factors for funding that shall include the 

following: geographic diversity (as 

defined by the grantee in the 

consolidated plan); the applicant’s 

ability to obligate HTF funds and 

undertake eligible activities in a timely 

manner; in the case of rental housing 

projects, the extent to which rents for 

units in the project are affordable to ELI 

families; in the case of rental housing 

projects, the duration of the units’ 

affordability period; the merits of the 

application in meeting the priority 

housing needs of the jurisdiction (such 

as housing that is accessible to transit or 

employment centers, housing that 

includes green building and sustainable 

development features, and housing that 

serves special needs populations); and 

the extent to which the application 

makes use of non-Federal funding 

sources. 

(ii) The plan must include the 

requirement that the application contain 

a description of the eligible activities to 

be conducted with the HTF funds (as 

provided in 24 CFR 92.730) and contain 

a certification by each eligible recipient 

that housing units assisted with the HTF 

will comply with HTF requirements. 

The plan must also describe eligibility 

requirements for recipients (as defined 

in 24 CFR 92.702). 

(iii) The plan must provide for 

performance goals, consistent with the 

jurisdiction’s goals established under 24 

CFR 91.215(b)(2). 

(iv) The plan must provide the 

jurisdiction’s rehabilitation standards, 

as required by 24 CFR 92.742. 

(v) The plan must describe the 

conditions under which the grantee will 

refinance existing debt. 

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6. Revise § 91.315(b)(2) to read as 

follows: 

§ 91.315 Strategic plan. 

* * * * * 

(b) * * * 

(2) The affordable housing section 

shall include specific objectives that 

describe proposed accomplishments the 

State hopes to achieve and must specify 

the number of extremely low-income, 

low-income, and moderate-income 

families to which the State will provide 

affordable housing, as defined in 24 CFR 

92.252 for rental housing, 24 CFR 

92.254 for homeownership, 24 CFR 

92.746 for rental housing, and 24 CFR 

92.748 for homeownership (if the 

jurisdiction receives HTF from the 

State) over a specific time period. 

* * * * * 

7. Add § 91.320(k)(5) to read as 

follows: 

§ 91.320 Action plan. 

* * * * * 

(k) * * * 

(5) Housing Trust Fund. The action 

plan must include the HTF allocation 

plan that describes the distribution of 

the HTF funds, and establishes the 

application requirements and the 

criteria for selection of applications 

submitted by eligible recipients that 

meet the State’s priority housing needs. 

The plan must also establish the State’s 

maximum per-unit subsidy limit for 

housing assisted with HTF funds. If the 

HTF funds will be used for first-time 

homebuyers, the plan must include 

resale restrictions in accordance with 24 

CFR 92.748. The plan must reflect the 

State’s decision to distribute HTF funds 

through grants to subgrantees and/or to 

select applications submitted by eligible 

recipients. If the State is selecting 

applications submitted by eligible 

recipients, the plan must include the 

following: 

(i) The plan must provide priority for 

funding based on geographic diversity 

(as defined by the grantee in the 

consolidated plan); the applicant’s 

ability to obligate HTF funds and 

undertake eligible activities in a timely 

manner; in the case of rental housing 

projects, the extent to which the project 

has Federal, State, or local project-based 

rental assistance so that rents are 

affordable to ELI families; in the case of 

rental housing projects, the duration of 

the units’ affordability period; the 

merits of the application in meeting the 

priority housing needs of the State (such 

as housing that is accessible to transit or 

employment centers, housing that 

includes green building and sustainable 

development features, or housing that 

serves special needs populations); and 

the extent to which the application 

makes use of non-Federal funding 

sources. 

(ii) The plan must include the 

requirement that the application contain 

a description of the eligible activities to 

be conducted with the HTF funds (as 

provided in 24 CFR 92.730) and contain 

a certification by each eligible recipient 

that housing units assisted with the HTF 

will comply with HTF requirements. 

The plan must also describe eligibility 

requirements for recipients (as defined 

in 24 CFR 92.702). 

(iii) The plan must provide for 

performance goals and benchmarks 

against which the State will measure its 

progress, consistent with the State’s 

goals established under 24 CFR 

91.315(b)(2). 

(iv) The plan must include the State’s 

rehabilitation standards, as required by 

24 CFR 92.742. 

(v) The plan must include the 

refinancing guidelines as required by 24 

CFR 92.731(b). 

(vi) The plan must describe the 

conditions under which the grantee will 

refinance existing debt. 

PART 92—HOME INVESTMENT 

PARTNERSHIPS PROGRAM 

8. The authority for 24 CFR part 92 

continues to read as follows: 

Authority: 42 U.S.C. 3535(d), 12701– 

12839, and 12 U.S.C. 1301 et seq. 

9. In § 92.2, revise the definition of 

‘‘First-time homebuyer’’ to read as 

follows: 

§ 92.2 Definitions. 

* * * * * 

First-time homebuyer means an 

individual and his or her spouse who 

have not owned a home during the 3- 

year period prior to purchase of a home 

with assistance under this part. The 

term first-time homebuyer also includes 

an individual who is a displaced 

homemaker or single parent, as those 

terms are defined in this section. 

* * * * * 

10. Add new subpart N to read as 

follows: 

Subpart N—Housing Trust Fund 

General 

Sec. 

92.701 Overview. 

92.702 Definitions. 

92.703 Waivers. 

Allocation Formula; Reallocations 

92.710–92.713 [Reserved] 

92.714 Reallocations by formula. 

Participation and Submission Requirements; 

Distribution of Assistance 

92.720 Participation and submission 

requirements. 

92.725 Distribution of assistance. 

Program Requirements 

92.726 Site and neighborhood standards. 

92.727 Income determinations. 

Eligible and Prohibited Activities 

92.730 Eligible activities: general. 

92.731 Eligible project costs. 

92.732 Eligible administrative and planning 

costs. 

92.734 HTF funds and public housing. 

92.735 Prohibited activities and fees. 

Income Targeting 

92.736 Income targeting: rental units. 

92.737 Income targeting: homeownership. 

Project Requirements 

92.740 Maximum per-unit subsidy amount, 

underwriting, and subsidy layering. 

92.741 Property standards: new 

construction projects and gut 

rehabilitation projects. 

92.742 Property standards: rehabilitation 

projects. 

92.743 Property standards: acquisition of 

standard housing. 

92.744 Property standards: manufactured 

housing. 

92.745 Ongoing property standards: rental 

housing. 

92.746 Qualification as affordable housing: 

rental housing. 

92.747 Tenant protections and selection. 

92.748 Qualification as affordable housing: 

homeownership. 

92.749 Qualification as affordable housing: 

modest housing requirements for 

homeownership. 

92.750 Faith-based organizations. 

Other Federal Requirements 

92.760 Other Federal requirements and 

nondiscrimination; affirmative 

marketing. 

92.761 Lead-based paint. 

92.762 Displacement, relocation, and 

acquisition. 

92.763 Conflict of interest. 

92.764 Funding accountability and 

transparency. 

Program Administration 

92.770 Housing Trust Fund (HTF) accounts. 

92.771 HTF Grant Agreement. 

92.772 Program disbursement and 

information system. 

92.773 Program income and repayments. 

92.774 Grantee responsibilities; written 

agreements; onsite inspections; financial 

oversight. 

92.775 Applicability of uniform 

administrative requirements. 

92.776 Audit. 

92.777 Closeout. 

92.778 Recordkeeping. 

92.779 Performance reports. 

Performance Review and Sanctions 

92.780 Accountability of recipients. 

92.781 Performance reviews. 

92.782 Corrective and remedial actions. 

92.783 Notice and opportunity for hearing; 

sanctions. 

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Subpart N—Housing Trust Fund 

General 

§ 92.701 Overview. 

(a) This subpart implements the 

Housing Trust Fund (HTF) program 

established under section 1338 of the 

Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992 

(FHEFSSA), as amended by the Federal 

Housing Finance Regulatory Reform Act 

of 2008 (12 U.S.C. 4568). In general, 

under the HTF program, HUD allocates 

funds by formula to eligible States to 

increase and preserve the supply of 

decent, safe, sanitary, and affordable 

housing, with primary attention to 

rental housing for ELI and VLI 

households, including homeless 

families. 

(b) Section 1337 of FHEFSSA requires 

a percentage of the unpaid principal 

balance of total new business for the 

Federal Home Loan Mortgage 

Corporation (Freddie Mac) and the 

Federal National Mortgage Association 

(Fannie Mae) (collectively, the 

government-sponsored enterprises or 

GSEs) to be set-aside and allocated as a 

dedicated source of annual funding for 

the HTF, unless allocations are 

suspended by the Director of the Federal 

Housing Finance Agency, the agency 

that regulates the GSEs. These funds 

will be deposited into an HTF account 

established in the Treasury of the 

United States by the Secretary of the 

Treasury to carry out the HTF program. 

FHEFSSA also provides that the HTF 

may be funded with amounts 

appropriated, transferred, or credited to 

the HTF under other provisions of law. 

(c) Other subparts of part 92 are not 

applicable to the HTF program, except 

as expressly provided in this subpart N. 

To the extent that sections of other 

subparts of this part are made 

applicable, references to HOME shall 

mean HTF and references to 

participating jurisdictions shall mean 

grantees. 

§ 92.702 Definitions. 

(a) The definitions in 24 CFR 92.2 

apply to this subpart, except as 

modified in paragraph (b) of this 

section. 

(b) As used in this subpart: 

Commitment means: 

(1) The grantee has executed a legally 

binding written agreement (that 

includes the date of the signature of 

each person signing the agreement) with 

an eligible recipient for a project that 

meets the definition of ‘‘commit to a 

specific local project’’ of paragraph (2) of 

this definition or with a unit of general 

local government for a project that 

meets the definition of ‘‘commit to a 

transit-oriented development’’ of 

paragraph (3) of this definition. 

(2) Commit to a specific project, 

which means: 

(i) If the project consists of 

rehabilitation or new construction (with 

or without acquisition), the grantee and 

recipient have executed a written legally 

binding agreement under which HTF 

assistance will be provided to the 

recipient for an identifiable project for 

which construction can reasonably be 

expected to start within 12 months of 

the agreement date. 

(ii) If the project consists of 

acquisition of standard housing and the 

grantee is providing HTF funds to a 

recipient to acquire rental housing, or to 

a first-time homebuyer family to acquire 

single-family housing for 

homeownership, the grantee and 

recipient or the family have executed a 

written agreement under which HTF 

assistance will be provided for the 

purchase of the single-family housing or 

rental housing and the property title 

will be transferred to the family or 

recipient within 6 months of the 

agreement date. 

(iii) If the project includes operating 

cost assistance, the grantee and the 

recipient must have executed a legally 

binding written agreement under which 

HTF assistance will be provided to the 

recipient for operating cost assistance 

for the identified HTF project. The 

legally binding agreement must include 

the amount of HTF funds necessary for 

operating cost assistance for a period of 

not more than 2 years, which may be 

renewed during the period of 

affordability. 

(3) Commit to a transit-oriented 

development means a unit of general 

local government and the property 

owner have executed a legally binding 

written contract for sale of an 

identifiable property for use for HTFassisted units within a transit-oriented 

development and that the property title 

will be transferred to the unit of general 

local government within 6 months of 

the date of the contract. Within 36 

months of the date of the transfer of 

title, the local government must commit 

an additional amount of HTF funds or 

other resources, as necessary, to a 

specific local project (that meets the 

definition in paragraph (2) of this 

definition) for this property. 

Energy-Efficient Improvements mean 

activities undertaken to minimize 

energy waste in existing housing 

through rehabilitation work, including 

home weatherization and other 

improvements such as installing 

additional insulation, sealing or 

reducing air leakage, upgrading to 

energy-efficient lighting, installing 

programmable thermostats, and 

converting to high-efficiency HVAC 

equipment and appliances. Energyefficient improvements can increase 

comfort levels, and improve health in 

homes, reduce operating costs, improve 

building performance, lower 

maintenance costs, and reduce energyrelated pollution of the environment. 

ENERGY STAR is a joint program of 

the Environmental Protection Agency 

(EPA) and the Department of Energy to 

save money and protect the 

environment through endorsement of 

energy-efficient products and practices. 

ENERGY STAR-Qualified New Homes 

means homes that earn the ENERGY 

STAR label. To earn the ENERGY STAR 

label, a home must meet strict 

guidelines for energy efficiency set by 

the U.S. Environmental Protection 

Agency (EPA) and be independently 

verified by a third-party Home Energy 

Rater. Any home three stories or less 

can earn the ENERGY STAR label if it 

has been verified to meet EPA’s 

guidelines, including: single-family, 

attached, and low-rise multifamily 

homes; manufactured homes; systemsbuilt homes (e.g., SIP, ICF, or modular 

construction); log homes; concrete 

homes; and existing retrofitted homes. 

ENERGY STAR qualified homes can 

include a variety of energy-efficient 

features that contribute to improved 

home quality and homeowner comfort, 

lower energy demand, and reduced air 

pollution, including effective insulation, 

high-performance windows, tight 

construction and ducts, efficient heating 

and cooling equipment, and efficient 

ENERGY STAR qualified products. 

ENERGY STAR-Qualified Products 

and Appliances means that the energyefficient products and appliances have 

earned the ENERGY STAR label by 

meeting guidelines for energy efficiency 

set by the EPA, and will help deliver 

energy savings and environmental 

benefits. Products that can earn the 

ENERGY STAR label include lighting, 

windows, heating and cooling 

equipment, and appliances such as 

refrigerators, dishwashers, and washing 

machines. 

Extremely Low-Income (ELI) Families 

means low-income families whose 

annual incomes do not exceed 30 

percent of the median family income of 

a geographic area, as determined by 

HUD with adjustments for smaller and 

larger families, except that HUD may 

establish income ceilings higher or 

lower than 30 percent of the median for 

the area on the basis of HUD findings 

that such variations are necessary 

because of prevailing levels of 

construction costs or fair market rents, 

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or unusually high or low family 

incomes. 

FHEFSSA means the Federal Housing 

Enterprises Financial Safety and 

Soundness Act of 1992, as amended (12 

U.S.C. 1301 et seq.). 

Grantee means the State or the Statedesignated entity that receives the HTF 

funds from HUD. 

Gut Rehabilitation means the total 

removal and replacement of all interior 

(nonstructural) systems, equipment, 

components, or features of the existing 

structure, and may include structural 

and nonstructural modifications of the 

exterior of the structure. 

Home Energy Rater (HER) means an 

independent third-party rater who 

verifies that a home meets ENERGY 

STAR guidelines. Home Energy Raters 

are trained and certified through the 

Residential Energy Services Network 

(RESNET) to evaluate construction 

techniques, recommend improvements, 

take key measurements, and perform 

inspections and testing procedures 

during and after construction to verify a 

home’s energy-efficient performance 

and conduct Home Energy Rating 

System (HERS) ratings. 

Home Energy Rating means an 

analysis of a home’s projected energy 

efficiency in comparison to a ‘‘reference 

home’’ based on the International Energy 

Conservation Code. A home energy 

rating involves both an analysis of a 

home’s construction plans, as well as 

onsite inspections and testing by a 

certified Home Energy Rater. 

HTF Allocation Plan means the 

annual submission to HUD required by 

FHEFSSA that describes how the 

grantee will distribute its HTF funds, 

including how it will use the funds to 

address its priority housing needs, what 

activities may be undertaken with those 

funds, and how recipients and projects 

will be selected to receive those funds. 

See 24 CFR 91.220(l)(4) and 

91.320(k)(5). 

HTF Funds means funds made 

available under this part through 

formula allocations and reallocations, 

plus program income. 

Income-eligible means a family, 

homeowner, or household (as 

appropriate given the context of the 

specific regulatory provision) that is 

very low-income, extremely lowincome, or both, depending on the 

income-targeting requirements 

established by the Secretary for the 

fiscal year. 

Observed Deficiency (OD) means any 

deficiency identified during an onsite 

inspection of each inspected item for 

each inspected area. The grantee can 

establish its own standards for an 

observed deficiency for each inspected 

item, except that at a minimum, the 

grantee’s standards shall identify each 

deficiency (regardless of the level of 

severity) for each inspected item and 

inspected area included in the latest 

Uniform Physical Condition Standards 

(UPCS) Dictionary of Definitions 

established by HUD pursuant to 24 CFR 

5.703 and 24 CFR 5.705, or such other 

requirements that the Secretary of HUD 

may establish. 

Poverty Line is defined in section 673 

of the Omnibus Budget Reconciliation 

Act of 1981 (42 U.S.C. 9902). 

Program Income means gross income 

received by the grantee that is directly 

generated from the use of HTF funds. 

When program income is generated by 

housing that is only partially assisted 

with HTF funds, the income shall be 

prorated to reflect the percentage of HTF 

funds used. Program income includes, 

but is not limited to, the following: 

(1) Proceeds from the disposition by 

sale or long-term lease of real property 

acquired, rehabilitated, or constructed 

with HTF funds; 

(2) Gross income from the use or 

rental of real property owned by the 

grantee that was acquired, rehabilitated, 

or constructed with HTF funds, minus 

costs that were incidental to generation 

of the income; therefore, program 

income excludes gross income from the 

use, rental, or sale of real property 

received by the recipient, unless the 

funds are paid by the recipient to the 

grantee); 

(3) Payments of principal and interest 

on loans made using HTF funds; 

(4) Proceeds from the sale of loans 

made with HTF funds; 

(5) Proceeds from the sale of 

obligations secured by loans made with 

HTF funds; 

(6) Interest earned on program income 

pending its disposition; and 

(7) Any other interest or return on the 

investment of HTF funds, as permitted 

under § 92.730(b). 

Project Completion means that all 

necessary title transfer requirements and 

construction work have been performed, 

the project complies with the 

requirements of this subpart (including 

the property standards under §§ 92.741 

through 92.745 of this subpart), the final 

drawdown has been disbursed for the 

project, and the project completion 

information has been entered in the 

disbursement and information system 

established by HUD. 

Recipient means an organization, 

agency, or other entity (including a forprofit entity or a nonprofit entity) that 

receives HTF assistance from a grantee 

as an owner or developer to carry out an 

HTF-assisted project. A recipient must: 

(1) Make acceptable assurances to the 

grantee that it will comply with the 

requirements of the HTF program 

during the entire period that begins 

upon selection of the recipient to 

receive HTF funds, and ending upon the 

conclusion of all HTF-funded activities; 

(2) Demonstrate the ability and 

financial capacity to undertake, comply, 

and manage the eligible activity; 

(3) Demonstrate its familiarity with 

the requirements of other Federal, State, 

or local housing programs that may be 

used in conjunction with HTF funds to 

ensure compliance with all applicable 

requirements and regulations of such 

programs; and 

(4) Have demonstrated experience and 

capacity to conduct an eligible HTF 

activity as evidenced by its ability to: 

(i) Own, construct, or rehabilitate, and 

manage and operate an affordable 

multifamily rental housing 

development; or 

(ii) Design, construct, or rehabilitate, 

and market affordable housing for 

homeownership. 

(iii) Provide forms of assistance, such 

as down payments, closing costs, or 

interest rate buydowns for purchasers. 

State means any State of the United 

States, the District of Columbia, the 

Commonwealth of Puerto Rico, the 

Commonwealth of the Northern Mariana 

Islands, Guam, the Virgin Islands, and 

American Samoa. 

State-Designated Entity means a State 

housing finance agency, Tribally 

designated housing entity, or any other 

qualified instrumentality of the State 

that is designated by the State to be the 

grantee. 

Subgrantee means a unit of general 

local government or State public agency 

selected by the grantee to administer all 

or a portion of its HTF program. A local 

government subgrantee must have an 

approved consolidated plan submitted 

in accordance with 24 CFR part 91. The 

selection of a subgrantee by a grantee is 

not subject to the procurement 

procedures and requirements. 

Transit-Oriented Development (TOD) 

refers to a compact, mixed-use, mixedincome development that is within 

walking distance (no more than 1⁄2 mile) 

of a proposed or existing transit facility, 

that is easily accessible to essential 

neighborhood destinations including 

jobs, education, retail, and health 

services. 

Tribally Designated Housing Entity 

has the meaning given the term in 

section 4 of the Native American 

Housing Assistance and SelfDetermination Act of 1997 (25 U.S.C. 

4103). 

Uniform Physical Condition 

Standards (UPCS) means uniform 

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national standards established by HUD 

pursuant to 24 CFR part 5.703 that 

ensure that assisted housing is decent, 

safe, sanitary, and in good repair. 

Standards are established for inspected 

items for each of the following areas, 

which must be inspected: site, building 

exterior, building systems, dwelling 

units, and common areas. 

Very Low-Income (VLI) Families 

means low-income families whose 

annual incomes are in excess of 30 

percent but not greater than 50 percent 

of the median family income of a 

geographic area, as determined by HUD 

with adjustments for smaller and larger 

families, except that HUD may establish 

income ceilings higher or lower than 50 

percent of the median for the area on the 

basis of HUD findings that such 

variations are necessary because of 

prevailing levels of construction costs or 

fair market rents, or unusually high or 

low family incomes. ‘‘Very low-income 

family’’ includes any family that resides 

in a rural area that does not exceed the 

poverty line applicable to the family 

size involved. 

WaterSense is a partnership program 

sponsored by the EPA that seeks to 

protect the future of our Nation’s water 

supply by promoting water efficiency 

and enhancing the market for waterefficient products, programs, and 

practices. WaterSense-labeled products 

must be independently tested and 

certified by an EPA-licensed certifying 

body to meet the criteria in EPA’s 

specifications for water efficiency and 

performance. 

§ 92.703 Waivers. 

The Secretary may, upon a 

determination of good cause and subject 

to statutory limitations, waive any 

provision of this subpart and delegate 

this authority in accordance with 

section 106 of the Department of 

Housing and Urban Development 

Reform Act of 1989 (42 U.S.C. 3535(q)). 

Allocation Formula; Reallocations 

§§ 92.710–92.713 [Reserved] 

§ 92.714 Reallocations by formula. 

(a) HUD will reallocate under this 

section: 

(1) Any HTF funds available for 

reallocation because HUD reduced or 

recaptured funds from an HTF grantee 

under § 92.770 for failure to commit or 

expend the funds within the time 

specified, or under § 92.783 for failure 

to comply substantially with any 

provision of this subpart; 

(2) Any HTF funds reduced for failure 

by the grantee to obtain funds required 

to be reimbursed or returned under 

§ 92.780; and 

(3) Any HTF funds remitted to HUD 

under § 92.773(b)(4) when a grantee 

ceases to be an HTF grantee for any 

reason. 

(b) Any reallocation of funds must be 

made only among all participating 

States, except those States from which 

the funds were recaptured or reduced. 

(c) Any amounts that become 

available for reallocation shall be added 

to amounts for formula allocation in the 

succeeding fiscal year. 

Participation and Submission 

Requirements; Distribution of 

Assistance 

§ 92.720 Participation and submission 

requirements. 

(a) Notification of intent to 

participate. Not later than 30 days after 

receiving notice of its formula allocation 

amount, a State must notify HUD in 

writing of its intention to become an 

HTF grantee for the first year of HTF 

funding. 

(b) Submission requirement. In order 

to receive its HTF grant, the grantee 

must submit a consolidated plan in 

accordance with 24 CFR part 91. 

§ 92.725 Distribution of assistance. 

(a) A State may choose to be the HTF 

grantee to receive and administer its 

grant or it may choose a qualified Statedesignated entity to be the HTF grantee. 

(b) Each grantee is responsible for 

distributing HTF funds throughout the 

State according to the State’s assessment 

of the priority housing needs within the 

State, as identified in the State’s 

approved consolidated plan, and as may 

be directed by HUD at the time of 

allocation of HTF funds for the fiscal 

year. 

(c) An HTF grantee may choose to 

directly fund projects by eligible 

recipients in accordance with the 

grantee’s HTF allocation plan or to fund 

projects by eligible recipients through 

one or more subgrantees. The HTF 

subgrantee must have a consolidated 

plan under 24 CFR part 91, must 

include an HTF allocation plan in its 

consolidated plan (see 24 CFR 

91.220(l)(4)), and must select projects by 

eligible recipients in accordance with its 

HTF plan. The grantee or subgrantee 

must determine that the applicant is an 

eligible recipient that meets the 

definition of ‘‘recipient’’ in § 92.702 

before awarding HTF assistance. 

(d) If the HTF grantee subgrants HTF 

funds to subgrantees, the grantee must 

ensure that its subgrantees comply with 

the requirements of this subpart and 

carry out the responsibilities of the 

grantee. The grantee must annually 

review the performance of subgrantees 

in accordance with 24 CFR 92.774(a). 

Program Requirements 

§ 92.726 Site and neighborhood standards. 

The site and neighborhood standards 

contained in § 92.202 apply to the HTF. 

§ 92.727 Income determinations. 

(a) General. The HTF program has 

income-targeting requirements for HTFassisted projects. Therefore, the grantee 

must determine that each family 

occupying an HTF-assisted unit is 

income-eligible, by determining the 

family’s annual income. 

(b) Definition of ‘‘annual income.’’ (1) 

When determining whether a family is 

income-eligible, the grantee must use 

one of the following two definitions of 

‘‘annual income’’: 

(i) ‘‘Annual income’’ as defined at 24 

CFR 5.609; or 

(ii) ‘‘Adjusted gross income’’ as 

defined for purposes of reporting under 

the Internal Revenue Service (IRS) Form 

1040 series for individual Federal 

annual income tax purposes, except that 

government cost-of-living allowances 

that are not included in income (e.g., for 

a Federal civilian employee or a Federal 

court employee who is stationed in 

Alaska, Hawaii, or outside the United 

States) must be added to adjusted gross 

income. 

(2) To calculate adjusted income, the 

grantee must apply exclusions from 

income established at 24 CFR 5.611. 

(3) The grantee may use only one 

definition for each HTF-assisted 

program (e.g., down payment assistance 

program) that it administers. 

(c) Determining annual income. (1) 

Tenants in HTF-assisted housing. For 

families who are tenants in HTFassisted housing, the grantee must 

initially determine annual income using 

the method in paragraph (d)(1) of this 

section. For subsequent income 

determinations during the period of 

affordability, the grantee may use any 

one of the methods described in 

paragraph (d) of this section, in 

accordance with § 92.746(e). 

(2) HTF-assisted homebuyers. For 

families who are HTF-assisted 

homebuyers, the grantee must 

determine annual income using the 

method described in paragraph (d)(1) of 

this section. 

(d) Methods for determining annual 

income. A grantee must use one of the 

following methods to determine annual 

income, as described in paragraph (c) of 

this section: 

(1) Examine the source documents 

evidencing annual income (e.g., wage 

statement, interest statement, 

unemployment compensation 

statement) for the family. 

(2) Obtain from the family a written 

statement of the amount of the family’s 

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annual income and family size, along 

with a certification that the information 

is complete and accurate. The 

certification must state that the family 

will provide source documents upon 

request. 

(3) Obtain a written statement from 

the administrator of a government 

program under which the family 

receives benefits and that examines the 

annual income of the family each year. 

The statement must indicate the tenant’s 

family size and state the amount of the 

family’s annual income; or alternatively, 

the statement must indicate the current 

dollar limit for VLI or ELI families for 

the family size of the tenant and state 

that the tenant’s annual income does not 

exceed this limit. 

(e) Calculation of annual income. (1) 

The grantee must calculate the annual 

income of the family by projecting the 

prevailing rate of income of the family 

at the time the grantee determines that 

the family is income-eligible. Annual 

income shall include income from all 

family members and must include the 

annual income of all families in the 

unit. Income or asset enhancement 

derived from the HTF-assisted project 

shall not be considered in calculating 

annual income. 

(2) The grantee is not required to reexamine the family’s income at the time 

the HTF assistance is provided, unless 

more than 6 months has elapsed since 

the grantee determined that the family 

qualified as income-eligible. 

(3) The grantee must follow the 

requirements in 24 CFR 5.617 when 

making subsequent income 

determinations of persons with 

disabilities who are tenants in HTFassisted rental housing. 

Eligible and Prohibited Activities 

§ 92.730 Eligible activities: General. 

(a)(1) HTF funds may be used for the 

production, preservation, and 

rehabilitation of affordable rental 

housing and affordable housing for firsttime homebuyers through the 

acquisition (including assistance to 

homebuyers), new construction, 

reconstruction, or rehabilitation of 

nonluxury housing with suitable 

amenities, including real property 

acquisition, site improvements, 

conversion, demolition, and other 

expenses, including financing costs, 

relocation expenses of any displaced 

persons, families, businesses, or 

organizations; for operating costs of 

HTF-assisted rental housing; and for 

reasonable administrative and planning 

costs. Not more than 20 percent of the 

annual grant may be used for operating 

cost assistance. Operating cost 

assistance may be provided only to 

rental housing acquired, rehabilitated, 

preserved, or newly constructed with 

HTF funds. Not more than 10 percent of 

the annual grant shall be used for 

housing for homeownership. HTFassisted housing must be permanent or 

transitional housing. The specific 

eligible costs for these activities are 

found in §§ 92.731 and 92.732. The 

activities and costs are eligible only if 

the housing meets the property 

standards in §§ 92.741 through 92.744, 

as applicable, upon project completion. 

(2) Acquisition of vacant land or 

demolition must be undertaken only 

with respect to a particular housing 

project intended to provide affordable 

housing within the time frames 

established in the definition of 

‘‘commitment’’ in § 92.702(b). 

(3) A unit of general local government 

may purchase improved or unimproved 

land for use for HTF-assisted units to be 

part of a transit-oriented development 

within the time frame established in the 

‘‘commitment’’ definition of ‘‘commit to 

a transit oriented development’’ in 

§ 92.702. The unit of general local 

government must own the improved or 

unimproved property until the project 

meets the requirement for ‘‘commit to a 

specific local project’’ in § 92.702. If the 

unit of general local government does 

not have a commitment for a specific 

HTF-assisted project within 36 months 

from the date of the contract to acquire 

the property, the cost to purchase or the 

current value of the property, whichever 

is greater, must be repaid to the 

grantee’s HTF account from which the 

funds were drawn (i.e., local or Treasury 

account). The amount repaid must be 

prorated in proportion to the amount of 

HTF funds to total funds used to 

purchase the land. 

(4) HTF funds may be used to 

purchase and/or rehabilitate a 

manufactured housing unit, or purchase 

the land upon which a manufactured 

housing unit is located. The 

manufactured housing unit must, at the 

time of project completion, be 

connected to permanent utility hookups and be located on land that is 

owned by the manufactured housing 

unit owner or land for which the 

manufactured housing owner has a lease 

for a period at least equal to the 

applicable period of affordability. 

(b) Forms of assistance. A grantee may 

invest HTF funds as equity investments, 

interest-bearing loans or advances, noninterest-bearing loans or advances, 

interest subsidies consistent with the 

purposes of this subpart, deferred 

payment loans, grants, or other forms of 

assistance that HUD determines to be 

consistent with the purposes of this 

part. Each grantee has the right to 

establish the terms of assistance, subject 

to the requirements of this part. 

(c) Multi-unit projects. (1) HTF funds 

may be used to assist in the 

development of one or more housing 

units in a multi-unit project. Only the 

actual HTF eligible development costs 

of the assisted units may be charged to 

the HTF program. If the assisted and 

non-assisted units are not comparable, 

the actual costs may be determined 

based on a method of cost allocation. If 

the assisted and non-assisted units are 

comparable in terms of size, features, 

and number of bedrooms, the actual cost 

of the HTF-assisted units can be 

determined by prorating the total HTFeligible development costs of the project 

so that the proportion of the total 

development costs charged to the HTF 

program does not exceed the proportion 

of the HTF-assisted units in the project. 

(2) After project completion, the 

number of HTF-assisted units 

designated as part of the development 

process may not be reduced, except that 

in a project consisting of all HTFassisted units, one unit may be 

converted to an onsite manager’s unit if 

the grantee determines the conversion is 

reasonable and that, based on one fewer 

HTF-assisted unit, the costs charged to 

the HTF program do not exceed the 

actual costs of the HTF-assisted units 

and do not exceed the subsidy limit 

established pursuant to § 92.740(a). 

(d) Terminated projects. An HTFassisted project that is terminated before 

completion, either voluntarily or 

otherwise, constitutes an ineligible 

activity and the grantee must repay any 

HTF funds invested in the project to the 

HTF account from which the funds were 

drawn (i.e., local or Treasury account), 

in accordance with § 92.773(b). A 

project that does not meet the 

requirements for affordable housing 

must be terminated and the HTF funds 

must be repaid to the grantee’s HTF 

account. 

§ 92.731 Eligible project costs. 

HTF funds may be used to pay the 

following eligible costs: 

(a) Development hard costs. The 

actual cost of constructing or 

rehabilitating housing. These costs 

include the following: 

(1) For new construction projects, 

costs to meet the new construction 

standards in § 92.741; 

(2) For rehabilitation projects, costs to 

meet the property standards for 

rehabilitation projects in § 92.742; 

(3) For both new construction and 

rehabilitation projects, costs: 

(i) To demolish existing structures; 

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(ii) To make utility connections 

including offsite connections from the 

property line to the adjacent street; and 

(iii) To make improvements to the 

project site that is in keeping with 

improvements of surrounding, standard 

projects. Site improvements may 

include onsite roads and sewer and 

water lines necessary to the 

development of the project. The project 

site is the property, owned by the 

project owner, upon which the project 

is located. 

(4) For both new construction and 

rehabilitation of multifamily rental 

housing projects, costs to construct or 

rehabilitate laundry and community 

facilities that are located within the 

same building as the housing and that 

are for the use of the project residents 

and their guests. 

(5) Costs to make utility connections 

or to make improvements to the project 

site, in accordance with the paragraphs 

(a)(3)(ii) and (iii) of this section, are also 

eligible, in connection with acquisition 

of standard housing. 

(b) Refinancing costs. (1) The cost to 

refinance existing debt secured by rental 

housing units that are being 

rehabilitated with HTF funds, but only 

if the refinancing is necessary to reduce 

the overall housing costs and to make 

the housing more affordable and 

proportional to the number of HTFassisted units in the rental project. The 

proportional rehabilitation cost must be 

greater than the proportional amount of 

debt that is refinanced. 

(2) The grantee must establish 

refinancing guidelines and state them in 

its consolidated plan described in 24 

CFR part 91. The guidelines shall 

describe the conditions under which the 

grantee will refinance existing debt. At 

minimum, the guidelines must 

demonstrate that rehabilitation is the 

primary eligible activity and ensure that 

this requirement is met by establishing 

a minimum level of rehabilitation per 

unit or a required ratio between 

rehabilitation and refinancing. 

(c) Acquisition costs. Costs of 

acquiring improved or unimproved real 

property, including acquisition by 

homebuyers. 

(d) Related soft costs. Other 

reasonable and necessary costs incurred 

by the owner or grantee and associated 

with the financing or development (or 

both) of new construction, 

rehabilitation, or acquisition of housing 

assisted with HTF funds. These costs 

include, but are not limited to: 

(1) Architectural, engineering, or 

related professional services required to 

prepare plans, drawings, specifications, 

or work write-ups. 

(2) Costs to process and settle the 

financing for a project, such as private 

lender origination fees, credit reports, 

fees for title evidence, fees for 

recordation and filing of legal 

documents, building permits, attorney’s 

fees, private appraisal fees, fees for an 

independent cost estimate, and builder’s 

or developer’s fees. 

(3) Costs of a project audit and 

certification of costs performed by a 

certified public accountant that the 

grantee may require with respect to the 

development of the project. 

(4) Costs to provide information 

services such as affirmative marketing 

and fair housing information to 

prospective homeowners and tenants, as 

required by § 92.760. 

(5) For new construction and 

rehabilitation of rental housing, the cost 

of funding an initial operating deficit 

reserve, which is a reserve to meet any 

shortfall in project income during the 

period of project rent-up (not to exceed 

the amount necessary for a period of 18 

months). Any HTF funds that are placed 

in an operating deficit reserve that 

remain unexpended after the project 

rent-up may be retained for project 

reserves if permitted by the 

participating jurisdiction. 

(6) Staff and overhead costs of the 

grantee directly related to carrying out 

the project, such as work specifications 

preparation, loan processing, and 

inspections. For multi-unit projects, 

such costs must be allocated among 

HTF-assisted units in a reasonable 

manner and documented. These costs 

cannot be charged to or paid by the 

assisted families. 

(7) For both new construction and 

rehabilitation, costs for the payment of 

impact fees that are charged for all 

projects within a jurisdiction. 

(8) Costs to address and meet 

environmental and historic preservation 

property standards on the project, 

including any necessary studies, 

research, or mitigation in accordance 

with §§ 92.741(f) and 92.742(c). 

(e) Operating cost assistance; and 

operating cost assistance reserves. For 

HTF-assisted units for which projectbased assistance is not available, when 

necessary and subject to the limitations 

in § 92.730(a), HTF funds may be used 

to pay for operating costs and operating 

cost assistance reserves, as follows: 

(1) Operating costs for insurance, 

utilities, real property taxes, and 

maintenance and scheduled payments 

to a reserve for replacement of major 

systems (provided that the payments 

must be based on the useful life of each 

major system and expected replacement 

cost) of an HTF-assisted unit. The 

eligible amount of HTF funds per unit 

for operating cost assistance is 

determined based on the deficit 

remaining after the monthly rent 

payment for the HTF-assisted unit is 

applied to the HTF-assisted unit’s share 

of monthly operating costs. The grantee 

may agree to provide operating cost 

assistance during the entire period of 

affordability, subject to the availability 

of funds. The maximum amount of the 

operating assistance to be provided to 

an HTF-assisted rental project must be 

specified in a written agreement 

between the grantee and the recipient. 

The grantee may provide for the amount 

of expected operating cost assistance 

necessary for the project in the written 

agreement, for a period of not more than 

two years, which may be renewed 

during the period of affordability, 

subject to the availability of funds. The 

amount of HTF funds for operating cost 

assistance that a grantee may provide to 

a project from any fiscal year HTF grant 

may not exceed the eligible amount for 

operating cost assistance for the HTFassisted units in a project for a period 

of not greater than two years. 

(2) Operating Cost Assistance 

Reserves may be established by the 

grantee for HTF-assisted projects where 

such reserves are deemed necessary by 

the grantee to ensure a project’s 

financial feasibility. The allowable 

amount of an operating cost reserve 

shall not exceed, for a period of more 

than 5 years, the amount determined to 

be necessary to provide operating cost 

assistance for HTF-assisted units, as 

determined by the grantee, based on an 

analysis of potential deficits remaining 

after the expected rent payments for the 

HTF-assisted unit are applied to the 

HTF-assisted unit’s expected share of 

operating costs. 

(f) Relocation costs. The cost of 

relocation payments and other 

relocation assistance to persons 

displaced by the project are eligible 

costs. 

(1) Relocation payments include 

replacement housing payments, 

payments for moving expenses, and 

payments for reasonable out-of-pocket 

costs incurred in the temporary 

relocation of persons. 

(2) Other relocation assistance means 

staff and overhead costs directly related 

to providing advisory and other 

relocation services to persons displaced 

by the project, including timely written 

notices to occupants, referrals to 

comparable and suitable replacement 

property, property inspections, 

counseling, and other assistance 

necessary to minimize hardship. 

(g) Costs relating to payment of loans. 

If the HTF funds are not used to directly 

pay a cost specified in this section, but 

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are used to pay off a construction loan, 

bridge financing loan, or guaranteed 

loan, the payment of principal and 

interest for such loan is an eligible cost 

only if: 

(1) The loan was used for eligible 

costs specified in this section, 

(2) The HTF assistance is part of the 

original financing for the project, and 

(3) The project meets the 

requirements of this subpart. 

(h) Construction undertaken before 

the HTF funds are committed to the 

project. HTF funds cannot be used for 

development hard costs, as provided in 

paragraph (a) of this section, including 

acquisition of construction undertaken 

before the HTF funds are committed to 

the project. However, the written 

agreement committing the HTF funds to 

the project may authorize HTF funds to 

be used for architectural and 

engineering costs and other related soft 

costs, as provided in paragraphs (d)(1) 

and (2) of this section, that were 

incurred before HTF funds were 

committed to the project. 

§ 92.732 Eligible administrative and 

planning costs. 

(a) General. A grantee may expend, 

for payment of reasonable 

administrative and planning costs of the 

HTF program, an amount of HTF funds 

that is not more than 10 percent of the 

fiscal year HTF grant. A grantee may 

also expend, for payment of reasonable 

administrative and planning costs of the 

HTF program, a sum up to 10 percent 

of the program income deposited into its 

local account or received and reported 

by its subgrantees during the program 

year. A grantee may expend such funds 

directly or may authorize its 

subgrantees, if any, to expend all or a 

portion of such funds, provided that 

total expenditures for planning and 

administrative costs do not exceed the 

maximum allowable amount. For 

purposes of this section, ‘‘reasonable 

administrative and planning costs’’ are 

the costs described in paragraphs (b) 

through (h) of this section. 

(b) General management, oversight, 

and coordination. Reasonable costs of 

overall program management, 

coordination, monitoring, and 

evaluation. Such costs include, but are 

not limited to, necessary expenditures 

for the following: 

(1) Salaries, wages, and related costs 

of the grantee’s staff. In charging costs 

to this category, the grantee may either 

include the entire salary, wages, and 

related costs (allocable to the program) 

of each person whose primary 

responsibilities with regard to the 

program involve program 

administration assignments or the 

prorated share of the salary, wages, and 

related costs of each person whose job 

includes any program administration 

assignments. The grantee may use only 

one of these methods. Program 

administration includes the following 

types of assignments: 

(i) Developing systems and schedules 

for ensuring compliance with program 

requirements; 

(ii) Developing interagency 

agreements and agreements with entities 

receiving HTF funds; 

(iii) Monitoring HTF-assisted housing 

for progress and compliance with 

program requirements; 

(iv) Preparing reports and other 

documents related to the program for 

submission to HUD; 

(v) Coordinating the resolution of 

audit and monitoring findings; 

(vi) Evaluating program results against 

stated objectives; and 

(vii) Managing or supervising persons 

whose primary responsibilities with 

regard to the program include such 

assignments as those described in 

paragraphs (b)(1)(i) through (b)(1)(vi) of 

this section. 

(2) Travel costs incurred for official 

business in carrying out the program. 

(3) Administrative services performed 

under third party contracts or 

agreements, including such services as 

general legal services, accounting 

services, and audit services. 

(4) Other costs for goods and services 

required for administration of the 

program, including such goods and 

services as rental or purchase of 

equipment, insurance, utilities, office 

supplies, and rental and maintenance 

(but not purchase) of office space. 

(c) Staff and overhead. (1) Staff and 

overhead costs of the grantee directly 

related to carrying out the project, such 

as work specifications preparation; loan 

processing; inspections; lead-based 

paint inspections (visual assessments, 

inspections, and risk assessments); 

housing counseling; and other services 

related to assisting potential owners, 

tenants, and homebuyers; and staff and 

overhead costs directly related to 

providing advisory and other relocation 

services to persons displaced by the 

project, including timely written notices 

to occupants, referrals to comparable 

and suitable replacement property, 

property inspections, counseling, and 

other assistance necessary to minimize 

hardship. 

(2) These costs, except housing 

counseling, may be charged as 

administrative costs or as project costs 

under §§ 92.731(d)(5) and 92.731(f)(2), 

at the discretion of the grantee; 

however, these costs cannot be charged 

to or paid by the assisted families. 

(d) Public information. The provision 

of information and other resources to 

residents and citizen organizations 

participating in the planning, 

implementation, or assessment of 

projects being assisted with HTF funds. 

(e) Fair housing. Activities to 

affirmatively further fair housing, in 

accordance with the grantee’s 

certification under 24 CFR part 91. 

(f) Indirect costs. Indirect costs may be 

charged to the HTF program under a 

cost allocation plan prepared in 

accordance with OMB Circulars A–87 or 

A–122, as applicable. 

(g) Preparation of the consolidated 

plan. Preparation of the consolidated 

plan required under 24 CFR part 91. 

Preparation includes the costs of public 

hearings, consultations, and 

publication. 

(h) Other Federal requirements. Costs 

of complying with the Federal 

requirements in §§ 92.760 through 

92.764 of this subpart. 

§ 92.734 HTF funds and public housing. 

(a) HTF funds may not be used for 

public housing, including public 

housing that is developed under section 

24 of the 1937 Act (HOPE VI). 

(b) HTF-assisted housing may not 

receive operating assistance under 

section 9 of the 1937 Act during the 

HTF period of affordability. 

(c) Consistent with § 92.730(c), HTF 

funds may be used for affordable 

housing in a project that also contains 

public housing units, provided that the 

HTF funds are not used for the public 

housing units and HTF funds are used 

only for eligible costs, in accordance 

with this subpart. 

§ 92.735 Prohibited activities and fees. 

(a) HTF funds may not be used to: 

(1) Provide assistance (other than 

assistance to a homebuyer to acquire 

housing previously assisted with HTF 

funds) to a project previously assisted 

with HTF funds during the period of 

affordability established by the grantee 

in the written agreement under § 92.774. 

However, additional HTF funds may be 

committed to a project up to one year 

after project completion, but the amount 

of HTF funds in the project may not 

exceed the maximum per-unit subsidy 

amount established pursuant to 

§ 92.740. 

(2) Pay for the acquisition of property 

owned by the grantee, except for 

property acquired by the grantee with 

HTF funds or property acquired in 

anticipation of carrying out an HTF 

project. 

(3) Pay delinquent taxes, fees, or 

charges on properties to be assisted with 

HTF funds. 

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(4) Pay for political activities, 

advocacy, lobbying (whether directly or 

through other parties), counseling 

services (except for housing counseling), 

travel expenses (other than those 

eligible under § 92.732(b)), or preparing 

or providing advice on tax returns. The 

prohibited use of funds for political 

activities includes influencing the 

selection, nomination, election, or 

appointment of one or more candidates 

to any Federal, State, or local office as 

codified in section 501 of the Internal 

Revenue Code of 1986 (26 U.S.C. 501). 

(5) Pay for administrative, outreach, 

or other costs to manage and operate the 

grantee of HTF funds, except those 

administrative costs necessary to carry 

out the HTF program, including housing 

counseling. 

(6) Pay for any cost that is not eligible 

under § 92.731 and § 92.732. 

(b)(1) The grantee may not charge 

(and must prohibit subgrantees and 

recipients from charging) servicing, 

origination, or other fees for the costs of 

administering the HTF program (except 

as allowed in § 92.731(d)(2)). However, 

the grantee may charge owners of rental 

projects reasonable annual fees for 

monitoring compliance during the 

period of affordability and may charge 

nominal application fees (although 

these fees are not an eligible HTF cost) 

to eligible recipients, to discourage 

frivolous applications. 

(2) The amount of application fees 

must be appropriate to the type of 

application and may not create an 

undue impediment to an ELI family to 

be able to participate in the grantee’s 

program. All fees are applicable credits 

under OMB Circular A–87. 

(3) In addition, the grantee must 

prohibit project owners from charging 

origination fees, parking fees that 

exceed usual and customary charges, 

laundry room access fees, and other 

fees; however, rental project owners 

may charge reasonable application fees 

to prospective tenants. 

Income Targeting 

§ 92.736 Income targeting: Rental units. 

Unless otherwise directed by HUD at 

the time of allocation of HTF funds for 

a fiscal year, in each fiscal year, not less 

than 75 percent of HTF grant amounts 

provided to rental projects under each 

grant must be used for the benefit of ELI 

families or families with incomes at or 

below the poverty line, whichever is 

greater. For the first year of HTF 

funding, States must use 100 percent of 

HTF rental housing funding for the 

benefit of ELI families or families with 

incomes at or below the poverty line, 

whichever is greater. For subsequent 

funding years, HUD will advise the 

percentage of funds to be used for the 

benefit of ELI families or families with 

incomes at or below the poverty line, if 

such percentage is to be greater than 75 

percent. 

§ 92.737 Income targeting: 

Homeownership. 

Unless otherwise directed by HUD at 

the time of allocation of HTF funds for 

a fiscal year, in each fiscal year, not less 

than 75 percent of HTF grant amounts 

provided to homeownership projects 

under each grant must be used for the 

benefit of ELI families or families with 

incomes at or below the poverty line, 

whichever is greater. For the first year 

of HTF funding, each assisted 

homeownership unit must be for 

purchase only by ELI families, or 

families with incomes at or below the 

poverty line, whichever is greater, who 

qualify as first-time homebuyers. For 

subsequent funding years, HUD will 

advise the percentage of funds to be 

used for the benefit of ELI families or 

families with incomes at or below the 

poverty line, if such percentage is to be 

greater than 75 percent. 

Project Requirements 

§ 92.740 Maximum per-unit subsidy 

amount, underwriting, and subsidy layering. 

(a) Maximum per-unit development 

subsidy amount. The grantee must 

establish maximum limitations on the 

total amount of HTF funds that the 

grantee may invest per-unit for 

development, with adjustments for the 

number of bedrooms and the geographic 

location of the project. The grantee must 

include these limits in its consolidated 

plan and update these limits annually. 

(b) Underwriting and subsidy 

layering. Before committing funds to a 

project, the grantee must evaluate the 

project in accordance with guidelines 

that it has adopted for this purpose and 

make a determination that it will not 

invest any more HTF funds, alone or in 

combination with other governmental 

assistance, than is necessary to provide 

quality affordable housing that is 

financially viable for a reasonable 

period (at a minimum, the period of 

affordability in § 92.746 or § 92.748) and 

will not provide undue return on the 

owner’s or developer’s investment or 

undue profit. This analysis must 

include any operating cost assistance or 

project-based rental assistance that will 

be provided to the project. In addition, 

the grantee must examine the sources 

and uses of funds for the project, and 

determine that the costs are reasonable. 

§ 92.741 Property standards: New 

construction projects and gut rehabilitation 

projects. 

(a) State and local codes, ordinances, 

and zoning requirements. (1) Housing 

that is constructed or has undergone gut 

rehabilitation with HTF funds must 

meet all applicable State and local 

codes, ordinances, and zoning 

requirements. HTF-assisted new 

construction and gut rehabilitation 

projects must meet the International 

Residential Code or International 

Building Code (as applicable to the type 

of housing) of the International Code 

Council, or State or local residential and 

building codes for new construction or 

gut rehabilitation. The housing must 

meet the applicable requirements upon 

project completion. 

(2) All new construction and gut 

rehabilitation housing must also meet 

the requirements described in 

paragraphs (b) through (f) of this 

section: 

(b) Lead-based paint. The housing 

must meet the lead-based paint 

requirements at 24 CFR part 35. 

(c) Accessibility. (1) The housing must 

meet the accessibility requirements at 

24 CFR part 8, which implements 

section 504 of the Rehabilitation Act of 

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

(2) Covered multifamily dwellings, as 

defined at 24 CFR 100.201, must also 

meet the design and construction 

requirements at 24 CFR 100.205, which 

implements the Fair Housing Act (42 

U.S.C. 3601–3619). 

(3) Construction may include 

improvements that permit use by 

persons with disabilities, but are not 

required by regulation or statute. 

(d) Energy and water efficiency. Upon 

completion, the housing must meet 

energy and water efficiency standards, 

as set forth in paragraphs (d)(1), (2), and 

(3) of this section. 

(1) All residential buildings up to 

three stories must meet the guidelines 

for ENERGY STAR-Qualified New 

Homes, as certified by a qualified Home 

Energy Rater. The requirement for 

ENERGY STAR certification by a 

qualified Home Energy Rater shall apply 

to all projects to which funds are 

committed after 6 months from the 

effective date of this rule. 

(2) All mid- or high-rise multifamily 

housing over three stories must exceed, 

by 20 percent, the minimum energy 

efficiency requirements defined by the 

American Society of Heating, 

Refrigerating, and Air-Conditioning 

Engineers (ASHRAE) Standard 90.1– 

2007, Appendix G: Performance Rating 

Method. When the ASHRAE standard is 

updated, the updated standard, plus 20 

percent, must be applied to all projects 

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with HTF funds committed after the 

date that the updated standard is 

published. At such time as an ENERGY 

STAR standard is established for all 

housing taller than three stories, the 

ENERGY STAR guidelines and 

certification requirements shall apply. 

(3) All water-usage products installed 

in HTF-assisted units must be certified 

‘‘WaterSense’’-labeled products, 

including toilets, showers, and faucets. 

(e) Disaster mitigation. Where 

relevant, the housing must be 

constructed or rehabilitated to mitigate 

the impact of potential disasters (e.g., 

earthquakes, hurricanes, flooding, and 

wildfires), in accordance with State and 

local codes, ordinances, and 

requirements, or such other 

requirements as the Secretary of HUD 

may establish. 

(f) Environmental review 

requirements. (1) Historic preservation. 

(i) The project activities (including 

demolition) must not be performed on 

properties that are either listed in or 

determined eligible for listing in the 

National Register of Historic Places, or 

identified as historic by the State, 

territory, Tribe, or municipality (i.e., 

listed in a State or local inventory of 

historic places, or designated as a State 

or local landmark or historic district by 

appropriate law or ordinance), unless 

the project activities comply with at 

least one of the following conditions: 

(A) The project activities must meet 

the Secretary of the Interior’s Standards 

for Rehabilitation, as verified by 

someone that meets the Secretary of the 

Interior’s Professional Qualification 

Standards; 

(B) The project activities must comply 

with the State (or territory) historic 

preservation law and requirements 

(applies to projects that are defined as 

State-assisted); or 

(C) Project activities must comply 

with local historic preservation 

ordinances and permit conditions 

(applies to projects affecting locally 

designated historic landmarks or 

districts). 

(ii) Archaeological resources. If 

archaeological resources or human 

remains are discovered on the project 

site during construction, the recipient 

must comply with applicable State (or 

territory) law and/or local ordinance 

(e.g., State unmarked burial law). 

(2) Farmland. Project activities must 

not result in the conversion of unique, 

prime, or statewide or locally significant 

agricultural properties to urban uses. 

(3) Airport zones. Projects are not 

permitted within the runway protection 

zones of civilian airports, or the clear 

zones or accident potential zones of 

military airfields. 

(4) Coastal Barrier Resource System. 

No projects may be assisted in Coastal 

Barrier Resource System (CBRS) units. 

CBRS units are mapped and available 

from the U.S. Fish and Wildlife Service. 

(5) Coastal zone management. 

Development must be consistent with 

the appropriate State coastal zone 

management plan. Plans are available 

from the local coastal zone management 

agency. 

(6) Floodplains. Except as modified 

below, definitions for terms used below 

can be found at 24 CFR part 55. 

(i) Construction and other activities in 

the 100-year floodplain are to be 

avoided when practicable. If there are 

no practicable alternatives to new 

construction or substantial 

improvement in the 100-year floodplain, 

the structure must be elevated at least to 

the base flood elevation (BFE) or 

floodproofed to one foot above the BFE. 

Elevated and floodproofed buildings 

must adhere to National Flood 

Insurance Program standards. The 

primary sources of floodplain data are 

Federal Emergency Management Agency 

(FEMA) Flood Insurance Rate Maps 

(FIRMs). In certain situations, including 

but not limited to, post-disaster 

development or redevelopment, interim 

FEMA information will be the source of 

these designations. If FEMA information 

is unavailable, other Federal, State, or 

local data may be used. 

(ii) No Housing Trust Fund financial 

assistance may be approved with 

respect to: 

(A) Any action, other than a 

functionally dependent use, located in a 

floodway; 

(B) Any critical action located in a 

coastal high hazard area, 100- or 500- 

year floodplain; or 

(C) Any non-critical action located in 

a coastal high hazard area, unless the 

action is designed for location in a 

coastal high hazard area consistent with 

the FEMA National Flood Insurance 

Program requirements for V–Zones. 

(7) Wetlands. (i) No draining, 

dredging, channelizing, filling, diking, 

impounding, or related grading 

activities are to be performed in 

wetlands. No activities, structures, or 

facilities funded under this program are 

to adversely impact a wetland. 

(ii) A wetland means those areas that 

are inundated by surface or ground 

water with a frequency sufficient to 

support, and under normal 

circumstances, does or would support a 

prevalence of vegetative or aquatic life 

that requires saturated or seasonally 

saturated soil conditions for growth and 

reproduction. Wetlands generally 

include swamps, marshes, bogs, and 

similar areas such as sloughs, potholes, 

wet meadows, river overflows, mud 

flats, and natural ponds. This definition 

includes those wetlands areas separated 

from their natural supply of water as a 

result of activities, such as the 

construction of structural flood 

protection methods or solid-fill road 

beds, or mineral extraction and 

navigation improvements. This 

definition is independent of the 

definition of jurisdictional wetland used 

by the U.S. Army Corps of Engineers 

under section 404 of the Clean Water 

Act (33 U.S.C. 1251 et seq.). 

(8) Explosives and hazards. Projects 

must be in compliance with the 

standards for acceptable separation 

distance, as set forth at 24 CFR part 51, 

Subpart C. 

(9) Contamination. It is HUD policy 

that all properties to be used in the HTF 

program be free of hazardous materials, 

contamination, toxic chemicals and 

gases, and radioactive substances, where 

a hazard could affect the health and 

safety of occupants or conflict with the 

intended utilization of the property. 

(i) All proposed multifamily (more 

than 4 housing units) development of 

HUD-assisted HTF project activities 

requires a Phase I Environmental Site 

Assessment (ESA–ASTM–E 1527–05). If 

the Phase I ESA identifies recognized 

environmental concerns (RECs), a Phase 

II (ESA–ASTM–E 1903–97) will be 

required. Single-family properties (up to 

4 units) do not require a Phase I ESA. 

(ii) HTF projects must avoid sites 

located within 0.25 miles of a 

Superfund or CERCLIS (Comprehensive 

Environmental Response, 

Compensation, and Liability 

Information System) site or other 

contaminated site reported to Federal, 

State, or local authorities without a 

statement in writing from the U.S. 

Environmental Protection Agency (EPA) 

or the appropriate State agency that 

there is no hazard that could affect the 

health and safety of the occupants or 

conflict with the intended utilization of 

the property. 

(10) Noise. (i) Internal noise levels: 

All activities will be developed to 

ensure an interior noise level of 45 

decibels (dB). 

(ii) External noise levels: 

(A) Project sites exposed to less than 

or equal to 65 dB of environmental 

noise are acceptable. 

(B) Sites between 65 dB and less than 

75 dB are acceptable with mitigation 

(e.g., noise walls, careful site planning) 

that results in an interior standard of 45 

dB. 

(C) Locations with environmental 

noise levels of 75 dB or greater may not 

have noise sensitive outdoor uses (e.g., 

picnic areas, totlots, balconies, or 

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patios) and require sound attenuation in 

the building shell to achieve the 45 dB 

interior standard. 

(11) Endangered species. Recipients 

must avoid all actions which could 

jeopardize the continued existence of 

any endangered or threatened species, 

as designated by U.S. Fish and Wildlife 

Service or National Marine Fisheries 

Service, or would result in the 

destruction or adversely modify the 

designated critical habitat of such 

species. 

(12) Wild and scenic rivers. Recipients 

must avoid activities that are 

inconsistent with conservation 

easements, land-use protections, and 

restrictions adjacent to wild and scenic 

rivers, as designated/listed by the 

Departments of Agriculture or Interior. 

Maps for the National Wild and Scenic 

Rivers System are available at the 

governing departments. 

(13) Safe drinking water. Projects with 

a potable water system must use only 

lead-free pipes, solder, and flux. 

(14) Sole-source aquifers. Project 

activities should avoid sites and 

activities that have the potential to 

contaminate sole source aquifer areas 

(SSAs). The EPA defines a sole or 

principal source aquifer as an aquifer 

that supplies at least 50 percent of the 

drinking water consumed in the area 

overlying the aquifer. If the project 

overlies an SSA, the EPA must review 

the project. The EPA review is designed 

to reduce the risk of ground water 

contamination, that could pose a health 

hazard to those who use it. 

(g) Written standards for methods and 

materials, plans, specifications, work 

write-ups, and cost estimates. (1) The 

grantee must establish written standards 

for methods and materials to be used for 

new construction and gut rehabilitation. 

(2) The grantee must ensure that plans 

and specifications for new construction 

or work write-ups for gut rehabilitation 

that describe the work to be undertaken 

are in compliance with State and local 

codes, ordinances, requirements, and 

the grantee’s standards for methods and 

materials. 

(3) The grantee must review and 

approve a written cost estimate based 

upon a finding of cost reasonableness. 

(h) Property inspections. The grantee 

must establish written procedures for 

initial, progress, and final inspections 

during construction including: 

(1) Detailed inspection checklists; 

(2) Description of how and by whom 

inspections will be carried out; and 

(3) Procedures for training and 

certifying qualified inspectors. 

(i) Frequency of inspections. 

(1) For gut rehabilitation, the grantee 

must conduct an initial property 

inspection to identify the deficiencies 

that must be addressed. 

(2) The grantee must conduct progress 

and final inspections to ensure that 

work is done in accordance with 

approved standards for methods and 

materials, plans, specifications, and 

work write-ups, as applicable to the 

work. 

(3) In accordance with § 92.774(d), the 

grantee must comply with ongoing 

responsibilities for onsite inspections 

during the affordability period. 

(j) Payment schedule. The grantee 

must have procedures to ensure that 

progress payments are consistent with 

the amount of work performed and that 

final payment does not occur until 

project completion. 

§ 92.742 Property standards: 

Rehabilitation projects. 

Housing that has undergone gut 

rehabilitation with HTF funds must 

meet the requirements of § 92.741. All 

other rehabilitation must meet the 

requirements of this part. 

(a) State and local codes, ordinances, 

and zoning requirements. Housing that 

is rehabilitated with HTF funds must 

meet all applicable State and local 

codes, ordinances, and requirements. 

The housing must meet the applicable 

requirements upon project completion. 

(b) Written standards for methods and 

materials. The grantee must establish 

written standards for methods and 

materials to be used for rehabilitation 

work and describe these standards in its 

consolidated plan, whether or not there 

are applicable State or local 

rehabilitation codes. The housing must 

meet the grantee’s standards upon 

project completion. The grantee’s 

description of its standards must be in 

sufficient detail to establish the basis for 

a uniform inspection of the property. At 

a minimum, the grantee’s standards 

must cover all items included in HUD’s 

most recent Uniform Physical Condition 

Standards (UPCS) Comprehensive 

Listing of Inspectable Areas, or such 

other requirements as the Secretary of 

HUD may establish. The grantee’s 

rehabilitation standards must address 

each of the following: 

(1) Health and safety. The housing 

must be free of all health and safety 

defects. The grantee’s standards must 

identify life-threatening deficiencies 

that must be addressed. 

(2) Habitability and functionality. The 

housing must meet minimum standards 

of habitability and functionality for each 

of the following areas: site, building 

exterior, building systems, dwelling 

units, and common areas. All inspected 

items with an observed deficiency (OD) 

must be corrected. 

(3) Major systems. Upon project 

completion, each of the following major 

systems must have a useful life for a 

minimum of 15 years. The grantee may 

specify a longer period. 

(i) Structural support; 

(ii) Roofing; 

(iii) Cladding and weatherproofing 

(e.g., windows, doors, siding, gutters); 

(iv) Plumbing; 

(v) Electrical; and 

(vi) Heating, ventilation, and air 

conditioning. 

(4) Lead-based paint. The housing 

must meet the lead-based paint 

requirements at 24 CFR part 35. 

(5) Accessibility. (i) The housing must 

meet the accessibility requirements at 

24 CFR part 8, which implements 

section 504 of the Rehabilitation Act of 

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

(ii) If the rehabilitation includes an 

addition, covered multifamily 

dwellings, as defined at 24 CFR 100.201, 

must also meet the design and 

construction requirements at 24 CFR 

100.205, which implements the Fair 

Housing Act (42 U.S.C. 3601–3619). 

(iii) Rehabilitation may include 

improvements that are not required by 

regulation or statute that permit use by 

persons with disabilities. 

(6) Energy and water efficiency. 

ENERGY STAR-labeled and 

WaterSense-labeled products must be 

installed when older obsolete products 

(such as windows, doors, lighting, fans, 

water heaters, furnaces, boilers, air 

conditioning units, refrigerators, clothes 

washers, dryers, dishwashers, toilets, 

showers, and faucets) are replaced as 

part of the approved rehabilitation 

work, and such products are appropriate 

for achieving energy efficiency for the 

climate area in which the housing is 

located. 

(7) Disaster mitigation. Where 

relevant, the housing must be improved 

to mitigate the impact of potential 

disasters (e.g., earthquakes, hurricanes, 

flooding, wildfires) in accordance with 

State and local codes, ordinances, and 

requirements, or such other 

requirements as the Secretary of HUD 

may establish. 

(8) Other improvements. Discretionary 

housing improvements beyond those 

described in paragraphs (b)(1) through 

(7) of this section may include modest 

amenities and aesthetic features that are 

in keeping with housing of similar type 

in the community and must avoid 

luxury improvements, as defined by the 

grantee. 

(c) Environmental requirements. (1) 

Historic preservation. (i) The project 

activities (including demolition) must 

not be performed on properties that are 

either listed in or determined eligible 

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for listing in the National Register of 

Historic Places, or identified as historic 

by the State, territory, Tribe, or 

municipality (i.e., listed in a State or 

local inventory of historic places, or 

designated as a State or local landmark 

or historic district by appropriate law or 

ordinance), unless the project activities 

comply with at least one of the 

following conditions: 

(A) The project activities must meet 

the Secretary of the Interior’s Standards 

for Rehabilitation, either as certified 

through the Federal and/or State 

historic rehabilitation tax credit 

programs or as verified by someone that 

meets the Secretary of the Interior’s 

Professional Qualification Standards; 

(B) The project activities must comply 

with the State (or territory) historic 

preservation law and requirements 

(applies to projects that are defined as 

State-assisted); or 

(C) Project activities must comply 

with local historic preservation 

ordinances and permit conditions 

(applies to projects affecting locally 

designated historic landmarks or 

districts). 

(ii) Archaeological resources. If 

archaeological resources or human 

remains are discovered on the project 

site during construction or 

rehabilitation, the recipient must 

comply with applicable State (or 

territory) law and/or local ordinance 

(e.g., State unmarked burial law). 

(2) Farmland. Project activities must 

not result in the conversion of unique, 

prime, or locally significant agricultural 

properties to urban uses. 

(3) Airport zones. Projects are not 

permitted within the runway protection 

zones of civilian airports, or the clear 

zones or accident potential zones of 

military airfields. 

(4) Coastal Barrier Resource System. 

No projects may be assisted in Coastal 

Barrier Resource System (CBRS) units. 

CBRS units are mapped and available 

from the U.S. Fish and Wildlife Service. 

(5) Coastal zone management. 

Development must be consistent with 

the appropriate State coastal zone 

management plan. Plans are available 

from the local coastal zone management 

agency. 

(6) Floodplains. Except as modified 

below, definitions for terms used below 

can be found at 24 CFR part 55. 

(i) Construction and other activities in 

the 100-year floodplain are to be 

avoided when practicable. If there are 

no practicable alternatives to new 

construction or substantial 

improvement in the 100-year floodplain, 

the structure must be elevated at least to 

the base flood elevation (BFE) or 

floodproofed to one foot above the BFE. 

Elevated and floodproofed buildings 

must adhere to National Flood 

Insurance Program standards. The 

primary sources of floodplain data are 

Federal Emergency Management Agency 

(FEMA) Flood Insurance Rate Maps 

(FIRMS). In certain situations, 

including, but not limited to, postdisaster development or redevelopment, 

interim FEMA information will be the 

source of these designations. If FEMA 

information is unavailable, other 

Federal, State, or local data may be 

used. 

(ii) No HTF financial assistance may 

be approved with respect to: 

(A) Any action, other than 

functionally dependent uses, located in 

a floodway; 

(B) Any critical action located in a 

coastal high hazard area, 100- or 500- 

year floodplain; or 

(C) Any non-critical action located in 

a coastal high hazard area, unless the 

action is designed for location in a 

coastal high hazard area consistent with 

the FEMA National Flood Insurance 

Program requirements for V–Zones. 

(7) Wetlands. No rehabilitation of 

existing properties that expands the 

footprint into a wetland is allowed. A 

wetland means those areas that are 

inundated by surface or ground water 

with a frequency sufficient to support, 

and under normal circumstances, does 

or would support a prevalence of 

vegetative or aquatic life that requires 

saturated or seasonally saturated soil 

conditions for growth and reproduction. 

Wetlands generally include swamps, 

marshes, bogs, and similar areas such as 

sloughs, potholes, wet meadows, river 

overflows, mud flats, and natural ponds. 

This definition includes those wetlands 

areas separated from their natural 

supply of water as a result of activities 

such as the construction of structural 

flood protection methods or solid-fill 

road beds and activities such as mineral 

extraction and navigation 

improvements. This definition is 

independent of the definition of 

jurisdictional wetland used by the U.S. 

Army Corps of Engineers under section 

404 of the Clean Water Act (33 U.S.C. 

1251 et seq.). 

(8) Explosives and hazards. If the 

rehabilitation of the building increases 

the number of dwelling units, then the 

project must be in compliance with the 

standards for acceptable separation 

distance as set forth at 24 CFR part 51, 

subpart C. 

(9) Contamination. It is HUD policy 

that all properties to be used in the HTF 

be free of hazardous materials, 

contamination, toxic chemicals and 

gases, and radioactive substances, where 

a hazard could affect the health and 

safety of occupants or conflict with the 

intended utilization of the property: 

(i) All proposed multifamily (more 

than four housing units) development of 

HUD-assisted HTF project activities 

requires a phase I Environmental Site 

Assessment (ESA–ASTM–E 1527–05). If 

the Phase I ESA identifies recognized 

environmental concerns (RECs), a Phase 

II (ESA–ASTM–E 1903–97) will be 

required. Single-family properties (up to 

four units) do not require a Phase I ESA. 

(ii) Must avoid sites located within 

0.25 miles of a Superfund or CERCLIS 

(Comprehensive Environmental 

Response, Compensation, and Liability 

Information System) site or other 

contaminated site reported to Federal, 

State, or local authorities without a 

statement in writing from the EPA or the 

appropriate State agency that there is no 

hazard that could affect the health and 

safety of the occupants or conflict with 

the intended utilization of the property. 

(10) Noise. (i) Internal noise levels: 

All activities will be developed to 

ensure an interior noise level of 45 

decibels (dB). 

(ii) External noise levels: 

(A) Project sites exposed to less than 

or equal to 65 dB of environmental 

noise are acceptable. 

(B) Sites between 65 dB and less than 

75 dB may be acceptable with 

mitigation (e.g., noise walls, careful site 

planning) that results in an interior 

standard of 45 dB. 

(C) Locations with environmental 

noise levels of 75 dB or greater may not 

have noise sensitive outdoor uses (e.g., 

picnic areas, totlots, balconies, or 

patios) and require sound attenuation in 

the building shell to achieve the interior 

standard. 

(11) Endangered species. (i) 

Recipients must avoid all actions that 

could jeopardize the continued 

existence of any species designated by 

the U.S. Fish and Wildlife Service or 

National Marine Fisheries as 

endangered or threatened. 

(ii) Recipients must avoid all actions 

that adversely modify the critical habitat 

of such species. 

(12) Wild and scenic rivers. Recipients 

must avoid activities that are 

inconsistent with conservation 

easements, land-use protections, and 

restrictions adjacent to wild and scenic 

rivers, as designated/listed by the 

Departments of Agriculture and Interior. 

Maps for the National Wild and Scenic 

Rivers System are available at the 

governing departments. 

(13) Safe drinking water. Projects with 

a potable water system must use only 

lead-free pipes, solder, and flux. 

(14) Sole-source aquifers. Project 

activities should avoid sites and 

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activities that have the potential to 

contaminate sole source aquifer areas 

(SSAs). The EPA defines a sole or 

principal source aquifer as an aquifer 

that supplies at least 50 percent of the 

drinking water consumed in the area 

overlying the aquifer. If the project 

overlies an SSA, the EPA must review 

the project. The EPA review is designed 

to reduce the risk of ground water 

contamination, which could pose a 

health hazard to those who use it. 

(d) Work write-ups and cost estimates. 

(1) The grantee must ensure that a work 

write-up that describes the work to be 

undertaken is in compliance with State 

and local codes, ordinances, 

requirements, and the grantee’s 

standards for methods and materials. 

(2) The grantee must review and 

approve a written cost estimate based 

upon a finding of cost reasonableness. 

(e) Property inspections. The grantee 

must establish written inspection 

procedures for initial, progress, and 

final inspections during construction 

(see § 92.774(d) for the grantee’s ongoing 

responsibilities for onsite inspections 

during the affordability period) 

including: 

(1) Detailed inspection checklists; 

(2) Description of how and by whom 

inspections will be carried out; and 

(3) Procedures for training and 

certifying qualified inspectors. 

(f) Frequency of inspections. (1) The 

grantee must conduct an initial property 

inspection to identify the deficiencies 

that must be addressed. 

(2) The grantee must conduct progress 

and final inspections to ensure that 

work is done in accordance with 

approved standards for methods and 

materials, and work write-ups. 

(3) In accordance with § 92.774(d), the 

grantee must comply with ongoing 

responsibilities for onsite inspections 

during the affordability period. 

(g) Payment schedule. The grantee 

must have procedures to ensure that 

progress payments are consistent with 

the amount of work performed and that 

final payment does not occur until all 

punch list items are completed. 

§ 92.743 Property standards: Acquisition 

of standard housing. 

(a) Existing housing that is acquired 

with HTF assistance, and has been 

newly constructed or gut-rehabilitated 

less than 12 months before the 

commitment of HTF funds, must meet 

the property standards at § 92.741 for 

new construction and gut rehabilitation 

projects. The grantee must document 

this compliance based upon a review of 

approved building plans and 

Certificates of Occupancy, and a current 

inspection that is conducted no earlier 

than 30 days prior to the commitment 

of HTF assistance. 

(b) All other existing housing that is 

acquired with HTF assistance must meet 

the property standards requirements of 

§ 92.742. The grantee must document 

this compliance based upon a current 

inspection that is conducted no earlier 

than 30 days prior to the commitment 

of HTF assistance, in accordance with 

the inspection procedures that the 

grantee established pursuant to § 92.742. 

(c) If the property does not meet these 

standards, with the exception of noise 

standards at § 92.741(f)(10) or 

§ 92.742(c)(10), the property must be 

rehabilitated to meet the standards of 

§ 92.741 or § 92.742, as applicable. 

§ 92.744 Property standards: 

Manufactured housing. 

(a) Compliance With manufactured 

home construction and safety 

standards. Construction of all 

manufactured housing must meet the 

Manufactured Home Construction and 

Safety Standards codified at 24 CFR part 

3280. These standards pre-empt State 

and local codes covering the same 

aspects of performance for such 

housing. 

(b) Installation and standards for new 

construction and gut rehabilitation of 

manufactured housing projects. (1) If 

the grantee provides HTF assistance to 

install a manufactured housing unit, the 

installation must comply with 

applicable State and local laws or codes. 

In the absence of such laws or codes, the 

installation must comply with the 

manufacturer’s written instructions for 

installation. Manufactured housing 

constructed or rehabilitated using HTF 

funds must be on a permanent 

foundation. The grantee must document 

this compliance in accordance with the 

inspection procedures that the grantee 

has established pursuant to § 92.742. 

(2) Manufactured housing that is 

newly constructed or has undergone gut 

rehabilitation using HTF funds must 

meet the energy and water efficiency 

standards in § 92.741. An ENERGY 

STAR-qualified manufactured home is a 

home that has been designed, produced, 

and installed in accordance with 

ENERGY STAR’s guidelines by an 

ENERGY STAR-certified plant. A plant 

must be certified by a Quality Assurance 

Provider (QAP), which is an EPAdesignated organization that meets 

certain qualifications, to produce 

ENERGY STAR-qualified manufactured 

homes on an ongoing basis. Once 

certified, a plant must follow ENERGY 

STAR guidelines for producing and 

installing homes to maintain its plant 

certification. To comply with the 

requirement in § 92.741 to meet the 

guidelines for ENERGY STAR-Qualified 

New Homes, a QAP may provide quality 

assurance oversight for the ENERGY 

STAR verification process of energyefficient manufactured homes that 

cannot be certified by a qualified Home 

Energy Rater. 

(c) Manufactured housing 

rehabilitation. Manufactured housing 

that is rehabilitated (other than gut 

rehabilitation) using HTF funds must 

meet the property standards 

requirements of § 92.742, as applicable. 

The grantee must document this 

compliance in accordance with the 

inspection procedures that the grantee 

has established pursuant to § 92.742, as 

applicable. 

(d) Environmental requirements. 

Manufactured housing is subject to the 

environmental standards in § 92.741(f) 

for new construction and gut 

rehabilitation or § 92.742(c) for 

rehabilitation, as applicable. If an 

existing property does not meet these 

standards, the property must be 

rehabilitated to meet the standards in 

§ 92.741 or § 92.742, as applicable, with 

the exception of noise standards at 

§ 92.741(f)(10) or § 92.742(c)(10). 

§ 92.745 Ongoing property standards: 

Rental housing. 

(a) Property standards. The grantee 

must establish property standards for 

rental housing (including manufactured 

housing) that apply throughout the 

affordability period, and describe these 

standards in its Consolidated Plan. The 

standards must ensure that owners 

maintain the housing as decent, safe, 

and sanitary housing in good repair. The 

grantee’s description of its property 

standards must be in sufficient detail to 

establish the basis for a uniform 

inspection of the property. At a 

minimum, the grantee’s standards must 

include all inspectable items included 

in HUD’s most recent Uniform Physical 

Condition Standards (UPCS) 

Comprehensive Listing of Inspectable 

Areas, or such other requirements as the 

Secretary of HUD may establish. The 

grantee’s ongoing property standards 

must address each of the following: 

(1) Compliance with State and local 

codes, ordinances, and requirements. 

The housing must meet all applicable 

State and local codes, ordinances, and 

requirements. 

(2) Health and safety. The housing 

must be free of all health and safety 

defects. The standards must identify 

life-threatening deficiencies that the 

owners must immediately correct and 

the grantee’s time frame for addressing 

these deficiencies. 

(3) Habitability and functionality. The 

housing must meet minimum standards 

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of habitability and functionality for each 

of the following areas: site, building 

exterior, building systems, dwelling 

units, and common areas. All inspected 

items with an observed deficiency (OD) 

must be corrected within a reasonable 

time frame established by the grantee. 

(4) Lead-based paint. The housing 

must meet the lead-based paint 

requirements at 24 CFR part 35. 

(b) Inspection procedures. The grantee 

must have written inspection 

procedures for ongoing property 

inspections, in accordance with 

§ 92.774(d). These procedures must 

include: 

(1) Detailed inspection checklists; 

(2) Description of how frequently the 

property inspections will be 

undertaken; 

(3) Description of how and by whom 

inspections will be carried out; and 

(4) Procedures for training and 

certifying qualified inspectors. 

(c) Corrective and remedial actions. 

The grantee must have procedures for 

ensuring that timely corrective and 

remedial actions are taken by the project 

owner to address identified deficiencies. 

§ 92.746 Qualification as affordable 

housing: Rental housing. 

(a) General. Not less than 75 percent 

of the HTF grant amounts a grantee 

provides to rental projects under each 

grant must be used for the benefit only 

of ELI families or families at or below 

the poverty line, whichever is greater, 

except that in any given fiscal year, the 

Secretary may establish a higher 

minimum percentage. The HTF-assisted 

units in a rental housing project must be 

occupied only by households that 

qualify as ELI and must meet the 

requirements of this section to qualify as 

affordable housing. The affordability 

requirements also apply to the HTFassisted rental units in single-family 

housing purchased by a first-time 

homebuyer with HTF funds, in 

accordance with 24 CFR 92.748(g). 

(b) Rent limitations. (1) The HTF rent 

plus utilities shall not exceed the greater 

of 30 percent of the Federal poverty line 

or 30 percent of the income of a family 

whose annual income equals 30 percent 

of the median income for the area, as 

determined by HUD, with adjustments 

for the number of bedrooms in the unit. 

HUD will publish the HTF rent limits 

on an annual basis. 

(2) If the unit receives Federal or State 

project-based rental subsidy, the 

maximum rent is the rent allowable 

under the Federal or State project-based 

rental subsidy program. 

(c) Initial rent schedule and utility 

allowance. (1) The grantee must 

establish maximum monthly allowances 

for utilities and services (excluding 

telephone, television, and Internet 

service). 

(2) The grantee must annually review 

and approve rents proposed by the 

owner for HTF units. For all units for 

which the tenant is paying utilities, the 

grantee must ensure that the rents do 

not exceed the maximum rent minus the 

monthly allowances for utilities. 

(d) Periods of affordability. (1) HTFassisted units must meet the 

affordability requirements for not less 

than 30 years, beginning after project 

completion. The grantee may impose 

longer periods. 

(2) The affordability requirements 

apply without regard to the term of any 

loan or mortgage, repayment of the HTF 

investment, or the transfer of 

ownership. They must be imposed by 

deed restrictions, covenants running 

with the land, use restrictions, or other 

mechanisms approved by HUD under 

which the grantee and beneficiaries may 

require specific performance, except 

that the affordability restrictions may 

terminate upon foreclosure or transfer in 

lieu of foreclosure. The affordability 

requirements must be recorded in 

accordance with State recordation laws. 

(3) The grantee may use purchase 

options, rights of first refusal, or other 

preemptive rights to purchase the 

housing before foreclosure or deed in 

lieu of foreclosure in order to preserve 

affordability. 

(4) The affordability restrictions shall 

be revived according to the original 

terms if, during the original affordability 

period, the owner of record before the 

foreclosure, or deed in lieu of 

foreclosure, or any entity that includes 

the former owner or those with whom 

the former owner has or had family or 

business ties, obtains an ownership 

interest in the project or property. 

(5) The termination of the restrictions 

on the project does not terminate the 

grantee’s repayment obligation under 

§ 92.773. 

(e) Tenant income. (1) The income of 

each tenant must be determined initially 

in accordance with § 92.727(d)(1). In 

addition, in each year during the period 

of affordability, the project owner must 

re-examine each tenant’s annual income 

in accordance with one of the options in 

§ 92.727(c) selected by the grantee. 

(2) An owner who re-examines a 

tenant’s annual income through a 

statement and certification in 

accordance with § 92.727(d)(2), must 

examine the source documentation of 

the income of each tenant every 6th year 

of the affordability period, except that, 

for units that receive Federal projectbased assistance, the owner must reexamine the tenant’s annual income in 

accordance with the project-based 

assistance rules. Otherwise, an owner 

who accepts the tenant’s statement and 

certification in accordance with 

§ 92.727(d)(2) is not required to examine 

the income of tenants, unless there is 

evidence that the tenant’s written 

statement failed to completely and 

accurately state information about the 

family’s size or income. 

(f) Over-income tenants. HTF-assisted 

units continue to qualify as affordable 

housing despite a temporary 

noncompliance caused by increases in 

the incomes of existing tenants if 

actions satisfactory to HUD are being 

taken to ensure that all vacancies are 

filled in accordance with this section 

until the noncompliance is corrected. 

(g) Fixed and floating HTF units. In a 

project containing HTF-assisted and 

other units, the grantee may designate 

fixed or floating HTF units. This 

designation must be made at the time of 

project commitment in the written 

agreement between the grantee and the 

recipient, and the HTF units must be 

identified not later than the time of 

project completion. Fixed units must 

remain the same throughout the period 

of affordability. Floating units must be 

changed to maintain conformity with 

the requirements of this section during 

the period of affordability so that the 

total number of housing units meeting 

the requirements of this section remains 

the same, and each substituted unit 

must be comparable in terms of size, 

features, and number of bedrooms to the 

originally designated HTF-assisted unit. 

(h) Tenant selection. The tenants must 

be selected in accordance with 

§ 92.747(d) and must enter into a 

written lease that complies with 

§ 92.747. 

(i) Nondiscrimination against rental 

assistance subsidy holders. The owner 

cannot refuse to lease HTF-assisted 

units to a voucher holder under 24 CFR 

part 982, the Housing Choice Voucher 

Program, or to the holder of a 

comparable document evidencing 

participation in a HOME tenant-based 

rental assistance program because of the 

status of the prospective tenant as a 

holder of such voucher or comparable 

HOME tenant-based assistance 

document. 

(j) Onsite inspections and financial 

oversight. See § 92.774(d) for the 

grantee’s ongoing responsibilities for 

onsite inspections and financial 

oversight. 

§ 92.747 Tenant protections and selection. 

(a) Lease. There must be a written 

lease between the tenant and the owner 

of rental housing assisted with HTF 

funds that is for a period of not less than 

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one year, unless a shorter period is 

specified by mutual agreement between 

the tenant and the owner. Renewal of 

the tenancy also requires a written lease. 

The lease must comply with this 

subpart and with State law. The lease 

period for transitional housing must 

equal the tenancy period established by 

the grantee or the owner in accordance 

with the definition of ‘‘transitional 

housing.’’ 

(b) Prohibited lease terms. The lease 

may not contain any of the following 

provisions: 

(1) Agreement to be sued. Agreement 

by the tenant to be sued, to admit guilt, 

or to a judgment in favor of the owner 

in a lawsuit brought in connection with 

the lease. 

(2) Treatment of property. Agreement 

by the tenant that the owner may take, 

hold, or sell personal property of 

household members without notice to 

the tenant and a court decision on the 

rights of the parties. This prohibition, 

however, does not apply to an 

agreement by the tenant concerning 

disposition of personal property 

remaining in the housing unit after the 

tenant has moved out of the unit. The 

owner may dispose of this personal 

property in accordance with State law. 

(3) Excusing owner from 

responsibility. Agreement by the tenant 

not to hold the owner or the owner’s 

agents legally responsible for any action 

or failure to act, whether intentional or 

negligent. 

(4) Waiver of notice. Agreement of the 

tenant that the owner may institute a 

lawsuit without notice to the tenant. 

(5) Waiver of legal proceedings. 

Agreement by the tenant that the owner 

may evict the tenant or household 

members without instituting a civil 

court proceeding in which the tenant 

has the opportunity to present a 

defense, or before a court decision on 

the rights of the parties. 

(6) Waiver of a jury trial. Agreement 

by the tenant to waive any right to a trial 

by jury. 

(7) Waiver of right to appeal court 

decision. Agreement by the tenant to 

waive the tenant’s right to appeal, or to 

otherwise challenge, in court, a court 

decision in connection with the lease. 

(8) Tenant chargeable with cost of 

legal actions regardless of outcome. 

Agreement by the tenant to pay 

attorney’s fees or other legal costs even 

if the tenant wins in a court proceeding 

by the owner against the tenant. The 

tenant, however, may be obligated to 

pay costs if the tenant loses. 

(9) Mandatory supportive services. 

Agreement by the tenant (other than a 

tenant in transitional housing) to accept 

supportive services that are offered. 

(c) Termination of tenancy. (1) An 

owner may not terminate the tenancy or 

refuse to renew the lease of a tenant of 

rental housing assisted with HTF funds 

except for serious or repeated violation 

of the terms and conditions of the lease; 

violation of applicable Federal, State, or 

local law; completion of the tenancy 

period for transitional housing or failure 

to follow a transitional housing services 

plan; or other good cause. Good cause 

does not include an increase in the 

tenant’s income. 

(2) To terminate or refuse to renew 

tenancy, the owner must serve written 

notice upon the tenant specifying the 

grounds for the action and providing a 

specific period for vacating that is 

consistent with State or local law. 

(d) Tenant selection. An owner of 

rental housing assisted with HTF funds 

must comply with the affirmative 

marketing requirements established by 

the grantee pursuant to § 92.760. The 

owner must adopt and follow written 

tenant selection policies and criteria 

that: 

(1) Limit the housing to incomeeligible families. 

(2) Are reasonably related to the 

applicants’ ability to perform the 

obligations of the lease (i.e., pay the 

rent, not damage the housing, not 

interfere with the rights of and quiet 

enjoyment by other tenants). 

(3)(i) Limit eligibility or give a 

preference to a particular segment of the 

population if permitted in its written 

agreement with the grantee (and only if 

the limitation or preference is described 

in the grantee’s consolidated plan). 

(ii) Any limitation or preference 

cannot violate nondiscrimination 

requirements of § 92.760. The use of 

HTF funds for a project that limits 

eligibility to persons with disabilities or 

persons with a particular type of 

disability does not violate 

nondiscrimination requirements if the 

housing also receives funding from a 

Federal program that limits eligibility to 

a particular segment of the population 

(e.g., the Housing Opportunity for 

Persons with AIDS program under 24 

CFR part 574, the Shelter Plus Care 

program under 24 CFR part 582, the 

Supportive Housing program under 24 

CFR part 583, and supportive housing 

programs for the elderly or persons with 

disabilities under 24 CFR part 891). 

(iii) When a project is limited to 

persons with disabilities or with a 

particular type of disability as set forth 

in paragraph (d)(3)(ii) of this section, the 

owner may advertise the project as 

being open only to those who are 

eligible under the relevant statute and 

admit only those persons who meet the 

statutory requirements. 

(iv) In the absence of a statute that 

limits occupancy to persons with 

disabilities or to persons with a 

particular type of disability, a project 

may propose to provide a preference to 

such persons, if necessary to provide 

housing, aid, benefits, or services 

equally as effective as those provided to 

others, so long as the project is in the 

most integrated setting appropriate to 

meet their needs and otherwise 

complies with 24 CFR 8.4. 

(4) Do not reject an applicant with a 

voucher under the Section 8 Housing 

Choice Voucher Program (24 CFR part 

982) or an applicant with HOME tenantbased rental assistance (24 CFR 92.209) 

because of the status of the prospective 

tenant as a recipient of tenant-based 

rental assistance. 

(5) Provide for the selection of tenants 

from a written waiting list in the 

chronological order of their application, 

insofar as is practicable. 

(6) Give prompt written notification to 

any rejected applicant of the grounds for 

any rejection. 

§ 92.748 Qualification as affordable 

housing: Homeownership. 

(a) Homeownership activities. 

Housing that is for purchase by a firsttime homebuyer must meet the 

affordability requirements of this 

section. 

(b) Single-family housing. The 

housing must be single-family housing, 

as defined at § 92.2. 

(c) Modest housing. The housing must 

be modest housing, in accordance with 

§ 92.749. 

(d) First-time homebuyer and income 

requirements. The housing must be 

acquired by a first-time homebuyer 

whose family qualifies as an incomeeligible family and the housing must be 

the principal residence of the family 

throughout the period described in 

paragraph (e) of this section. In 

determining the income eligibility of the 

family, the grantee must include the 

income of all persons living in the 

housing. Before purchasing the housing, 

the family must have completed a 

program of independent financial 

education and homeownership 

counseling from an eligible organization 

that meets the requirements of section 

1132 of the Federal Housing Finance 

Regulatory Reform Act of 2008 (12 

U.S.C. 1701x note). 

(e) Period of affordability. (1) The 

HTF-assisted housing must meet the 

affordability requirements for not less 

than 30 years. 

(f) Resale during period of 

affordability. (1) To ensure continuing 

affordability, the grantee may apply its 

HOME program resale restrictions to the 

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HTF-assisted units or the grantee may 

develop and adopt resale restrictions for 

the HTF program. The HTF resale 

provisions must be included in the 

State’s consolidated plan. If a grantee 

uses resale provisions established for 

the HOME program, it must amend 

those provisions to accommodate 

subsequent purchasers who are incomeeligible families. 

(2) The resale requirements must 

ensure, if the housing does not continue 

to be the principal residence of the 

family for the duration of the period of 

affordability, that: 

(i) The housing is made available for 

subsequent purchase only to a first-time 

homebuyer whose family qualifies as an 

income-eligible family and will use the 

property as its principal residence; and 

(ii) The price at resale provides the 

original HTF-assisted owner a fair 

return on investment (including the 

homeowner’s investment and any 

capital improvement), and ensures that 

the housing will remain affordable to a 

reasonable range of income-eligible 

homebuyers. The grantee must 

specifically define ‘‘fair return on 

investment’’ and ‘‘affordability to a 

reasonable range of income-eligible 

homebuyers.’’ 

(3)(i) The mechanism to impose the 

resale provisions must be deed 

restrictions, covenants running with the 

land, use restrictions, or other 

mechanisms approved by HUD under 

which the grantee and beneficiaries may 

require specific performance. 

(ii) The affordability restrictions may 

terminate upon foreclosure, transfer in 

lieu of foreclosure, or assignment of a 

mortgage insured by the Federal 

Housing Administration to HUD. 

(iii) The grantee may use purchase 

options, rights of first refusal, or other 

preemptive rights to purchase the 

housing before foreclosure to preserve 

affordability. The affordability 

restrictions shall be revived according to 

the original terms if, during the original 

affordability period, the owner of record 

before the termination event obtains an 

ownership interest in the housing. 

(g) Special considerations for singlefamily properties with more than one 

unit. (1) If the HTF funds are used only 

to assist an income-eligible homebuyer 

in acquiring one unit in a single-family 

property containing more than one unit 

and the assisted unit will be the 

principal residence of the homebuyer, 

the affordability requirements of this 

section apply only to the assisted unit. 

(2) If HTF funds are also used to assist 

the income-eligible homebuyer in 

acquiring one or more of the rental units 

in the single-family property, the 

affordability requirements of § 92.746 

apply to assisted rental units, except 

that the grantee must impose resale 

restrictions on all assisted units (owneroccupied and rental units) in the singlefamily housing. The affordability 

requirements on all assisted units 

continue for the period of affordability. 

If HTF funds are used to assist only the 

rental units in such a property, then the 

requirements of § 92.746 would apply 

and the owner-occupied unit would not 

be subject to the income targeting or 

affordability provisions of this section. 

(h) Lease-purchase. (1) HTF funds 

may be used to assist homebuyers 

through lease-purchase programs for 

existing housing and for housing to be 

constructed. The housing must be 

purchased by an eligible homebuyer 

within 36 months of signing the leasepurchase agreement. The homebuyer 

must qualify as an income-eligible 

family at the time the lease-purchase 

agreement is signed. 

(2) If HTF funds are used to acquire 

housing that will be resold to a 

homebuyer through a lease-purchase 

program, the HTF affordability 

requirements for rental housing in 

§ 92.746 shall apply if the housing is not 

transferred to an eligible homebuyer 

within 42 months after project 

completion. 

(i) Contract to purchase. If HTF funds 

are used to assist a homebuyer who has 

entered into a contract to purchase 

housing to be constructed, the 

homebuyer must qualify as an incomeeligible family at the time the contract 

is signed. 

(j) Preserving affordability. (1) To 

preserve the affordability of housing 

that was previously assisted with HTF 

funds and subject to the requirements of 

this section, a grantee may use 

additional HTF funds to acquire the 

housing through a purchase option, 

right of first refusal, or other preemptive 

right before foreclosure, or to acquire 

the housing at the foreclosure sale, 

undertake any necessary rehabilitation, 

and provide assistance to another firsttime homebuyer. The housing must be 

sold to a new eligible homebuyer in 

accordance with the requirements of 

this section. Additional HTF funds may 

not be used if the mortgage in default 

was funded with HTF funds. 

(2) The total amount of original and 

additional HTF assistance may not 

exceed the maximum per-unit subsidy 

amount established pursuant to 

§ 92.740. As an alternative to charging 

the cost to the HTF program under 

§ 92.731, the grantee may charge the 

cost to the HTF program under § 92.732 

as a reasonable administrative cost of its 

HTF program, so that the additional 

HTF funds for the housing are not 

subject to the maximum per-unit 

subsidy amount. 

(k) Agreements with lending 

institutions. (1) The grantee may 

provide homeownership assistance 

through written agreements with forprofit or nonprofit lending institutions 

that are providing the first mortgage 

loan to a family. The grantee must 

independently verify that the family is 

income-eligible and meets the definition 

of ‘‘first-time homebuyer,’’ and must 

inspect the housing for compliance with 

the applicable property standards. 

(2) No fees may be charged to the 

family for the HTF homeownership 

assistance (e.g., origination fees or 

points, processing fees, inspection fees), 

although reasonable administrative 

costs can be charged to the HTF 

program as project costs (e.g., nominal 

application fees, credit report fees, and 

appraisal fees). The grantee must 

determine that the fees and other 

amounts charged to the family by the 

lender for the first mortgage financing 

are reasonable. If the grantee requires 

lenders to pay a fee to participate in the 

HTF program, the fee is program income 

to the HTF program. 

(l) Written policies. The grantee must 

have and follow written policies for: 

(1) Underwriting standards for 

homeownership assistance that examine 

the family’s housing debt, overall debt, 

income, and ability to maintain the 

housing; 

(2) Anti-predatory lending; and 

(3) Refinancing loans to which HTF 

loans are subordinated to ensure that 

the terms of the new loan are 

reasonable. 

§ 92.749 Qualification as affordable 

housing: Modest housing requirements for 

homeownership. 

(a) General. Housing that is for 

acquisition by a family pursuant to 

§ 92.748 must be modest housing in 

accordance with this section. 

(b) New construction. In the case of 

acquisition of newly constructed 

housing or standard housing, the 

housing must have an appraised value 

that does not exceed 95 percent of the 

median purchase price for the type of 

single-family housing for the area, as 

described in paragraphs (d) and (e) of 

this section. 

(c) Rehabilitation. In the case of 

acquisition with rehabilitation, the 

housing must have an estimated value 

after rehabilitation that does not exceed 

95 percent of the median purchase price 

for the area, as described in paragraphs 

(d) and (e) of this section. 

(d) Options for determining purchase 

price limits. If a grantee intends to use 

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HTF funds for homebuyer assistance, 

the grantee must either: 

(1) Use the limits issued by HUD for 

the HTF program (i.e., 95 percent of the 

median purchase price for the area); or 

(2) Determine 95 percent of the area 

median purchase price for single-family 

housing in the jurisdiction, in 

accordance with paragraph (e) of this 

section. 

(e) Determining 95 percent of area 

median purchase price. A grantee that 

elects to determine the purchase price 

limit under paragraph (d)(2) of this 

section must use the following 

methodology: 

(1) The grantee must establish the 

price for different types of single-family 

housing for different areas within its 

jurisdiction. The 95 percent of area 

median purchase price must be 

established in accordance with a market 

analysis that ensures that a sufficient 

number of recent housing sales are 

included in the survey. 

(2) Sales must cover the requisite 

number of months based on volume: 

(i) For 500 or more sales per month, 

a one-month reporting period; 

(ii) For 250 through 499 sales per 

month, a 2-month reporting period; and 

(iii) For less than 250 sales per month, 

at least a 3-month reporting period. 

(3) The data must be listed in 

ascending order of sales price. The 

address of the listed properties must 

include the location within the 

jurisdiction. Lot, square, and 

subdivision data may be substituted for 

the street address. The housing sales 

data must reflect all, or nearly all, of the 

one-family house sales in the entire 

jurisdiction. 

(4) To determine the median, the 

grantee must: 

(i) Use the middle sale on the list if 

an odd number of sales; or 

(ii) Use the higher of the middle 

numbers if an even number of sales. 

(5) After identifying the median sales 

price, the amount must be multiplied by 

0.95 to determine the 95 percent of the 

area median purchase price. This 

information must be updated annually 

and submitted to the relevant HUD 

Field Office for review. 

§ 92.750 Faith-based organizations. 

Faith-based organizations are eligible 

to participate in the HTF, as provided in 

24 CFR 92.257. 

Other Federal Requirements 

§ 92.760 Other Federal requirements and 

nondiscrimination; affirmative marketing. 

(a) The Federal requirements set forth 

in 24 CFR part 5, subpart A, are 

applicable to the HTF program. 

(b) The affirmative marketing 

requirements contained in 24 CFR 

92.351(a) apply to the HTF program. 

§ 92.761 Lead-based paint. 

Housing assisted with HTF funds is 

subject to the regulations at 24 CFR part 

35, subparts A, B, J, K, and R. 

§ 92.762 Displacement, relocation, and 

acquisition. 

The displacement, relocation, and 

acquisition requirements of 24 CFR 

92.353 apply to the HTF program. 

§ 92.763 Conflict of interest. 

The conflict-of-interest requirements 

contained in § 92.356 apply to the HTF 

program. 

§ 92.764 Funding accountability and 

transparency. 

The HTF grant to the grantee and all 

assistance provided to subgrantees and 

recipients shall be considered a Federal 

award for purposes of the Federal 

Funding Accountability and 

Transparency Act of 2006 (31 U.S.C. 

6101 note). 

Program Administration 

§ 92.770 Housing Trust Fund (HTF) 

accounts. 

(a) General. The HTF consists of the 

accounts described in this section solely 

for use in accordance with the 

provisions of this subpart. HUD will 

establish an HTF United States Treasury 

account (HTF Treasury account) for 

each grantee. Each grantee may use 

either a separate HTF local account or 

a subsidiary account within its general 

fund (or other appropriate fund) as the 

HTF local account. 

(b) HTF Treasury account. The HTF 

Treasury account includes the annual 

grant and funds reallocated to the State 

by formula. 

(c) HTF local account. (1) The HTF 

local account includes deposits of HTF 

funds disbursed from the HTF Treasury 

account, any program income, and any 

repayments as required by § 92.773. 

(2) The HTF local account must be 

interest-bearing. 

(d) Reductions. (1) HUD will reduce 

or recapture funds in the HTF account 

by the amount of: 

(i) Any funds in the HTF Treasury 

account that are not committed within 

24 months after the last day of the 

month in which HUD notifies the State 

of HUD’s execution of the HTF Grant 

Agreement; 

(ii) Any funds in the HTF local 

account that are not expended within 5 

years after the last day of the month in 

which HUD notifies the State of HUD’s 

execution of the HTF Grant Agreement; 

(iii) Any amounts pursuant to 

§ 92.783; and 

(iv) Amounts that the grantee fails to 

obtain and that were required to be 

reimbursed or returned under § 92.780. 

(2) For purposes of determining the 

amount by which the HTF account will 

be reduced or recaptured under 

paragraphs (d)(1)(i) and (ii) of this 

section, HUD will consider the sum of 

commitments or expenditures, as 

applicable, from the fiscal year grant 

being examined, as well as from 

previous and subsequent grants. The 

sum must be greater than the amount of 

the fiscal year grant being examined and 

all previous grants. 

§ 92.771 HTF Grant Agreement. 

Allocated and reallocated funds will 

be made available pursuant to an HTF 

Grant Agreement. 

§ 92.772 Program disbursement and 

information system. 

(a) General. The HTF Treasury 

account is managed through a 

computerized disbursement and 

information system established by HUD. 

The system disburses HTF funds that 

are allocated or reallocated, and collects 

and reports information on the use of 

funds in the HTF Treasury account. The 

grantee must report on the receipt and 

use of all program income in HUD’s 

computerized disbursement and 

information system. The grantee must 

develop and maintain a system to 

ensure that each recipient and 

subgrantee uses HTF funds in 

accordance with the requirements of 

this subpart and that any requirements 

or conditions under which the HTF 

funds were provided. 

(b) Project set-up. (1) After the grantee 

executes the HTF Grant Agreement, 

submits the applicable banking and 

security documents, and commits funds 

to a specific local project, the grantee 

shall identify (set up) specific activities 

(i.e., projects) in the disbursement and 

information system. Investments that 

require the set-up of projects in the 

system are the acquisition, new 

construction, or rehabilitation of 

housing, and operating cost assistance. 

The grantee is required to enter 

complete project set-up information at 

the time of project set-up. 

(2) If the project set-up information is 

not completed within 20 days of the 

initial project set-up, the project may be 

canceled by the system. In addition, a 

project that has been committed in the 

system for 12 months without an initial 

disbursement of funds may be canceled 

by the system. 

(c) Disbursement of HTF Funds. (1) 

After complete project set-up 

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information is entered into the 

disbursement and information system, 

HTF funds for the project may be drawn 

down from the HTF Treasury account 

by the grantee by electronic funds 

transfer. The funds will be deposited in 

the HTF local account of the grantee 

within 72 hours of the disbursement 

request. Any drawdown of funds in the 

HTF Treasury account is conditioned 

upon the provision of satisfactory 

information by the grantee about the 

project and compliance with other 

procedures, as specified by HUD. 

(2) Funds drawn from the HTF 

Treasury account are subject to the 

Intergovernmental Cooperation Act (31 

U.S.C. 6501 et seq.) and regulations at 31 

CFR part 205. 

(3) Funds in the HTF local account 

must be disbursed before requests are 

made for funds in the HTF Treasury 

account. 

(4) The grantee will be paid on an 

advance basis, provided it complies 

with the requirements of this subpart. 

(d) Project completion. (1) Complete 

project completion information must be 

entered into the disbursement and 

information system, or otherwise 

provided, within 120 days of the final 

project drawdown. If satisfactory project 

completion information is not provided, 

HUD may suspend further project setups or take other corrective actions. 

(2) Additional HTF funds for 

development-related costs may be 

committed to a project up to one year 

after project completion, but the amount 

of HTF funds in the project may not 

exceed the maximum per-unit 

development subsidy amount 

established pursuant to § 92.740. 

(e) Access by other participants. 

Access to the disbursement and 

information system by other entities 

participating in the HTF program will 

be governed by procedures established 

by HUD. 

§ 92.773 Program income and repayments. 

(a) Program income. Program income 

must be treated as HTF funds and must 

be used in accordance with the 

requirements of this subpart. Program 

income must be deposited in the 

grantee’s HTF local account unless the 

grantee permits a subgrantee to retain 

the program income for additional HTF 

projects pursuant to the written 

agreement required by § 92.774. The 

grantee must report the program income 

received as well as the use of the 

program income in the disbursement 

and information system that HUD 

designates for the HTF. 

(b) Repayments. (1) Any HTF funds 

invested in housing that does not meet 

the affordability requirements for the 

period specified in § 92.746 or § 92.748, 

as applicable, must be repaid by the 

grantee in accordance with paragraph 

(b)(3) of this section. 

(2) Any HTF funds invested in a 

project that is terminated before 

completion, either voluntarily or 

otherwise, must be repaid by the 

grantee, in accordance with paragraph 

(b)(3) of this section. 

(3) HUD will instruct the grantee to 

either repay the funds to the HTF 

Treasury account or the local account. 

Generally, if the HTF funds were 

disbursed from the grantee’s HTF 

Treasury account, they must be repaid 

to the HTF Treasury account. If the HTF 

funds were disbursed from the grantee’s 

HTF local account, they must be repaid 

to the local account. 

(4) If the grantee is no longer a grantee 

in the HTF program when the 

repayment is made, the funds must be 

remitted to HUD and reallocated in 

accordance with § 92.714 of this 

subpart. 

§ 92.774 Grantee responsibilities; written 

agreements; onsite inspections; financial 

oversight. 

(a) Responsibilities. The grantee is 

responsible for managing the day-to-day 

operations of its HTF program, ensuring 

that HTF funds are used in accordance 

with all program requirements and 

written agreements, and taking 

appropriate action when performance 

problems arise. The use of subgrantees 

or contractors does not relieve the 

grantee of this responsibility, and 

procurement contracts shall be governed 

by 24 CFR 85.36 and 84.44. The 

performance of subgrantees and 

contractors of the grantee must be 

reviewed at least annually. The grantee 

must have and follow written policies, 

procedures, and systems, including a 

system for assessing risk of activities 

and projects, and a system for 

monitoring entities consistent with this 

section, to ensure that the requirements 

of this subpart are met. 

(b) Executing a written agreement. 

Before disbursing any HTF funds to any 

entity, the grantee must enter into a 

written agreement with that entity. The 

written agreement must ensure 

compliance with the requirements of 

this subpart. Where HOME program 

funds are used together with HTF funds, 

a single written agreement meeting the 

requirements of both § 92.504 and this 

subpart may be used to enforce 

requirements for both programs. 

(c) Provisions in written agreements. 

The contents of the agreement may vary 

depending upon the role the entity is 

asked to assume or the type of project 

undertaken. This section details basic 

requirements by role and the minimum 

provisions that must be included in a 

written agreement. 

(1) Subgrantee. The agreement must 

require the subgrantee to comply with 

the requirements applicable to the 

grantee under this subpart. The 

agreement between the grantee and the 

subgrantee must include: 

(i) Use of the HTF funds. The HTF 

subgrantee must have a consolidated 

plan under 24 CFR part 91, and the 

written agreement must require that an 

HTF allocation plan be part of the 

subgrantee’s consolidated plan (see 24 

CFR 91.220(l)(4)). The written 

agreement must require that the 

selection of projects by eligible 

recipients will be in accordance with 

the HTF allocation plan. The agreement 

must describe the tasks to be performed, 

a schedule for completing the tasks 

(including a schedule for committing 

funds to projects), a budget, and the 

period of the agreement. These items 

must be in sufficient detail to provide a 

sound basis for the grantee to effectively 

monitor performance under the 

agreement. 

(ii) Deadlines. The agreement must 

state the time requirements for the 

commitment and expenditure of HTF 

funds and specify that remaining funds 

will be reduced or recaptured by HUD, 

as provided in § 92.770. 

(iii) Audit. The agreement must state 

that an audit of the subgrantee must be 

conducted at least annually, in 

accordance with § 92.776. 

(iv) Program income. The agreement 

must state if program income is to be 

remitted to the grantee or to be retained 

by the subgrantee for additional eligible 

activities. 

(v) Uniform administrative 

requirements. The agreement must 

require the subgrantee to comply with 

applicable uniform administrative 

requirements, as described in § 92.775. 

(vi) Other program requirements. The 

agreement must require the subgrantee 

to carry out each project in compliance 

with all Federal laws and regulations 

described in §§ 92.760–92.764 of this 

subpart. 

(vii) Affirmative marketing. The 

agreement must specify the subgrantee’s 

affirmative marketing responsibilities, 

in accordance with § 92.760. 

(viii) Requests for disbursement of 

funds. The agreement must specify that 

the subgrantee may not request 

disbursement of funds under the 

agreement until the funds are needed for 

payment of eligible costs. The amount of 

each request must be limited to the 

amount needed. Program income must 

be disbursed before the subgrantee 

requests funds from the grantee. 

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(ix) Reversion of assets. The 

agreement must specify that upon 

expiration of the agreement, the 

subgrantee must transfer to the grantee 

any HTF funds on hand at the time of 

expiration and any accounts receivable 

attributable to the use of HTF funds. 

(x) Records and reports. The 

agreement must specify the particular 

records that must be maintained and the 

information or reports that must be 

submitted in order to assist the grantee 

in meeting its recordkeeping and 

reporting requirements. 

(xi) Enforcement of the agreement. 

The agreement must specify remedies 

for breach of the provisions of the 

agreement. The agreement must specify 

that, in accordance with 24 CFR 84.62 

or 85.43, suspension or termination may 

occur if the subgrantee materially fails 

to comply with any term of the 

agreement. The grantee may permit the 

agreement to be terminated for 

convenience, in accordance with 24 

CFR 84.61 or 85.44. 

(xii) Written agreement. The 

agreement must require that before the 

subgrantee provides HTF funds to 

eligible recipients, first-time 

homebuyers, or contractors, the 

subgrantee must have a written 

agreement that meets the requirements 

of this section. 

(xiii) Duration of the agreement. The 

agreement must specify the duration of 

the agreement. 

(xiv) Fees. The agreement must 

prohibit the subgrantee from charging 

servicing, origination, or other fees for 

the costs of administering the HTF 

program. 

(2) Eligible recipient. The agreement 

between the grantee and the eligible 

recipient selected for funding must 

include: 

(i) Use of the HTF funds. The 

agreement must describe the use of the 

HTF funds for the project, including the 

tasks to be performed, a schedule for 

completing the tasks and project 

(including the expenditure deadline), 

and a project budget. These items must 

be in sufficient detail to provide a sound 

basis for the grantee to effectively 

monitor performance under the 

agreement. If the grantee is providing 

operating cost assistance, the written 

agreement must include the provisions 

required by § 92.731(c). 

(ii) Deadlines. The agreement must 

state the time requirements for the 

commitment and expenditure of HTF 

funds and specify that remaining funds 

will be reduced or recaptured by HUD, 

as provided in § 92.770. 

(iii) Audit. The agreement must 

specify that the recipient will submit to 

the grantee a cost certification 

performed by a certified public 

accountant for each project assisted 

with HTF funds. The agreement must 

specify that the recipient will submit to 

the grantee an annual audit performed 

on each project assisted with HTF 

funds, beginning the first year following 

the cost certification and with the final 

annual audit occurring the last year of 

the affordability period. 

(iv) Affordability. The agreement must 

specify the affordability period, require 

housing assisted with HTF funds to 

meet the affordability requirements of 

§ 92.746 or § 92.748, as applicable, and 

must require repayment of the funds if 

the housing does not meet the 

affordability requirements for the 

specified time period. If the recipient is 

undertaking a rental project, the 

agreement must establish the initial 

rents and the procedures for rent 

increases, the number of HTF units, the 

size of the HTF units, the designation of 

the HTF units as fixed or floating, and 

the requirement to provide the address 

(e.g., street address and apartment 

number) of each HTF unit no later than 

the time of project completion. If the 

recipient is undertaking 

homeownership projects for sale to firsttime homebuyers, in accordance with 

§ 92.748, the agreement must establish 

the resale requirements that must be 

imposed on the housing, the sales price 

or the basis upon which the sales price 

will be determined, and the disposition 

of the sales proceeds. 

(v) Project requirements. The 

agreement must require the housing to 

meet the property standards in 

§§ 92.741–92.745 of this subpart, as 

applicable, and in accordance with the 

type of project assisted upon project 

completion. The agreement must also 

require owners of rental housing 

assisted with HTF funds to maintain the 

housing in compliance with § 92.745 of 

this part for the duration of the 

affordability period, and to comply with 

the requirements of § 92.747. The 

agreement may permit the recipient to 

limit eligibility or give a preference to 

a particular segment of the population, 

only if the grantee has described any 

such limited eligibility or preference in 

its consolidated plan; provided, 

however, that any limitation or 

preference cannot violate 

nondiscrimination requirements in 

§ 92.760. 

(vi) Other program requirements. The 

agreement must require the eligible 

recipient to carry out each project in 

compliance with all Federal laws and 

regulations described in §§ 92.760– 

92.764 of this subpart. 

(vii) Affirmative marketing. The 

agreement must specify the recipient’s 

affirmative marketing responsibilities, 

as enumerated by the grantee in 

accordance with § 92.760. 

(viii) Requests for disbursement of 

funds. The agreement must specify that 

the recipient may not request 

disbursement of funds under the 

agreement until the funds are needed for 

payment of eligible costs. The amount of 

each request must be limited to the 

amount needed. 

(ix) Records and reports. The 

agreement must specify the particular 

records that must be maintained and the 

information or reports that must be 

submitted in order to assist the grantee 

in meeting its recordkeeping and 

reporting requirements. The owner of 

rental housing must annually provide 

the grantee with information on rents 

and occupancy of HTF-assisted units to 

demonstrate compliance with § 92.746. 

If the rental housing project has floating 

HTF units, the owner must provide the 

grantee with information regarding unit 

substitution and filling vacancies so that 

the project remains in compliance with 

HTF rental occupancy requirements. 

The agreement must specify the 

reporting requirements (including 

copies of financial statements) to enable 

the grantee to determine the financial 

condition (and continued financial 

viability) of the rental project. 

(x) Enforcement of the agreement. The 

agreement must provide for a means of 

enforcement of the affordable housing 

requirements by the grantee and the 

intended beneficiaries. This means of 

enforcement and the affordability 

requirements in § 92.746 must be 

imposed by deed restrictions, covenants 

running with the land, use restrictions, 

or other mechanisms approved by HUD 

under which the grantee and 

beneficiaries may require specific 

performance. In addition, the agreement 

must specify remedies for breach of the 

provisions of the agreement. 

(xi) Duration of the agreement. The 

agreement must specify the duration of 

the agreement. If the housing assisted 

under this agreement is rental housing, 

the agreement must be in effect through 

the affordability period required by the 

grantee under § 92.746. If the housing 

assisted under this agreement is 

homeownership housing, the agreement 

must be in effect at least until 

completion of the project and 

ownership by the first-time homebuyer. 

(xii) Fees. The agreement must 

prohibit project owners from charging 

origination fees, parking fees, laundry 

room access fees, and other fees; 

however, rental project owners may 

charge reasonable application fees to 

prospective tenants. 

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(3) First-time homebuyer. When a 

grantee provides assistance to a 

homebuyer, the written agreement must 

include as a minimum: 

(i) Use of the HTF funds. The 

agreement must conform to the 

requirements in § 92.748, including the 

limitations on the value of the property, 

principal residence requirement, leasepurchase terms, if applicable, and the 

resale provisions. The agreement must 

specify the amount of HTF funds, the 

form of assistance (e.g., grant, 

amortizing loan, deferred payment 

loan), the use of the funds (e.g., 

downpayment, closing costs), and the 

time by which the housing must be 

acquired. 

(ii) Resale restrictions. The agreement 

must specify the resale restrictions 

established under § 92.748 for the 

specified time period. 

(iii) Enforcement of the agreement. 

The agreement must provide for a 

means of enforcement of the affordable 

housing requirements by the grantee. 

This means of enforcement and the 

affordability requirements in § 92.748 

must be imposed by deed restrictions, 

covenants running with the land, use 

restrictions, or other mechanisms 

approved by HUD under which the 

grantee and beneficiaries may require 

specific performance. In addition, the 

agreement must specify remedies for 

breach of the provisions of the 

agreement. 

(d) Onsite inspections. (1) Project 

completion. The grantee must perform 

an onsite inspection of each HTFassisted project at project completion to 

determine that the housing meets the 

property standards of §§ 92.741 through 

92.744. The inspections must be in 

accordance with the inspection 

procedures that the grantee establishes 

to meet the inspection requirements of 

§§ 92.741 through 92.744. 

(2) Period of affordability. (i) During 

the period of affordability, the grantee 

must perform onsite inspections of HTFassisted rental housing buildings to 

determine compliance with the ongoing 

property standards of § 92.745 and to 

verify the information submitted by the 

owners in accordance with the 

requirements of § 92.746. The 

inspections must be in accordance with 

the inspection procedures that the 

grantee establishes to meet the 

inspection requirements of § 92.745. 

(ii) The onsite inspections must occur 

12 months after project completion and 

at least once every 3 years thereafter 

during the period of affordability. 

(iii) If there are observed deficiencies 

for any of the inspectable items 

established by the grantee, in 

accordance with the inspection 

requirements of § 92.745, a follow-up 

onsite inspection must occur within 12 

months, or within a reasonable time 

frame established by the grantee 

depending on the severity of the 

deficiency, to verify that all observed 

deficiencies have been corrected. Lifethreatening health and safety 

deficiencies must be corrected 

immediately, in accordance with 

§ 92.745(a)(2). 

(iv) The property owner must 

annually certify to the grantee that each 

building in the project is suitable for 

occupancy, taking into account State 

and local health, safety, and other 

applicable codes, ordinances, and 

requirements, and the ongoing property 

standards established by the grantee to 

meet the requirements of § 92.745. 

(v) Inspections must be based on a 

sufficient sample of units. The grantee 

must select the sample. For projects 

with one to four HTF-assisted units, the 

inspectable items (site, building 

exterior, building systems, and common 

areas) for each building with HTFassisted units and 100 percent of the 

HTF-assisted dwelling units must be 

inspected. For projects with more than 

four HTF-assisted units, the inspectable 

items (site, building exterior, building 

systems, and common areas) for each 

building with HTF-assisted units and at 

least 20 percent of the HTF-assisted 

dwelling units in each building, but not 

less than four HTF-assisted units in 

each project and one HTF-assisted unit 

in each building, must be inspected. 

(e) Financial oversight. During the 

period of affordability, the grantee must 

examine regularly (at least annually) the 

financial condition of HTF-assisted 

rental housing to determine the 

continued financial viability of the 

housing and must take actions to correct 

problems. 

§ 92.775 Applicability of uniform 

administrative requirements. 

The uniform administrative 

requirements contained in § 92.505 

apply to the HTF. 

§ 92.776 Audit. 

(a) Audits of the grantee and 

subgrantees must be conducted in 

accordance with 24 CFR 84.26 and 

85.26. The use of HTF grant funds by 

the grantee must be audited not less 

than annually to ensure compliance 

with this subpart. Any financial 

statement submitted by the grantee to 

HUD must be reviewed by an 

independent certified public 

accountant, in accordance with 

Statements on Standards for Accounting 

and Review Services, which is issued by 

the American Institute of Certified 

Public Accountants. 

(b) The agreement must specify that 

the recipient will submit to the grantee 

a cost certification performed by a 

certified public accountant for each 

project assisted with HTF funds. The 

agreement must specify that the 

recipient will submit to the grantee an 

annual audit performed on each project 

assisted with HTF funds, beginning the 

first year following the cost certification 

and with the final annual audit 

occurring the last year of the 

affordability period. 

§ 92.777 Closeout. 

HTF funds will be closed out in 

accordance with procedures established 

by HUD. 

§ 92.778 Recordkeeping. 

(a) General. Each grantee must 

establish and maintain sufficient 

records to enable HUD to determine 

whether the grantee has met the 

requirements of this subpart. At a 

minimum, the following records are 

needed: 

(1) Program records. (i) The forms of 

HTF assistance used in the program. 

(ii) The subsidy layering guidelines 

adopted in accordance with § 92.740. 

(iii) If HTF funds are used for housing 

for first-time homebuyers, the 

procedures used for establishing 95 

percent of the median purchase price for 

the area in accordance with § 92.749, as 

set forth in the Consolidated Plan. 

(iv) If HTF funds are used for 

acquisition of housing for 

homeownership, the resale guidelines 

established in accordance with § 92.748, 

as set forth in the Consolidated Plan. 

(v) Records documenting compliance 

with the 24-month commitment 

deadline of § 92.770(d)(i). 

(vi) Records documenting compliance 

with the 10 percent limitation on 

administrative and planning costs in, 

accordance with § 92.732. 

(2) Project records. (i) A full 

description of each project assisted with 

HTF funds, including the location 

(address of each unit), form of HTF 

assistance, and the units assisted with 

HTF funds. 

(ii) The source and application of 

funds for each project, including 

supporting documentation, in 

accordance with 24 CFR 85.20, and 

records to document the eligibility and 

allowability of the project costs, 

including the documentation of the 

actual HTF-eligible development costs 

of each HTF-assisted unit (through 

allocation of costs, if permissible under 

§ 92.730(c)) in situations where HTF 

funds are used to assist less than all of 

the units in a multi-unit project. 

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(iii) Records demonstrating that each 

rental housing or homeownership 

project meets the maximum per-unit 

subsidy amount established pursuant to 

§ 92.740(a), and the subsidy layering 

and underwriting evaluation in 

accordance with § 92.740(b). 

(iv) Records (e.g., inspection reports) 

demonstrating that each project meets 

the property standards of §§ 92.740– 

92.745 of this part at project completion. 

In addition, during the period of 

affordability, records for rental projects 

demonstrating compliance with the 

property standards, and financial 

reviews and actions pursuant to 

§ 92.774(a). 

(v) Records demonstrating that each 

family is income-eligible. 

(vi) Records demonstrating that each 

rental housing project meets the 

affordability and income targeting 

requirements of § 92.746 for the 

required period. Records must be kept 

for each family assisted. 

(vii) Records demonstrating that each 

lease for an assisted rental housing unit 

complies with the tenant and 

participant protections of § 92.747. 

Records must be kept for each family 

assisted. 

(viii) Records demonstrating that the 

purchase price or estimated value after 

rehabilitation for each housing unit for 

a first-time homebuyer does not exceed 

95 percent of the median purchase price 

for the area, in accordance with 

§ 92.749. The records must demonstrate 

how the estimated value was 

determined. 

(ix) Records demonstrating that each 

housing unit for a first-time homebuyer 

meets the affordability requirements of 

§ 92.748 for the required period. 

(x) Records demonstrating that a site 

and neighborhood standards review was 

conducted for each project that included 

new construction of rental housing 

assisted under this subpart, to 

determine that the site meets the 

requirements of § 92.726. 

(xi) Records (written agreements) 

demonstrating compliance with the 

written agreements requirements in 

§ 92.774. 

(3) Financial records. (i) Records 

identifying the source and application 

of funds for each fiscal year, including 

the annual grant and any reallocation 

(identified by Federal fiscal year). 

(ii) Records concerning the HTF 

Treasury account and local account 

required to be established and 

maintained by § 92.770, including 

deposits, disbursements, balances, 

supporting documentation, and any 

other information required by the 

program disbursement and information 

system established by HUD. 

(iii) Records identifying the source 

and application of program income and 

repayments. 

(iv) Records demonstrating adequate 

budget control, in accordance with 24 

CFR 85.20, including evidence of 

periodic account reconciliations. 

(4) Program administration records. 

(i) Written policies, procedures, and 

systems, including a system for 

assessing risk of activities and projects, 

and a system for monitoring entities 

consistent with this section, to ensure 

that the requirements of this subpart are 

met. 

(ii) Records demonstrating 

compliance with the applicable uniform 

administrative requirements required by 

§ 92.775. 

(iii) Records documenting required 

inspections, monitoring reviews and 

audits, and the resolution of any 

findings or concerns. 

(5) Records concerning other Federal 

requirements. (i) Equal opportunity and 

fair housing records, as required under 

24 CFR part 121. 

(A) Data on the extent to which each 

racial and ethnic group and singleheaded households (by gender of 

household head) have applied for, 

participated in, or benefited from, any 

program or activity funded in whole or 

in part with HTF funds. 

(B) Documentation of actions 

undertaken to meet the requirements of 

24 CFR part 135, which implements 

section 3 of the Housing Development 

Act of 1968, as amended (12 U.S.C. 

1701u). 

(ii) Records demonstrating 

compliance with the affirmative 

marketing procedures and requirements 

of § 92.760. 

(iii) Records demonstrating 

compliance with the lead-based paint 

requirements of 24 part 35, subparts A, 

B, J, K, M, and R. 

(iv) Records demonstrating 

compliance with requirements of 

§ 92.762 regarding displacement, 

relocation, and real property 

acquisition. 

(v) Records supporting exceptions to 

the conflict-of-interest prohibition 

pursuant to § 92.763. 

(vi) Debarment and suspension 

certifications required by 24 CFR parts 

24 and 91. 

(vii) Records demonstrating 

compliance with § 92.764. 

(viii) Records demonstrating 

compliance with § 85.36(e) regarding 

the grantee’s activities related to 

minority business enterprise (MBE) and 

women’s business enterprise (WBE). 

(b) Period of record retention. All 

records pertaining to each fiscal year of 

HTF funds must be retained in a secure 

location for the most recent 5-year 

period, except as provided below. 

(1) For rental housing projects, 

records may be retained for 5 years after 

the project completion date, except that 

records of individual tenant income 

verifications, project rents, and project 

inspections must be retained for the 

most recent 5-year period, until 5 years 

after the affordability period terminates. 

(2) For homeownership housing 

projects, records may be retained for 5 

years after the project completion date, 

except for documents imposing resale 

restrictions that must be retained for 5 

years after the affordability period 

terminates. 

(3) Written agreements must be 

retained for 5 years after the agreement 

terminates. 

(4) Records covering displacements 

and acquisitions must be retained for 5 

years after the date by which all persons 

displaced from the property and all 

persons whose property is acquired for 

the project have received the final 

payment to which they are entitled, in 

accordance with § 92.762. 

(5) If any litigation, claim, negotiation, 

audit, monitoring, inspection, or other 

action has been started before the 

expiration of the required record 

retention period, records must be 

retained until completion of the action 

and resolution of all issues that arise 

from it, or until the end of the required 

period, whichever is later. 

(c) Access to records. (1) The grantee 

must provide citizens, public agencies, 

and other interested parties with 

reasonable access to records, consistent 

with applicable State and local laws 

regarding privacy and obligations of 

confidentiality. 

(2) HUD and the Comptroller General 

of the United States, and any of their 

representatives, have the right of access 

to any pertinent books, documents, 

papers, or other records of the grantee, 

subgrantees, and recipients, in order to 

make audits, examinations, excerpts, 

and transcripts. 

§ 92.779 Performance reports. 

Each grantee must develop and 

maintain a system to track the use of its 

HTF funds, and submit annual 

performance and management reports 

on its HTF program in such format and 

at such time as HUD may prescribe. 

These reports must describe the 

program’s accomplishments, and the 

extent to which the grantee complied 

with its approved allocation plan and 

the requirements of this subpart. HUD 

will make the performance and 

management reports publicly available. 

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Performance Reviews and Sanctions 

§ 92.780 Accountability of recipients. 

The grantee shall review each 

recipient to determine compliance with 

the requirements of this subpart and the 

terms of the written agreement in 

accordance with the grantee’s policies, 

procedures, and systems established 

pursuant to § 92.774(a). 

(a) Misuse of funds. (1) 

Reimbursement requirement. If a 

recipient of HTF assistance is 

determined to have used HTF funds in 

a manner that is materially in violation 

of the requirements of this subpart or 

any requirements or conditions under 

which the funds were provided, the 

grantee must require that, within 12 

months after the determination of such 

misuse, the recipient reimburse the 

grantee for such misused amounts and 

return to the grantee any such amounts 

that remain unused or uncommitted for 

use. The reimbursement is in addition 

to any other remedies that may be 

available under law. 

(2) Determination. The grantee or 

HUD may make the determination, 

provided that: 

(i) The grantee provides notification 

and opportunity for discretionary 

review to HUD; and 

(ii) HUD does not subsequently 

reverse the determination. 

(b) Reduction for failure to obtain 

return of misused funds. (1) If, in any 

year, a grantee fails to obtain 

reimbursement or return of the full 

amount required to be reimbursed or 

returned to the grantee during the year, 

the amount of the grant for the grantee 

for the succeeding year will be reduced 

by the amount by which the amounts 

required to be reimbursed or returned 

exceed the amount actually reimbursed 

or returned. 

(2) In any case in which a failure to 

obtain reimbursement or return occurs 

during a year immediately preceding a 

year in which HTF grants will not be 

made, the grantee shall pay to HUD, for 

reallocation among the other grantees, 

an amount equal to the amount of the 

reduction for the entity that would 

otherwise apply. 

§ 92.781 Performance reviews. 

(a) General. HUD will review the 

performance of each grantee in carrying 

out its responsibilities under this 

subpart whenever determined necessary 

by HUD, but at least annually. In 

conducting performance reviews, HUD 

will rely primarily on information 

obtained from the grantee’s records and 

reports, findings from onsite 

monitoring, audit reports, and 

information generated from the 

disbursement and information system 

established by HUD. Where applicable, 

HUD may also consider relevant 

information pertaining to a grantee’s 

performance gained from other sources, 

including citizen comments, complaint 

determinations, and litigation. Reviews 

to determine compliance with specific 

requirements of this subpart will be 

conducted as necessary, with or without 

prior notice to the grantee. Onsite 

comprehensive performance reviews 

under the standards in paragraph (b) of 

this section will be conducted after 

prior notice to the grantee. 

(b) Standards for comprehensive 

performance review. A grantee’s 

performance will be comprehensively 

reviewed periodically, as prescribed by 

HUD, to determine whether the grantee 

has committed and expended the HTF 

funds as required by § 92.770; has met 

the requirements of this subpart, 

particularly eligible activities, income 

targeting, affordability, and property 

standards; has awarded the funds in 

accordance with its HTF plan and 

requirements of this subpart; has 

reviewed its subgrantees and recipients 

to determine whether they have 

satisfied the requirements of this 

subpart and the terms of their written 

agreements; and has met its 

performance measures in its 

consolidated plan. 

§ 92.782 Corrective and remedial actions. 

The corrective and remedial actions 

contained in § 92.551 apply to the HTF, 

except paragraph (c)(1)(viii). 

§ 92.783 Notice and opportunity for 

hearing; sanctions. 

(a) If HUD finds after reasonable 

notice and opportunity for hearing that 

a grantee has substantially failed to 

comply with any provision of this 

subpart, and until HUD is satisfied that 

there is no longer any such failure to 

comply: 

(1) HUD shall reduce the funds in the 

grantee’s HTF account by the amount of 

any expenditures that were not in 

accordance with the requirements of 

this subpart or require the grantee to 

repay to HUD any amount of the HTF 

grant that was not used in accordance 

with the requirements of this subpart; 

and 

(2) HUD may do one or more of the 

following: 

(i) Prevent withdrawals from the 

grantee’s HTF account for activities 

affected by the failure to comply; 

(ii) Restrict the grantee’s activities 

under this subpart to activities or 

recipients not affected by the failure to 

comply; 

(iii) Remove the State from 

participation in allocations or 

reallocations of funds made available 

under §§ 92.710 through 92.714 of this 

part; or 

(iv) Terminate any HTF assistance to 

the grantee. HUD may, on due notice, 

suspend payments at any time after the 

issuance of a notice of opportunity for 

hearing pursuant to paragraph (b)(1) of 

this section, pending such hearing and 

a final decision, to the extent that HUD 

determines such action to be necessary 

to preclude the further expenditure of 

funds for activities affected by the 

failure to comply. 

(b) Proceedings. When HUD proposes 

to take action pursuant to this section, 

the respondent in the proceedings will 

be the grantee. Proceedings will be 

conducted in accordance with 24 CFR 

part 26. 

Dated: September 28, 2010. 

Shaun Donovan, 

Secretary. 

[FR Doc. 2010–27069 Filed 10–28–10; 8:45 am] 

BILLING CODE P 

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