[Federal Register Volume 79, Number 200 (Thursday, October 16, 2014)]
[Proposed Rules]
[Pages 62250-62288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-24068]



[[Page 62249]]

Vol. 79

Thursday,

No. 200

October 16, 2014

Part II





Department of Housing and Urban Development





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24 CFR Parts 970 and 972





Public Housing Program: Demolition or Disposition of Public Housing 
Projects, and Conversion of Public Housing to Tenant-Based Assistance; 
Proposed Rule

Federal Register / Vol. 79 , No. 200 / Thursday, October 16, 2014 / 
Proposed Rules

[[Page 62250]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 970 and 972

[Docket No. FR-5399-P-01]
RIN 2577-AC82


Public Housing Program: Demolition or Disposition of Public 
Housing Projects, and Conversion of Public Housing to Tenant-Based 
Assistance

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise and update HUD's regulations 
governing the demolition and disposition of public housing. Currently, 
demolitions and dispositions are approved based on certification by a 
public housing agency (PHA) that certain conditions are met. This rule 
increases the oversight of demolition and disposition of public housing 
by requiring PHAs to submit more detailed justifications supporting 
such certifications, and specifying the requirements concerning the use 
of disposition proceeds, and other matters. The rule would also clarify 
and provide more detail related to existing requirements applicable to 
demolition and disposition such as resident relocation, and fair 
housing and civil rights compliance to ensure that PHAs properly abide 
by such requirements. The rule proposes to allow a PHA to request HUD 
permission to retain public housing property free of restrictions under 
the declaration of trust and annual contributions contract. In 
addition, the rule would update regulatory provisions to conform to 
certain requirements under the Housing and Economic Recovery Act of 
2008, and clarify the definition of ``conversion'' in HUD's conversion 
of public housing regulations.

DATES:  Comment Due Date: December 15, 2014.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed 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.
    1. 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 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
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 
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 202-402-3055 (this is 
not a toll-free number). Individuals with speech or hearing impairments 
may access this number via TTY by calling the Federal Relay Service, 
toll-free, at 800-877-8339. Copies of all comments submitted are 
available for inspection and downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Kathleen Szybist, Program Analyst, 
Special Applications Center, Office of Public and Indian Housing, 
Department of Housing and Urban Development, 121 S. Main Street, Suite 
300, Providence, RI 02903; telephone number 401-277-8310 (this is not a 
toll-free number); email <a href="/cdn-cgi/l/email-protection#d2b9b3a6babeb7b7bcfcb3fca1a8abb0bba1a692baa7b6fcb5bda4"><span class="__cf_email__" data-cfemail="204b4154484c45454e0e410e535a5942495354604855440e474f56">[email protected]</span></a>. Hearing- or 
speech-impaired individuals may access this number through TTY by 
calling the toll-free Federal Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

A. Purpose of Regulatory Action

    Need for regulation. HUD last updated its demolition and 
disposition regulations in 24 CFR part 970 in 2006 (71 FR 62362, 
October 24, 2006). This regulation is necessary in order to update 
HUD's regulations in accordance with the Housing and Economic Recovery 
Act of 2008 (Pub. L. 110-289, approved July 30, 2008) (HERA), which 
made certain changes to the requirements applicable to qualified PHAs, 
which are non-troubled PHAs whose public housing and Section 8 units 
combined are fewer than 550 units. Such PHAs are relieved from annual 
plan filing requirements, and consequently from demolition and 
disposition requirements that involve the annual plan. In addition, 
this regulation is necessary to add clarifications and requirements 
related to resident consultation, application processing, and other 
requirements that have until now been placed in notices to PHAs. This 
regulation would provide the requirements applicable to real property 
transactions and retention of projects by PHAs, a topic which HUD has 
addressed in practice under 24 CFR part 85 but which until now has not 
had specific regulatory standards. Finally, this regulation makes a 
needed clarification to HUD's regulations at 24 CFR part 972, which 
govern the conversion of public housing assistance to tenant-based 
assistance (conversion regulations).
    How this rule would meet the need. This rule would promulgate the 
HERA-related changes and the needed clarifications to the demolition 
and disposition regulations, would substantially clarify the existing 
regulations, and correct HUD's conversion regulations.
    Legal authority for the regulation. HUD has general authority to 
make such rules and regulations as needed to carry out its functions, 
powers, and duties under 42 U.S.C. 3535(d). In addition, HUD has 
specific authority over the demolition and disposition of public 
housing under 42 U.S.C. 1437p. HUD has authority over conversion of 
assistance under 42 U.S.C. 1437t and 1437z-5.

B. Summary of the Major Provisions

    The rule would divide HUD's 24 CFR part 970 into two subparts. 
Subpart A would comprise the current regulations applicable to 
demolitions and dispositions of public housing projects as provided 
under section 18 of the 1937 Act. Subpart B would provide the 
requirements applicable to real property

[[Page 62251]]

transactions and retention of projects by PHAs. Additionally, this rule 
would issue a clarification to 24 CFR part 972 on conversion of 
assistance.
Subpart A
    Rules regarding leasing of the project and reconfiguration of 
interior space would be tightened to address abuses that have occurred. 
Currently, 24 CFR 970.3(b)(10) does not limit the purposes for which a 
lease may be entered into. In order to clarify that leases should not 
be entered into to avoid obligations under the Annual Contributions 
Contract (ACC), this proposed rule would clarify this exception to 
indicate these leases should only be entered into for the limited 
purposes of allowing an owner-entity to show site control. Thus, the 
rule at Sec.  970.3(b)(7), would permit, as an exception, the leasing 
of the entire project only for one year or less for the strictly 
limited purpose of allowing a prospective owner-entity to show site 
control in an application for funding for the redevelopment of the 
project. The rule would clarify that reconfiguration as an exception to 
demolition may only be done for an authorized use related to the normal 
operation of public housing and without demolition, as permitted by the 
ACC.
    The material on de minimis demolition, which is allowed by statute, 
would be revised to ensure that HUD receives a notice of the proposed 
action before it takes place and ensures that the statutory 
requirements are being met prior to the action.
    Generally, under the currently codified rule and this proposed 
rule, PHA property must be disposed of for fair market value (FMV). 
While the current rule, as an exception to the requirement that PHA 
property generally must be disposed for FMV, allows for the disposition 
of public housing for less than FMV if there is a commensurate public 
benefit to the community, the PHA, or the Federal Government, there are 
no further requirements ensuring that commensurate benefit is actually 
obtained. The proposed rule would add informational requirements to 
ensure that commensurate public benefit is actually being obtained for 
these types of dispositions. The information required would include 
anticipated future use of the property, a detailed description of any 
housing to be located on the property, the length of time the future 
use would be maintained, and other pertinent information.
    The rule would strengthen the application and resident consultation 
requirements. Regarding application requirements, the rule would 
enhance the information provided with the application to ensure that 
HUD has enough information regarding the action to make sure the PHA's 
supporting certifications are correct so that HUD makes the appropriate 
decision. Demolition requests would (as the statute requires), be 
granted unless HUD has or obtains information contrary to the 
supporting certification of the PHA, or the application was not 
developed in consultation with the affected residents and appropriate 
local government officials.
    Regarding resident consultation, the proposed rule would provide 
more specificity to the resident consultation requirements to give PHAs 
better guidance and to ensure that resident consultation is as 
effective as possible. The rule would require the supporting evidence 
to include a description of the process of the consultations 
summarizing the dates, meetings, and issues raised by the residents and 
the PHA's responses to those issues; meeting sign-in sheets; any 
written comments submitted by affected residents/groups along with the 
PHA's responses to those comments; and any certifications or other 
written documentation that the PHA receives from the resident advisory 
board (RAB) and resident council regarding resident support or 
opposition.
    Regarding the relocation of residents made necessary by demolition 
or disposition, the rule would continue to incorporate the requirement 
that the housing being offered must meet Housing Quality Standards 
(HQS) (or such successor standard that HUD may adopt) and be in a 
location ``not less desirable'' than the housing the resident is being 
displaced from. However, the currently codified regulation does not 
define a ``not less desirable'' location. The proposed rule would 
define the ``not less desirable'' location, within the definition of 
``comparable housing,'' as not less desirable than the original 
neighborhood in terms of access to public transportation, employment, 
education, service, child care, medical services, shopping, 
recreational, and other amenities, considered in the aggregate (such 
that, for example, a large increase with respect to shopping and 
employment would outweigh a small deficit as to recreation).
    The proposed rule would also strengthen the notice to be provided 
to residents who would be relocated. The written notice would have to 
include a statement that the demolition, disposition, or combined 
application has been approved and that the action will occur, and a 
description of the process to relocate the residents. The written 
notice must be provided through an effective means of communication to 
persons with disabilities in accordance with 24 CFR 8.6 and in the 
appropriate non-English language or languages to persons with limited 
English proficiency as needed. The rule would specify that the notice 
must include a description of the (statutorily required) housing 
counseling services that will be available, including mobility 
counseling, and how a resident may access those services. The timing of 
the notice to residents would be specified as at least 90 days prior to 
the displacement date, except in cases of imminent threat to health and 
safety, but not before HUD has approved the application.
    The rule would codify HUD's practice of allowing for timely 
demolitions made necessary by natural disasters and accidents to ensure 
the health and safety of residents. In such a case, if the PHA rebuilds 
the same number of dwelling units or non-dwelling structures that 
comprised the demolished project, the demolition (and any additional 
demolition required to carry out the redevelopment) shall not be 
subject to 24 CFR part 970. If the PHA rebuilds less than all of the 
demolished structures or the project, the PHA shall submit a demolition 
application under this part within one year of such demolition to 
formalize and request official HUD approval for the action under this 
part.
    There has been increased frequency of dispositions that remove all 
of the housing and other property in a PHA's inventory. To clarify the 
PHA's obligations in this situation, a section would be added to 
require that once the action is complete and the PHA has no plans to 
develop any additional units, the PHA shall not expend any remaining 
Operating Funds, including operating reserves, other than for purposes 
related to the close-out of its public housing inventory, including 
audit requirements required by this section. Any remaining Operating 
Funds (including operating reserves and any unspent asset-repositioning 
fees received pursuant to 24 CFR 990.190(h)) would be required to be 
returned to HUD within 90 days of the date of removal of the project. 
The PHA may spend no more of its Capital Funds other than, with HUD 
approval, amounts required to close out contract obligations incurred 
prior to HUD's approval of the action.
    The proposed rule would add civil rights requirements, including 
documentation that the PHA is not in violation of any civil rights law, 
compliance agreement, settlement

[[Page 62252]]

agreement, or court order. Certifications would be required that the 
action will not violate any such law, settlement, order or other 
nondiscrimination requirements, and does not serve to maintain or 
increase segregation based on race, ethnicity, or disability. The rule 
would require a description of the civil rights-related characteristics 
(including race, color, religion, sex, national origin, familial 
status, and disability) of both the residents who will be displaced by 
the action, the residents anticipated to remain in a public housing 
project that is partially demolished or disposed of, and of the 
residents on the PHA's waiting list (by bedroom size). The purpose of 
these requirements is to ensure that PHAs that request demolition or 
disposition are not in violation of any civil rights-related laws, 
agreements, or orders.
    Finally, the rule would revise currently codified Sec.  970.35, 
``Reports and records'' to strengthen HUD's oversight and monitoring of 
demolition and disposition actions.
Subpart B
    The proposed rule would add a subpart B to 24 CFR part 970, to 
allow PHAs and other owners of public housing to retain public housing 
property, including dwelling units, without the use restrictions under 
the ACC and Declaration of Trust (DOT). Section 18 does not apply to 
cases where a PHA retains property, rather than disposing of it to 
another party.
Part 972--Conversion of Assistance
    HUD is also proposing to revise the definition of ``conversion'' in 
the part 972 regulations that cover both voluntary and required 
conversion of public housing to tenant-based assistance to more 
accurately reflect what ``conversion'' means in the relevant statutory 
sections (for voluntary conversion, section 22 of the 1937 Act (42 
U.S.C. 1437t); for required conversion, section 33 of the 1937 Act (42 
U.S.C. 1437z-5). Currently, the regulations at 24 CFR 972.103 and 
972.203 (for voluntary and required conversion, respectively), define 
conversion as the removal of public housing units from the inventory of 
a Public Housing Agency (PHA), and the provision of tenant-based, or 
project-based assistance for the residents of the PHA. While it is true 
that under the statutes the residents of a project undergoing 
conversion may be provided with alternate housing including project-
based assistance, the statute provides that the conversion is only from 
public housing to tenant-based assistance. Therefore, HUD is proposing 
to revise these definitions accordingly to remove the reference to 
project-based assistance.

C. Costs, Benefits, and Transfers

Costs and Benefits
    The inception of this proposed rule does not come from a perceived 
market failure, but rather, from the desire to strengthen and 
streamline the demolition and disposition processes to reflect changes 
that have occurred in the public housing program over the last 20 
years. As such, while this proposed rule would marginally increase the 
administrative burden, it would provide greater clarity regarding the 
demolition and disposition process.
    The rule adds increased clarity and guidance to assist PHAs in 
determining when a demolition and/or disposition may be appropriate for 
their public housing inventories (e.g., so a PHA would be less likely 
to put the time into preparing and submitting an application to HUD 
that would not meet the criteria necessary for HUD approval and thus 
would not waste its or HUD's staff time and resources. Based on the 
clarified and new guidance in the rule, some PHAs may sometimes opt not 
to apply for demolition/disposition and instead pursue other HUD 
tools--e.g., CFFP financing--for their public housing stock).
    The rule adds increased clarity and guidance on what HUD will 
require to approve an application submitted by a PHA (e.g., HUD will 
re-do the paperwork burden--HUD form--to make the application easier to 
fill out by PHAs). Applications submitted by PHAs will be more likely 
to be approved by HUD because PHAs will be better able to show they are 
meeting the applicable HUD criteria. Further, HUD's review time will 
likely be significantly reduced, a benefit to both PHAs and HUD.
    On average, HUD's special application center (SAC) estimates that 
the total additional administrative burden as a result of this rule is 
162 hours per application per year. Each year, the center receives 
between 150 and 200 applications for demolition and or disposition. If 
HUD assumes that the average hourly rate is $200, the total compliance 
cost would be between $4.86 million and $6.48 million a year. For 
example, the proposed rule would require that the determination of 
obsolescence be found by an independent architect or engineer that is 
not a regular employee of the PHA (Sec.  970.15(a)(2)).
    In addition, units that are demolished or disposed of do not 
receive full funding under the public housing operating and capital 
funds. Under the public housing program, these units receive a 
proration and under the capital funds, they receive replacement housing 
factor funds. Funds retained under the capital fund program are 
redistributed to PHAs (including the applying PHA) by formula. The same 
units removed from the inventory and the PHA will no longer receive 
operating funds for those units, but the PHA will also not have any 
operating or maintenance expenses for those units.
    The proposed rule would create very little additional financial 
flux. It is likely that the proposed rule may generate up to $2.23 
million in additional compliance costs. These costs would constitute 
transfers to architects, engineers, lawyers, accountants, etc. For 
example, the proposed rule requires that the determination of 
obsolescence be found by an independent (that is not a regular employee 
of the PHA) architect or engineer.

II. Background

    The Quality Housing and Work Responsibility Act of 1998 (Pub. L. 
105-276, approved October 21, 1998) (QHWRA) made extensive amendments 
to the United States Housing Act of 1937 (42 U.S.C. 1437 et seq.) (1937 
Act) for the purpose of reforming and improving HUD's public housing 
and tenant-based Section 8 housing assistance programs. Prior to QHWRA, 
HUD had to make specific findings regarding the obsolescence and the 
cost of rehabilitation of public housing, prior to approving any 
demolition or disposition of public housing. At that time, the Nation's 
public housing supply had a large stock of dilapidated and unusable 
housing. QHWRA, among other things, amended section 18 of the 1937 Act 
(42 U.S.C. 1437p) to allow for demolition if the PHA requesting 
demolition certifies to HUD that: (1) The project or portion of the 
public housing project is obsolete as to physical condition, location, 
or other factors, making it unsuitable for housing purposes; and (2) no 
reasonable program of modifications is cost-effective to return the 
public housing project or portion of the project to useful life.
    The 1937 Act provides that, in the case of partial demolition, the 
PHA must certify that the demolition will help to ensure the viability 
of the remaining portion of the project. In the case of disposition by 
sale or transfer, the PHA must certify that: (1) Conditions in the area 
surrounding the project adversely affect the health or safety of the 
residents or the feasible operation of the project by the PHA; or

[[Page 62253]]

(2) disposition allows the acquisition, development, or rehabilitation 
of other properties that will be more efficiently or effectively 
operated as low-income housing. The PHA may also certify that the 
disposition is appropriate for other reasons, as long as those reasons 
are in the best interests of the residents and the PHA; consistent with 
the goals of the PHA as set forth in the PHA plan; and otherwise 
consistent with the goals of the 1937 Act. In the case of both 
demolition and disposition, the 1937 Act contains specific requirements 
to which the PHA must certify for notice to residents residing in the 
project 90 days prior to the action. Residents to be displaced, by 
statute, must be offered replacement housing, which may include tenant-
based or project-based vouchers in addition to other public housing.
    There are several other statutory requirements governing demolition 
and disposition of public housing that relate to the following: 
Resident and local government consultation; the PHA planning process; 
relocation rights of residents; the use of the proceeds that result 
from disposition; residents' opportunity to purchase the property 
subject to disposition in the case of a proposed disposition; 
consolidation of occupancy; demolition of a minimum number of units 
under an exception to many of the requirements of the statute (de 
minimis demolition); and the non-applicability of the Uniform 
Relocation Assistance and Real Property Acquisition Policies Act (42 
U.S.C. 4601 et seq.) (URA) to demolition and disposition (section 18(g) 
of the 1937 Act (42 U.S.C. 1437p(g)) (although displaced residents have 
specific rights to be relocated, and the PHA specific relocation 
responsibilities, including payment of the actual and reasonable 
relocation expenses of residents being displaced, section 18(a)(4)(B) 
of the 1937 Act (42 U.S.C. 1437p(a)(4)(B))).
    In accordance with section 18(a) of the 1937 Act (42 U.S.C. 
1437p(a)), HUD approves a demolition or disposition application from a 
PHA as long as the proper certification is made and the specified 
requirements are met. The only statutory exceptions to this requirement 
are: (1) That the PHA's certifications pertaining to the demolition or 
disposition are inconsistent with information and data that is made 
available to HUD or that is requested by HUD; and (2) the PHA did not 
comply with the resident and local government consultation process. 
Under exception (1) HUD has the statutory right to request 
``information and data'' regarding the proposed action in order to 
ascertain whether the PHA's certifications do in fact comport with the 
facts (see section 18(b)(1) of the 1937 Act (42 U.S.C. 1437p(b)(1)).

III. This Proposed Rule

    HUD's demolition and disposition regulations (24 CFR part 970), 
were promulgated by a final rule published on October 24, 2006, at 71 
FR 62362, and no significant changes to the regulations have been made 
since that date.\1\ The Housing and Economic Recovery Act of 2008 (Pub. 
L. 110-289, approved July 30, 2008) (HERA) made certain changes to the 
requirements applicable to qualified PHAs, as this term was defined by 
section 2702 of HERA, and these changes therefore require certain 
corresponding changes to HUD's demolition and disposition regulations. 
However, as recent notices issued by HUD's Office of Public and Indian 
Housing (PIH) reflect, HUD has clarified, through such notices, 
existing regulatory requirements applicable to demolition and 
disposition, such as resident consultation, application processing, and 
PHA Plan requirements because the regulations did not provide the 
details that PHAs needed to execute the requirements as contemplated by 
law.\2\ Therefore, as more fully discussed below, this proposed rule 
revises HUD's demolition and disposition regulations to add the details 
and further clarify certain requirements as presented in recent notices 
issued by PIH.
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    \1\ Certain technical corrections were made to the regulations 
by a January 23, 2008, final rule published at 73 FR 3868.
    \2\ See Notice PIH 2012-7, issued February 2, 2012, pertaining 
to demolition/disposition of public housing and associated 
requirements; Notice PIH-2011-18, issued April 12, 2011, providing 
guidance on re-occupying public housing units proposed or approved 
for demolition, disposition, or transition to homeownership; Notice 
PIH-2008-17, providing guidance in the disposition of certain public 
housing assets.
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Proposed Organization of Part 970

    This rule proposes to divide HUD's regulations on demolition and 
disposition in 24 CFR part 970 into two subparts. Subpart A would 
comprise, with revisions, the current regulations applicable to 
demolitions and dispositions of public housing projects as provided 
under section 18 of the 1937 Act. Subpart B would provide the 
requirements applicable to real property transactions and retention of 
projects by PHAs, to which 24 CFR part 85, which provides the 
administrative requirements for grants and cooperative agreements to 
state, local, and federally recognized Indian tribal governments, would 
apply. Part 85 does not apply to subpart A, as subpart A is issued 
pursuant to a superseding statutory authority, 42 U.S.C. 1437p. This 
non-applicability is consistent with 24 CFR 85.31(b), which provides an 
exception to part 85 for real property pursuant to Federal statutes.

A. Purpose and Applicability (Subpart A)

    Purpose (Sec.  970.1). Section 970.1, which addresses the purpose 
of the part 970 regulations, would be revised to reflect the new 
structure of the regulations.
    Applicability (Sec.  970.3). The applicability of subpart A, as 
stated in Sec.  970.3, would be revised to reflect changes to the 
applicability of the regulations. A new Sec.  970.3(b)(1) would exempt 
from applicability, of the part 970 regulations, those public housing 
projects that PHAs apply to retain under subpart B of this rule. The 
current Sec.  970.3(b)(1), which exempts PHA-owned section 8 housing, 
or housing leased under former sections 10(c) or 23 of the 1937 Act, 
would be redesignated as Sec.  970.3(b)(2), and the current Sec.  
970.3(b)(2), which exempts demolition or disposition before the date of 
funding availability (DOFA) of property acquired incident to the 
development of a public housing project, would be redesignated at Sec.  
970.3(b)(3). The conveyance exception for providing homeownership 
opportunities under Sec.  970.3(b)(3) would be redesignated as Sec.  
970.3(b)(4) and revised to clarify that this homeownership exception 
applies to certain specified homeownership opportunities for low-income 
families. In addition, the references to specific homeownership 
programs would be updated to reflect new homeownership programs since 
the regulations were promulgated in 2006. Discontinued programs like 
the section 5(h) homeownership program (section 5(h) of the 1937 Act 
(42 U.S.C. 1437c(h)) would remain referenced in this section to reflect 
the continued applicability of the part 970 regulations to any units 
that remain to be administered under these discontinued programs.
    The exception for the leasing of non-dwelling space incidental to 
the operation of the PHA is updated and clarified in proposed Sec.  
970.3(b)(5). Agreements with third parties in the form of leases or 
license agreements, only insofar as they are for authorized non-
dwelling purposes related to public housing, are permitted, provided 
that such an agreement benefits the PHA and its residents; is 
consistent with the PHA's plan, as determined by HUD; is consistent 
with the PHA's annual contributions contract (ACC); and is approved in 
writing by HUD.

[[Page 62254]]

    Proposed Sec.  970.3(b)(6) would revise the currently codified 
Sec.  970.3(b)(5), on the use of common areas and unoccupied dwelling 
units, similarly to clarify that the use must be for authorized non-
dwelling purposes related to public housing.
    Proposed new Sec.  970.3(b)(7) would permit, as an exception, the 
leasing of the entire project only for one year or less for a strictly 
limited purpose. That purpose is to allow a prospective owner-entity to 
show site control in an application for funding for the redevelopment 
of the project, such as low-income housing tax credits (LIHTC). Only 
the entire project, not individual dwelling units, may be leased under 
this exception.
    Proposed Sec.  970.3(b)(8) would revise currently codified Sec.  
970.3(b)(6) on reconfiguration of interior space to clarify that 
reconfiguration as an exception to demolition may only be done for an 
authorized use related to the normal operation of public housing and 
without demolition as defined in 24 CFR 970.5, as permitted by the ACC. 
As proposed, such reconfiguration would have to be done in accordance 
with all HUD requirements and approvals, and any resulting reduction in 
bedroom numbers would have to be reflected in the Inventory Management 
System (IMS)/PIH Information Center (PIC) or any future system for 
collecting similar information.
    Proposed Sec.  970.3(b)(9) would revise currently codified Sec.  
970.3(b)(7), which relates to transfers, easements, and transfers of 
utility systems. The proposed rule would require that such easements, 
rights of way, and transfers be approved in writing.
    Based on experience since the regulations were promulgated in 2006, 
HUD has found that the general exception for leases of units or land 
for one year or less (currently codified Sec.  970.3(b)(10)) is not 
always being used for the intended purpose. Specifically, HUD has found 
that some PHAs have incorrectly relied on this exception to enter into 
leases that did not otherwise comply with the PHA's ACC with HUD and 
other public housing requirements and this was never the intent of this 
exception. In addition, HUD has found that some PHAs incorrectly used 
this exception to avoid the disposition requirements of section 18 of 
the 1937 Act (42 U.S.C. 1437p), for instance, by structuring a long-
term lease as a one-year lease and then renewing that lease every year. 
As a result, Sec.  970.3(b)(10) is proposed to be removed by this rule. 
Proposed Sec.  970.3(b)(5) specifies the conditions under which leases 
of units and other PHA property will be allowed. The current Sec.  
970.3(b)(8), which exempts a whole or partial taking by a public or 
quasi-public agency, would be redesignated at Sec.  970.3(b)(10). 
Proposed Sec.  970.3(b)(11) would clarify currently codified Sec.  
970.3(b)(11), which addresses conveyance of PHA property to allow for 
mixed-finance development under 24 CFR 905.604. As proposed, real 
property, including land, improvements, or both, may be acquired by a 
PHA with public housing or other funds, or donated to a PHA, and sold 
or otherwise transferred to an owner entity prior to DOFA, to enable 
the owner entity to develop the property using the mixed finance method 
in 24 CFR 905.604.
    Proposed Sec.  970.3(b)(12) clarifies that this exemption for 
disposition of vacant land for mixed-finance development is only an 
exemption from these regulations, and not from the statutory 
requirements in section 18 of the 1937 Act, and only if the PHA submits 
an application in the form prescribed by HUD, and receives HUD approval 
of the application before commencing disposition of the property.
    Section 18(f) of the 1937 Act (42 U.S.C. 1437p(f)) and the 
currently codified regulations at Sec.  970.3(b)(13)) provide an 
exception for most requirements under the statute for demolition of the 
lesser of 5 dwelling units or 5 percent of the PHA's total units in any 
5-year period (referred to as de minimis demolition). HUD determined 
that environmental review, which has authority separate from the 1937 
Act, applies, which the current regulation reflects, and the proposed 
rule would continue to reflect. In addition, the 1937 Act states that 
such de minimis exception only applies if the space occupied by the 
demolished unit is used for meeting the service or other needs of 
public housing residents or the demolished unit was beyond repair. This 
proposed rule would revise Sec.  970.3(b)(13) to require that the PHA 
must receive acknowledgment by HUD of the required notification prior 
to the commencement of the demolition. Such requirement would confirm 
that HUD is in fact aware of the proposed demolition and proposed use 
of space before the demolition commences.
    Proposed Sec.  970.3(b)(15) clarifies the current language to 
indicate that demolition of severely distressed units as a part of a 
revitalization plan in connection with a Choice Neighborhoods grant is 
exempt from these regulations.
    The proposed rule would add a new Sec.  970.3(b)(16) to provide for 
demolition of projects made necessary by disaster or sudden accident or 
casualty loss. It has been HUD's practice, as reflected in the ACC, to 
allow for such demolitions in order to ensure the health and safety of 
public housing residents.
    At proposed Sec.  970.3(b)(17), the rule would add an exception to 
this rule for dispositions of a de minimis nature that are necessary to 
correct and/or clarify legal descriptions to deed or ownership 
documents, provided such de minimis dispositions are approved by HUD. 
Generally, these are dispositions of a very small amount of property, 
in some cases literally a few square feet, that should never have been 
owned by the PHA but through an error were added to the legal 
description of the property. It is necessary to correct these small 
inaccuracies because, if a PHA's deed to public housing property 
reflects other than what was originally intended in the PHA's 
acquisition of the property, a PHA may be subject to unanticipated 
liabilities. These small dispositions are authorized under section 
18(a)(2)(B) of the 1937 Act (42 U.S.C. 1437p(a)(2)(B)), which states 
that a justification for disposition is that retention of the property 
is not in the best interests of the PHA because ``the public housing 
agency has otherwise determined the disposition to be appropriate for 
reasons that are in the best interests of the residents and the public 
housing agency.''
    The proposed rule would add a new Sec.  970.3(b)(18), which would 
reorganize the consolidation of occupancy exception currently found at 
Sec.  970.25(b), and authorized under section 18(e) of the 1937 Act (42 
U.S.C. 1437p(e)). The purpose of such consolidation must be to improve 
the living conditions of residents or to provide greater efficiency in 
serving the residents. For example, in the case of older projects that 
are badly in need of modernization, health hazards, such as lack of 
heating and issues with plumbing, may occur in certain buildings. 
Residents can be consolidated into healthier buildings with vacancies 
so that the PHA can concentrate on providing services over a more 
compact and manageable area, and the residents have a better living 
environment.
    In addition, as it proposes for other exceptions, the rule would 
add legal parameters to ensure that PHAs take such consolidation 
actions pursuant to applicable federal laws and requirements, including 
the PHA's written policies on admissions and continued occupancy, the 
PHA's section 8 Administrative Plan (24 CFR part 982), and PHA Plan 
requirements (24 CFR part 903). The PHA would be required as well to 
notify HUD in

[[Page 62255]]

advance of such occupancy consolidation.
    HUD proposes to add a new 24 CFR 970.3(c) to clarify that the 
enumerated activities in Sec.  970.3(b) are exempt from section 18 
requirements only. As described in Sec.  970.21(g) of this proposed 
rule, section 104(d) of the Housing and Community Development Act of 
1974 (42 U.S.C. 5304(d) (section 104(d)) operates independently of 
section 18 and cannot be limited administratively by HUD. If any of the 
activities listed in Sec.  970.3(b) involve demolition or conversion of 
a lower-income dwelling unit, as those terms are defined in 24 CFR part 
42, subpart C, and include funding pursuant to the Community 
Development Block Grant Program (42 U.S.C. 5301 et seq.), the Urban 
Development Action Grant Program (42 U.S.C. 5318) or the HOME 
Investment Partnerships Program (42 U.S.C. 12701 et seq.), the 
relocation assistance and one-for-one replacement requirements of 
section 104(d) may apply.
    Definitions (Sec.  970.5). The proposed rule would add several new 
definitions to this section, and revise or remove others.
    <bullet> Accessible or accessibility would be added, referencing 
the definition of ``accessible'' at 24 CFR 8.3.
    <bullet> Commensurate public benefit would be added. While this 
phrase is used in current Sec.  970.19 to describe a standard for 
disposition of a property for less than fair market value where there 
are other compensating benefits. However, currently the phrase is not 
defined. In order to eliminate any possible ambiguity about the 
applicable standard, HUD proposes to define this phrase. The definition 
would make clear that public benefits in this context are ``as approved 
by HUD.'' The definition also supplies four general cases of 
commensurate public benefits: (1) Rental units with a 30-year use 
restriction; (2) homeownership units affordable to low-income families; 
(3) non-dwelling structures or facilities to serve low-income families 
as approved by HUD; and (4) other or additional benefits as approved by 
HUD, which may include, in part, planning and carrying out related 
activities under section 3 of the Housing and Urban Development Act of 
1968 (12 U.S.C. 1701u).
    <bullet> ``Comparable housing'' would be added. This term means 
housing that meets HQS (or such successor standard that HUD may adopt) 
and is appropriate in size for the household, and located in an area 
that is generally not less desirable than the location of the displaced 
resident's current public housing unit. In determining comparable 
housing, a PHA shall also consider the following criteria (in 
aggregate): neighborhood safety; quality of local schools; 
accessibility of amenities (e.g., transportation, employment); and 
exposure to adverse environmental conditions. The comparable location 
should not expose displaced persons to increased segregation by race or 
national origin, poverty, crime or adverse environmental conditions. 
For residents with disabilities, comparable housing must include the 
accessibility features that the resident needs and must be located in 
the most integrated setting appropriate for the resident with respect 
to the residents' ability to interact to the fullest extent possible 
with non-disabled persons and access to community-based services. Such 
housing is often subsidized housing, but does not have to be if there 
is comparable non-subsidized housing available on the private market.
    <bullet> ``Demolition'' would be revised from the definition in the 
currently codified Sec.  970.5. The revised term defines demolition as 
the removal by razing or other means, in whole or in part, of one or 
more permanent buildings of a project such as to render the building(s) 
uninhabitable as defined by the applicable building occupancy code. The 
revised definition states that a demolition involves not only any four 
or more of the factors listed in the current definition (including 
envelope removal (roof, windows, exterior walls), kitchen removal, 
bathroom removal, electrical system removal (unit service panels and 
distribution circuits, and plumbing system removal (e.g., either the 
hot water heater or distribution piping in the unit, or both)), but 
also the lifting and relocating of a building from its existing site to 
another not covered by the same Declaration of Trust.
    <bullet> ``Declaration of Trust (DOT)'' is proposed to be added. 
This term is not currently defined in 24 CFR part 970, and it would be 
beneficial to define what the term means in this context. Generally, 
this term would refer to a legal instrument that grants HUD an interest 
in a project, and provides public notice that the project must be 
operated in accordance with all federal requirements for public 
housing.
    <bullet> ``Displaced resident'' would be added to Sec.  970.5. This 
term means a resident of public housing, one that is assisted with 
Section 8, or is eligible for assistance under an MTW agency's HUD-
approved annual MTW plan, that is relocated permanently from the 
project as a direct result of a demolition and/or disposition action 
under this part. The term includes any members of the resident's 
household and over-income residents who are, at the time of 
displacement, eligible for occupancy under PHA policies for continued 
occupancy or other special rent exceptions.
    <bullet> ``Disposition'' would be added. The proposed definition 
would include both sales and transfers to an independent legal entity 
under the relevant state's law, including an affiliate that is legally 
independent. Under this definition, a PHA would be able to make a 
transfer to an affiliate such as a non-profit in which the PHA has a 
controlling interest, so long as the non-profit is a separate legal 
entity. A PHA could not dispose to an instrumentality of the PHA, 
because the instrumentality essentially is the PHA--it is fully 
controlled by the PHA and assumes the role of the PHA. ``Affiliate'' 
and ``instrumentality'' are both defined at 24 CFR 905.604(b)(3) and 
(4).
    <bullet> ``Emergency'' would be added. This term is defined to mean 
any occasion or instance, for which, in the determination of the 
President or HUD, federal assistance is needed to supplement state and 
local efforts and capabilities to save lives and protect property and 
public health and safety, or to lessen or avert the threat of a 
catastrophe in any part of the United States. This proposed definition 
is based on the definition of ``emergency'' found in 42 U.S.C. 5122.
    <bullet> ``Fair Market Value (FMV)'' would be added. This 
definition provides that FMV is the estimated value of a project, as 
determined by an independent appraiser contracted but not employed by 
the PHA, and completed within 6 months of the application, unless HUD 
approves a longer time. This definition would capture the importance of 
the appraiser being independent of the PHA and the appraisal being 
completed on a timely basis.
    <bullet> ``Major disaster'' would be added. This term is defined to 
mean any natural catastrophe (including any hurricane, tornado, storm, 
high water, wind-driven water, tidal wave, tsunami, earthquake, 
volcanic eruption, landslide, mudslide, snowstorm, or drought), or, 
regardless of cause, any fire, flood, or explosion, in any part of the 
United States, which in the determination of the President causes 
damage of sufficient severity and magnitude to warrant major disaster 
assistance to supplement the efforts and available resources of states, 
local governments, and disaster relief organizations, or causes severe 
danger, hardship, or suffering, as determined by HUD. This proposed 
definition is based

[[Page 62256]]

on the definition of ``major hazard'' found in 42 U.S.C. 5122.
    <bullet> The rule incorporates the general definition of ``public 
housing agency (PHA),'' at 24 CFR 5.100.
    <bullet> The rule would incorporate the definition of ``public 
housing funds'' from Sec.  905.108, and specify that as to disposition 
proceeds that are public housing funds, Sec.  970.20(d) applies.
    <bullet> The rule would add a definition of ``project'' to clarify 
that the term refers to all public housing property (units, vacant 
land, air rights, non-dwelling and dwelling buildings, and appurtenant 
equipment and personal property purchased by the PHA using 1937 Act 
funds) and has the same meaning as development, which is often used in 
other HUD issuances and guidance. In the currently codified part 970, 
both terms are used. This proposed rule would use the term ``project'' 
as defined in preference to ``development.'' This rule would clarify 
that the term ``project'' includes mixed-finance public housing units. 
Additionally, because by definition the term now includes appurtenant 
equipment and property, when a PHA disposes of a project or portion of 
a project, it is generally expected that the related appurtenances will 
be disposed of as well.
    <bullet> ``Public housing unit'' would be added to clarify what HUD 
means by the term in the context of demolition and disposition. The 
definition includes any dwelling unit in a project, including a 
dwelling unit developed for homeownership under the 1937 Act (other 
than units developed for homeownership under section 8(y) of the 1937 
Act (42 U.S.C. 1437f(y)), because that is a tenant-based program and 
does not constitute a unit ``developed'' for homeownership) prior to 
the transfer of title of that unit to the homebuyer.
    <bullet> The phrase ``related to the normal operation of the 
project for public housing purposes'' would be added to mean activities 
that are required or permitted to meet the obligations of the ACC, 
including the provision of low-income housing and related services and 
other benefits to the residents of the PHA. This phrase is used in 
Sec.  970.3.
    <bullet> ``Resident'' would be defined. The purpose of the 
definition is to clarify that a resident under part 970 includes an 
individual or family assisted under HUD's Housing Choice Voucher 
program (section 8 program), or one that is eligible for assistance 
under an MTW agency's HUD-approved annual MTW plan, in addition to 
those who reside in public housing, in accordance with the 1937 Act.
    <bullet> The term ``qualified PHA'' would be added and defined as a 
PHA that is considered a ``qualified public housing agency'' under 
section 2702 of HERA, codified at section 5A(b)(3)(C) of the 1937 Act 
(42 U.S.C. 1437c-1(b)(3)(C)). Essentially, this is a non-troubled PHA 
that does not have a recent failing Management Assessment Program 
score, and which has 550 or fewer units, considering only public 
housing units and vouchers under 42 U.S.C. 1437f(o).
    The proposed rule would add definitions for the following terms--
``Housing Quality Standards (HQS)'', housing construction cost (HCC)'', 
``low-income families'', ``low-income housing'', ``PHA or Public 
Housing Agency,'' ``PHA Plan'', and ``Resident Management Corporation 
(RMC)''--by cross-referencing to those terms found elsewhere in HUD's 
codified regulations. The definition of ``total development cost'' 
would be removed because total development cost would be replaced by 
HCC.
    The proposed rule would also revise some existing definitions. The 
definition of ``chief executive officer of a unit of local government'' 
would clarify that the officer must have the authority to contractually 
bind the local government jurisdiction. The definition of ``firm 
financial commitment'' would be revised to remove the requirement that 
contingencies must be satisfied before the closing of the transaction. 
Other minor editorial changes are made to definitions to update 
terminology or correct errors.
    General requirements for HUD review and approval of a demolition, 
disposition, or combined application (Sec.  970.7). The proposed rule 
would make substantial revisions to Sec.  970.7, the title of which 
would be revised to read ``General requirements for HUD review and 
approval of a demolition, disposition, or combined application.'' A 
paragraph on ``Sufficiency of application'' would be added to make 
explicit that HUD will not consider an application for demolition, 
disposition, or both, unless the application contains all the 
substantive information required in Sec.  970.7 and in this part.
    Section 970.7(c), which addresses an application's supporting 
documentation, would be revised to require additional material.
    Paragraph (c)(1) would require that the PHA not only ``describe'' 
the demolition or disposition action, but that the PHA has specifically 
authorized the action in its PHA plan or significant amendment to that 
plan, and the plan is consistent with any plans, policies, assessment, 
or strategies prepared pursuant to the PHA plan, for example, the 
deconcentration plan under 24 CFR 903.2 or the obligation to 
affirmatively further fair housing (42 U.S.C. 3608(e)(5)). An exception 
would be provided for qualified PHAs (those non-troubled PHAs whose 
public housing and Section 8 units combined are fewer than 550 units), 
which are not required to file PHA plans under HERA. In those cases, 
the qualified PHA must describe the proposed action at its required 
annual public hearing (or second public hearing if it determines to 
submit an application for demolition and/or disposition between its 
annual public hearings). Also, the PHA will certify that the proposed 
activities are consistent with its Deconcentration Plan (24 CFR 903.2), 
its obligation to affirmatively further fair housing (42 U.S.C. 
3608(e)(5)), and any applicable Consolidated Plan (24 CFR 91.2).
    Paragraph (c)(2), requiring a description of the property to be 
demolished, would be revised to require bedroom size, whether the units 
meet the accessibility requirements of Section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794) and HUD's implementing 
regulations at 24 CFR part 8, and the acreage and legal description of 
the land. The description would include both dwelling and non-dwelling 
units.
    A new paragraph (c)(3) would be added to Sec.  970.7 and would 
require information about the number of vacant units approved for the 
demolition, disposition, or combined action, and a narrative 
explanation of the reasons for any vacancies. The explanation could be, 
for example, health or safety issues have arisen; the PHA is 
consolidating occupancy under Sec.  970.3(b)(18); or there is an 
emergency or major disaster.
    Paragraph (c)(4) would require a description of the demolition and/
or disposition action, and, if disposition is involved, the method of 
disposition, which may include methods in addition to sale, such as 
leases, negotiated dispositions, and public bids. To ensure that future 
use of the property to be disposed of or demolished would be used for 
low-income housing purposes, this paragraph would also require a 
statement about the proposed future use of the property, including any 
anticipated subsidies expected to be used for future low-income housing 
on the site of the former project.
    The current Sec.  970.7(a)(4), which requires the inclusion of a 
general timetable for the proposed action, would be redesignated at 
Sec.  970.7(c)(5). The current Sec.  970.7(a)(5), which requires a 
statement and other supporting documentation justifying the proposed 
demolition and/or disposition under the applicable criteria of

[[Page 62257]]

Sec. Sec.  970.15 or 970.17, would be redesignated at Sec.  
970.7(c)(6).
    Proposed Sec.  970.7(c)(2) would require the portion of the 
application that contains a description of all identifiable property to 
include appurtenant personal property and equipment, in conformance to 
the proposed definition of ``project.'' Such property and equipment 
would consist of items purchased with 1937 Act funds for use in 
connection with the project.
    Proposed Sec.  970.7(c)(7) would revise currently codified Sec.  
970.7(a)(6) to add more specificity to the information submitted in the 
resident relocation plan, which is required when any residents will be 
displaced by a proposed demolition and/or disposition action. This 
additional information would include:
    <bullet> A certification that the PHA will comply with the 
relocation provisions of this part;
    <bullet> The estimated number of individual residents and families 
to be displaced;
    <bullet> The comparable housing resources the PHA will provide to 
displaced residents;
    <bullet> The type of housing counseling services the PHA plans to 
provide, including mobility counseling for residents, and affirmative 
marketing outreach to persons in groups whose representation among 
applicants and participants in the PHA's housing programs is 
significantly less than in the PHA's service area and those least 
likely to apply, including outreach appropriate to individuals with 
limited English proficiency, and accessible to persons with 
disabilities;
    <bullet> An estimate of the costs for housing counseling services 
and resident relocation (which requirement is currently in Sec.  
970.7(a)(11), which would be removed), and the expected source for 
payment for these expenses;
    <bullet> Evidence that displaced residents will be relocated in 
compliance with all civil rights and fair housing laws, including all 
affirmatively furthering fair housing regulations, the laws, and 
authorities listed in 24 CFR 5.105, and the identification of 
accessible units for displaced residents with disabilities;
    <bullet> Evidence that residents with disabilities will be 
relocated in housing that meets their accessibility needs in the most 
integrated setting appropriate to their needs, that is, the setting 
that enables individuals with a disability to interact with non-
disabled persons to the greatest extent possible and provides access to 
community-based services;
    <bullet> A relocation timetable, which indicates the estimated 
number of days after HUD approval of the demolition, disposition, or 
combined action that the PHA plans to begin relocating residents;
    <bullet> Evidence that displaced residents will be relocated in 
compliance with all nondiscrimination and equal opportunity 
requirements;
    <bullet> A plan for determining and meeting the functional needs of 
displaced residents with disabilities, including communications 
assistance under 24 CFR 8.6 and assistance in locating units that 
provide appropriate access to social services, reasonable 
accommodations, compliance with section 504 of the Rehabilitation Act 
of 1973;
    <bullet> A marketing plan that informs residents of affordable 
housing units or other new developments in the market area, especially 
to persons who may not be aware of the housing opportunity, and 
including information in languages other than English as needed; and
    <bullet> A plan and information under Sec.  970.21(d) if 
applicable.
    The relocation timetable information will be used to determine the 
PHA's Operating Fund eligibility under 24 CFR part 990, which may 
include the PHA's eligibility for an asset-repositioning fee (or add-on 
to Operating Funds) under 24 CFR 990.190(h). As to comparable housing 
resources the PHA will provide to displaced residents, if some 
residents are not eligible to move to other public or assisted housing, 
the PHA must describe why such residents are not eligible and what 
resources it will make available to provide comparable housing for such 
displaced residents.
    This additional relocation information is to ensure that the PHA is 
ready and able to comply with Section 18 relocation requirements if and 
when HUD approves the demolition, disposition, or combined action. The 
proposed Sec.  970.7(c)(7) would also clarify that the Relocation Plan 
must be a separate written document that the PHA must prepare and 
submit as part of its application for demolition or disposition, or 
both.
    Proposed Sec.  970.7(c)(8) would require more supporting evidence 
on a PHA's required resident consultation than the current Sec.  
970.7(a)(7). The supporting evidence under the proposed rule must 
include: A description of the process of the consultations summarizing 
the dates, meetings, and issues raised by the residents and the PHA's 
responses to those issues; meeting sign-in sheets; any written comments 
submitted by affected residents/groups along with the PHA's responses 
to those comments; and any certifications or other written 
documentation that the PHA receives from the RAB (or equivalent body) 
and resident council regarding resident support or opposition. In 
addition, there must be a description and/or documentation evidencing 
that the PHA communicated with affected residents and other required 
groups in a manner that was effective for persons with hearing, visual, 
and other communications-related disabilities; that public hearing 
facilities and services were physically accessible to persons with 
disabilities; and that appropriate written or oral translations and 
language assistance services, as required, were provided for Limited 
English Proficient (LEP) individuals, consistent with the requirements 
of 24 CFR 8.6. These requirements are to ensure that the required 
consultations are held and issues raised by residents are considered.
    The current Sec.  970.7(a)(8), which requires the inclusion of 
evidence of compliance with the offering to resident organizations in 
the case of disposition, would be redesignated at Sec.  970.7(c)(9). 
The current Sec.  970.7(a)(9), which requires, in the case of 
disposition, the inclusion of the FMV of the project as established on 
the basis of at least one independent appraisal, unless otherwise 
determined by HUD, would be redesignated at Sec.  970.7(c)(11). The 
current Sec.  970.7(a)(10), which requires, in the case of disposition, 
the inclusion of estimates of the gross and net proceeds to be 
realized, would be redesignated at Sec.  970.7(c)(12).
    Under proposed Sec.  970.7(c)(13), in the case of a sale for less 
than FMV based on commensurate public benefit, HUD will consider the 
anticipated future use of the project after disposition required in 
Sec.  970.7(c)(4)(iii). In addition, the supporting information for the 
application shall include: A detailed description of any housing that 
will be located on the property, including the number of units, bedroom 
size, accessibility, affordability, and priorities for displaced 
residents; the proposed length of time in which the acquiring entity 
will maintain the former project for the proposed future use (HUD will 
generally require the proposed future use remain as such for not less 
than 30 years, but will consider other factors such as the extent of 
public benefits (e.g. number of affordable units) arising from proposed 
disposition and the FMV of the property in determining if a period of 
less than 30 years is acceptable); proposed legal documentation (e.g. 
use restriction, provision in ground lease, declaration of restrictive 
covenant) the PHA proposes to ensure the approved use; a plan to 
implement the requirement that income-eligible, displaced residents be 
offered an opportunity to return if housing units will be developed on-
site at the former

[[Page 62258]]

project as outlined in Sec.  970.21(d); and other information that HUD 
may require in order to make the determination.
    HUD's part 970 regulations currently allow PHAs to request a waiver 
of the requirement to apply the proceeds of disposition to the 
repayment of outstanding debt (see Sec.  970.19(e)(1)), which is 
required unless waived by HUD under section 18p(a)(5)(A) of the 1937 
Act (42 U.S.C. 1437p(a)(5)(A)). Proposed Sec.  970.7(c)(14) provides 
more details about the types of debt waivers that can and cannot be 
requested. HUD does not have the statutory authority to waive 
modernization debt, such as Capital Fund Financing Program (CFFP) debt, 
Energy Performance Contracting (EPC) debt, and Operating Fund Financing 
Program (OFFP) debt.
    The current Sec.  970.7(a)(13), which requires the inclusion a copy 
of a resolution by the PHA's Board of Commissioners approving the 
specific demolition and/or disposition application, would be 
redesignated at Sec.  970.7(c)(16). The current Sec.  970.7(a)(14), 
which requires evidence that the application was developed in 
consultation with appropriate government officials, would be 
redesignated at Sec.  970.7(c)(17). The proposed rule at Sec.  
970.7(c)(18) would revise the environmental review requirement in 
currently codified Sec.  970.13 to address environmental justice issues 
as applicable.
    The proposed rule would add submission requirements related to 
civil rights compliance. Proposed Sec.  970.7(c)(19) would add a 
requirement to submit a statement as to whether the PHA is subject to a 
voluntary compliance agreement (VCA), conciliation agreement, 
settlement agreement, consent order, consent decree, or any other civil 
rights related final judicial ruling or decision, in connection with 
the civil rights and fair housing rights of residents who will be 
affected by the proposed demolition, disposition, or combined action, 
and a certification that the demolition or disposition, or combined 
action does not violate any civil rights law, remedial order or 
agreement, VCA, conciliation agreement, final judgment, consent order, 
consent decree, settlement agreement, or any other civil rights related 
final judicial ruling or decision.
    This section would also require a certification that the proposed 
activities will not violate nondiscrimination or equal opportunity 
requirements, and that the PHA will meet affirmative obligations to 
provide equal housing opportunity, supported by: A statement that the 
proposed demolition and/or disposition will not prevent the PHA from 
fulfilling any VCA, conciliation agreement final judgment, consent 
order, consent decree, settlement agreement, or any other civil rights 
related final judicial ruling or decision, as well as a description of 
how the proposed demolition and/or disposition will help the PHA meet 
its affirmative obligations, including but not limited to the 
obligations to overcome discriminatory effects of the PHA's use of 1937 
Act funds pursuant to 24 CFR part 1 to address the obligation to 
affirmatively further fair housing (42 U.S.C. 3608(e)(5)); 
deconcentration plans adopted by the PHA pursuant to 24 CFR part 903; 
and housing accessibility, effective communications, and integration 
requirements under 24 CFR part 8.
    The PHA would also certify that it does not have any outstanding 
charges from HUD or a substantially equivalent state or local fair 
housing agency concerning a violation of the Fair Housing Act (42 
U.S.C. 3601-19); it is not a defendant in a Fair Housing Act lawsuit 
filed by the Department of Justice; it does not have outstanding 
letters of findings identifying noncompliance under title VI of the 
Civil Rights Act of 1964 (42 U.S.C. 2000d-200d-4), section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 294), or section 109 of the 
Housing and Community Development Act of 1974 (42 U.S.C. 5309); and it 
has not received a cause determination from a substantially equivalent 
state or local fair housing agency concerning a violation of provisions 
of a state or local law prohibiting discrimination in housing based on 
sexual orientation, gender identity, or source of income; and any 
additional supporting information that may be requested by HUD, that 
shows that the proposed demolition and/or disposition will not maintain 
or increase segregation on the basis of race, ethnicity, or disability 
and will not otherwise violate applicable nondiscrimination or equal 
opportunity requirements, including a description of any affirmative 
efforts to prevent discriminatory effects. The purpose of these 
requirements is to ensure that PHAs that request demolition or 
disposition do not discriminate against residents, are not in violation 
of any civil rights-related law, agreements or orders, and that HUD can 
ensure that the residents who are displaced are not unlawfully 
segregated or denied appropriate housing because of their membership in 
a protected class.
    Proposed Sec.  970.7(c)(20) would require a description of the 
civil rights-related characteristics (including race, color, religion, 
sex, national origin, familial status, and disability) of both the 
residents who will be displaced by the action, the residents 
anticipated to remain in a public housing project that is partially 
demolished or disposed of, and of the residents on the PHA's waiting 
list (by bedroom size). The purpose of these requirements is to ensure 
that PHAs that request demolition or disposition are not in violation 
of any civil rights-related laws, agreements, or orders, and that HUD 
can ensure that the residents who are displaced are not unlawfully 
segregated or denied appropriate housing because of their membership in 
a protected class.
    Proposed Sec. Sec.  970.7(c)(10), (c)(15), and (c)(21) would 
require material related to legal eligibility to undertake the 
demolition or disposition. In the case of disposition, a legal opinion 
would be required that the acquiring entity is a separate entity (i.e., 
an affiliate or fully independent entity rather than an instrumentality 
of the PHA) under the applicable state law. In the case where the PHA 
has applied for or been approved for financing under a HUD financing 
program such as the Capital Fund Financing Program (CFFP), the 
Operating Funding Financing Program (OFFP), or the Energy Performance 
Contract (EPC) program, the PHA must submit a legal opinion stating 
that the demolition, disposition, or combined action is permitted 
pursuant to the legal documentation associated with any such CFFP, 
OFFP, or EPC program. In addition the PHA must submit a general 
certification that it will comply with the program regulations and any 
conditions of HUD's approval.
    Finally, proposed Sec.  970.7(c)(22) would permit HUD to request 
any additional documentation it determines necessary to support the 
application and assist HUD in making a determination whether or not to 
approve it.
    Under both the current regulations and this proposed rule, a PHA 
must obtain written approval from HUD prior to demolishing or disposing 
of public housing (see Sec.  970.7(a)). This proposed rule would allow 
HUD to require PHAs to adhere to certain terms and conditions based on 
the approval documents. Proposed Sec.  970.7(d) states that if a PHA 
includes documentation, certifications, assurances, or legal opinions 
in its application that exceed the requirements of section 18 of the 
1937 Act or the regulations of part 970 (e.g., that commit to provide 
residents with an opportunity to return to new affordable housing units 
that may be developed with disposition proceeds and/or on the public 
housing property when such an opportunity is not

[[Page 62259]]

required by this part), HUD may establish additional requirements, 
based on such documentation, in its approval of the demolition, 
disposition, or combined action. Further, this proposed section states 
that the PHA cannot vary from the terms and conditions of HUD approval 
without prior written approval from HUD.
    Currently codified Sec.  970.7(b)(1) allows for PHAs to request 
rescission of an approval of a demolition or disposition application 
based on a board resolution and documentation that the conditions that 
led to the original request have significantly changed or been removed. 
Proposed Sec.  970.7(e) would also allow a PHA to amend an earlier 
approval, on a case-by-case basis, based on the PHA's submission (in 
the form prescribed by HUD) of an explanation and documentation, if 
applicable, evidencing the reason for the requested change. The current 
requirement at Sec.  970.7(b)(2), which provides that substitution or 
addition of units requires the submission of a new application for 
those units would be removed.
    Resident Participation and Opportunity To Purchase (Sec.  970.9). 
The proposed rule would provide more specificity to the resident 
consultation requirements to give PHAs better guidance and to ensure 
that resident consultation is as effective as possible. Proposed Sec.  
970.9(a) would list with specificity the residents and resident groups 
with which the PHA must consult, as well as specific steps required to 
be taken. Included in the consultation, in addition to residents 
residing in the project proposed for the action, would be any resident 
councils, resident organizations for the project, PHA-wide resident 
organizations that will be affected, and the applicable RAB. 
Consultation would mandatorily include the following: Providing a copy 
of the demolition, disposition, or combined application, or posting it 
on the PHA's Web site, which must be accessible; consulting on any 
report on the environmental or health effects of the proposed 
activities; consulting on the final application; consulting on the 
relocation plan and opportunity to return to ACC units, if applicable; 
stating that residents and groups have the right to submit written 
comments, that the PHA will respond to those comments, and that the 
comments and responses will be submitted to HUD as part of the PHA's 
application materials. The PHA would have to provide residents and 
resident groups with a reasonable time frame to submit written 
comments, and must respond to those comments within a reasonable time 
frame.
    In addition, PHAs must take steps to ensure that they communicate 
with public housing and rental assistance applicants and residents that 
are effective for persons with hearing, visual, and other 
communications-related disabilities consistent with section 504 of the 
Rehabilitation Act of 1973, and as applicable, the Americans with 
Disabilities Act (42 U.S.C. 12101 et seq.). This includes ensuring that 
notices, policies, and procedures are made available via accessible 
communication methods including the use of alternative formats, such as 
Braille, audio, large type, sign language interpreters, assistive 
listening devices, and other similar methods, and are written using 
plain language. Additionally, PHAs must ensure that the public meeting 
facilities and services used are physically accessible to persons with 
disabilities in accordance with section 504 of the Rehabilitation Act 
of 1973 and that Limited English Proficient (LEP) individuals will have 
meaningful access to programs and activities, in accordance with Title 
VI of the Civil Rights Act of 1974, as amended, 42 U.S.C. 2000, and 
Executive Order 13166.
    As part of the consultation, in addition to the requirement for the 
PHA to consult residents and resident organizations on the application 
as stated in proposed Sec.  970.9(a)(5)(i) and (ii), the PHA must 
consult with the residents and resident organizations on any report on 
the environmental or health effects of the proposed demolition, 
disposition, or combined action (see proposed Sec.  970.9(a)(5)(iii)).
    Proposed Sec.  970.9(b) would require, similarly to the currently 
codified section, the PHA in appropriate circumstances to offer to sell 
the project proposed for disposition to any ``Established Eligible 
Organization,'' which is defined as a resident organization, resident 
management corporation (RMC), or a nonprofit organization acting on 
behalf of the residents. Exceptions in proposed Sec.  970.9(b)(3) would 
be similar to those in the currently codified rule, with a few 
clarifications and updating of vocabulary. Proposed Sec.  970.9(b)(4) 
would remove language referencing the partial disposition of PHA 
property and use the term ``project'' instead, under the proposed 
revised definition of which a partial disposition would be included. If 
there is no exception to the resident offer requirement and if an 
Established Eligible Organization has expressed an interest under Sec.  
970.9(c), then the procedures in proposed Sec.  970.11, ``Procedures 
for the offer of sale to established eligible organizations,'' would 
apply.
    Procedure for the Offer of Sale to an Established Eligible 
Organization (Sec.  970.11). Proposed Sec.  970.11 would be generally 
similar to the currently codified section. However, current paragraph 
(d), ``Contents of the initial written notification,'' which states the 
information the PHA must provide to the Established Eligible 
Organization when it notifies them of the upcoming disposition, would 
be moved and redesignated as Sec.  970.11(b), to immediately follow the 
requirement to send the notification (current paragraphs (b) and (c) 
accordingly would be redesignated (c) and (d)).
    Proposed Sec.  970.11(b) would be revised largely to update 
terminology; however, a couple of substantive changes are proposed. 
Proposed Sec.  970.11(b)(1) replaces the phrase ``development, or 
portion of the development,'' with the term ``project,'' which would 
also include a portion of a project. In addition, the proposed rule 
would add ``the number of accessible units or units that otherwise 
contain accessible features'' to the information that must be provided 
in the initial written notification. Proposed Sec.  970.11(b)(5) would 
revise currently codified Sec.  970.11(d)(5), which states that public 
housing developments sold to resident organizations will not receive 
capital or operating funds after the disposition. The proposed rule 
would revise this general statement to indicate that if the Established 
Eligible Organization is an RMC and enters into an ACC with HUD, it 
will receive Operating and Capital Funds in accordance with 24 CFR part 
964 (Tenant Participation and Tenant Opportunities in Public Housing), 
the ACC, and applicable federal law and regulation.
    Proposed Sec.  970.11(e), ``Response to notice of sale,'' would be 
updated to state that the count of the 30-day response time begins with 
the date the PHA's notice is postmarked.
    Proposed Sec.  970.11(h) would change the addressee for the letter 
of appeal from the field office director to HUD, and break the single 
paragraph into 2 numbered paragraphs solely for better readability, and 
would specify the initial 30-day clock for HUD's response begins to run 
on the date on which HUD receives the appeal. Proposed Sec.  970.11(i), 
which states the required contents of the Established Eligible 
Organization's proposal, except for the use of updated terminology (for 
instance, using the terms ``project'' and ``Established Eligible 
Organization''),

[[Page 62260]]

would be substantively the same as the current regulation.
    Proposed Sec.  970.11(i)(6), which would require the resident 
organization's proposal to include a plan for financing the purchase of 
the project similar to the currently codified Sec.  970.11(i)(6), would 
also require the financing to include paying for any necessary 
accessibility modifications.
    Proposed Sec.  970.11(j) summarizes the PHA's responsibilities, 
which are to: Prepare and distribute the notice of disposition; 
evaluate the proposals received and make selections based on regulatory 
criteria in Sec.  970.11(b); obtain the certifications from the 
executive director or board of commissioners required in Sec.  
970.11(k); consult with residents as required in Sec.  970.9(a); not 
act in an arbitrary and capricious manner and give full and fair 
consideration to any offer from an Established Eligible Organization; 
and accept an offer if the offer meets the terms of sale. This section 
does not change the obligations that PHAs must currently meet under the 
codified regulations, but updates some terminology and provides some 
clarification to existing language where HUD thought further 
clarification would enhance understanding of the obligations required.
    Proposed Sec.  970.11(k) would change its title from ``PHA post-
offer requirements'' to ``Offer by an Established Eligible 
Organization,'' and, like the current Sec.  970.11(k), would state the 
procedures that the PHA is to follow once a resident offer is made. 
Except for the removal of language related to a partial disposition 
because it is no longer needed under the new definition of ``project,'' 
this section is the same as in the currently codified regulation. 
Essentially, this section requires the PHA to fully document that it 
correctly followed the resident offer requirements, including a board 
resolution of each eligible organization that the eligible organization 
received the PHA's offer, that the organization understands the offer, 
and that it waives its opportunity to purchase; alternatively, a 
certification of the executive director or board of commissioners of 
the PHA that the 30-day time has expired and no resident offer was 
received; or a certification, with supporting documentation, that the 
offer was rejected by the PHA.
    Civil Rights and Equal Opportunity Review (Sec.  970.12). The 
proposed rule would add a new Sec.  970.12 that describes compliance 
with civil rights and equal opportunity requirements. HUD will review 
the PHA's civil rights certification under section 5A(d)(16) of the 
1937 Act (42 U.S.C. 1437c-1(d)(16)), and other related information that 
may be available to HUD or requested by HUD. Pursuant to Sec.  970.29, 
HUD will disapprove a PHA's application for demolition and/or 
disposition if HUD determines that any civil rights certifications or 
submissions required under this part are incomplete, inaccurate, or 
inconsistent with the requirements stated in this section.
    Environmental Review Requirements (Sec.  970.13). The environmental 
review requirements in proposed Sec.  970.13 would be substantively the 
same as in the currently codified Sec.  970.13. Environmental review 
requirements apply to the demolition, disposition, or combined action 
being taken and any known future re-use. The current regulation and 
this proposed rule state four factors to be considered in determining 
whether a future re-use is ``known.'' These factors are as follows: (1) 
That funding has been committed; (2) a grant application involving the 
site has been filed; (3) a government (federal, state, or local) has 
made a commitment to take an action that will facilitate a particular 
re-use of the site, and this may or may not be a physical action; and 
(4) that there are architectural, engineering, or design plans that go 
beyond preliminary stages.
    Section 3 Compliance (Sec.  970.14). Pursuant to section 3 of the 
Housing and Urban Development Act of 1968 (section 3) (12 U.S.C. 
1701u), and HUD's regulation at 24 CFR part 135, HUD requires programs 
or projects funded by public housing funds to provide employment, 
training, contracting, and economic opportunities to the greatest 
extent feasible, to low and very-low income persons. The proposed rule 
would implement this requirement by adding a new Sec.  970.14. This 
requirement applies to demolition and disposition (and combined) 
actions if public housing funds are used. If public housing funds are 
not used so that the requirement does not apply, planning and carrying 
out section 3 activities related to these proposed actions would 
satisfy, in part, the commensurate public benefit requirement for below 
FMV dispositions pursuant to Sec.  970.19.
    Specific Criteria for HUD Approval of a Demolition Application 
(Sec.  970.15). Proposed Sec.  970.15, like currently codified Sec.  
970.15, states the specific criteria for HUD approval of demolition 
applications, although the section would be reorganized and more detail 
would be added to some of the requirements. The proposed rule would 
reorganize this section to keep similar material together; for example, 
proposed Sec.  970.15(a)(1) would cover the factor of obsolescence 
making a project unsuitable for housing purposes, and then include the 
list of major problems indicative of obsolescence to subparagraphs.
    The problems that cause obsolescence for purposes of this rule are 
structural deficiencies, serious outstanding capital needs, and design 
or site issues such as severe erosion or flooding. While the currently 
codified regulation, at Sec.  970.15(b)(1)(i), lists specific kinds of 
structural deficiencies, HUD believes that other structural 
deficiencies than those mentioned could cause obsolescence. At the same 
time, HUD acknowledges that there must be some degree of objectivity in 
the obsolescence determination. Therefore, this rule would propose at 
Sec.  970.15(a)(1)(i) that obsolescence be found by an independent 
(that is, not a regular employee of the PHA) architect or engineer. HUD 
will review the determination and supporting documentation, and may 
obtain additional information, to ensure against any discriminatory 
effects of the proposed demolition--such as avoidance of the obligation 
to provide accessible housing for persons with disabilities. 
Furthermore, HUD seeks to clarify that, if the issue is a site issue 
related to the location of the project, such as physical deterioration 
of the neighborhood, a change from residential to industrial or 
commercial development in the neighborhood, or environmental conditions 
as determined by an environmental review in accordance with HUD's 
environmental regulations at 24 CFR part 50 or part 58, which 
jeopardize the suitability of the site or a portion of the site and its 
housing structures for residential use, then the proposed rule would 
require that the PHA simultaneously submit a disposition application. 
The reason for this proposed change is that if the site is not suitable 
for public housing such that existing public housing had to be 
demolished, it should not be redeveloped for low-income housing 
purposes in the future, even if of a lesser density. Instead, the PHA 
should dispose of the unsuitably located property.
    The criteria of ``no reasonable program of modifications will be 
cost-effective to return the project to its useful life'' would be 
addressed in proposed Sec.  970.15(a)(2). The test for cost 
effectiveness in this context would be revised from a percentage of 
total development cost based on type of structure (elevator or non-
elevator), to a simple test as to whether the cost of modifications 
would exceed the HCC for new housing in effect at the time the

[[Page 62261]]

application is submitted to HUD. HCC is regularly updated and well 
understood by the public housing industry.
    In the case of partial demolitions, proposed Sec.  970.15(b) would 
revise currently codified Sec.  970.15(c) to remove the requirement for 
an additional PHA certification that the proposed action would reduce 
development density to allow better access by emergency services or 
improve marketability. Instead, in the case of contiguous (non-
scattered site) projects, the PHA would have to certify that the 
demolition will help to ensure the viability of the remaining portion 
of the project. In the case of scattered site projects, the viability 
certification would not be required. Where there is no contiguous 
project, there is no ``remaining portion of the project'' that would be 
affected, so the viability concern would not apply.
    Proposed Sec.  970.15(c) would require the PHA, unless the PHA also 
submits an application for disposition of the project at the same time 
it submits the demolition application, to also certify that the vacant 
land comprising the project after the demolition of the buildings shall 
be used for low-income housing purposes as permitted by the ACC, which 
purposes may initially include land banking as approved in writing by 
HUD if a use is not determined. In addition, proposed Sec.  970.15(d) 
would require a demolition to be completed in 2 years of the date of 
HUD approval, unless the PHA receives from HUD an extension in writing. 
Proposed paragraphs (c) and (d) of Sec.  970.15 would be new 
requirements.
    Specific Criteria and Conditions for HUD Approval of a Disposition 
(Sec.  970.17). Proposed Sec.  970.17, like currently codified Sec.  
970.17, states the specific reasons for which HUD may approve of 
disposition applications. The standard would in part remain the same as 
currently codified in regulation, which is that HUD will approve an 
application for disposition when retention of the project is not in the 
best interests of the residents or the PHA for at least one of these 
reasons: The conditions in the area surrounding the project adversely 
affect the health and safety of the residents (proposed Sec.  
970.17(a)); disposition allows for the acquisition, development, or 
rehabilitation of other properties that will be operated as low-income 
housing more efficiently, effectively, or both (proposed Sec.  
970.17(b)); the PHA has determined the disposition to be appropriate 
(proposed Sec.  970.17(c)); and, in the case of a disposition that does 
not include dwellings, the PHA must certify that the portion disposed 
of exceeds the needs of the project or the disposition is incidental 
to, or does not interfere with, the continued operation of the 
remainder of the project.
    In addition, the proposed rule would revise and add more detail to 
some of the existing standards. Proposed Sec.  970.17(b) would add 
examples of what would be considered more efficient and effective 
operation. In addition, the rule would require the PHA to demonstrate 
to the satisfaction of HUD that the units will be replaced with other 
low-income housing units. Section 970.17(b)(2) clarifies that the PHA 
must demonstrate to the satisfaction of HUD that sufficient replacement 
units are being provided in connection with the disposition of the 
property. The PHA should obtain sufficient value for the units to 
attain this replacement goal, which ensures that the PHA receives 
sufficient value for its units and also safeguards the Nation's 
valuable low-income housing stock. It is worth noting in this 
connection that the Senate Committee on Appropriations, in Senate 
Report 112-83 (September 21, 2011) stated, in a discussion of 
leveraging resources, that ``The Committee is concerned that without an 
infusion of new resources to bring public housing stock into a state of 
good repair, irreplaceable affordable housing will be permanently 
lost'' (p. 108). The Committee also notes that the public housing stock 
continues to age, and that the current backlog of capital needs is 
$25.6 billion. In this environment, when disposing of public housing 
units, PHAs must receive sufficient compensation, after any required 
retirement of outstanding debt not waived by HUD, from the disposition 
to replace the dwelling units with other low-income housing units 
through acquisition, development, or rehabilitation.
    The replacement housing may, for example, be public housing units 
or project-based voucher units. Section 970.17(b)(3) would provide that 
replacement housing units be developed on another property, that the 
PHA must have the replacement housing units or land for the new 
construction of the units identified at the time it submits its request 
to HUD, and that the PHA provide its financing plan for the replacement 
units. The disposition of the project must be an arms-length 
transaction at FMV and 100 percent of the proceeds must be used to 
acquire, develop, or rehabilitate the replacement units. The proposed 
rule would revise Sec.  970.17(c), which currently states that the PHA 
may also dispose of a project if the PHA has otherwise determined the 
disposition to be consistent with the goals of the PHA, the PHA Plan, 
and the 1937 Act, to add that the disposition under this section (c) 
must be in the best interests of the residents and the PHA. In 
addition, the proposed rule would add an additional condition under 
this section. Specifically, the PHA may not dispose of a project under 
this section if the reason for disposition, as determined by HUD, falls 
under another regulatory section (such as Sec.  970.7(a) or (b)); 
another law (such as voluntary conversion under section 22 of the 1937 
Act (42 U.S.C. 1437t) and required conversion under section 33 of the 
1937 Act (42 U.S.C. 1437z-5) or homeownership under section 32 of the 
1937 Act (42 U.S.C. 1437z-4)), or an eminent domain taking. HUD would 
consider the following reasons for disposition to be acceptable under 
this section: The project meets the criteria for obsolescence under 
Sec.  970.15; the units will be rehabilitated through mixed-finance 
development method, and to reduce the number of public housing units in 
the project, the criteria under Sec.  970.15 or another section of this 
part must be met; and other reasons determined by HUD to meet this 
criteria. In addition, proposed Sec.  970.17(d) would revise currently 
codified Sec.  970.17(d) by clarifying the language of the provision.
    Requirements for the Disposition of a Project (Sec.  970.19). 
Proposed Sec.  970.19 would require that a project be disposed of for 
not less than FMV, unless HUD authorizes a disposition for less than 
FMV under Sec.  970.19(b), which requires that a commensurate public 
benefit result from the disposition. The statute does not cover the 
amount that the PHA is required to obtain when disposing of public 
housing property, but instead appears to leave that element up to HUD 
regulation. In the case where there are proceeds from the disposition, 
the statute requires specified uses to be made of the proceeds, that 
is, retirement of bond debt that originally financed the project unless 
waived by the Secretary (see 42 U.S.C. 1437p(a)(5)(A)), and, to the 
extent that other proceeds remain, the provision of low-income housing 
or to benefit the residents of the public housing agency, or on-site 
commercial enterprises to serve the needs of the residents (see 42 
U.S.C. 1437p(a)(5)(B)). Thus, the statute evidences an intent that the 
proceeds of disposition inure to the benefit of public housing 
residents. The statute does not explicitly cover the situation, 
however, where disposition is for less than FMV and hence there are no 
proceeds from the disposition to be applied as directed. Instead, that 
scenario is left to HUD regulation.
    HUD believes that in below-FMV dispositions, there needs to be some

[[Page 62262]]

assurance that the federal investment in public housing is not lost and 
the purpose of the investment continues to be fulfilled. Hence, the 
proposed rule would add a new Sec.  970.19(c), while currently codified 
paragraph (c), which relates to obtaining an estimate of FMV, would be 
redesignated as paragraph (c)(i). This new paragraph would require that 
where a PHA disposes of a project at below FMV on the basis that there 
is a commensurate public benefit, the PHA execute a use restriction or 
other arrangement of public record, in a form acceptable to HUD, that 
will ensure that the property will be used for not less than 30 years 
for the public use that HUD approved. This period is commensurate with 
other PIH use restrictions. This proposed new measure would ensure that 
public funds are being used for appropriate purposes. The use 
restriction or other similar arrangement must be in a first priority 
lien position that would survive any other liens or foreclosures. The 
PHA would be responsible for monitoring and enforcing the use 
restriction throughout the term of the use restriction. HUD may take 
enforcement action against the PHA if the PHA fails to enforce the use 
restriction.
    Proposed Sec.  970.19(a) and (b) are substantively similar to 
currently codified Sec.  970.19(a), with the exception that the 
definition of commensurate public benefit is moved, to proposed Sec.  
970.5.
    A new Sec.  970.19(d) would provide that if a PHA is unable to 
dispose of a project containing obsolete units that is approved for 
disposition under Sec.  970.17(c)(1) in its ``as is'' condition despite 
due diligence and reasonable efforts, as determined by HUD, if 
requested by the PHA, HUD will approve a demolition of the project, in 
accordance with Sec.  970.15 so that the PHA can proceed with 
demolition and then the disposition of only the vacant land comprising 
the project.
    In order to ensure timely action, the proposed rule would require 
at Sec.  970.19(e) that the disposition shall occur within 2 years of 
HUD's approval, unless HUD extends the time in writing. In HUD's 
experience, 2 years is usually sufficient time. This time limit is the 
same as HUD is proposing for demolition (see proposed Sec.  970.15(d)).
    The proposed rule would also specifically address dispositions in 
which the property is transferred for more than one, but less than 30 
years, such as by lease. Proposed Sec.  970.19(f) would require the PHA 
to return the project to either return the property to the public 
housing inventory, including adding the property again to its ACC and 
placing a DOT on the property, or submit another disposition or other 
removal (e.g. demolition, homeownership, voluntary conversion) 
application, at the end of the temporary period.
    Proposed Sec.  970.19(g) would require the PHA to ensure that the 
use of the property that HUD approved as the commensurate public 
benefit begin within 2 years of the date of disposition of the project, 
unless the PHA receives an extension from HUD in writing. This 
proposal, again, is intended to ensure timeliness in the use of public 
funds. Current Sec.  970.19(b), which allows for the PHA to pay for the 
reasonable expenses of disposition and relocation cost for displaced 
residents, is redesignated Sec.  970.19(h).
    Proposed Sec.  970.19(h) and (i) would revise existing Sec.  
970.19(c) on obtaining an estimate of FMV and would add a provision on 
obtaining an estimate of FMV when a project is proposed for disposition 
via negotiated sale at less than FMV based on commensurate public 
benefit. In that case, HUD may accept any reasonable valuation of the 
property, which need not be obtained by hiring an independent 
appraiser, such as a tax assessor's valuation. Because of the 
commensurate public benefit being obtained in lieu of FMV, the market 
valuation is not as critical, so HUD can rely on a less expensive and 
more easily available form of valuation than an appraisal.
    Use and treatment of Proceeds (Sec.  970.20). The proposed rule 
would move and revise the content on use of proceeds found in currently 
codified Sec.  970.19(e) and (f) into a new Sec.  970.20, entitled 
``Use and treatment of proceeds.'' The proposed revisions would provide 
additional detail on what HUD considers the appropriate uses of 
proceeds of disposition after the payment of HUD-approved costs of 
disposition and relocation. According to the 1937 Act, the proceeds are 
to be used: (1) For the retirement of outstanding debt, unless waived 
by HUD; (2) to the extent that any proceeds remain, for the provision 
of low-income housing or ``to benefit the residents of the public 
housing agency''; or (3) leveraging amounts for commercial enterprises 
appropriate to the needs of the residents. The proposed revisions would 
provide more detail regarding HUD's interpretation of ``to benefit the 
residents.''
    The proposed new section would provide that uses of proceeds that 
remain after debt obligations for providing low-income housing could 
include: Modernization of existing projects; development of a project; 
funding of homeownership units under sections 9, 24, or 32 of the 1937 
Act (42 U.S.C. 1437g, 1437v, and 1437z-4, respectively); construction, 
rehabilitation, and acquisition of units to be used as Section 8 
housing, provided that the PHA complies with safe harbors in connection 
with such construction, rehabilitation, and/or acquisition, and 
executes a use agreement in a form acceptable to HUD ensuring that the 
property will be operated exclusively as Section 8 housing for not less 
than 30 years, roughly commensurate with other use restrictions (along 
with other requirements, such as compliance with program regulations); 
benefits to the residents for uses permitted by HUD's Operating Fund 
rule; and funding of shortfalls (but not new allocations) of vouchers 
under section 8 of the 1937 Act (42 U.S.C. 1437f), subject to further 
HUD approval and discretion considering the applicable section 8 
statutory, regulatory, and funding requirements. Benefits to the 
residents (that is, benefits for public housing residents) for which 
funds could be used include, for example, job training, child care 
programs, and service coordination. Other housing and benefits to the 
residents may be approved by HUD as well. The net proceeds may be 
leveraged with other funds so long as the net proceeds are used on a 
pro-rata basis to fund only the approved uses.
    The proposed rule would require, in other contexts, expenditures of 
proceeds for the provision of low-income housing or for the benefit of 
PHA residents under this section to begin within 2 years from the date 
of disposition approval and be completed (i.e., entirely expended for 
the approved use) within 4 years unless HUD approves an extension in 
writing. The purpose of this proposal is to ensure timely use of public 
funds for their appropriate purposes, and to prevent banking public 
funds. These funds are appropriated and approved for particular public 
purposes, and should be used for those purposes in a timely manner.
    The rule would also provide that proceeds generated from 
dispositions are subject to all laws, regulations, and other 
requirements applicable to use approved by HUD unless otherwise 
approved by HUD in writing. Thus, for example, for development, equal 
opportunity and environmental requirements, requirements pertaining to 
section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 
1701u) and the labor standards provisions of section 12 of the 1937 Act 
(42 U.S.C. 1437j), may all be applicable.

[[Page 62263]]

The one exception to this general rule is that where disposition 
proceeds are used with HUD approval for the development of public 
housing units, the disposition proceeds will not count toward the total 
development cost (TDC) limit pursuant to 24 CFR 905.314(c).
    If a PHA fails to use proceeds as required, HUD may recapture or 
require repayment of the proceeds, or take all other remedies available 
under law. Finally, the rule would require that upon immediate receipt 
of proceeds, and until expended for an approved use, a PHA must deposit 
the proceeds into an interest bearing account, subject to a HUD General 
Depository Agreement and/or an escrow agreement in a form acceptable to 
HUD. All accrued interest will be treated as additional proceeds, 
subject to this section.
    Relocation of Residents (Sec.  970.21). Proposed Sec.  970.21(a) 
would revise the currently codified Sec.  970.21(a) to include material 
concerning the written notice to residents who will be displaced, now 
required at Sec.  970.21(e), with additional details provided. The 
written notice would have to include a statement that the demolition, 
disposition, or combined application has been approved and that the 
action will occur, and a description of the process to relocate the 
residents. The written notice must be provided through an effective 
communications means to persons with disabilities in accordance with 24 
CFR 8.6 and in the appropriate non-English language to persons with 
limited English proficiency as needed. This section would also continue 
to incorporate the requirement that the housing being offered must meet 
HQS (or such equivalent or successor standard that HUD may adopt) and 
be in a location ``not less desirable'' than the housing the resident 
is being displaced from. The currently codified regulation does not 
define a ``not less desirable'' location. Under the proposed rule, a 
PHA would, in determining comparable housing, also consider the 
following criteria (in aggregate): Neighborhood safety; quality of 
local schools; accessibility of amenities (e.g., transportation, 
employment); and exposure to adverse environmental conditions. 
Relocation associated with demolition and disposition plans must be 
consistent with the PHA's obligation to affirmatively further fair 
housing (42 U.S.C. 3608(e)(5)). In no event shall a PHA commence a 
demolition or disposition of the building (or a combined action) in 
which a resident lives until each resident of the building is provided 
relocation assistance.
    Under proposed Sec.  970.21(a)(4), the written notice would include 
a description of the comparable housing options that the PHA is 
offering to the resident, including the location of the housing to 
public transportation, employment, education, child care, medical 
services, shopping, and other amenities. The housing may include the 
types of housing currently codified at Sec.  970.21(a)(1)-(3) (as of 
the April 1, 2013 edition of the Code of Federal Regulations).
    Under Sec.  970.21(a)(5), the notice shall include statements that 
the PHA shall offer displaced residents comparable housing on a 
nondiscriminatory basis with respect to race, color, religion, national 
origin, disability, familial status, or sex, as required by civil 
rights laws. Under proposed Sec.  970.21(a)(6), the PHA shall offer 
residents with disabilities comparable housing that includes the 
accessibility features needed by the resident and located in the most 
integrated setting appropriate for the resident. The most integrated 
setting appropriate to the needs of individuals with disabilities is 
the setting that enables individuals with disabilities to interact with 
nondisabled individuals to the fullest extent possible, in furtherance 
of the Supreme Court's decision in Olmstead v. L.C., 527 U.S. 581 
(1999), and pursuant to HUD's regulations at 24 CFR 8.4(d). The 
statement shall also include the right of displaced residents to a 
reasonable accommodation under Section 504 of the Rehabilitation Act of 
1973, the Fair Housing Act, and the Americans with Disabilities Act, as 
applicable, and how to request such an accommodation.
    Section 18(a)(4)(B) of the 1937 Act (42 U.S.C. 1437p(a)(4)(B)) 
requires the payment of ``actual and reasonable relocation expenses'' 
of each resident being displaced, as does the current regulation at 
Sec.  970.21(e)(2). The proposed rule would add more detail to what 
constitutes ``actual and reasonable relocation expenses.'' Under 
proposed Sec.  970.21(a)(7), the PHA would provide for the payment of 
actual and reasonable relocation costs for each displaced resident, 
including reasonable accommodations for residents with a disability in 
accordance with Section 504 of the Rehabilitation Act of 1973, 
essentially similar to currently codified 970.21(e)(2). The proposed 
rule would further specify that the PHA shall pay for moving cost 
assistance, the payment of a displaced resident's security or utility 
deposit (or both), at a comparable housing unit (provided that loans or 
grants made directly to displaced residents for new deposits are not 
permitted if the PHA's source is either Capital or Operating Funds). 
The PHA would pay such deposits directly to the utility company, the 
landlord, or both, with the resident holding no interest in the funds. 
Any returns or refunds would go to the PHA directly.
    Section 18(a)(4)(D) of the 1937 Act (42 U.S.C. 1437p(a)(4)(D)) 
provides that a PHA, as a condition of approval of its application, 
must provide ``any necessary counseling for residents who are 
displaced'' as a result of the demolition, disposition, or combined 
action. Proposed Sec.  970.21(a)(8) would specify that the notice must 
include a description of the housing counseling services that will be 
available, including mobility counseling, and how a resident may access 
those services.
    Proposed Sec.  970.21(a)(9) requires that if the provisions of 
section 104(d) of the Housing and Community Development Act of 1974 (42 
U.S.C. 5304(d) (section 104(d)), referenced in Sec.  970.21(g), apply 
to the project, the notice required by Sec.  970.21(a) must explain the 
assistance available under section 104(d), which requires a residential 
antidisplacement and relocation assistance plan for certain grants.
    Proposed Sec.  970.21(b) covers the timing of the notification to 
residents of the upcoming action. Like currently codified Sec.  
970.21(e)(1), proposed Sec.  970.21(b) requires notification to 
residents at least 90 days prior to the displacement date, except in 
cases of imminent threat to health and safety. The proposed rule would 
define displacement date as the earliest date by which a resident who 
will be displaced by a demolition, disposition, or combined action 
shall be required to move. A PHA may not issue the notification prior 
to the date that HUD approves the application. Section 18(a)(4)(A)(iii) 
of the 1937 Act (42 U.S.C. 1437p(a)(4)(A)(iii)) and the current 
regulation at Sec.  970.21(e)(1)(iii) require that each resident who is 
displaced from housing must be offered comparable housing and must be 
provided with actual and reasonable relocation assistance. The notice 
provisions in proposed Sec.  970.21(a) reflect these requirements.
    Proposed Sec.  970.21(c)(1) would provide that if a PHA offers a 
resident comparable housing in the form of tenant-based assistance 
under section 8 of the 1937 Act, and the resident is unable to lease a 
dwelling unit during the initial 60-day leasing period provided under 
the Housing Choice Voucher program, the PHA may either (i) grant one or 
more extensions to the initial term in accordance with the voucher 
program regulations at 24 CFR 982.303 as reflected in the PHA's 
administrative plan; or (ii) provide the resident with another form of

[[Page 62264]]

comparable housing (e.g., public housing unit or project-based unit 
under section 8 of the 1937 Act). Proposed Sec.  970.21(c)(2) would 
provide that a PHA shall not commence the HUD-approved demolition or 
complete the HUD-approved disposition of a building until each resident 
who will be displaced by the action is relocated in accordance with the 
requirements of this part.
    As discussed in this preamble, the proposed rule would allow 
dispositions at below FMV based on commensurate public benefit. In such 
a case, if housing is developed on the site of the former project and 
is income-eligible, proposed Sec.  970.21(d) would provide that income-
eligible residents shall be offered the opportunity to return to the 
site once appropriately-sized units are available for occupancy. As 
part of its application for this type of disposition, the PHA would 
provide a plan that addresses how residents will be notified of the 
opportunity to return; the amount of time residents will have to 
exercise this opportunity; the source of funds from which the PHA or 
the new owner will pay the moving costs for moving the displaced 
residents back into the new units; and the process for selecting 
displaced residents who will be offered an opportunity to return (for 
example, lottery) if the number of new public housing units cannot 
accommodate all lease-compliant displaced residents at appropriate 
bedroom sizes. A displaced resident is ``lease-compliant'' for this 
purpose if the displaced resident (including household members whose 
names appear on their public housing lease) has not engaged in serious 
or repeated violations of material terms of the lease that result, or 
could result, in good cause to evict or terminate the assistance;
    Proposed Sec.  970.21(e) would provide that if a resident who will 
be displaced by a demolition, disposition, or combined action, refuses 
to move or otherwise rejects the PHA's offer(s) of comparable housing 
and relocation counseling and advisory services despite the PHA's due 
diligence, the PHA may evict the tenant under state law as long as the 
PHA exercises due diligence in making continued efforts to offer the 
resident comparable housing and relocation counseling.
    Proposed Sec.  970.21(f) would specify some of the sources of 
funding that may be used for relocation. Proposed Sec.  970.21(f) would 
state that sources of funding for relocation expenses include gross 
proceeds a PHA receives under this part, Capital Funds, section 8 
administrative fee funding (where section 8 assistance is offered as 
comparable housing), or other federal funds available for this purpose.
    Proposed Sec.  970.21(g) would specify that if federal financial 
assistance under the Community Development Block Grant (CDBG) program 
(42 U.S.C. 5301 et seq.); the Urban Development Action Grant (UDAG) 
program (42 U.S.C. 5318 et seq.); or the HOME Investment Partnerships 
(HOME) program (42 U.S.C. 12701 et seq.) is used in connection with the 
demolition of lower-income dwelling units, or conversion of such units 
to a use other than lower-income dwelling units, the project is subject 
to section 104(d) of the HCD Act of 1974, including the relocation 
payment and one-for-one replacement provisions as provided at 24 CFR 
part 42, subpart C. Proposed Sec.  970.21(h) states that the URA does 
not apply to this part.
    Costs of Demolition and Relocation of Displaced Residents (Sec.  
970.23). Proposed Sec.  970.23 would add provisions and clarifications 
to currently codified Sec.  970.23. Proposed Sec.  970.23(a) would 
clarify that a PHA may pay for relocation expenses with non-Federal 
funds or any eligible HUD funds, which may include Capital Funds. 
Proposed Sec.  970.23(b) would provide that the PHA may pay for the 
costs of demolition with non-Federal or any eligible funds, including 
Capital Fund. Proposed Sec.  970.23(c) would provide that where HUD has 
approved the demolition of a project and the proposed action is part of 
a program under the Capital Fund Program (24 CFR part 905), that the 
expenses of the demolition and of relocation of displaced residents 
must be included in the Capital Fund Submission pursuant to section 
9(d) of the Act (42 U.S.C. 1437g(d)) or other eligible HUD funds.
    Required and Permitted Actions Prior to Approval (Sec.  970.25). 
Proposed Sec.  970.25 would update and clarify currently codified Sec.  
970.25. In addition to updating language, proposed Sec.  970.25(a) 
would clarify that HUD permission to take any actions related to 
demolition, disposition, or a combined action prior to HUD approval of 
the application, may only be granted in writing, and that a PHA may not 
delay or withhold maintenance on a project in such a way as to cause or 
allow it to meet the demolition criteria under Sec.  970.15.
    The consolidation of occupancy requirements would be covered under 
proposed Sec.  970.3(b)(18), and so would be removed from currently 
codified Sec.  970.25(b) by this proposed rule. Proposed Sec.  
970.25(b) would provide that a PHA may lease public housing units at 
turnover while HUD is considering approval or after HUD has approved 
its application subject to the following conditions: The units are in 
decent, safe, and sanitary condition; the PHA determines that due to 
community housing needs or for other reasons consistent with its PHA 
Plan, leasing turnover units is in the best interests of the PHA, its 
residents, and community; and residents of units leased during such a 
period are provided with the relocation assistance required by proposed 
Sec.  970.21. Where units are leased under this provision, the PHA's 
Operating Fund continues to be calculated as stated in 24 CFR part 990 
(Public Housing Operating Fund).
    De Minimis Exception to Demolition Application Requirements (Sec.  
970.27). Proposed Sec.  970.27 is essentially the same as the current 
codified section. The basic requirements--that the demolition be 
limited to the lesser of 5 dwelling units or 5 percent of the total 
number of units owned by the PHA, and that the space occupied by the 
demolished units be used for meeting the needs of PHA residents, or, 
alternatively, that the units were beyond repair--are found at proposed 
Sec.  970.27(a) and (c).
    The explanation of the 5-year period currently found at Sec.  
970.27(c) would be moved to proposed Sec.  970.27(b). The reporting and 
recordkeeping requirements would be updated at proposed Sec.  
970.27(e).
    Proposed Sec.  970.27(f) would clarify that any resident displaced 
by de minimis demolition would be entitled to housing assistance in 
accordance with federal laws and requirements, which include the PHA's 
Admissions and Continued Occupancy Policy (24 CFR part 966), the PHA's 
section 8 Administrative Plan (24 CFR part 982), PHA Plan requirements 
(24 CFR part 903), and, except where the PHA provides the residents to 
be displaced with another public housing unit from its inventory, the 
URA. If CDBG or HOME funds are involved, the displaced resident shall 
be provided assistance under section 104(d) of the Housing and 
Community Development Act of 1974, where applicable.
    Criteria for HUD Disapproval of Demolition or Disposition 
Application (Sec.  970.29). Proposed Sec.  970.29 would revise the 
currently codified Sec.  970.29, specifically, the provision that an 
application can be rejected if it is clearly inconsistent with the PHA 
Plan. The section would explicitly state that failing to satisfy the 
application requirements is grounds for disapproval. The proposed rule 
would also specify in particular the civil rights related

[[Page 62265]]

requirements under Sec.  970.12. There are minor technical updates to 
language.
    Effect on the Operating Fund Program and Capital Fund Program 
(Sec.  970.31). The proposed rule would remove Sec.  970.31 on 
replacement units as this material will be moved to the Capital Fund 
rule at 24 CFR part 905. Currently codified Sec.  970.33, which states 
the applicability of the Operating Fund program (24 CFR part 990) and 
the Capital Fund program (24 CFR part 905), would be redesignated as 
Sec.  970.31.
    Demolition Due to Emergency, Major Disaster, or Accidental Loss 
(Sec.  970.33). Proposed Sec.  970.33 would codify HUD's practice in 
cases where PHAs must demolish housing due to an emergency or natural 
disaster. These terms are defined at proposed Sec.  970.5. An 
``emergency'' is defined as it is in section 102(1) of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 
5122(1)) (Stafford Act). ``Major disaster'' is defined similarly to the 
definition in the Stafford Act (see 42 U.S.C. 5122(2)), with the 
addition that it includes any natural catastrophe or, regardless of 
cause, fire, flood, or explosion, that causes damage of sufficient 
severity or magnitude to warrant demolition to alleviate the danger, 
loss, hardship, or suffering caused thereby. In such a case, if the PHA 
rebuilds the same number of dwelling units or non-dwelling structures 
that comprised the demolished project, the demolition (and any 
additional demolition required to carry out the redevelopment) shall 
not be subject to 24 CFR part 970. If the PHA rebuilds less than all of 
the demolished structures or the project, the PHA shall submit a 
demolition application under this part within one year of such 
demolition to formalize and request official HUD approval for the 
action under this part.
    Removal of All Projects in the PHA's Public Housing Inventory 
(Sec.  970.35). Proposed Sec.  970.35 would be added to address the 
increased frequency of such actions and to clearly codify the PHA's 
responsibilities in this case, as well as to assist HUD and HUD field 
offices in monitoring and enforcing these requirements. In cases where 
a disposition application proposes to remove all structures and land in 
a PHA's public housing inventory and the PHA has no plans to develop 
any additional projects, once the disposition is complete, the PHA 
shall not expend any remaining Operating Funds, including operating 
reserves, other than for purposes related to the close-out of its 
public housing inventory, including audit requirements required by this 
section. Any remaining Operating Funds (including operating reserves 
and any unspent asset-repositioning fees received pursuant to 24 CFR 
990.190(h)) would be required to be returned to HUD within 90 days of 
the date of disposition of the project. The PHA may spend no more of 
its Capital Funds other than, with HUD approval, amounts required to 
close out contract obligations incurred prior to HUD's approval of the 
disposition and amounts required to address imminent health and safety 
issues that arise at the project prior to completion of the disposition 
transaction.
    If the disposition was approved at below FMV based on commensurate 
public benefit, prior to expending any Capital Funds on the project for 
the purposes identified above, the PHA must notify HUD in writing of 
the planned expenditure of Capital Funds so that HUD can determine if 
any changes are necessary to the terms of its commensurate public 
benefit and/or if the disposition price should be adjusted to reflect 
the expenditure of funds; no Capital Funds may be expended after the 
date of disposition of the project and any remaining Capital Funds 
shall be returned to HUD within 180 days of such date of disposition. 
The PHA shall be ineligible to receive any Capital Funds (replacement 
housing factor funds) under 24 CFR 905.10(i), and any funds issued 
under this section shall be recaptured by HUD.
    Within 60 days after the disposition of all projects in its 
inventory, the PHA shall dispose of all equipment in its inventory that 
was acquired in whole or in part with 1937 Act funds in accordance with 
24 CFR 85.32(c) (which addresses equipment acquired under a grant or 
subgrant), pursuant to a plan acceptable to HUD; and within 90 days of 
the date of disposition, the PHA must have an independent audit 
conducted on the close-out of its public housing inventory.
    Reports and Records (Sec.  970.37). Proposed Sec.  970.37 would 
revise currently codified Sec.  970.35, ``Reports and records'' to 
strengthen HUD's oversight and monitoring of demolition and disposition 
actions. The information on demolition and sale or lease contracts 
currently found at Sec.  970.35(a)(1) and (2) would be retained at 
proposed Sec.  970.37(a)(1) and (2), and a new paragraph (a)(3) would 
be added.
    This section would revise currently codified Sec.  970.35 to 
require a report, in a form and frequency to be prescribed by HUD, 
until HUD determines that the report no longer needs to be submitted, 
containing the following information: (i) A description of resident 
relocation and timetable, including the number of families actually 
relocated by bedroom size; the types and location of comparable housing 
provided to each family; demographic information on family size, race, 
national origin, sex, and disability of relocated residents; reasonable 
accommodations that were provided in connection with the comparable 
housing; units to which residents were relocated that meet the 
accessibility requirements of Section 504 of the Rehabilitation Act of 
1973 and HUD's implementing regulations at 24 CFR part 8 or that 
otherwise contain accessible features; the status of the Opportunity to 
Return Plan, including residents who express an interest in the plan; 
and the comparable housing offered to families that include a member 
with a disability that was located in a non-segregated setting, or, if 
non-segregated housing was not offered, an explanation of why the 
setting that was offered was the most integrated setting appropriate 
for the family, that is, the setting that enables the family to 
interact with non-disabled persons to the fullest extent possible and 
have access to community-based services; (ii) a description of the 
PHA's use of the proceeds of disposition by providing a financial 
statement showing how the gross and net proceeds were expended by item 
and dollar amount, as approved by HUD; (iii) a description of any 
remaining disposition proceeds, including current balance (plus 
interest), bank information of where such proceeds are being held, and 
plans for expending such proceeds for the use approved by HUD within 
the required timeframe; (iv) for dispositions approved by HUD at less 
than FMV based on commensurate public benefit, a description of the 
current use of the property (e.g., owner, number of housing units 
developed), and a statement of how the property is being used for the 
HUD-approved use; (v) a description of whether any project-based 
voucher contracts under section 8 of the 1937 Act have been executed on 
a former public housing property approved for disposition and/or at 
housing developed, acquired, or constructed with disposition proceeds; 
and (vi) evidence that an audit has been conducted on the demolition, 
and/or disposition action within 3 years of completion of the 
demolition and/or disposition action. In addition, as in the current 
regulation, HUD would be able to ask for such additional information as 
HUD may require from time to time.

B. Retention of Projects by PHAs Under 24 CFR Part 85

    The proposed rule would add a subpart B to 24 CFR part 970, to 
allow

[[Page 62266]]

PHAs and other owners of public housing to retain public housing 
property, including dwelling units and appurtenant personal property 
and equipment that were purchased with 1937 Act funds, without the use 
restrictions under the ACC and DOT. Section 18 does not apply to cases 
where a PHA retains property rather than disposing of it to another 
party. In the case of retention, 24 CFR part 85 applies, particularly, 
Sec.  85.31.
    Definitions (Sec.  970.39). Proposed Sec.  970.39 would provide 
that the definitions contained in Sec.  970.5 would apply to subpart B.
    Applicability (Sec.  970.41). Under proposed Sec.  970.41, 
disposition in this case would be under 24 CFR 85.31. Under proposed 
Sec.  970.41, the PHA may retain title to property that is no longer 
needed provided that the PHA requests and is approved by HUD to retain 
the property. In order to approve a request under this section, HUD 
will generally require the PHA to compensate HUD for the federal 
government's equity in the project (computed by applying HUD's 
percentage of participation in the cost of the original purchase to the 
FMV of the property and subsequent modernization), but the PHA could 
request an exception to this repayment requirement, for good cause, in 
accordance with 24 CFR 85.6(c). If HUD finds the PHA has shown good 
cause for retaining the project under this section, HUD will release 
the ACC and DOT on the project. HUD's approval may require the PHA to 
enter into certain use restrictions or may impose other requirements to 
ensure that the property is used for the HUD-approved purposes for a 
certain length of time.
    Removal of a project from public housing without a transfer to a 
third party (Sec.  970.43). Proposed Sec.  970.43 would clarify when a 
project can be removed from public housing without a transfer to a 
third party. HUD's regulations at 24 CFR 85.31 provide that except as 
otherwise provided by federal statutes, real property will be used for 
the originally authorized purpose as long as needed for that purpose, 
and the grantee shall not dispose of or encumber its title or other 
interests. Proposed Sec.  970.43(a) would provide that when real 
property is no longer needed for the originally authorized purpose, the 
grantee will request disposition instructions from HUD. Section 18 of 
the 1937 Act and subpart A of part 970 covers the procedures that PHAs 
must follow if they choose to sell or otherwise transfer title of the 
property.
    Section 85.31 of HUD's regulations in 24 CFR part 85 permits a PHA 
to retain title of real property that is no longer needed for its 
originally authorized purpose, provided the PHA requests and is 
approved by HUD to retain the property. Proposed Sec.  970.43(b) would 
provide that HUD will generally require the PHA to compensate HUD for 
the federal government's equity in the project (computed by applying 
HUD's percentage of participation in the cost of the original purchase 
or construction to the FMV of the property and subsequent 
modernization), but the PHA could request an exception to this 
repayment requirement, for good cause, in accordance with 24 CFR 
85.6(c). If HUD finds the PHA has shown good cause for retaining the 
project under this section, HUD will release the ACC and DOT on the 
project. HUD's approval may require the PHA to enter into certain use 
restrictions or may impose other requirements to ensure that the 
property is used for the HUD-approved purposes for a certain length of 
time.
    Specific Criteria for HUD Approval of Requests (Sec.  970.45). 
Proposed Sec.  970.45 would list the specific criteria for HUD approval 
of retention of public housing without use restrictions under subpart 
B. In addition to showing that the project is no longer needed for 
public housing and there is good cause for the action, for projects 
that include dwelling units, HUD will require compliance with the 
regular disposition regulations under part 970, subpart A, particularly 
Sec.  970.17. To determine applicable requirements, references to 
``disposition'' in subpart A shall mean ``retention of property'' for 
subpart B. The PHA must also show that retention of projects with 
dwelling units will leverage the property so that the PHA can obtain 
financing to address deferred capital needs and otherwise better 
maintain and operate the units as low-income housing. In addition, 
where there is resulting resident displacement, the PHA must comply 
with the relocation requirements in subpart A of this part. Vacant land 
may be retained (for example, as green space) as may nondwelling 
structures, if the structure is no longer needed by the PHA.
    Proposed Sec.  970.45(c) would contain the applicable application 
requirements for retention requests. These application requirements are 
proposed to be parallel to the application requirements under subpart A 
found in proposed Sec.  970.7(c), with the omission of those items that 
would not apply in the case of retention. Thus, Sec.  970.7(c)(4), a 
description of the specific action proposed; Sec.  970.7(c)(7)(ii), a 
description of the comparable housing resources to be provided to any 
residents to be displaced; Sec.  970.7(c)(9), related to the offering 
to resident organizations; Sec.  970.7(c)(10), the name of the 
acquiring entity in the case of dispositions; Sec. Sec.  970.7(c)(11)-
(13), having to do with disposition proceeds, FMV, and commensurate 
public benefit; and Sec.  970.7(c)(20), requiring a description of the 
race, color, religion, sex, national origin, familial status, and 
disability status of any residents who will be displaced.
    On the other hand, elements that are unique to property retention 
are proposed to be added to the application requirements. These include 
a description of the future ownership structure of the project; the 
anticipated future use of the project and the proposed length of time 
the PHA will maintain the former project for the anticipated future 
use; and, in the case of displacement of residents, if any, a 
certification that the PHA will comply with the URA (which does not 
apply under 42 U.S.C. 1437p and subpart A; instead, there are specific 
relocation requirements under both the statute and regulation).
Revisions to Conversion Regulations
    HUD is also proposing to revise the definition of ``conversion'' in 
the part 972 regulations that cover both voluntary and required 
conversion of public housing to tenant-based assistance to more 
accurately reflect what ``conversion'' means in the relevant statutory 
sections (for voluntary conversion, section 22 of the 1937 Act (42 
U.S.C. 1437t); for required conversion, section 33 of the 1937 Act (42 
U.S.C. 1437z-5). Currently, the regulations at 24 CFR 972.103 and 
972.203 (for voluntary and required conversion, respectively) define 
conversion as the removal of public housing units from the inventory of 
a Public Housing Agency (PHA), and the provision of tenant-based, or 
project-based assistance for the residents of the PHA. While it is true 
that under the statutes the residents of a project undergoing 
conversion may be provided with alternate housing including project-
based assistance, the statute provides that the conversion is only from 
public housing to tenant-based assistance. Therefore, HUD is proposing 
to revise these definitions accordingly to remove the reference to 
project-based assistance.
    HUD notes in this context that the voluntary conversion rule as 
currently codified at 24 CFR 972.212(d) states that HUD may require 
that funding for the initial year of tenant-based assistance be 
provided from the public housing Capital Fund, Operating Fund, or both. 
This is a regulatory provision not found in the voluntary conversion 
statute,

[[Page 62267]]

section 22(f) of the 1937 Act (42 U.S.C. 1437t(f)), although that 
statute has a clause granting discretion to the Secretary in this area 
(``[t]o the extent approved by the Secretary''). HUD notes as a point 
of clarification that this statement is only true to the extent that 
use of Capital or Operating funds for this purpose is specifically 
provided for in appropriations acts, and that there is currently no 
appropriation, outside of the limited Rental Assistance Demonstration 
under the Consolidated and Further Continuing Appropriations Act, 2012 
(Pub. L. 112-55, approved November 18, 2011), that allows either 
Operating or Capital fund appropriations to be used for this purpose. 
However, HUD is retaining this language in its regulations in case 
Congress chooses to grant HUD this ability in an upcoming 
appropriation.
Specific Questions for Public Comment
    HUD welcomes public comments on any issue relevant to this 
rulemaking. HUD is also interested in public comments on the following 
specific subjects:
    <bullet> The proposed definition of ``commensurate public benefit'' 
in proposed Sec.  970.5;
    <bullet> Whether or not the definition of ``disposition'' in 
proposed Sec.  970.5 should include a PHA's transfer to the PHA's own 
nonprofit instrumentality;
    <bullet> The requirements for a PHA to amend an existing approval 
under proposed Sec.  970.7(e). For example, should the PHA be required 
to get a board resolution approving the amendment request? Should the 
PHA be required to consult residents and local government officials on 
the amendment request? Should it depend on whether the change is minor 
or significant?
    <bullet> The circumstances under which a PHA would want to only 
demolish structures on public housing property under proposed Sec.  
970.15 without also proceeding with a disposition of the vacant land 
after demolition (considering the land would remain under the 
conventional ACC and DOT and could only be used for public housing 
purposes, e.g., to construct new public housing units), and there is 
limited funding for such purposes;
    <bullet> In those instances where PHAs seek to both demolish and 
dispose of public housing projects as part of the same request, when 
would it be appropriate for HUD to allow a PHA to demolish obsolete 
structures (with HUD funds) only to immediately seek to dispose of the 
underlying vacant land, and whether HUD should instead require the PHA 
to dispose of the obsolete structures in their ``as-is'' obsolete 
condition and have the acquiring entity agree to demolish or otherwise 
dispose of or use that property?
    <bullet> The criteria HUD should use in determining if a project is 
obsolete as to location under Sec.  970.15(a)(1)(ii) and whether HUD 
should require the PHA to simultaneously submit a disposition 
application in these instances;
    <bullet> For HUD to approve disposition under proposed Sec.  
970.17(b) for acquisition of other properties that will more 
efficiently or effectively operate as low-income housing, how far along 
must the development/acquisition of the replacement housing be? Is it 
enough that the PHA be irrevocably committed for the replacement units? 
Alternatively, is it enough that the PHAs have permanent financing in 
place and the actual replacement units identified? If the replacement 
units are public housing units, should a threshold requirement for 
approval under this section include those replacement units having met 
the applicable site and neighborhood standards? If the replacement 
units are not public housing but other low-income housing units (e.g., 
project-based Section 8 units), how much involvement should HUD have in 
the development of those units to assure that they will be more 
effectively and efficiently operated as low-income housing than the 
units proposed for disposition?
    <bullet> For HUD to approve disposition under proposed Sec.  
970.17(b) for acquisition of other properties that will more 
efficiently or effectively operate as low-income housing, this 
rulemaking proposes that the minimum replacement amount be 75 percent 
of the units (all units housing families displaced by the action must 
be replaced). HUD would also consider a minimum of 50 percent, and 
would be interested in public comment on this issue;
    <bullet> Are there any additional factors HUD should consider when 
approving a disposition for less than FMV under Sec.  970.19(b)? Should 
the definition of commensurate public benefit under Sec.  970.5 be 
amended?
    <bullet> In what extent of planning should a PHA engage under Sec.  
970.25 without receiving HUD approval under section 18? For instance, 
should a PHA issue RFQs or RFPs that assume HUD will approve a full or 
partial demolition and/or disposition of the project?
    <bullet> In order to preserve and make most efficient use of 
appropriated funds, should HUD limit tenant protection vouchers (TPVs) 
to fewer than the number of occupied units being replaced in cases 
where the PHA can provide assistance from funds already allocated to 
it?

IV. Findings and Certifications

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 (PRA), 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.
    HUD currently collects information related to this rule through OMB 
PRA package 2577-0075 (which expires in August 2014). That information 
package includes submission requirements for the current 24 CFR part 
970 rule, as well as submission requirements for 24 CFR part 972 
(required and voluntary conversion), 24 CFR part 906 (homeownership), 
and eminent domain takings and de minimis demolitions (both exempt from 
Section 18 and the requirements of 24 CFR part 970). HUD will revise 
this PRA package 2577-0075 to reflect the changes made to this rule 
once the final version of this rule is published in the FR.
    HUD estimates the burden increase on PHAs from this rule as 161.75 
hours. HUD estimates the average cost to the PHA (staff salary) for 
these hours to be approximately $30 per hour. The modest increase from 
the current rule will benefit PHAs, HUD, and public housing residents 
and in several general ways, including:
    (1) Faster application processing: HUD cannot process incomplete or 
substantially deficient applications. By clearly indicating (at a 
modest increase) the application submission materials that PHAs are 
required to provide about their proposed disposition and/or demolition 
actions, HUD staff will be less likely to reject an application for 
being incomplete or deficient. In addition, HUD staff will be able to 
more quickly process an application that meets the clearer requirements 
of this revised rule. Finally, HUD staff will be able to complete its 
civil rights compliance review in a much more streamlined and 
expeditious manner;
    (2) Better protection for public housing residents--in assuring 
PHAs comply with all applicable requirements related to resident 
relocation and consultation;
    (3) Better information for monitoring: HUD staff has an ongoing 
obligation to assure PHAs comply with the terms and requirements of 
Section 18, this revised rule, and the HUD approval letter. Sometimes 
these requirements extend

[[Page 62268]]

for 30+ years (use restrictions on land, receipt and use of proceeds). 
Requiring PHAs to submit annual reports to HUD will vastly assist HUD 
in its monitoring efforts.
    Specific explanations for the increase in burden hours are as 
follows:
    <bullet> 24 CFR 970.3(b)(5), (7), (9), and (18): HUD is clarifying 
that although these actions are exempt from Section 18 and the 
``normal'' submission requirements of 24 CFR 970.7, HUD approval is 
nevertheless required and this requires a very modest PRA submission 
requirement;
    <bullet> 24 CFR 970.3(b)(10): HUD is clarifying that although these 
eminent domain actions are exempt from Section 18 and the ``normal'' 
submission requirements of 24 CFR 970.7, HUD approval is nevertheless 
required and this requires a PRA submission requirement as is currently 
captured in PRA package 2577-0075);
    <bullet> 24 CFR 970.3(c)(7): HUD is requiring PHAs to submit 
modestly more information about their relocation plans to HUD. The 
current rule requires PHAs to keep their relocation plans on file so 
the increased burden is minimal. This information will also assist HUD 
in doing a quicker civil rights compliance review;
    <bullet> 24 CFR 970.7(c)(8): HUD is requiring PHAs to submit 
modestly more information about their resident consultations to HUD, 
including communication to persons with disabilities. This information 
will also assist HUD in doing a quicker civil rights compliance review;
    <bullet> 24 CFR 970.7(c)(10) and (15): HUD is requiring PHAs to 
submit a legal opinion related to the acquiring entity (if applicable 
with dispositions) and outside financing (if applicable with CFFP, 
OFFP, or EPC). The legal opinion may be done by in-house PHA counsel or 
outside counsel. The purpose of this is to assure PHAs are aware of the 
legal implications of these disposition requirements;
    <bullet> 24 CFR 970.7(c)(13): In the case of disposition proposed 
at below FMV based on commensurate public benefit in accordance with 
Sec.  970.19, HUD is clarifying the information that PHAs are required 
to submit including: (i) A detailed description of any housing that 
will be located on the property, including the number of units, bedroom 
sizes, accessibility, affordability, and priorities for displaced 
residents; (ii) The proposed length of time in which the acquiring 
entity will maintain the former project for the proposed future use 
(HUD will generally require the proposed future use remain as such for 
not less than 30 years, but will consider other factors such as the 
extent of public benefits (e.g., number of affordable units) arising 
from proposed disposition and the FMV of the property in determining if 
a period of less than 30 years is acceptable); (iii) The plan to 
implement the opportunity to return requirement for existing residents' 
as outlined in Sec.  970.21(d); and (iv) The proposed legal 
documentation (e.g., use restriction, provision in ground lease, 
declaration of restrictive covenant) the PHA proposes to ensure the 
approved use. This information is necessary for HUD to fully evaluate 
and review the ``opportunity cost'' of a PHA not disposing of public 
housing property at its FMV and using the proceeds for authorized 
purposes under the statute. HUD is currently processing applications in 
a way that requests much of this information. This section of the 
proposed rule makes these requirements clearer and more transparent;
    <bullet> 24 CFR 970.7(e)(1): HUD is clarifying that PHAs must 
request HUD approval to amend any aspect of an approved demolition/
disposition application;
    <bullet> 24 CFR 970.15(a)(1)(i): HUD is requiring that obsolescence 
be verified by an independent architect or engineer not employed by the 
PHA. PHAs area already required to submit supporting information about 
obsolescence, so this burden reporting increase is minimal in that it 
just requires the submission be prepared by a professional other than 
the PHA staff;
    <bullet> 24 CFR 970.17(b)(3): HUD is requiring documentation on its 
replacement housing plan to assure the PHA meets the requirements of 
this section, as newly implemented by this rule revision, including 
information on the financing plan, etc., for the replacement units;
    <bullet> 24 CFR 970.37(a)(3): To assure continued compliance with 
all statutory and regulatory requirements, HUD is reserving the right 
to require PHAS to submit reports in the form and frequency required by 
HUD. The purpose of this is to assist HUD with monitoring these actions 
(there has been a vast increase in OIG investigations and findings 
related to approved demolition and disposition actions). While this 
section is one of the largest increases in the reporting burden in this 
proposed rule, HUD thinks it is justified. However, the rule is written 
in a way that allows HUD to implement this and reduce the burden on 
some or all PHAs. For instance, HUD could further implement this in a 
way to require reporting under this section at a frequency of less than 
1 time per year (e.g., on an as-requested basis). In addition, HUD 
could revise/reduce/eliminate this burden, for instance, for small 
PHAs, per OMB's other comment;
    <bullet> 24 CFR 970.45(a): HUD is requiring PHAs to submit 
documentation on assuring that it is justified, under these HUD 
criteria, to retain property free of federalized public housing 
restrictions (e.g., evidencing good cause) under the new subpart B.
    This information, like currently required information, will be 
collected via on-line application and reviewed by HUD's Special 
Application Center (SAC) to ensure that PHAs meet the statutory and 
regulatory requirements necessary for HUD to approve inventory removal 
actions. HUD approval is necessary prior to PHAs removing their public 
housing property in order to protect the Federal interest in the public 
housing property under the ACC and Declaration of Trust. This 
information is also collected so that HUD has an accurate database of 
Federal public housing inventory and so the HUD Field Office can 
effectively monitor the implementation of the removal action.
    The burden of the information collections in this rule is estimated 
as follows:

                                       Reporting and Recordkeeping Burden
----------------------------------------------------------------------------------------------------------------
                                                                                     Estimated
                                                                     Number of     average  time     Estimated
                Section reference                    Number of     responses per        for       annual  burden
                                                    respondents     respondent      requirement      (in hours)
                                                                                    (in hours)
----------------------------------------------------------------------------------------------------------------
970.3(b)(5) PHA request for HUD approval for                  25               1             .15             7.5
 agreement related to operation of public
 housing........................................
970.3(b)(7) PHA request for HUD approval for                   5               1             .15             2.5
 agreement of leasing of project................

[[Page 62269]]

 
970.3(b)(9) PHA request for HUD approval for                  25               1             .15             7.5
 easements related to operation of public
 housing........................................
970.3(b)(10) Eminent Domain.....................               7               1               2              14
970.3(b)(12) Dispositions for property developed              20               1               2              40
 pursuant to 24 CFR 905.604.....................
970.3(b)(13) De Mimimis Demolition..............              15               1               2              30
970.3(b)(16) Demolitions due to disaster........               8               1               1               8
970.3(b)(17) De Minimis Dispositions............               3               1             .15             4.5
970.3(b)(18) Occupancy Consolidation approval...              10               1             .15             1.5
970.7(c)(1) Certification authorized in PHA Plan             150               1             .05             7.5
970.7(c)(2) Description of property.............             150               1             .10              15
970.7(c)(3) Vacant units........................             100               1             .05               5
970.7(c)(4) Description of action proposed......             150               1             .15            22.5
970.7(c)(5) General Timeframe...................             150               1             .05             7.5
970.7(c)(6) Justification for action............             150               1               1             150
970.7(c)(7) Relocation Certification and plan...             100               1               1             100
970.7(c)(8) Resident Consultation Description...             150               1               1             150
970.7(c)(9) Offer to sell to residents or                    100               1             .10              10
 exception to offer to sell (disposition only)..
970.7(c)(10) Legal Opinion as to acquiring                   100               1             .05               5
 entity (disposition only)......................
970.7(c)(11) Fair market value of property                   100               1             .10              10
 (disposition only).............................
970.7(c)(12) Estimates of the gross and net                  100               1             .45              45
 proceeds to be realized and proposed uses
 (disposition only).............................
970.7(c)(13) Proposed commensurate public                     70               1               1              70
 benefit in accordance for below FMV disposition
 (disposition only).............................
970.7(c)(14) Debt Waiver (disposition only).....             100               1             .05               5
970.7(c)(15) Legal Opinion as to other debt                   50               1             .05             2.5
 financing......................................
970.7(c)(16) Board Resolution...................             150               1             .05             7.5
970.7(c)(17) Local government consultation......             150               1             .10              15
970.7(c)(18) Environmental review...............             150               1             .10              15
970.7(c)(19) Civil Rights Compliance                         150               1             .15            22.5
 Certification..................................
970.7(c)(20) Civil rights description of                     150               1             .50              50
 residents......................................
970.7(c)(21) Certification will comply with HUD              150               1             .05               5
 approval.......................................
970.7(c)(22) Additional requested information...             100               1             .50              50
970.7(e)(1) Amendments requests.................             100               1               1             100
970.7(e)(2) Recession requests..................               5               1               1               5
970.35 Removal of all units in a PHA's                        10               1               2              20
 inventory, HUD approvals, and audit............
970.37 Record-keeping and reporting requirements             250               1               1             250
970.43 Requirements for HUD approval under                     5               1               2              20
 subpart B......................................
----------------------------------------------------------------------------------------------------------------
    Total Paperwork Burden for the New Rule.....            1483
    Total Burden from Previous Rule (24 CFR part         1321.25
     970).......................................
    Total additional burden as a result of this           161.75
     rule.......................................
----------------------------------------------------------------------------------------------------------------

    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-5563) 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 Public and Indian Housing, 
Department of Housing and Urban Development, 451 7th Street SW., 
Washington, DC 20410.
    Interested persons may submit comments regarding the information 
collection requirements 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

[[Page 62270]]

instructions provided on that site to submit comments electronically.

Executive Order 12866--Regulatory Impact Analysis

    At the outset, it is determined that while the proposed rule is a 
significant regulatory action, it is not economically significant. The 
rule addresses programmatic concerns to an existing regulation, 
clarifies ambiguous language in program regulations, strengthens 
internal controls, and facilitates the full implementation of the 
demolition and disposition processes. To the extent that this proposed 
rule would alter the previous demolition/disposition requirements, it 
would do so in ways that are likely to leave the economic impact mostly 
unchanged.
    Notwithstanding, the proposed rule would marginally add to the 
administrative burden associated with added oversight and compliance 
and would generate some costs. Housing authorities and other program 
participants would also benefit from the added clarity in the 
demolition and disposition regulations. These program clarifications 
would also certainly translate into some cost savings. On average, 
HUD's special application center (SAC) estimates that the total 
additional administrative burden as a result of this rule is 162 hours 
per application per year. Each year, the center receives between 150 
and 200 applications for demolition and or disposition. If we assume 
that the average hourly rate is $70, the total compliance cost would be 
between $1.70 million and $2.27 million a year.
    In regards to the above, it is concluded that this proposed rule is 
not a major rule under Executive Order 12866 and OMB Circular A-4 as it 
would not result in transfers of funding to and among stakeholders of 
more than $100 million per year.

Background

    HUD has promulgated a regulation, 24 CFR part 970, detailing the 
administrative steps required to perform demolition/disposition 
activity in accordance with the 1937 Act, as authorized under section 
18 of the 1937 Act, 42 U.S.C. 1437p. A revision to 24 CFR part 970 was 
published in the Federal Register on October 24, 2006, and took effect 
on November 24, 2006. A correction to the revised 24 CFR part 970 was 
published in the Federal Register on January 23, 2008.
    Although demolition/disposition activity has always been permitted, 
HUD and its business partners have begun to actively pursue it as a 
management strategy option in the last twenty years with the HOPE VI 
program. This is due to the realization that some developments have 
difficulties associated not only with physical deterioration of the 
housing stock, but also with the overall condition of the community 
surrounding the public housing development subject to demolition or 
disposition. It is also true that a large portion of the housing now 
being proposed for demolition/disposition was built in the late 1940s 
and early 1950s, and was built to a standard that is no longer 
acceptable for the general public.
    Currently, demolitions and dispositions are approved based on 
certification by the public housing agency (PHA) that certain 
conditions are met. About 150,000 of the 1.4 million public housing 
units available in 1989 have been demolished, converted, or disposed 
of. The program would continue to lose thousands more units every year 
as properties continue to deteriorate. Based on the HUD's 2010 Capital 
Needs in the Public Housing Program study, there is no sign that this 
trend will change anytime soon. This Congressionally-funded study 
estimated that the aggregate national capital backlog exceeds $25.6 
billion--or, $23,365 per unit--in the public housing portfolio 
alone.\3\
---------------------------------------------------------------------------

    \3\ http://portal.hud.gov/hudportal/documents/huddoc?id=PH_Capital_Needs.pdf.
---------------------------------------------------------------------------

Costs and Benefits.

    The inception of this proposed rule does not come from a perceived 
market failure, but rather, from the desire to strengthen and 
streamline the demolition and disposition processes to reflect changes 
that have occurred in the public housing program over the last 20 
years. As such, while the proposed rule would marginally add 
administrative burden, this proposed rule would not have any 
significant financial or cost incidence on stakeholders, but it would 
create greater clarity regarding the demolition and disposition 
process. The rule adds increased clarity and guidance to assist PHAs in 
determining when a demolition and/or disposition may be appropriate for 
their public housing inventories (e.g., so a PHA would be less likely 
to put the time into preparing and submitting an application to HUD 
that would not meet the criteria necessary for HUD approval and thus 
would not waste its or HUD's staff time and resources. Based on the 
clarified and new guidance in the rule, some PHAs may sometimes opt not 
to apply for demolition/disposition and instead pursue other HUD 
tools--e.g. CFFP financing--for their public housing stock);
    The rule adds increased clarity and guidance on what HUD will 
require to approve an application submitted by a PHA (e.g., HUD will 
re-do the paperwork burden--HUD form--to make the application easier to 
fill-out by PHAs. Applications submitted by PHAs will be more likely to 
be approved by HUD because PHAs will be better able to show that they 
are meeting the applicable HUD criteria. Further, HUD's review time 
will likely be significantly reduced, a cost benefit to both PHAs and 
HUD).
    On average, HUD's SAC estimates that the total additional 
administrative burden as a result of this rule is 162 hours per 
application per year. Each year, the center receives between 150 and 
200 applications for demolition and or disposition. If we assume that 
the average hourly rate is $70, the total compliance cost would be 
between $1.70 million and $2.27 million a year.\4\ The proposed rule 
requires that the determination of obsolescence be found by an 
independent (that is not a regular employee of the PHA) architect or 
engineer.
---------------------------------------------------------------------------

    \4\ The Congressional Budget Office (CBO) reports that the 
average total compensation for a federal government employee with a 
Master's Degree was $65.30 in 2010 or $70 adjusted for inflation in 
2013. CBO, comparing the Compensation of Federal and Private-Sector 
Employees, January 2012, available at http://www.cbo.gov.
---------------------------------------------------------------------------

    In addition, units that are demolished or disposed of do not 
receive full funding under the public housing operating and capital 
funds. Under the public housing program, these units receive a 
proration and under the capital funds, they receive replacement housing 
factor funds. Funds retained under the capital fund program are 
redistributed to PHAs (including the applying PHA) by formula. The same 
units removed from the inventory and the PHA will no longer receive 
operating funds for those units, but the PHA will also not have any 
operating or maintenance expenses for those units.

Transfers

    The proposed rule would create very little additional financial 
flux. It is likely that the proposed rule may generate up to $2.23 
million in additional compliance costs. These costs would constitute 
transfers to architects, engineers, lawyers, accountants, etc. For 
example, the proposed rule requires that the determination of 
obsolescence be found by an independent (that is not a regular employee 
of the PHA) architect or engineer.

[[Page 62271]]

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (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. 
This proposed rule would not change existing requirements applicable to 
demolition and disposition of public housing, but would clarify and 
include additional detail regarding such requirements, to assist those 
PHAs that seek to demolish or dispose of public housing fully meet 
these requirements.
    The rule is voluntary. PHAs may choose to continue to retain all of 
their current public housing property and operate and maintain it in 
accordance with all public housing requirements (and obtain all 
available HUD funding to do this). For those entities that choose to 
demolish or dispose of public housing units, as discussed in Section 
III of this preamble, while the proposed rule would add marginally to 
administrative burden associated with increased oversight and enhanced 
compliance, the proposed rule would also generate savings through the 
greater clarity brought to existing requirements, as well as relieve 
the PHAs of the cost associated with the preexisting legal requirement 
to maintain all of their residential units in a condition that is 
decent, safe, sanitary, and in good repair (24 CFR 5.703). Additionally 
and importantly, the proposed rule does not alter the exemption from 
the annual PHA Plan requirements that are applicable to qualified 
public housing agencies, which are small agencies, which significantly 
reduces the administrative burden associated with demolishing or 
disposing of property.
    For those PHAs that choose to demolish or dispose of their public 
housing units, data shows that relatively few are small PHAs and the 
economic impact on those PHAs is not significant. Between January 2009-
January 2014, HUD received approximately 930 demolition and/or 
disposition applications from PHAs (an average of 186/year). Of these 
approximately 930 applications, approximately 136 were submitted by 
PHAs that are currently small PHAs (PHAs with inventories of 50-249 
public housing units) and approximately 16 applications were submitted 
by PHAs that are currently very small PHAs (PHAs with inventories of 1-
49 of total public housing units) (note that some of these PHAs may 
have been large PHAs at the time of the application). Only 23 small and 
very small PHAs submitted more than one application during this period. 
Thus the demolition and/or disposition applications submitted by small 
and very small PHAs over the past 5 years represent only about 16.3 
percent of all applications received. There are approximately 2,310 
small or very small PHAs nationwide out of 3,089 total PHAs, and thus 
the percentage of all small or very small PHAs submitting applications 
over the last 5 years is only 6.6 percent of all small or very small 
PHAs, and only 4.9 percent of all PHAs. Thus, there are not a 
substantial number of small entities involved.
    As noted in the Regulatory Impact Analysis, the average cost to 
PHAs is $70 per hour, and the average number of hours per application 
is 162, resulting in an average cost of $11,340. The average 2013 
budget of small and very small PHAs is approximately $104,230 in 
Capital Funds and $197,159 in Operating Funds, so this cost, on 
average, represents only 3.8 percent of a small PHA's funding, which is 
not a significant impact.
    As also noted in Section III of this preamble, applying for 
demolition or disposition of a portion of the property has no economic 
impact on the PHA apart from this minor administrative cost; units are 
removed from the inventory and the PHA will no longer receive operating 
funds for those units, but the PHA will also not have any operating or 
maintenance expenses for those units. Furthermore, any resident 
relocation would be to existing PHA housing or funded through section 8 
of the 1937 Act, 42 U.S.C. 1437f. Accordingly, HUD has determined that 
this rule would 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.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) 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.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations in 24 CFR part 50 that 
implement section 102(2)(C) of the National Environmental Policy Act of 
1969 (42 U.S.C. 4332(2)(C)). The Finding is available for public 
inspection during regular business hours 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 Finding by calling the Regulations Division 
at (202) 402-3055 (this is not a toll-free number). Individuals with 
speech or hearing impairments may access this number via TTY by calling 
the Federal 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.

Catalog of Federal Domestic Assistance Number

    The Catalog of Federal Domestic Assistance number for 24 CFR part 
970 is 14.850.

List of Subjects in 24 CFR Parts 970 and 972

    Grant programs--housing and community development, Public housing, 
Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, HUD proposes to amend 24 
CFR parts 970 and 972 as follows:

0
1. 24 CFR part 970 is revised to read as follows:

[[Page 62272]]

PART 970--PUBLIC HOUSING PROGRAM--DEMOLITION OR DISPOSITION OF 
PUBLIC HOUSING PROJECTS

Subpart A--Demolitions and Dispositions Under Section 18 of the U.S. 
Housing Act of 1937
Sec.
970.1 Purpose.
970.3 Applicability.
970.5 Definitions.
970.7 General requirements for HUD review and approval of a 
demolition or disposition application.
970.9 Resident participation--consultation and opportunity to 
purchase.
970.11 Procedures for the offer of sale to an Established Eligible 
Organization.
970.12 Civil rights and equal opportunity review.
970.13 Environmental review requirements.
970.14 Section 3 compliance.
970.15 Specific criteria for HUD approval of a demolition 
application.
970.17 Specific criteria and conditions for HUD approval of a 
disposition application.
970.19 Requirements for the disposition of a project.
970.20 Use and treatment of proceeds.
970.21 Relocation of residents.
970.23 Costs of demolition and relocation of displaced residents.
970.25 Required and permitted actions prior to approval.
970.27 De minimis exception to demolition application requirement.
970.29 Criteria for HUD disapproval of a demolition or disposition 
application.
970.31 Effect on Operating Fund Program and Capital Fund Program.
970.33 Demolitions due to emergency, disaster, or accidental loss.
970.35 Removal of all projects in the PHA's public housing 
inventory.
970.37 Reports and records.
Subpart B--Real Property Transactions: Retention of Projects by Public 
Housing Agencies
970.39 Definitions.
970.41 Applicability.
970.43 Removal of a project from public housing without a transfer 
to a third party.
970.45 Specific criteria for HUD approval of requests under this 
subpart.

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

Subpart A--Demolitions and Dispositions Under Section 18 of the 
U.S. Housing Act of 1937


Sec.  970.1  Purpose.

    This part states requirements for HUD approval of applications for 
demolition or disposition (in whole or in part) of public housing 
projects assisted under Title I of the U.S. Housing Act of 1937 (1937 
Act). This subpart states the requirements applicable to demolitions 
and dispositions of public housing projects as provided under section 
18 of the 1937 Act. Subpart B of this part states the requirements 
applicable to real property transactions and retention of projects by 
public housing agencies (PHAs). The regulations in 24 CFR part 85 are 
not applicable to this subpart, and are addressed in subpart B of this 
part.


Sec.  970.3  Applicability.

    (a) This subpart applies to public housing projects that are 
subject to an annual contributions contract (ACC) under the 1937 Act 
and which are proposed for demolition, disposition, or both, through an 
application under section 18 of the 1937 Act, and includes projects 
owned by PHAs;
    (b) This subpart does not apply to the following:
    (1) Public housing projects that PHAs apply to retain under subpart 
B of this part;
    (2) PHA-owned Section 8 housing, or housing leased under former 
sections 10(c) or 23 of the 1937 Act;
    (3) Demolition or disposition before the date of full availability 
(DOFA) of property acquired incidental to the development of a project 
(however, this exception shall not apply to dwelling units under ACC);
    (4) The conveyance of projects for the purpose of providing 
homeownership opportunities for low-income families under sections 21 
and 32 of the 1937 Act (42 U.S.C. 1437s and 42 U.S.C. 1437z-4, 
respectively), the homeownership program under former section 5(h) of 
the 1937 Act (42 U.S.C. 1437c(h)), or other predecessor homeownership 
programs;
    (5) An agreement with a third party (e.g., leases or license, solar 
roof top lease, telecommunications lease, garden or park space) 
provided such agreement:
    (i) Benefits the PHA and its residents;
    (ii) Is consistent with the PHA's Plan (as determined by HUD);
    (iii) Is consistent with the PHA's ACC with HUD; and
    (iv) Is approved in writing by HUD;
    (6) The adaptation or utilization of portions of projects 
(including available common areas and unoccupied dwelling units) for 
authorized non-dwelling purposes related to public housing, including 
resident amenities, activities and services, and public housing 
administration;
    (7) The leasing of a project (but not individual dwelling units) 
for the purpose of enabling a prospective owner-entity to show site 
control in an application for funding for the redevelopment of the 
project, such as low-income housing tax credits (LIHTC), provided such 
lease is for one year or less and is approved by HUD in writing;
    (8) The reconfiguration of the interior space of buildings (e.g., 
moving or removing interior walls to change the design, sizes, or 
number of units) for an authorized use related to the normal operation 
of public housing, without ``demolition,'' as defined in Sec.  970.5. 
(This includes the reconfiguration of bedroom size, occupancy type, or 
changing the status of unit from dwelling to non-dwelling in accordance 
with all applicable HUD requirements and approvals. Changes in the 
number of units or number of bedrooms will be reflected in the PIH 
Information Center (PIC) or any future substitute system required by 
HUD);
    (9) Easements, rights-of-way, and transfers of utility systems 
related to the normal operation of the project for public housing 
purposes as permitted by the ACC, provided such easements, rights-of-
way, and transfers of utility systems are approved by HUD in writing;
    (10) A whole or partial taking by a public or quasi-public entity 
(taking agency) authorized to take real property by its use of police 
power or exercise of its power of eminent domain under state law. A 
taking does not qualify for the exception under this paragraph unless:
    (i) The taking agency has been authorized to acquire real property 
by use of its police power or power of eminent domain under its state 
law;
    (ii) The taking agency has taken at least the first step in formal 
proceedings under its state law; and
    (iii) If the taking is for a federally assisted project, the 
Uniform Relocation Assistance and Real Property Acquisition Policies 
Act of 1970 (URA) (42 U.S.C. 4601 et seq.) applies to any resulting 
displacement of residents and it is the responsibility of the taking 
agency to comply with applicable URA requirements;
    (11) Real property (vacant land and improvements) that is owned or 
has been acquired by, or donated to, a PHA with public housing or other 
funds and then conveyed, sold, or otherwise transferred to an owner-
entity prior to DOFA to enable an owner-entity to develop the property 
using the mixed-finance development method at 24 CFR 905.604;
    (12) Disposition of vacant land (but not units) comprising a 
project for development pursuant to the mixed-finance development 
method at 24 CFR 905.604 are exempt from this regulation, but not 
Section 18 of the 1937 Act, and provided that the PHA:
    (i) Submits an application, in the form prescribed by HUD, that 
evidences to HUD's satisfaction that it has complied

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with the requirements of section 18 of the 1937 Act; and
    (ii) Receives HUD approval of that application before commencing 
the disposition of the project;
    (13) Demolition under the de minimis exception in Sec.  970.27, 
except that the environmental review provisions apply, including the 
provisions at Sec. Sec.  970.7(c)(18) and 970.13, provided that the PHA 
notifies HUD in the form prescribed and submits the documents and 
information outlined in Sec.  970.27(e) and, except in cases of 
imminent threats to health or safety, HUD acknowledges the action in 
writing prior to the commencement of the demolition;
    (14) Demolition (but not disposition) of severely distressed units 
as part of a revitalization plan under section 24 of the 1937 Act (42 
U.S.C. 1437v) (HOPE VI and Choice Neighborhoods) approved after October 
21, 1998;
    (15) Demolition (but not disposition) of projects removed from a 
PHA's inventory under section 33 of the 1937 Act (42 U.S.C. 1437z-5);
    (16) Demolition of projects due to a disaster, sudden accidental or 
casualty loss, as permitted by the ACC and Sec.  970.33, provided the 
PHA submits the documents and information outlined in Sec.  970.33;
    (17) Dispositions of projects of a de minimis nature that are 
necessary to correct and/or clarify legal descriptions to deed or 
ownership documents, provided such de minimis dispositions are approved 
by HUD; and
    (18) Consolidation of occupancy within or among buildings of a 
project, or among projects, or with other low-income housing for the 
purposes of improving living conditions of, or providing more efficient 
services to residents, provided such consolidation of occupancy is done 
in accordance with applicable federal laws and requirements, which may 
include the PHA's written policies on admissions and continued 
occupancy, the PHA's section 8 Administrative Plan (24 CFR part 982), 
and PHA Plan requirements (24 CFR part 903), and further provided the 
PHA notifies HUD in writing in advance of such occupancy consolidation.
    (c) The exclusion of activities in Sec.  970.3(b) from 
applicability of this subpart does not impair the applicability of 
other requirements that apply independently of section 18 of the 1937 
Act, including the requirements of section 104(d) of the Housing and 
Community Development Act of 1974 (42 U.S.C. 5304(d)).


Sec.  970.5  Definitions.

    1937 Act, is defined in 24 CFR 5.100.
    ACC, or annual contributions contract, is defined in 24 CFR 5.403.
    Accessible, or accessibility, means accessible to persons with 
disabilities as defined further in HUD's regulations at 24 CFR 8.3.
    Appropriate government officials mean the Chief Executive Officer 
or officers of a unit of general local government.
    Assistant Secretary means the Assistant Secretary for Public and 
Indian Housing at HUD.
    Chief Executive Officer of a unit of general local government means 
the elected official or the legally designated official who has the 
primary responsibility for the conduct of that entity's governmental 
affairs and who has the authority to contractually bind the 
jurisdiction. Examples of the chief executive officer of a unit of 
general local government are: The elected mayor of a municipality; the 
elected county executive of a county; the chairperson of a county 
commission or board in a county that has no elected county executive; 
and the official designated pursuant to law by the governing body of a 
unit of general local government.
    Commensurate public benefit means benefits to the residents of the 
PHA, the community, and/or the federal government, as approved by HUD. 
General public improvements or public infrastructure such as streets 
and bridges, do not qualify as commensurate public benefits. HUD will 
generally consider the following to be commensurate public benefits:
    (1) Rental dwelling units (in a number approved by HUD) to house 
low-income families (as defined herein) for a period required by HUD of 
not less than 30 years from the date such units are available for 
occupancy, and for which all lease-compliant public housing residents 
(as defined herein) who are displaced from a public housing project (as 
defined herein) due to a demolition and/or disposition under this part 
are provided with an opportunity to return to size-appropriate public 
housing units that are rebuilt on the site;
    (2) Homeownership dwelling units (in a number approved by HUD) 
affordable to low-income families;
    (3) Non-dwelling structures or facilities to serve low-income 
families, as approved by HUD; and
    (4) Other or additional benefits as approved by HUD (which may 
include, in part, planning and carrying out section 3 activities under 
section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 
1701u) (section 3 or section 3 activities) related to these proposed 
benefits)).
    Comparable housing means housing that meets housing quality 
standards (HQS) (or such successor standard that HUD may adopt) and is 
appropriate in size for the household. For residents with a disability, 
comparable housing must include the accessibility features needed by 
the resident and must be located in the most integrated setting 
appropriate for the resident with a disability (i.e., the setting that 
enables the resident to interact with non-disabled persons to the 
fullest extent possible and have access to community-based services). 
Comparable housing must be located in an area that is generally not 
less desirable than the location of the displaced resident's current 
public housing unit. In determining comparable housing, a PHA shall 
also consider the following criteria (in aggregate): Neighborhood 
safety; quality of local schools; accessibility of amenities (e.g., 
transportation, employment); and exposure to adverse environmental 
conditions. Relocation associated with demolition and disposition plans 
must be consistent with the PHA's obligation to affirmatively further 
fair housing (42 U.S.C. 3608(e)(5))).
    (1) Comparable housing for displaced residents is generally other 
subsidized housing and may include:
    (i) Tenant-based assistance under section 8 of the 1937 Act;
    (ii) Project-based assistance under section 8 of the 1937 Act; or
    (iii) Occupancy in a unit operated or assisted by a PHA at a rental 
rate paid by the resident that is comparable to the rental rate 
applicable to the public housing unit from which the resident is 
displaced. Comparable housing for a resident household which is not 
eligible for public or assisted housing or in cases where no other 
comparable subsidized housing is available may be provided by offering 
referrals to non-subsidized housing currently available on the private 
market, and may include another level of housing assistance, as adopted 
by the PHA and approved by HUD, in order to mitigate the costs of 
displacement.
    (2) [Reserved]
    Demolition means the removal by razing or other means, in whole or 
in part, of one or more permanent buildings of a project such as to 
render the building(s) uninhabitable as defined by the applicable 
building occupancy code. A demolition involves:
    (1) The lifting and relocation of a building from its existing site 
to another site not covered by the same DOT; or
    (2) The removal of 50 percent or more of a building's partition 
walls in

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addition to four or more of the following:
    (i) Envelope removal (roof, windows, exterior walls);
    (ii) Kitchen removal;
    (iii) Bathroom removal;
    (iv) Electrical system removal (unit service panels and 
distribution circuits); or
    (v) Plumbing system removal (e.g., either the hot water heater or 
distribution piping in the unit, or both).
    Declaration of Trust (DOT) means a legal instrument that grants HUD 
an interest in a project. It provides public notice that the project 
must be operated in accordance with all public housing federal 
requirements, including the requirement not to convey or otherwise 
encumber the property unless expressly authorized by federal law and/or 
HUD.
    Displaced resident means a ``resident'' as defined in this section 
that is relocated permanently from the project as a direct result of a 
demolition and/or disposition action under this part. The term 
``displaced resident'' means a resident displaced from a project under 
this part and includes, but is not limited to:
    (1) An eligible public housing resident (including any current 
members of the resident household) that lives in a project at the time 
the displacement is approved, subject to an ACC under the 1937 Act; and
    (2) An over-income or other resident who is otherwise ineligible 
for occupancy in public housing or other subsidized housing who, at the 
time the displacement is approved, resides in a project subject to an 
ACC under the Act but occupies a unit under PHA policies for continued 
occupancy or other special rent exceptions.
    Disposition means the sale or other transfer (e.g. ground lease) of 
a project that will cause HUD to terminate the ACC with respect to the 
project and release the DOT recorded against the project, provided that 
such sale or transfer is to a legal entity that is independent from the 
PHA under the applicable state law.
    DOFA, or date of full availability, means the last day of the month 
in which substantially all (95 percent or more) of the units in a 
project are available for occupancy.
    Emergency means any occasion or instance for which, in the 
determination of the President or HUD, federal assistance is needed to 
supplement state and local efforts and capabilities to save lives and 
to protect property and public health and safety, or to lessen or avert 
the threat of a catastrophe in any part of the United States.
    Established Eligible Organization means any resident council or any 
resident management corporation as those terms are defined in 24 CFR 
part 964, or to a nonprofit organization acting on behalf of the 
residents.
    Fair Market Value (FMV) means the estimated market value of a 
project, as determined by an independent appraiser contracted but not 
employed by the PHA and completed within 6 months of the date an 
application is submitted to HUD, unless a longer time is approved by 
HUD.
    Firm financial commitment means a commitment that obligates a 
creditable source, lender, or equity provider, to the lending or equity 
investment of a specific sum of funds to be made on or before a 
specific date(s) and may contain contingencies or conditions that must 
be satisfied by the borrower (or entity receiving equity investments). 
The condition of a firm commitment must be that it is enforceable by 
the borrower (or entity receiving the equity investment) upon the 
satisfaction of all contingencies or conditions.
    Housing Quality Standards (HQS) has the same meaning as 24 CFR part 
982.
    Housing Construction Cost (HCC) has the same meaning as in 24 CFR 
part 905.
    Lease-compliant displaced resident means a displaced resident 
(including household members whose names appear on the public housing 
lease) who has not engaged in serious or repeated violations of 
material terms of the lease that result, or could result, in good cause 
to evict, and terminate the resident's assistance.
    Low-income families has the same meaning as found in section 3 of 
the 1937 Act (e.g., families with incomes that do not exceed 80 percent 
of area median income (AMI)).
    Low-income housing has the same meaning as section 3 of the 1937 
Act (e.g., decent, safe, and sanitary dwellings assisted under the 1937 
Act) and which may include public housing units and units assisted by 
funds from section 8 of the 1937 Act (e.g., tenant-based or project-
based voucher units under section 8 of the 1937 Act, and homeownership 
units developed under sections 32, 24, or 9 of the 1937 Act.)
    Major disaster means any natural catastrophe (including any 
hurricane, tornado, storm, high water, wind-driven water, tidal wave, 
tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, 
or drought), or, regardless of cause, any fire, flood, or explosion, in 
any part of the United States, which:
    (1) In the determination of the President causes damage of 
sufficient severity and magnitude to warrant major disaster assistance 
under this 1937 Act to supplement the efforts and available resources 
of states, local governments, and disaster relief organizations; or
    (2) Causes severe danger, hardship, or suffering, as determined by 
HUD.
    PHA or Public Housing Agency is defined at 24 CFR 5.100.
    PHA Plan means the plan the PHA is required to prepare and/or 
submit to HUD under section 5(A) of the 1937 Act (42 U.S.C. 1437c-1) 
and 24 CFR part 903, and which plan must be consistent with the 
jurisdiction's Consolidated Plan under 24 CFR part 91 (the PHA Plan is 
generally the annual plan unless the PHA is a Moving to Work (MTW) 
agency in which case it means the Annual MTW Plan).
    Project means discrete property, including all necessary 
appurtenances (e.g., playgrounds, as well as equipment and personal 
property that has been acquired with HUD funds and used in the 
operation, maintenance, or improvement of the project) and other real 
property developed, acquired, or assisted with funds under the 1937 
Act. A project may comprise vacant land and/or dwelling or non-dwelling 
structures. A project will generally have an identification number in 
the PIH Information Center (PIC), but may also include housing, 
including mixed finance public housing units, and other real property 
that has been acquired or otherwise developed with funds provided under 
the 1937 Act, but without prior HUD approval. A project may be owned by 
a PHA or, in whole or in part, by another owner entity pursuant to 24 
CFR 905.604. A project is governed by an ACC. For purposes of this 
part, the term project includes any housing or other real property, 
regardless of whether the property comprises all or a portion of 
property on a given site and/or within a project number, and includes 
units developed pursuant to the mixed finance method at 24 CFR 905.604. 
The term project means the same as the word development used in other 
HUD systems and guidance.
    Public housing funds are defined at Sec.  905.108 and include 
disposition proceeds that a PHA may realize under 42 U.S.C. 1437p. In 
the case of such proceeds, Sec.  970.20(d) applies.
    Public housing unit means a dwelling unit in a project, including a 
dwelling unit developed for homeownership under the 1937 Act (other 
than units developed for homeownership under section 8(y) of the Act) 
prior to the transfer of title of that unit to the homebuyer.
    Qualified PHA means a PHA that is considered a ``qualified public 
housing agency'' under section 2702 of the

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Housing and Economic Recovery Act of 2008 (HERA), codified at section 
5A(b)(3) of the 1937 Act (42 U.S.C. 1437c-1(b)(3)).
    Related to the normal operation of the project for public housing 
purposes means activities that are required or permitted to meet the 
obligations of the ACC, including the provision of low-income housing 
and related services and other benefits to the residents of the PHA.
    Resident means an individual or family who in accordance with the 
1937 Act:
    (1) Is living in a public housing unit;
    (2) Is living in a unit that is assisted with funds under section 8 
of the 1937 Act; or
    (3) Is eligible for assistance under an MTW agency's HUD-approved 
annual MTW plan.
    Resident Advisory Board (RAB) has the same meaning as in 24 CFR 
903.13(a).
    Resident Council means a resident organization, the role and 
requirements of which are as described in 24 CFR part 964.
    Resident Management Corporation (RMC) has the same meaning as 24 
CFR 964.7.


Sec.  970.7  General requirements for HUD review and approval of a 
demolition or disposition application.

    (a) Application for HUD approval. A PHA must obtain written 
approval from HUD before undertaking any transaction involving 
demolition and/or disposition of a project. Where a PHA demolishes or 
disposes of a project without HUD approval, no HUD funds may be used to 
fund the costs of demolition or disposition or reimburse the PHA for 
those costs. HUD will approve an application for demolition and/or 
disposition upon the submission of an application with the required 
certifications and the supporting information required by this section 
and Sec. Sec.  970.15 or 970.17. Section 970.29 specifies criteria for 
disapproval of an application. Approval of the application under this 
part does not imply approval of a request for additional funding, which 
the PHA must make separately under a program that makes such additional 
funding available.
    (b) Sufficiency of application. HUD will not consider an 
application for demolition, disposition, or both, unless the 
application contains all the substantial information set forth in Sec.  
970.7 and in this part, and will return an incomplete application to 
the PHA.
    (c) Form of application. Applications for demolition and/or 
disposition shall be submitted in the form and manner prescribed by 
HUD. The supporting information shall include:
    (1) A certification that the PHA has specifically authorized the 
demolition and/or disposition action in its PHA Plan or significant 
amendment to that plan unless the PHA is a qualified PHA under the 
Housing and Economic Recovery Act of 2008 (HERA), and the proposed 
action is consistent with any plans, policies, assessments, or 
strategies prepared pursuant to the PHA Plan, such as the 
deconcentration plan (24 CFR 903.2) and the obligation to affirmatively 
further fair housing (42 U.S.C. 3608(e)(5)). In the case of a qualified 
PHA, the PHA must describe the proposed demolition and/or disposition 
at its required annual public hearing (or a second public hearing if it 
determines to submit an application for demolition and/or disposition 
between its annual public hearings). Qualified PHAs must also comply 
with Sec. Sec.  970.12 and 970.7(c)(19) regarding civil rights and fair 
housing requirements in connection to 24 CFR part 903 and PHA Plans;
    (2) A description of all identifiable property (including dwelling 
and non-dwelling units, bedroom size, and whether the units meet the 
accessibility requirements of Section 504 of the Rehabilitation Act of 
1973 (29 U.S.C. 794) and HUD's implementing regulations at 24 CFR part 
8, other improvements, and land (acreage and legal description) in the 
project proposed for demolition and/or disposition, as well as 
equipment and personal property appurtenant to the project proposed for 
demolition and/or disposition;
    (3) The number of vacant units proposed for demolition and/or 
disposition and a narrative explanation for the reasons for the 
vacancies (e.g., health/safety issues, occupancy consolidation, 
emergency relocation due to disaster);
    (4) A description of the specific action proposed, such as:
    (i) Demolition, disposition, or demolition and disposition;
    (ii) If disposition is involved, the method of disposition (e.g., 
sale or lease terms, proposed compensation, negotiated or public bid 
disposition);
    (iii) The anticipated future use of the project after demolition 
and/or disposition, including any anticipated subsidies (e.g., low-
income housing tax credits, Section 8 project-based vouchers, Section 8 
tenant-based vouchers) that the PHA expects will be used for future 
dwelling that will be operated as housing for low-income families on 
the site of the former project; and
    (iv) Plans for replacement of demolished or disposed of housing, if 
any;
    (5) A general timetable for the proposed demolition and/or 
disposition, including the initial contract for demolition, the actual 
demolition, and, if applicable, the closing of sale or other form of 
disposition;
    (6) A statement and other supporting documentation justifying the 
proposed demolition and/or disposition under the applicable criteria of 
Sec. Sec.  970.15 or 970.17;
    (7) If any residents will be displaced by the proposed demolition 
and/or disposition, a certification that the PHA will comply with the 
relocation provisions of this part and a written relocation plan in 
compliance with this part that describes the proposed relocation of 
residents, and includes the following information:
    (i) The estimated number of individual residents and families to be 
displaced;
    (ii) The comparable housing resources the PHA will provide to 
displaced residents. If the source is tenant-based assistance under 
section 8 of the 1937 Act, indicate if the PHA is relying on a future 
allocation of tenant-protection vouchers to complete the relocation and 
if the PHA's desire to proceed with the action, if approved, is 
conditional upon its receipt of such vouchers. If some residents are 
not eligible to move to other public or assisted housing, the PHA must 
describe why such residents are not eligible and what resources it will 
make available to provide comparable housing for such displaced 
residents;
    (iii) The type of housing counseling services, including mobility 
counseling, to be provided to residents so that they are informed about 
comparable housing opportunities throughout the market area (e.g., 
showing residents who receive a tenant-based voucher comparable housing 
located in neighborhoods with low concentrations of poverty and high-
performing schools), and plans for making this counseling available to 
persons with disabilities in accordance with the effective 
communication requirements at 24 CFR 8.6 and to residents with limited 
English proficiency;
    (iv) An estimate of the costs for housing counseling services and 
resident relocation, and the expected source for payment for these 
expenses;
    (v) A discussion of how the PHA will relocate residents in 
compliance with the non-discrimination and equal opportunity 
requirements specified under 24 CFR 5.105(a). This discussion shall 
include, but is not limited to, how

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the PHA will make its best efforts to offer each displaced resident at 
least one unit of comparable housing that is located in a non-minority 
area with access to public transportation, employment, education, child 
care, medical services, shopping, and other amenities. The PHA shall 
provide census tract data for the location(s) of the comparable housing 
that it will offer to residents;
    (vi) A plan for determining the housing needs of displaced 
residents with disabilities and offering them comparable housing that 
includes the accessibility features needed by the resident with a 
disability in the most integrated setting appropriate for the resident 
(i.e., the setting that enables the resident with a disability to 
interact with non-disabled persons to the fullest extent possible and 
have access to community-based services);
    (vii) A plan and information required by Sec.  970.21(d) if 
applicable; and
    (viii) A relocation timetable, which indicates the estimated number 
of days after HUD approval of the demolition and/or disposition action 
that the PHA plans to begin relocating residents. This information will 
be used to determine the PHA's Operating Fund eligibility under 24 CFR 
part 990, which may include an asset-repositioning fee under 24 CFR 
990.190(h);
    (8) A description with supporting evidence of the PHA's 
consultations with affected residents and other groups, as required 
under Sec.  970.9(a). Supporting evidence shall include: A description 
of the process of the consultations summarizing the dates, meetings, 
and issues raised by the residents and the PHA's responses to those 
issues; meeting sign-in sheets; any written comments submitted by 
affected residents/groups along with the PHA's responses to those 
comments; any certifications or other written documentation that the 
PHA receives from the RAB (or equivalent body) and resident council 
regarding resident support or opposition; a description and/or 
documentation evidencing that the PHA communicated with affected 
residents and other required groups in a manner that was effective for 
persons with hearing, visual, and other communications-related 
disabilities consistent with 24 CFR 8.6 and that public hearing 
facilities and services were physically accessible to persons with 
disabilities, and that appropriate translations were provided for 
Limited English Proficient (LEP) individuals;
    (9) In the case of disposition, evidence of compliance with the 
offering to resident organizations, as required under Sec.  970.9;
    (10) In the case of disposition, the name of the acquiring entity 
(e.g., buyer or ground lessee) and a legal opinion that the acquiring 
entity is a separate legal entity (i.e., an affiliate or fully 
independent entity rather than an instrumentality of the PHA) under the 
applicable state law;
    (11) In the case of disposition, the FMV of the project, as 
established on the basis of at least one independent appraisal, unless 
otherwise determined by HUD, as described in Sec.  970.19;
    (12) In the case of disposition, estimates of the gross and net 
proceeds to be realized, with an itemization of estimated expenses to 
be paid out of gross proceeds and the proposed use of any net proceeds 
in accordance with Sec.  970.19;
    (13) In the case of disposition proposed at below FMV based on 
commensurate public benefit in accordance with Sec.  970.19, HUD will 
consider the anticipated future use of the project after disposition 
described in Sec.  970.7(c)(3). In addition, the supporting information 
for the application shall include:
    (i) A detailed description of any housing that will be located on 
the property, including the number of units, bedroom sizes, 
accessibility, affordability, and priorities for displaced residents;
    (ii) The proposed length of time in which the acquiring entity will 
maintain the former project for the proposed future use (HUD will 
generally require the proposed future use remain as such for not less 
than 30 years, but will consider other factors such as the extent of 
public benefits (e.g., number of affordable units) arising from 
proposed disposition and the FMV of the property in determining if a 
period of less than 30 years is acceptable);
    (iii) The plan to implement the opportunity to return requirement 
for existing residents' as outlined in Sec.  970.21(d);
    (iv) The proposed legal documentation (e.g., use restriction, 
provision in ground lease, declaration of restrictive covenant) the PHA 
proposes to ensure the approved use; and
    (v) Other information as may be required by HUD in determining if a 
commensurate public benefit exists;
    (14) Where the PHA is requesting a waiver of the requirement for 
the application of proceeds for repayment of outstanding development 
debt, the PHA must request such a waiver in its application, however, 
modernization debt, such as Capital Fund Financing Program (CFFP) debt, 
Energy Performance Contracting (EPC) debt, and Operating Fund Financing 
Program (OFFP) debt cannot be waived and repayment is required;
    (15) In the case where the PHA has applied for and/or been approved 
for financing under any HUD program (including CFFP, the OFFP, and the 
EPC program) or any other financing requested pursuant to section 30 of 
the 1937 Act (42 U.S.C. 1437z-2)), a legal opinion that the proposed 
demolition and/or disposition action is permitted pursuant to the legal 
documentation associated to that program;
    (16) A copy of a resolution by the PHA's Board of Commissioners 
approving the specific demolition and/or disposition application or, in 
the case of the report required under Sec.  970.27(e) for ``de 
minimis'' demolitions, the Board of Commissioner's resolution approving 
the ``de minimis'' action for that project. The resolution must be 
signed and dated after all resident and local government consultation 
has been completed;
    (17) Evidence that the application was developed in consultation 
with appropriate government officials as defined in Sec.  970.5, 
including:
    (i) A description of the process of consultation with local 
government officials, which summarizes dates, meetings, and issues 
raised by the local government officials and the PHA's responses to 
those issues;
    (ii) A signed and dated letter in support of the application from 
the chief executive officer of the unit of local government that 
demonstrates that the PHA has consulted with the appropriate local 
government officials on the proposed demolition or disposition;
    (iii) Where the local government consistently fails to respond to 
the PHA's attempts at consultation, including letters, requests for 
meetings, public notices, and other reasonable efforts, documentation 
of those attempts;
    (iv) Where the PHA covers multiple jurisdictions (such as a 
regional housing authority), the PHA must meet these requirements for 
each of the jurisdictions where the PHA is proposing demolition or 
disposition of the project;
    (18) An approved environmental review of the proposed demolition 
and/or disposition in accordance with 24 CFR parts 50 or 58, including 
acting in accordance with the applicable environmental justice 
principles, for any demolition and/or disposition of the project 
covered under this part, as required under Sec.  970.13;
    (19) Evidence of compliance with Sec.  970.12 including:

[[Page 62277]]

    (i) A civil rights certification in a form and manner prescribed by 
HUD whereby the PHA certifies:
    (A) A description of how the proposed demolition and/or disposition 
will help the PHA meet its affirmative obligations including, but not 
limited to, the obligation and to overcome discriminatory effects of 
the PHA's use of 1937 Act funds pursuant to part 1 of this title and 
the obligations to deconcentrate poverty (24 CFR part 903, subpart A) 
and affirmatively further fair housing (42 U.S.C. 3608(e)(5));
    (B) It does not have any outstanding charges from HUD (or a 
substantially equivalent state or local fair housing agency) concerning 
a violation of the Fair Housing Act or substantially equivalent state 
or local fair housing law proscribing discrimination because of race, 
color, religion, sex, national origin, disability, or familial status;
    (C) It is not a defendant in a Fair Housing Act lawsuit filed by 
the Department of Justice;
    (D) It does not have outstanding letters of findings identifying 
noncompliance under title VI of the Civil Rights Act of 1964, section 
504 of the Rehabilitation Act of 1973, or section 109 of the Housing 
and Community Development Act of 1974; and
    (E) It has not received a cause determination from a substantially 
equivalent state or local fair housing agency concerning a violation of 
provisions of a state or local law proscribing discrimination in 
housing based on sexual orientation, gender identity, or source of 
income;
    (ii) Additional supporting information that may be requested by 
HUD, if applicable, that shows that the proposed demolition and/or 
disposition will not maintain or increase segregation on the basis of 
race, ethnicity, or disability and will not otherwise violate 
applicable nondiscrimination or equal opportunity requirements, 
including a description of any affirmative efforts to prevent 
discriminatory effects;
    (20) A description and data regarding the race, color, religion, 
sex, national origin, familial status, and disability status of its 
residents who will be displaced by the action, the residents 
anticipated to remain in a public housing project that is partially 
demolished or disposed of, and the applicants on the PHA's waiting 
list(s), by bedroom size;
    (21) A certification that the PHA will comply with this part and 
the terms and conditions of the HUD demolition and/or disposition 
approval, including, if applicable, monitoring the future use of a 
former project, for compliance with HUD's approval; and
    (22) Any additional information requested by and determined to be 
necessary to HUD to support the demolition and/or disposition 
application and assist HUD in making a determination to approve or 
disapprove the application under this part.
    (d) Approval documents. (1) If a PHA includes documentation, 
certifications, assurances, or legal opinions in its application that 
go above and beyond the requirements of section 18 or this part, HUD 
may include these as additional requirements in its approval of the 
demolition and/or disposition action.
    (2) A PHA shall not take any action contrary to the terms and 
conditions of HUD's approval documents of a demolition and/or 
disposition action without obtaining prior written approval of the 
proposed change from HUD.
    (e) Amendments to and rescissions of approval. (1) HUD will 
consider a PHA's request to amend an earlier approval on a case-by-case 
basis upon the PHA's submission (in the form prescribed by HUD) of an 
explanation and documentation, if applicable, evidencing the reason for 
the requested change.
    (2) HUD will consider a PHA's request to rescind an earlier 
approval to demolish and/or dispose of a project, where a PHA submits a 
resolution from the Board of Commissioners and submits documentation 
that the conditions that originally led to the request for demolition 
and/or disposition have significantly changed or been removed.


Sec.  970.9  Resident participation--consultation and opportunity to 
purchase.

    (a) Resident consultation. PHAs must ensure that they communicate 
with public housing and rental assistance applicants and residents in a 
manner that is effective for persons with hearing, visual, and other 
communications-related disabilities consistent with section 504 of the 
Rehabilitation Act of 1973, and as applicable, the Americans with 
Disabilities Act. This includes ensuring that notices, policies, and 
procedures are made available via accessible communications methods 
including the use of alternative formats, such as Braille, audio, large 
type, sign language interpreters, and assistive listening devices, 
etc., and are written in plain language. Additionally, PHAs must ensure 
public hearing facilities and services are physically accessible to 
persons with disabilities in accordance with section 504 of the 
Rehabilitation Act of 1973 and that Limited English Proficient (LEP) 
individuals will have meaningful access to programs and activities, in 
accordance with Executive Order 13166.
    (1) A PHA must consult with the following residents and resident 
groups who will be affected by a proposed demolition, disposition, or 
combined action that is the subject of an application:
    (i) Residents who are residing in the project proposed for 
demolition and/or disposition;
    (ii) Resident council, if any;
    (iii) Resident management corporation for the project, if any;
    (iv) PHA-wide resident organization, if any; and
    (v) The Resident Advisory Board (RAB) (or equivalent body).
    (2) As part of such consultation, the PHA must either provide a 
copy of its demolition and/or disposition application to the residents 
and groups identified above, post the application on its Web site, or 
make the application available for review at its central office. 
Consultation must take place as follows:
    (i) On the final application submitted to HUD (e.g., even if the 
PHA consults the affected residents and groups early on in the 
application planning process, it must consult the residents and groups 
again on the final application);
    (ii) On any report on the environmental or health effects of the 
proposed activities;
    (iii) On the relocation plan, if any, for the demolition and/or 
disposition action;
    (iv) Informed by the PHA that they have a right to submit written 
comments about the application and that the PHA shall respond to those 
comments in writing to the residents and also submit such comments and 
responses to HUD.
    (v) Provided by the PHA with a reasonable timeframe in which they 
can submit written comments and must respond to those comments within a 
reasonable timeframe; and
    (vi) If applicable, consultation with Affected Resident and 
Resident Groups shall include information concerning the opportunity to 
return to ACC units under Sec.  970.21(d).
    (b) Applicability of the requirement to sell to Established 
Eligible Organization. In the situation where the PHA applies to 
dispose of a project:
    (1) The PHA shall, in appropriate circumstances as determined by 
the Assistant Secretary, initially offer the project proposed for 
disposition to any Established Eligible Organization, if such 
Established Eligible Organization has expressed an interest in 
purchasing

[[Page 62278]]

the project for continued use as housing for low-income families in 
accordance with Sec.  970.11.
    (2) If the Established Eligible Organization has expressed an 
interest in purchasing the project for continued use as housing for 
low-income persons, in order for its purchase offer to be considered, 
the Established Eligible Organization must:
    (i) In the case of a nonprofit organization, be acting on behalf of 
the residents of the project; and
    (ii) Demonstrate that it has obtained a firm commitment for the 
necessary financing within 60 days of the date of serving its written 
notice of interest under paragraph (b)(1) of this section.
    (3) The requirements of this section do not apply to the following 
cases, which have been determined not to present an appropriate 
opportunity for purchase by a resident organization:
    (i) A unit of state or local government requests to acquire vacant 
land that is less than two acres in order to build or expand its public 
services (e.g., a local government wishes to use the land to build or 
establish a police substation);
    (ii) A PHA seeks disposition to privately finance or otherwise 
develop housing for low-income families (including housing that is part 
of a mixed-income community) or to develop a non-dwelling facility to 
benefit low-income families (e.g., day care center or administrative 
building);
    (iii) Units that have been legally vacated in accordance with the 
HOPE VI program, the regulations at 24 CFR part 971, or the regulations 
at 24 CFR part 972, excluding projects where the PHA has consolidated 
vacancies;
    (iv) Distressed units required to be converted to tenant-based 
assistance under section 33 of the 1937 Act (42 U.S.C. 1437z-5); or
    (v) Disposition of non-dwelling properties, including 
administration and community buildings, and maintenance facilities.
    (4) If the requirements of this section are not applicable, as 
provided in paragraph (b)(3) of this section, the PHA may proceed to 
submit to HUD its application under this part to dispose of the 
project, without affording an opportunity for purchase by a resident 
organization. However, PHAs must:
    (i) Consult with their residents in accordance with paragraph (a) 
of this section; and
    (ii) Submit documentation with date and signatures to support the 
applicability of one of the exceptions in paragraph (b)(3) of this 
section.
    (c) Established Eligible Organization purchase of project. Where 
there is an Established Eligible Organization that has expressed an 
interest in purchasing the project in accordance with the requirements 
of Sec.  970.11, the PHA shall follow the procedures concerning such 
offer as described in such section.


Sec.  970.11  Procedures for the offer of sale to an Established 
Eligible Organization.

    In making an offer of sale to an Established Eligible Organization, 
in the case of a proposed disposition, the PHA shall proceed as 
follows:
    (a) Initial written notification of sale of project. The PHA shall 
send an initial written notification to each Established Eligible 
Organization (for purposes of this section, an Established Eligible 
Organization that has been so notified is a ``Notified Eligible 
Organization'') of the proposed sale of the project. The notice of sale 
must include, at a minimum, the information listed in paragraph (b) of 
this section.
    (b) Contents of initial written notification. The initial written 
notification to each Established Eligible Organization under paragraph 
(a) of this section must include at a minimum the following:
    (1) An identification of the project involved in the proposed 
disposition, including the project number and location, the number of 
units and bedroom configuration, the number of accessible units or 
units that otherwise contain accessible features, the amount and use of 
non-dwelling space, the current physical condition (fire damaged, 
friable asbestos, lead-based paint test results), and percent of 
occupancy;
    (2) A copy of the appraisal of the project and any terms of sale to 
residents;
    (3) Disclosure and description of the PHA's plans for reuse of 
land, if any, after the proposed disposition;
    (4) An identification of available resources (including its own and 
HUD's) to provide technical assistance to the organization to help it 
to better understand its opportunity to purchase the project, the 
project's value, and potential use;
    (5) A statement that any project sold to an Established Eligible 
Organization will not continue to receive grants from the Capital Fund 
and Operating Fund after the completion of the sale unless the 
Established Eligible Organization is also a Resident Management 
Corporation and such Resident Management Corporation enters into an ACC 
with HUD in accordance with 24 CFR part 964;
    (6) Any and all terms of sale that the PHA will require, including 
a statement that the purchaser must use the project for low-income 
housing. If the PHA does not know all the terms of the offer of sale at 
the time of the notice of sale, the PHA shall include all the terms of 
sale of which it is aware. The PHA must supply the totality of all the 
terms of sale and all necessary material to the residents no later than 
7 business days from the day the PHA receives the residents' initial 
expression of interest;
    (7) A date by which an Established Eligible Organization must 
express its interest, in writing, in response to the PHA's offer to 
sell the project proposed for demolition and/or disposition, which 
shall be up to 30 days from the date of the official written offer of 
sale from the PHA; and
    (8) A statement that the established eligible organization will be 
given 60 days from the date of the PHA's receipt of its letter 
expressing interest to develop and submit a proposal to the PHA to 
purchase the project and to obtain a firm financial commitment, as 
defined in Sec.  970.5. The statement shall:
    (i) Explain that the PHA shall approve the proposal from an 
organization if the proposal meets the terms of sale and is supported 
by a firm commitment for financing;
    (ii) Provide that the PHA can consider accepting an offer from the 
organization that differs from the terms of sale;
    (iii) Explain that if the PHA receives proposals from more than one 
organization, the PHA shall select the proposal that meets the terms of 
sale, if any. In the event that two proposals from the project to be 
sold meet the terms of sale, the PHA shall choose the best proposal. 
The PHA may reject all proposals if none adequately meet terms of sale 
or may select the best available proposal.
    (c) Initial expression of interest. All Notified Eligible 
Organizations shall have 30 days to initially express an interest, in 
writing, in the offer (``initial expression of interest''). The initial 
expression of interest need not contain details regarding financing, 
acceptance of an offer of sale, or any other terms of sale.
    (d) Opportunity to obtain firm financial commitment by a notified 
eligible organization. If a Notified Eligible Organization expresses 
interest in writing during the 30-day period referred to in paragraph 
(b) of this section, no disposition of the project shall occur during 
the 60-day period beginning on the date of the receipt of the written 
notice of interest. During this period, the PHA must give the entity 
expressing interest an opportunity to obtain a firm financial 
commitment as defined in Sec.  970.5 for the financing necessary to 
purchase the project.

[[Page 62279]]

    (e) Response to the notice of sale. The Established Eligible 
Organization, or organizations have up to 30 days, from the date the 
notice is postmarked, to respond to the notice of sale from the PHA. 
The Established Eligible Organization shall respond to the PHA's notice 
of sale by means of an initial expression of interest under paragraph 
(c) of this section.
    (f) Resident proposal. The Established Eligible Organization has up 
to 60 days from the date the PHA receives its initial expression of 
interest and provides all necessary terms and information to prepare 
and submit a proposal to the PHA for the purchase of the project of 
which the PHA plans to dispose, and to obtain a firm commitment for 
financing. The Established Eligible Organization's proposal shall 
provide all the information requested in paragraph (i) of this section.
    (g) PHA review of proposals. The PHA has up to 60 days from the 
date of receipt of the proposal or proposals to review the proposals 
and determine whether they meet the terms of sale described in the 
PHA's offer or offers. If the PHA determines that the proposal meets 
the terms of sale, within 14 days of the date of this determination, 
the PHA shall notify the organization of that fact and that the 
proposal has been accepted. If the PHA determines that the proposal 
differs from the terms of sale, the PHA may accept or reject the 
proposal at its discretion.
    (h) Appeals. An Established Eligible Organization has the right to 
appeal the PHA's decision to the Assistant Secretary for Public and 
Indian Housing, or the Assistant Secretary's designee, by sending a 
letter of appeal within 30 days of the date of the PHA's decision to 
the Field Office of Public Housing Director.
    (1) The letter of appeal must include copies of the proposal and 
any related correspondence, along with a statement of reasons why the 
organization believes the PHA should have decided differently.
    (2) HUD shall render a decision within 30 days of the date the 
appeal is received by HUD, and notify the organization and the PHA by 
letter within 14 days of such decision. If HUD cannot render a decision 
within 30 days, HUD will so notify the PHA and the Established Eligible 
Organization in writing, in which case HUD will have an additional 30 
days in which to render a decision. HUD may continue to extend its time 
for decision in 30-day increments for a total of 120 days. Once HUD 
renders its decision, there is no further administrative appeal or 
remedy available.
    (i) Contents of the organization's proposal. The Established 
Eligible Organization's proposal shall at a minimum include the 
following:
    (1) The length of time the organization has been in existence;
    (2) A description of current or past activities that demonstrate 
the organization's organizational and management capability, or the 
planned acquisition of such capability through a partner or other 
outside entities (in which case the proposal should state how the 
partner or outside entity meets this requirement);
    (3) To the extent not included in paragraph (i)(2) of this section, 
the Established Eligible Organization's experience in the development 
of low-income housing, or planned arrangements with partners or outside 
entities with such experience (in which case the proposal should state 
how the partner or outside entity meets this requirement);
    (4) A statement of financial capability;
    (5) A description of involvement of any non-resident organization 
(such as non-profit, for-profit, governmental, or other entities), if 
any, the proposed division of responsibilities between the non-resident 
organization and the Established Eligible Organization, and the non-
resident organization's financial capabilities;
    (6) A plan for financing the purchase of the project and a firm 
financial commitment as stated in paragraph (c) of this section for 
funding resources necessary to purchase the project and pay for any 
necessary repairs, including accessibility modifications;
    (7) A plan for using the project for low-income housing;
    (8) The proposed purchase price in relation to the appraised value;
    (9) Justification for purchase at less than the FMV of the project 
in accordance with Sec.  970.19(a), if applicable;
    (10) Estimated time schedule for completing the transaction;
    (11) Any additional items necessary to respond fully to the PHA's 
terms of sale;
    (12) A resolution from the Established Eligible Organization 
approving the proposal; and
    (13) A proposed date of settlement, generally not to exceed 6 
months from the date of PHA approval of the proposal, or such period as 
the PHA may determine to be reasonable.
    (j) PHA responsibility. The PHA must:
    (1) Prepare and distribute the initial notice of sale pursuant to 
Sec.  970.11(a), and, if any Established Eligible Organization 
expresses an interest, any further documents necessary to enable the 
organization, or organizations, to make an offer to purchase;
    (2) Evaluate proposals received, make the selection based on the 
considerations set forth in paragraph (b) of this section, and issue 
letters of acceptance or rejection;
    (3) Obtain certifications, where appropriate, as provided in 
paragraph (k) of this section; and
    (4) Comply with its requirements under Sec.  970.9(a) regarding 
resident consultation and provide evidence to HUD that the PHA has met 
those obligations. The PHA shall not act in an arbitrary manner and 
shall give full and fair consideration to any offer from an Established 
Eligible Organization, and shall accept the proposal if the proposal 
meets the terms of sale.
    (k) Offer by an Established Eligible Organization. If an offer is 
made by an Established Eligible Organization, the PHA shall:
    (1) Submit its disposition application to HUD in accordance with 
section 18 of the 1937 Act and this part. The disposition application 
must include complete documentation that the resident offer provisions 
of this part have been met. This documentation shall include:
    (i) A copy of the signed and dated PHA notification letter(s) to 
each Established Eligible Organization informing them of the PHA's 
intention to submit an application for disposition, the organization's 
right to purchase the project to be disposed of; and
    (ii) The responses from each organization.
    (2)(i) If the PHA accepts the proposal of an Established Eligible 
Organization, the PHA shall submit revisions to its disposition 
application to HUD in accordance with section 18 of the 1937 Act and 
this part reflecting the arrangement with the Established Eligible 
Organization, with appropriate justification for a negotiated sale and 
for sale at less than fair market value, if applicable.
    (ii) If the PHA rejects the proposal of an Established Eligible 
Organization, the Established Eligible Organization may appeal as 
provided in paragraph (h) of this section. Once the appeal is resolved, 
or, if there is no appeal, and the 30 days allowed for appeal has 
passed, HUD shall proceed to approve or disapprove the application.
    (3) HUD will not process an application for disposition unless the 
PHA provides HUD with one of the following:
    (i) An official board resolution or its equivalent from each 
Established Eligible Organization stating that such

[[Page 62280]]

organization has received the PHA offer, and that it understands the 
offer and waives its opportunity to purchase the project covered by the 
disposition application;
    (ii) A certification from the executive director or board of 
commissioners of the PHA that the 30-day time frame to express interest 
has expired and no response was received to its offer; or
    (iii) A certification from the executive director or board of 
commissioners of the PHA with supporting documentation that the offer 
was rejected.


Sec.  970.12  Civil rights and equal opportunity review.

    Demolition and/or disposition activities under this part (including 
de minimis demolition pursuant Sec.  970.27) are subject to compliance 
with HUD's nondiscrimination and equal opportunity requirements 
specified in 24 CFR 5.105(a) and must be consistent with the PHA's 
civil rights certification at section 5A(d)(16) of the 1937 Act (42 
U.S.C. 1437c-1(d)(16)) and the obligation to affirmatively further fair 
housing (42 U.S.C. 3608(e)(5)). Pursuant to Sec.  970.29, HUD will 
disapprove a PHA's application for demolition and/or disposition if HUD 
determines that the application is inconsistent with this section.


Sec.  970.13  Environmental review requirements.

    (a) Activities under this part (including de minimis demolition 
pursuant to Sec.  970.27) are subject to HUD environmental regulations 
in 24 CFR part 58. However, if a PHA objects in writing to the 
responsible entity performing the review under 24 CFR part 58, HUD may 
make a finding in accordance with 24 CFR 58.11(d) and perform the 
environmental review under the provisions of 24 CFR part 50.
    (b) The environmental review is limited to the demolition and/or 
disposition action and any known re-use, and is not required for any 
unknown future re-use. Factors that indicate that the future site reuse 
can reasonably be considered to be known include the following:
    (1) Private, Federal, state, or local funding for the site reuse 
has been committed;
    (2) A grant application involving the site has been filed with the 
Federal Government or a state or local unit of government;
    (3) The Federal Government or a state or unit of local government 
has made a commitment to take an action, including a physical action, 
that will facilitate a particular reuse of the site; and
    (4) Architectural, engineering, or design plans for the reuse exist 
that go beyond preliminary stages.
    (c) In the case of a demolition and/or disposition made necessary 
by a disaster that the President has declared under the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121 
et seq., or a disaster that has been declared under state law by the 
officer or entity with legal authority to make such declaration, the 
provisions of 40 CFR 1506.11 will apply pursuant to 24 CFR 50.43 and 
58.33.


Sec.  970.14  Section 3 compliance.

    Pursuant to section 3 of the Housing and Urban Development Act of 
1968 (section 3), HUD's regulation to provide employment, training, 
contracting, and economic opportunities to the greatest extent feasible 
to section 3 residents or business concerns is applicable to any 
projects or activities funded by public housing funds, regardless of 
the amount of funds (24 CFR 135.3(a)(3)), including the demolition or 
disposition of public housing. PHAs must comply with section 3 if 
public housing funds are used to demolish a project and when 
disposition proceeds are used for section 3 covered assistance as 
defined in 24 CFR 135.3. In addition, in the event that section 3 does 
not apply to demolition and/or disposition actions, planning and 
carrying out section 3 activities related to these proposed actions 
would satisfy, in part, the commensurate public benefit requirement for 
below fair market value (FMV) dispositions pursuant to Sec.  970.19.


Sec.  970.15  Specific criteria for HUD approval of a demolition 
application.

    (a) In addition to other applicable requirements of this part, 
unless the application meets the criteria for disapproval under Sec.  
970.29, HUD will approve an application for demolition upon the PHA's 
certification that the project proposed for demolition meets the 
following criteria:
    (1) The project is obsolete as to physical condition, location, or 
other factors, making it unsuitable for housing purposes. HUD shall 
consider the following major problems to be indicative of obsolescence:
    (i) As to physical condition: Structural deficiencies, serious 
outstanding capital needs, and/or other design or site problems (e.g., 
severe erosion or flooding), as evidenced by an independent architect 
or engineer not employed by the PHA); or
    (ii) As to location: Physical deterioration of the neighborhood, 
change from residential to industrial or commercial development, or 
environmental conditions as determined by an environmental review in 
accordance with 24 CFR part 50 or 58, which jeopardize the suitability 
of the site and its housing structures for residential use, provided 
the PHA simultaneously submits a disposition application pursuant to 
Sec.  970.17; or
    (iii) As to other factors: Conditions that have seriously affected 
the marketability, usefulness, or management of the project; and
    (2) No reasonable program of modifications is cost-effective to 
return the project to its useful life as evidenced by at least one 
estimate of the rehabilitation cost of the project by an independent 
architect or engineer that is not a regular employee of the PHA. HUD 
generally shall not consider a program of modifications to be cost-
effective if the costs of such program exceeds Housing Conservation 
Coordinators (HCC) in effect at the time the application is submitted 
to HUD; and
    (b) In the case of an application for demolition of a project that 
comprises less than all real property in a given project identification 
number, the PHA must also certify that the demolition will help to 
ensure the viability of the remaining portion of the project, except 
that this requirement shall not apply for applications where buildings 
are scattered non-contiguous sites.
    (c) Unless the PHA also submits an application to HUD for 
disposition of the project in accordance with Sec.  970.17 at the time 
it submits an application to HUD for the demolition of the project, the 
PHA must also certify that the vacant land comprising the project after 
demolition shall be used for low-income housing purposes, as permitted 
by the ACC, which may initially include land banking as approved in 
writing by HUD if a specific use is not determined.
    (d) The PHA shall demolish a project approved under this part 
within two years of the date of HUD approval (unless the PHA receives 
an extension from HUD in writing).


Sec.  970.17  Specific criteria and conditions for HUD approval of a 
disposition application.

    In addition to other applicable requirements of this part, unless 
the application meets the criteria for disapproval under Sec.  970.29, 
HUD will approve a request for disposition of a project if the PHA 
certifies that the retention of the project is not in the best 
interests of the residents and the PHA for at least one of the 
following reasons:
    (a) Conditions in the area surrounding the project (density, or 
industrial or commercial development) adversely

[[Page 62281]]

affect the health or safety of the residents or the feasible operation 
of the project by the PHA.
    (b)(1) Disposition allows for the acquisition, development, or 
rehabilitation of other properties that will be more efficiently and/or 
effectively operated as low-income housing (e.g., more energy 
efficient, better unit configurations to meet community needs, better 
location for resident jobs and transportation), provided that the PHA 
demonstrates to the satisfaction of HUD that public housing units will 
be replaced with other low-income housing units (e.g., public housing 
units or Section 8 project-based voucher units).
    (2) In order to dispose of public housing units under paragraph 
(b)(1) of this section, a PHA must demonstrate to the satisfaction of 
HUD that sufficient replacement units are being provided in connection 
with the disposition of the property. A PHA must receive sufficient 
compensation from the disposition to replace not less than 75 percent 
of the public housing units (HUD encourages the PHA to replace as many 
units as is feasible through leveraging the proceeds) with other low-
income housing units through acquisition, development, or 
rehabilitation as required by this part. Replacement units must be 
provided for all units housing families displaced by the disposition.
    (3) The following additional terms apply to dispositions under 
paragraph (b)(1) of this section:
    (i) The replacement housing units must be developed on another 
property (e.g., not on the same land as the existing project);
    (ii) The PHA must have the replacement housing units (or land for 
the new construction of the units) identified at the time it submits a 
request to HUD under this part;
    (iii) The PHA must provide its financing plan for the replacement 
units. HUD will evaluate the feasibility of the financing plan; and
    (iv) The disposition of the project must be an arms-length 
transaction at FMV and 100 percent of the proceeds must be used to 
acquire, develop, or rehabilitate the replacement housing units. While 
a PHA may dispose to an affiliate (as defined in 24 CFR 905.604(b)(4)) 
that is an independent legal entity, a PHA may not dispose to its own 
instrumentality (as defined in 24 CFR 905.604(b)(3)).
    (c) The PHA has otherwise determined the disposition to be 
appropriate for reasons that are in the best interests of the residents 
and the PHA, consistent with the goals of the PHA and the PHA Plan, and 
are otherwise consistent with the 1937 Act. The PHA may not dispose of 
a project under this section if the PHA's reason for disposition (as 
determined by HUD) falls under another HUD regulation or federal 
statute (e.g., Sec.  970.17(b)), voluntary or required conversion under 
sections 22 or 33 of the 1937 Act, homeownership under section 32 of 
the 1937 Act, or proposed eminent domain taking). HUD considers each of 
the following reasons to be acceptable under this section:
    (1) The project meets the criteria for obsolescence under Sec.  
970.15;
    (2) The units will be rehabilitated through the mixed-finance 
development method. To reduce the number of public housing units in the 
project, the criteria under Sec.  970.15 or another section 
specifically permitting demolition or disposition, such as Sec. Sec.  
970.15, 970.17 (along with 970.19), 970.27, or 970.33, must be met; and
    (3) Other reasons determined by HUD to meet the criteria of Sec.  
970.17(c).
    (d) In the case of disposition of a project that does not include 
dwelling structures (e.g., includes non-dwelling community center 
structure, vacant land), the PHA certifies that:
    (1) The non-dwelling structure or land exceeds the needs of the 
project (after DOFA); and
    (2) The disposition is incidental to, or does not interfere with, 
the continued operation of the remainder of the project.


Sec.  970.19  Requirements for the disposition of a project.

    (a) Where HUD approves the disposition of a project, the PHA shall 
dispose of the project for not less than FMV unless HUD authorizes a 
below FMV disposition under paragraph (b) of this section.
    (b) HUD may approve a PHA to dispose of a project, in whole or in 
part, for less than FMV (if permitted by state law) if HUD finds, in 
its sole discretion, that a commensurate public benefit will result 
from the disposition.
    (c) As a condition of HUD's approval of a project for disposition 
at below FMV under paragraph (b) of this section and HUD's release of 
the DOT on the project, HUD shall require the PHA to execute a use 
restriction, or other arrangement of public record, in a form 
acceptable to HUD, that will ensure to HUD's satisfaction that the 
former project will be used for the commensurate public benefit use 
approved by HUD for a period of not less than 30 years, and such use 
restriction is in a first priority position against the property and 
survives foreclosure of any mortgages or other liens on the property. 
The PHA is responsible for monitoring and enforcing the required use 
restrictions throughout the use restriction term. HUD may impose 
sanctions or take other enforcement action against the PHA if the PHA 
fails to enforce the use restrictions.
    (d) If a PHA is unable to dispose of a project containing obsolete 
units that is approved for disposition under Sec.  970.17(c)(1) in its 
``as is'' condition despite due diligence and reasonable efforts (as 
determined by HUD), if requested by the PHA, HUD will approve a 
demolition of the project (in accordance with Sec.  970.15) so that the 
PHA can proceed with demolition and the disposition of only that vacant 
land comprising the project.
    (e) The PHA shall dispose of a project approved for disposition 
under this part within two years of the date of HUD approval (unless 
the PHA receives an extension from HUD in writing).
    (f) Where HUD approves the disposition of a project for a period 
greater than one year but fewer than 30 years (e.g., via lease or other 
transfer), the PHA is required to return the project to its public 
housing inventory, including adding the property again to its ACC and 
placing a DOT on the property, (or submit another disposition or other 
removal application) at the end of the approved disposition period.
    (g) The PHA shall ensure the HUD-approved commensurate public 
benefit use commences within 2 years from the date of actual 
disposition of the project (unless the PHA receives an extension from 
HUD in writing).
    (h) A PHA may pay the reasonable expenses of disposition and 
relocation costs for displaced residents under Sec.  970.21 out of the 
gross proceeds, as approved by HUD.
    (i) To obtain an estimate of the FMV before the project is 
advertised for bid, the PHA shall have one independent appraisal 
performed on the project proposed for disposition, unless HUD 
determines that:
    (1) More than one appraisal is warranted; or
    (2) Another method of valuation is clearly sufficient and the 
expense of an independent appraisal is unjustified because of the 
limited nature of the project interest involved or other available 
data.
    (j) To obtain an estimate of the FMV when a project is proposed for 
disposition via a negotiated sale at less than FMV based on 
commensurate public benefit, HUD may accept a reasonable valuation of 
the project (e.g., tax assessor's valuation).

[[Page 62282]]

Sec.  970.20  Use and treatment of proceeds.

    (a) Use of proceeds. Subject to HUD approval, a PHA shall use net 
proceeds, including any interest earned on the proceeds (after payment 
of HUD-approved costs of disposition and relocation under Sec.  
970.19(h)), as follows:
    (1) Unless waived by HUD, for the retirement of outstanding 
obligations, if any, issued to finance original development or 
modernization of the project;
    (2) For the payment of CFFP debt or later issued modernization debt 
on the project; and
    (3) To the extent that any net proceeds remain, after the 
application of proceeds in accordance with paragraphs (a)(1) and (2) of 
this section, for the provision of low-income housing or to benefit the 
residents of the PHA, which uses may include:
    (i) Modernization (as defined in 24 CFR 905.108) of existing 
projects;
    (ii) Development (as defined in 24 CFR 905.108) of a project;
    (iii) Funding of homeownership units in accordance with an approved 
homeownership plan under sections 9, 24, and 32 of the 1937 Act (42 
U.S.C. 1437g, 1437v, and 1437z-4), respectively;
    (iv) Construction, rehabilitation, and/or acquisition of dwelling 
units that will be assisted by funds under Section 8 of the 1937 Act, 
provided that:
    (A) The PHA complies with safe harbors as determined by HUD in 
connection with such construction, rehabilitation, and/or acquisition;
    (B) Complies with program regulations governing such assistance and 
the PHA executes a use agreement, in a form acceptable to HUD, to 
ensure the units will be operated exclusively as Section 8 units for 
not less than 30 years;
    (4) Benefits to the residents of the PHA (e.g., job training, child 
care programs, service coordination), for uses permitted by HUD's 
Operating Fund regulations at 24 CFR part 990;
    (5) Leveraging amounts for securing commercial enterprises on-site 
in public housing projects of the PHA, appropriate to serve the needs 
of the residents;
    (6) Funding of voucher shortfalls under section 8 of the 1937 Act, 
however, this is subject to further HUD approval and discretion 
considering the applicable section 8 statutory, regulatory, and funding 
requirements; and
    (7) Other housing assisted under the 1937 Act or benefits to the 
residents of the PHA, as approved by HUD.
    (b) Net proceeds. Net proceeds which HUD approves for the purposes 
described in paragraph (a) of this section may be leveraged with other 
funds so long as the net proceeds are used on a pro-rata basis to fund 
only the approved uses (e.g., low-income housing units).
    (c) Expenditure of proceeds. Expenditure of the proceeds pursuant 
to paragraph (a) of this section must begin within 2 years from the 
date of disposition approval and be completed (i.e., entirely expended 
for the approved use) within 4 years (unless the PHA receives an 
extension from HUD in writing).
    (d) Disposition proceeds. Disposition proceeds are subject to all 
laws, regulations, and other requirements applicable to use approved by 
HUD unless otherwise approved by HUD in writing. For instance, if net 
disposition proceeds are approved by HUD for modernization of public 
housing units, they are considered public housing funds and are 
generally subject to the requirements of 24 CFR part 905. However, when 
net disposition proceeds are used with HUD approval for the development 
of public housing units, the disposition proceeds will not count toward 
total development cost limits as determined pursuant to 24 CFR 
905.314(c). Disposition proceeds may be used to supplement existing HAP 
contracts when there are funding shortages, but cannot be used to issue 
new vouchers. Federal requirements apply to disposition proceeds, 
including the Federal nondiscrimination and equal opportunity 
requirements stated in 24 CFR 5.105, environmental requirements, and, 
where applicable, the labor standard provisions of section 12 of the 
1937 Act (42 U.S.C. 1437j) and section 3 of the HUD Act of 1968 (12 
U.S.C. 1701u). 42 U.S.C. 1437p(a)(5).
    (e) Recapture or repayment of proceeds. If a PHA fails to use 
proceeds as permitted by this section and approved by HUD or violates 
the term of the use agreement imposed to ensure proceeds are used in 
accordance with this part, HUD may recapture or require repayment of 
the proceeds or take all other available remedies available under law.
    (f) Treatment of proceeds. Upon immediate receipt of proceeds and 
until expended for an approved use, PHAs must deposit proceeds into an 
interest bearing account subject to HUD General Depository Agreement 
and/or an escrow agreement in a form acceptable to HUD. All accrued 
interest shall be treated as additional proceeds, subject to this 
section.


Sec.  970.21  Relocation of residents.

    (a) Notification to residents--Content. A PHA shall provide a 
written notice to each resident who will be displaced by a demolition 
and/or disposition action approved under this part. Notices shall be 
provided via an effective communications means to persons with 
disabilities in accordance with 24 CFR 8.6 and in the appropriate non-
English language to persons with limited English proficiency as needed. 
The notice shall specifically include the following information:
    (1) A statement that the PHA's application for the demolition and/
or disposition of the project has been approved by HUD and the project 
will be demolished and/or disposed of;
    (2) A description of the process involved to relocate the 
residents, including that the residents will not be required to 
relocate until the conditions set forth in this section have been met, 
and in no event shall a PHA commence a demolition or disposition of the 
building (or a combined action) in which a resident lives until each 
resident of the building is provided relocation assistance in 
accordance with this section;
    (3) A statement that each displaced resident shall be offered 
comparable housing that, at minimum:
    (i) Meets the standards stated in the definition of ``comparable 
housing'' in Sec.  970.5; and
    (ii) Not be in a special flood hazard area as stated in 24 CFR 
905.602(d)(11).
    (4) If tenant-based assistance under section 8 of the 1937 Act is 
provided for relocation, such assistance will not be considered to have 
fulfilled the PHA's obligation to offer comparable housing under this 
section until the resident is actually relocated into such housing, or 
alternate housing is provided pursuant to paragraph (c) of this 
section;
    (5) A description of the comparable housing options that the PHA is 
offering to the resident. This description shall include the location 
of the comparable housing and specifically how it at minimum meets the 
requirements of comparable housing, as defined in Sec.  970.5;
    (6) A statement that comparable housing shall be offered to each 
resident on a nondiscriminatory basis, without regard to race, color, 
religion, sex, national origin, familial status, or disability in 
compliance with applicable federal, state, and local laws;
    (7) A statement that displaced residents with disabilities shall be 
offered comparable housing that includes the accessibility features 
needed by the resident with a disability and located in the most 
integrated

[[Page 62283]]

setting appropriate for the resident (i.e., the setting that enables 
the resident with a disability to interact with non-disabled persons to 
the fullest extent possible and have access to community-based 
services). This statement shall also include the right of displaced 
residents to a reasonable accommodation under Section 504 of the 
Rehabilitation Act of 1973, the Fair Housing Act, and the Americans 
with Disabilities Act, as applicable, and how to request such an 
accommodation;
    (8) A statement that the PHA shall provide for the payment of the 
actual and reasonable relocation expenses of each displaced resident, 
including moving cost assistance, expenses necessary to provide 
reasonable accommodations for a resident with a disability in 
accordance with Section 504 of the Rehabilitation Act of 1973, and the 
payment of a displaced resident's security, utility, or both security 
and utility deposits at a comparable housing unit, provided that loans 
or grants directly to displaced residents for new deposits are not 
permitted if the PHA's source is either Capital or Operating Funds. The 
PHA shall pay such deposits directly to the utility company or landlord 
with subsequent returns or refunds back to the PHA. The resident shall 
hold no interest in a utility or security deposit paid by the PHA;
    (9) A description of the housing counseling services, including 
mobility counseling, that will be available to the resident and how the 
resident can access these services; and
    (10) If the provisions of section 104(d) of the Housing and 
Community Act of 1974 (42 U.S.C. 5304(d)) (section 104(d)), referenced 
in Sec.  970.21(g), apply to the project, the notice required by Sec.  
970.21(a) must explain the assistance available under section 104(d).
    (b) Notification to residents--Timing. (1) Except in cases of 
imminent threat to health or safety, no resident of a project approved 
by HUD for demolition and/or disposition shall be required to move 
unless he or she has been provided with the written notice required by 
Sec.  970.21(a) at least 90 days prior to the displacement date. 
Displacement date means the earliest date by which a resident who will 
be displaced by a demolition and/or disposition action under this part 
shall be required to move.
    (2) The notification required by paragraph (a) of this section 
shall not be issued to any resident prior to the date HUD approves the 
PHA's application for demolition and/or disposition.
    (c) Offer of comparable housing. The PHA shall ensure that each 
displaced resident is offered comparable housing and provided with the 
relocation assistance required by this part.
    (1) If a PHA offers a resident comparable housing in the form of 
tenant-based assistance under section 8 of the 1937 Act, and the 
resident is unable to lease a dwelling unit during the initial period 
of not less than 60-days, the PHA may either:
    (i) Grant one or more extensions to the initial term in accordance 
with 24 CFR part 982 as reflected in its administrative plan; or
    (ii) Provide the resident with another form of comparable housing 
(e.g., public housing unit or project-based unit under section 8 of the 
1937 Act).
    (2) The PHA shall not commence the HUD-approved demolition or 
complete the HUD-approved disposition of a building until each resident 
who will be displaced by the action is relocated in accordance with the 
requirements of this part.
    (d) Plan of return. If HUD approves a below fair market value (FMV) 
disposition of a project based on commensurate public benefit under 
Sec.  970.19 and housing units will be developed on-site at the former 
project, income-eligible, displaced residents shall be provided with 
the opportunity to return to the new, appropriately sized units once 
those units are available for occupancy. The PHA shall develop a plan 
to implement this opportunity to return requirement and the plan must 
address the following:
    (1) How residents will be notified of the opportunity to return;
    (2) The amount of time residents will have to exercise the 
opportunity to return, from the date of the notice;
    (3) The source of funds from which the PHA or the new owner will 
pay the moving costs for moving the displaced residents back into the 
new units; and
    (4) The process for selecting displaced residents who will be 
offered an opportunity to return (for example, lottery) if the number 
of new public housing units cannot accommodate all lease-compliant 
displaced residents (as defined in Sec.  970.5) at appropriate bedroom 
sizes. This opportunity to return requirement does not negate the PHA's 
responsibility to provide permanent comparable housing to all displaced 
residents in accordance with this part.
    (e) Refusal or rejection. If a resident who will be displaced by a 
demolition, disposition, or combined action, refuses to move or 
otherwise rejects the PHA's offer(s) of comparable housing and 
relocation counseling and advisory services despite the PHA's due 
diligence and continued efforts to offer the resident comparable 
housing and counseling and advisory services, HUD shall consider the 
PHA to have satisfied the relocation requirements of this section if 
the PHA must resort to eviction of the resident as long as the PHA 
exercises due diligence in making continued efforts to offer the 
resident comparable housing and relocation counseling.
    (f) Funding sources. Sources of funding for relocation expenses 
related to demolition and/or disposition may include, but are not 
limited to, gross proceeds a PHA receives under this part, Capital 
Funds, section 8 administrative fee funding (where section 8 assistance 
is offered as comparable housing), or other federal funds currently 
available for this purpose.
    (g) Certain funding requirements. If Federal financial assistance 
under the Community Development Block Grant (CDBG) program (42 U.S.C. 
5301 et seq.); the Urban Development Action Grant (UDAG) program (42 
U.S.C. 5318 et seq.); or the HOME Investment Partnerships (HOME) 
program (42 U.S.C. 12701 et seq.) is used in connection with the 
demolition of lower-income dwelling units, or conversion of such units 
to a use other than lower-income dwelling units, the project is subject 
to section 104(d) of the Housing and Community Development Act of 1974, 
including the relocation payment and one-for-one replacement provisions 
as provided at 24 CFR part 42, subpart C. For purposes of this 
paragraph (g), lower-income dwelling units and conversion shall have 
the definitions in 24 CFR part 42 and units in projects under this part 
are considered lower-income dwelling units.
    (h) URA. The URA shall not apply to demolitions and/or dispositions 
actions under this part.


Sec.  970.23  Costs of demolition and relocation of displaced 
residents.

    (a) A PHA may pay for the relocation expenses it incurs under Sec.  
970.21 with non-federal funds or any eligible HUD funds, which may 
include Capital Funds or proceeds received for a disposition under this 
part.
    (b) A PHA may pay for the costs of demolition with non-federal 
funds or any eligible HUD funds, which may include Capital Funds when 
HUD approves a demolition under Sec.  970.15.
    (c) Where HUD has approved the demolition of a project and the 
proposed action is part of a program under the Capital Fund Program (24 
CFR part 905), the expenses of the demolition and of relocation of

[[Page 62284]]

displaced residents must be included in the Capital Fund Submission 
pursuant to section 9(d) of the 1937 Act (42 U.S.C. 1437g(d)) or other 
eligible HUD funds.


Sec.  970.25  Required and permitted actions prior to approval.

    (a) A PHA may not take any action to demolish and/or dispose of a 
project without obtaining prior written HUD approval under this part.
    (1) HUD funds may not be used to pay for the expense to demolish or 
dispose of a project unless HUD approval has been obtained under this 
part.
    (2) Until the PHA receives HUD approval, the PHA shall continue to 
meet its ACC obligations to maintain and operate the project as public 
housing. A PHA may not delay or withhold maintenance on a project in 
such a way as to cause or allow it to meet the demolition criteria 
under Sec.  970.15.
    (3) The PHA may engage in planning activities, analysis, or 
consultations without seeking HUD approval. Planning activities may 
include project viability studies, capital planning, relocation and 
replacement housing planning, and comprehensive occupancy planning.
    (4) The PHA must continue to provide full housing services to all 
residents that remain in the project.
    (b) A PHA may lease public housing units at turnover to eligible 
residents while HUD is considering, or after HUD has approved, its 
application for demolition and/or disposition of the project, provided 
that:
    (1) The units are in decent, safe, and sanitary condition;
    (2) The PHA determines that due to community housing needs or for 
other reasons consistent with its PHA Plan, leasing turnover units is 
in the best interests of the PHA, its residents, and community; and
    (3) Residents of units leased during such a period are provided 
with the relocation assistance required by Sec.  970.21. The PHA's 
Operating Fund eligibility will continue to be calculated as stated in 
24 CFR part 990.


Sec.  970.27  De minimis exception to demolition application 
requirement.

    (a) A PHA may demolish public housing units in a project without 
HUD approval if the PHA is proposing to demolish not more than the 
lesser of:
    (1) 5 dwelling units; or
    (2) 5 percent of the total dwelling units owned by the PHA over any 
5-year period.
    (b) The 5-year period referred to in paragraph (a)(2) of this 
section is the 5 years counting backward from the date of the proposed 
de minimis demolition, except that any demolition performed prior to 
October 21, 1998, will not be counted against the 5 units or 5 percent 
of the total, as applicable. For example, if a PHA that owns 1,000 
housing units wishes to demolish units under this de minimis provision 
on July 1, 2004, and previously demolished 2 units under this provision 
on September 1, 2000, and 2 more units on July 1, 2001, the PHA would 
be able to demolish 1 additional unit for a total of 5 in the preceding 
5 years. As another example, if a PHA that owns 60 housing units as of 
July 1, 2004, had demolished 2 units on September 1, 2000, and 1 unit 
on July 1, 2001, that PHA would not be able to demolish any further 
units under this ``de minimis'' provision until after September 1, 
2005, because it would have already demolished 5 percent of its total.
    (c) In order to qualify for this exemption, one of the following 
criteria must be met:
    (1) The space occupied by the demolished unit must be used for 
meeting the service or other needs of public housing residents (e.g., 
use of space to construct a laundry facility, community center, child 
care facility, office space for a service coordinator; or for use as 
open space or garden); or
    (2) The unit(s) being demolished must be beyond repair.
    (d) PHAs utilizing this section will comply with environmental 
review requirements at Sec.  970.13 and, if applicable, the 
requirements of 24 CFR 8.23.
    (e) For recordkeeping purposes, PHAs that wish to demolish units 
under this section shall submit the information required in Sec.  
970.7(c)(2), (16), (18), and (19) in addition to a certification that 
the unit(s) being demolished meets one of the two conditions in 
paragraph (c) of this section. HUD will accept such a certification 
unless it has independent information that the requirements for ``de 
minimis'' demolition have not been met. Additionally, PHAs demolishing 
units under this section must comply with the reporting and 
recordkeeping requirements of Sec.  970.37.
    (f) Any resident displaced by a ``de minimis'' demolition under 
this section shall be provided with housing assistance in accordance 
with applicable federal laws and requirements, which may include the 
PHA's Admissions and Continued Occupancy Policy (ACOP) (24 CFR part 
966), the PHA's section 8 Administrative Plan (24 CFR part 982), and 
PHA Plan requirements (24 CFR part 903), and if CDBG or HOME funds are 
involved, section 104(d) of the Housing and Community Development Act 
of 1974.


Sec.  970.29  Criteria for HUD disapproval of a demolition or 
disposition application.

    HUD will disapprove an application for demolition and/or 
disposition if HUD determines that:
    (a) The applicant failed to satisfy the application requirements 
contained in Sec.  970.7;
    (b) Any certification or submission made by the PHA under this part 
is clearly inconsistent with:
    (1) Any information and data available to HUD related to the 
requirements of this part, including failure to meet the requirements 
for the justification for demolition and/or disposition as found in 
Sec. Sec.  970.15 or 970.17 and the civil rights requirements 
referenced in Sec.  970.12; or
    (2) Information or data requested by HUD; or
    (c) The application was not developed in consultation with:
    (1) Residents who will be affected by the proposed demolition or 
disposition as required in Sec.  970.9; and
    (2) Each RAB and resident council, if any, of the project (that 
will be affected by the proposed demolition and/or disposition as 
required in Sec.  970.9), and appropriate government officials as 
required in Sec.  970.7.


Sec.  970.31  Effect on Operating Fund Program and Capital Fund 
Program.

    The provisions of 24 CFR part 990, the Public Housing Operating 
Fund Program, and 24 CFR part 905, the Public Housing Capital Fund 
Program, apply.


Sec.  970.33  Demolitions due to emergency, disaster, or accidental 
loss.

    (a) A PHA may demolish a project without HUD approval if a project 
suffers abrupt damage from an Emergency, Major Disaster, or other event 
outside of the control of the PHA to the extent necessary to maintain 
the project in a safe condition or to eliminate an unattractive 
nuisance, and to the extent such demolition is permitted by section 13 
of the ACC and Sec.  970.3(b)(16). For funding requirements under the 
Capital Fund related to emergencies and disasters, the requirements of 
24 CFR part 905 apply.
    (b) If the PHA rebuilds the same number of dwelling units or non-
dwelling structures that comprised the demolished project, the 
demolition (and any additional demolition required to carry out the 
redevelopment) shall not be subject to this part.
    (c) If the PHA decides not to rebuild the same number of structures 
with the

[[Page 62285]]

same number of units at the project, the PHA shall submit a demolition 
application under this part within one year of such demolition to 
formalize, and request official HUD approval for the action under this 
part, unless HUD specifically authorizes, in writing, a lesser number 
of units. If the PHA decides to rebuild fewer structures at the 
project, regardless of the number of units, the PHA shall submit a 
demolition application under this part within one year of the action.


Sec.  970.35  Removal of all projects in the PHA's public housing 
inventory.

    If a proposed disposition action (or combined demolition and 
disposition action) will remove all projects (including dwelling units, 
non-dwelling structures, and underlying land) in a PHA's public housing 
inventory and the PHA has no plans to develop any additional projects, 
the following additional provisions apply:
    (a) Operating Funds. After the disposition is complete, the PHA 
shall not expend any remaining Operating Funds (including operating 
reserves) other than for purposes related to the close-out of its 
public housing inventory, including audit requirements required by this 
section. Any remaining Operating Funds (including operating reserves 
and any unspent asset-repositioning fees received pursuant to 24 CFR 
990.190) shall be returned to HUD within 90 days of the date of 
disposition of the project.
    (b) Capital Funds. (1) If the project will not be retained as 
public housing after the disposition is approved, the PHA may spend no 
more of its Capital Funds without HUD approval, and then only if the 
amounts are required to close out contract obligations incurred prior 
to HUD's approval of the disposition and/or to address imminent health 
and/or safety issues that arise at the project prior to completion of 
the disposition transaction. However, if the disposition was approved 
for disposition at below fair market value based on commensurate public 
benefit, prior to expending Capital Funds for the purposes permitted in 
this section, the PHA must notify HUD in writing of the planned 
expenditure of Capital Funds so that HUD can determine if any changes 
are necessary to the terms of its commensurate public benefit, if the 
disposition price should be adjusted to reflect the expenditure of 
funds, or both.
    (2) No Capital Funds may be expended after the date of disposition 
of the project and any remaining Capital Funds shall be returned to HUD 
within 180 days of such date of disposition. The PHA shall be 
ineligible to receive any Capital Funds (replacement housing factor 
funds) under 24 CFR 905.10(i), and any funds issued under this section 
shall be recaptured by HUD.
    (c) If a PHA owns any equipment or other personal property that it 
acquired or has maintained with 1937 Act funds, which property was not 
included in the disposition of all projects in its inventory or any 
particular project to which the equipment or personal property 
appertained, the PHA shall, within 60 days after the disposition, 
dispose of all such remaining personal equipment and other personal 
property in its inventory that was acquired in whole or in part with 
1937 Act funds pursuant to a plan acceptable to HUD.
    (d) Within 90 days of the date of disposition, the PHA must have an 
independent audit conducted on the close-out of its public housing 
inventory.


Sec.  970.37  Reports and records.

    (a) After HUD approval of demolition or disposition of all or part 
of a project, the PHA shall provide the following to HUD:
    (1) Date of execution of each demolition contract by entering the 
appropriate information into HUD's applicable data system, or providing 
the information by another method HUD may require, within a week of 
executing such contract;
    (2) Date of execution of sales or lease contracts by entering the 
appropriate information into HUD's applicable data system, or providing 
the information by another method HUD may require, within a week of 
execution;
    (3) A report, in a form and frequency prescribed by HUD (until HUD 
determines that the report no longer needs to be submitted), containing 
the following information:
    (i) A description of resident relocation and timetable, including:
    (A) The number of families actually relocated by bedroom size and 
the types and locations (including census tract) of comparable housing 
offered to each family;
    (B) A description of the Fair Housing Act protected classes of 
relocated residents;
    (C) Reasonable accommodations that were provided to residents in 
connection with the comparable housing, in accordance with Section 504 
of the Rehabilitation Act of 1973;
    (D) Units where residents were relocated that meet federal 
accessibility standards or that otherwise contain accessible features;
    (E) The status of the Opportunity to Return Plan, including 
residents who express an interest in the plan; and
    (F) The comparable housing that was offered to families that 
include a member with a disability that was located in a non-segregated 
setting. If such a family was not offered comparable housing in a non-
segregated setting, the PHA must explain why the comparable housing 
that it offered was the most integrated setting appropriate for the 
family (i.e., the setting that enables the family member with a 
disability to interact with non-disabled persons to the fullest extent 
possible and have access to community-based services);
    (ii) A description of the PHA's use of the proceeds of disposition 
by providing a financial statement showing how the gross and net 
proceeds were expended by item and dollar amount, as approved by HUD;
    (iii) A description of any remaining disposition proceeds, 
including current balance (plus interest), bank information of where 
such proceeds are being held, and plans for expending such proceeds for 
the use approved by HUD within the required timeframe;
    (iv) For dispositions approved by HUD at less than fair market 
value based on commensurate public benefit, a description of the 
current use of the property (e.g., owner, number of housing units 
developed), and a statement of how the property is being used for the 
HUD-approved use; and
    (v) A description of whether any project-based voucher contracts 
under Section 8 of the 1937 Act have been executed on a former public 
housing property approved for disposition and/or at housing developed, 
acquired, or constructed with disposition proceeds; and
    (vi) Evidence that an audit has been conducted on the demolition 
and/or disposition within 3 years of completion of the demolition and/
or disposition action; and
    (4) Such other information as HUD may from time to time require.
    (b) [Reserved]

Subpart B--Real Property Transactions: Retention of Projects by 
Public Housing Agencies


Sec.  970.39  Definitions.

    All definitions in Sec.  970.5 shall apply to this subpart.


Sec.  970.41  Applicability.

    This subpart applies when a PHA proposes to retain ownership of a 
project without public housing DOT and ACC restrictions (e.g., clean 
title) in accordance with 24 CFR 85.31. This subpart is an alternative 
to disposing of projects under subpart A of this part and

[[Page 62286]]

is another option available to PHAs to determine the future of their 
public housing stock. Actions under this subpart may especially assist 
PHAs in preserving their public housing stock.


Sec.  970.43  Removal of a project from public housing without a 
transfer to a third party.

    (a) General. HUD's regulations at 24 CFR 85.31 provide that except 
as otherwise provided by federal statutes, real property will be used 
for the originally authorized purpose as long as needed for that 
purpose, and the grantee shall not dispose of or encumber its title or 
other interests. When real property is no longer needed for the 
originally authorized purpose, the grantee will request disposition 
instructions from HUD. Section 18 of the 1937 Act and subpart A of this 
part covers the procedures that PHAs must follow if they choose to sell 
or otherwise transfer title of the property, except as stated in Sec.  
970.43(b).
    (b) Retention of property (no PHA transfer of title). Section 85.31 
of HUD's regulations (24 CFR 85.31) permits a PHA to retain title of 
real property that is no longer needed for its originally authorized 
purpose, provided the PHA requests and is approved by HUD to retain the 
property. In order to approve a request under this section, HUD will 
generally require the PHA to compensate HUD for the federal 
government's equity in the project (computed by applying HUD's 
percentage of participation in the cost of the original purchase or 
construction to the FMV of the property and subsequent modernization), 
but the PHA could request an exception to this repayment requirement, 
for good cause, in accordance with 24 CFR 85.6(c). If HUD finds the PHA 
has shown good cause for retaining the project under this section, HUD 
will release the ACC and DOT on the project. HUD's approval may require 
the PHA to enter into certain use restrictions, or may impose other 
requirements to ensure that the property is used for the HUD-approved 
purposes for a certain length of time.


Sec.  970.45  Specific criteria for HUD approval of requests under this 
subpart.

    (a) Minimum requirements. The PHA shall comply with HUD 
requirements and application procedures relative to this subpart. At a 
minimum, to obtain HUD approval under this subpart, a PHA must 
demonstrate that:
    (1) The project is no longer needed for the operation of public 
housing; and
    (2) There is good cause for the action (and, if applicable, for any 
request for an exception to the repayment requirement).
    (b) Retention requests. HUD may accept retention of title requests 
under this subpart in three instances:
    (1) Retention of projects that include dwelling units (e.g., in 
order to leverage the property or attach project-based assistance under 
section 8 of the 1937 Act), as well as appurtenant equipment, and 
personal property, in accordance with all program requirements, so that 
the project can be better operated and maintained as long-term low-
income housing;
    (2) Retention of vacant land (e.g., to retain limited green-space 
as part of a mixed-finance redevelopment); and
    (3) Retention of a central warehouse building or other non-dwelling 
structure (e.g., if the structure is no longer needed).
    (c) Form of application. Applications for retentions under this 
part shall be submitted in the form and manner prescribed by HUD. The 
supporting information shall include:
    (1) A certification that the PHA has specifically authorized the 
retention action in its PHA Plan or significant amendment to that plan 
unless the PHA is a Qualified PHA under the Housing and Economic 
Recovery Act of 2008 (HERA), and the proposed action is consistent with 
any plans, policies, assessments, or strategies prepared pursuant to 
the PHA Plan, such as the deconcentration plan (24 CFR 903.2) and the 
obligation to affirmatively further fair housing (42 U.S.C. 
3608(e)(5)). In the case of a qualified PHA, the PHA must describe the 
proposed retention at its required annual public hearing (or a second 
public hearing if it determines to submit an application for retention 
between its annual public hearings). Qualified PHAs must also comply 
with Sec. Sec.  970.12 and 970.7(c)(19) regarding civil rights and fair 
housing requirements in connection to 24 CFR part 903 and PHA Plans;
    (2) A description of all identifiable property (including dwelling 
and non-dwelling units, bedroom size, and whether the units meet the 
accessibility requirements of Section 504 of the Rehabilitation Act of 
1973 (29 U.S.C. 794) and HUD's implementing regulations at 24 CFR part 
8, other improvements, and land (acreage and legal description) in the 
project proposed for retention; and equipment and personal property 
appurtenant to the project proposed for retention;
    (3) The number of vacant units proposed for retention and a 
narrative explanation for the reasons for the vacancies (e.g., health/
safety issues, occupancy consolidation, emergency relocation due to 
disaster);
    (4) A description of the future ownership structure of the project 
by the PHA (e.g., fee title by the PHA, ownership by the PHA's 
instrumentality, ownership by a Limited Partnership or LLC that is 
controlled by the PHA);
    (5) The anticipated future use of the project after HUD approval 
under this part, including any rehabilitation of units and/or 
demolition and any anticipated subsidies (e.g., low-income housing tax 
credits Section 8 project-based vouchers, Section 8 tenant-based 
vouchers) that the PHA expects will be used for future dwelling that 
will be operated as housing for low-income families on the site of the 
former project;
    (6) A general timetable for the proposed action, including the 
anticipated relocation start date, if applicable, and the anticipated 
transfer date to an instrumentality, limited partnership or LLC, if 
applicable;
    (7) A statement and other supporting documentation justifying the 
proposed action, including a statement justifying a waiver to the 
repayment provision of 24 CFR 85.31 based on 24 CFR 85.6(c) if 
applicable. Such a statement shall include:
    (i) A detailed description of the proposed future use of the 
project, including a description of any housing that will be located on 
the property after de-federalization under this part, including the 
number of units, bedroom sizes, accessibility, affordability, and 
priorities for displaced residents;
    (ii) The proposed length of time in which the PHA will maintain the 
former project for the proposed future use (HUD will generally require 
the proposed future use remain as such for not less than 30 years, but 
will consider other factors such as the extent of public benefits 
(e.g., number of affordable units) arising from the proposed action of 
the property in determining if a period of less than 30 years is 
acceptable); and
    (iii) The proposed legal documentation (e.g., use restriction, 
provision in ground lease, declaration of restrictive covenant) the PHA 
proposes to ensure the approved use.
    (8) A description of any displacement of residents (temporary or 
permanent) that will occur based on this action, along with a 
certification that the PHA will comply with the URA and has a written 
relocation plan on file at its central office that includes:
    (i) The estimated number of individual residents and families to be 
displaced, if any (and whether the relocation is temporary or 
permanent);

[[Page 62287]]

    (ii) The housing resources the PHA will provide to displaced 
residents, if any; and
    (iii) The type of housing counseling services, including mobility 
counseling, to be provided to displaced residents, if any;
    (iv) An estimate of the costs for housing counseling services and 
resident relocation, and the expected source for payment for these 
expenses;
    (v) A plan for determining the housing needs of any displaced 
residents with disabilities and offering them comparable housing that 
includes the accessibility features needed by the resident with a 
disability in the most integrated setting appropriate for the resident 
(i.e., the setting that enables the resident with a disability to 
interact with non-disabled persons to the fullest extent possible and 
have access to community-based services);
    (9) A description with supporting evidence of the PHA's 
consultations with any residents who are residing in the project; the 
resident council (if any), the resident management corporation for the 
project, if any; the PHA-wide resident organization, if any; and the 
Resident Advisory Board (RAB). Supporting evidence shall include: A 
description of the process of the consultations summarizing the dates, 
meetings, and issues raised by the residents and the PHA's responses to 
those issues; meeting sign-in sheets; any written comments submitted by 
affected residents/groups along with the PHA's responses to those 
comments; any certifications or other written documentation that the 
PHA receives from the RAB (or equivalent body) and resident council 
regarding resident support or opposition; a description and/or 
documentation evidencing that the PHA communicated with affected 
residents and other required groups in a manner that was effective for 
persons with hearing, visual, and other communications-related 
disabilities consistent with 24 CFR 8.6 and that public hearing 
facilities and services were physically accessible to persons with 
disabilities, and that appropriate translations were provided for 
Limited English Proficient (LEP) individuals;
    (10) Where the PHA is requesting a waiver of the requirement for 
the application of proceeds for repayment of outstanding development 
debt, the PHA must request such a waiver in its application. However, 
modernization debt, such as Capital Fund Financing Program (CFFP) debt, 
Energy Performance Contracting (EPC) debt, and Operating Fund Financing 
Program (OFFP) debt cannot be waived and repayment is required;
    (11) In the case where the PHA has applied for and/or been approved 
for financing under any HUD program (including CFFP, the OFFP, and the 
EPC program) or any other financing requested pursuant to section 30 of 
the 1937 Act (42 U.S.C. 1437z-2)), a legal opinion that the proposed 
retention action is permitted pursuant to the legal documentation 
associated to that program;
    (12) A copy of a resolution by the PHA's Board of Commissioners 
approving the retention under this part;
    (13) Evidence that the application was developed in consultation 
with local government officials. Supporting evidence should include a 
signed and dated letter in support of the application from the chief 
executive officer of the unit of local government;
    (14) An approved environmental review of the proposed action under 
this part in accordance with 24 CFR part 50 or 58, including acting in 
accordance with the applicable environmental justice principles;
    (15) A civil rights certification in a form and manner prescribed 
by HUD whereby the PHA certifies:
    (i) A description of how the proposed action under this part will 
help the PHA meet its affirmative obligations including, but not 
limited to, the obligation and to overcome discriminatory effects of 
the PHA's use of 1937 Act funds pursuant to part 1 of this title and 
the obligations to deconcentrate poverty (24 CFR part 903, subpart A) 
and affirmatively further fair housing (42 U.S.C. 3608(e)(5)); and
    (ii) It does not have any outstanding charges from HUD (or a 
substantially equivalent state or local fair housing agency) concerning 
a violation of the Fair Housing Act or substantially equivalent state 
or local fair housing law proscribing discrimination because of race, 
color, religion, sex, national origin, disability, or familial status.
    (iii) It is not a defendant in a Fair Housing Act lawsuit filed by 
the Department of Justice;
    (iv) It does not have outstanding letters of findings identifying 
noncompliance under title VI of the Civil Rights Act of 1964, section 
504 of the Rehabilitation Act of 1973, or section 109 of the Housing 
and Community Development Act of 1974; and
    (v) It has not received a cause determination from a substantially 
equivalent state or local fair housing agency concerning a violation of 
provisions of a state or local law proscribing discrimination in 
housing based on sexual orientation, gender identity, or source of 
income;
    (vi) Additional supporting information that may be requested by 
HUD, if applicable, that shows that the proposed action will not 
maintain or increase segregation on the basis of race, ethnicity, or 
disability and will not otherwise violate applicable nondiscrimination 
or equal opportunity requirements, including a description of any 
affirmative efforts to prevent discriminatory effects;
    (16) A certification that the PHA will comply with this part and 
the terms and conditions of the HUD retention approval, including, if 
applicable, monitoring the future use of a former project, for 
compliance with HUD's approval; and
    (17) Any additional information requested by and determined to be 
necessary to HUD to support the proposed retention action, and to 
assist HUD in making a determination to approve or disapprove the 
application under this part.

PART 972--CONVERSION OF PUBLIC HOUSING TO TENANT-BASED ASSISTANCE

0
2. The authority citation for part 972 continues to read as follows:

    Authority: 42 U.S.C. 1437t, 1437z-5, and 3535(d).

Subpart A--Required Conversion of Public Housing Developments

0
3. Revise Sec.  972.103 to read as follows:


Sec.  972.103  Definition of ``conversion.''

    For purposes of this subpart, the term ``conversion'' means the 
removal of public housing units from the inventory of a PHA, and the 
replacement of the converted project or portion with tenant-based 
assistance. The term ``conversion,'' as used in this subpart, does not 
necessarily mean the physical removal of the public housing 
development.

Subpart B--Voluntary Conversion of Public Housing Developments

0
4. Revise Sec.  972.203 to read as follows:


Sec.  972.203  Definition of ``conversion.''

    For purposes of this subpart, the term ``conversion'' means the 
removal of public housing units from the inventory of a PHA, and the 
replacement of the converted project or portion with tenant-based 
assistance. The term ``conversion,'' as used in this subpart, does not 
necessarily mean the physical removal of the public housing 
development.


[[Page 62288]]


    Dated: October 3, 2014.
Jemine A. Bryon,
Acting Assistant Secretary for Public and Indian Housing.
[FR Doc. 2014-24068 Filed 10-15-14; 8:45 am]
BILLING CODE 4210-67-P


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