[Federal Register Volume 80, Number 9 (Wednesday, January 14, 2015)]
[Proposed Rules]
[Pages 1860-1868]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00357]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

 24 CFR Parts 880, 881, 883, 884, 886, and 891

[Docket No. FR-5654-P-01]
RIN 2502-AJ22


Streamlining Management and Occupancy Reviews for Section 8 
Housing Assistance Programs and Amending Vacancy Payments for Section 8 
and Section 162 Housing Assistance Programs

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend existing project-based Section 
8 regulations related to Management and Occupancy Reviews (MORs) and 
Vacancy Payments for the following programs: the Section 8 Housing 
Assistance Payments (HAP) Programs for New Construction, Substantial 
Rehabilitation, State Housing Agencies, New Construction financed under 
Section 515 of the Housing Act of 1949, the Loan Management Set-Aside 
Program, the HAP Program for the Disposition of HUD-Owned Projects, and 
the Section 202/8 Program. This rule would also amend the existing 
Section 162 regulations related to Vacancy Payments for the Section 202 
Projects. Under this rule, MORs would be conducted in accordance with a 
schedule published in the Federal Register and subject to public 
comment. The first such schedule is being published for comment 
concurrently with this proposed rule, and can be found elsewhere in 
today's Federal Register. HUD is proposing this change in order to 
reduce the frequency of MORs, thereby minimizing interruptions in 
property operations created by onsite reviews, preserving staff time, 
and reducing costs. In addition, this proposed rule would reduce the 
vacancy payments made to the owner by HUD for a vacant assisted unit.

DATES: Comment Due Date. March 16, 2015.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, 451 
7th Street SW., Room 10276, Department of Housing and Urban 
Development, 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 comments, 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. Eastern Time 
weekdays at the above address. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the public 
comments must be scheduled by calling the Regulations Division at 202-
708-3055 (this is not a toll-free number). Individuals with speech or 
hearing impairments may access this number through TTY by calling the 
Federal Relay Service at 800-877-8339. Copies of all comments submitted 
are available for inspection and downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For information about management and 
occupancy reviews contact Lauryn Alleva, Program Administration Office, 
Office of Housing, Department of Housing and Urban Development, 451 7th 
Street SW., Washington, DC 20410-7000; telephone number 202-708-3730 
(this is not a toll-free number). For information about vacancy claims, 
contact Yvette Viviani, Housing Assistance Policy Division, Office of 
Housing Assistance and Grant Administration, Office of Housing, 
Department of Housing and Urban Development, 451 7th Street SW., 
Washington, DC 20410-7000; telephone number 202-708-3000 (this is not a 
toll-free number). Hearing- and speech-impaired persons may access 
these numbers through TTY by calling the Federal Relay Service at 800-
877-8339 (this is a toll-free number).

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 8 of the United States Housing Act of 1937 (42 U.S.C. 
1437f) authorizes one of HUD's primary programs for providing rental 
housing assistance (Section 8). The purpose of Section 8 is to provide 
low-income families with decent, safe, and sanitary rental housing. The 
Section 8 program includes a project-based program and a tenant-based 
housing choice program. Under the project-based program, HUD may enter 
into an annual contributions contract (ACC) with a public housing 
agency (PHA) through which HUD commits to provide the agency with funds 
to make housing assistance payments to a project owner. The PHA or 
state agency, acting as a contract administrator, then enters into a 
Housing Assistance Payments (HAP) contract with the owner. Under the 
HAP contract, the contract administrator agrees to subsidize certain 
units for a specified period of time for eligible low-income families. 
In certain circumstances HUD may act as the contract administrator, 
whereby HUD will directly enter into a HAP contract with an owner.
    There are seven project-based Section 8 HAP programs administered 
by the Office of Multifamily Housing Programs: The HAP program for New 
Construction (24 CFR part 880) and the HAP program for Substantial 
Rehabilitation (24 CFR part 881), which provide rental assistance in 
connection with the development of newly constructed or substantially 
rehabilitated privately owned rental housing; the HAP Program for State 
Housing Agencies (24 CFR part 883); the HAP program for New

[[Page 1861]]

Construction financed under Section 515 of the Housing Act of 1949 (24 
CFR part 884), which applies to U.S. Department of Agriculture rural 
rental housing projects; the Loan Management Set Aside Program (24 CFR 
part 886, subpart A), which provides rental subsidies to HUD-insured or 
HUD-held multifamily properties experiencing immediate or potential 
financial difficulties; the Housing Assistance Program for the 
Disposition of HUD-Owned Projects (24 CFR part 886, subpart C), which 
provides Section 8 assistance in connection with the sale of HUD-owned 
multifamily rental housing projects and the foreclosure of HUD-held 
mortgages on rental housing projects; and the Section 202/8 Program (24 
CFR part 891, subpart E), which provides assistance for housing 
projects serving elderly or families and individuals with disabilities.
    Section 162 Project Assistance Contracts (PACs) were authorized 
under the now repealed Section 202(h) of the Housing Act of 1959 (12 
U.S.C. 1701q). Although the program was repealed, Section 162 PACs are 
still renewed under the Section 162 program. Section 162 renewals 
provide funding for projects under the Section 202 Direct Loan Program 
for the Elderly and targeted persons with disabilities. A PAC is 
similar to the ACC in the Section 8 projects and the program operates 
under the same terms as the Section 8 program.

A. Management and Occupancy Reviews

    Contract administrators in the Section 8 above-listed programs are 
responsible for assessing the management and oversight of housing 
projects and for ensuring that owners comply with the requirements of 
the HAP contract. In order to assess an owner's compliance with the 
terms and conditions of its HAP contract, contract administrators 
conduct management and occupancy reviews (MORs).
    Under existing regulations, the frequency of MORs across the seven 
project-based Section 8 programs administered by the Office of 
Multifamily Housing is inconsistent. Contract administrators in the HAP 
New Construction Program, HAP Substantial Rehabilitation Program, and 
HAP State Housing Agencies Program are required to review a project's 
operations ``at least annually'' to determine whether the owner is in 
compliance with the HAP contract. The regulations for the HAP Program 
for Section 515 projects, the Loan Management Set-Aside Program, and 
the Housing Assistance Program for the Disposition of HUD-Owned 
Projects are less prescriptive and only require that HUD review project 
operations ``at such intervals as it deems necessary'' to ensure an 
owner is in compliance with its HAP contract. Lastly, the Section 202/8 
program regulations provide no reference to the frequency of MORs.
    Completion of MORs can require Contract Administrators to visit the 
site and can cause interruption in project operations. The Contract 
Administrator spends approximately 8 hours of staff time and additional 
resources to review every project. HUD has found that in recent years 
projects have been rated ``Above Average'' or ``Superior'' 35 percent 
of the time, ``Satisfactory'' 57 percent of the time, and ``Below 
Average'' or ``Unsatisfactory'' eight percent of the time. A full or 
limited review of all projects, including those that consistently 
receive high marks, puts a strain on HUD and project resources.

B. Vacancy Payments

    Under section 8(c)(4) of the United States Housing Act of 1937, a 
HAP contract providing project-based rental assistance may contain 
payments for vacant units. Similarly, a PAC may contain payments for 
vacant units. A contract administrator may continue to provide 
assistance under the contract for a dwelling unit that remains vacant 
after the effective date of the contract or a dwelling unit that 
becomes vacant only if the vacancy was not the fault of the owner of 
the dwelling unit, and the agency and the owner take every reasonable 
action to minimize the likelihood and extent of any such vacancy.
    Under current regulations, an owner is entitled to vacancy payments 
in the amount of 80 percent of the contract rent for a period of no 
more than 60 days after initial rent up or after an eligible family 
vacates the unit. These vacancy payments are made as part of an owner's 
monthly HAP or PAC payment. If the vacancy persists past the 60 days, 
an owner may also receive additional vacancy payments in an amount 
equal to the principal and interest payments required to amortize that 
portion of the debt service attributable to the vacant unit for up to 
12 additional months (debt-service vacancy payments). Debt-service 
vacancy payments are made semi-annually by the contract administer upon 
request by the owner. In either case, an owner is not entitled to 
vacancy payments for vacant units to the extent he can collect for the 
vacancy from other sources (such as security deposits and governmental 
payments under other programs). Additionally, an owner is only eligible 
for payments if during the vacancy period for which payment is claimed 
an owner continues to market the unit in accordance with HUD 
requirements, takes all feasible actions to fill the vacancy, does not 
reject an eligible applicant except for good cause acceptable to the 
contract administrator; and maintains the unit in decent, safe, and 
sanitary conditions.
    HUD has observed that the 60-day period for vacancy payments may be 
too long; resulting in contract units staying vacant for longer periods 
and extending the time it takes for eligible families to secure 
housing.

II. This Proposed Rule--Overview

A. Management and Occupancy Reviews

    HUD is proposing to revise the regulations that govern MORs for 
Section 8 HAP projects to provide consistency across programs and allow 
HUD the flexibility to set a schedule that is more in-line with the 
needs of the programs. Because many of the properties that receive 
assistance under a Section 8 HAP program have consistently received 
high marks on their MORs, reducing the frequency of MORs for these 
properties would result in fewer interruptions in project operations 
and would allow HUD to focus its staff and resources on areas that 
require greater attention. HUD proposes to amend the project-based 
Section 8 HAP program regulations to require that MORs be conducted in 
accordance with a schedule set out by the Secretary as published in the 
Federal Register, following notice and comment. HUD's proposal would 
adopt this new language in 24 CFR 880.612, 884.224, 886.130, and 
886.355, and would re-title these sections ``Management and occupancy 
reviews.'' Additionally, this proposal would add a new Sec.  891.582, 
also titled ``Management and occupancy reviews.'' Because the cross-
reference in 24 CFR 881.601 and 24 CFR 883.701 includes 24 CFR 880.612, 
this new MOR requirement would also apply to the HAP Substantial 
Rehabilitation Program and the HAP Program for State Housing Agencies, 
respectively, without changes being made to the regulations that are 
specific for those programs.
    The first proposed schedule for MORs is published elsewhere in 
today's Federal Register and HUD invites public comment on that 
schedule. As provided in that notice, although HUD is proposing a 
schedule for MORs that is based on both a project's annual MOR rating 
and a HUD risk-based management model, nothing in this

[[Page 1862]]

proposed rule nor the accompanying notice restricts HUD or the Contract 
Administrator from conducting additional MORs outside of this schedule 
pursuant to existing and future administrative guidelines.

B. Vacancy Payments

    HUD is also proposing to revise the regulations that permit owners 
of Section 8 HAP projects and Section 162 PAC projects to collect 
vacancy payments in the amount of 80 percent of the contract rent for 
the first 60 days of a vacancy. HUD has observed that since vacancy 
payments are only available once units are ready to be rented, owners 
typically turn around a unit in 30 days rather than collect a reduced 
vacancy payment. HUD also wants to incentivize owners, when 
appropriate, to see that vacant units are rented more expeditiously to 
eligible individuals and families. The proposed rule would provide that 
owners could receive vacancy payments in the amount of 80 percent of 
the contract rent for the first 30 days of a vacancy in place of the 
current 60 days of a vacancy. This proposed rule would not preempt 
existing HAP contracts and renewal contracts under the Multifamily 
Assisted Housing Reform and Affordability Act of 1997 (42 U.S.C. 1437f 
note) (MAHRA) that include a 60 day period for vacancy payments; 
however, all future renewal contracts under MAHRA will reflect this new 
requirement. Additionally, the proposed rule would not preempt existing 
PAC and renewals; however, all future renewals would reflect this 
requirement. Owners may still apply for additional debt-service vacancy 
payments for up to 12 months after receiving the first 30 days of 
vacancy payments at 80 percent of the contract rent.
    The proposed change would amend the vacancy payment references to 
the first 60 days in all seven project-based Section 8 HAP programs 
administered by the Office of Multifamily Housing and Section 162 
program regulations. Specifically, HUD proposes to amend the ``vacancy 
payment'' definition to remove the reference to the length of the 
vacancy period in Sec. Sec.  880.201, 881.201, 883.302, 891.520, and 
891.655. HUD also proposes to remove the reference to ``the first 60 
days'' and replace it with ``the first 30 days of a vacancy'' and 
remove any cross-references to the 60 day time period by amending the 
provisions describing the length of vacancy payment periods in 
Sec. Sec.  880.501, 880.611 881.501, 883.602, 884.106, 886.109, 
886.309, 891.560, 891.650, 891.705, and 891.790. This proposed rule 
would also amend the provision regarding the length of the vacancy 
payment period in Sec.  886.309(d) so that it is consistent with all 
the other vacancy length payment provisions, and amends Sec.  886.109 
to distinguish between vacancies during rent-up, vacancies after rent-
up and debt-service vacancy payments. Additionally, HUD proposes to 
change headings in Sec. Sec.  880.611, 886.106, 886.309, 891.650(d), 
and 891.790 for consistency with the other sections.

III. Findings and Certifications

Regulatory Review--Executive Orders 12866 and 13563

    Under Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made whether a regulatory action is significant 
and, therefore, subject to review by the Office of Management and 
Budget (OMB) in accordance with the requirements of the order. 
Executive Order 13563 (Improving Regulation and Regulatory Review) 
directs executive agencies to analyze regulations that are ``outmoded, 
ineffective, insufficient, or excessively burdensome, and to modify, 
streamline, expand, or repeal them in accordance with what has been 
learned.'' Executive Order 13563 also directs that where relevant, 
feasible, and consistent with regulatory objectives, and to the extent 
permitted by law, agencies are to identify and consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public.
    This rule was determined to be a significant regulatory action 
under section 3(f) of Executive Order 12866. More importantly, for HUD 
program participants, this rule is part of HUD's retrospective review 
carried out under Executive Order 13563, and designed to reduce burden 
on well-performing program participants.
Need for Regulatory Action
    Executive Order 12866 emphasizes that ``Federal agencies should 
promulgate only such regulations as are required by law, are necessary 
to interpret the law or are made necessary by compelling public need, 
such as material failures of private markets to protect or improve the 
health and safety of the public, the environment, or the well-being of 
the American people.'' Because the schedule for MORs was established by 
regulation, HUD (1) can only reduce burden for those programs required 
to have annual MORs, and (2) bring consistency to the schedule for MORs 
for the other programs, through regulation. Moreover, HUD has 
determined that the current MORs schedule is inconsistent and, as 
currently codified, places a strain on HUD resources and on projects 
that consistently receive high marks on their MORs. As described in 
this preamble, HUD has recently determined that projects have been 
rated as ``Above Average'', ``Superior'', or ``Satisfactory'' 92 
percent of the time. This fact, and the costs placed on projects to 
prepare for a MOR and that may result from the interruption in normal 
operations caused by a MOR, makes reducing this burden an important 
topic for rulemaking.
    Similarly, HUD can only reduce the period of vacancy payments from 
60 days to 30 days for the purpose of turning units around more quickly 
for the next individual or family ready to occupy the unit by 
regulation. Additionally, while vacancy payments are only available 
once the unit is ready to be rented, this rule proposes to further 
reduce any incentive for owners not to rent the unit as quickly as 
possible. This is consistent with the need to ensure a constant supply 
of affordable housing. As a result, consistent with Executive Order 
13563, this rulemaking is intended to modify, streamline, or repeal 
burdensome regulations. Thus, the placement of this proposed rule on 
HUD's Retrospective Review Plan. See page 6 of HUD's updated 
Retrospective Review Plan at http://portal.hud.gov/hudportal/documents/huddoc?id=EO13563_PLAN.PDF.
Discussion of Costs and Benefits
    As discussed in this preamble, the proposed amendments to the MORs 
regulations would provide consistency to the scheduling of MORs and 
allow HUD to issue the schedule by publishing it in the Federal 
Register, subject to public comment. Because many of the properties 
that receive assistance under a Section 8 HAP contract have 
consistently received high marks on their MORs, reducing the frequency 
of a MOR would result in fewer interruptions in project operations.
    The purpose of a MOR is to verify compliance of the property with 
the terms of the HAP contract. Scheduling of the MOR begins with a 
letter sent to the owner generally 30 days, but at least 2 weeks, in 
advance of the date the MOR is to be undertaken. The on-site review by 
HUD involves inspection of a sampling of units. The owner is 
responsible for providing notice to residents that their units may be 
chosen for inspection. The review also involves a determination of 
owner compliance with civil rights regulations, including

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Title VI, Title VII, the Americans with Disabilities Act, and Section 
504 of the Rehabilitation Act of 1973. Before the actual inspection by 
HUD, HUD will review property status by referring to the last 
inspection performed, and note any exigent health and safety concerns 
previously identified. HUD will also review complaints from residents, 
congressional inquiries and media reports, if any, to verify all 
concerns were responded to in a timely manner. Any contractual 
violations and imposed sanctions will also be reviewed. As this 
description of an MOR reveals, it is not an insignificant process, but 
for those properties that consistently receive high marks, HUD 
concluded that it can and should reduce, the frequency of MORs. In 
reaching this conclusion, HUD has also determined that the deficiencies 
found in MORs of properties that receive high marks do not offset the 
costs to the project in preparing for the MOR and in the disruption to 
normal property operations that inevitably accompany a MOR.
    With respect to vacancy payments, the proposed amendments to the 
vacancy payments regulations would make units available to eligible 
families earlier rather than later and further incentivize owners to 
rent the unit as quickly as possible. As the need for affordable 
housing remains constant, it is important that owner provide for 
occupancy of vacant units at the earliest date possible. As noted 
earlier in this preamble, vacancy payments are only available once 
units are ready to be rented, meaning that units are decent, safe, and 
in sanitary condition and are therefore available for occupancy. 
Vacancy payments are not paid for the days that a unit is being 
prepared for occupancy. HUD has observed that owners typically turn 
around a unit in 30 days rather than collect a reduced vacancy payment. 
Therefore, the amendment largely reflects existing practice among 
owners. The number of units receiving vacancy payments is small 
relative to the total number of units utilized in project-based section 
8. For those owners that may not move to rent units as quickly as HUD 
hopes or expects, the reduction of vacancy payments to a 30-day period 
should incentivize these owners to take actions that will result in 
available units being promptly rented.
    HUD first provided notification of its intention to reduce vacancy 
payments from 60 days to 30 days in its FY 2013 Congressional 
Justifications.\1\ HUD was unable to move to implement the proposals in 
the FY 2013 Congressional Justification as early as HUD had intended. 
However, the proposal to reduce vacancy payments from 60 days to 30 
days remained in HUD's FY 2014 Congressional Justification and HUD's FY 
2015 Congressional Justification \2\ and, through this rule, HUD 
proposes to proceed to implement the reduced vacancy payment amendment.
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    \1\ See http://portal.hud.gov/hudportal/HUD?src=/program_offices/cfo/reports/2013/main_toc.
    \2\ See respectively page Y-2 at http://portal.hud.gov/hudportal/documents/huddoc?id=PROJBASEDRA.pdf and page Y-3 at http://portal.hud.gov/hudportal/documents/huddoc?id=fy15cj_pbra.pdf.
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    Due to data limitations, HUD is unable to determine the aggregate 
saving resulting from reducing the vacancy payment to 30 days. HUD 
estimates, however, that taxpayers as a whole will realize a benefit 
from the shorter payment period and from the incentive for owners 
created by the rule to take actions that will result in available units 
being more promptly rented. These changes would result in a savings to 
the government and represents a transfer from owners to the taxpayer.

Information Collection Requirements

    The information collection requirements for this rule have been 
approved by the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB 
control numbers 2502-0178. In accordance with the Paperwork Reduction 
Act, an agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information, unless the collection 
displays a currently valid OMB control number. The overall burden of 
this collection would be reduced, however, by the reducing the 
frequency of MORs for properties that perform well. As discussed in 
HUD's notice proposing the MOR schedule for comment published elsewhere 
in today's Federal Register, HUD has determined that the net reduction 
of burden resulting from this rule represents a 73 percent savings from 
that currently codified. The public is referred to HUD's notice for 
addition information regarding the determination of this savings.

Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment has been made in accordance with HUD regulations at 24 CFR 
part 50, which implement section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI is 
available for public inspection between 8 a.m. and 5 p.m. weekdays in 
the Regulations Division, Office of General Counsel, Department of 
Housing and Urban Development, 451 7th Street SW., Room 10276, 
Washington, DC 20410-0500. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the docket file 
must be scheduled by calling the Regulations Division at 202-708-3055 
(this is not a toll-free number). Hearing or speech-impaired 
individuals may access this number through TTY by calling the toll-free 
Federal Relay Service at 800-877-8339.

Unfunded Mandates Reform Act

    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 on the private sector. This proposed rule does not 
impose a federal mandate on any state, local, or tribal government, or 
on the private sector, within the meaning of UMRA.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally 
requires an agency to conduct a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements, unless the 
agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities. It is HUD's position 
that the burden reduction measures provided by this rule would not have 
a significant economic impact (beneficial or adverse) on a substantial 
number of small entities.
    As noted earlier in this preamble, this proposed rule is one of the 
regulatory actions being undertaken as part of HUD's Retrospective 
Review Plan, established in accordance with Executive Order 13563. The 
primary focus of this rule is to reduce burden, but reduce burden for 
project owners that manage their projects well in accordance with HUD 
regulations. In establishing requirements as to how HUD subsidized 
housing is to be managed and administered, the requirements are not 
based on whether a project owner is a large entity or small entity. The 
focus of such requirements is on ensuring that the units that HUD 
subsidizes are decent, safe and sanitary and are made available to 
eligible tenants in a nondiscriminatory manner. These are not 
requirements that HUD can alter on the basis that a project owner is a 
small entity. However, this rule reduces burden for all project owners, 
large or small, that manage their properties well in accordance with 
HUD

[[Page 1864]]

regulations and score well under the MOR rating system. This proposed 
rule would provide that for these properties there is no need for an 
annual MOR, reduce burden for the project owner, whether such owner is 
a large or small entity.
    The proposal to reduce the period in which HUD will provide vacancy 
payments from 60 days to 30 days is also a proposal directed to project 
owners that manage their projects well. As noted earlier in this 
preamble, the majority of project owners rent vacant units (units ready 
for occupancy) within 30 days, and therefore the reduction of the 
vacancy payment period from 60 to 30 days will have minimal impact. As 
also noted earlier in this preamble, since 2013, HUD has alerted owners 
of its intention to reduce the vacancy payment period from 60 to 30 
days. For owners that may regularly or from time-to-time undertake 
little effort to rent a vacant unit within 30 days of availability for 
occupancy, the reduction is intended to serve as motivation to rent the 
vacant unit within 30 days. The rule would not remove the option in the 
existing regulations that allow owners to apply for additional debt-
service vacancy payments for up to 12 months after receiving the first 
30-days of vacancy payments at 80 percent of the contract rent. 
Accordingly, the undersigned certifies that this rule will not have a 
significant economic impact on a substantial number of small entities.
    Notwithstanding HUD's determination that this rule will not have a 
significant effect on a substantial number of small entities, HUD 
specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either (1) imposes substantial direct compliance costs on state and 
local governments and is not required by statute, or (2) preempts state 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This final rule does not have 
federalism implications and does not impose substantial direct 
compliance costs on state and local governments nor preempt state law 
within the meaning of the Executive Order.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number applicable to the 
programs that would be affected by this rule is 14.195.

List of Subjects

24 CFR Part 880

    Annual contributions contract, audit, construction, contract 
administration, financing, housing assistance, housing assistance 
payments contract, management, new construction, owner, public housing 
agency, property standards, rent, section 8, tenants, and units.

24 CFR Part 881

    Annual contributions contract, audit, contract administration, 
conversion, housing assistance, housing assistance payments contract, 
inspections, low-income family, owner, public housing agency, rent, 
section 8, substantial rehabilitation, tenants, and units.

24 CFR Part 883

    Annual contributions contract, audit, contract administration, 
housing finance agencies, housing assistance, housing assistance 
payments contract, low-income family, owner, rent, section 8, 
substantial rehabilitation, state agencies, tenants, and units.

24 CFR Part 884

    Annual contributions contract, audit, contract administration, 
conversion, housing assistance, housing assistance payments contract, 
income limit, inspections, low-income family, maintenance, new 
construction, owner, public housing agency, rent, rural housing, 
section 8, security deposits, tenants, units, and utility deposits.

24 CFR Part 886

    Audit, contract administration, housing assistance, housing 
assistance payments contract, income, inspection, maintenance, 
marketing, mortgages, owner, rehabilitation, rent, section 8, security 
deposits, special allocations, tenants, units, and utility deposits.

24 CFR Parts 891

    Capital advances, persons with disabilities, project rental 
assistance, rent, section 8, supportive housing for persons with 
disabilities, supportive services, tenants, and units.

    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend 24 CFR part 880, 881, 883, 884, 886, and 891 as 
follows:

PART 880--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR NEW 
CONSTRUCTION

0
1. The authority citation for 24 CFR part 880 continues to read as 
follows:

    Authority:  42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 12701, and 
13611-13619.

0
2. In Sec.  880.201, revise the definition of ``Vacancy payment'' to 
read as follows:


Sec.  880.201  Definitions.

* * * * *
    Vacancy payment. The housing assistance payment made to the owner 
by the contract administrator for a vacant assisted unit if certain 
conditions are fulfilled.
* * * * *
0
3. In Sec.  880.501, revise paragraphs (c), (d)(2) and (3) to read as 
follows:


Sec.  880.501  The contract.

* * * * *
    (c) Housing Assistance Payments to Owners under the Contract. (1) 
The housing assistance payments made under the Contract are:
    (i) Payments to the owner to assist eligible families leasing 
assisted units, and
    (ii) Payments to the owner for vacant assisted units (``vacancy 
payments'') if the conditions specified in Sec.  880.611 are satisfied.
    (2) The housing assistance payments are made monthly by the 
contract administrator upon proper requisition by the owner, except 
payments for vacancies under paragraph (d)(3) of this section, which 
are made semi-annually by the contract administrator upon requisition 
by the owner.
    (d) * * *
    (2) A housing assistance payment will be made to the owner for a 
vacant assisted unit in an amount equal to 80 percent of the contract 
rent for the first 30 days of a vacancy, subject to the conditions in 
Sec.  880.611. If the owner collects any tenant rent or other amount 
for this period which, when added to this vacancy payment, exceeds the 
contract rent, the excess must be repaid as HUD directs.
    (3) For a vacancy that exceeds the vacancy period in paragraph 
(d)(2) of this section, a housing assistance payment for the vacant 
unit will be made, subject to the conditions in Sec.  880.611, in an 
amount equal to the principal and interest payments required to 
amortize that portion of the debt attributable to the vacant unit for 
up to 12 additional months.
* * * * *
0
4. In Sec.  880.611, revise the introductory text of paragraphs (b), 
(c), and (d) to read as follows:

[[Page 1865]]

Sec.  880.611  Conditions for receipt of vacancy payments.

* * * * *
    (b) Vacancies during Rent-up. For each assisted unit that is not 
leased as of the effective date of the Contract, the owner is entitled 
to vacancy payments in the amount of 80 percent of the contract rent 
for the first 30 days of a vacancy, if the owner: * * *
    (c) Vacancies after Rent-Up. If an eligible family vacates a unit, 
the owner is entitled to vacancy payments in the amount of 80 percent 
of the contract rent for the first 30 days of a vacancy, if the owner: 
* * *
    (d) Debt-service vacancy payments. If an assisted unit continues to 
be vacant after the vacancy period specified in paragraph (b) or (c) of 
this section, the owner may apply to receive additional vacancy 
payments in an amount equal to the principal and interest payments 
required to amortize that portion of the debt service attributable to 
the vacant unit for up to 12 additional months for the unit if:
* * * * *
0
5. Revise Sec.  880.612 to read as follows:


Sec.  880.612  Management and occupancy reviews.

    (a) The contract administrator will conduct management and 
occupancy reviews to determine whether the owner is in compliance with 
the Contract. Such reviews will be conducted in accordance with a 
schedule set out by the Secretary and published in the Federal 
Register, following notice and the opportunity to comment.
    (b) HUD may independently inspect project operations and units at 
any time.
    (c) Equal Opportunity reviews may be conducted by HUD at any time.

PART 881--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR 
SUBSTANTIAL REHABILITATION

0
6. The authority citation for 24 CFR part 881 continues to read as 
follows:

    Authority:  42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 12701, and 
13611-13619.

0
7. In Sec.  881.201, revise the definition of ``Vacancy payment'' to 
read as follows:


Sec.  881.201  Definitions.

* * * * *
    Vacancy payment. The housing assistance payment made to the owner 
by the contract administrator for a vacant assisted unit if certain 
conditions are fulfilled.
* * * * *
0
8. In Sec.  881.501,
0
a. Revise paragraph (c)(2);
0
b. Redesignate the undesignated paragraph in paragraph (c) as (c)(3) 
and revise the newly redesignated paragraph; and
0
c. Revise paragraphs (d)(2) and (3) to read as follows:


Sec.  881.501  The contract.

* * * * *
    (c) * * *
    (2) Payments to the owner for vacant assisted units (``vacancy 
payments'') if the conditions specified in Sec.  880.611 of this 
chapter are satisfied.
    (3) The housing assistance payments are made monthly by the 
contract administrator upon proper requisition by the owner, except 
payments under paragraph (d)(3), which are made semi-annually by the 
contract administrator upon requisition by the owner.
    (d) * * *
    (2) A housing assistance payment will be made to the owner for a 
vacant assisted unit in an amount equal to 80 percent of the contract 
rent for the first 30 days of a vacancy, subject to the conditions in 
Sec.  880.611 of this chapter. If the owner collects any tenant rent or 
other amount for this period which, when added to this vacancy payment, 
exceeds the contract rent, the excess must be repaid as HUD directs.
    (3) For a vacancy that exceeds the vacancy period in paragraph 
(d)(2), a housing assistance payment for the vacant unit will be made, 
subject to the conditions in Sec.  880.611 of this chapter, in an 
amount equal to the principal and interest payments required to 
amortize that portion of the debt attributable to the vacant unit for 
up to 12 additional months.
* * * * *

PART 883--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--STATE 
HOUSING AGENCIES

0
9. The authority citation for 24 CFR part 883 continues to read as 
follows:

    Authority:  42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-
13619.

0
10. In Sec.  883.302, revise the definition of ``Vacancy payment'' to 
read as follows:


Sec.  883.302  Definitions.

* * * * *
    Vacancy payments. The housing assistance payment made to the owner 
by the State Agency for a vacant, assisted unit if certain conditions 
are fulfilled.
* * * * *
0
11. In Sec.  883.602:
0
a. Redesignate the undesignated paragraph in paragraph (b) as (b)(3) 
and revise the newly redesignated paragraph; and
0
b. Revise paragraphs (c)(2) and (3) to read as follows:


Sec.  883.602  The contract.

* * * * *
    (b) * * *
    (3) The housing assistance payments are made monthly by the State 
Agency upon proper requisition by the owner, except payments under 
paragraph (c)(3) of this section, which are made semi-annually by the 
Agency upon proper requisition by the owner.
    (c) * * *
    (2) A housing assistance payment will be made to the owner for a 
vacant assisted unit in an amount equal to 80 percent of the contract 
rent for the first 30 days of a vacancy, subject to the conditions in 
Sec.  880.611 of this chapter. If the owner collects any tenant rent or 
other amount for this period which, when added to this vacancy payment, 
exceeds the contract rent, the excess must be repaid as the Agency 
directs in accordance with HUD guidelines.
    (3) For a vacancy that exceeds the vacancy period in paragraph 
(c)(2) of this section, a housing assistance payment for the vacant 
unit will be made, subject to the conditions in Sec.  880.611 of this 
chapter, in an amount equal to the principal and interest payments 
required to amortize that portion of the debt attributable to the 
vacant unit for up to 12 additional months.
* * * * *

PART 884--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM, NEW 
CONSTRUCTION SET-ASIDE FOR SECTION 515 RURAL RENTAL HOUSING 
PROJECTS

0
12. The authority citation for 24 CFR part 884 continues to read as 
follows:

    Authority:  42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-
13619.

0
13. In Sec.  884.106, revise the introductory text of paragraphs (b) 
and paragraph (c)(1), and revise paragraph (d)(1) to read as follows:


Sec.  884.106  Housing assistance payment to owners.

* * * * *
    (b) Vacancies during rent-up. If a Contract Unit is not leased as 
of the effective date of the Contract, the Owner shall be entitled to 
housing assistance payments in the amount of 80 percent of the Contract 
Rent for the first 30 days of a vacancy, in accordance with the 
procedure set forth in Sec.  884.213(b): * * *
    (c) Vacancies after rent-up. (1) If an Eligible Family vacates its 
unit (other than as a result of action by the Owner

[[Page 1866]]

which is in violation of the Lease or the Contract or any applicable 
law), the Owner shall receive housing assistance payments in the amount 
of 80 percent of the Contract Rent for the first 30 days of a vacancy; 
provided, however, That if the Owner collects any of the Family's share 
of the rent for this period in an amount which, when added to the 80 
percent payments, results in more than the Contract Rent, such excess 
shall be payable to HUD or as HUD may direct. (See also Sec.  884.115). 
The Owner shall not be entitled to any payment under this paragraph 
(c)(1) unless the Owner: * * *
* * * * *
    (d) Debt-service vacancy payments. (1) If a unit continues to be 
vacant after the vacancy period specified in paragraph (b) or (c) of 
this section, the owner may submit a claim to receive additional 
housing assistance payments on a semiannual basis with respect to the 
vacant unit in an amount equal to the principal and interest payments 
required to amortize the portion of the debt attributable to that unit 
for the period of the vacancy, whether the vacancy commenced during 
rent-up or after rent-up.
* * * * *
0
14. Revise Sec.  884.224 to read as follows:


Sec.  884.224  Management and occupancy reviews.

    (a) The contract administrator will conduct management and 
occupancy reviews to determine whether the owner is in compliance with 
the Contract. Such reviews will be conducted in accordance with a 
schedule set out by the Secretary and published in the Federal 
Register, following notice and the opportunity to comment.
    (b) HUD may independently inspect project operations and units at 
any time.
    (c) Equal Opportunity reviews may be conducted by HUD at any time.

PART 886--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--SPECIAL 
ALLOCATIONS

0
15. The authority citation for 24 CFR part 886 continues to read as 
follows:

    Authority:  42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-
13619.

0
16. In Sec.  886.109, revise paragraph (c) and add paragraphs (d), (e), 
(f), and (g) to read as follows:


Sec.  886.109  Housing assistance payments to owners.

* * * * *
    (c) Vacancies during rent-up. If a Contract unit which is decent, 
safe and sanitary and has been accepted by HUD as available as of the 
effective date of the Contract is not leased within 15 days of the 
effective date of the Contract, the owner will be entitled to housing 
assistance payments in the amount of 80 percent of the Contract Rent 
for the first 30 days of a vacancy, provided that the owner:
    (1) Has submitted a list of units leased as of the effective date 
and a list of the units not so leased;
    (2) 60 days prior to the completion of the rehabilitation or the 
date the agreement was executed, whichever is later, had notified the 
PHA of any units which the owner anticipated would be vacant on the 
anticipated effective date of the contract;
    (3) Has taken and continues to take all feasible actions to fill 
the vacancy including, but not limited to: Contacting applicants on the 
owner's waiting list, if any, requesting the PHA and other appropriate 
sources to refer eligible applicants, and advertising the availability 
of the units in a manner specifically designed to reach low-income 
families; and
    (4) Has not rejected any eligible applicant except for good cause 
acceptable to HUD.
    (d) Vacancies after rent-up. If an Eligible Family vacates its unit 
(other than as a result of action by the owner which is in violation of 
the Lease or the Contract or any applicable law), the owner shall 
receive housing assistance payments in the amount of 80 percent of the 
Contract Rent for the first 30 days of a vacancy. However, if the owner 
collects any of the family's share of the rent for this period, the 
payment must be reduced to an amount which, when added to the family's 
payments, does not exceed 80 percent of the Contract Rent. Any such 
excess shall be reimbursed by the owner to HUD or as HUD may direct. 
(See also Sec.  886.115.) The owner shall not be entitled to any 
payment under this paragraph unless he or she:
    (1) Immediately upon learning of the vacancy, has notified HUD of 
the vacancy or prospective vacancy and the reasons for the vacancy,
    (2) Has made and continues to make a good faith effort to fill the 
vacancy, including but not limited to, contacting applicants on the 
waiting list, if any, requesting the PHA and other appropriate sources 
to refer eligible applicants, and advertising the availability of the 
unit, and
    (3) Has not rejected any eligible applicant, except for good cause 
acceptable to HUD.
    (e) Payments for units where family is evicted. If the owner evicts 
a family, the owner shall not be entitled to any payments pursuant to 
paragraph (d) of this section unless the request for such payment is 
supported by a certification that the provisions of Sec.  886.128 and 
part 247 of this title have been followed.
    (f) Prohibition for double compensation for vacancies. The owner 
shall not be entitled to housing assistance payments with respect to 
vacant units under this section to the extent he or she is entitled to 
payments from other sources (for example, payments for losses of rental 
income incurred for holding units vacant for relocatees pursuant to 
Title I of the HCD Act or payments under Sec.  886.116).
    (g) Debt-service vacancy payments. (1) If a contract unit continues 
to be vacant after the vacancy period specified in paragraph (c) or (d) 
of this section, the owner may submit a claim and receive additional 
housing assistance payments on a semiannual basis with respect to such 
a vacant unit in an amount equal to the principal and interest payments 
required to amortize the portion of the debt attributable to that unit 
for the period of the vacancy, whether such vacancy commenced during 
rent-up or after rent-up.
    (2) Additional payments under this paragraph (g) for any unit shall 
not be for more than 12 months for any vacancy period, and shall be 
made only if:
    (i) The unit was in decent, safe, and sanitary condition during the 
vacancy period for which payments are claimed.
    (ii) The owner has taken and is continuing to take the actions 
specified in paragraphs (c)(1), (2) and (3) or paragraphs (d)(1) and 
(2) of this section, as appropriate.
    (iii) The owner has demonstrated, in connection with the semiannual 
claim form and in accordance with the standards prescribed by HUD, that 
the project is not providing the owner with revenues at least equal to 
the project costs incurred by the owner, and that the amount of the 
payments requested is not in excess of that portion of the deficiency 
which is attributable to the vacant units for the period of the 
vacancies.
    (iv) The owner has submitted, in connection with the semiannual 
claim, a statement with relevant supporting evidence that there is a 
reasonable prospect that the project can achieve financial soundness 
within a reasonable time. The statement shall indicate the causes of 
the deficiency; the corrective steps that have been and will be taken; 
and the time by which it is expected that the project revenues will at 
least equal project costs without the additional payments provided 
under this paragraph.

[[Page 1867]]

    (3) HUD may deny any claim for additional payments or suspend or 
terminate payments if it determines that based on the owner's statement 
and other evidence, there is not a reasonable prospect that the project 
can achieve financial soundness within a reasonable time.
0
17. Revise Sec.  886.130 to read as follows:


Sec.  886.130  Management and occupancy reviews.

    (a) The contract administrator will conduct management and 
occupancy reviews to determine whether the owner is in compliance with 
the Contract. Such reviews will be conducted in accordance with a 
schedule set out by the Secretary and published in the Federal 
Register, following notice and the opportunity to comment.
    (b) HUD may independently inspect project operations and units at 
any time.
    (c) Equal Opportunity reviews may be conducted by HUD at any time.
0
18. Amend Sec.  886.309 to read as follows:
0
a. Revise paragraphs (c) and (d);
0
b. In paragraph (e), remove the phrase ``to Sec.  886.327'' and add in 
its place ``to Sec.  886.328;'' and
0
c. In paragraph (g), revise the heading of paragraph (g) and paragraph 
(g)(1).


Sec.  886.309  Housing assistance payment to owners.

* * * * *
    (c) Vacancies during rent-up. If a Contract unit which is decent, 
safe and sanitary and has been accepted by HUD as available as of the 
effective date of the Contract is not leased within 15 days of the 
effective date of the Contract, the Owner will be entitled to housing 
assistance payments in the amount of 80 percent of the Contract Rent 
for the first 30 days of a vacancy, provided that the Owner:
    (1) Has submitted a list of units leased as of the effective date 
and a list of the units not so leased;
    (2) Sixty days prior to the completion of the rehabilitation or the 
date the agreement was executed, whichever is later, had notified the 
PHA of any units which the owner anticipated would be vacant on the 
anticipated effective date of the contract;
    (3) Has taken and continues to take all feasible actions to fill 
the vacancy including, but not limited to: Contracting applicants on 
the Owner's waiting list, if any, requesting the PHA and other 
appropriate sources to refer eligible applicants, and advertising the 
availability of the units in a manner specifically designed to reach 
low-income families; and
    (4) Has not rejected any eligible applicant except for good cause 
acceptable to HUD.
    (d) Vacancies after rent-up. If an Eligible Family vacates its unit 
(other than as a result of action by the Owner which is in violation of 
the Lease or the Contract or any applicable law), the Owner shall 
receive housing assistance payments in the amount of 80 percent of the 
Contract Rent for the first 30 days of a vacancy. However, if the owner 
collects any of the family's share of the rent for this period, the 
payment must be reduced to an amount which, when added to the family's 
payments, does not exceed 80 percent of the Contract Rent. Any such 
excess shall be reimbursed by the Owner to HUD or as HUD may direct. 
(See also Sec.  886.315.) The owner shall not be entitled to any 
payment under this paragraph unless he or she:
    (1) Immediately upon learning of the vacancy, has notified HUD of 
the vacancy or prospective vacancy and the reasons for the vacancy; and
    (2) Has made and continues to make a good faith effort to fill the 
vacancy, including but not limited to, contacting applicants on the 
waiting list, if any, requesting the PHA and other appropriate sources 
to refer eligible applicants, and advertising the availability of the 
unit; and
    (3) Has not rejected any eligible applicant, except for good cause 
acceptable to HUD.
* * * * *
    (g) Debt-service vacancy payments. (1) If a contract unit continues 
to be vacant after the vacancy period specified in paragraph (c) or (d) 
of this section, the owner may submit a claim and receive additional 
housing assistance payments on a semiannual basis with respect to such 
a vacant unit in an amount equal to the principal and interest payments 
required to amortize the portion of the debt attributable to that unit 
for the period of the vacancy, whether such vacancy commenced during 
rent-up or after rent-up.
* * * * *
0
19. Revise Sec.  886.335 to read as follows:


Sec.  886.335  Management and occupancy reviews.

    (a) The contract administrator will conduct management and 
occupancy reviews to determine whether the owner is in compliance with 
the Contract. Such reviews will be conducted in accordance with a 
schedule set out by the Secretary and published in the Federal 
Register, following notice and the opportunity to comment.
    (b) HUD may independently inspect project operations and units at 
any time.
    (c) Equal Opportunity reviews may be conducted by HUD at any time.

PART 891--SUPPORTIVE HOUSING FOR THE ELDERLY AND PERSONS WITH 
DISABILITIES

0
20. The authority citation for 24 CFR part 891 continues to read as 
follows:

    Authority: 12 U.S.C. 1701q; 42 U.S.C. 1437f, 3535(d), and 8013.

0
21. In Sec.  891.520, revise the definition of ``Vacancy payment'' to 
read as follows:


Sec.  891.520  Definitions applicable to 202/8 projects.

* * * * *
    Vacancy payment means the housing assistance payment made to the 
owner by HUD for a vacant assisted unit if certain conditions are 
fulfilled.
* * * * *
0
22. In Sec.  891.560, remove the word ``Borrower'' and add in its place 
the word ``Owner'' wherever it appears, and revise paragraph (c)(2) to 
read as follows:


Sec.  891.560  HAP contract.

* * * * *
    (c) * * *
    (2) Payments to the owner for vacant assisted units (vacancy 
payments). The amount of and conditions for vacancy payments are 
described in Sec.  891.650. The housing assistance payments are made 
monthly by HUD upon proper requisition by the owner, except payments 
for vacancies under Sec.  891.650(d), which are made semiannually by 
HUD upon requisition by the owner.
* * * * *
0
23. Add Sec.  891.582 to read as follows:


Sec.  891.582  Management and occupancy reviews.

    (a) The contract administrator will conduct management and 
occupancy reviews to determine whether the owner is in compliance with 
the HAP Contract. Such reviews will be conducted in accordance with a 
schedule set out by the Secretary and published in the Federal 
Register, following notice and the opportunity to comment.
    (b) HUD may independently inspect project operations and units at 
any time.
    (c) Equal Opportunity reviews may be conducted by HUD at any time.
0
24. In Sec.  891.650, remove the word ``Borrower'' and add in its place 
the word ``Owner'' wherever it appears and revise the introductory text 
of paragraphs (b), (c), and (d) to read as follows:

[[Page 1868]]

Sec.  891.650  Conditions for receipt of vacancy payments for assisted 
units.

* * * * *
    (b) Vacancies during rent-up. For each unit that is not leased as 
of the effective date of the HAP contract, the owner is entitled to 
vacancy payments in the amount of 80 percent of the contract rent for 
the first 30 days of a vacancy, if the owner:
* * * * *
    (c) Vacancies after rent-up. If an eligible family vacates a unit, 
the owner is entitled to vacancy payments in the amount of 80 percent 
of the contract rent for the first 30 days of a vacancy, if the owner:
* * * * *
    (d) Debt-service vacancy payments. If a unit continues to be vacant 
after the vacancy period specified in paragraph (b) or (c) of this 
section, the owner may apply to receive additional vacancy payments in 
an amount equal to the principal and interest payments required to 
amortize that portion of the debt service attributable to the vacant 
unit for up to 12 additional months for the unit if:
* * * * *
0
25. In Sec.  891.655, revise the definition of ``Vacancy payment'' to 
read as follows:


Sec.  891.655  Definitions applicable to 202/162 projects.

* * * * *
    Vacancy payment means the housing assistance payment made to the 
owner by HUD for a vacant assisted unit if certain conditions are 
fulfilled.
* * * * *
0
26. In Sec.  891.705, remove the word ``Borrower'' and add in its place 
the word ``Owner'' wherever it appears, and revise paragraph (c)(2) to 
read as follows:


Sec.  891.705  Project assistance contract.

* * * * *
    (c) * * *
    (2) Payments to the owner for vacant assisted units (vacancy 
payments). The amount of and conditions for vacancy payments are 
described in Sec.  891.790. HUD makes the project assistance payments 
monthly upon proper requisition by the owner, except payments for 
vacancies under Sec.  891.790(d), which HUD makes semiannually upon 
requisition by the owner.
* * * * *
0
27. In Sec.  891.790, remove the word ``Borrower'' and add in its place 
the word ``Owner'' wherever it appears, and revise the introductory 
text of paragraphs (b), (c), and (d) to read as follows:


Sec.  891.790  Conditions for receipt of vacancy payments for assisted 
units.

* * * * *
    (b) Vacancies during rent-up. For each unit (or residential space 
in a group home) that is not leased as of the effective date of the 
PAC, the owner is entitled to vacancy payments in the amount of 80 
percent of the contract rent (or pro rata share of the contract rent 
for a group home) for the first 30 days of a vacancy, if the owner:
* * * * *
    (c) Vacancies after rent-up. If an eligible family vacates an 
assisted unit (or residential space in a group home) the owner is 
entitled to vacancy payments in the amount of 80 percent of the 
contract rent (or pro rata share of the contract rent for a group home) 
for the first 30 days of a vacancy, if the owner:
* * * * *
    (d) Debt-service vacancy payments. If an assisted unit (or 
residential space in a group home) continues to be vacant after the 
vacancy period specified in paragraph (b) or (c) of this section, the 
owner may apply to receive additional vacancy payments in an amount 
equal to the principal and interest payments required to amortize that 
portion of the debt service attributable to the vacant unit (or, in the 
case of group homes, the residential space) for up to 12 additional 
months for the unit, if:
* * * * *

    Dated: December 11, 2014.
Biniam Gebre,
Acting Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2015-00357 Filed 1-13-15; 8:45 am]
BILLING CODE 4210-67-P