America's Affordable Communities Initiative HUD's Initiative on Removal of Regulatory Barriers: Identification of HUD Regulations That Present Barriers to Affordable Housing, 29343-29360 [05-10041]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 70, Number 97 (Friday, May 20, 2005)]
[Notices]
[Pages 29343-29360]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-10041]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4890-N-02]


America's Affordable Communities Initiative HUD's Initiative on 
Removal of Regulatory Barriers: Identification of HUD Regulations That 
Present Barriers to Affordable Housing

AGENCY: Office of General Counsel, HUD.

ACTION: Notice.

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SUMMARY: On November 25, 2003, HUD published a Federal Register notice 
seeking comments from HUD's program partners and participants, as well 
as other interested members of the public, on HUD regulations that 
address the production and rehabilitation of affordable housing and 
that present or appear to present barriers to the production and 
rehabilitation of affordable housing. The November 25, 2003, notice 
seeking public comment on regulatory barriers is one of several efforts 
being undertaken as part of America's Affordable Communities 
Initiative, a HUD initiative that focuses on removing regulatory 
barriers that impede the production or rehabilitation of affordable 
housing. This notice responds to the public comments that were 
submitted in response to the November 25, 2003, notice, and advises of 
actions taken by HUD since November 2003 to remove HUD regulatory 
barriers to affordable housing or increase flexibility in program 
administration of those HUD programs that address affordable housing.

FOR FURTHER INFORMATION CONTACT: Camille E. Acevedo, Associate General 
Counsel for Legislation and Regulations, Office of General Counsel, 
Room 10282, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Washington, DC 20410-0500, telephone (202) 708-1793 (this 
is not a toll-free number). Persons with hearing or speech impairments 
may access this number through TTY by calling the toll-free Federal 
Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    In June 2003, HUD announced America's Affordable Communities 
Initiative (the Initiative). This departmentwide initiative is devoted 
to harnessing existing HUD resources to develop tools to measure and 
ultimately mitigate the harmful effects of excessive barriers to 
affordable housing, at all levels of government. The Initiative has its 
roots in the Department's renewed emphasis to increase the stock of 
affordable housing to meet America's growing housing needs. Another 
element of that renewed emphasis was the creation, in 2001, of the 
Regulatory Barriers Clearinghouse, a central, web-based repository of 
successful affordable housing endeavors. The Regulatory Barriers 
Clearinghouse offers state and local governments, nonprofits, builders, 
and developers alike the opportunity to not only share ideas, but also 
share

[[Page 29344]]

solutions to overcome state and local regulatory barriers to affordable 
housing. The Regulatory Barriers Clearinghouse, like the Initiative, 
presents a public forum to facilitate the identification of barriers to 
affordable housing and solutions to their removal. The Regulatory 
Barriers Clearinghouse can be found at https://www.regbarriers.org.
    One of the primary tasks of the Initiative is to examine federal, 
state, and local regulatory barriers to affordable housing and 
determine the feasibility of removing these barriers or, at a minimum, 
reducing the burden created by the barriers. HUD, as the federal agency 
charged with promoting and facilitating the production and 
rehabilitation of affordable housing, commenced a review of its own 
regulations. HUD's review involves identifying HUD regulations that may 
adversely impact the production and rehabilitation of affordable 
housing, and therefore constitute unnecessary, excessive, cumbersome, 
or duplicative departmental regulatory requirements. HUD's review is 
targeting those regulations that raise costs substantially or 
significantly impede the development or rehabilitation of America's 
affordable housing stock.

II. Inviting the Public To Identify HUD Regulatory Barriers

    In reviewing its own regulations, HUD sought the assistance of its 
current and former program participants and partners, which include 
state and local governments, public housing agencies, state finance 
agencies, nonprofit and for-profit organizations, and also the general 
public. This assistance was sought through the notice published on 
November 25, 2003 (68 FR 66294).
    In response to this notice, HUD received 33 public comments. The 
commenters included units of state and local governments, organizations 
representative of various private industries involved in housing or HUD 
programs, as well as nonprofit organizations. The comments covered a 
broad range of HUD programs. HUD has reviewed all the comments 
responding to the November 25, 2003, notice and in this notice responds 
to the recommendations and issues raised by the commenters concerning 
reduction of HUD regulatory barriers. Several of the commenters 
responding to the November 25, 2003, notice raised issues about HUD 
regulations that do not pertain to the production or rehabilitation of 
affordable housing. Although the issues raised by these comments were 
not the focus of the November 25, 2003, notice, HUD has attempted to 
respond to these issues in this notice.

III. Regulatory Reform Already Underway at HUD

    Under Secretary Alphonso Jackson, the charge of the Department to 
meet the strategic goals of increasing homeownership and promoting 
decent affordable housing has been reinforced. The Secretary recognizes 
that HUD's and the Administration's proposals to increase the 
availability of affordable rental and homeownership housing, such as 
the American Dream Downpayment Initiative implemented in 2004, will not 
gain significant ground if at the same time HUD is issuing regulations 
that present barriers to affordable housing. The charge of the 
Initiative, indeed the entire Department, is to identify barriers to 
affordable housing and remove the barriers if possible or reduce the 
burden to the extent feasible.

Rulemaking Directed at Removing and Reducing Barriers

    Since publication of the November 25, 2003, notice HUD has issued, 
or will soon be issuing, several rules directed to promoting the 
availability of affordable housing or removing or reducing regulatory 
burdens to affordable housing, as reflected by the following examples 
(listed in chronological order).
    On March 10, 2004, HUD published a final rule (69 FR 11500) that 
made available a new adjustable rate mortgage (ARM) product for HUD-
insured single family housing that can be better tailored to the needs 
of borrowers. This rule provides for seven- and ten-year ARMs 
adjustable annually by up to two percentage points, and for one-, 
three-, and five-year ARMs adjustable annually by up to one percentage 
point.
    HUD issued its regulations to implement the American Dream 
Downpayment Initiative (ADDI) on March 30, 2004 (69 FR 16758). Under 
ADDI, HUD makes formula grants to participating jurisdictions under the 
HOME Investment Partnerships Program (HOME program) for the purpose of 
assisting low-income families achieve homeownership.
    By notice issued on November 8, 2004 (69 FR 64826), HUD further 
simplified the annual plan that must be submitted by public housing 
agencies (PHAs) in accordance with the U.S. Housing Act of 1937 (see 42 
U.S.C. 1437c-1) and HUD's implementing regulations in 24 CFR part 903. 
The annual plan is the mechanism by which PHAs advise HUD, its 
residents and members of the public of its strategy, among other 
things, of serving low-income and very low-income families. The 
November 2004 notice streamlined the requirements for high-performing 
PHAs.
    HUD published an interim rule on November 22, 2004 (69 FR 68050) 
that amends its HOME program regulations to give participating 
jurisdictions the flexibility to invest additional HOME funds to 
preserve homebuyer housing for which HOME funds have already been 
expended.
    HUD published its final rule on the Federal Housing Administration 
(FHA) TOTAL Mortgage Scorecard on November 26, 2004 (69 FR 68784). This 
final rule adopted a November 21, 2003, interim rule (68 FR 65824), 
which launched the use of the TOTAL Mortgage Scorecard. The FHA TOTAL 
Mortgage Scorecard is an empirically-derived, statistically proven 
mortgage scorecard for installation in various automated underwriting 
systems. By using automated underwriting systems that employ the TOTAL 
(Technology Open to Approved Lenders) mortgage scorecard, lenders are 
able to dramatically reduce the paperwork associated with underwriting 
FHA insured mortgages, and reduce underwriting staff costs as well. In 
addition, some borrowers, previously thought to represent too great of 
an insurance risk to subjective underwriting requirements, may now have 
their mortgages approved by an objective electronic system.
    HUD is working with the Manufactured Housing Consensus Committee 
(MHCC) to review and propose changes to HUD's manufactured housing 
safety standards and regulations. The first proposed rule resulting 
from this collaborative work was issued on December 1, 2004 (69 FR 
70016). This December 1, 2004, proposed rule recommends changes to the 
following manufactured housing standards: Whole-house ventilation, 
firestopping, body and frame requirements, thermal protection, plumbing 
systems, and electrical, heating, cooling and fuel burning systems.
    On December 15, 2004 (69 FR 75204), HUD issued regulations that 
provide for a reduced mortgage insurance premium for its Home Equity 
Conversion Mortgage (HECM) program. HUD's HECM program enables 
homeowners 62 years or age or older who have paid off their mortgages 
or have small mortgage balances to stay in their homes while using some 
of their equity as income.
    HUD issued a rule on December 23, 2004 (69 FR 77114), that provided 
two additional exceptions to the time resale restrictions in HUD's 
``Prohibition on Property Flipping'' regulations

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promulgated on May 1, 2003 (69 FR 77114). The December 23, 2004, rule 
allows two additional categories of properties to be more quickly 
marketed and sold, thereby removing a regulatory barrier to affordable 
housing.
    On December 30, 2004 (69 FR 78830), HUD issued a proposed rule for 
public comment to clarify and streamline the consolidated plan, the 
planning document that states and local jurisdictions receiving funding 
under HUD's community planning and development formula grant programs 
must submit to HUD. The consolidated plan serves as the jurisdiction's 
planning document for the use of the funds received under these 
programs. Consistent with efforts of the Initiative, the proposed rule 
would require each jurisdiction to describe specific actions it plans 
to take during the year addressed by the plan to address public 
policies and procedures that impact the cost of developing, 
maintaining, or improving affordable housing.
    HUD issued an interim rule on March 29, 2005 (70 FR 16080) that 
makes available a new ARM product. The rule enables FHA to insure five-
year hybrid ARMs with interest rates adjustable up to two percentage 
points annually. This type of mortgage is known as a 5/1 ARM. The 
lifetime cap on annual interest rate adjustments for five-year ARMs is 
set at six percentage points.
    On April 26, 2005 (70 FR 21498), HUD issued its second proposed 
rule developed in consultation with the MHCC. This proposed rule 
addresses model manufactured home installation standards.
    These are a few of the rules issued by HUD that reflect it's 
efforts to remove barriers to affordable housing and increase 
flexibility in program administration of those HUD programs that 
address affordable housing. In addition to rules already issued, HUD 
expects to soon finalize its rule on Mixed-Finance Development for 
Supportive Housing for the Elderly or Persons with Disabilities, for 
which an interim rule was published on December 1, 2003. The interim 
rule enables the use of mixed-finance and for-profit participation in 
HUD's Section 202 Supportive Housing programs for the elderly and HUD's 
Section 811 Supportive Housing program for persons with disabilities. 
The use of a mixed-finance development in these programs allows for 
leveraging the capital and expertise of the private developer to create 
attractive and affordable supportive housing developments for the 
elderly and persons with disabilities.
    In addition to the issuance of rules, HUD also has reduced certain 
barriers through notices related to regulatory policies. For example, 
in late 2002, the FHA Commissioner issued a mortgagee letter that 
announced an alternative to existing HUD requirements where state and 
local statutes differ from FHA guidelines with respect to the distance 
between domestic wells and septic drain tanks. The mortgagee letter 
reduces regulatory burden by allowing less onerous state and local 
standards to prevail over more burdensome HUD requirements.
    In early 2003, FHA issued a mortgagee letter that eliminated 
policies and procedures for approving planned unit developments (PUDs). 
Based on FHA's experience with PUDs and the role that state and local 
officials play in the development of PUD projects, HUD abolished its 
requirement for a detailed examination of the legal and budget 
documents associated with PUDs. The elimination of this requirement 
reduces costs to lenders and developers, and possible delays to the 
mortgage closing.
    In June 2004, FHA issued a mortgagee letter announcing that FHA 
would no longer issue, and lenders need no longer keep copies of, paper 
mortgage insurance certificates. By relying on FHA's electronic records 
and data submission systems, the mortgage letter significantly reduced 
the paperwork and custodial requirements of issuing and maintaining 
this document, as well as the related costs incurred by lenders.

Internal Rulemaking Procedures

    HUD's internal rulemaking procedures continue to include, as part 
of the development of new rules, a review to ensure that new 
regulations do not present new barriers to affordable housing. This 
procedure was put in place at the commencement of the Initiative and 
continues as part of HUD's regular internal rulemaking procedures.

New Regulatory Review

    As part of its continuing review of its existing regulations, in 
2005, the Initiative has targeted for enhanced review and assessment 
HUD's regulations governing financing of condominiums, minimum property 
standards, and its environmental regulations.

Legislation Directed at Removing or Reducing Barriers

    Rulemaking activity is one avenue by which HUD strives to address 
barriers to affordable housing. Legislation provides another avenue. 
The President's Fiscal Year (FY) 2006 Budget presented to Congress on 
February 7, 2005, includes several legislative proposals directed to 
removing barriers to affordable housing. The FHA Zero Downpayment and 
Payment Incentives legislative proposals would remove two larger 
barriers to homeownership--the downpayment and impaired credit. The 
Zero Downpayment legislative proposal allows first-time buyers with a 
strong credit record to finance 100 percent of the home purchase price 
and closing costs. For borrowers with limited or weak credit histories, 
the Payment Incentives legislative proposal provides for an initial 
charge of a higher insurance premium and then reduces the premium after 
a period of on-time payments. These two legislative proposals, if 
enacted, would assist more than 250,000 families achieve homeownership. 
(See page 170 of the FY2006 Budget of the U.S. Government, available at 
https://www.whitehouse.gov/omb/budget/fy2006/budget.html.)
    The Single Family Homeownership Tax Credit legislative proposal in 
the President's FY2006 budget proposes a new homeownership tax credit 
that will increase the supply of single family affordable homes by up 
to an additional 50,000 homes annually. Under this proposal, builders 
of affordable homes for middle-income purchasers will receive a tax 
credit. State housing finance agencies will award tax credits to single 
family developments located in a census tract with median income equal 
to 80 percent or less of area median income and will be limited to 
homebuyers in the same income range. The credits may not exceed 50 
percent of the cost of constructing a new home or rehabilitating an 
existing property. Each state would have a homeownership credit ceiling 
adjusted for inflation each year and equal to the greater of $1.75 
times the state population or $2 million. (See page 170 of the FY2006 
Budget of the U.S. Government, available at https://www.whitehouse.gov/
omb/budget/fy2006/budget.html.)
    The prior year's budget, the President's FY2005 Budget announced a 
HUD legislative proposal that is designed to provide flexibility in 
administering HUD's Housing Choice Voucher program. (The FY2005 Budget 
of the U.S. Government can be found at https://www.gpoaccess.gov/
usbudget/fy05/browse.html.) The Housing Choice Voucher program provides 
two million low-income families with help to afford a decent place to 
live. These families contribute 30 percent of their income towards 
their rent and the government pays the rest. In the past, funds have 
been appropriated for a specific number

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of units each year. These funds were given to PHAs based on the number 
of vouchers they were awarded. Over the years, HUD and Congress have 
expressed concern with this program because voucher costs have 
increased at a rate of more than double the average increase in the 
private rental market for the past two years. The Administration's 
proposal is to simplify this program and give more flexibility to PHAs 
to administer the program to better address local needs. On April 13, 
2005, Senator Wayne Allard of Colorado introduced legislation, the 
State and Local Housing Flexibility Act of 2005 (S.771) that is similar 
to the Administration's legislative proposal.

Recognizing Successful Efforts at the State and Local Level in Reducing 
Barriers

    With respect to HUD's funding opportunities, HUD continues to place 
a premium on funding local communities and organizations that are 
working toward removing excessive and burdensome regulations that 
restrict the development of affordable housing at the local level. As 
HUD provided in FY2004, HUD will continue to award priority points to 
certain applicants in communities that can demonstrate successful 
efforts to reduce regulatory barriers that prevent many families from 
living in the communities where they work. More information about the 
priority points for reducing regulatory barriers can be found in the 
Federal Register notices published on November 25, 2003 (68 FR 66288), 
March 22, 2004 (69 FR 13450), April 21, 2005 (69 FR 21664), and also in 
HUD's FY2004 Super Notice of Funding Availability (NOFA), published on 
May 14, 2004 (69 FR 26942) and HUD's FY2005 SuperNOFA, published on 
March 21, 2005 (70 FR 13576).
    HUD also seeks to recognize the successful efforts of state and 
local governments in reducing regulatory barriers to affordable housing 
through an awards program. On November 17, 2004, Secretary Jackson 
announced the Affordable Communities Awards program, a new national 
awards program designed to recognize local governments for reducing 
regulatory barriers to affordable housing. Interested individuals or 
groups were invited to nominate either a state or local government that 
demonstrated extraordinary achievements in eliminating regulatory 
barriers to housing affordability. State and local governments were 
also invited to nominate themselves or other local units of government 
for awards. Submissions will be evaluated and selected by a diverse 
group of senior-level HUD staff who comprise the Initiative Team. HUD 
intends to recognize local governments for their outstanding work to 
encourage the production of homes affordable to working families. HUD 
expects to announce the award winners in June 2005. Secretary Jackson 
recently announced that the Affordable Communities Awards would be 
named the Robert L. Woodson, Jr. Award, in memory of HUD's former chief 
of staff.

Reducing Regulatory Barriers Through Information Sharing and Education

    HUD's efforts to reduce regulatory barriers also include 
information sharing and education. HUD's Regulatory Barriers 
Clearinghouse (https://www.regbarriers.org), a national web-based forum 
established in 2001 gives state and local governments the ability to 
share ideas and develop solutions to address unique housing challenges. 
This website is a primary vehicle for information sharing on reducing 
regulatory barriers. In July 2004, Secretary Jackson hosted an 
affordable housing roundtable at HUD Headquarters entitled ``Affordable 
Housing: Confronting Regulatory Barriers Together.'' The panel that led 
the discussion of regulatory barriers facing the nation included 
representatives from nonprofit organizations, industry groups, and 
government associations from across the country. In February 2005, 
Secretary Jackson released a major report on affordable housing in 
America entitled ``Why Not in Our Community?'' This report constitutes 
HUD's first substantive examination of the impact of regulatory 
barriers on affordable housing since the Department's report in 1991 
entitled ``Not in My Backyard.'' Like the 1991 report, the 2005 report 
found that outdated, exclusionary, and unnecessary regulations continue 
to block the construction or rehabilitation of affordable housing in 
some parts of America. The 2005 report, however, also found that many 
communities are actively removing these barriers and promoting the 
production of housing that was formerly beyond the reach of many 
working families.
    The activities described above constitute a few of the efforts that 
HUD has taken, through the Initiative, to reduce regulatory barriers to 
affordable housing. More details about these activities can be found at 
HUD's Web site at https://www.hud.gov/initiatives/affordablecom.cfm.

IV. Discussion of Public Comments

    This section provides response to the public comments received in 
response to the November 25, 2003, notice. The discussion of public 
comments is organized in accordance with HUD program area jurisdiction. 
As will be evident in the discussion that follows, many HUD regulations 
reflect statutory requirements and therefore HUD has no authority to 
change these regulations as requested by commenters. Other HUD 
regulations reflect statutory requirements under which HUD was 
authorized to exercise discretion, but only within the parameters set 
by the statute, and therefore, HUD is also unable to revise these 
regulations through rulemaking. However, in several cases where a 
specific statute may pose a barrier to affordable housing, the 
discussion notes that the issue of legislative relief will be taken 
under advisement.
    As noted earlier in this notice, several commenters raised issues 
about regulations that do not pertain to the production or 
rehabilitation of affordable housing. HUD recognizes that while certain 
of its regulations may not directly address the production or 
rehabilitation of affordable housing, they may nevertheless relate in 
some way to HUD programs directed to promoting affordable housing or 
increasing homeownership, and may be found to be administratively 
burdensome. HUD has included those comments in this notice and has 
strived to be responsive to the commenters' questions or concerns about 
such regulations. Other commenters raised questions about activities or 
procedures, beneficial to the production or rehabilitation of 
affordable housing, which appeared prohibited or restricted by HUD 
regulations but, in fact, were not prohibited or restricted. While HUD 
was pleased to be able to respond positively to the commenters' 
concerns, the fact that there was ambiguity about a HUD regulation is 
equally important information to HUD. HUD will review these regulations 
to determine if they should be revised for clarity or user 
friendliness.
    As highlighted in Section III of this notice, HUD has published 
rules or proposed legislation to address existing regulatory barriers 
in response to public comments and its own review of regulations. 
Finally, some comments addressed governmentwide regulations for which 
HUD does not have jurisdictional responsibility, such as regulations 
under the National Historic Preservation Act, the Davis-Bacon Act, or 
the Uniform Relocation Assistance

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and Real Property Acquisition Policies Act. Since HUD is not the lead 
agency for these authorities, HUD did not include a discussion of 
comments pertaining to these statutes in this notice.

A. Office of Community Planning and Development (CPD)

1. Community Development Block Grant (CDBG) Program
    Comment. One commenter requested that HUD make direct homeownership 
assistance, such as subsidizing principal and interest rates, a 
permanent eligible activity under the CDBG program.
    Response. HUD is pleased to advise that direct homeownership 
assistance, such as subsidizing principal and interest rates, is a 
permanent eligible activity under the CDBG program. HUD's regulations 
at 24 CFR 570.201(n) provide that CDBG funds may be used to provide 
direct homeownership assistance to low or moderate-income households in 
accordance with section 105(a) of the Housing and Community Development 
Act of 1974 (42 U.S.C. 5305(a)). Direct homeownership assistance was 
made a permanent eligibility category in the CDBG program by the 
Omnibus Consolidated Rescissions and Appropriations Act of 1996 (Pub. 
L. 104-136), which was enacted April 26, 1996. Direct homeownership 
assistance may be used to: (1) Subsidize interest rates and mortgage 
principal amounts for low- and moderate-income homebuyers; (2) finance 
the acquisition by low- and moderate-income homebuyers of housing that 
is occupied by the homebuyers; (3) acquire guarantees for mortgage 
financing obtained by low- and moderate-income homebuyers from private 
lenders (except that amounts received may not be used to directly 
guarantee such mortgage financing and grantees may not directly provide 
such guarantees); (4) provide up to 50 percent of any downpayment 
required from low-or moderate-income homebuyers; or (5) pay reasonable 
closing costs (normally associated with the purchase of a home) 
incurred by low-or moderate-income homebuyers.
    Comment. One commenter stated that CDBG funds should be allowed to 
be used for emergency repairs and operating assistance in buildings 
where a court has seized control and appointed an administrator (for 
example, as in New York City's 7A Program). The commenter further wrote 
that, where tax foreclosure has not occurred, HUD should urge Congress 
to amend section 105(a) of the Housing and Community Development Act 
(42 U.S.C. 5305(a), to authorize use of CDBG funding for ``activities 
necessary to make essential repairs and payment of operating expenses 
needed to maintain the habitability of housing units under the 
supervision of a court in order to prevent abandonment and 
deterioration of such housing in primarily low- and moderate-income 
neighborhoods.''
    Response. CDBG regulations currently allow the use of CDBG funds to 
make emergency repairs in privately owned buildings, as long as a 
national objective can be met. The fact that a privately owned building 
may be under the control of a court-appointed administrator would not 
change its eligibility for rehabilitation assistance. A statutory 
change would be required, however, to allow CDBG funds to be used to 
pay the operating costs of such buildings. To date, HUD has not pursued 
a legislative approach because HUD remains concerned that broadening 
eligibility in this way may draw funds away from other eligible 
activities.
2. Home Program
    Comment. One commenter recommended delegating subsidy-layering 
reviews to state allocating agencies for Low-Income Housing Tax Credit 
(LIHTC) properties that are HOME-assisted. Subsidy layering reviews are 
required by 24 CFR 92.250(b) of HUD's HOME regulations. This regulatory 
section states that before committing funds to a project, a 
participating jurisdiction (PJ) must evaluate the project in accordance 
with its own subsidy layering guidelines to ensure that no more HOME 
funds, in combination with other funds, are invested in the housing 
than is necessary to provide affordable housing.
    Response. HUD is pleased to advise that the proposal outlined by 
the commenter is already allowable under the HOME program. HUD 
previously provided guidance on this topic in its Notice CPD 98-01. The 
Notice states that for projects using LIHTC, the PJ may rely upon the 
state tax credit allocating agency's evaluation (which is conducted to 
determine whether there are excess tax credits) to ensure that HUD 
subsidies are not greater than necessary to provide affordable housing 
when combining HOME assistance with the LIHTC.
    Comment. One commenter raised the issue of for-profit involvement 
in the HOME program. Section 231 of the HOME Investment Partnerships 
Act (42 U.S.C. 12744-12745) (HOME statute) requires that at least 15 
percent of a PJ's annual HOME allocation be reserved for projects to be 
developed, sponsored, or owned by Community Housing Development 
Organizations (CHDOs), which are community-based non-profit 
organizations. To date, 51 percent of all HOME funds in completed 
projects have been used by CHDOs and other nonprofit organizations, 
with 49 percent used by for-profit developers for completed HOME 
projects.
    Response. Because this requirement is based in statute, HUD could 
not remove the requirement through regulation. HUD, however, believes 
strongly in the ability of local PJs to identify affordable housing 
priorities and independently determine which organizations are best 
suited to assist them in achieving their goals. HUD believes local 
flexibility to make such decisions is important.
    Comment. Five commenters raise a HOME Program topic that was 
recently highlighted by HUD in its June 2003 HOMEfires policy guidance 
newsletter (Vol. 5, No. 2). The commenters' issue centers on the 
statutory and regulatory requirement that a HOME PJ repay its local 
HOME account from non-federal sources in instances in which a HOME-
assisted property does not remain affordable for the entire period of 
affordability. These provisions can be found in section 219(b) of the 
HOME statute (42 U.S.C. 12749) and Sec.  92.503(b)(1) of the HOME 
regulations.
    Response. HUD regrets that the statutory and regulatory 
requirements governing repayment may have been misunderstood by some 
PJs, but notes this is not a new policy. It is also important to 
recognize that it also has been HUD's longstanding policy to grant 
requests for waivers of the repayment requirement when a PJ can 
demonstrate that it took reasonable steps to intervene in a troubled 
project. Consequently, for rental projects, PJs that practice sound 
asset management (e.g., exercising a reasonable amount of physical and 
financial oversight of their HOME-assisted projects and taking feasible 
actions to correct problems) reduce or eliminate their repayment risk, 
even if their actions are unsuccessful. With respect to homeownership 
projects, HUD published an interim rule on November 22, 2004 (69 FR 
68050), that mitigates the risk incurred by PJ. HUD believes that the 
current approach is fair to PJs, while maximizing the continued 
availability of affordable housing units and protecting public funds.
    Comment. Two commenters inquired about HUD allowing PJs to charge 
fees to help defray the cost of complying with the HOME onsite 
inspection requirement (24 CFR 92.504(d)) during the period of 
affordability. Section 92.214(b) of the HOME regulations prohibits PJs 
from charging monitoring,

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servicing and origination fees in HOME-assisted projects.
    Response. HUD agrees that as the number of completed units in a 
PJ's portfolio increases, its monitoring burden increases as well and 
that the current 10 percent administrative set-aside may not always 
cover these costs. Permitting PJs to charge monitoring fees is one 
method of covering this cost. However, assessing monitoring fees on 
projects will have the effect of raising rents charged to low- and very 
low-income tenants, making housing less affordable rather than reducing 
a barrier to affordable housing.
    Comment. Three commenters raised the issue of expanding the 
eligible recipients of CHDO operating expense funds to include 
nonprofit organizations that do not develop, sponsor, or own HOME-
assisted units. Section 92.208(a) of the HOME regulations allows up to 
five percent of a PJ's annual HOME allocation to be used for the 
operating expenses of CHDOs. However, Sec.  92.300(e) limits these 
operating funds to organizations that will enter into a written 
agreement with the PJ to develop, own or sponsor HOME-assisted housing 
within the next 24 months following receipt of funds for operating 
assistance.
    Response. The purpose of allowing up to five percent of a PJ's 
annual HOME allocation to be used for operating costs for CHDOs is to 
support organizations that are undertaking HOME projects. Currently, 
PJs use much less than the five percent allowed for CHDO operating 
expenses, choosing instead to use the funds for development of 
projects. Consequently, allowing HOME funds to be used for operating 
expenses for nonprofit organizations that do not develop, own or 
sponsor HOME-assisted housing might subject PJs to local pressure to 
fund organizations that do not produce HOME-assisted housing, reducing 
the amount of HOME funds available for affordable housing production 
and the number of affordable housing units produced.
    Comment. One commenter noted that for HOME projects involving the 
new construction of rental housing, Sec.  92.202(b) requires the PJ to 
meet the site and neighborhood standards at Sec.  983.6(b). The 
commenter states that the site and neighborhood standards requirement 
in Sec.  92.202 is unnecessary and that the location of affordable 
housing developments should be a local land use decision.
    Response. HUD has an affirmative responsibility to provide equal 
housing opportunity and to expand housing choice for all persons 
without regard to race, color, national origin, religion, sex, familial 
status, or disability. This responsibility applies to HUD's recipients 
through site and neighborhood standards. The commenter, however, raises 
an issue for further consideration within HUD, and HUD will examine the 
requirements to determine whether modification is needed.
    Comment. One commenter proposed a change to the regulation at Sec.  
92.214(a)(6) of the HOME regulations, which prohibits an additional 
investment of HOME funds in HOME-assisted properties after one year of 
completion.
    Response. The purpose of this regulation is to ensure HOME funds 
are being invested in projects that will deliver standard units of 
affordable housing. This regulation prevents HOME funds from being used 
for (1) staged rehabilitation projects that do not bring properties up 
to standard, and (2) the ongoing maintenance of HOME-assisted units. 
HUD, therefore, does not support a change to this regulation. However, 
HUD recognizes that there are individual circumstances, subject to 
examination on a case-by-case basis, in which this regulation may 
constitute a barrier to affordable housing. In these circumstances, HUD 
has granted waivers of this regulation for good cause for the purpose 
of salvaging severely financially distressed HOME projects or 
addressing unforeseen problems.
    Comment. One commenter advised that the need to document and 
account for HOME match is overly burdensome to PJs, although the 
commenter did not elaborate on specific aspects of documenting and 
accounting for HOME match that the commenter found overly burdensome.
    Response. By establishing the HOME program, Congress intended to 
establish a partnership between the federal government and states, 
units of local government and nonprofit organizations to expand the 
supply of affordable, standard housing for low-income families. In 
keeping with the concept of partnership, each PJ is required to make 
contributions to qualified housing in an amount equal to 25 percent of 
appropriated HOME funds drawn down for housing projects. These 
contributions are referred to as ``match.'' The recordkeeping and 
reporting requirements pertaining to HOME match are necessary to 
demonstrate compliance with the HOME statute.
    Comment. One commenter supports the creation of a new HOME loan 
guarantee program modeled after the CDBG Section 108 Loan Guarantee 
Program.
    Response. In the past, HUD has supported attempts to enact a 
Section 108-style HOME loan guarantee program similar to the program 
suggested by the commenter. Creation of the type of loan guarantee 
suggested by the commenter, however, would require a statutory change 
and previous efforts to establish such a program have been 
unsuccessful. While loan guarantees are currently an eligible form of 
assistance under Sec.  92.205(b)(2) of the HOME regulations, it is 
important to note that loan guarantees have been used infrequently 
during the history of the HOME program.
    Comment. One commenter urges HUD to revise the HOME regulations to 
simplify the rent and income restrictions of HOME-assisted rental 
projects. The commenter wrote that the HOME rent and income 
requirements unnecessarily restrict an owner's right to collect 
reasonable rents, while simultaneously failing to ensure that all 
tenants are in fact paying a reasonable percentage of their income for 
rent. The commenter also favors a single income eligibility ceiling of 
80 percent of area median income.
    Response. The HOME rent and income restrictions are found in 
sections 214 and 215 of the HOME statute and Sec. Sec.  92.216 and 
92.252 of the HOME regulations. HUD agrees that the rent and income 
restrictions of the HOME program are somewhat complex, but it is this 
system of rent and income restrictions that ensures the affordability 
of the housing assisted by HUD. HUD is concerned that the commenter's 
proposal would result in increased rents and a reduction of the 
affordability of HOME-assisted rental units for low- and very low-
income renters. Increasing rents and weakening income targeting for 
lower income households would result in HOME funds being used 
increasingly for those renters with higher incomes or those with 
tenant-based rental assistance.
    A June 28, 2001, study of rental housing under the HOME program 
performed by Abt Associates, Inc., entitled ``Study of Ongoing 
Affordability of HOME Program Rents,'' found that 60 percent of all 
renter households in HOME-assisted rental housing are rent-burdened, or 
pay more than 30 percent of their income for housing. The study also 
found that 80 percent of the households living in HOME-assisted rental 
units have an annual income of 50 percent or less of area median 
income. An increase in HOME rents would affect not only those tenants 
that could afford an increase in rent, but also those tenants that are 
already rent-burdened, thereby increasing their rent burden and making 
the HOME-assisted units less affordable. Given the findings

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of this study, HUD is not inclined to support a statutory or regulatory 
change to the HOME rent and income requirements.
    Comment. One commenter advises that HOME funds would be more useful 
if the funds could be used for project reserves for operating costs and 
operating reserves for HOME-assisted rental projects. The HOME 
regulations at Sec.  92.214(1) state that HOME funds may not be used to 
provide project reserve accounts, except as initial operating deficit 
reserve, or operating subsidies to cover potential shortfalls in the 
first 18 months of operation.
    Response. Based on the purposes of the HOME program, which among 
others is to increase the supply of decent, safe, sanitary, and 
affordable housing for very low- and low-income families, and the 
limited HOME resources appropriated each year, the eligible use of HOME 
funds should not be expanded to cover operating subsidies and project 
reserves. In this regard, it is important to recognize that HOME funds 
are typically a small percentage of the total funding package in most 
rental housing development projects and are often used as gap financing 
enabling many affordable housing development projects to happen. HOME 
funds also often leverage other public and private funds that may be 
used for project operating costs. If operating reserve funding is 
necessary, other funding sources can be used to capitalize reserves and 
HOME funds attributed to other eligible costs. In addition, the limited 
amount of resources appropriated for the HOME program each year often 
restricts PJs from investing anything beyond gap financing in rental 
housing.
    Comment. Two commenters addressed the HOME onsite inspection 
requirements at Sec.  92.504(d)(1). The commenters wrote that an onsite 
inspection requirement of once every three years is more practical than 
the current HOME regulations, which require periodic inspections based 
on the total number of units in a HOME-assisted rental project. One of 
the commenters offers a risk assessment plan to determine how often 
projects should be inspected, with required inspections at least every 
three years. The commenter also suggests that the number of HOME-
assisted units, and not the total number of units in a project, should 
determine the frequency of inspections.
    Response. HUD believes that frequent inspection ensures that 
beneficiaries of the HOME program are residing in quality, standard 
housing at affordable rents and, equally as important, ensures the PJ's 
investment in affordable housing is protected. However, HUD will 
further examine this issue to determine whether the inspections 
currently required are excessive, or whether alternative approaches, 
such as risk-based approaches, would achieve the same protections.
    Comment. Two commenters proposed that the HOME program could be 
more effective by allowing PJs to fund housing counseling for low-
income families that will not use HOME funds to assist in the purchase 
of their own home. The HOME program regulation at Sec.  92.206(d)(6) 
identifies housing counseling as an allowable project soft cost only if 
the (homebuyer) project is funded and the individual receiving the 
counseling becomes the owner of a HOME-assisted project.
    Response. HUD agrees that housing counseling is a crucial component 
of a successful homeownership program. The chief purpose of the HOME 
program is to expand the supply of decent, safe, sanitary and 
affordable housing. By limiting the use of HOME funds for housing 
counseling to those who purchase housing with HOME funds, HUD ensures 
that HOME program beneficiaries are purchasing decent, safe, sanitary 
and affordable housing. As a result, the HOME program would not be more 
effective by allowing PJs to fund housing counseling for low-income 
families that will not use HOME funds to assist in the purchase of 
their own home. Currently, HUD administers a housing counseling program 
through HUD's Office of Housing. In a recent study of HOME-assisted 
homebuyer programs, more than 90 percent of PJs were either requiring 
or encouraging eligible homebuyers to participate in counseling 
programs. It is clear that most jurisdictions receiving HOME funds are 
using HUD-sponsored counseling programs or are supporting other 
existing counseling programs.
    Comment. One commenter takes issue with the inclusion of property 
standards in the HOME program. The commenter submits that the property 
standard requirements of the HOME program result in fewer households 
receiving rehabilitation assistance. According to the commenter, this 
is because rather than only addressing the emergency needs of the unit, 
the PJ must also ensure that the HOME-assisted unit meets all 
applicable property standards, which is often a more costly endeavor.
    Response. As discussed above, a primary purpose of the HOME program 
is to expand the supply of decent, safe, sanitary, and affordable 
housing. The HOME program is able to accomplish this goal due, in part, 
to the provisions at Sec.  92.251, which address the property standard 
requirements of HOME-assisted units. The HOME program was not designed 
to address emergency repair needs, as evidenced by its exclusion as an 
eligible activity. HUD notes, however, that with respect to emergency 
needs, CDBG funds can be used to address the emergency repair needs of 
low-income households.
    Comment. One commenter wrote that the income verification 
requirement of the HOME program is a regulatory barrier to affordable 
housing because it deters many private landlords from participating in 
the program.
    Response. For HOME-assisted rental projects, Sec.  92.252(h) of the 
HOME regulations requires initial determination of income using source 
documentation and annual re-certification of each tenant's annual 
income during the period of affordability. This requirement ensures 
compliance with section 215(a)(1)(C) of the HOME statute (42 U.S.C. 
12745(a)(1)(C)), which provides that, in order for HOME-assisted rental 
units to qualify as affordable, they must be occupied only by 
households that qualify as low-income families. In developing the HOME 
regulations in 1996, HUD attempted to minimize the burden of performing 
income determinations on project owners by allowing owners to use 
tenant income self-certifications for five years after conducting the 
initial income determination. A complete income determination is 
required to be performed every sixth year. In addition, HUD posted an 
interactive online calculator on https://www.hud.gov to assist project 
owners with income determinations. Initial and periodic tenant income 
determinations ensure that HOME-assisted affordable housing continues 
to benefit the intended population. Consequently, HUD does not support 
a statutory change to eliminate this requirement.
    Comment. One commenter requests a change to Sec.  92.252(a) of the 
HOME regulations, which bases rent levels in HOME-assisted units on the 
lesser of the HUD Section 8 fair market rent (FMR) or rent that does 
not exceed 30 percent of the adjusted income of a family whose annual 
income equals 65 percent of the area median income. The commenter 
writes that by basing HOME rent levels on FMR and not on income, 
tenants at higher income levels are paying less than they can afford 
under a standard of affordability of 30 percent of income or less.
    Response. FMRs are set at the 40th percentile rents paid by recent 
movers for standard quality housing units (e.g.,

[[Page 29350]]

40 percent of all recently rented units rent for less than the FMR). 
They are intended to be high enough to permit program participants to 
access a wide range of neighborhoods. Local housing authorities are 
asked to review proposed FMRs each year, and to provide comments and 
documentation if they believe FMRs are inaccurate and need to be 
revised. FMRs were established by the Congress as a ceiling on HOME 
program rents on the premise that rents above that level contributed 
little to the housing affordability problems faced by low income 
renters. HUD believes that the Congress's concerns were valid and 
supports retention of FMRs as a limit on HOME rents.
    As discussed above in this notice, a June 28, 2001, study of rental 
housing under the HOME program performed by Abt Associates, Inc., 
entitled ``Study of Ongoing Affordability of HOME Program Rents,'' 
provided significant information about rental housing under the HOME 
program. This study found that 60 percent of all renter households in 
HOME-assisted rental housing are rent burdened (i.e., pay more than 30 
percent of their income for housing). The study also found that 80 
percent of the households living in HOME-assisted rental units have an 
annual income of 50 percent or less of area median income. Therefore, 
HUD does not support using a higher rent standard than the FMRs and 
would not endorse a move to increase rents in HOME-assisted rental 
projects.
    Comment. One commenter proposes that all units in HOME-assisted 
projects that also receive project-based rental assistance should rent 
at the level allowable under the project-based rental subsidy program 
so that very low-income tenants would not have to pay more than 30 
percent of income as rent. Currently, Sec.  92.252(b)(2) of the HOME 
regulations allows state or local project-based rents only to be 
charged in HOME-assisted units occupied by families with income at or 
below 50 percent of area median income.
    Response. Currently, project-based rents can only be charged in 
HOME-assisted units occupied by families with incomes at or below 50 
percent of area median income. This is a statutory limitation, which 
would require legislative change.
3. Special Needs Assistance Programs
    Comment. One commenter stated that a HUD field office has 
interpreted Supportive Housing (SHP) program regulations at 24 CFR 
583.320 (Site Control) to mean that all properties funded for 
acquisition under a single project award must meet site control 
concurrently and that all inspections be completed before grant 
execution. As a result, properties have been lost when a seller is 
ready to close before others in the group are ready. This further 
delays or denies production of housing.
    Response. The program statute requires HUD to recapture and 
reallocate funds if an applicant does not obtain ownership or control 
of the project site within 12 months of notification of the award of a 
grant. HUD regulations requiring all sites to be under control before 
the grant is signed are designed to comply with the statute, while 
ensuring that the entire project selected in the competition will be 
carried out as described in the application. Applicants who are 
concerned that they will not be able to obtain control over multiple 
sites at one time should apply for each individual site as a separate 
project.
    Comment. One commenter stated that projects under Housing 
Preservation and Development programs and the Shelter Plus Care (S+C) 
program, including Section 8 Single Room Occupancy (SRO) Moderate 
Rehabilitation projects, should be automatically renewed similar to 
Section 8 vouchers. Expiring contracts should be renewed through the 
Section 8 Certificate Fund.
    Response. Annual appropriations acts specify the source of funds 
and renewal standards for S+C renewals. Without Congressional action, 
HUD cannot implement automatic renewals through the Housing Certificate 
Fund.
    Comment. One commenter stated that HUD's S+C regulations do not 
adequately allow for the reality and complexity of new construction 
projects. The commenter implies a need for a construction period that 
can exceed one year as currently limited in the McKinney-Vento Homeless 
Assistance Act (42 U.S.C. 11301 et seq.) (McKinney-Vento Act). The 
commenter recommended that HUD change the statute to expand the time 
allowed for new construction.
    Response. The McKinney-Vento Act does not authorize S+C rental 
assistance in conjunction with new construction. However, where new 
construction is performed in conjunction with SHP, the construction 
activities must begin with 18 months of the date of HUD's grant award 
letter and must be complete with 36 months after that notification.
    Comment. One commenter stated that HUD's recent reinterpretation of 
the law has disallowed any ``in-place'' low-income tenants of a S+C/SRO 
project from returning to units after renovation to receive rental 
assistance. The commenter stated that this interpretation results in 
the displacement of poor non-homeless persons who are equally in need 
of housing. The commenter requested that HUD revisit its interpretation 
to allow for the inclusion of these ``in-place'' tenants.
    Response. The McKinney-Vento Act, at section 441(b) (42 U.S.C. 
11401(b), states that the amounts made available under Section 8 
Moderate Rehabilitation for the SRO program shall be used only in 
connection with moderate rehabilitation of housing for occupancy by 
homeless individuals. Persons who reside in the housing prior to 
rehabilitation are not homeless, within the McKinney-Vento Act 
definition, so may not benefit from the S+C rental assistance payments. 
Such persons are eligible for relocation benefits pursuant to the 
Uniform Relocation Assistance and Real Property Acquisition Policies 
Act of 1970 (42 U.S.C. 4601 et seq.) (URA) or may return to their unit 
without rental assistance.
    Comment. One commenter made the following recommendations. First, 
the commenter recommended that the McKinney-Vento Act funds authorized 
for the Continuum of Care (CoC) program should be allowed to assist in 
the development of ground floor commercial units as part of homeless 
project development. Such units would help reduce costs and help build 
support for projects. Second, the commenter recommended that local CoCs 
should determine the match required for eligible activities.
    Response. With respect to the first recommendation, the McKinney-
Vento Act requires all program funds to be used for homeless persons. 
HUD does permit the development of commercial activities in homeless 
facilities with non-McKinney-Vento funds. With respect to the second 
recommendation, the match is established by statute and HUD therefore 
cannot make the requested change through regulation.

B. Office of Fair Housing and Equal Opportunity

    Comment. One commenter raised a question about uniform federal 
accessibility standards with respect to HUD's Supportive Housing for 
Persons with Disabilities (also referred to as the Section 811 
program). The commenter stated that participants in the Section 811 
program that provide for construction and development should be able to 
design their group homes for persons with developmental disabilities by 
working with HUD architects, based on their knowledge and experience 
with clients. The commenter referred to a group home that has housed 
persons

[[Page 29351]]

with developmental disabilities for the past 18 years. The commenter's 
issue is directed to section 4.34 of the Uniform Federal Accessibility 
Standards (UFAS), which pertains to kitchens. Under this requirement, 
most of the clients are supervised while handling food and cooking and 
are rarely able to work alone in preparation. The staff at these homes 
is responsible for utilizing the kitchen appliances in assisting the 
clients, and it is burdensome for them to work in situations where 
everything is lowered.
    Response. Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 
791 et seq.) (Section 504) prohibits discrimination based on disability 
in any program or activity receiving federal financial assistance. 
HUD's regulation implementing Section 504, codified at 24 CFR part 8, 
requires the design, construction, or alteration of buildings to be in 
conformance with UFAS. In addition, the Fair Housing Act (42 U.S.C. 
3601 et seq.) and the regulation implementing the Fair Housing Act (24 
CFR part 100) prohibit discrimination in the sale, rental, and 
financing of dwelling units, regardless of federal financial 
assistance, based on a variety of factors including disability.
    As Section 811 projects are frequently newly constructed, both 
Section 504 and the Fair Housing Act apply. When projects are designed 
with accessibility features in mind from the beginning, costs 
associated with providing such elements are minimal. Additionally, 
although these accessibility requirements are mandated by statute, 
recipients have the authority to request waivers in limited situations. 
For example, although the regulation in 24 CFR 891.310(b)(3) mandates 
that all dwelling units in acquired or rehabilitated independent living 
facilities be accessible or adaptable for people with physical 
disabilities, it also allows for a lesser number of units to be 
accessible if costs make it financially infeasible, if less than one-
half of the intended occupants have mobility impairments, and if the 
project complies with 24 CFR 8.23.
    The Department acknowledges that certain costs are associated with 
ensuring that facilities are accessible to people with disabilities and 
that not every person will benefit from all accessible features. 
Persons with developmental disabilities, however, can also benefit from 
features of accessible housing under these laws. Additionally, it is 
incumbent upon the Department and its recipients to comply with the 
regulatory requirements of Section 504 and the Fair Housing Act.
    Comment. One commenter wrote that the accessibility requirements 
are cumbersome and confusing for both the public and private sectors 
because several federal agencies have overlapping administrative 
requirements that sometimes appear to conflict with regulations 
administered by other federal agencies or state and local public 
housing agencies and builders. The commenter stated that it would like 
to see more consistency in guidance provided by HUD on the Fair Housing 
Act and Section 504.
    Response. HUD recognizes that the existence of more than one 
federal law mandating accessibility for persons with disabilities in 
housing presents challenges for the building industry in assuring 
compliance with all applicable laws. HUD provides ongoing technical 
assistance and guidance concerning the statutes it enforces and their 
implementing regulations. HUD has taken a number of steps over a period 
of years to provide guidance to HUD recipients and the building 
industry on meeting the accessibility requirements of Section 504, the 
Architectural Barriers Act (42 U.S.C. 4151 et seq.), the Fair Housing 
Act, and the Americans with Disabilities Act of 1990 (42 U.S.C. 12101 
et seq.) (ADA). These efforts include holding town meetings and 
training seminars, disseminating training materials at these meetings, 
and providing technical guidance to outside housing-industry 
organizations. More recently, HUD has taken the steps described below:
    a. In its role as a standard setting agency and member of the U.S. 
Access Board, HUD participated in the development of new guidelines 
covering access to facilities covered by the ADA. These guidelines 
overhaul the existing ADA Accessibility Guidelines, which were first 
published in 1991. As part of this effort, HUD has assisted in revising 
guidelines for federally funded facilities required to be accessible 
under the Architectural Barriers Act. Both the ADA guidelines and the 
guidelines for the Architectural Barriers Act specify access in new 
construction and alterations, and provide detailed provisions for 
various building elements, including ramps, elevators, restrooms, 
parking, and signage, among others. The guidelines, which are now in 
the final stages of development, are expected to be published in the 
near future.
    b. HUD published a final report and policy statement on its review 
of model building codes for consistency with the accessibility 
requirements of the Fair Housing Act, including identification of areas 
of inconsistency and recommendations for resolution. In response to 
requests from the industry, HUD provided technical guidance in 
development of code text language that would address the areas of 
inconsistency HUD identified for the International Building Code (IBC), 
and in development of a stand-alone document, entitled ``Code 
Requirements for Housing Accessibility,'' resulting in HUD's 
recognition of the 2003 IBC as an additional safe harbors for 
compliance with the accessibility requirements of the Fair Housing Act. 
The results of HUD's review were published in the Federal Register on 
February 28, 2005 (70 FR 9738).
    c. HUD's program offices issued four notices to its recipients 
detailing the requirements of Section 504, the Fair Housing Act and the 
ADA: Two covered CPD programs, one covered Office of Housing programs, 
and the one most recently covered programs of the Office of Public and 
Indian Housing. These notices reach thousand of recipients that 
administer all of HUD's programs and services.
    d. HUD's Fair Housing Accessibility FIRST program is providing 
extensive education and outreach on the accessibility requirements of 
the Fair Housing Act. (See, for example, the information about the 
program on the Web site: https://www.fairhousingfirst.org.) While the 
FIRST program focuses on the Fair Housing Act, the training modules, 
FAQ's and other information also discuss related laws, including 
Section 504, the Architectural Barriers Act and the ADA. The Disability 
Rights Laws training module includes a matrix of the laws. HUD 
acknowledges that it has an ongoing obligation to provide assistance to 
the public and anticipates more guidance in the future.
    Comment. HUD has recently denied FHA mortgage insurance under 
section 221 of the National Housing Act (12 U.S.C. 17151) to properties 
that restrict occupancy to persons age 62 or over due to HUD's long-
standing policy of not discriminating against families with children.
    Response. HUD is not aware of the situation to which the commenter 
refers but advises that section 808(e)(5) of the Fair Housing Act 
requires HUD to administer HUD programs and activities in a manner that 
affirmatively furthers the purposes of the Fair Housing Act. HUD's 
handbook entitled Occupancy Requirements of Subsidized Multifamily 
Housing Programs (Handbook 4350.3, issued on June 12, 2003) is 
consistent with the Fair Housing Act and addresses the matter raised by 
the commenter. Paragraph 3-22(D) of this handbook

[[Page 29352]]

provides that owners of properties which house elderly persons or which 
house elderly persons and persons with disabilities may not exclude 
otherwise eligible elderly families with children. The policy stated in 
this paragraph furthers the intent of the Fair Housing Act to 
affirmatively further fair housing for families with children under the 
age of 18.

C. Office of Healthy Homes and Lead Hazard Control (OHHLC)

    Comment. One commenter stated that lead-based paint inspection and 
paint removal is required of homes receiving repair loans or grants up 
to $20,000 under the Department of Agriculture's Rural Housing Service 
504 program, and that this requirement is burdensome and should be 
withdrawn.
    Response. The U.S. Department of Agriculture has decided to use 
HUD's approach for residential properties which the Department of 
Agriculture provides rehabilitation assistance and that are not also 
receiving HUD assistance. This was not a requirement imposed by HUD.
    Comment. One commenter suggested that HUD remove the clearance 
testing requirement and recognize the training provided by either the 
Environmental Protection Agency (EPA) or the Occupational Health and 
Safety Administration (OSHA) as sufficient to perform ``interim 
controls.''
    Response. Clearance is required to ensure that the job is done 
properly. HUD therefore finds that clearance testing is not a 
substitute for EPA training, but rather constitutes a quality assurance 
measure, which is important in striving for lead-hazard free housing. 
HUD, however, does recognize EPA training, and has for some time.
    Comment. In a related issue, one commenter stated that HUD's 
requirement that clearance testing be done prior to completion of any 
job can result in significant delays in the rehabilitation of housing. 
The commenter states that neither EPA nor OSHA requires clearance 
testing prior to conclusion of work on a jobsite.
    Response. For most rehabilitation, renovation and remodeling 
projects in pre-1978 assisted housing, clearance is required to ensure 
that the job is done properly and to reduce the liability of 
contractors. HUD believes