Demolition or Disposition of Public Housing Projects, 62354-62369 [E6-17724]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 71, Number 205 (Tuesday, October 24, 2006)]
[Rules and Regulations]
[Pages 62354-62369]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-17724]



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Part II





Department of Housing and Urban Development





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24 CFR Part 970



Demolition or Disposition of Public Housing Projects; Final Rule

Federal Register / Vol. 71, No. 205 / Tuesday, October 24, 2006 / 
Rules and Regulations

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 970

[Docket No. FR-4598-F-02]
RIN 2577-AC20


Demolition or Disposition of Public Housing Projects

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

ACTION: Final rule.

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SUMMARY: This final rule revises HUD's regulations governing demolition 
or disposition of public housing projects. This rule establishes the 
general and specific requirements for HUD approval of demolition or 
disposition applications, relocation of residents, resident 
participation in the form of consultation and opportunity to purchase a 
public housing project, the replacement of units, and a new authority 
for a public housing agency (PHA) to demolish a small number of its 
units without a formal application under certain circumstances, 
referred to as ``de minimis'' demolition. This final rule follows a 
December 15, 2004, proposed rule and makes several changes in response 
to public comment.

DATES: Effective Date: November 24, 2006.

FOR FURTHER INFORMATION CONTACT: Ainars Rodins, Director, Public and 
Indian Housing Special Application Center, Department of Housing and 
Urban Development, Ralph H. Metcalfe Federal Building, 77 West Jackson 
Boulevard, Room 2401, Chicago, IL 60604-3507; telephone: (312) 353-6236 
(this is not a toll-free number). Persons with hearing or speech 
impairments may access that number toll-free through TTY by calling the 
Federal Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    On December 15, 2004, HUD published a proposed rule (69 FR 75188) 
entitled ``Demolition or Disposition of Public Housing Projects.'' This 
rule proposed to implement revisions to section 18 of the U.S. Housing 
Act of 1937 (1937 Act) (42 U.S.C. 1437p) (section 18) made by the 
Quality Housing and Work Responsibility Act of 1998 (Pub. L. 105-276, 
approved October 21, 1998) (QHWRA). Section 18 generally pertains to 
the demolition and disposition of public housing projects, including 
application and other requirements. The main features of the QHWRA 
revisions to section 18 are:
     A change in the burden of proof required for HUD approval 
of an application for demolition or disposition. Rather than HUD having 
to independently make certain findings, as long as the PHA certifies 
truthfully to the relevant factors, HUD will approve the application.
     The resident opportunity to purchase a project, which, by 
regulation, applied in the case of both demolition and disposition, is 
now by statute available only for proposed dispositions of public 
housing projects.
     The former requirement for one-for-one replacement of 
demolished units was eliminated.
     Former section 18(d) of the 1937 Act was removed. That 
section provided that a PHA could not ``take any action'' to demolish a 
public housing project, or portion of a project, without HUD approval. 
Similar language in 24 CFR 970.7(a) and 970.25(a) is designed to make 
certain that HUD can track units being phased out for funding purposes. 
That language is not intended to create any private right of action.
     A small, ``de minimis'' exception to the requirements of 
section 18 is made that allows the lesser of 5 percent of a PHA's 
public housing units or five units to be demolished, if the space will 
be used for meeting service or other needs of residents or if the units 
are beyond repair.
     Consolidation of occupancy in buildings for the purpose of 
improving living conditions or providing more efficient services to 
residents is allowed.
     If replacement units are put back on the site of a 
demolished project, they must be significantly fewer in number than the 
number of units demolished.
     The Uniform Relocation Act (42 U.S.C. 4601 et seq.) is 
statutorily not applicable to residents of projects to be demolished or 
disposed, but there are specific notice and relocation requirements for 
those residents.
    There is a more detailed description of the statutory changes in 
the preamble to the proposed rule at 69 FR 75188.

II. This Final Rule

    This final rule follows publication of the December 15, 2004, 
proposed rule and takes into consideration all comments received. 
Section III of this preamble summarizes the issues raised by the public 
commenters and provides HUD's responses.
    In consideration of the public comments, and in order to clarify 
certain legal points, HUD has made several changes at the final rule 
stage.
     The exception in Sec.  970.3(b)(5) for common areas and 
unoccupied units for use in Family Self-Sufficiency (FSS) programs has 
been expanded to include HUD-approved economic self-sufficiency 
services and activities to promote employment of public housing 
residents.
     In Sec.  970.3(b)(11), the explanation of the acronym 
``DOFA'' (date of full availability) has been eliminated because the 
correct explanation is now given at Sec.  970.3(b)(2).
     In Sec.  970.3(b)(12), a clarification is made that the 
regulation does not apply to disposition of property for mixed-finance 
development under 24 CFR part 941, subpart F.
     In Sec.  970.7(a)(6), the rule clarifies that a relocation 
plan must include reasonable accommodations for persons who require 
such accommodations under law. This addition simply clarifies existing 
law.
     The requirement in proposed Sec.  970.7(a)(9), that a PHA 
provide the estimated balance of project debt with a disposition 
application, has been eliminated because HUD has independent access to 
that information.
     The proposed 2-year time limitation on completion of 
demolition or disposition in Sec.  970.7(b)(1) has been removed.
     The rule clarifies references to the HOPE VI program and 
mandatory conversion in Sec.  970.9(b) relating to exceptions from the 
resident opportunity to purchase, and, in Sec.  970.9(c), includes a 
clarifying reference to the definition of ``established eligible 
organizations.''
     In Sec.  970.11, which contains the procedures for sales 
offers to resident organizations, the final rule gives the PHAs 3 
business days to provide information in response to the residents' 
initial expression of interest, rather than the proposed same-day 
response (see Sec.  970.11(d)(6)).
     In Sec.  970.13, HUD has incorporated more explanation 
about environmental review procedures and policies into the 
environmental review provisions.
     In Sec.  970.15, which relates to criteria for HUD 
approval of demolition requests, the use of housing construction cost 
(HCC) in the test for obsolescence is replaced with a percentage of 
total development cost (TDC).
     In Sec.  970.21(c)(2), this rule clarifies that the use of 
Urban Development Action Grant (UDAG) funds under 42 U.S.C. 5318 and 
HOME Investment Partnership Act (HOME) funds under 42 U.S.C. 12701 et 
seq., as well as Community Development Block Grant (CDBG) funds under 
42 U.S.C. 5301 et

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seq., can trigger relocation obligations under section 104(d) of the 
Housing and Community Development Act of 1974.
     In Sec.  970.27, relating to the requirements for de 
minimis demolition, the definition of ``beyond repair'' is removed, and 
a clarification is added to the effect that PHAs must still comply with 
applicable laws outside of the 1937 Act, including environmental 
authorities and civil rights requirements.
     The phrase ``notwithstanding any other provision of law'' 
is added to Sec.  970.31, which contains the requirement that any on-
site replacement units be significantly fewer in number than the number 
of units demolished.

III. Discussion of the Public Comment on the December 15, 2004, 
Proposed Rule

    The public comment period for the proposed rule closed on February 
14, 2005. Fourteen commenters submitted comments. Commenters included 
industry trade associations, PHAs, and individuals. A summary of the 
issues raised by the commenters follows.
    A number of commenters stated that they generally support the rule. 
A commenter stated that it supports the ``streamlined changes'' to the 
regulations. Another commenter favorably cited the provision allowing 
PHAs to rescind requests for demolition or disposition if conditions 
have changed (Sec.  970.7(b)(2)), and that an offer only has to be made 
to resident organizations in the case of disposition (Sec.  970.11). 
Another commenter stated that the rule is now better organized and 
easier to read.
    One commenter stated support for the following specific provisions: 
Sec. Sec.  970.7, 970.15, and 970.17, which provide for HUD deference 
to a PHA's ``unique knowledge of local conditions,'' and Sec. Sec.  
970.15 and 970.17, permitting a PHA to certify that portions of its 
housing stock are no longer viable for public housing ``according to 
more realistic standards.'' The commenter stated that these provisions 
will give PHAs greater flexibility to develop alternative housing 
programs and preserve its other existing housing stock.
    This commenter also stated support for Sec.  970.19 providing for a 
waiver of the duty to retire outstanding obligations. Sections 970.9 
and 970.11 would provide for ``reasonable prior notice to residents.'' 
While PHAs would ``no longer be obligated to wait for a period of time 
for the resident to organize'' in the case of a disposition, they would 
only be obligated to make an offer to existing resident organizations. 
Proposed Sec.  970.25, allowing the PHA to consolidate occupancies, 
will provide ``greater flexibility in allocating scarce resources.'' 
Section 970.27, providing for a de minimis exception to demolition 
requirements, will ``grant the PHA relief from the substantial 
administrative burdens'' involved in making small changes to its public 
housing stock.

A. General Comments

    Comment: One commenter requested an extension of time to file 
public comments, stating that the rule could have a large impact and 
that time for further research was necessary.
    Response: HUD provided 60 days for public comment. This time span 
is in accordance with HUD's policy as stated in 24 CFR 10.1, and 
experience has shown that this period is generally sufficient time for 
the public to comment on HUD's proposed rules, and HUD determined that 
this was the case for this rule.
    Comment: HUD should continue to refine and streamline this rule for 
greater flexibility. Another commenter stated that HUD should remove 
``all unnecessary and redundant regulations to streamline the 
demolition and disposition process.''
    Response: HUD continually seeks to improve its regulations.

B. Comments on Specific Provisions

1. Demolition or Disposition for Mixed-Finance Projects
    Comment: Demolition or disposition related to mixed-finance 
development should be exempt from the requirements of this rule, or 
such disposition should be exempt. Some commenters raising this issue 
stated that because mixed-finance projects are already heavily 
regulated and time-consuming, they should not have to undergo a 
separate complete approval process under this rule. These and other 
commenters stated that there is already substantial overlap between the 
mixed-finance approval process and the approval process under this 
rule, and to the extent that there are some different requirements 
(such as environmental review and offer of sale to residents), the 
entire approval process could be done as part of mixed-finance 
approval, or at least PHAs should be given that option.
    Response: The rule does exempt public housing developments that are 
conveyed by a PHA prior to the date of full availability (DOFA) to 
enable an owner entity to develop the property using the mixed-finance 
development method (see 24 CFR 970.3(b)(11)). In addition, HUD agrees 
with the commenters that section 18 of the 1937 Act and this regulation 
do not apply to public housing property to be used for mixed-finance 
developments. This final rule revises 24 CFR 970.3(b)(12) to clarify 
this point.
    Comment: Section 970.2(a)(11) of the currently codified regulations 
should be read to exempt mixed-finance projects from a separate 
disposition review process, although HUD (according to the commenter, 
incorrectly) does not read the section this way. Some other commenters 
also cited proposed Sec.  970.3(b)(11) as well as Sec.  970.3(b)(12) 
for the same proposition. Other commenters cited proposed Sec.  
970.3(b)(12) for the proposition that mixed-finance public housing does 
not require a demolition/disposition application, and asked that HUD's 
Mixed-Finance Guidebook be amended accordingly.
    Response: See the response to the preceding comment. Additionally, 
all guidance and application materials will be revised accordingly.
    Comment: The rule should contain a clear statement that mixed-
finance projects are exempt. HUD should ``clarify'' its regulations on 
this issue, because working on complex issues with multiple departments 
at HUD may cause delays that increase development costs and that are 
detrimental to residents. Sections 970.3(b)(11) and (12) should be 
revised to exempt ``any public housing development or land on which a 
public housing development formerly stood that is conveyed by a PHA to 
an owner entity pursuant to an approved proposal under 24 CFR part 941, 
subpart F.'' If HUD chooses not to exempt mixed-finance projects in 
their entirety, HUD should add a new Sec.  970.3(c) as follows:

    Land or public housing disposed of prior to the start of 
construction in or due to mixed-finance development is not exempt 
under this part. Although development under 24 CFR part 941, subpart 
F is not exempt from this part 970, for such development under part 
941, subpart F, HUD will collect all information required by part 
970 during the approval process described at 24 CFR part 941, 
subpart F.

    Response: The rule does exempt public housing developments that are 
conveyed by a PHA prior to the date of full availability (DOFA) to 
enable an owner entity to develop the property using the mixed-finance 
development method (see 24 CFR 970.3(b)(11)). HUD believes that 
Sec. Sec.  970.3(b)(11) and (12) resolve the issues raised by these 
comments.
    Comment: Independent appraisals should not be required where a 
property is undergoing disposition for a nominal

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price or for use in a mixed-finance project, because most such 
dispositions are for a nominal or de minimis price. PHAs should not 
have to obtain an independent appraisal for dispositions at less than 
fair market value (FMV). Section 970.7(a)(10) should be revised to 
read:

    In the case of disposition, an estimate of the fair market value 
of the property, established on the basis of one independent 
appraisal, unless HUD determines that another method of valuation is 
sufficient, as described in Sec.  970.10(c).

    Three commenters stated that Sec.  970.19(c)(2) should be revised 
to read:

    Another method of valuation is clearly sufficient and the 
expense of an independent appraisal is unjustified because of the 
limited nature of the property interest involved or other available 
data, including, but not limited to, transfers for less than fair 
market value.

    Response: HUD reserves the right to request a determination of fair 
market value (FMV) of the property. Assessing the market value of a 
property is a common business practice and assists in evaluating any 
gain or loss. HUD only requires an appraisal if the property is 
advertised for bid and, even then, not in all cases. HUD recognizes 
that in some cases, a full appraisal is not necessary and has accepted 
tax assessors' opinions for dollar deals, negotiated sales, and leases 
in order to meet the appraisal requirement. Appraisal would not be 
required for disposition based on commensurate public benefit. Even in 
the case of public sale, appraisal is not required under some 
circumstances as indicated in Sec.  970.19 of the proposed rule. 
Language in the proposed rule stated that an independent appraisal is 
required unless ``HUD determines that another method of valuation is 
clearly sufficient and the expense of an independent appraisal is 
unjustified.'' (See proposed Sec.  970.7(a)(10), final Sec.  
970.7(a)(9).) Therefore, HUD has not adopted suggestions from 
commenters regarding proposed Sec.  970.7(a)(10), since the result is 
the same under both the proposed rule and the commenter's suggested 
language.
2. De Minimis Demolition, Proposed Sec.  970.27
    Comment: Section 970.27(c)(2) defines ``beyond repair'' for the de 
minimis demolition exception. This definition should be removed to 
provide PHAs with more discretion. One commenter stated that it may not 
be appropriate to rehabilitate a property even if costs fall just under 
the HCC. Some commenters stated that ``this rigid definition conflicts 
with the spirit of the de minimis exception'' to limit regulatory 
burdens.
    Response: Since this proposed definition may be overly restrictive, 
HUD is adopting the requested change. This final rule removes language 
in Sec.  970.27(c)(2) defining ``beyond repair.''
3. The Use of Proceeds of Demolition, Proposed Sec.  970.19(e)(2)(i)
    Comment: The proposed rule should permit as much flexibility as 
possible for the use of the proceeds of disposition. Several commenters 
stated that the listing of specific examples of permissible uses of 
proceeds should be removed from Sec.  970.19(e)(2)(i). An additional 
section should be added stating that proceeds will be allowed for use 
on all projects benefiting public housing residents and low-income 
families. One commenter stated that the phrase ``or for other low-
income housing purposes'' should be added to the section.
    Response: HUD did not adopt suggestions by commenters to remove the 
examples from the rule, since HUD believes that examples provide 
clarity to the rule (however, the examples are not intended to limit 
flexibility). HUD is not adopting a suggestion by commenters to add 
additional explanatory language since the proposed regulatory language 
does permit net proceeds to be used for the provision of low-income 
housing or to benefit the residents of the PHA.
    Comment: Proposed Sec.  970.19(e)(2)(ii) provides that the net 
proceeds of disposition may be used for ``leveraging amounts for 
securing commercial enterprises, on-site in public housing developments 
of the PHA, appropriate to serve the needs of the residents.'' Some 
commenters stated that this provision should be explicitly expanded to 
define ``on-site'' as including either current public housing sites or 
``former public housing property which is disposed of for purposes 
including commercial enterprises.'' The commenters stated that there is 
an urgent need for commercial enterprises, such as grocery stores, 
pharmacies, and other services on and around public housing 
developments, and HUD is unlikely to consider such enterprises as an 
appropriate use of current public housing property.
    Response: HUD incorporates statutory language from 42 U.S.C. 
1437p(a)(5)(B)(ii) in Sec.  970.19(e)(2)(ii) and believes this language 
is clear. However, HUD may provide additional guidance in this area 
after issuance of the final rule.
4. Definition of ``End of Initial Operating Period (EIOP), `` Proposed 
Sec.  970.5
    Comment: The definition of end of initial operating period (EIOP) 
should be conformed to the definition in 24 CFR part 941.
    Response: HUD has decided to use DOFA instead of EIOP throughout 
the rule, and so this final rule removes the definition of EIOP.
5. Exemption for Disposition for Homeownership Programs, Proposed Sec.  
970.3(b)(3)
    Comment: Several commenters stated that they support the exemption 
in Sec.  970.3(b)(3) of homeownership programs under public housing 
homeownership programs under sections 5(h), 21, and 32 of the 1937 Act 
from the disposition approval process. A commenter stated that some 
provisions of the current regulations conflict with the homeownership 
programs, and that there should be ``expedited adoption'' of the 
homeownership exemption and that notices required ``to keep the PIC 
system up to date occur as part of the final rule making process.'' 
Commenters also stated that the exemption is not sufficiently broad and 
should be extended to all homeownership programs, including ``Section 
24/9'' and ``Nehemiah-like'' programs. Some commenters stated that a 
new Sec.  970.3(b)(16) be added as follows:

    The conveyance of a public housing project or vacant land 
formerly containing a public housing project for the purpose of 
providing homeownership opportunities under Section 24, Section 9, 
Middle-Income, Nehemiah, or other HUD-approved homeownership 
program.

    Response: The purpose of this exemption is to allow for the removal 
of units outside of this regulation for use in a statutory 
homeownership program. While ``Nehemiah-like'' activities may be 
eligible under HOPE VI, homeownership may or may not be the result of a 
HOPE VI plan. In addition, any disposition as part of a HOPE VI plan is 
subject to section 18 of the 1937 Act and hence this implementing 
regulation. On the other hand, the Section 5(h) and 32 programs both 
provide a statutory basis for removal of units from the program under 
the requirement that the units be used for homeownership. It is these 
types of programs to which the exemption is addressed. In order to 
clarify this focus, this final rule refers to ``statutory predecessor'' 
homeownership programs.

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6. Time Limit for Completion, Timetable, and Plan in PHA Plan, Proposed 
Sec.  970.7
    Comment: Commenters objected to the 2-year time limit in Sec.  
970.7(b)(1) for completion of demolition or disposition. Because 
project approval, relocation of tenants, and obtaining funding take 
varying amounts of time depending on the project, there should be no 
time limit. There is a potential conflict between Sec.  970.7(a)(4), 
which requires the PHA to submit with its application a general 
timetable, and the 2-year time limit. There are too many variables 
involved to limit the process to 2 years. Instead, the timetable 
submitted under Sec.  970.7(a)(4) should determine the time limit.
    In addition, there is no statutory basis for the 2-year limitation, 
and HUD should consider PHA applications for extensions under 
appropriate circumstances. The 2-year limitation might be impossible 
for larger projects to meet, and instead there should be a firm date 
after which no HUD money could be spent on the property except for 
demolition and disposition costs. A solution might be to revise Sec.  
970.7(b)(1) to require that a PHA ``must either (a) commence any 
demolition or disposition within 2 years of the date of HUD's approval 
or (b) complete any demolition or disposition within 3 years of the 
date of HUD's approval.''
    Response: While the majority of demolitions and dispositions can be 
accomplished in 2 years, there may be some cases where a longer period 
is required. Therefore, this final rule adopts the commenters' 
suggestion and removes the 2-year requirement.
    Comment: Section 970.7(a)(1) should not require an identical 
timetable and description in the application and the PHA's plan. This 
requirement is antithetical to a streamlined process, and requires PHAs 
to submit, in effect, multiple applications for every demolition or 
disposition. The administrative burden will be extensive and will 
create delays, and having two identical submissions will not improve 
the process. For example, if, during the process, it were discovered 
that another property should have been included, the proposed rule 
would require the PHA to wait until the next annual plan submission 
before including the property. It should be sufficient under the 
statute for the PHA to specifically authorize demolition of a certain 
number of units in a certain neighborhood, and have the specific units 
listed in the demolition application. Accordingly, Sec.  970.7(a)(1) 
should be revised to read:

    A certification that the PHA has described the demolition or 
disposition in the approved PHA Annual Plan under 24 CFR part 903 
(except in the case of small, high-performing, or MTW PHAs eligible 
for streamlined annual plan treatment), and that the application 
submitted pursuant to this part otherwise complies with section 18 
of the Act, 42 U.S.C. 1437p, and this part * * *

    The timetable requirement is unrealistic because the description in 
the annual plan could anticipate a slightly different formulation of 
units, land, or other components that the agency is actually able to 
submit, and it is not clear from the regulation what to do in such a 
case. To require the PHA plan and the application to be identical 
serves no rational purpose and provides (because of minor differences 
that may arise) a basis for challenging or delaying a legitimate and 
necessary undertaking. Instead, the PHA plan should be ``substantially 
descriptive'' of the proposed action in order to facilitate general 
public comments.
    Another commenter stated that, while the intention to carry out a 
demolition or disposition would be stated in the annual plan, ``it is 
often difficult to predict accurately the timeline within which a 
project will be played out.''
    Response: Section 970.7 only requires that the description of the 
housing proposed to be demolished or disposed of in the approved PHA 
Annual Plan be identical to the application submitted pursuant to 24 
CFR part 970. The Annual Plan requirements ask for limited demolition/
disposition information as it relates to the planning process where the 
application requires more detailed information along with 
justifications and certifications. Since a PHA may amend the plan and 
submit significant changes to HUD, HUD disagrees with commenters that 
would suggest that only a certification be required for the contents of 
the PHA's plan.
    The Annual Plan's purpose is to provide a framework for local 
accountability and an easily identifiable source by which public 
housing residents, participants, and other members of the public may 
locate basic PHA policies, rules, and requirements; the PHA's mission 
for serving the needs of low-income families; and the PHA's goals and 
objectives to enable the PHA to reach that mission. The application for 
demolition/disposition is a specific request for demolition and/or 
disposition. HUD does not believe that this requirement is duplicative 
or burdensome.
    Comment: One commenter stated that ``at a time when there is a 
trend towards demolishing and disposing of public housing units, we 
must ensure that we do not make it easier'' for PHAs to remove units. 
For this reason, the provision exempting small and high-performing PHAs 
from certifying their demolition plans in their annual plans should be 
removed.
    Response: PHAs that are small or high performers are not entirely 
exempt from certifying their demolition plans. Those PHAs that are 
eligible to submit a streamlined plan are required to submit a 
certification listing the policies the PHA has revised since submission 
of its last Annual Plan, including those involving demolition and 
disposition. HUD believes that this certification is appropriate for 
PHAs using the streamlined plan process.
7. Resident Relocation, Proposed Sec. Sec.  970.21, 970.23
a. Notice to Residents, Proposed Sec.  970.21(e)(1)
    Comment: The required 90-day notice of demolition or disposition is 
too short. Only 20 percent of all new rental construction in the past 
decade has been targeted for low-income and extremely low-income 
people. Given the shortage of affordable rental units for low-income 
and extremely low-income people, it may be extremely difficult for 
families to find affordable rental housing within 90 days. The rule 
should require 6 months' advance notice.
    Response: The statute refers to 90 days' notice; however, it also 
should be noted that a PHA may not commence demolition or complete 
disposition until all residents are relocated. Since the rule, as 
proposed, addressed the commenter's concerns, HUD does not adopt this 
comment.
b. Uniform Relocation Act (URA) Procedures
    Comment: The rule provides an exemption from the URA, but the 
substitute procedures are ``the functional equivalent'' of URA 
procedures. The use of HUD funds for relocation costs (in proposed 
Sec.  970.23) would reduce the availability of those funds for other 
necessary uses. The use of disposition proceeds for relocation should 
be considered for those PHAs seeking waivers from using disposition 
proceeds to pay down debt.
    Response: HUD recognizes that much of what is required under URA is 
similar to the requirements in part 970. However, these requirements 
are statutory (see 42 U.S.C. 1437p(a)(4)(A)(iii)). HUD disagrees with 
the statement that funds for relocation costs would reduce the 
availability of those funds for other uses since other

[[Page 62358]]

funds are available for relocation costs. The comment pertaining to the 
use of disposition proceeds is not adopted because doing so would 
conflict with the requirements of Sec.  970.19 of this rule and 42 
U.S.C. 1437p(a)(5).
c. Use of Vouchers
    Comment: Given the funding shortfalls in the voucher program 
(citing that only 95 percent of 2004 vouchers are being funded, and the 
proposed FY 2006 budget would cut project-based assistance by $272 
million), HUD should require PHAs to ``confirm landlord stability'' in 
the tenant-based and project-based voucher programs before certifying 
that a resident has been relocated. The commenter also states that the 
rule should require PHAs to track relocated families for at least 3 
years, and that this data is to be shared with HUD.
    Response: The comments related to vouchers are beyond the scope of 
this rule. As to relocation, the relocation provisions are required by 
statute (see 42 U.S.C. 1437p(a)(4)(A)(iii)). The statutory requirement 
is that demolition not commence until each resident is relocated, and 
the rule appropriately implements that requirement. Therefore, no 
change is made to the final rule.
8. Reference to HOPE VI, Proposed Sec.  970.9(b)(3)(iii)
    Comment: Section 970.9(b)(3)(iii) incorrectly references part 970 
as including regulations for HOPE VI relocation. This reference should 
be revised.
    Response: The rule addresses circumstances in which a PHA is not 
required to make an offering to residents. The rule takes into account 
(1) HOPE VI revitalization (see 42 U.S.C. 1437v), (2) mandatory removal 
from inventory of distressed units for which there is no potential to 
revitalize under 24 CFR part 971 (authorized by the 1996 Omnibus 
Consolidated Rescissions and Appropriation Act, Pub. L. 104-134, 
approved April 26, 1996), and (3) the required conversion of distressed 
housing to tenant-based assistance under 42 U.S.C 1437z-5.
9. Environmental Review Provisions, Proposed Sec.  970.13
    Comment: Several commenters objected to environmental review 
provisions in proposed Sec.  970.13. Commenters stated that an 
environmental review should not be required for a known re-use unless 
such re-use involves PIH funds. Commenters also stated that:

    The Preamble describes known use so broadly that a housing 
authority disposing of property would have to get Part 58 approval 
for a future use such as a purely privately funded project * * *. 
That result places a disproportionate burden on housing authorities 
to obtain environmental approvals not otherwise required by the 
placement of HUD funds into a project. It also requires a housing 
authority to essentially subsidize activities by a third party 
outside of the public housing program. For situations in which 
housing authorities dispose of land that will no longer be used for 
public housing purposes, any required environmental review should be 
passed on to the purchaser. Accordingly, Sec.  970.13(b) should be 
revised to read:
    The environmental review is limited to the demolition or 
disposition action and any known re-use involving public housing 
funding. For the purposes of this section, known re-use means: (1) 
architectural, engineering, or design plans for the re-use exist and 
go beyond preliminary stages and (2) either of the following is 
true: (a) HUD public housing funding has been committed; or (b) a 
grant application for HUD public housing funding has been submitted 
to HUD.

    One commenter stated that the provision that environmental review 
is not required for an unknown future re-use is too general, and the 
term ``unknown'' should be defined. Another commenter stated that it is 
unlikely that a PHA does not know the future re-use of its property. 
The process of obtaining an environmental review is ``onerous'' because 
the responsibility for the review is on the local governmental entity. 
``In reality, this usually shifts the cost burden to the housing agency 
because the city is unlikely to cover the expense of environmental 
review.''
    Response: HUD believes that the proposed preamble language provided 
clarity regarding what is a ``known future reuse'' and what is an 
``unknown reuse'' and has placed the language describing the factors 
used to determine whether a future re-use is ``known'' in the text of 
the final rule.
    The suggested revision to Sec.  970.13(b) is not adopted since an 
environmental review is applicable when there is a ``federal action,'' 
such as HUD approving an application for demolition or disposition or a 
related request for release of funds. The requirement is not 
necessarily limited to public housing funding. HUD does not agree that 
the environmental review is ``onerous'' and points out that Sec.  
970.13 does permit HUD to make a finding in accordance with 24 CFR 
58.11(d) and may itself perform the environmental review under the 
provision of 24 CFR part 50 if a PHA objects in writing to the 
responsible entity performing the review under 24 CFR part 58.
    Comment: Dispositions by sealed-bid solicitations should be 
conducted without an environmental assessment. This would allow PHAs to 
``test the disposition market'' without the expense of an environmental 
review and also give relief to the transferee from the costs of having 
to conduct an environmental review prior to acquisition.
    Environmental review should not be required for mixed-finance 
projects or for de minimis demolitions under Sec.  970.27. ``There is 
little difference'' between mixed-finance development and redevelopment 
using the Capital Fund, where environmental review is not required. 
Since the de minimis exception is for cases where the demolition action 
is ``not substantive,'' the environmental review requirement should be 
eliminated for these demolitions as well.
    Response: See the response to the preceding comment. The 
commenter's statement that environmental review is not required for 
development and redevelopment using the Capital Fund is not correct 
(see 24 CFR 58.1(b)(6)(i)). Environmental review is required because 
federal financial assistance is involved.
10. Substitution of Units, Proposed Sec.  970.7(b)(3)
    Comment: Section 970.7(b)(3) should be revised to allow ``de 
minimis'' substitution of units. While HUD needs to be able to track 
units, the proposed rule is unduly restrictive. Redevelopment in an 
urban setting sometimes requires the substitution of small parcels in 
order to produce efficiency or meet local zoning or code requirements. 
The proposed provisions will cause unnecessary delays in these cases. 
To avoid this problem, Sec.  970.7(b)(3) should be revised to read:

    A PHA may request to either substitute units or add units to 
those originally included in the approved demolition or disposition 
application, without submitting a new application for those units, 
so long as such a request involves (a) units within the same project 
number or (b) the substitution or addition of no more than 3 units 
in project numbers adjacent to the project that is the subject of 
the disposition.

    In the alternative, HUD should permit amendments to approved 
demolition or disposition applications. In that case, the section 
should be revised to read:

    A PHA may either substitute units or add units to those 
originally included in the approved demolition or disposition 
application through an amendment to the application, so long as such 
a request involves (a) units within the same project number or (b) 
the substitution or addition of no more than 10 units in project 
numbers adjacent to the project that is the subject of the 
disposition.


[[Page 62359]]


    One commenter stated that ``PHAs should be permitted a greater 
degree of flexibility to substitute units within developments in order 
to effectuate the stated goal of consolidation of occupancies.''
    Response: The comments regarding ``de minimis'' substitution of 
units are not adopted since applications are approved for specific 
reasons and reviewed on a case-by-case basis. Not all units in a given 
public housing project are equivalent to all others, and considerations 
include not only the units themselves but such factors as location, 
amenities, and appearance. However, PHAs can apply for and obtain 
approval to demolish a larger set of units than they actually plan to 
demolish, including the units they may wish to substitute. The PHA 
could then substitute units within the approved larger group. Thus, 
PHAs can effectively have the ability to substitute units for 
demolition and still comply with this rule.
11. Offer to Existing Resident Organizations, Proposed Sec.  970.11
    Comment: One commenter supported the general idea of excluding 
demolitions (so that the offer to purchase to residents applies only to 
disposition), HOPE VI, and mandatory conversion projects from the 
resident offer requirement. However, the rule stops short by not also 
excluding projects where the PHA has consolidated vacancies as 
permitted by section 18. Excluding such developments does not seem to 
further any legitimate purpose, and will penalize PHAs that consolidate 
occupancies to improve the living conditions of their residents or to 
provide greater efficiency in serving residents. Why would HUD want to 
discourage such efforts?
    Commenters stated that the procedures for the offering to residents 
are unduly cumbersome and time-consuming. The entire process could take 
from 135 to 225 days, and such a delay is unreasonable. The rule should 
ensure that the entire process is completed within 30 days and that the 
decision of the PHA is not subject to an appeal process. One commenter 
stated that ``[p]roposal 970.11(h) would provide for an extension of 
the time, from 30 days to 120 days, for appealing resident 
organizations desiring to buy a complex, but receiving a rejected 
purchase proposal. Should the rejection be justified, and HUD agrees, 
it would seem that this proposal would further delay the redevelopment 
of a project. HUD should waive this requirement or certainly limit it 
to a nominal time frame if there is no organized resident group.''
    Extending the time frame for HUD to review the PHA decision from 30 
days to 120 days will place an additional burden on the PHA. Timing is 
a key factor, and it is essential that disposition applications be 
processed by the HUD Special Application Center as expeditiously as 
possible. However, the proposed appeals process could add an additional 
120 days or more to the application approval process. In addition, the 
uncertainty of how long the review period could last will likely hinder 
a PHA's ability to consummate market transactions with private partners 
and could unnecessarily deter private partners from working with PHAs 
on real estate transactions. The time frame for HUD to render a 
decision on an appeal should remain 30 days.
    Response: The rule does permit a PHA to consolidate without 
submitting a disposition application and, therefore, the offer to 
existing resident organizations under this rule is not applicable. The 
comments regarding the time for resident consultation are not adopted 
since the procedures for offer of sale to established eligible 
organizations is statutory. The comment regarding the 120-day HUD 
appeal process is not adopted since the 120-day period relates to the 
maximum amount of time HUD has to consider an appeal from a resident 
organization. HUD believes that there is no uncertainty as to how long 
the review period could last, since the period is a maximum of 120 
days. HUD's experience in this area reflects the possibility that some 
appeals may require the full 120 days to review and render a decision.
    Comment: Proposed Sec.  970.11(d)(6), which requires the PHA to 
provide sales materials to the resident organization on the same day as 
it receives the resident's expression of interest, has too short a time 
frame. The provision should be revised to read, ``The PHA must supply 
the totality of all the terms of sale and all the necessary materials 
to the residents no later than 3 business days from the day it receives 
the residents' initial expression of interest.''
    Response: HUD adopts this comment. This final rule revises the 
third sentence of Sec.  970.11(d)(6) to read: ``The PHA must supply the 
totality of all the terms of sale and all necessary material to the 
residents no later than 3 business days from the day it receives the 
residents' initial expression of interest.''
    Comment: The resident offer provision should be expanded. Contrary 
to HUD's assertions in the proposed rule, there are many PHAs that do 
not have resident organizations. HUD should include a requirement that 
PHAs have to inform tenants of their right to organize and allow them 
the opportunity to organize before moving forward with any disposition 
plans. The $25 per unit/per year for resident participation activities 
should be used for resident organizations.
    In addition, the 60 days provided for residents to secure financing 
is not enough. Residents should get 90 days. This commenter stated 
that, contrary to proposed Sec.  970.11(h), residents should have a 
right to appeal any HUD ruling in court.
    Response: HUD does not adopt this comment since the resident-offer 
provision, as required by the existing regulation, proved to be overly 
time-consuming and unworkable in some situations where there was not 
yet a resident organization formed. The suggestion to give residents 90 
days to secure financing is beyond statutory requirements and to allow 
an extended period of time would again delay the process unnecessarily. 
As for the right to judicial appeal, residents are not prevented by 
this section from pursuing any available judicial review; Sec.  
970.11(h) simply provides for finality of the administrative review 
process.
12. Exemption of Areas Used for Family Self-Sufficiency (FSS), Proposed 
Sec.  970.3(b)(5)
    Comment: The exemption for common and unoccupied areas being used 
for an FSS program is correct, but should be expanded to all areas 
being used for supportive services regardless of whether they are being 
used in the statutory FSS program.
    Response: After consideration of this issue, HUD agrees that HUD's 
policy in this area, should ``encourage and reward employment and 
economic self-sufficiency'' (see 42 U.S.C. 1437a(2)(D).) ``Employment 
and economic self-sufficiency'' includes FSS and other HUD-approved 
self-sufficiency activities. This final rule revises 24 CFR 970.3(b)(5) 
accordingly.
13. Review Under the Public Housing Assessment System (PHAS)
    Comment: Two commenters stated that when a PHA submits a property 
for demolition or disposition, it acknowledges that the units are in 
need of substantial repair and is working to resolve the problem. Such 
units should not be required to be reviewed under PHAS or scored as 
part of the PHA's overall rating. The PHA should not be penalized by 
HUD for the condition of the units being demolished or subject to 
disposition.

[[Page 62360]]

    Response: Changes to PHAS scoring are outside the scope of this 
rule.
14. Exemption for Eminent Domain Taking, Proposed Sec.  970.3(b)(8)
    Comment: One commenter stated that the preamble and regulatory 
provisions on eminent domain taking do not match. In particular, the 
preamble states that HUD must be a party to the eminent domain 
proceeding, that HUD must approve any out-of-court settlement for the 
transfer of PHA-owned property, and that additional adjustments may be 
made to account for changes in law. These requirements do not appear in 
the rule text.
    This commenter stated that the rule should clearly state that 
commencement of litigation is not required in those states such as Ohio 
where the first step toward an eminent domain taking occurs before 
litigation. This commenter also stated that material should be added to 
the rule that explains how to obtain HUD approval for an eminent domain 
taking and which HUD office to contact.
    Response: HUD does not adopt this comment since the proposed 
regulatory provisions address the fact of the exemption only. To fully 
explain the process of eminent domain is beyond the scope of this rule. 
This final rule does not limit the start of condemnation proceedings to 
the filing in a court but accepts the determination as to when the 
condemnation proceedings commence under state law.
15. Resident Consultation Requirement, Proposed Sec.  970.9
    Comment: The rule should have ``safe harbor'' criteria for resident 
consultation that, once met, ensure that the requirement has been 
fulfilled. This comment cites an example of a situation where the 
commenter states that more than 30 meetings were held with residents 
over 2 years, and HUD did not find the consultation adequate but 
required the PHA to sign a memorandum of understanding (MOU) with the 
resident council in which the parties agreed to the action. This 
requirement exceeds any reasonable interpretation of ``consultation.'' 
This comment suggests an additional sentence be added to read:

    The requirement for resident consultation will be satisfied 
where the PHA has invited all affected residents and resident 
organizations to attend at least three meetings at which the 
proposed demolition or disposition plan is presented in writing to 
those attending and the PHA affords the residents in attendance the 
right to present their comments orally and later in writing.

    Response: The comment is not adopted. The statute requires 
consultation with residents who will be affected by the action and HUD 
believes that PHAs should have flexibility in this area. HUD shall 
review consultation on a case-by-case basis. HUD does not consider it 
appropriate to specify how many meetings are necessary for resident 
consultation, but as proposed Sec.  970.9 requires, a PHA must submit 
copies of any written comments submitted to the PHA and any evaluation 
that the PHA has made of the comments.
    Comment: Proposed Sec.  970.9(c), which provides that established, 
eligible resident organizations may act for residents, ``does not 
identify any standards that must be met by nonprofit organizations that 
may act on behalf of residents. At a minimum, nonprofit organizations 
should have a history of working with the residents of the affected 
community and should be able to demonstrate the capacity and ability to 
assist the resident organization with real estate transactions.''
    Response: Proposed Sec.  970.9 makes reference to 24 CFR part 964 
to define what is a resident management corporation. Additionally, part 
964 contains language stating that a nonprofit organization is one that 
is ``validly incorporated under the laws of the state in which it is 
located.'' This standard has been clarified in the final rule. HUD 
believes that the rule is sufficient and that adopting the comment 
would make the rule too prescriptive and inflexible in this regard.
16. Method of Disposition, Proposed Sec.  970.19
    Comment: There should be an additional disposition option besides 
public solicitation for not less than FMV, or negotiated sale. The rule 
should also permit a sale by public solicitation for less than FMV. Why 
prohibit a sale on this basis? It does not serve anyone's interest to 
require the PHA to retain title solely because the purchaser willing to 
pay the most for it will not pay the appraised value. Whether or not to 
accept such a bid should be within the PHA's discretion.
    Response: The proposed rule permitted HUD to authorize sale for 
less than fair market value. No change is made to this final rule as a 
result of this comment.
    Comment: Two commenters stated that the rule requires an assessment 
of commensurate public benefits when selling for less than FMV. HUD 
required a showing of commensurate public benefits for a negotiated 
sale of greater than FMV. This requirement was a waste of time because 
there was no chance of anyone other than the offeror offering more than 
the negotiated price, and placed the PHA at risk of receiving less 
money because the offeror might decide to lower the offer and risk 
losing the property. The rule should be changed to allow for a 
negotiated price at greater than the appraised value without showing a 
commensurate public benefit.
    Response: The rule merely requires a showing of a commensurate 
public benefit for a sale of less than FMV. HUD will not require a 
showing of commensurate public benefit for a negotiated sale of greater 
than FMV on and after implementation date of the final rule.
17. Program of Modifications Is Not Cost-Effective, Proposed Sec.  
970.15(a)(2)
    Comment: The test for obsolescence--whether a reasonable program of 
modifications is cost-effective to return a development or portion to 
useful life--should be based on 90 percent of total development cost 
(TDC), rather than 100 percent of housing construction cost (HCC), as 
proposed.
    Response: HUD has eliminated proposed references to HCC for clarity 
purposes and revised language in the final rule to reflect 62.5 percent 
of TDC for elevator structures and 57.14 percent of TDC for all other 
types of structures, which is the functional equivalent of 100 percent 
of HCC. Such a change does not eliminate the flexibility the proposed 
rule offered.
18. PIH Information Center (PIC) System
    Comment: A trade association commenter stated that its members have 
found that the limitations of the PIC system for tracking public 
housing units make it difficult to demolish or dispose of units that 
should otherwise be eligible for demolition or disposition. As an 
example, if a PHA has two buildings under one public housing project 
number, and it decides to demolish one and apply for funding for 
replacement housing, it cannot later apply to replace the second 
building because, as far as the system is concerned, the PHA has 
already received replacement housing funding for that project.
    Response: Technical issues related to PIC were not addressed in the 
proposed rule and are outside the scope of this rulemaking.
19. Replacement Units, Proposed Sec.  970.31
    Comment: This section, which provides that replacement housing 
units

[[Page 62361]]

may be placed back on-site if the number of units is significantly 
fewer than the number of units demolished, should be prefaced with the 
phrase, ``notwithstanding any other provision of law.'' This phrase 
would mirror current law.
    Response: The final rule makes the suggested change. Section 18(d) 
of the 1937Act (42 U.S.C. 1437p(d)) provides for placing replacement 
units back on site ``notwithstanding any other provision of law.''
20. Application Requirements Generally, Proposed Sec. Sec.  970.7, 
970.29
    Comment: This proposed section requires submission of too much 
information and should be streamlined. HUD would approve an application 
based on a PHA's certification as to specific conditions of the 
property and evidence that the PHA complied with resident consultation 
requirements. This should result in a simpler process. One purpose of 
the statute, to eliminate the burden on PHAs, is overshadowed by HUD's 
demand for more information than is required.
    Response: The rule does reflect statutory language. PHAs determine 
whether a project is eligible for demolition or disposition and are 
permitted to certify to this unless HUD has information that the PHA's 
certification is incorrect. Certification forms reflect language from 
section 18(b) of the 1937 Act. However, the application process will be 
updated to conform to any changes made by this rule.
    Comment: Commenters stated that proposed Sec.  970.29, which 
provides the rules for HUD's rejection of an application, is too broad 
or too vague. Proposed Sec.  970.29(a)(3), which states that HUD may 
disapprove an application if it has information inconsistent with the 
application, is too vague concerning what that contrary information may 
be. ``The rule should be more explicit on what information or data may 
be requested so that PHAs are not subject to the vagaries of those 
conducting the application process.'' This section implies that HUD can 
ask for additional information after it reviews the application, and 
that, since HUD reviews the PHA's annual and 5-year plans, HUD 
personnel should know what to ask before their review. As written, the 
section could cause lengthy delays.
    The phrase ``HUD will disapprove an application if HUD determines * 
* *'' should be changed to ``HUD will disapprove an application only if 
HUD determines * * *'' because, as written, the phrase implies that HUD 
may disapprove an application for some other reason. A commenter 
objected to proposed Sec.  907.29(a) because it does not define what 
``clearly inconsistent'' means, and because the phrase ``if HUD 
determines'' vests absolute discretion in the agency regardless of how 
clear and convincing a case the PHA has made. This commenter stated 
that the section should be revised to read:

    HUD will disapprove an application only if any certification by 
the PHA required under this part is:
    (a) Inconsistent with the approved PHA Plan; or
    (b) Arbitrary, capricious, made in bad faith, or constitutes an 
abuse of discretion.

    Response: Language in this section reflects statutory requirements. 
Each proposal is unique and must be reviewed on a case-by-case basis. 
HUD may reject an application for demolition or disposition if the 
reason for the proposed action is not in conformance with the statute.
21. Other Miscellaneous Application Requirements, Proposed Sec.  970.7
a. Estimate of Project Debt, Sec.  970.7(a)(9)
    Comment: Proposed Sec.  970.7(a)(9), requiring PHAs to submit 
estimate of project debt, should be removed. This information is 
readily available to HUD and not to PHAs.
    Response: This comment is adopted since HUD currently maintains 
such information. However, if HUD determines the project still has 
debt, it will assume the PHA is asking for a waiver of the requirement 
to use the proceeds to repay the debt, if the PHA has shown another use 
for the proceeds.
b. Consultation With Appropriate Government Officials, Sec.  
970.7(a)(15)
    Comment: This requirement could ``require a great deal of extra 
effort if the PHA's project is trying to move forward during a change 
in local government.'' The rule should allow more latitude in case of 
change in local political volatility.
    Response: HUD disagrees with this commenter and believes that the 
rule does allow for latitude. Section 970.7(a)(15)(iii) provides that, 
where the local government consistently fails to respond to the PHA's 
attempt at consultation, including letters, request for meetings, 
public notice and other reasonable efforts, documentation of those 
attempts are acceptable. HUD will review such documentation on a case-
by-case basis to determine if the consultation requirement was met. 
Because of the large amount of variations in local situations, HUD does 
not consider it appropriate to make a general rule as to what action on 
the part of the public body will be required to meet the consultation 
requirement in situations where the local government does not respond.
    Comment: The rule should have a ``safe harbor'' standard so that it 
is known when the PHA has satisfied the consultation requirement. 
Otherwise, jurisdictions could delay the process. For example, if a 
racially concentrated project were to be demolished to provide for 
integration of its residents into non-concentrated neighborhoods, a 
jurisdiction opposed to integration could refuse to issue the letter 
required in proposed Sec.  970.7(a)(15)(ii) and allege that the PHA did 
not consult. By establishing threshold criteria, the PHA could 
establish that it had consulted adequately even absent the letter. A 
new paragraph should be added to Sec.  970.7(a)(15) to read:

    The requirement for consultation with local government officials 
will be satisfied where the PHA has either met or offered to meet 
with the appropriate government officials on three occasions at 
which the proposed demolition or disposition plan was presented in 
writing to those attending and the PHA has responded in writing to 
any written objections, comments, or concerns received within ten 
days following the third such meeting or offer to meet.

    Response: As discussed in the response to the preceding comment, 
because of the variances in local situations, HUD does not believe it 
is possible to provide a safe harbor standard that will be applicable 
in all cases.

IV. Findings and Certifications

Paperwork Reduction Act

    The information collection requirements in this rule have been 
approved by OMB under section 3507(d) of the Paperwork Reduction Act of 
1995 (44 U.S.C. Chapter 35) and assigned OMB Control number 2577-0157. 
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 valid control number.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for Federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments and the private sector. This final rule does not 
impose any Federal mandates on any state, local, or tribal government, 
or the private sector within the meaning of UMRA.

[[Page 62362]]

Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment was made with respect to the proposed rule in accordance 
with HUD regulations in 24 CFR part 50 that implement section 102(2)(C) 
of the National Environmental Policy Act of 1969 (42 U.S.C. 
4332(2)(C)). The FONSI remains applicable and is available for public 
inspection between 8 a.m. and 5 p.m. weekdays in the Regulations 
Division, Office of General Counsel, U.S. Department of Housing and 
Urban Development, 451 Seventh Street, SW., Room 10276, Washington, DC 
20410-0500. Due to security measures at the HUD Headquarters building, 
please schedule an appointment to review the FONSI by calling the 
Regulations Division at (202) 708-3055 (this is not a toll-free 
number).

Impact on Small Entities

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.), 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities.
    This rule is concerned solely with the requirements for PHAs to 
apply for demolition or disposition of the public housing developments 
that they administer. However, many of the requirements of this rule 
were already present under the existing regulations regarding public 
housing demolition or disposition. To the extent that this rule would 
alter the previous requirements, it would do so in ways that are likely 
to either leave the economic impact unchanged or lower such impact. For 
example, because of a statutory change, the rule would no longer 
require PHAs to have a replacement housing plan. The rule would provide 
greater flexibility than before in how PHAs can use the proceeds from 
disposition of a property. The rule would provide for demolition of a 
minimal number of units without submitting an application. Thus, the 
rule certainly would not impose a greater administrative burden on 
entities than previously, and in some ways would lower the 
administrative requirements for demolishing or disposing of public 
housing units. Therefore, the undersigned certifies that this final 
rule will not have a significant economic impact on a substantial 
number of small entities, and an initial regulatory flexibility 
analysis is not required.

Federalism Impact

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts state law, unless the relevant 
requirements of section 6 of the executive order are met. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on state and local governments or preempt state 
law within the meaning of the executive order.

Executive Order 12866, Regulatory Planning and Review

    OMB reviewed this final rule under Executive Order 12866 (entitled 
Regulatory Planning and Review). OMB determined that this rule is a 
significant regulatory action, as defined in section 3(f) of the order 
(although not economically significant, as provided in section 3(f)(1) 
of the order). The docket file is available for public inspection from 
8 a.m. to 5 p.m. in the Regulations Division, Office of General 
Counsel, U.S. Department of Housing and Urban Development, 451 Seventh 
Street, SW., Room 10276, Washington, DC 20410-0500. Due to security 
measures at the HUD Headquarters building, please schedule an 
appointment to review the docket file by calling the Regulations 
Division at (202) 708-3055 (this is not a toll-free number).

List of Subjects in 24 CFR Part 970

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

    The Catalog of Federal Domestic Assistance program number for the 
program affected by this final rule is 14.850.

0
For the reasons stated in the preamble, HUD revises 24 CFR part 970 as 
follows:
0
1. 24 CFR part 970 is revised to read as follows:

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

Sec.
970.1 Purpose.
970.3 Applicability.
970.5 Definitions.
970.7 General requirements for HUD approval of a PHA demolition/
disposition application.
970.9 Resident participation--consultation and opportunity to 
purchase.
970.11 Procedures for the offer of sale to established eligible 
organizations.
970.13 Environmental review requirements.
970.15 Specific criteria for HUD approval of demolition requests.
970.17 Specific criteria for HUD approval of disposition requests.
970.19 Disposition of property; use of proceeds.
970.21 Relocation of residents.
970.23 Costs of demolition and relocation of displaced tenants.
970.25 Required and permitted actions prior to approval.
970.27 De minimis exception to demolition requirements.
970.29 Criteria for disapproval of demolition or disposition 
applications.
970.31 Replacement units.
970.33 Effect on Operating Fund Program and Capital Fund Program.
970.35 Reports and records.

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


Sec.  970.1  Purpose.

    This part states requirements for HUD approval of a public housing 
agency's application for demolition or disposition (in whole or in 
part) of public housing deve