Request for Comments on Ending “Hold Harmless” Policy in Calculating Income Limits Under Section 8 of the United States Housing Act of 1937, 47016-47017 [E9-22077]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 74, Number 176 (Monday, September 14, 2009)]
[Notices]
[Pages 47016-47017]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-22077]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5323-N-01]


Request for Comments on Ending ``Hold Harmless'' Policy in 
Calculating Income Limits Under Section 8 of the United States Housing 
Act of 1937

AGENCY: Office of the Assistant Secretary for Policy Development and 
Research, HUD.

ACTION: Notice.

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SUMMARY: For Fiscal Year (FY) 2009, HUD has continued its policy of 
maintaining Section 8 income limits at the previously published level 
in cases where HUD's estimate of area median family income (MFI) or 
housing cost adjustment data, or changes in calculation methodology, 
would lead to a lower income limit than was previously published. The 
policy was adopted to ensure that Multifamily Tax Subsidy Projects 
(MTSPs) would not be subject to income-limit and rent decreases when 
the data underlying income limits otherwise indicated decreases. The 
Housing and Economic Recovery Act of 2008 (Pub. L. 110-289) changed the 
tax code to protect existing MTSPs from decreases in income limits and 
rents, should HUD decide to discontinue this policy. However, 
maintaining artificially high income limits may have an adverse impact 
on other federal programs. HUD is requesting public comment on whether 
HUD should discontinue the practice with respect to Section 8 income 
limits such that income limits generally would be allowed to decrease.

DATES: Comments Due Date: October 14, 2009.

ADDRESSES: Interested persons are invited to submit comments regarding 
this notice to the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street, SW., Room 
10276, Washington, DC 20410-0500. Communications must refer to the 
above docket number and title. There are two methods for submitting 
public comments. All submissions must refer to the above docket number 
and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street, SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit a comment, ensures their 
timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
www.regulations.gov website can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that website to submit comments 
electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
rule.

    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at 202-708-3055 (this is 
not a toll-free number). Individuals with speech or hearing impairments 
may access this number via TTY by calling the Federal Information Relay 
Service at 800-877-8339. Copies of all comments submitted are available 
for inspection and downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For technical information on the 
methodology used to develop income limits and median family income 
estimates, please call the HUD USER information line at 800-245-2691 or 
access the information on the HUD Web site, https://www.huduser.org/datasets/il.html. That Web site has current and historical income 
limits. Furthermore, HUD maintains an interactive on-line documentation 
system for income limits and median family income estimates. The 
documentation system will provide interested users with their income 
limits prior to the application of the hold-harmless policy in areas 
currently designated as ``historical exception'' areas. The FY 2009 
documentation system may be accessed at https://www.huduser.org/datasets/il/il09/. Questions may be addressed to Marie L. 
Lihn or Lynn A. Rodgers, Economic and Market Analysis Division, Office 
of Economic Affairs, Office of Policy Development and Research, 
telephone number 202-708-0590. 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. Electronic Data 
Availability: This Federal Register notice is available electronically 
from the HUD news page: https://www.hud.gov/offices/adm/hudclips/index.cfm. Federal Register notices also are available electronically 
from the U.S. Government Printing Office Web site: https://www.gpoaccess.gov/fr/. This Federal Register notice also will 
be posted on the following HUD Web site: https://www.huduser.org/datasets/il.html.

SUPPLEMENTARY INFORMATION:

I. Background

    The United States Housing Act of 1937 (the 1937 Act) provides for 
assisted housing for ``low income families'' and ``very low income 
families.'' Section 3(b)(2) of the 1937

[[Page 47017]]

Act defines ``low-income families'' and ``very low-income families'' as 
families whose incomes are below 80 percent and 50 percent, 
respectively, of the median family income for the area, with 
adjustments for family size. These income limits are referred to as 
``Section 8 income limits'' because of the historical and statutory 
links with that program, although the same income limits are also used 
as eligibility criteria by several other federal programs. The 1937 Act 
specifies conditions under which Section 8 income limits are to be 
adjusted either on a designated area basis or because of family incomes 
or housing-cost-to-income relationships that are unusually high or low. 
Section 8 income limits are calculated using Section 8 Fair Market Rent 
(FMR) area definitions, which in turn are based on Office of Management 
and Budget (OMB) metropolitan statistical area definitions.
    It has been HUD's policy to maintain Section 8 income limits for 
certain areas at previously published levels when reductions would 
otherwise have resulted from changes in median family income estimates, 
housing cost adjustment data, median family income update methodology, 
income limit methodology, or metropolitan area definitions. This policy 
is commonly referred to as the ``hold harmless'' policy and was 
implemented to avoid jeopardizing the financial feasibility of existing 
housing projects in instances where program rents were tied to Section 
8 income limits. Section 8 income limits have been maintained at the 
same level until such time as income limit calculations produced 
increases.

II. MTSPs

    The primary federal housing programs that rely on HUD's Section 8 
income limits for the determination of maximum rental rates are MTSPs, 
which include multifamily projects financed with Internal Revenue Code 
(IRC) section 42 Low-Income Housing Tax Credits and IRC section 142 
tax-exempt private activity bonds. Maximum rents for units in MTSPs are 
generally 30 percent of the HUD-published Section 8 income limit, 
multiplied by a factor that is based on the number of bedrooms in a 
unit. Absent a hold-harmless policy, when Section 8 income limits fall, 
the maximum rent that a private owner can charge low-income tenants in 
MTSPs falls. This can place a financial strain on existing MTSPs. 
Accordingly, HUD has maintained Section 8 income limits at their 
existing levels when the normal calculation would otherwise result in a 
decrease. Section 3009 of Division C, Title I, Subtitle A, Part III of 
the Housing and Economic Recovery Act of 2008, Public Law 110-289, 
statutorily implements a project-level hold-harmless provision for 
existing MTSPs at 26 U.S.C. 142 (note), obviating the need for HUD to 
continue the policy for the benefit of MTSPs.

III. Other Programs

    Maintaining artificially high income limits has had an adverse 
impact on other federal programs. Higher income limits increase the 
number of eligible participants, making it harder to target limited HUD 
resources to those most in need. Accordingly, HUD is considering 
whether to end its hold-harmless policy in calculating Section 8 income 
limits, since the policy is no longer needed to protect existing MTSPs. 
More than 99 percent of HUD assisted households have incomes below the 
extremely low-income level (30 percent of area median), so modest 
decreases in the Section 8 income limits resulting from this change 
would have minimal impact on families residing in assisted housing. 
However, other programs that use HUD's Section 8 income limits to 
determine program eligibility may be affected. These programs include, 
but may not be limited to, the Treasury Department's Tax-exempt 
Mortgage Revenue Bonds for Homeownership Financing; the Department of 
Agriculture's Rental and Ownership Assistance programs; the Federal 
Deposit Insurance Corporation's Disposition of Multifamily Housing to 
Non-profit and Public Agencies and the Disposition of Single Family 
Housing; the Federal Housing Finance Agency's Rental Program Funding 
Priorities and Homeownership Funding Priorities; the Veterans 
Administration's Eligibility for Disability Income Support Payments; 
and the HUD-administered, governmentwide Uniform Relocation Act to 
determine the extent of replacement housing assistance. Applicable 
income limits are modified to meet the requirements of each of these 
programs, but each starts with the Section 8 Very Low-Income Limit that 
incorporates high and low housing cost adjustments and the state 
nonmetropolitan median as a minimum. Additional details about the 
specific limits used by each of these programs can be found at: https://www.huduser.org/datasets/il/il09/IncomeLimitsBriefingMaterial_FY09.pdf.
    In addition, determinations of Difficult Development Areas (DDAs) 
under IRC section 42 will be affected by this policy proposal. DDAs are 
areas with high ratios of construction, land, and utility costs to area 
median gross income and, collectively, may not include more than 20 
percent of the population of all areas evaluated under the statutory 
formula. The hold-harmless policy may prevent increases in this ratio 
for areas that would otherwise experience decreasing income limits, 
making them less likely to be designated as a DDA.
    HUD specifically invites public comment on whether these programs 
would better target persons and communities with the most need if HUD 
discontinued the hold-harmless policy and allowed Section 8 income 
limits to fall in accordance with the statutory and regulatory formula.
    HUD also specifically invites comments on whether the hold-harmless 
policy should be maintained with respect to Section 8 income limits 
used for calculating HOME program rents, while discontinuing the hold-
harmless policy with respect to eligibility requirements under the HOME 
program and other programs. The language defining income limits in the 
HOME program is parallel to that in Section 3(b)(2) of the 1937 Act, 
but does not refer specifically to that or any other section in setting 
income limits. Therefore, HUD may, for the HOME program's income limits 
and rents, use a process like that used to create the Section 3(b)(2) 
income limits, but with variations like a hold-harmless policy, if 
needed. Maintaining the hold-harmless policy for HOME program rents 
would prevent such rents from falling in areas where incomes may be 
falling, while discontinuing the hold-harmless policy with respect to 
eligibility requirements would help target HOME funds for use by 
families with lower incomes and greater need.
    Any change in HUD's policy in this regard would become effective 
only upon publication of a future notice by HUD.

    Dated: September 4, 2009.
Raphael W. Bostic,
Assistant Secretary for Policy Development and Research.
[FR Doc. E9-22077 Filed 9-11-09; 8:45 am]
BILLING CODE 4210-67-P