Housing Trust Fund, 66978-67009 [2010-27069]
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instructions provided on that site to
submit comments electronically.
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
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.
24 CFR Parts 91 and 92
[Docket No. FR–5246–P–02]
RIN 2506–AC30
Housing Trust Fund
Office of the Assistant
Secretary for Community Planning and
Development, HUD.
ACTION: Proposed rule.
AGENCY:
The Housing and Economic
Recovery Act of 2008 establishes a
Housing Trust Fund (HTF) to be
administered by HUD. The purpose of
the HTF is to provide grants to State
governments to increase and preserve
the supply of rental housing for
extremely low- and very low-income
families, including homeless families,
and to increase homeownership for
extremely low- and very low-income
families. This proposed rule submits, for
public comment, the regulations that
will govern the HTF.
DATES: Comment due date: December
28, 2010.
ADDRESSES: Interested persons are
invited to submit comments regarding
this rule to the Regulations Division,
Office of General Counsel, Department
of Housing and Urban Development,
451 7th Street, SW., Room 10276,
Washington, DC 20410–0500.
Communications must refer to the above
docket number and title. There are two
methods for submitting public
comments. All submissions must refer
to the above docket number and title.
• 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 20410–0001.
• Electronic Submission of
Comments. Interested persons may
submit comments electronically through
the Federal eRulemaking Portal at
https://www.regulations.gov. HUD
strongly encourages commenters to
submit comments electronically.
Electronic submission of comments
allows the commenter maximum time to
prepare and submit a comment, ensures
timely receipt by HUD, and enables
HUD to make them immediately
available to the public. Comments
submitted electronically through the
https://www.regulations.gov Web site can
be viewed by other commenters and
interested members of the public.
Commenters should follow the
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SUMMARY:
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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
through TTY by calling the Federal
Information Relay Service at 800–877–
8339. Copies of all comments submitted
are available for inspection and
downloading at https://
www.regulations.gov.
FOR FURTHER INFORMATION CONTACT:
Marcia Sigal, Office of Community
Planning and Development, Department
of Housing and Urban Development,
451 7th Street, SW., Room 7162,
Washington, DC 20410; telephone
number 202–402–3002 (this is not a tollfree number). Persons with hearing or
speech impairments may access this
number through TTY by calling the tollfree Federal Information Relay Service
at 800–877–8389.
SUPPLEMENTARY INFORMATION:
I. Background
The Housing and Economic Recovery
Act of 2008 (Pub. L. 110–289, approved
July 30, 2008) (HERA) was major
housing legislation enacted to reform
and improve the regulation of Fannie
Mae and Freddie Mac, the governmentsponsored enterprises (GSEs),
strengthen neighborhoods hardest hit by
the foreclosure crisis, enhance mortgage
protection and disclosures, and
maintain the availability of affordable
home loans. The reform of the GSEs is
provided in the Federal Housing
Finance Regulatory Reform Act of 2008,
which is found in Division A, Title I of
HERA. Section 1131 of the GSE-reform
portion of HERA amended the Federal
Housing Enterprises Financial Safety
and Soundness Act of 1992 (12 U.S.C.
4501 et seq.) (FHEFSSA) to add a new
section 1337 entitled ‘‘Affordable
Housing Allocations’’ and a new section
1338 entitled ‘‘Housing Trust Fund.’’
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Section 1337 of FHEFSSA provides
for the HTF to be funded with amounts
allocated by Fannie Mae and Freddie
Mac. Proceeds equal to 4.2 basis points
(.042%) of the GSEs’ new mortgage
purchases were to be partially diverted
to fund the HTF. However, because the
GSEs experienced significant declines
in their respective capital reserves in
2008, under the authority granted to the
Federal Housing Finance Agency
(FHFA), the GSE’s oversight agency, by
Section 1367 of FHEFSSA, Fannie Mae
and Freddie Mac were placed in
conservatorship in September 2008.
Under Section 1337 of FHEFSSA, the
Director of the FHFA has the authority
to suspend Fannie Mae’s and Freddie
Mac’s contributions to the HTF if such
contributions were to have an adverse
impact on the financial stability of the
GSEs. Shortly after being placed in
conservatorship, the GSEs were
instructed by the FHFA to suspend such
contributions. However, Section 1338 of
FHEFSSA provides that the HTF may be
funded with amounts appropriated,
transferred, or credited to the HTF
under other provisions of law.
Accordingly, HUD is proceeding with
regulatory implementation of the HTF
in anticipation of future funding
through sources other than GSE
proceeds.
Congress authorized the HTF with the
stated purpose of: (1) Increasing and
preserving the supply of rental housing
for extremely low-income (ELI) families
with incomes between 0 and 30 percent
of area median income and very lowincome (VLI) families with incomes
between 30 and 50 percent of area
median income, including homeless
families, and (2) increasing
homeownership for ELI and VLI
families. HUD’s periodic reports to
Congress on worst-case needs for
affordable rental housing document that
shortages of affordable rental housing
for ELI and VLI families have grown
increasingly more severe. A household
defined as experiencing worst-case
housing needs means that the
household has an income at or below 50
percent of the area median income,
receives no housing assistance, and has
a severe rent burden (paying more than
half of its income for rent) and/or lives
in severely inadequate conditions (e.g.,
incomplete plumbing).
As of 2007, the combined number of
ELI and VLI renters with worst-case
housing needs was 5.9 million, or 37
percent of all ELI and VLI renters (15.9
million). Furthermore, 51 percent of ELI
and VLI renters who lack housing
assistance have worst-case housing
needs. When the 2007 data are broken
down further, worst-case needs
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occurred to 47 percent of all ELI renters
and 73 percent of ELI renters lacking
housing assistance. By comparison, 24
percent of all VLI renters and 28 percent
of VLI renters lacking housing
assistance have worst-case housing
needs. ELI renters are particularly
burdened with severe housing
problems.
There is a shortage of low-cost rental
units, as builders and housing providers
are unable to construct, finance, and
operate a sufficient supply of rental
housing affordable to ELI and VLI
households. The result is that in 2007,
for every 100 ELI renters nationwide,
only 44 rental units were both
affordable and available for rent or
currently occupied by households in
this income range. HUD notes that more
than half of the 3.8 million ELI renters
who occupied affordable units in 2007
were able to do so only because they
reported receiving government rental
assistance, such as from the public
housing, project-based Section 8 or
Section 202/811 programs, and the
housing choice voucher program. Other
units that would have been affordable
may have been occupied by higherincome households. For every 100 VLI
and ELI renters, on average, there were
only 74 affordable units available. The
HTF will provide funds to produce
additional units affordable to ELI and
VLI households with the greatest need,
thus increasing the supply and reducing
the most critical component of the
existing shortage.
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Housing Trust Fund—Formula
Allocation
Section 1338 of FHEFSSA directs
HUD to establish, through regulation,
the formula for distribution of amounts
made available for the HTF. The statute
specifies that only certain factors are to
be part of the formula, and assigns
priority to certain factors. HUD’s
proposed formula for the allocation of
HTF funds was submitted for public
comment in a proposed rule published
on December 4, 2009 (74 FR 63938). The
allocation formula will be renumbered
and published with the final program
rule in §§ 92.710–92.714.
Housing Trust Fund—Administration of
the Fund
In addition to the statutory direction
to establish by regulation a formula for
the allocation of HTF funds, section
1338 of FHEFSSA directs HUD to
establish and manage the HTF, the
purpose of which is to provide grants to
States for use to: (1) Increase and
preserve the supply of rental housing for
ELI and VLI families, including
homeless families; and (2) increase
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homeownership for ELI and VLI
families. Section 1338 of FHEFSSA also
directs HUD to establish regulations to
administer the HTF, and this rule
proposes the regulations that will
govern the HTF.
II. This Proposed Rule
New 24 CFR Part 92 Subpart N
HUD proposes to codify the HTF
regulations in a new subpart N of 24
CFR part 92. Part 92 contains the
regulations for HUD’s HOME
Investment Partnerships program
(HOME program). Established by the
National Affordable Housing Act of
1992, the HOME program is the largest
Federal block grant program that
produces affordable housing for VLI
households. The HOME program is
similar in most aspects to the proposed
HTF. Each year, the HOME program
allocates approximately $2 billion to
States and more than 600 localities
nationwide. Since it inception in 1992,
the HOME program has produced
approximately one million units of
affordable rental and homeownership
units. Both programs provide funding
through a formula allocation for rental
housing production and
homeownership. The HOME program
provides formula grants that
communities use, often in partnership
with local nonprofit groups, to fund a
wide range of activities that build, buy,
and/or rehabilitate affordable housing
units for rent or homeownership. The
HTF will operate in substantially the
same manner, with formula grants to
States used to develop affordable
housing units for rent or
homeownership. In addition, the grant
activities in both programs require the
same grantee administration and HUD
oversight functions.
While the HTF provides new
resources targeted to producing
affordable housing primarily for ELI
households, an entirely new or different
set of program regulations is not
necessary in order to implement the
statutory requirements of the HTF.
Many of the program requirements
applicable to the HOME program are
applicable to the HTF. Further, each
State is a participating jurisdiction in
the HOME program, and all States and
their designated housing entities will be
the HTF grantees. Accordingly, it is
HUD’s position that codifying the HTF
regulations in part 92 is a logical step
that will enable HUD to: (1) Provide a
coordinated ‘‘menu’’ of production
programs that State and local
governments can use to address the
affordable housing needs of low-, very
low- and extremely low-income
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households, including those with
special needs, in their communities, and
(2) simplify and streamline program
requirements for grantees, and avoid
making grantees create new or separate
structures to administer HTF funds.
Additionally, HUD believes that many
grantees will use HTF funds in
combination with HOME program funds
to develop mixed-income housing, and
many of the applicable requirements are
the same for both programs (e.g.,
administrative requirements;
monitoring, site and neighborhood
standards; and affirmative marketing).
This approach is expected to expedite
the expenditure of HTF funds and
deliver more affordable housing sooner
to households and communities.
HUD is specifically soliciting input
from HTF grantees and interested
parties on HUD’s proposed coordination
of HOME program and HTF regulations,
as well as on additional or alternative
ways to better coordinate and use HTF
funds with funding from other Federal,
State, local programs, or private sources
typically used to produce mixed-income
affordable housing developments.
The Department is embarking on a
number of initiatives to incorporate and
promote energy efficiency, transitoriented development, and other
sustainability features in the
development of units and projects
assisted with HUD funds. These efforts
will help reduce the impact of the
property on the environment and
promote a healthier environment for
building occupants, as well as reduce
the costs of utilities to help make these
units affordable. In addition, facilitating
the inclusion of affordable housing for
ELI and VLI households in transitoriented development will help ensure
that affordable housing is located in
areas that are within walking distance of
transit facilities and more easily
accessible to essential area destinations
such as jobs, and educational, retail, and
health services. The HTF implements
the Department’s commitment to further
sustainable affordable housing available
for ELI households, by requiring energy
and water-efficiency features in all HTFassisted units. In addition, the proposed
rule includes specific funding
commitment definitions that address the
need to commit HTF funds early in the
development process of a TransitOriented Development (TOD) project.
HUD’s efforts to promote energyefficient homes directly reflect the
Department’s energy goal contained in
its Fiscal Year (FY) 2010–15 Strategic
Plan to ‘‘promote energy-efficient
buildings and location-efficient
communities that are healthy,
affordable, and diverse.’’ The proposed
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energy and water efficiency
requirements for the HTF are similar to
those of several HUD energy-efficiency
and green initiatives, such as the
‘‘Green’’ Community Housing
Development Organization Notice Of
Funding Availability (HOME
Competitive Reallocation of CHDO
Funds to Provide for Energy Efficient
and Environmentally Friendly Housing
for Low-Income Families), the Self-Help
Homeownership Opportunity Program
(SHOP) NOFA, and the Neighborhood
Stabilization Program (NSP)–2 NOFA.
Fostering the development of
sustainable, transit-oriented, mixed-use
communities with HTF funds is
consistent with the Livability Principles
established by the Partnership for
Sustainable Communities, an
interagency collaboration between HUD,
the Department of Transportation
(DOT), and the Environmental
Protection Agency (EPA). This
partnership aims to coordinate Federal
housing, transportation, and other
infrastructure investments to provide
communities with the resources they
need to build more livable and
sustainable communities, promote
equitable development, and improve
access to affordable housing. Each of the
three agencies is responsible for
incorporating the Livability Principles
into its policies and programs, to the
maximum extent feasible.
Energy-efficiency and transit-oriented
development definitions and property
standards for the HTF can be found in
Sections 92.702 and 92.741–92.745,
respectively. The following sections
highlight key provisions of the HTF
regulations established in accordance
with section 1338 of FHEFSSA.
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General Provisions
Sections 92.701–92.703 of new
subpart N sets forth the general
provisions applicable to the HTF.
Section 92.701 provides an overview
of the statutory basis for the HTF, and
identifies which subparts of part 92 are
applicable to the HTF. To the extent that
other sections or subparts of part 92 are
applicable to the HTF, § 92.701 provides
that references to ‘‘HOME’’ mean ‘‘HTF’’
and that references to ‘‘participating
jurisdictions’’ mean ‘‘HTF grantees.’’
Definitions
Section 92.702 incorporates terms
defined in the HOME program
regulations (24 CFR 92.2) and defines
terms that are specifically applicable to
the HTF. Key definitions applicable to
the HTF include the following:
Commitment. The definition of
‘‘commitment’’ implements the statutory
requirement that HTF funds must be
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used or committed within 2 years of the
formula allocation (grant award).
Grantees must commit funds to a
specific project pursuant to legally
binding agreements that meet the
requirements of written agreements in
§ 92.774. To facilitate TOD projects, the
definition of ‘‘commitment’’ permits a
unit of general local government to
acquire the land for a TOD project in
advance of having specific project plans.
The definition of transit-oriented
commitment would allow the
acquisition of property without the
requirement of having a specific project.
The unit of general local government
has 36 months from the date of
acquisition of the property for a TOD
project to commit additional funds to a
specific project on the property. To
discourage the use of this provision for
acquisition of property for any purpose
other than the development of HTFassisted units as part of transit-oriented
development, the local government
where the development is to take place
is required to hold title to the property.
If no commitment to a specific HTFassisted project occurs within 36
months from date of the acquisition of
the property, the amount of HTF funds
used to pay for the property, or the
current value of the property, whichever
is greater, must be repaid to the
grantee’s HTF account. The amount
repaid will be prorated in proportion to
the amount of HTF funds to total funds
used to purchase the land.
Energy Efficiency. Several definitions
are included in this rule that will help
facilitate the development of energyefficient residential units, including
definitions of ENERGY STAR-Qualified
New Homes and WaterSense-labeled
products.
Grantee. The statute allows a State or
State-designated entity to receive the
HTF formula allocations. Each State
may decide which agency within the
State will be the HTF grantee. For
example, in many States, there are
multiple State agencies, as well as a
State housing finance agency, that
administer housing programs.
Recipient. An HTF recipient means an
entity that receives HTF funds solely as
a developer or owner of HTF-assisted
housing. Section 1338(c)(9) of FHEFSSA
requires an eligible recipient of a grant
from a State’s HTF formula allocation to
have demonstrated experience and
capacity to conduct an eligible activity,
as evidenced by its ability to: (i) Own,
construct, rehabilitate, manage, or
operate an affordable multifamily rental
housing development; (ii) design,
construct, rehabilitate, or market
affordable housing for homeownership;
or (iii) provide forms of assistance, such
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as down payments, closing costs, or
interest-rate buy-downs for purchasers.
Section 1338(c)(9) of FHEFSSA also
requires an eligible recipient to
demonstrate the ability and financial
capacity to undertake, comply, and
manage the eligible activity;
demonstrate its familiarity with the
requirements of any other Federal, State,
or local housing program that will be
used in conjunction with such grant
amounts to ensure compliance with all
applicable requirements and regulations
of such programs; and make such
assurances to the grantee that it will
comply with the HTF requirements.
These conditions of eligibility imposed
on recipients are incorporated in the
definition of ‘‘recipient’’ found in
§ 92.702.
State. The term ‘‘State’’ means any
State of the United States, the District of
Columbia, the Commonwealth of Puerto
Rico, the Commonwealth of the
Northern Mariana Islands, Guam, the
Virgin Islands, and American Samoa.
(See 1338 (a)(1) of FHEFSSA.)
State-Designated Entity. The statute
permits a State to use a ‘‘Statedesignated entity’’ to receive its formula
allocation. Permissible designees for the
HTF State-designated entity are: A State
housing finance agency, a Tribally
designated housing entity (as such term
is defined in section 4 of the Native
American Housing Assistance and SelfDetermination Act of 1997 (25 U.S.C.
4103)), or any other qualified
instrumentality of the State. (See
1338(c)(2) of FHEFSSA.)
Subgrantee. An HTF grantee may
choose to distribute HTF funds through
one or more subgrantees. A subgrantee
may be a State agency or a unit of
general local government. All local
governments that are HTF subgrantees
must have an approved consolidated
plan under 24 CFR part 91.
Allocation Formula
Reallocations
Section 92.714 describes the
conditions under which HUD will
reallocate HTF funds. Consistent with
the statute, funds will be reallocated by
formula in the following fiscal year. (See
section 1338(c)(10) and (d) of
FHEFSSA.)
Participation and Submission
Requirements; Distribution of
Assistance
Section 92.720 requires the State to
notify HUD of its intent to participate in
the HTF program and to have a
consolidated plan that contains its HTF
allocation plan required by FHEFSSA.
(See section 1338(c)(8) of FHEFSSA.)
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Allocation Plan
Section 1338(c)(5)(A) of FHEFSSA
provides that for a grantee to receive an
HTF grant, the grantee must submit an
HTF allocation plan, which must: (1)
Describe the distribution of the grant; (2)
be based on priority housing needs, as
determined by the grantee in accordance
with the HTF regulations; (3) comply
with the statutory requirements
regarding activities eligible for HTF
funding; and (4) include performance
goals that comply with HUD’s HTF
regulations. HUD has chosen to
implement the requirement for an HTF
allocation plan by amending its
regulations in 24 CFR part 91 to include
these requirements in the consolidated
plans of grantees and, where applicable,
subgrantees. The decision to include the
HTF allocation plan in the consolidated
plan is consistent with the statutory
requirement in section 105(a) of the
Cranston-Gonzalez National Affordable
Housing Act (12 U.S.C. 12705) that HUD
may only provide assistance directly to
a jurisdiction if the jurisdiction submits
a comprehensive housing affordability
strategy (the basic framework of the
consolidated plan) to HUD and the
strategy is approved by HUD.
Sections 91.220 and 91.320 of the
consolidated plan regulation are
amended to reflect the HTF allocation
plan requirements.
In addition, section 1338(c)(5)(B) of
FHEFSSA directs each State, in
establishing its HTF allocation plan, to:
(1) Notify the public of the
establishment of the plan; (2) provide an
opportunity for public comments
regarding the plan, (3) consider any
public comments received on the plan,
and (4) make the completed plan
available to the public. Section
1338(c)(8)(B) of FHEFSSA requires
grantees to comply with the
requirements of laws related to public
participation, including laws related to
consolidated plans. Rather than
establish new citizen participation
requirements, § 92.720 directs States to
include the HTF allocation plan in the
consolidated plan and follow the citizen
participation requirements found in the
consolidated plan regulations in 24 CFR
part 91.
Section 1338(c)(5)(C) of FHEFSSA
also provides that a State’s allocation
plan must disclose the requirements
that the State will impose on eligible
recipients that apply for grants under
the State’s formula allocation. Section
1338(c)(5)(C) provides that such
requirements must include: (1) A
description of the eligible activities to
be conducted using such assistance; and
(2) a certification from the eligible
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recipient that any housing units assisted
will comply with HTF requirements
under this section. The statutory
requirements are implemented in
§§ 91.220 and 91.320.
In the case of HTF-assisted rental
housing projects, the plan must provide
priority to projects that have Federal,
State, or local project-based rental
assistance so that rents are affordable to
ELI families, and take into consideration
the duration of the HTF-assisted units’
affordability period. (See 1338 (g)(2)(D)
of FHEFSSA.) The HTF allocation plan
must consider the merits of the
application in meeting the priority
housing needs of the State. The rule
provides flexibility to allow each
grantee to include incentives and
priorities in its HTF allocation plan that
are appropriate to the communities
where housing developed with HTF
funds will be located. For example,
incentives to promote green building,
the use of renewable building materials,
or sustainable development, as defined
by the grantee, may be included in its
HTF allocation plan.
HUD specifically requests comments
on how it may provide incentives to
encourage the use of HTF funds to
develop housing affordable to ELI
households that is also accessible to
transit and employment centers. HUD is
also seeking comments on what program
structure or features will encourage or
assist States in allocating HTF funding
in accordance with metropolitan and
regional land use and transportation
plans. Similarly, HUD is interested in
hearing about how it can provide
incentives to HTF grantees and
recipients to incorporate ‘‘green
building’’ and ‘‘sustainability’’ features
in the development of HTF-assisted
projects, such as the use of renewable
building materials or other techniques
that reduce the impact of the property
or site on the environment and promote
a healthier environment for building
occupants. In addition, HUD
specifically requests comments on how
it could include standards or minimum
requirements in the HTF regulations for
specific ‘‘green building’’ or sustainable
development features.
Distribution of Assistance: HTF
Grantees, Subgrantees, and Recipients
Section 92.725 describes the way HTF
funds will flow to the communities and
recipients, as well as the participation
and submission requirements for
grantees receiving an HTF allocation.
For each year that funds are made
available for the HTF, a formula grant
will be provided to each State. The State
or State-designated entity is responsible
for distributing HTF funds throughout
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the State according to its assessment of
the priority housing needs, as identified
in the State’s approved consolidated
plan, and in accordance with any
priorities that may be established by
HUD in allocating grants to the States in
accordance with the formula. HUD will
issue notices in the future as necessary
to communicate policy priorities for the
HTF.
FHEFSSA allows a State to choose to
be the HTF grantee (to receive and
administer its grant) or to choose a
qualified State-designated entity to be
the HTF grantee. In addition, the HTF
grantee may choose to directly fund
projects (in accordance with the
grantee’s HTF allocation plan in its
consolidated plan), or a grantee may
choose one or more subgrantees (to
administer the HTF funds and fund
projects). A subgrantee may be a State
agency or a unit of general local
government that has submitted a
consolidated plan under 24 CFR part 91.
The subgrantee must include an HTF
allocation plan in its consolidated plan
(see 24 CFR 91.220(l)(4)) and must
select projects by eligible recipients in
accordance with its HTF allocation
plan.
Eligible recipients of HTF funds must
meet statutorily prescribed criteria, as
promulgated through this rulemaking.
An HTF recipient means an
organization, agency, or other entity
(including a for-profit entity or a
nonprofit entity) that receives HTF
assistance from a grantee to be an owner
or developer of an HTF-assisted project.
In order to qualify as an eligible
recipient, the entity must demonstrate
its ability and financial capacity to
manage the eligible activity in
compliance with all applicable HTF
requirements. In addition, the entity
must demonstrate familiarity with the
requirements of other Federal, State, or
local housing programs that may be
used in conjunction with HTF funds to
ensure compliance with all applicable
requirements and regulations of such
programs. An eligible HTF recipient
must have demonstrated experience in
housing construction or rehabilitation of
rental housing or housing for
homeownership; if it is to be the owner,
it must demonstrate experience in the
management and operation of affordable
multifamily rental housing.
Income Targeting
Based on tabulations of American
Housing Survey data, HUD estimates
that during 2007, there were about 9.2
million ELI renter households
nationwide, but only about 4.2 million
units with rents affordable and available
to this income group. As a result, 64.5
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percent of ELI renters were severely
rent-burdened (paid more than 50
percent of their income for rent) or lived
in severely inadequate housing. HUD
notes that more than half (51 percent) of
the 3.8 million ELI renters who
occupied affordable units in 2007 were
able to do so only because they reported
receiving government rental assistance,
such as from the public housing,
project-based Section 8 or Section 202/
811 program, and the housing choice
voucher program.
By contrast, of the 6.7 million renters
with incomes between 30 and 50
percent of area median income (VLI
renters), only 23.6 percent had severe
rent burdens in 2007. Furthermore,
there were about 7.8 million units with
rents affordable and available to VLI
renters, and about one million of these
units were assisted.
FHEFSSA requires that not less than
80 percent of the HTF grant shall be
used to produce rental housing 1 and, of
this amount, section 1338(c)(7)(A) of
FHEFSSA requires that not less than 75
percent shall be used for the benefit
only of ELI families or families with
incomes at or below the poverty line (as
such term is defined in section 673 of
the Omnibus Budget Reconciliation Act
of 1981 (42 U.S.C. 9902), including any
revision required by such section),
whichever is the greater, applicable to a
family of the size involved, and not
more than 25 percent be used for the
benefit only of VLI families.
Under the rulemaking authority of
section 1338(g) of FHEFFSA, which
provides that ‘‘The Secretary shall issue
regulations to carry out this section
[section 1338],’’ the Secretary has the
discretion to elaborate upon, clarify,
define and, in some instances, add to
the statutory program requirements and
criteria. With respect to the allocation of
funds for ELI families or families with
incomes below the poverty line, the
Secretary has the discretion to direct
grantees, in any given year, to use more
than 75 percent of the HTF funds for the
1 The establishment of a minimum of 80 percent
of HTF funds to be used for rental housing is
derived by reading two provisions of the statute.
Section 1338(c)(10) provides that of the aggregate
amount allocated to a State or State-designated
entity under section 1338, not more than 10 percent
shall be used for activities under section
1338(c)(7)(B), which are the homeownership
activities. Therefore, under section 1338, not more
than 10 percent of funds can be used for
homeownership, leaving 90 percent available for
the production, preservation, and rehabilitation of
rental housing. Section 1338(c)(10)(D)(iii) limits the
amount that a State or State-designated entity may
use for administrative costs for carrying out the
HTF program, to a maximum of 10 percent.
Therefore, the minimum amount available for
activities under section 1338(c)(7)(A) (rental
housing production) is 80 percent.
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benefit only of ELI families or families
with incomes at or below the poverty
line, whichever is greater. For the first
year in which HTF funds are made
available, the rule provides that of the
amount made available for rental and
homeownership housing, grantees are to
expend 100 percent of HTF funds to
provide rental and homeownership
housing for ELI households. The
Secretary shall publish subsequent
income targeting requirements when
HUD’s allocation amounts to States are
published. Sections 92.736 and 92.737
set forth the income targeting
requirements, as required by section
1338(c)(7) of FHEFSSA, for HTFassisted rental units and
homeownership units, respectively.
HUD recognizes that subsidizing the
development and operations of rental
units targeted to ELI households can be
extremely challenging. The resources
available to develop rental units
targeted to ELI households are scarce,
and the financing mechanisms that are
often required to develop financially
viable and sustainable projects with
units targeted to ELI households are
complex and dependent on multiple
sources of both public and private
funding. In implementing the HTF,
HUD’s goal is to provide resources and
a program structure that will help States
and local governments, as well as
private and nonprofit developers to
develop energy-efficient rental housing
that is affordable to ELI households.
Toward that end, Section 8 projectbased vouchers may be made available
through appropriations. If Section 8
project-based vouchers are made
available, HTF grantees will allocate the
vouchers concurrently with HTF
funding to specific projects. These
Section 8 project-based vouchers will be
administered in accordance with the
rules applicable to that program. The
vouchers will help pay for the operating
costs of units constructed with HTF
funds. However, an HTF-assisted unit
that has a Section 8 project-based
voucher attached to it may not also
receive HTF operating cost assistance.
HUD is interested in hearing from
developers of affordable rental housing
for ELI families about the ways to
reduce the cost of subsidizing this
housing. What specific measures can the
Department undertake to help reduce
the cost of producing rental units
targeted to ELI families? Similarly, what
approaches will help to reduce
operating costs and reduce the need for
ongoing operating subsidies? For
example, to what extent do energyefficiency measures reduce the costs of
operations of these units—for both the
tenants and project owners? To what
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extent do tax abatements significantly
reduce operating costs? If HTF funds are
used to pay for the entire development
cost of these rental units, would the
absence of debt significantly impact the
financial viability of HTF-assisted units?
If grantees choose to undertake
homeownership activities for ELI
households, HUD expects that grantees
will ensure that the underwriting for
these units and homebuyer counseling
address the precarious financial
conditions that ELI households usually
experience. Shared equity models and
other types of homeownership program
designs, such as lease purchase models,
may be more appropriate for HTFassisted homeownership activities. The
Department is seeking comments from
the public about appropriate and
effective approaches for homeownership
programs for ELI households. What
specific measures can the Department
undertake to help reduce the cost of
homeownership targeted to ELI
families? Similarly, what approaches
will help to reduce operating costs for
ELI homeowners? For example, to what
extent do energy-efficiency measures
reduce the costs of operations of these
units?
Eligible and Prohibited Activities
Sections 92.730–92.735 reflect the
statutory requirements that govern
eligible and prohibited activities,
eligible project costs, and planning and
administrative costs. Allowable and
prohibited fees are also addressed in
these sections.
Eligible Activities
Section 92.730 describes the HTFeligible activities. Section 1338(c)(7) of
FHEFSSA provides that HTF funds may
be used for assistance for the
production, preservation, rehabilitation,
and operating costs of rental housing.
The Department views the HTF as
primarily a production program meant
to add units to the supply of affordable
housing for ELI and VLI households.
While the statute allows HTF funds to
be used for operating costs, it does not
provide a limit. In order to achieve the
goal of using HTF funds primarily for
the production of new affordable units,
the Department proposes to limit the
amount of HTF funds that may be used
for operating cost assistance to 20
percent of each annual grant. In
establishing this limit, the Department
assumes that HTF funds will be
combined with other sources to produce
and preserve affordable units, mostly in
mixed-income projects. The Department
also considered various analyses with
different scenarios, including different
operating cost assistance caps and
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different local development practices.
HUD anticipates that project-based
vouchers will be made available to
subsidize operating costs in HTFassisted units. However, if vouchers or
other forms of project-based assistance
are not available for the HTF-assisted
unit, it may be necessary to use HTF
funds for operating cost assistance. This
limit would make sufficient funds
available to pay for operating cost
assistance if needed, while ensuring that
additional affordable units continue to
be produced with HTF funds. The 20
percent limit applies to each annual
grant. Therefore, grantees will have
discretion in how they allocate funds to
each project’s development and
operating costs. Grantees may apply the
20 percent limit to all projects or adjust
it accordingly, as long as no more than
20 percent of each annual grant is used
for operating cost assistance.
Analyses of the use of HTF funds for
both development and operating
subsidy show that the use of HTF funds
for operating cost assistance could very
quickly consume each State’s formula
allocation and would deter the use of
HTF funds for production of additional
units, as well as preservation and
rehabilitation of units, targeted to ELI
households—the primary purpose of the
HTF. If Section 8 Project-Based
Vouchers are made available to HTF
projects for HTF-assisted units, limiting
the amount of HTF funds available for
operating cost assistance will not hinder
implementation of the HTF.
Nonetheless, HUD is seeking
comments regarding how imposing this
or any restriction on the use of HTF
funds for operating cost assistance
might enhance or hinder the ability of
a grantee to maximize the number of
units affordable to ELI families
produced, by new construction or
acquisition, with HTF funds.
Section 1338(c)(7)(B) provides that
the production, preservation, and
rehabilitation of housing for
homeownership, including forms of
down payment assistance, closing cost
assistance, and assistance for interest
rate buy-downs, are eligible activities.
HTF funds may be used only for units
that will be the principal residence of
eligible families who are first-time
homebuyers.
Section 1338(c)(10)(A) of FHEFSSA
provides that not more than 10 percent
of the annual grant may be used for
homeownership activities. If a grantee
chooses to implement a homeownership
program with HTF funds, the
regulations require the grantee to
perform due diligence and underwriting
analysis such that the affordability of
the homeownership units is sustainable
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for ELI households. In light of the
distressed housing market conditions in
many jurisdictions, program techniques
such as shared equity, lease-purchase,
and first options to re-purchase HTFassisted homeownership units in default
might be practical features to include in
HTF homeownership programs.
Forms of Assistance
Section 92.730(b) provides that HTF
funds may be invested as equity
investments, interest-bearing loans or
advances, non-interest-bearing loans or
advances, interest subsidies, deferred
payment loans, grants, or other forms of
assistance that HUD may determine to
be consistent with the goals and
objectives of the HTF.
Section 92.730(c) requires that only
the actual cost of development and
operation of HTF units can be charged
to the program, and describes the
methods for allocating costs and
determining HTF units in multiunit
projects. An HTF-assisted unit that has
a Section 8 project-based voucher
attached to it may not also receive HTF
operating cost assistance.
Terminated Project
Section 92.730(d) provides that an
HTF-assisted project that is terminated
before completion, either voluntarily or
otherwise, constitutes an ineligible
activity, and any HTF funds invested in
the project must be repaid to the
grantee’s HTF account.
Prohibited Activities
Prohibited activities are set forth in
§ 92.735. Section 1338(c)(10)(D) of
FHEFSSA provides that HTF funds may
not be used for: Political activities;
advocacy; lobbying, whether directly or
through other parties; counseling
services; travel expenses; and preparing
or providing advice on tax returns. The
prohibited use of funds for political
activities includes influencing the
selection, nomination, election, or
appointment of one or more candidates
to any Federal, State, or local office as
codified in section 501 of the Internal
Revenue Code of 1986 (26 U.S.C. 501).
This statutory section further provides
that, subject to the exception in section
1338(c)(10)(D)(iii), HTF funds may not
be used for administrative, outreach, or
other costs of the grantee, or any other
recipient of such grant amounts. The
statutory exception to this prohibition is
that a grantee may use up to 10 percent
of the State’s HTF grant for
administrative costs of carrying out its
program(s) using the HTF, including
homeownership counseling.
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Eligible Project Costs
Section 92.731 sets forth the eligible
project costs, which include
development hard costs, refinancing
costs in conjunction with rehabilitation,
acquisition of standard projects,
development related soft costs,
architectural and engineering fees,
project audit costs, staff overhead
related to the development of the units,
settlement costs, impact fees, the cost to
address and meet environmental and
historic preservation property
standards, operating costs, relocation
costs, repayment of construction or
other loans, and certain types of costs
for construction undertaken before HTF
funds were committed to the project.
Operating cost assistance, as defined
in § 92.731(e), may include the cost of
utilities, insurance, taxes, and
scheduled payments to a replacement
reserve. The eligible amount of HTF
funds per unit for operating costs is
determined based on the deficit
remaining after the monthly rent
payment for the HTF-assisted unit is
applied to the HTF-assisted unit’s share
of monthly operating costs. The written
agreement between the grantee and the
recipient must set forth the maximum
amount of the operating assistance to be
provided to the HTF-assisted rental
project. The grantee may provide
operating cost assistance necessary for
the project for up to 2 years from one
HTF grant. However, the written
agreement may provide for renewal of
operating cost assistance during the
period of affordability of the project,
subject to funding availability.
Administration and Planning Costs
As noted earlier, the administrative
costs allowed in the HTF program
cannot exceed 10 percent of the annual
grant. Similar to the HOME program
requirements at § 92.207, eligible
administrative and planning costs are
found in § 92.732.
HTF and Public Housing
Section 1338(c)(7)(A) of FHEFSSA
provides that HTF assistance may be
used for the production, preservation,
and rehabilitation of housing, including
housing identified in section
1335(a)(1)(B) of FHEFSSA (12 U.S.C.
4565(a)(1)(B)). (Note: The statute
incorrectly references section
1335(a)(2)(B)). The programs identified
in that section include housing projects
subsidized under the project-based and
tenant-based rental assistance programs
under section 8 of the United States
Housing Act of 1937 (1937 Act); the
program under section 236 of the
National Housing Act; the below-market
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interest rate mortgage program under
section 221(d)(4) of the National
Housing Act (note: Section 1335(a)(1)(B)
of FHEFSSA incorrectly references the
below-market interest rate mortgage
program; the correct statutory reference
is section 221(d)(3)/(d)(5) of the
National Housing Act.); the supportive
housing for the elderly program under
section 202 of the Housing Act of 1959;
the supportive housing program for
persons with disabilities under section
811 of the Cranston-Gonzalez National
Affordable Housing Act; the permanent
supportive housing projects subsidized
under programs under Title IV of the
McKinney-Vento Homeless Assistance
Act (42 U.S.C. 11361 et seq.); the rural
rental housing program under section
515 of the Housing Act of 1949; the lowincome housing tax credit under section
42 of the Internal Revenue Code of 1986,
as amended; and comparable State and
local affordable housing programs.
Although this list is not necessarily
exhaustive, it is HUD’s determination
that the HTF funds are not eligible to be
used in existing public housing units.
Moreover, the 1937 Act provides annual
formula funding for public housing.
Accordingly, § 92.734 prohibits the use
of HTF funds for public housing.
Prohibited Activities and Fees
The section on prohibited activities
and fees mirrors the HOME program
regulation at § 92.214, except that the
HTF section is expanded to expressly
cover political activities, advocacy, and
lobbying, which are ineligible under
FHEFSSA.
Program Requirements
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Site and Neighborhood Standards
Section 92.726 applies the site and
neighborhood standards for the HOME
program, at § 92.202, to the HTF. If
Section 8 project-based vouchers are
made available, the Section 8
requirements related to site and
neighborhood standards will apply to an
HTF-assisted unit that has a Section 8
project-based voucher attached to it.
Income Determinations
Section 92.727 defines ‘‘annual
income’’ and describes the process for
determining the annual income of
tenants and homebuyers for eligibility
in HTF-assisted housing. Income from
all family members must be included
when determining income eligibility. As
in the HOME program, grantees may use
the definition of annual income in 24
CFR 5.609 (Section 8 program
definitions) or the Internal Revenue
Service (IRS) definition of annual
income from IRS Form 1040. Section
92.727(e) provides that a State must
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follow HUD’s regulations in 24 CFR
5.617 when making income
determinations for persons with
disabilities who are tenants in HTFassisted rental housing. For
homebuyers, the grantee must
determine annual income by examining
source documentation for the entire
household, or obtain written statements
verifying incomes from the household
or administrators of government
programs from which the household
receives assistance.
Project Requirements
Sections 92.740–92.750 establish
requirements applicable to HTF-assisted
housing projects.
Maximum Per-Unit Subsidy
Section 92.740(a) establishes
maximum per-unit subsidy,
underwriting, and subsidy layering
requirements. The grantee must
establish maximum limitations on the
amount of HTF funds the grantee may
invest on a per-unit basis.
Underwriting and Subsidy Layering
Section 92.740(b) requires the grantee
to perform subsidy layering analysis
before committing HTF funds to a
project. The grantee must determine that
costs are reasonable, examine the
sources and uses of funds, and ensure
that the amounts available and their use
are necessary to provide quality
affordable rental or homeownership
housing for ELI households for the
affordability period (30 years).
Furthermore, developers or owners of
HTF-assisted projects may not receive
undue returns on their investments.
Property Standards
As described below, the HTF requires
energy and water efficiency features in
all HTF-assisted units. Each grantee can
include incentives and priorities in its
HTF allocation plan to further promote
sustainable development that is
appropriate to the communities where
housing developed with HTF funds will
be located.
Applicable property standards are
established at §§ 92.741 through 92.745.
This rule requires, at minimum, that all
HTF-assisted units that are newly
constructed or undergoing gut
rehabilitation must be certified that they
meet the guidelines for ENERGY STARQualified New Homes (for residential
buildings up to 3 stories) or exceed, by
20 percent, the energy efficiency
requirements of the American Society of
Heating, Refrigerating, and AirConditioning Engineers (ASHRAE)
Standard 90.1–2007, Appendix G:
Performance Rating Method (for
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residential buildings over 3 stories), as
defined in § 92.741. A Home Energy
Rater (HER) must inspect the units to
certify that the units meet the ENERGY
STAR guidelines. HUD is aware that
Home Energy Raters may not be
available in all places; therefore, the
requirement for ENERGY STAR
certification will become effective 6
months from the effective date of this
rule. ENERGY STAR-labeled products
must be installed when older obsolete
products are replaced as part of the
rehabilitation work for HTF-assisted
units, as applicable in § 92.742. All
water-usage products installed in HTFassisted units must also be certified to
meet the WaterSense requirements, in
accordance with § 92.741 and § 92.742.
The specific property standards
addressed by §§ 92.741 through 92.745
are as follows: § 92.741 contains the
property standards for new construction
and gut rehabilitation, § 92.742
establishes the standards for housing
undergoing other rehabilitation,
§ 92.743 contains the property standards
for existing housing that is acquired
with HTF funds, § 92.744 establishes
property standards for manufactured
housing, and § 92.745 establishes
ongoing property standards for rental
housing during the period of
affordability.
HUD requests comments from
interested parties on how additional
minimum property standards may be
imposed to increase the efficiency and
reduce the operating costs of HTFassisted units.
Qualification as Affordable Housing
Sections 92.746 and 92.748 establish
an affordability period of not less than
30 years for rental housing and
homeownership units assisted with HTF
funds. As stated earlier, the Department
expects that HTF funds will be
combined with the other sources of
private funding and financing typically
used for the development of affordable
housing, such as Low-Income Housing
Tax Credits (LIHTCs). The affordability
period for HTF-assisted units is
designed to work in conjunction with
the 30-year affordability period for
LIHTC projects. Grantees may also
establish longer affordability periods in
their HTF allocation plans.
Section 92.746(b) establishes the
maximum rent (including utilities) for
HTF-assisted units at 30 percent of the
annual income of a family whose
income equals 30 percent of the area
median income, or 30 percent of the
poverty line, whichever is greater. It is
necessary to establish fixed rents for
underwriting purposes and required
subsidy layering analyses. HUD
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recognizes that some ELI tenants living
in HTF-assisted units may be rentburdened if required to pay HTF rents.
As stated earlier in this preamble,
Section 8 Project-Based Vouchers may
be made available to HTF-assisted units;
these vouchers alleviate cost burdens for
ELI tenants. When project-based
assistance from other HUD programs is
provided to HTF units, the rents are
based on the rent requirements of that
program.
Section 92.746(e) requires that HTF
project owners verify the initial and
continued eligibility of tenants living in
HTF-assisted rental units and
establishes the methods by which HTF
project owners must verify tenant
income. Furthermore, this section
specifies that when Section 8 ProjectBased Vouchers or any other Federal
rental assistance programs are used in
conjunction with an HTF-assisted rental
unit, the income verification rules and
procedures of those programs will apply
instead of the requirements set forth in
this subsection.
Section 92.747 establishes tenant
protection, lease, and selection
requirements, and incorporates the
requirements of section 1338(c)(8) of
FHEFSSA.
Section 92.748(d) establishes the HTF
requirements for homebuyers. HTF
assistance to homebuyers may be
provided only to first-time homebuyers
and must be for the principal residence
of the homebuyer. Before purchasing the
housing, in accordance with section
1338(c)(7)(B)(iv) of FHEFSSA, the
homebuyer must have completed
homeownership counseling from an
organization that meets the
requirements of section 1132 of the
Federal Housing Regulatory Reform Act
of 2008.
Section 92.748(f) establishes the
resale requirements, as required by
section 1338(c)(7)(B)(iii), for
homeownership units assisted by the
HTF. Upon resale, each HTF-assisted
homeownership unit must be sold to an
income-eligible family. Each grantee
that has an HTF homeownership
program must include resale restriction
policies in its HTF allocation plan. HTF
grantees may adopt their HOME
program resale restriction policies,
modified for income-eligible
households. The grantee may also
include purchase options and right of
first refusal to purchase the HTFassisted units upon foreclosure, in order
to preserve affordability.
Section 92.749 defines the modest
housing requirements in section
1338(c)(7)(B)(ii) of FHEFSSA for HTFassisted homeownership units. For
newly constructed housing, the value of
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the housing may not exceed 95 percent
of the median purchase price for singlefamily housing in the area. HUD intends
to provide these purchase limits for
each area or the grantee can determine
95 percent of the area median purchase
price in accordance with the
methodology set forth in § 92.749(e).
In the event of foreclosure of HTFassisted rental or homeownership units,
or transfer of deed in lieu of foreclosure,
the affordability period required by
§§ 92.746 and 92.748 is terminated. In
order to preserve the affordability of the
housing, the grantee may include
purchase options in the HTF written
agreement, such as ‘‘right of first refusal’’
to purchase the HTF-assisted units in
default. The termination of the
affordability restrictions on the project
does not terminate the grantee’s
repayment obligation under § 92.773.
Faith-Based Organizations
Section 92.750 provides for the
eligibility of faith-based organizations to
apply for and use HTF funds under the
same requirements as other recipients.
Other Federal Requirements
Sections 92.760–92.764 set forth the
other Federal requirements that are
applicable to the use of HTF funds,
including nondiscrimination
requirements. For example, the rule
requires the grantee to establish
affirmative marketing requirements, as
required in the HOME program, and
grantees must comply with Federal
lead-based paint and relocation
requirements. These sections also
include the funding accountability and
transparency requirements of the
Federal Funding Accountability and
Transparency Act of 2006 (31 U.S.C.
6101 note), which must be met in
accordance with section 1338(i) of
FHEFSSA.
Program Administration
Sections 92.770–92.779 establish the
conditions and requirements by which
States are to administer their HTF
funds. Section 92.770 describes two
HTF accounts that make up the HTF:
The HTF Treasury account, which is for
HTF funds allocated or reallocated to a
grantee under the HTF formula, and the
HTF local account, which is for deposits
of HTF funds disbursed from the HTF
Treasury account, any program income,
and any repayments required to be
made. Section 92.771 provides that
allocation and reallocation of HTF funds
will be made available pursuant to an
HTF grant agreement.
Section 92.772 establishes the
requirements applicable to program
disbursement and the establishment of
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the information system consistent with
section 1338(e) of FHEFSSA. This
statutory section provides that (1) HUD
must require each grantee to develop
and maintain a system to ensure that
each recipient of assistance use HTF
funds in accordance with the statute,
the regulations, and any requirements or
conditions under which HTF funds
were provided; and (2) establish
minimum requirements for agreements
between the grantee and recipients. This
statutory section further provides that
the minimum requirements must
include: (1) Appropriate periodic
financial and project reporting, record
retention, and audit requirements for
the duration of the assistance to the
recipient, to ensure compliance with the
limitations and requirements of the
statute and regulations; and (2) any
other requirements that the Secretary
determines are necessary to ensure
appropriate administration and
compliance. These statutory
requirements are reflected in §§ 92.776–
92.779.
Specifically, § 92.774(b) requires that
before disbursing any HTF funds to any
entity, the grantee must enter into a
written agreement with that entity. The
written agreement must ensure
compliance with the requirements of
this subpart. Requirements for the HTF
written agreement and required
provisions are specified in § 92.774(c).
Where HOME program funds are used
together with HTF funds, a single
written agreement meeting the
requirements of both § 92.504 and this
subpart may be used to enforce
requirements for both programs.
Section 1338(g)(2) of FHEFSSA
requires that HUD ensure that the use of
HTF grants by States or State-designated
entities is audited not less than annually
to ensure compliance with statutory and
HUD’s regulatory requirements. Section
1338(g)(2) also authorizes HUD to audit,
provide for an audit, or otherwise verify
a grantee’s activities to ensure
compliance with all HTF requirements.
Section 1338(g)(2) further provides that
any financial statement submitted by a
grantee or recipient to HUD shall be
reviewed by an independent certified
public accountant in accordance with
Statements on Standards for Accounting
and Review Services, issued by the
American Institute of Certified Public
Accountants. These requirements are
reflected in § 92.776.
Performance Review and Sanctions
Review of Subgrantees and Recipients
Grantees will report on their progress
and performance in meeting the
requirements of the HTF in HUD’s
Integrated Disbursement & Information
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System (IDIS) and the consolidated
plan. For example, grantees will report
on the incomes of HTF beneficiaries in
IDIS, and will also demonstrate
compliance with the deadlines for the
commitment and expenditure of funds
by data entered into IDIS. As stated
earlier, this proposed rule would add
the annual HTF allocation plan as a
subsection to the strategic plan and
annual action plan. Performance
benchmarks will be established in the
HTF allocation plan in conjunction with
the strategic and annual plans, and
subsequent reporting on performance
will be reported to the public and HUD
through the submissions and reports
associated with those plans.
Section 1338(e)(2)(B) of FHEFSSA is
directed to the misuse of funds and
provides that if HUD determines, after
reasonable notice and opportunity for
hearing, that a grantee has failed to
comply substantially with any provision
of the HTF statutory requirements or
HUD’s regulatory requirements, and
until HUD is satisfied that there is no
longer any such failure to comply, HUD
shall: (1) Reduce the amount of
assistance to the grantee by an amount
equal to the amount of grant amounts
that were not used; (2) require the
grantee to repay HUD any amount of the
grant that was not used; (3) limit the
availability of assistance to the grantee
to activities or recipients not affected by
such failure to comply; or (4) terminate
any assistance under this section to the
grantee. These statutory requirements
are reflected in § 92.782.
Section 1338(e)(1)(B) provides that if
any recipient of assistance of HTF funds
is determined to have used any such
amounts in a manner that is materially
in violation of the HTF statutory
requirements, HUD’s HTF regulatory
requirements, or any requirements or
conditions under which such amounts
were provided, the grantee shall require,
within 12 months after the
determination of the misuse, that the
recipient must reimburse the grantee for
the misused amounts and return to the
grantee any such amounts that remain
unused or uncommitted for use. Section
1338(e)(1)(B) provides that if a grantee
makes this determination, the grantee
must first provide notification of the
determination to HUD for review and
concurrence. This statutory section
authorizes HUD to reverse the
determination if it disagrees. These
statutory requirements are reflected in
§ 92.783.
Consolidated Plan Revisions
As noted earlier in this preamble, this
rule also makes conforming changes to
the consolidated plan regulations at 24
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Part 91 to require information related to
the HTF to be included in strategic and
5-year State or local government
strategic and annual action plans.
III. Findings and Certifications
Executive Order 12866, Regulatory
Planning and Review
The Office of Management and Budget
(OMB) reviewed this rule under
Executive Order 12866 (entitled,
‘‘Regulatory Planning and Review’’).
This proposed rule was determined to
be a ‘‘significant regulatory action,’’ as
defined in section 3(f) of the Order but
not economically significant, as
provided in section 3(f)(1) of the Order.
The reasons for the determination are as
follows:
As discussed above in this preamble,
HERA charged HUD to establish through
regulation, the formula for the
distribution of HTF grants to States, and
to follow that rule with one that
implements the programmatic
requirements for the HTF. Consistent
with that statutory direction, on
December 4, 2009 (74 FR 63938), HUD
published a proposed rule submitting
for public comment the proposed
formula for allocating HTF funds. As the
first rule to be issued in the rulemaking
process for the HTF, the formula
allocation constituted, on behalf of the
entire HTF rulemaking, an economically
significant regulatory action under
Executive Order 12866. The preamble to
the December 2009 rule summarized the
economic impacts of the HTF program,
as proposed to be implemented through
the formula issued for public comment
on December 4, 2009. (For a discussion
of the economic impact, please see 74
FR 63940–63941.) HUD’s full economic
analysis for the allocation rule is
available for inspection on HUD’s Web
site at https://www.huduser.org/portal/
publications/pubasst/riaforhtf.html.
This proposed rule follows the
December 4, 2009, allocation formula
rule by submitting for public comment
the program requirements that will
govern the HTF. The economic impacts
of the rulemakings implementing the
HTF are largely limited to the
procedures governing the allocation and
distribution of grant funds set forth in
the December 4, 2009, proposed rule.
This proposed rule does not revise the
HTF allocation formula or otherwise
affect the allocation of HTF funds. To
the extent that this proposed rule has an
economic impact, it derives from the
December 2009 allocation formula
proposed rule. That economic
assessment may be revised to account
for any new impacts resulting from
changes made at the final rule stage.
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The docket file is available for public
inspection between the hours of 8 a.m.
and 5 p.m. weekdays in the Regulations
Division, Office of General Counsel,
Department of Housing and Urban
Development, 451 7th Street, SW.,
Room 10276, Washington, DC 20410–
0500. Due to security measures at the
HUD Headquarters building, 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). Persons with hearing
or speech impairments may access the
above telephone number via TTY by
calling the toll-free Federal Information
Relay Service at 800–877–8339.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) generally requires an
agency to conduct a regulatory
flexibility analysis of any rule subject to
notice and comment rulemaking
requirements, unless the agency certifies
that the rule will not have a significant
economic impact on a substantial
number of small entities.
Under the HTF program, HUD makes
grants to the relatively large entities of
States or their designated housing
entities for the purposes of preserving
and increasing the supply of rental
housing and increasing homeownership
for eligible families. Therefore, the
primary focus on the rule is on these
large entities. The States and Statedesignated housing entities may, in
turn, make funding available to
recipients, which may include smaller
entities (such as nonprofit or for-profit
organizations), but the funding made
available to recipients is provided under
application procedures and
requirements established by the States
or State-designated housing entities, not
HUD; however, the grantees must
ensure their recipients’ adherence to the
statutory requirements and regulatory
requirements promulgated by HUD.
Additionally, the regulatory text
largely reflects statutory requirements of
FHEFFSA. Where HUD has exercised
the discretion to elaborate on the
statutory requirements, HUD has strived
to closely model these procedures on
existing development programs, which
are familiar to entities likely to be
participants under the new HTF
program. For example, as noted earlier
in this preamble, the HTF program
adopts several definitions used under
the HOME program. The organization of
the HTF regulations is modeled after
those for the HOME program, and HUD
has elected to adopt many existing
HOME program requirements. Given
that HTF funding is statutorily provided
for the benefit of the States and is to be
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allocated to the States, HUD has
determined that the rule will not have
a significant economic impact on a
substantial number of small entities.
Notwithstanding HUD’s
determination that this rule will not
have a significant effect on a substantial
number of small entities, HUD
specifically invites comments regarding
any less burdensome alternatives to this
rule that will meet HUD’s objectives as
described in this preamble.
Environmental Impact
A Finding of No Significant Impact
(FONSI) with respect to the
environment has been made in
accordance with HUD regulations at 24
CFR part 50, which implement section
102(2)(C) of the National Environmental
Policy Act of 1969 (42 U.S.C.
4332(2)(C)). The Finding of No
Significant Impact is available for public
inspection between the hours of 8 a.m.
and 5 p.m. weekdays in the Regulations
Division, Office of General Counsel,
Department of Housing and Urban
Development, 451 Seventh Street, SW.,
Room 10276, Washington, DC 20410.
Unfunded Mandates Reform Act
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). Individuals with speech or
hearing impairments may access this
number via TTY by calling the Federal
Information Relay Service at 800–877–
8339.
Title II of the Unfunded Mandates
Reform Act of 1995 (UMRA) (2 U.S.C.
1531–1538) establishes requirements for
Federal agencies to assess the effects of
their regulatory actions on State, local,
and Tribal governments and the private
sector. This rule does not impose any
Federal mandate on any State, local, or
Tribal government or the private sector
within the meaning of UMRA.
Executive Order 13132, Federalism
Executive Order 13132 (entitled
‘‘Federalism’’) prohibits, to the extent
practicable and permitted by law, an
agency from promulgating a regulation
that has federalism implications and
either imposes substantial direct
compliance costs on State and local
governments and is not required by
statute, or preempts State law, unless
the relevant requirements of Section 6 of
the Executive Order are met. This rule
does not have federalism implications,
and does not impose substantial direct
compliance costs on State and local
governments or preempt State law
within the meaning of the Executive
Order.
Paperwork Reduction Act
The information collection
requirements contained in this rule have
been submitted to the Office of
Management and Budget (OMB) under
the Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520). In accordance
with the Paperwork Reduction Act, an
agency may not conduct or sponsor, and
a person is not required to respond to,
a collection of information, unless the
collection displays a currently valid
OMB control number.
The burden of the information
collections in this rule is estimated as
follows:
REPORTING AND RECORDKEEPING BURDEN
Recordkeeping
hours
Reg. section
Paperwork requirement
§ 91.215 ..............................
Strategic Planning—Draft Housing Section of
Localities Plan.
Allocation Planning—Draft the localities allocation plan.
Distribution of Assistance ...............................
Site and Neighborhood Standards .................
Income Determinations ...................................
Documentation required by HUD to be included in project file to determine project
eligibility (i.e., eligible activities and costs,
income targeting, subsidy limits, qualification as affordable housing).
Property Standards (new construction, rehabilitation, acquisition, manufactured housing, rental housing).
Tenant Protections and Selection (including
lease requirement).
Qualification as Affordable Housing: Homeownership.
Public Participation .........................................
Other Federal Requirements and Nondiscrimination (including minority and
women business enterprise and minority
outreach efforts).
Affirmative Marketing ......................................
Displacement, Relocation, and Acquisition
(including tenant assistance policy).
Lead-based paint ............................................
Debarment and Suspension ...........................
HTF Grant Agreement (HUD 40101) ..............
Grantee Written Agreements ..........................
Distribution of Assistance—State Designation
of Local Recipients.
Eligible Project Costs—Refinancing ...............
Program Disbursement and Information System (IDIS).
§ 91.220 ..............................
§ 92.725 ..............................
§ 92.726 ..............................
§ 92.727 ..............................
§ 92.730, § 92.731,
§ 92.736, § 92.737,
§ 92.740, § 92.746, and
§ 92.748.
§ 92.741, § 92.742,
§ 92.743, § 92.744, and
§ 92.745.
§ 92.747 ..............................
§ 92.748 ..............................
§ 92.720 ..............................
§ 92.760 ..............................
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§ 92.760 ..............................
§ 92.762 ..............................
§ 92.761
§ 92.778
§ 92.771
§ 92.774
§ 92.725
..............................
..............................
..............................
..............................
..............................
§ 92.731 ..............................
§ 92.772 ..............................
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Reporting
hours
Number of
jurisdictions
Total hours
10
........................
62
620
30
........................
62
1,860
2
2
1
5
........................
........................
........................
........................
56
56
4,573
415
112
112
4,573
2,075
1
........................
415
415
1
........................
4,573
4,573
1
........................
58
58
4
5
........................
........................
56
415
224
2,075
10
5
........................
........................
415
457
4,150
2,285
1
1
1
10
........................
........................
........................
........................
........................
2
208
25
56
415
52
208
25
56
4,150
78
........................
........................
1
1
25
415
25
415
Sfmt 4702
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REPORTING AND RECORDKEEPING BURDEN—Continued
Reg. section
Recordkeeping
hours
Paperwork requirement
Total Annual Respondents and Burden Hours ........................................
Total Estimated Burden Hours
In accordance with 5 CFR
1320.8(d)(1), HUD is soliciting
comments from members of the public
and affected agencies concerning this
collection of information to:
(1) Evaluate whether the proposed
collection of information is necessary
for the proper performance of the
functions of the agency, including
whether the information will have
practical utility;
(2) Evaluate the accuracy of the
agency’s estimate of the burden of the
proposed collection of information;
(3) Enhance the quality, utility, and
clarity of the information to be
collected; and
(4) Minimize the burden of the
collection of information on those who
are to respond, including through the
use of appropriate automated collection
techniques or other forms of information
technology, e.g., permitting electronic
submission of responses.
Interested persons are invited to
submit comments regarding the
information collection requirements in
this rule. Comments must refer to the
proposal by name and docket number
(FR–5246) and must be sent to:
HUD Desk Officer, Office of
Management and Budget, New
Executive Office Building,
Washington, DC 20503, Fax: 202–
395–6947, and
Reports Liaison Officer, Office of
Community Planning and
Development, Department of Housing
and Urban Development, 451 Seventh
Street, SW., Room 7233, Washington,
DC 20410.
List of Subjects
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24 CFR Part 91
Aged, Grant programs-housing and
community development, Homeless,
Individuals with disabilities, Low- and
moderate-income housing, Reporting
and recordkeeping requirements.
24 CFR Part 92
Administrative practice and
procedure, Grant programs-housing and
community development, Low- and
moderate-income housing,
Manufactured homes, Rent subsidies,
Reporting and recordkeeping
requirements.
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90
For the reasons stated in the
preamble, HUD proposes to amend 24
CFR part 91 and amend 24 CFR part 92
as follows:
PART 91—CONSOLIDATED
SUBMISSIONS FOR COMMUNITY
PLANNING AND DEVELOPMENT
PROGRAMS
1. The authority citation for part 91
continues to read as follows:
Authority: 42 U.S.C. 3535(d), 3601–3619,
5301–5315, 11331–11388, 12701–12711,
12741–12756, 12901–12912, and 12 U.S.C.
1301 et seq.
2. In § 91.2, remove the word ‘‘and’’ at
the end of paragraph (a)(3), remove the
period at the end of paragraph (a)(4) and
add ‘‘; and’’ in its place, and add
paragraph (a)(5) to read as follows:
§ 91.2
Applicability.
(a) * * *
(5) The Housing Trust Fund (HTF)
program (see 24 CFR part 92).
*
*
*
*
*
3. Revise the first sentence of
§ 91.10(a) to read as follows:
§ 91.10
Consolidated program year.
(a) Each of the following programs
shall be administered by a jurisdiction
on a single consolidated program year,
established by the jurisdiction: CDBG,
ESG, HOME, HOPWA, and HTF. * * *
*
*
*
*
*
4. Revise § 91.215(b)(2) to read as
follows:
§ 91.215
Strategic plan.
*
*
*
*
*
(b) * * *
(2) The affordable housing section
shall include specific objectives that
describe proposed accomplishments the
jurisdiction hopes to achieve and must
specify the number of extremely lowincome, low-income, and moderateincome families to whom the
jurisdiction will provide affordable
housing as defined in 24 CFR 92.252 for
rental housing, 24 CFR 92.254 for
homeownership, and 24 CFR 92.746 and
24 CFR 92.748 (if the jurisdiction
receives HTF funds from the State) over
a specific time period.
*
*
*
*
*
5. Add § 91.220(l)(4) to read as
follows:
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Reporting
hours
Number of
jurisdictions
4
§ 91.220
12,809
Total hours
28,089
Action plan.
*
*
*
*
*
(l) * * *
(4) Housing Trust Fund. If the
jurisdiction receives HTF funds from
the State, under 92.725, the action plan
must include the HTF allocation plan
(consistent with the State’s HTF
requirements) that describes the
distribution of the HTF funds, and
establishes the application requirements
and the criteria for selection of
applications submitted by eligible
recipients that meet the jurisdiction’s
priority housing needs. The plan must
include the following:
(i) The plan must identify priority
factors for funding that shall include the
following: geographic diversity (as
defined by the grantee in the
consolidated plan); the applicant’s
ability to obligate HTF funds and
undertake eligible activities in a timely
manner; in the case of rental housing
projects, the extent to which rents for
units in the project are affordable to ELI
families; in the case of rental housing
projects, the duration of the units’
affordability period; the merits of the
application in meeting the priority
housing needs of the jurisdiction (such
as housing that is accessible to transit or
employment centers, housing that
includes green building and sustainable
development features, and housing that
serves special needs populations); and
the extent to which the application
makes use of non-Federal funding
sources.
(ii) The plan must include the
requirement that the application contain
a description of the eligible activities to
be conducted with the HTF funds (as
provided in 24 CFR 92.730) and contain
a certification by each eligible recipient
that housing units assisted with the HTF
will comply with HTF requirements.
The plan must also describe eligibility
requirements for recipients (as defined
in 24 CFR 92.702).
(iii) The plan must provide for
performance goals, consistent with the
jurisdiction’s goals established under 24
CFR 91.215(b)(2).
(iv) The plan must provide the
jurisdiction’s rehabilitation standards,
as required by 24 CFR 92.742.
(v) The plan must describe the
conditions under which the grantee will
refinance existing debt.
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6. Revise § 91.315(b)(2) to read as
follows:
§ 91.315
Strategic plan.
*
*
*
*
*
(b) * * *
(2) The affordable housing section
shall include specific objectives that
describe proposed accomplishments the
State hopes to achieve and must specify
the number of extremely low-income,
low-income, and moderate-income
families to which the State will provide
affordable housing, as defined in 24 CFR
92.252 for rental housing, 24 CFR
92.254 for homeownership, 24 CFR
92.746 for rental housing, and 24 CFR
92.748 for homeownership (if the
jurisdiction receives HTF from the
State) over a specific time period.
*
*
*
*
*
7. Add § 91.320(k)(5) to read as
follows:
§ 91.320
Action plan.
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*
*
*
*
*
(k) * * *
(5) Housing Trust Fund. The action
plan must include the HTF allocation
plan that describes the distribution of
the HTF funds, and establishes the
application requirements and the
criteria for selection of applications
submitted by eligible recipients that
meet the State’s priority housing needs.
The plan must also establish the State’s
maximum per-unit subsidy limit for
housing assisted with HTF funds. If the
HTF funds will be used for first-time
homebuyers, the plan must include
resale restrictions in accordance with 24
CFR 92.748. The plan must reflect the
State’s decision to distribute HTF funds
through grants to subgrantees and/or to
select applications submitted by eligible
recipients. If the State is selecting
applications submitted by eligible
recipients, the plan must include the
following:
(i) The plan must provide priority for
funding based on geographic diversity
(as defined by the grantee in the
consolidated plan); the applicant’s
ability to obligate HTF funds and
undertake eligible activities in a timely
manner; in the case of rental housing
projects, the extent to which the project
has Federal, State, or local project-based
rental assistance so that rents are
affordable to ELI families; in the case of
rental housing projects, the duration of
the units’ affordability period; the
merits of the application in meeting the
priority housing needs of the State (such
as housing that is accessible to transit or
employment centers, housing that
includes green building and sustainable
development features, or housing that
serves special needs populations); and
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Jkt 223001
the extent to which the application
makes use of non-Federal funding
sources.
(ii) The plan must include the
requirement that the application contain
a description of the eligible activities to
be conducted with the HTF funds (as
provided in 24 CFR 92.730) and contain
a certification by each eligible recipient
that housing units assisted with the HTF
will comply with HTF requirements.
The plan must also describe eligibility
requirements for recipients (as defined
in 24 CFR 92.702).
(iii) The plan must provide for
performance goals and benchmarks
against which the State will measure its
progress, consistent with the State’s
goals established under 24 CFR
91.315(b)(2).
(iv) The plan must include the State’s
rehabilitation standards, as required by
24 CFR 92.742.
(v) The plan must include the
refinancing guidelines as required by 24
CFR 92.731(b).
(vi) The plan must describe the
conditions under which the grantee will
refinance existing debt.
PART 92—HOME INVESTMENT
PARTNERSHIPS PROGRAM
8. The authority for 24 CFR part 92
continues to read as follows:
Authority: 42 U.S.C. 3535(d), 12701–
12839, and 12 U.S.C. 1301 et seq.
9. In § 92.2, revise the definition of
‘‘First-time homebuyer’’ to read as
follows:
§ 92.2
Definitions.
*
*
*
*
*
First-time homebuyer means an
individual and his or her spouse who
have not owned a home during the 3year period prior to purchase of a home
with assistance under this part. The
term first-time homebuyer also includes
an individual who is a displaced
homemaker or single parent, as those
terms are defined in this section.
*
*
*
*
*
10. Add new subpart N to read as
follows:
Subpart N—Housing Trust Fund
General
Sec.
92.701 Overview.
92.702 Definitions.
92.703 Waivers.
Allocation Formula; Reallocations
92.710–92.713 [Reserved]
92.714 Reallocations by formula.
Participation and Submission Requirements;
Distribution of Assistance
92.720 Participation and submission
requirements.
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92.725
66989
Distribution of assistance.
Program Requirements
92.726
92.727
Site and neighborhood standards.
Income determinations.
Eligible and Prohibited Activities
92.730 Eligible activities: general.
92.731 Eligible project costs.
92.732 Eligible administrative and planning
costs.
92.734 HTF funds and public housing.
92.735 Prohibited activities and fees.
Income Targeting
92.736
92.737
Income targeting: rental units.
Income targeting: homeownership.
Project Requirements
92.740 Maximum per-unit subsidy amount,
underwriting, and subsidy layering.
92.741 Property standards: new
construction projects and gut
rehabilitation projects.
92.742 Property standards: rehabilitation
projects.
92.743 Property standards: acquisition of
standard housing.
92.744 Property standards: manufactured
housing.
92.745 Ongoing property standards: rental
housing.
92.746 Qualification as affordable housing:
rental housing.
92.747 Tenant protections and selection.
92.748 Qualification as affordable housing:
homeownership.
92.749 Qualification as affordable housing:
modest housing requirements for
homeownership.
92.750 Faith-based organizations.
Other Federal Requirements
92.760 Other Federal requirements and
nondiscrimination; affirmative
marketing.
92.761 Lead-based paint.
92.762 Displacement, relocation, and
acquisition.
92.763 Conflict of interest.
92.764 Funding accountability and
transparency.
Program Administration
92.770 Housing Trust Fund (HTF) accounts.
92.771 HTF Grant Agreement.
92.772 Program disbursement and
information system.
92.773 Program income and repayments.
92.774 Grantee responsibilities; written
agreements; onsite inspections; financial
oversight.
92.775 Applicability of uniform
administrative requirements.
92.776 Audit.
92.777 Closeout.
92.778 Recordkeeping.
92.779 Performance reports.
Performance Review and Sanctions
92.780 Accountability of recipients.
92.781 Performance reviews.
92.782 Corrective and remedial actions.
92.783 Notice and opportunity for hearing;
sanctions.
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Subpart N—Housing Trust Fund
General
§ 92.701
Overview.
(a) This subpart implements the
Housing Trust Fund (HTF) program
established under section 1338 of the
Federal Housing Enterprises Financial
Safety and Soundness Act of 1992
(FHEFSSA), as amended by the Federal
Housing Finance Regulatory Reform Act
of 2008 (12 U.S.C. 4568). In general,
under the HTF program, HUD allocates
funds by formula to eligible States to
increase and preserve the supply of
decent, safe, sanitary, and affordable
housing, with primary attention to
rental housing for ELI and VLI
households, including homeless
families.
(b) Section 1337 of FHEFSSA requires
a percentage of the unpaid principal
balance of total new business for the
Federal Home Loan Mortgage
Corporation (Freddie Mac) and the
Federal National Mortgage Association
(Fannie Mae) (collectively, the
government-sponsored enterprises or
GSEs) to be set-aside and allocated as a
dedicated source of annual funding for
the HTF, unless allocations are
suspended by the Director of the Federal
Housing Finance Agency, the agency
that regulates the GSEs. These funds
will be deposited into an HTF account
established in the Treasury of the
United States by the Secretary of the
Treasury to carry out the HTF program.
FHEFSSA also provides that the HTF
may be funded with amounts
appropriated, transferred, or credited to
the HTF under other provisions of law.
(c) Other subparts of part 92 are not
applicable to the HTF program, except
as expressly provided in this subpart N.
To the extent that sections of other
subparts of this part are made
applicable, references to HOME shall
mean HTF and references to
participating jurisdictions shall mean
grantees.
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§ 92.702
Definitions.
(a) The definitions in 24 CFR 92.2
apply to this subpart, except as
modified in paragraph (b) of this
section.
(b) As used in this subpart:
Commitment means:
(1) The grantee has executed a legally
binding written agreement (that
includes the date of the signature of
each person signing the agreement) with
an eligible recipient for a project that
meets the definition of ‘‘commit to a
specific local project’’ of paragraph (2) of
this definition or with a unit of general
local government for a project that
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meets the definition of ‘‘commit to a
transit-oriented development’’ of
paragraph (3) of this definition.
(2) Commit to a specific project,
which means:
(i) If the project consists of
rehabilitation or new construction (with
or without acquisition), the grantee and
recipient have executed a written legally
binding agreement under which HTF
assistance will be provided to the
recipient for an identifiable project for
which construction can reasonably be
expected to start within 12 months of
the agreement date.
(ii) If the project consists of
acquisition of standard housing and the
grantee is providing HTF funds to a
recipient to acquire rental housing, or to
a first-time homebuyer family to acquire
single-family housing for
homeownership, the grantee and
recipient or the family have executed a
written agreement under which HTF
assistance will be provided for the
purchase of the single-family housing or
rental housing and the property title
will be transferred to the family or
recipient within 6 months of the
agreement date.
(iii) If the project includes operating
cost assistance, the grantee and the
recipient must have executed a legally
binding written agreement under which
HTF assistance will be provided to the
recipient for operating cost assistance
for the identified HTF project. The
legally binding agreement must include
the amount of HTF funds necessary for
operating cost assistance for a period of
not more than 2 years, which may be
renewed during the period of
affordability.
(3) Commit to a transit-oriented
development means a unit of general
local government and the property
owner have executed a legally binding
written contract for sale of an
identifiable property for use for HTFassisted units within a transit-oriented
development and that the property title
will be transferred to the unit of general
local government within 6 months of
the date of the contract. Within 36
months of the date of the transfer of
title, the local government must commit
an additional amount of HTF funds or
other resources, as necessary, to a
specific local project (that meets the
definition in paragraph (2) of this
definition) for this property.
Energy-Efficient Improvements mean
activities undertaken to minimize
energy waste in existing housing
through rehabilitation work, including
home weatherization and other
improvements such as installing
additional insulation, sealing or
reducing air leakage, upgrading to
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energy-efficient lighting, installing
programmable thermostats, and
converting to high-efficiency HVAC
equipment and appliances. Energyefficient improvements can increase
comfort levels, and improve health in
homes, reduce operating costs, improve
building performance, lower
maintenance costs, and reduce energyrelated pollution of the environment.
ENERGY STAR is a joint program of
the Environmental Protection Agency
(EPA) and the Department of Energy to
save money and protect the
environment through endorsement of
energy-efficient products and practices.
ENERGY STAR-Qualified New Homes
means homes that earn the ENERGY
STAR label. To earn the ENERGY STAR
label, a home must meet strict
guidelines for energy efficiency set by
the U.S. Environmental Protection
Agency (EPA) and be independently
verified by a third-party Home Energy
Rater. Any home three stories or less
can earn the ENERGY STAR label if it
has been verified to meet EPA’s
guidelines, including: single-family,
attached, and low-rise multifamily
homes; manufactured homes; systemsbuilt homes (e.g., SIP, ICF, or modular
construction); log homes; concrete
homes; and existing retrofitted homes.
ENERGY STAR qualified homes can
include a variety of energy-efficient
features that contribute to improved
home quality and homeowner comfort,
lower energy demand, and reduced air
pollution, including effective insulation,
high-performance windows, tight
construction and ducts, efficient heating
and cooling equipment, and efficient
ENERGY STAR qualified products.
ENERGY STAR-Qualified Products
and Appliances means that the energyefficient products and appliances have
earned the ENERGY STAR label by
meeting guidelines for energy efficiency
set by the EPA, and will help deliver
energy savings and environmental
benefits. Products that can earn the
ENERGY STAR label include lighting,
windows, heating and cooling
equipment, and appliances such as
refrigerators, dishwashers, and washing
machines.
Extremely Low-Income (ELI) Families
means low-income families whose
annual incomes do not exceed 30
percent of the median family income of
a geographic area, as determined by
HUD with adjustments for smaller and
larger families, except that HUD may
establish income ceilings higher or
lower than 30 percent of the median for
the area on the basis of HUD findings
that such variations are necessary
because of prevailing levels of
construction costs or fair market rents,
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or unusually high or low family
incomes.
FHEFSSA means the Federal Housing
Enterprises Financial Safety and
Soundness Act of 1992, as amended (12
U.S.C. 1301 et seq.).
Grantee means the State or the Statedesignated entity that receives the HTF
funds from HUD.
Gut Rehabilitation means the total
removal and replacement of all interior
(nonstructural) systems, equipment,
components, or features of the existing
structure, and may include structural
and nonstructural modifications of the
exterior of the structure.
Home Energy Rater (HER) means an
independent third-party rater who
verifies that a home meets ENERGY
STAR guidelines. Home Energy Raters
are trained and certified through the
Residential Energy Services Network
(RESNET) to evaluate construction
techniques, recommend improvements,
take key measurements, and perform
inspections and testing procedures
during and after construction to verify a
home’s energy-efficient performance
and conduct Home Energy Rating
System (HERS) ratings.
Home Energy Rating means an
analysis of a home’s projected energy
efficiency in comparison to a ‘‘reference
home’’ based on the International Energy
Conservation Code. A home energy
rating involves both an analysis of a
home’s construction plans, as well as
onsite inspections and testing by a
certified Home Energy Rater.
HTF Allocation Plan means the
annual submission to HUD required by
FHEFSSA that describes how the
grantee will distribute its HTF funds,
including how it will use the funds to
address its priority housing needs, what
activities may be undertaken with those
funds, and how recipients and projects
will be selected to receive those funds.
See 24 CFR 91.220(l)(4) and
91.320(k)(5).
HTF Funds means funds made
available under this part through
formula allocations and reallocations,
plus program income.
Income-eligible means a family,
homeowner, or household (as
appropriate given the context of the
specific regulatory provision) that is
very low-income, extremely lowincome, or both, depending on the
income-targeting requirements
established by the Secretary for the
fiscal year.
Observed Deficiency (OD) means any
deficiency identified during an onsite
inspection of each inspected item for
each inspected area. The grantee can
establish its own standards for an
observed deficiency for each inspected
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item, except that at a minimum, the
grantee’s standards shall identify each
deficiency (regardless of the level of
severity) for each inspected item and
inspected area included in the latest
Uniform Physical Condition Standards
(UPCS) Dictionary of Definitions
established by HUD pursuant to 24 CFR
5.703 and 24 CFR 5.705, or such other
requirements that the Secretary of HUD
may establish.
Poverty Line is defined in section 673
of the Omnibus Budget Reconciliation
Act of 1981 (42 U.S.C. 9902).
Program Income means gross income
received by the grantee that is directly
generated from the use of HTF funds.
When program income is generated by
housing that is only partially assisted
with HTF funds, the income shall be
prorated to reflect the percentage of HTF
funds used. Program income includes,
but is not limited to, the following:
(1) Proceeds from the disposition by
sale or long-term lease of real property
acquired, rehabilitated, or constructed
with HTF funds;
(2) Gross income from the use or
rental of real property owned by the
grantee that was acquired, rehabilitated,
or constructed with HTF funds, minus
costs that were incidental to generation
of the income; therefore, program
income excludes gross income from the
use, rental, or sale of real property
received by the recipient, unless the
funds are paid by the recipient to the
grantee);
(3) Payments of principal and interest
on loans made using HTF funds;
(4) Proceeds from the sale of loans
made with HTF funds;
(5) Proceeds from the sale of
obligations secured by loans made with
HTF funds;
(6) Interest earned on program income
pending its disposition; and
(7) Any other interest or return on the
investment of HTF funds, as permitted
under § 92.730(b).
Project Completion means that all
necessary title transfer requirements and
construction work have been performed,
the project complies with the
requirements of this subpart (including
the property standards under §§ 92.741
through 92.745 of this subpart), the final
drawdown has been disbursed for the
project, and the project completion
information has been entered in the
disbursement and information system
established by HUD.
Recipient means an organization,
agency, or other entity (including a forprofit entity or a nonprofit entity) that
receives HTF assistance from a grantee
as an owner or developer to carry out an
HTF-assisted project. A recipient must:
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(1) Make acceptable assurances to the
grantee that it will comply with the
requirements of the HTF program
during the entire period that begins
upon selection of the recipient to
receive HTF funds, and ending upon the
conclusion of all HTF-funded activities;
(2) Demonstrate the ability and
financial capacity to undertake, comply,
and manage the eligible activity;
(3) Demonstrate its familiarity with
the requirements of other Federal, State,
or local housing programs that may be
used in conjunction with HTF funds to
ensure compliance with all applicable
requirements and regulations of such
programs; and
(4) Have demonstrated experience and
capacity to conduct an eligible HTF
activity as evidenced by its ability to:
(i) Own, construct, or rehabilitate, and
manage and operate an affordable
multifamily rental housing
development; or
(ii) Design, construct, or rehabilitate,
and market affordable housing for
homeownership.
(iii) Provide forms of assistance, such
as down payments, closing costs, or
interest rate buydowns for purchasers.
State means any State of the United
States, the District of Columbia, the
Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana
Islands, Guam, the Virgin Islands, and
American Samoa.
State-Designated Entity means a State
housing finance agency, Tribally
designated housing entity, or any other
qualified instrumentality of the State
that is designated by the State to be the
grantee.
Subgrantee means a unit of general
local government or State public agency
selected by the grantee to administer all
or a portion of its HTF program. A local
government subgrantee must have an
approved consolidated plan submitted
in accordance with 24 CFR part 91. The
selection of a subgrantee by a grantee is
not subject to the procurement
procedures and requirements.
Transit-Oriented Development (TOD)
refers to a compact, mixed-use, mixedincome development that is within
walking distance (no more than 1⁄2 mile)
of a proposed or existing transit facility,
that is easily accessible to essential
neighborhood destinations including
jobs, education, retail, and health
services.
Tribally Designated Housing Entity
has the meaning given the term in
section 4 of the Native American
Housing Assistance and SelfDetermination Act of 1997 (25 U.S.C.
4103).
Uniform Physical Condition
Standards (UPCS) means uniform
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national standards established by HUD
pursuant to 24 CFR part 5.703 that
ensure that assisted housing is decent,
safe, sanitary, and in good repair.
Standards are established for inspected
items for each of the following areas,
which must be inspected: site, building
exterior, building systems, dwelling
units, and common areas.
Very Low-Income (VLI) Families
means low-income families whose
annual incomes are in excess of 30
percent but not greater than 50 percent
of the median family income of a
geographic area, as determined by HUD
with adjustments for smaller and larger
families, except that HUD may establish
income ceilings higher or lower than 50
percent of the median for the area on the
basis of HUD findings that such
variations are necessary because of
prevailing levels of construction costs or
fair market rents, or unusually high or
low family incomes. ‘‘Very low-income
family’’ includes any family that resides
in a rural area that does not exceed the
poverty line applicable to the family
size involved.
WaterSense is a partnership program
sponsored by the EPA that seeks to
protect the future of our Nation’s water
supply by promoting water efficiency
and enhancing the market for waterefficient products, programs, and
practices. WaterSense-labeled products
must be independently tested and
certified by an EPA-licensed certifying
body to meet the criteria in EPA’s
specifications for water efficiency and
performance.
§ 92.703
Waivers.
The Secretary may, upon a
determination of good cause and subject
to statutory limitations, waive any
provision of this subpart and delegate
this authority in accordance with
section 106 of the Department of
Housing and Urban Development
Reform Act of 1989 (42 U.S.C. 3535(q)).
Allocation Formula; Reallocations
§§ 92.710–92.713
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§ 92.714
[Reserved]
Reallocations by formula.
(a) HUD will reallocate under this
section:
(1) Any HTF funds available for
reallocation because HUD reduced or
recaptured funds from an HTF grantee
under § 92.770 for failure to commit or
expend the funds within the time
specified, or under § 92.783 for failure
to comply substantially with any
provision of this subpart;
(2) Any HTF funds reduced for failure
by the grantee to obtain funds required
to be reimbursed or returned under
§ 92.780; and
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(3) Any HTF funds remitted to HUD
under § 92.773(b)(4) when a grantee
ceases to be an HTF grantee for any
reason.
(b) Any reallocation of funds must be
made only among all participating
States, except those States from which
the funds were recaptured or reduced.
(c) Any amounts that become
available for reallocation shall be added
to amounts for formula allocation in the
succeeding fiscal year.
Participation and Submission
Requirements; Distribution of
Assistance
§ 92.720 Participation and submission
requirements.
(a) Notification of intent to
participate. Not later than 30 days after
receiving notice of its formula allocation
amount, a State must notify HUD in
writing of its intention to become an
HTF grantee for the first year of HTF
funding.
(b) Submission requirement. In order
to receive its HTF grant, the grantee
must submit a consolidated plan in
accordance with 24 CFR part 91.
§ 92.725
Distribution of assistance.
(a) A State may choose to be the HTF
grantee to receive and administer its
grant or it may choose a qualified Statedesignated entity to be the HTF grantee.
(b) Each grantee is responsible for
distributing HTF funds throughout the
State according to the State’s assessment
of the priority housing needs within the
State, as identified in the State’s
approved consolidated plan, and as may
be directed by HUD at the time of
allocation of HTF funds for the fiscal
year.
(c) An HTF grantee may choose to
directly fund projects by eligible
recipients in accordance with the
grantee’s HTF allocation plan or to fund
projects by eligible recipients through
one or more subgrantees. The HTF
subgrantee must have a consolidated
plan under 24 CFR part 91, must
include an HTF allocation plan in its
consolidated plan (see 24 CFR
91.220(l)(4)), and must select projects by
eligible recipients in accordance with its
HTF plan. The grantee or subgrantee
must determine that the applicant is an
eligible recipient that meets the
definition of ‘‘recipient’’ in § 92.702
before awarding HTF assistance.
(d) If the HTF grantee subgrants HTF
funds to subgrantees, the grantee must
ensure that its subgrantees comply with
the requirements of this subpart and
carry out the responsibilities of the
grantee. The grantee must annually
review the performance of subgrantees
in accordance with 24 CFR 92.774(a).
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Program Requirements
§ 92.726
Site and neighborhood standards.
The site and neighborhood standards
contained in § 92.202 apply to the HTF.
§ 92.727
Income determinations.
(a) General. The HTF program has
income-targeting requirements for HTFassisted projects. Therefore, the grantee
must determine that each family
occupying an HTF-assisted unit is
income-eligible, by determining the
family’s annual income.
(b) Definition of ‘‘annual income.’’ (1)
When determining whether a family is
income-eligible, the grantee must use
one of the following two definitions of
‘‘annual income’’:
(i) ‘‘Annual income’’ as defined at 24
CFR 5.609; or
(ii) ‘‘Adjusted gross income’’ as
defined for purposes of reporting under
the Internal Revenue Service (IRS) Form
1040 series for individual Federal
annual income tax purposes, except that
government cost-of-living allowances
that are not included in income (e.g., for
a Federal civilian employee or a Federal
court employee who is stationed in
Alaska, Hawaii, or outside the United
States) must be added to adjusted gross
income.
(2) To calculate adjusted income, the
grantee must apply exclusions from
income established at 24 CFR 5.611.
(3) The grantee may use only one
definition for each HTF-assisted
program (e.g., down payment assistance
program) that it administers.
(c) Determining annual income. (1)
Tenants in HTF-assisted housing. For
families who are tenants in HTFassisted housing, the grantee must
initially determine annual income using
the method in paragraph (d)(1) of this
section. For subsequent income
determinations during the period of
affordability, the grantee may use any
one of the methods described in
paragraph (d) of this section, in
accordance with § 92.746(e).
(2) HTF-assisted homebuyers. For
families who are HTF-assisted
homebuyers, the grantee must
determine annual income using the
method described in paragraph (d)(1) of
this section.
(d) Methods for determining annual
income. A grantee must use one of the
following methods to determine annual
income, as described in paragraph (c) of
this section:
(1) Examine the source documents
evidencing annual income (e.g., wage
statement, interest statement,
unemployment compensation
statement) for the family.
(2) Obtain from the family a written
statement of the amount of the family’s
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annual income and family size, along
with a certification that the information
is complete and accurate. The
certification must state that the family
will provide source documents upon
request.
(3) Obtain a written statement from
the administrator of a government
program under which the family
receives benefits and that examines the
annual income of the family each year.
The statement must indicate the tenant’s
family size and state the amount of the
family’s annual income; or alternatively,
the statement must indicate the current
dollar limit for VLI or ELI families for
the family size of the tenant and state
that the tenant’s annual income does not
exceed this limit.
(e) Calculation of annual income. (1)
The grantee must calculate the annual
income of the family by projecting the
prevailing rate of income of the family
at the time the grantee determines that
the family is income-eligible. Annual
income shall include income from all
family members and must include the
annual income of all families in the
unit. Income or asset enhancement
derived from the HTF-assisted project
shall not be considered in calculating
annual income.
(2) The grantee is not required to reexamine the family’s income at the time
the HTF assistance is provided, unless
more than 6 months has elapsed since
the grantee determined that the family
qualified as income-eligible.
(3) The grantee must follow the
requirements in 24 CFR 5.617 when
making subsequent income
determinations of persons with
disabilities who are tenants in HTFassisted rental housing.
Eligible and Prohibited Activities
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§ 92.730
Eligible activities: General.
(a)(1) HTF funds may be used for the
production, preservation, and
rehabilitation of affordable rental
housing and affordable housing for firsttime homebuyers through the
acquisition (including assistance to
homebuyers), new construction,
reconstruction, or rehabilitation of
nonluxury housing with suitable
amenities, including real property
acquisition, site improvements,
conversion, demolition, and other
expenses, including financing costs,
relocation expenses of any displaced
persons, families, businesses, or
organizations; for operating costs of
HTF-assisted rental housing; and for
reasonable administrative and planning
costs. Not more than 20 percent of the
annual grant may be used for operating
cost assistance. Operating cost
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assistance may be provided only to
rental housing acquired, rehabilitated,
preserved, or newly constructed with
HTF funds. Not more than 10 percent of
the annual grant shall be used for
housing for homeownership. HTFassisted housing must be permanent or
transitional housing. The specific
eligible costs for these activities are
found in §§ 92.731 and 92.732. The
activities and costs are eligible only if
the housing meets the property
standards in §§ 92.741 through 92.744,
as applicable, upon project completion.
(2) Acquisition of vacant land or
demolition must be undertaken only
with respect to a particular housing
project intended to provide affordable
housing within the time frames
established in the definition of
‘‘commitment’’ in § 92.702(b).
(3) A unit of general local government
may purchase improved or unimproved
land for use for HTF-assisted units to be
part of a transit-oriented development
within the time frame established in the
‘‘commitment’’ definition of ‘‘commit to
a transit oriented development’’ in
§ 92.702. The unit of general local
government must own the improved or
unimproved property until the project
meets the requirement for ‘‘commit to a
specific local project’’ in § 92.702. If the
unit of general local government does
not have a commitment for a specific
HTF-assisted project within 36 months
from the date of the contract to acquire
the property, the cost to purchase or the
current value of the property, whichever
is greater, must be repaid to the
grantee’s HTF account from which the
funds were drawn (i.e., local or Treasury
account). The amount repaid must be
prorated in proportion to the amount of
HTF funds to total funds used to
purchase the land.
(4) HTF funds may be used to
purchase and/or rehabilitate a
manufactured housing unit, or purchase
the land upon which a manufactured
housing unit is located. The
manufactured housing unit must, at the
time of project completion, be
connected to permanent utility hookups and be located on land that is
owned by the manufactured housing
unit owner or land for which the
manufactured housing owner has a lease
for a period at least equal to the
applicable period of affordability.
(b) Forms of assistance. A grantee may
invest HTF funds as equity investments,
interest-bearing loans or advances, noninterest-bearing loans or advances,
interest subsidies consistent with the
purposes of this subpart, deferred
payment loans, grants, or other forms of
assistance that HUD determines to be
consistent with the purposes of this
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part. Each grantee has the right to
establish the terms of assistance, subject
to the requirements of this part.
(c) Multi-unit projects. (1) HTF funds
may be used to assist in the
development of one or more housing
units in a multi-unit project. Only the
actual HTF eligible development costs
of the assisted units may be charged to
the HTF program. If the assisted and
non-assisted units are not comparable,
the actual costs may be determined
based on a method of cost allocation. If
the assisted and non-assisted units are
comparable in terms of size, features,
and number of bedrooms, the actual cost
of the HTF-assisted units can be
determined by prorating the total HTFeligible development costs of the project
so that the proportion of the total
development costs charged to the HTF
program does not exceed the proportion
of the HTF-assisted units in the project.
(2) After project completion, the
number of HTF-assisted units
designated as part of the development
process may not be reduced, except that
in a project consisting of all HTFassisted units, one unit may be
converted to an onsite manager’s unit if
the grantee determines the conversion is
reasonable and that, based on one fewer
HTF-assisted unit, the costs charged to
the HTF program do not exceed the
actual costs of the HTF-assisted units
and do not exceed the subsidy limit
established pursuant to § 92.740(a).
(d) Terminated projects. An HTFassisted project that is terminated before
completion, either voluntarily or
otherwise, constitutes an ineligible
activity and the grantee must repay any
HTF funds invested in the project to the
HTF account from which the funds were
drawn (i.e., local or Treasury account),
in accordance with § 92.773(b). A
project that does not meet the
requirements for affordable housing
must be terminated and the HTF funds
must be repaid to the grantee’s HTF
account.
§ 92.731
Eligible project costs.
HTF funds may be used to pay the
following eligible costs:
(a) Development hard costs. The
actual cost of constructing or
rehabilitating housing. These costs
include the following:
(1) For new construction projects,
costs to meet the new construction
standards in § 92.741;
(2) For rehabilitation projects, costs to
meet the property standards for
rehabilitation projects in § 92.742;
(3) For both new construction and
rehabilitation projects, costs:
(i) To demolish existing structures;
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(ii) To make utility connections
including offsite connections from the
property line to the adjacent street; and
(iii) To make improvements to the
project site that is in keeping with
improvements of surrounding, standard
projects. Site improvements may
include onsite roads and sewer and
water lines necessary to the
development of the project. The project
site is the property, owned by the
project owner, upon which the project
is located.
(4) For both new construction and
rehabilitation of multifamily rental
housing projects, costs to construct or
rehabilitate laundry and community
facilities that are located within the
same building as the housing and that
are for the use of the project residents
and their guests.
(5) Costs to make utility connections
or to make improvements to the project
site, in accordance with the paragraphs
(a)(3)(ii) and (iii) of this section, are also
eligible, in connection with acquisition
of standard housing.
(b) Refinancing costs. (1) The cost to
refinance existing debt secured by rental
housing units that are being
rehabilitated with HTF funds, but only
if the refinancing is necessary to reduce
the overall housing costs and to make
the housing more affordable and
proportional to the number of HTFassisted units in the rental project. The
proportional rehabilitation cost must be
greater than the proportional amount of
debt that is refinanced.
(2) The grantee must establish
refinancing guidelines and state them in
its consolidated plan described in 24
CFR part 91. The guidelines shall
describe the conditions under which the
grantee will refinance existing debt. At
minimum, the guidelines must
demonstrate that rehabilitation is the
primary eligible activity and ensure that
this requirement is met by establishing
a minimum level of rehabilitation per
unit or a required ratio between
rehabilitation and refinancing.
(c) Acquisition costs. Costs of
acquiring improved or unimproved real
property, including acquisition by
homebuyers.
(d) Related soft costs. Other
reasonable and necessary costs incurred
by the owner or grantee and associated
with the financing or development (or
both) of new construction,
rehabilitation, or acquisition of housing
assisted with HTF funds. These costs
include, but are not limited to:
(1) Architectural, engineering, or
related professional services required to
prepare plans, drawings, specifications,
or work write-ups.
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(2) Costs to process and settle the
financing for a project, such as private
lender origination fees, credit reports,
fees for title evidence, fees for
recordation and filing of legal
documents, building permits, attorney’s
fees, private appraisal fees, fees for an
independent cost estimate, and builder’s
or developer’s fees.
(3) Costs of a project audit and
certification of costs performed by a
certified public accountant that the
grantee may require with respect to the
development of the project.
(4) Costs to provide information
services such as affirmative marketing
and fair housing information to
prospective homeowners and tenants, as
required by § 92.760.
(5) For new construction and
rehabilitation of rental housing, the cost
of funding an initial operating deficit
reserve, which is a reserve to meet any
shortfall in project income during the
period of project rent-up (not to exceed
the amount necessary for a period of 18
months). Any HTF funds that are placed
in an operating deficit reserve that
remain unexpended after the project
rent-up may be retained for project
reserves if permitted by the
participating jurisdiction.
(6) Staff and overhead costs of the
grantee directly related to carrying out
the project, such as work specifications
preparation, loan processing, and
inspections. For multi-unit projects,
such costs must be allocated among
HTF-assisted units in a reasonable
manner and documented. These costs
cannot be charged to or paid by the
assisted families.
(7) For both new construction and
rehabilitation, costs for the payment of
impact fees that are charged for all
projects within a jurisdiction.
(8) Costs to address and meet
environmental and historic preservation
property standards on the project,
including any necessary studies,
research, or mitigation in accordance
with §§ 92.741(f) and 92.742(c).
(e) Operating cost assistance; and
operating cost assistance reserves. For
HTF-assisted units for which projectbased assistance is not available, when
necessary and subject to the limitations
in § 92.730(a), HTF funds may be used
to pay for operating costs and operating
cost assistance reserves, as follows:
(1) Operating costs for insurance,
utilities, real property taxes, and
maintenance and scheduled payments
to a reserve for replacement of major
systems (provided that the payments
must be based on the useful life of each
major system and expected replacement
cost) of an HTF-assisted unit. The
eligible amount of HTF funds per unit
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for operating cost assistance is
determined based on the deficit
remaining after the monthly rent
payment for the HTF-assisted unit is
applied to the HTF-assisted unit’s share
of monthly operating costs. The grantee
may agree to provide operating cost
assistance during the entire period of
affordability, subject to the availability
of funds. The maximum amount of the
operating assistance to be provided to
an HTF-assisted rental project must be
specified in a written agreement
between the grantee and the recipient.
The grantee may provide for the amount
of expected operating cost assistance
necessary for the project in the written
agreement, for a period of not more than
two years, which may be renewed
during the period of affordability,
subject to the availability of funds. The
amount of HTF funds for operating cost
assistance that a grantee may provide to
a project from any fiscal year HTF grant
may not exceed the eligible amount for
operating cost assistance for the HTFassisted units in a project for a period
of not greater than two years.
(2) Operating Cost Assistance
Reserves may be established by the
grantee for HTF-assisted projects where
such reserves are deemed necessary by
the grantee to ensure a project’s
financial feasibility. The allowable
amount of an operating cost reserve
shall not exceed, for a period of more
than 5 years, the amount determined to
be necessary to provide operating cost
assistance for HTF-assisted units, as
determined by the grantee, based on an
analysis of potential deficits remaining
after the expected rent payments for the
HTF-assisted unit are applied to the
HTF-assisted unit’s expected share of
operating costs.
(f) Relocation costs. The cost of
relocation payments and other
relocation assistance to persons
displaced by the project are eligible
costs.
(1) Relocation payments include
replacement housing payments,
payments for moving expenses, and
payments for reasonable out-of-pocket
costs incurred in the temporary
relocation of persons.
(2) Other relocation assistance means
staff and overhead costs directly related
to providing advisory and other
relocation services to persons displaced
by the project, including timely written
notices to occupants, referrals to
comparable and suitable replacement
property, property inspections,
counseling, and other assistance
necessary to minimize hardship.
(g) Costs relating to payment of loans.
If the HTF funds are not used to directly
pay a cost specified in this section, but
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are used to pay off a construction loan,
bridge financing loan, or guaranteed
loan, the payment of principal and
interest for such loan is an eligible cost
only if:
(1) The loan was used for eligible
costs specified in this section,
(2) The HTF assistance is part of the
original financing for the project, and
(3) The project meets the
requirements of this subpart.
(h) Construction undertaken before
the HTF funds are committed to the
project. HTF funds cannot be used for
development hard costs, as provided in
paragraph (a) of this section, including
acquisition of construction undertaken
before the HTF funds are committed to
the project. However, the written
agreement committing the HTF funds to
the project may authorize HTF funds to
be used for architectural and
engineering costs and other related soft
costs, as provided in paragraphs (d)(1)
and (2) of this section, that were
incurred before HTF funds were
committed to the project.
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§ 92.732 Eligible administrative and
planning costs.
(a) General. A grantee may expend,
for payment of reasonable
administrative and planning costs of the
HTF program, an amount of HTF funds
that is not more than 10 percent of the
fiscal year HTF grant. A grantee may
also expend, for payment of reasonable
administrative and planning costs of the
HTF program, a sum up to 10 percent
of the program income deposited into its
local account or received and reported
by its subgrantees during the program
year. A grantee may expend such funds
directly or may authorize its
subgrantees, if any, to expend all or a
portion of such funds, provided that
total expenditures for planning and
administrative costs do not exceed the
maximum allowable amount. For
purposes of this section, ‘‘reasonable
administrative and planning costs’’ are
the costs described in paragraphs (b)
through (h) of this section.
(b) General management, oversight,
and coordination. Reasonable costs of
overall program management,
coordination, monitoring, and
evaluation. Such costs include, but are
not limited to, necessary expenditures
for the following:
(1) Salaries, wages, and related costs
of the grantee’s staff. In charging costs
to this category, the grantee may either
include the entire salary, wages, and
related costs (allocable to the program)
of each person whose primary
responsibilities with regard to the
program involve program
administration assignments or the
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prorated share of the salary, wages, and
related costs of each person whose job
includes any program administration
assignments. The grantee may use only
one of these methods. Program
administration includes the following
types of assignments:
(i) Developing systems and schedules
for ensuring compliance with program
requirements;
(ii) Developing interagency
agreements and agreements with entities
receiving HTF funds;
(iii) Monitoring HTF-assisted housing
for progress and compliance with
program requirements;
(iv) Preparing reports and other
documents related to the program for
submission to HUD;
(v) Coordinating the resolution of
audit and monitoring findings;
(vi) Evaluating program results against
stated objectives; and
(vii) Managing or supervising persons
whose primary responsibilities with
regard to the program include such
assignments as those described in
paragraphs (b)(1)(i) through (b)(1)(vi) of
this section.
(2) Travel costs incurred for official
business in carrying out the program.
(3) Administrative services performed
under third party contracts or
agreements, including such services as
general legal services, accounting
services, and audit services.
(4) Other costs for goods and services
required for administration of the
program, including such goods and
services as rental or purchase of
equipment, insurance, utilities, office
supplies, and rental and maintenance
(but not purchase) of office space.
(c) Staff and overhead. (1) Staff and
overhead costs of the grantee directly
related to carrying out the project, such
as work specifications preparation; loan
processing; inspections; lead-based
paint inspections (visual assessments,
inspections, and risk assessments);
housing counseling; and other services
related to assisting potential owners,
tenants, and homebuyers; and staff and
overhead costs directly related to
providing advisory and other relocation
services to persons displaced by the
project, including timely written notices
to occupants, referrals to comparable
and suitable replacement property,
property inspections, counseling, and
other assistance necessary to minimize
hardship.
(2) These costs, except housing
counseling, may be charged as
administrative costs or as project costs
under §§ 92.731(d)(5) and 92.731(f)(2),
at the discretion of the grantee;
however, these costs cannot be charged
to or paid by the assisted families.
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(d) Public information. The provision
of information and other resources to
residents and citizen organizations
participating in the planning,
implementation, or assessment of
projects being assisted with HTF funds.
(e) Fair housing. Activities to
affirmatively further fair housing, in
accordance with the grantee’s
certification under 24 CFR part 91.
(f) Indirect costs. Indirect costs may be
charged to the HTF program under a
cost allocation plan prepared in
accordance with OMB Circulars A–87 or
A–122, as applicable.
(g) Preparation of the consolidated
plan. Preparation of the consolidated
plan required under 24 CFR part 91.
Preparation includes the costs of public
hearings, consultations, and
publication.
(h) Other Federal requirements. Costs
of complying with the Federal
requirements in §§ 92.760 through
92.764 of this subpart.
§ 92.734
HTF funds and public housing.
(a) HTF funds may not be used for
public housing, including public
housing that is developed under section
24 of the 1937 Act (HOPE VI).
(b) HTF-assisted housing may not
receive operating assistance under
section 9 of the 1937 Act during the
HTF period of affordability.
(c) Consistent with § 92.730(c), HTF
funds may be used for affordable
housing in a project that also contains
public housing units, provided that the
HTF funds are not used for the public
housing units and HTF funds are used
only for eligible costs, in accordance
with this subpart.
§ 92.735
Prohibited activities and fees.
(a) HTF funds may not be used to:
(1) Provide assistance (other than
assistance to a homebuyer to acquire
housing previously assisted with HTF
funds) to a project previously assisted
with HTF funds during the period of
affordability established by the grantee
in the written agreement under § 92.774.
However, additional HTF funds may be
committed to a project up to one year
after project completion, but the amount
of HTF funds in the project may not
exceed the maximum per-unit subsidy
amount established pursuant to
§ 92.740.
(2) Pay for the acquisition of property
owned by the grantee, except for
property acquired by the grantee with
HTF funds or property acquired in
anticipation of carrying out an HTF
project.
(3) Pay delinquent taxes, fees, or
charges on properties to be assisted with
HTF funds.
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(4) Pay for political activities,
advocacy, lobbying (whether directly or
through other parties), counseling
services (except for housing counseling),
travel expenses (other than those
eligible under § 92.732(b)), or preparing
or providing advice on tax returns. The
prohibited use of funds for political
activities includes influencing the
selection, nomination, election, or
appointment of one or more candidates
to any Federal, State, or local office as
codified in section 501 of the Internal
Revenue Code of 1986 (26 U.S.C. 501).
(5) Pay for administrative, outreach,
or other costs to manage and operate the
grantee of HTF funds, except those
administrative costs necessary to carry
out the HTF program, including housing
counseling.
(6) Pay for any cost that is not eligible
under § 92.731 and § 92.732.
(b)(1) The grantee may not charge
(and must prohibit subgrantees and
recipients from charging) servicing,
origination, or other fees for the costs of
administering the HTF program (except
as allowed in § 92.731(d)(2)). However,
the grantee may charge owners of rental
projects reasonable annual fees for
monitoring compliance during the
period of affordability and may charge
nominal application fees (although
these fees are not an eligible HTF cost)
to eligible recipients, to discourage
frivolous applications.
(2) The amount of application fees
must be appropriate to the type of
application and may not create an
undue impediment to an ELI family to
be able to participate in the grantee’s
program. All fees are applicable credits
under OMB Circular A–87.
(3) In addition, the grantee must
prohibit project owners from charging
origination fees, parking fees that
exceed usual and customary charges,
laundry room access fees, and other
fees; however, rental project owners
may charge reasonable application fees
to prospective tenants.
Income Targeting
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§ 92.736
Income targeting: Rental units.
Unless otherwise directed by HUD at
the time of allocation of HTF funds for
a fiscal year, in each fiscal year, not less
than 75 percent of HTF grant amounts
provided to rental projects under each
grant must be used for the benefit of ELI
families or families with incomes at or
below the poverty line, whichever is
greater. For the first year of HTF
funding, States must use 100 percent of
HTF rental housing funding for the
benefit of ELI families or families with
incomes at or below the poverty line,
whichever is greater. For subsequent
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funding years, HUD will advise the
percentage of funds to be used for the
benefit of ELI families or families with
incomes at or below the poverty line, if
such percentage is to be greater than 75
percent.
§ 92.737 Income targeting:
Homeownership.
Unless otherwise directed by HUD at
the time of allocation of HTF funds for
a fiscal year, in each fiscal year, not less
than 75 percent of HTF grant amounts
provided to homeownership projects
under each grant must be used for the
benefit of ELI families or families with
incomes at or below the poverty line,
whichever is greater. For the first year
of HTF funding, each assisted
homeownership unit must be for
purchase only by ELI families, or
families with incomes at or below the
poverty line, whichever is greater, who
qualify as first-time homebuyers. For
subsequent funding years, HUD will
advise the percentage of funds to be
used for the benefit of ELI families or
families with incomes at or below the
poverty line, if such percentage is to be
greater than 75 percent.
Project Requirements
§ 92.740 Maximum per-unit subsidy
amount, underwriting, and subsidy layering.
(a) Maximum per-unit development
subsidy amount. The grantee must
establish maximum limitations on the
total amount of HTF funds that the
grantee may invest per-unit for
development, with adjustments for the
number of bedrooms and the geographic
location of the project. The grantee must
include these limits in its consolidated
plan and update these limits annually.
(b) Underwriting and subsidy
layering. Before committing funds to a
project, the grantee must evaluate the
project in accordance with guidelines
that it has adopted for this purpose and
make a determination that it will not
invest any more HTF funds, alone or in
combination with other governmental
assistance, than is necessary to provide
quality affordable housing that is
financially viable for a reasonable
period (at a minimum, the period of
affordability in § 92.746 or § 92.748) and
will not provide undue return on the
owner’s or developer’s investment or
undue profit. This analysis must
include any operating cost assistance or
project-based rental assistance that will
be provided to the project. In addition,
the grantee must examine the sources
and uses of funds for the project, and
determine that the costs are reasonable.
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§ 92.741 Property standards: New
construction projects and gut rehabilitation
projects.
(a) State and local codes, ordinances,
and zoning requirements. (1) Housing
that is constructed or has undergone gut
rehabilitation with HTF funds must
meet all applicable State and local
codes, ordinances, and zoning
requirements. HTF-assisted new
construction and gut rehabilitation
projects must meet the International
Residential Code or International
Building Code (as applicable to the type
of housing) of the International Code
Council, or State or local residential and
building codes for new construction or
gut rehabilitation. The housing must
meet the applicable requirements upon
project completion.
(2) All new construction and gut
rehabilitation housing must also meet
the requirements described in
paragraphs (b) through (f) of this
section:
(b) Lead-based paint. The housing
must meet the lead-based paint
requirements at 24 CFR part 35.
(c) Accessibility. (1) The housing must
meet the accessibility requirements at
24 CFR part 8, which implements
section 504 of the Rehabilitation Act of
1973 (29 U.S.C. 794).
(2) Covered multifamily dwellings, as
defined at 24 CFR 100.201, must also
meet the design and construction
requirements at 24 CFR 100.205, which
implements the Fair Housing Act (42
U.S.C. 3601–3619).
(3) Construction may include
improvements that permit use by
persons with disabilities, but are not
required by regulation or statute.
(d) Energy and water efficiency. Upon
completion, the housing must meet
energy and water efficiency standards,
as set forth in paragraphs (d)(1), (2), and
(3) of this section.
(1) All residential buildings up to
three stories must meet the guidelines
for ENERGY STAR-Qualified New
Homes, as certified by a qualified Home
Energy Rater. The requirement for
ENERGY STAR certification by a
qualified Home Energy Rater shall apply
to all projects to which funds are
committed after 6 months from the
effective date of this rule.
(2) All mid- or high-rise multifamily
housing over three stories must exceed,
by 20 percent, the minimum energy
efficiency requirements defined by the
American Society of Heating,
Refrigerating, and Air-Conditioning
Engineers (ASHRAE) Standard 90.1–
2007, Appendix G: Performance Rating
Method. When the ASHRAE standard is
updated, the updated standard, plus 20
percent, must be applied to all projects
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with HTF funds committed after the
date that the updated standard is
published. At such time as an ENERGY
STAR standard is established for all
housing taller than three stories, the
ENERGY STAR guidelines and
certification requirements shall apply.
(3) All water-usage products installed
in HTF-assisted units must be certified
‘‘WaterSense’’-labeled products,
including toilets, showers, and faucets.
(e) Disaster mitigation. Where
relevant, the housing must be
constructed or rehabilitated to mitigate
the impact of potential disasters (e.g.,
earthquakes, hurricanes, flooding, and
wildfires), in accordance with State and
local codes, ordinances, and
requirements, or such other
requirements as the Secretary of HUD
may establish.
(f) Environmental review
requirements. (1) Historic preservation.
(i) The project activities (including
demolition) must not be performed on
properties that are either listed in or
determined eligible for listing in the
National Register of Historic Places, or
identified as historic by the State,
territory, Tribe, or municipality (i.e.,
listed in a State or local inventory of
historic places, or designated as a State
or local landmark or historic district by
appropriate law or ordinance), unless
the project activities comply with at
least one of the following conditions:
(A) The project activities must meet
the Secretary of the Interior’s Standards
for Rehabilitation, as verified by
someone that meets the Secretary of the
Interior’s Professional Qualification
Standards;
(B) The project activities must comply
with the State (or territory) historic
preservation law and requirements
(applies to projects that are defined as
State-assisted); or
(C) Project activities must comply
with local historic preservation
ordinances and permit conditions
(applies to projects affecting locally
designated historic landmarks or
districts).
(ii) Archaeological resources. If
archaeological resources or human
remains are discovered on the project
site during construction, the recipient
must comply with applicable State (or
territory) law and/or local ordinance
(e.g., State unmarked burial law).
(2) Farmland. Project activities must
not result in the conversion of unique,
prime, or statewide or locally significant
agricultural properties to urban uses.
(3) Airport zones. Projects are not
permitted within the runway protection
zones of civilian airports, or the clear
zones or accident potential zones of
military airfields.
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(4) Coastal Barrier Resource System.
No projects may be assisted in Coastal
Barrier Resource System (CBRS) units.
CBRS units are mapped and available
from the U.S. Fish and Wildlife Service.
(5) Coastal zone management.
Development must be consistent with
the appropriate State coastal zone
management plan. Plans are available
from the local coastal zone management
agency.
(6) Floodplains. Except as modified
below, definitions for terms used below
can be found at 24 CFR part 55.
(i) Construction and other activities in
the 100-year floodplain are to be
avoided when practicable. If there are
no practicable alternatives to new
construction or substantial
improvement in the 100-year floodplain,
the structure must be elevated at least to
the base flood elevation (BFE) or
floodproofed to one foot above the BFE.
Elevated and floodproofed buildings
must adhere to National Flood
Insurance Program standards. The
primary sources of floodplain data are
Federal Emergency Management Agency
(FEMA) Flood Insurance Rate Maps
(FIRMs). In certain situations, including
but not limited to, post-disaster
development or redevelopment, interim
FEMA information will be the source of
these designations. If FEMA information
is unavailable, other Federal, State, or
local data may be used.
(ii) No Housing Trust Fund financial
assistance may be approved with
respect to:
(A) Any action, other than a
functionally dependent use, located in a
floodway;
(B) Any critical action located in a
coastal high hazard area, 100- or 500year floodplain; or
(C) Any non-critical action located in
a coastal high hazard area, unless the
action is designed for location in a
coastal high hazard area consistent with
the FEMA National Flood Insurance
Program requirements for V–Zones.
(7) Wetlands. (i) No draining,
dredging, channelizing, filling, diking,
impounding, or related grading
activities are to be performed in
wetlands. No activities, structures, or
facilities funded under this program are
to adversely impact a wetland.
(ii) A wetland means those areas that
are inundated by surface or ground
water with a frequency sufficient to
support, and under normal
circumstances, does or would support a
prevalence of vegetative or aquatic life
that requires saturated or seasonally
saturated soil conditions for growth and
reproduction. Wetlands generally
include swamps, marshes, bogs, and
similar areas such as sloughs, potholes,
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wet meadows, river overflows, mud
flats, and natural ponds. This definition
includes those wetlands areas separated
from their natural supply of water as a
result of activities, such as the
construction of structural flood
protection methods or solid-fill road
beds, or mineral extraction and
navigation improvements. This
definition is independent of the
definition of jurisdictional wetland used
by the U.S. Army Corps of Engineers
under section 404 of the Clean Water
Act (33 U.S.C. 1251 et seq.).
(8) Explosives and hazards. Projects
must be in compliance with the
standards for acceptable separation
distance, as set forth at 24 CFR part 51,
Subpart C.
(9) Contamination. It is HUD policy
that all properties to be used in the HTF
program be free of hazardous materials,
contamination, toxic chemicals and
gases, and radioactive substances, where
a hazard could affect the health and
safety of occupants or conflict with the
intended utilization of the property.
(i) All proposed multifamily (more
than 4 housing units) development of
HUD-assisted HTF project activities
requires a Phase I Environmental Site
Assessment (ESA–ASTM–E 1527–05). If
the Phase I ESA identifies recognized
environmental concerns (RECs), a Phase
II (ESA–ASTM–E 1903–97) will be
required. Single-family properties (up to
4 units) do not require a Phase I ESA.
(ii) HTF projects must avoid sites
located within 0.25 miles of a
Superfund or CERCLIS (Comprehensive
Environmental Response,
Compensation, and Liability
Information System) site or other
contaminated site reported to Federal,
State, or local authorities without a
statement in writing from the U.S.
Environmental Protection Agency (EPA)
or the appropriate State agency that
there is no hazard that could affect the
health and safety of the occupants or
conflict with the intended utilization of
the property.
(10) Noise. (i) Internal noise levels:
All activities will be developed to
ensure an interior noise level of 45
decibels (dB).
(ii) External noise levels:
(A) Project sites exposed to less than
or equal to 65 dB of environmental
noise are acceptable.
(B) Sites between 65 dB and less than
75 dB are acceptable with mitigation
(e.g., noise walls, careful site planning)
that results in an interior standard of 45
dB.
(C) Locations with environmental
noise levels of 75 dB or greater may not
have noise sensitive outdoor uses (e.g.,
picnic areas, totlots, balconies, or
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patios) and require sound attenuation in
the building shell to achieve the 45 dB
interior standard.
(11) Endangered species. Recipients
must avoid all actions which could
jeopardize the continued existence of
any endangered or threatened species,
as designated by U.S. Fish and Wildlife
Service or National Marine Fisheries
Service, or would result in the
destruction or adversely modify the
designated critical habitat of such
species.
(12) Wild and scenic rivers. Recipients
must avoid activities that are
inconsistent with conservation
easements, land-use protections, and
restrictions adjacent to wild and scenic
rivers, as designated/listed by the
Departments of Agriculture or Interior.
Maps for the National Wild and Scenic
Rivers System are available at the
governing departments.
(13) Safe drinking water. Projects with
a potable water system must use only
lead-free pipes, solder, and flux.
(14) Sole-source aquifers. Project
activities should avoid sites and
activities that have the potential to
contaminate sole source aquifer areas
(SSAs). The EPA defines a sole or
principal source aquifer as an aquifer
that supplies at least 50 percent of the
drinking water consumed in the area
overlying the aquifer. If the project
overlies an SSA, the EPA must review
the project. The EPA review is designed
to reduce the risk of ground water
contamination, that could pose a health
hazard to those who use it.
(g) Written standards for methods and
materials, plans, specifications, work
write-ups, and cost estimates. (1) The
grantee must establish written standards
for methods and materials to be used for
new construction and gut rehabilitation.
(2) The grantee must ensure that plans
and specifications for new construction
or work write-ups for gut rehabilitation
that describe the work to be undertaken
are in compliance with State and local
codes, ordinances, requirements, and
the grantee’s standards for methods and
materials.
(3) The grantee must review and
approve a written cost estimate based
upon a finding of cost reasonableness.
(h) Property inspections. The grantee
must establish written procedures for
initial, progress, and final inspections
during construction including:
(1) Detailed inspection checklists;
(2) Description of how and by whom
inspections will be carried out; and
(3) Procedures for training and
certifying qualified inspectors.
(i) Frequency of inspections.
(1) For gut rehabilitation, the grantee
must conduct an initial property
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inspection to identify the deficiencies
that must be addressed.
(2) The grantee must conduct progress
and final inspections to ensure that
work is done in accordance with
approved standards for methods and
materials, plans, specifications, and
work write-ups, as applicable to the
work.
(3) In accordance with § 92.774(d), the
grantee must comply with ongoing
responsibilities for onsite inspections
during the affordability period.
(j) Payment schedule. The grantee
must have procedures to ensure that
progress payments are consistent with
the amount of work performed and that
final payment does not occur until
project completion.
§ 92.742 Property standards:
Rehabilitation projects.
Housing that has undergone gut
rehabilitation with HTF funds must
meet the requirements of § 92.741. All
other rehabilitation must meet the
requirements of this part.
(a) State and local codes, ordinances,
and zoning requirements. Housing that
is rehabilitated with HTF funds must
meet all applicable State and local
codes, ordinances, and requirements.
The housing must meet the applicable
requirements upon project completion.
(b) Written standards for methods and
materials. The grantee must establish
written standards for methods and
materials to be used for rehabilitation
work and describe these standards in its
consolidated plan, whether or not there
are applicable State or local
rehabilitation codes. The housing must
meet the grantee’s standards upon
project completion. The grantee’s
description of its standards must be in
sufficient detail to establish the basis for
a uniform inspection of the property. At
a minimum, the grantee’s standards
must cover all items included in HUD’s
most recent Uniform Physical Condition
Standards (UPCS) Comprehensive
Listing of Inspectable Areas, or such
other requirements as the Secretary of
HUD may establish. The grantee’s
rehabilitation standards must address
each of the following:
(1) Health and safety. The housing
must be free of all health and safety
defects. The grantee’s standards must
identify life-threatening deficiencies
that must be addressed.
(2) Habitability and functionality. The
housing must meet minimum standards
of habitability and functionality for each
of the following areas: site, building
exterior, building systems, dwelling
units, and common areas. All inspected
items with an observed deficiency (OD)
must be corrected.
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(3) Major systems. Upon project
completion, each of the following major
systems must have a useful life for a
minimum of 15 years. The grantee may
specify a longer period.
(i) Structural support;
(ii) Roofing;
(iii) Cladding and weatherproofing
(e.g., windows, doors, siding, gutters);
(iv) Plumbing;
(v) Electrical; and
(vi) Heating, ventilation, and air
conditioning.
(4) Lead-based paint. The housing
must meet the lead-based paint
requirements at 24 CFR part 35.
(5) Accessibility. (i) The housing must
meet the accessibility requirements at
24 CFR part 8, which implements
section 504 of the Rehabilitation Act of
1973 (29 U.S.C. 794).
(ii) If the rehabilitation includes an
addition, covered multifamily
dwellings, as defined at 24 CFR 100.201,
must also meet the design and
construction requirements at 24 CFR
100.205, which implements the Fair
Housing Act (42 U.S.C. 3601–3619).
(iii) Rehabilitation may include
improvements that are not required by
regulation or statute that permit use by
persons with disabilities.
(6) Energy and water efficiency.
ENERGY STAR-labeled and
WaterSense-labeled products must be
installed when older obsolete products
(such as windows, doors, lighting, fans,
water heaters, furnaces, boilers, air
conditioning units, refrigerators, clothes
washers, dryers, dishwashers, toilets,
showers, and faucets) are replaced as
part of the approved rehabilitation
work, and such products are appropriate
for achieving energy efficiency for the
climate area in which the housing is
located.
(7) Disaster mitigation. Where
relevant, the housing must be improved
to mitigate the impact of potential
disasters (e.g., earthquakes, hurricanes,
flooding, wildfires) in accordance with
State and local codes, ordinances, and
requirements, or such other
requirements as the Secretary of HUD
may establish.
(8) Other improvements. Discretionary
housing improvements beyond those
described in paragraphs (b)(1) through
(7) of this section may include modest
amenities and aesthetic features that are
in keeping with housing of similar type
in the community and must avoid
luxury improvements, as defined by the
grantee.
(c) Environmental requirements. (1)
Historic preservation. (i) The project
activities (including demolition) must
not be performed on properties that are
either listed in or determined eligible
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for listing in the National Register of
Historic Places, or identified as historic
by the State, territory, Tribe, or
municipality (i.e., listed in a State or
local inventory of historic places, or
designated as a State or local landmark
or historic district by appropriate law or
ordinance), unless the project activities
comply with at least one of the
following conditions:
(A) The project activities must meet
the Secretary of the Interior’s Standards
for Rehabilitation, either as certified
through the Federal and/or State
historic rehabilitation tax credit
programs or as verified by someone that
meets the Secretary of the Interior’s
Professional Qualification Standards;
(B) The project activities must comply
with the State (or territory) historic
preservation law and requirements
(applies to projects that are defined as
State-assisted); or
(C) Project activities must comply
with local historic preservation
ordinances and permit conditions
(applies to projects affecting locally
designated historic landmarks or
districts).
(ii) Archaeological resources. If
archaeological resources or human
remains are discovered on the project
site during construction or
rehabilitation, the recipient must
comply with applicable State (or
territory) law and/or local ordinance
(e.g., State unmarked burial law).
(2) Farmland. Project activities must
not result in the conversion of unique,
prime, or locally significant agricultural
properties to urban uses.
(3) Airport zones. Projects are not
permitted within the runway protection
zones of civilian airports, or the clear
zones or accident potential zones of
military airfields.
(4) Coastal Barrier Resource System.
No projects may be assisted in Coastal
Barrier Resource System (CBRS) units.
CBRS units are mapped and available
from the U.S. Fish and Wildlife Service.
(5) Coastal zone management.
Development must be consistent with
the appropriate State coastal zone
management plan. Plans are available
from the local coastal zone management
agency.
(6) Floodplains. Except as modified
below, definitions for terms used below
can be found at 24 CFR part 55.
(i) Construction and other activities in
the 100-year floodplain are to be
avoided when practicable. If there are
no practicable alternatives to new
construction or substantial
improvement in the 100-year floodplain,
the structure must be elevated at least to
the base flood elevation (BFE) or
floodproofed to one foot above the BFE.
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Elevated and floodproofed buildings
must adhere to National Flood
Insurance Program standards. The
primary sources of floodplain data are
Federal Emergency Management Agency
(FEMA) Flood Insurance Rate Maps
(FIRMS). In certain situations,
including, but not limited to, postdisaster development or redevelopment,
interim FEMA information will be the
source of these designations. If FEMA
information is unavailable, other
Federal, State, or local data may be
used.
(ii) No HTF financial assistance may
be approved with respect to:
(A) Any action, other than
functionally dependent uses, located in
a floodway;
(B) Any critical action located in a
coastal high hazard area, 100- or 500year floodplain; or
(C) Any non-critical action located in
a coastal high hazard area, unless the
action is designed for location in a
coastal high hazard area consistent with
the FEMA National Flood Insurance
Program requirements for V–Zones.
(7) Wetlands. No rehabilitation of
existing properties that expands the
footprint into a wetland is allowed. A
wetland means those areas that are
inundated by surface or ground water
with a frequency sufficient to support,
and under normal circumstances, does
or would support a prevalence of
vegetative or aquatic life that requires
saturated or seasonally saturated soil
conditions for growth and reproduction.
Wetlands generally include swamps,
marshes, bogs, and similar areas such as
sloughs, potholes, wet meadows, river
overflows, mud flats, and natural ponds.
This definition includes those wetlands
areas separated from their natural
supply of water as a result of activities
such as the construction of structural
flood protection methods or solid-fill
road beds and activities such as mineral
extraction and navigation
improvements. This definition is
independent of the definition of
jurisdictional wetland used by the U.S.
Army Corps of Engineers under section
404 of the Clean Water Act (33 U.S.C.
1251 et seq.).
(8) Explosives and hazards. If the
rehabilitation of the building increases
the number of dwelling units, then the
project must be in compliance with the
standards for acceptable separation
distance as set forth at 24 CFR part 51,
subpart C.
(9) Contamination. It is HUD policy
that all properties to be used in the HTF
be free of hazardous materials,
contamination, toxic chemicals and
gases, and radioactive substances, where
a hazard could affect the health and
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safety of occupants or conflict with the
intended utilization of the property:
(i) All proposed multifamily (more
than four housing units) development of
HUD-assisted HTF project activities
requires a phase I Environmental Site
Assessment (ESA–ASTM–E 1527–05). If
the Phase I ESA identifies recognized
environmental concerns (RECs), a Phase
II (ESA–ASTM–E 1903–97) will be
required. Single-family properties (up to
four units) do not require a Phase I ESA.
(ii) Must avoid sites located within
0.25 miles of a Superfund or CERCLIS
(Comprehensive Environmental
Response, Compensation, and Liability
Information System) site or other
contaminated site reported to Federal,
State, or local authorities without a
statement in writing from the EPA or the
appropriate State agency that there is no
hazard that could affect the health and
safety of the occupants or conflict with
the intended utilization of the property.
(10) Noise. (i) Internal noise levels:
All activities will be developed to
ensure an interior noise level of 45
decibels (dB).
(ii) External noise levels:
(A) Project sites exposed to less than
or equal to 65 dB of environmental
noise are acceptable.
(B) Sites between 65 dB and less than
75 dB may be acceptable with
mitigation (e.g., noise walls, careful site
planning) that results in an interior
standard of 45 dB.
(C) Locations with environmental
noise levels of 75 dB or greater may not
have noise sensitive outdoor uses (e.g.,
picnic areas, totlots, balconies, or
patios) and require sound attenuation in
the building shell to achieve the interior
standard.
(11) Endangered species. (i)
Recipients must avoid all actions that
could jeopardize the continued
existence of any species designated by
the U.S. Fish and Wildlife Service or
National Marine Fisheries as
endangered or threatened.
(ii) Recipients must avoid all actions
that adversely modify the critical habitat
of such species.
(12) Wild and scenic rivers. Recipients
must avoid activities that are
inconsistent with conservation
easements, land-use protections, and
restrictions adjacent to wild and scenic
rivers, as designated/listed by the
Departments of Agriculture and Interior.
Maps for the National Wild and Scenic
Rivers System are available at the
governing departments.
(13) Safe drinking water. Projects with
a potable water system must use only
lead-free pipes, solder, and flux.
(14) Sole-source aquifers. Project
activities should avoid sites and
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activities that have the potential to
contaminate sole source aquifer areas
(SSAs). The EPA defines a sole or
principal source aquifer as an aquifer
that supplies at least 50 percent of the
drinking water consumed in the area
overlying the aquifer. If the project
overlies an SSA, the EPA must review
the project. The EPA review is designed
to reduce the risk of ground water
contamination, which could pose a
health hazard to those who use it.
(d) Work write-ups and cost estimates.
(1) The grantee must ensure that a work
write-up that describes the work to be
undertaken is in compliance with State
and local codes, ordinances,
requirements, and the grantee’s
standards for methods and materials.
(2) The grantee must review and
approve a written cost estimate based
upon a finding of cost reasonableness.
(e) Property inspections. The grantee
must establish written inspection
procedures for initial, progress, and
final inspections during construction
(see § 92.774(d) for the grantee’s ongoing
responsibilities for onsite inspections
during the affordability period)
including:
(1) Detailed inspection checklists;
(2) Description of how and by whom
inspections will be carried out; and
(3) Procedures for training and
certifying qualified inspectors.
(f) Frequency of inspections. (1) The
grantee must conduct an initial property
inspection to identify the deficiencies
that must be addressed.
(2) The grantee must conduct progress
and final inspections to ensure that
work is done in accordance with
approved standards for methods and
materials, and work write-ups.
(3) In accordance with § 92.774(d), the
grantee must comply with ongoing
responsibilities for onsite inspections
during the affordability period.
(g) Payment schedule. The grantee
must have procedures to ensure that
progress payments are consistent with
the amount of work performed and that
final payment does not occur until all
punch list items are completed.
WReier-Aviles on DSKGBLS3C1PROD with PROPOSALS2
§ 92.743 Property standards: Acquisition
of standard housing.
(a) Existing housing that is acquired
with HTF assistance, and has been
newly constructed or gut-rehabilitated
less than 12 months before the
commitment of HTF funds, must meet
the property standards at § 92.741 for
new construction and gut rehabilitation
projects. The grantee must document
this compliance based upon a review of
approved building plans and
Certificates of Occupancy, and a current
inspection that is conducted no earlier
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than 30 days prior to the commitment
of HTF assistance.
(b) All other existing housing that is
acquired with HTF assistance must meet
the property standards requirements of
§ 92.742. The grantee must document
this compliance based upon a current
inspection that is conducted no earlier
than 30 days prior to the commitment
of HTF assistance, in accordance with
the inspection procedures that the
grantee established pursuant to § 92.742.
(c) If the property does not meet these
standards, with the exception of noise
standards at § 92.741(f)(10) or
§ 92.742(c)(10), the property must be
rehabilitated to meet the standards of
§ 92.741 or § 92.742, as applicable.
§ 92.744 Property standards:
Manufactured housing.
(a) Compliance With manufactured
home construction and safety
standards. Construction of all
manufactured housing must meet the
Manufactured Home Construction and
Safety Standards codified at 24 CFR part
3280. These standards pre-empt State
and local codes covering the same
aspects of performance for such
housing.
(b) Installation and standards for new
construction and gut rehabilitation of
manufactured housing projects. (1) If
the grantee provides HTF assistance to
install a manufactured housing unit, the
installation must comply with
applicable State and local laws or codes.
In the absence of such laws or codes, the
installation must comply with the
manufacturer’s written instructions for
installation. Manufactured housing
constructed or rehabilitated using HTF
funds must be on a permanent
foundation. The grantee must document
this compliance in accordance with the
inspection procedures that the grantee
has established pursuant to § 92.742.
(2) Manufactured housing that is
newly constructed or has undergone gut
rehabilitation using HTF funds must
meet the energy and water efficiency
standards in § 92.741. An ENERGY
STAR-qualified manufactured home is a
home that has been designed, produced,
and installed in accordance with
ENERGY STAR’s guidelines by an
ENERGY STAR-certified plant. A plant
must be certified by a Quality Assurance
Provider (QAP), which is an EPAdesignated organization that meets
certain qualifications, to produce
ENERGY STAR-qualified manufactured
homes on an ongoing basis. Once
certified, a plant must follow ENERGY
STAR guidelines for producing and
installing homes to maintain its plant
certification. To comply with the
requirement in § 92.741 to meet the
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guidelines for ENERGY STAR-Qualified
New Homes, a QAP may provide quality
assurance oversight for the ENERGY
STAR verification process of energyefficient manufactured homes that
cannot be certified by a qualified Home
Energy Rater.
(c) Manufactured housing
rehabilitation. Manufactured housing
that is rehabilitated (other than gut
rehabilitation) using HTF funds must
meet the property standards
requirements of § 92.742, as applicable.
The grantee must document this
compliance in accordance with the
inspection procedures that the grantee
has established pursuant to § 92.742, as
applicable.
(d) Environmental requirements.
Manufactured housing is subject to the
environmental standards in § 92.741(f)
for new construction and gut
rehabilitation or § 92.742(c) for
rehabilitation, as applicable. If an
existing property does not meet these
standards, the property must be
rehabilitated to meet the standards in
§ 92.741 or § 92.742, as applicable, with
the exception of noise standards at
§ 92.741(f)(10) or § 92.742(c)(10).
§ 92.745 Ongoing property standards:
Rental housing.
(a) Property standards. The grantee
must establish property standards for
rental housing (including manufactured
housing) that apply throughout the
affordability period, and describe these
standards in its Consolidated Plan. The
standards must ensure that owners
maintain the housing as decent, safe,
and sanitary housing in good repair. The
grantee’s description of its property
standards must be in sufficient detail to
establish the basis for a uniform
inspection of the property. At a
minimum, the grantee’s standards must
include all inspectable items included
in HUD’s most recent Uniform Physical
Condition Standards (UPCS)
Comprehensive Listing of Inspectable
Areas, or such other requirements as the
Secretary of HUD may establish. The
grantee’s ongoing property standards
must address each of the following:
(1) Compliance with State and local
codes, ordinances, and requirements.
The housing must meet all applicable
State and local codes, ordinances, and
requirements.
(2) Health and safety. The housing
must be free of all health and safety
defects. The standards must identify
life-threatening deficiencies that the
owners must immediately correct and
the grantee’s time frame for addressing
these deficiencies.
(3) Habitability and functionality. The
housing must meet minimum standards
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of habitability and functionality for each
of the following areas: site, building
exterior, building systems, dwelling
units, and common areas. All inspected
items with an observed deficiency (OD)
must be corrected within a reasonable
time frame established by the grantee.
(4) Lead-based paint. The housing
must meet the lead-based paint
requirements at 24 CFR part 35.
(b) Inspection procedures. The grantee
must have written inspection
procedures for ongoing property
inspections, in accordance with
§ 92.774(d). These procedures must
include:
(1) Detailed inspection checklists;
(2) Description of how frequently the
property inspections will be
undertaken;
(3) Description of how and by whom
inspections will be carried out; and
(4) Procedures for training and
certifying qualified inspectors.
(c) Corrective and remedial actions.
The grantee must have procedures for
ensuring that timely corrective and
remedial actions are taken by the project
owner to address identified deficiencies.
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§ 92.746 Qualification as affordable
housing: Rental housing.
(a) General. Not less than 75 percent
of the HTF grant amounts a grantee
provides to rental projects under each
grant must be used for the benefit only
of ELI families or families at or below
the poverty line, whichever is greater,
except that in any given fiscal year, the
Secretary may establish a higher
minimum percentage. The HTF-assisted
units in a rental housing project must be
occupied only by households that
qualify as ELI and must meet the
requirements of this section to qualify as
affordable housing. The affordability
requirements also apply to the HTFassisted rental units in single-family
housing purchased by a first-time
homebuyer with HTF funds, in
accordance with 24 CFR 92.748(g).
(b) Rent limitations. (1) The HTF rent
plus utilities shall not exceed the greater
of 30 percent of the Federal poverty line
or 30 percent of the income of a family
whose annual income equals 30 percent
of the median income for the area, as
determined by HUD, with adjustments
for the number of bedrooms in the unit.
HUD will publish the HTF rent limits
on an annual basis.
(2) If the unit receives Federal or State
project-based rental subsidy, the
maximum rent is the rent allowable
under the Federal or State project-based
rental subsidy program.
(c) Initial rent schedule and utility
allowance. (1) The grantee must
establish maximum monthly allowances
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for utilities and services (excluding
telephone, television, and Internet
service).
(2) The grantee must annually review
and approve rents proposed by the
owner for HTF units. For all units for
which the tenant is paying utilities, the
grantee must ensure that the rents do
not exceed the maximum rent minus the
monthly allowances for utilities.
(d) Periods of affordability. (1) HTFassisted units must meet the
affordability requirements for not less
than 30 years, beginning after project
completion. The grantee may impose
longer periods.
(2) The affordability requirements
apply without regard to the term of any
loan or mortgage, repayment of the HTF
investment, or the transfer of
ownership. They must be imposed by
deed restrictions, covenants running
with the land, use restrictions, or other
mechanisms approved by HUD under
which the grantee and beneficiaries may
require specific performance, except
that the affordability restrictions may
terminate upon foreclosure or transfer in
lieu of foreclosure. The affordability
requirements must be recorded in
accordance with State recordation laws.
(3) The grantee may use purchase
options, rights of first refusal, or other
preemptive rights to purchase the
housing before foreclosure or deed in
lieu of foreclosure in order to preserve
affordability.
(4) The affordability restrictions shall
be revived according to the original
terms if, during the original affordability
period, the owner of record before the
foreclosure, or deed in lieu of
foreclosure, or any entity that includes
the former owner or those with whom
the former owner has or had family or
business ties, obtains an ownership
interest in the project or property.
(5) The termination of the restrictions
on the project does not terminate the
grantee’s repayment obligation under
§ 92.773.
(e) Tenant income. (1) The income of
each tenant must be determined initially
in accordance with § 92.727(d)(1). In
addition, in each year during the period
of affordability, the project owner must
re-examine each tenant’s annual income
in accordance with one of the options in
§ 92.727(c) selected by the grantee.
(2) An owner who re-examines a
tenant’s annual income through a
statement and certification in
accordance with § 92.727(d)(2), must
examine the source documentation of
the income of each tenant every 6th year
of the affordability period, except that,
for units that receive Federal projectbased assistance, the owner must reexamine the tenant’s annual income in
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accordance with the project-based
assistance rules. Otherwise, an owner
who accepts the tenant’s statement and
certification in accordance with
§ 92.727(d)(2) is not required to examine
the income of tenants, unless there is
evidence that the tenant’s written
statement failed to completely and
accurately state information about the
family’s size or income.
(f) Over-income tenants. HTF-assisted
units continue to qualify as affordable
housing despite a temporary
noncompliance caused by increases in
the incomes of existing tenants if
actions satisfactory to HUD are being
taken to ensure that all vacancies are
filled in accordance with this section
until the noncompliance is corrected.
(g) Fixed and floating HTF units. In a
project containing HTF-assisted and
other units, the grantee may designate
fixed or floating HTF units. This
designation must be made at the time of
project commitment in the written
agreement between the grantee and the
recipient, and the HTF units must be
identified not later than the time of
project completion. Fixed units must
remain the same throughout the period
of affordability. Floating units must be
changed to maintain conformity with
the requirements of this section during
the period of affordability so that the
total number of housing units meeting
the requirements of this section remains
the same, and each substituted unit
must be comparable in terms of size,
features, and number of bedrooms to the
originally designated HTF-assisted unit.
(h) Tenant selection. The tenants must
be selected in accordance with
§ 92.747(d) and must enter into a
written lease that complies with
§ 92.747.
(i) Nondiscrimination against rental
assistance subsidy holders. The owner
cannot refuse to lease HTF-assisted
units to a voucher holder under 24 CFR
part 982, the Housing Choice Voucher
Program, or to the holder of a
comparable document evidencing
participation in a HOME tenant-based
rental assistance program because of the
status of the prospective tenant as a
holder of such voucher or comparable
HOME tenant-based assistance
document.
(j) Onsite inspections and financial
oversight. See § 92.774(d) for the
grantee’s ongoing responsibilities for
onsite inspections and financial
oversight.
§ 92.747
Tenant protections and selection.
(a) Lease. There must be a written
lease between the tenant and the owner
of rental housing assisted with HTF
funds that is for a period of not less than
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one year, unless a shorter period is
specified by mutual agreement between
the tenant and the owner. Renewal of
the tenancy also requires a written lease.
The lease must comply with this
subpart and with State law. The lease
period for transitional housing must
equal the tenancy period established by
the grantee or the owner in accordance
with the definition of ‘‘transitional
housing.’’
(b) Prohibited lease terms. The lease
may not contain any of the following
provisions:
(1) Agreement to be sued. Agreement
by the tenant to be sued, to admit guilt,
or to a judgment in favor of the owner
in a lawsuit brought in connection with
the lease.
(2) Treatment of property. Agreement
by the tenant that the owner may take,
hold, or sell personal property of
household members without notice to
the tenant and a court decision on the
rights of the parties. This prohibition,
however, does not apply to an
agreement by the tenant concerning
disposition of personal property
remaining in the housing unit after the
tenant has moved out of the unit. The
owner may dispose of this personal
property in accordance with State law.
(3) Excusing owner from
responsibility. Agreement by the tenant
not to hold the owner or the owner’s
agents legally responsible for any action
or failure to act, whether intentional or
negligent.
(4) Waiver of notice. Agreement of the
tenant that the owner may institute a
lawsuit without notice to the tenant.
(5) Waiver of legal proceedings.
Agreement by the tenant that the owner
may evict the tenant or household
members without instituting a civil
court proceeding in which the tenant
has the opportunity to present a
defense, or before a court decision on
the rights of the parties.
(6) Waiver of a jury trial. Agreement
by the tenant to waive any right to a trial
by jury.
(7) Waiver of right to appeal court
decision. Agreement by the tenant to
waive the tenant’s right to appeal, or to
otherwise challenge, in court, a court
decision in connection with the lease.
(8) Tenant chargeable with cost of
legal actions regardless of outcome.
Agreement by the tenant to pay
attorney’s fees or other legal costs even
if the tenant wins in a court proceeding
by the owner against the tenant. The
tenant, however, may be obligated to
pay costs if the tenant loses.
(9) Mandatory supportive services.
Agreement by the tenant (other than a
tenant in transitional housing) to accept
supportive services that are offered.
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(c) Termination of tenancy. (1) An
owner may not terminate the tenancy or
refuse to renew the lease of a tenant of
rental housing assisted with HTF funds
except for serious or repeated violation
of the terms and conditions of the lease;
violation of applicable Federal, State, or
local law; completion of the tenancy
period for transitional housing or failure
to follow a transitional housing services
plan; or other good cause. Good cause
does not include an increase in the
tenant’s income.
(2) To terminate or refuse to renew
tenancy, the owner must serve written
notice upon the tenant specifying the
grounds for the action and providing a
specific period for vacating that is
consistent with State or local law.
(d) Tenant selection. An owner of
rental housing assisted with HTF funds
must comply with the affirmative
marketing requirements established by
the grantee pursuant to § 92.760. The
owner must adopt and follow written
tenant selection policies and criteria
that:
(1) Limit the housing to incomeeligible families.
(2) Are reasonably related to the
applicants’ ability to perform the
obligations of the lease (i.e., pay the
rent, not damage the housing, not
interfere with the rights of and quiet
enjoyment by other tenants).
(3)(i) Limit eligibility or give a
preference to a particular segment of the
population if permitted in its written
agreement with the grantee (and only if
the limitation or preference is described
in the grantee’s consolidated plan).
(ii) Any limitation or preference
cannot violate nondiscrimination
requirements of § 92.760. The use of
HTF funds for a project that limits
eligibility to persons with disabilities or
persons with a particular type of
disability does not violate
nondiscrimination requirements if the
housing also receives funding from a
Federal program that limits eligibility to
a particular segment of the population
(e.g., the Housing Opportunity for
Persons with AIDS program under 24
CFR part 574, the Shelter Plus Care
program under 24 CFR part 582, the
Supportive Housing program under 24
CFR part 583, and supportive housing
programs for the elderly or persons with
disabilities under 24 CFR part 891).
(iii) When a project is limited to
persons with disabilities or with a
particular type of disability as set forth
in paragraph (d)(3)(ii) of this section, the
owner may advertise the project as
being open only to those who are
eligible under the relevant statute and
admit only those persons who meet the
statutory requirements.
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(iv) In the absence of a statute that
limits occupancy to persons with
disabilities or to persons with a
particular type of disability, a project
may propose to provide a preference to
such persons, if necessary to provide
housing, aid, benefits, or services
equally as effective as those provided to
others, so long as the project is in the
most integrated setting appropriate to
meet their needs and otherwise
complies with 24 CFR 8.4.
(4) Do not reject an applicant with a
voucher under the Section 8 Housing
Choice Voucher Program (24 CFR part
982) or an applicant with HOME tenantbased rental assistance (24 CFR 92.209)
because of the status of the prospective
tenant as a recipient of tenant-based
rental assistance.
(5) Provide for the selection of tenants
from a written waiting list in the
chronological order of their application,
insofar as is practicable.
(6) Give prompt written notification to
any rejected applicant of the grounds for
any rejection.
§ 92.748 Qualification as affordable
housing: Homeownership.
(a) Homeownership activities.
Housing that is for purchase by a firsttime homebuyer must meet the
affordability requirements of this
section.
(b) Single-family housing. The
housing must be single-family housing,
as defined at § 92.2.
(c) Modest housing. The housing must
be modest housing, in accordance with
§ 92.749.
(d) First-time homebuyer and income
requirements. The housing must be
acquired by a first-time homebuyer
whose family qualifies as an incomeeligible family and the housing must be
the principal residence of the family
throughout the period described in
paragraph (e) of this section. In
determining the income eligibility of the
family, the grantee must include the
income of all persons living in the
housing. Before purchasing the housing,
the family must have completed a
program of independent financial
education and homeownership
counseling from an eligible organization
that meets the requirements of section
1132 of the Federal Housing Finance
Regulatory Reform Act of 2008 (12
U.S.C. 1701x note).
(e) Period of affordability. (1) The
HTF-assisted housing must meet the
affordability requirements for not less
than 30 years.
(f) Resale during period of
affordability. (1) To ensure continuing
affordability, the grantee may apply its
HOME program resale restrictions to the
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HTF-assisted units or the grantee may
develop and adopt resale restrictions for
the HTF program. The HTF resale
provisions must be included in the
State’s consolidated plan. If a grantee
uses resale provisions established for
the HOME program, it must amend
those provisions to accommodate
subsequent purchasers who are incomeeligible families.
(2) The resale requirements must
ensure, if the housing does not continue
to be the principal residence of the
family for the duration of the period of
affordability, that:
(i) The housing is made available for
subsequent purchase only to a first-time
homebuyer whose family qualifies as an
income-eligible family and will use the
property as its principal residence; and
(ii) The price at resale provides the
original HTF-assisted owner a fair
return on investment (including the
homeowner’s investment and any
capital improvement), and ensures that
the housing will remain affordable to a
reasonable range of income-eligible
homebuyers. The grantee must
specifically define ‘‘fair return on
investment’’ and ‘‘affordability to a
reasonable range of income-eligible
homebuyers.’’
(3)(i) The mechanism to impose the
resale provisions must be deed
restrictions, covenants running with the
land, use restrictions, or other
mechanisms approved by HUD under
which the grantee and beneficiaries may
require specific performance.
(ii) The affordability restrictions may
terminate upon foreclosure, transfer in
lieu of foreclosure, or assignment of a
mortgage insured by the Federal
Housing Administration to HUD.
(iii) The grantee may use purchase
options, rights of first refusal, or other
preemptive rights to purchase the
housing before foreclosure to preserve
affordability. The affordability
restrictions shall be revived according to
the original terms if, during the original
affordability period, the owner of record
before the termination event obtains an
ownership interest in the housing.
(g) Special considerations for singlefamily properties with more than one
unit. (1) If the HTF funds are used only
to assist an income-eligible homebuyer
in acquiring one unit in a single-family
property containing more than one unit
and the assisted unit will be the
principal residence of the homebuyer,
the affordability requirements of this
section apply only to the assisted unit.
(2) If HTF funds are also used to assist
the income-eligible homebuyer in
acquiring one or more of the rental units
in the single-family property, the
affordability requirements of § 92.746
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apply to assisted rental units, except
that the grantee must impose resale
restrictions on all assisted units (owneroccupied and rental units) in the singlefamily housing. The affordability
requirements on all assisted units
continue for the period of affordability.
If HTF funds are used to assist only the
rental units in such a property, then the
requirements of § 92.746 would apply
and the owner-occupied unit would not
be subject to the income targeting or
affordability provisions of this section.
(h) Lease-purchase. (1) HTF funds
may be used to assist homebuyers
through lease-purchase programs for
existing housing and for housing to be
constructed. The housing must be
purchased by an eligible homebuyer
within 36 months of signing the leasepurchase agreement. The homebuyer
must qualify as an income-eligible
family at the time the lease-purchase
agreement is signed.
(2) If HTF funds are used to acquire
housing that will be resold to a
homebuyer through a lease-purchase
program, the HTF affordability
requirements for rental housing in
§ 92.746 shall apply if the housing is not
transferred to an eligible homebuyer
within 42 months after project
completion.
(i) Contract to purchase. If HTF funds
are used to assist a homebuyer who has
entered into a contract to purchase
housing to be constructed, the
homebuyer must qualify as an incomeeligible family at the time the contract
is signed.
(j) Preserving affordability. (1) To
preserve the affordability of housing
that was previously assisted with HTF
funds and subject to the requirements of
this section, a grantee may use
additional HTF funds to acquire the
housing through a purchase option,
right of first refusal, or other preemptive
right before foreclosure, or to acquire
the housing at the foreclosure sale,
undertake any necessary rehabilitation,
and provide assistance to another firsttime homebuyer. The housing must be
sold to a new eligible homebuyer in
accordance with the requirements of
this section. Additional HTF funds may
not be used if the mortgage in default
was funded with HTF funds.
(2) The total amount of original and
additional HTF assistance may not
exceed the maximum per-unit subsidy
amount established pursuant to
§ 92.740. As an alternative to charging
the cost to the HTF program under
§ 92.731, the grantee may charge the
cost to the HTF program under § 92.732
as a reasonable administrative cost of its
HTF program, so that the additional
HTF funds for the housing are not
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subject to the maximum per-unit
subsidy amount.
(k) Agreements with lending
institutions. (1) The grantee may
provide homeownership assistance
through written agreements with forprofit or nonprofit lending institutions
that are providing the first mortgage
loan to a family. The grantee must
independently verify that the family is
income-eligible and meets the definition
of ‘‘first-time homebuyer,’’ and must
inspect the housing for compliance with
the applicable property standards.
(2) No fees may be charged to the
family for the HTF homeownership
assistance (e.g., origination fees or
points, processing fees, inspection fees),
although reasonable administrative
costs can be charged to the HTF
program as project costs (e.g., nominal
application fees, credit report fees, and
appraisal fees). The grantee must
determine that the fees and other
amounts charged to the family by the
lender for the first mortgage financing
are reasonable. If the grantee requires
lenders to pay a fee to participate in the
HTF program, the fee is program income
to the HTF program.
(l) Written policies. The grantee must
have and follow written policies for:
(1) Underwriting standards for
homeownership assistance that examine
the family’s housing debt, overall debt,
income, and ability to maintain the
housing;
(2) Anti-predatory lending; and
(3) Refinancing loans to which HTF
loans are subordinated to ensure that
the terms of the new loan are
reasonable.
§ 92.749 Qualification as affordable
housing: Modest housing requirements for
homeownership.
(a) General. Housing that is for
acquisition by a family pursuant to
§ 92.748 must be modest housing in
accordance with this section.
(b) New construction. In the case of
acquisition of newly constructed
housing or standard housing, the
housing must have an appraised value
that does not exceed 95 percent of the
median purchase price for the type of
single-family housing for the area, as
described in paragraphs (d) and (e) of
this section.
(c) Rehabilitation. In the case of
acquisition with rehabilitation, the
housing must have an estimated value
after rehabilitation that does not exceed
95 percent of the median purchase price
for the area, as described in paragraphs
(d) and (e) of this section.
(d) Options for determining purchase
price limits. If a grantee intends to use
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HTF funds for homebuyer assistance,
the grantee must either:
(1) Use the limits issued by HUD for
the HTF program (i.e., 95 percent of the
median purchase price for the area); or
(2) Determine 95 percent of the area
median purchase price for single-family
housing in the jurisdiction, in
accordance with paragraph (e) of this
section.
(e) Determining 95 percent of area
median purchase price. A grantee that
elects to determine the purchase price
limit under paragraph (d)(2) of this
section must use the following
methodology:
(1) The grantee must establish the
price for different types of single-family
housing for different areas within its
jurisdiction. The 95 percent of area
median purchase price must be
established in accordance with a market
analysis that ensures that a sufficient
number of recent housing sales are
included in the survey.
(2) Sales must cover the requisite
number of months based on volume:
(i) For 500 or more sales per month,
a one-month reporting period;
(ii) For 250 through 499 sales per
month, a 2-month reporting period; and
(iii) For less than 250 sales per month,
at least a 3-month reporting period.
(3) The data must be listed in
ascending order of sales price. The
address of the listed properties must
include the location within the
jurisdiction. Lot, square, and
subdivision data may be substituted for
the street address. The housing sales
data must reflect all, or nearly all, of the
one-family house sales in the entire
jurisdiction.
(4) To determine the median, the
grantee must:
(i) Use the middle sale on the list if
an odd number of sales; or
(ii) Use the higher of the middle
numbers if an even number of sales.
(5) After identifying the median sales
price, the amount must be multiplied by
0.95 to determine the 95 percent of the
area median purchase price. This
information must be updated annually
and submitted to the relevant HUD
Field Office for review.
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§ 92.750
Faith-based organizations.
Faith-based organizations are eligible
to participate in the HTF, as provided in
24 CFR 92.257.
Other Federal Requirements
§ 92.760 Other Federal requirements and
nondiscrimination; affirmative marketing.
(a) The Federal requirements set forth
in 24 CFR part 5, subpart A, are
applicable to the HTF program.
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(b) The affirmative marketing
requirements contained in 24 CFR
92.351(a) apply to the HTF program.
§ 92.761
Lead-based paint.
Housing assisted with HTF funds is
subject to the regulations at 24 CFR part
35, subparts A, B, J, K, and R.
§ 92.762 Displacement, relocation, and
acquisition.
The displacement, relocation, and
acquisition requirements of 24 CFR
92.353 apply to the HTF program.
§ 92.763
Conflict of interest.
The conflict-of-interest requirements
contained in § 92.356 apply to the HTF
program.
§ 92.764 Funding accountability and
transparency.
The HTF grant to the grantee and all
assistance provided to subgrantees and
recipients shall be considered a Federal
award for purposes of the Federal
Funding Accountability and
Transparency Act of 2006 (31 U.S.C.
6101 note).
Program Administration
§ 92.770 Housing Trust Fund (HTF)
accounts.
(a) General. The HTF consists of the
accounts described in this section solely
for use in accordance with the
provisions of this subpart. HUD will
establish an HTF United States Treasury
account (HTF Treasury account) for
each grantee. Each grantee may use
either a separate HTF local account or
a subsidiary account within its general
fund (or other appropriate fund) as the
HTF local account.
(b) HTF Treasury account. The HTF
Treasury account includes the annual
grant and funds reallocated to the State
by formula.
(c) HTF local account. (1) The HTF
local account includes deposits of HTF
funds disbursed from the HTF Treasury
account, any program income, and any
repayments as required by § 92.773.
(2) The HTF local account must be
interest-bearing.
(d) Reductions. (1) HUD will reduce
or recapture funds in the HTF account
by the amount of:
(i) Any funds in the HTF Treasury
account that are not committed within
24 months after the last day of the
month in which HUD notifies the State
of HUD’s execution of the HTF Grant
Agreement;
(ii) Any funds in the HTF local
account that are not expended within 5
years after the last day of the month in
which HUD notifies the State of HUD’s
execution of the HTF Grant Agreement;
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(iii) Any amounts pursuant to
§ 92.783; and
(iv) Amounts that the grantee fails to
obtain and that were required to be
reimbursed or returned under § 92.780.
(2) For purposes of determining the
amount by which the HTF account will
be reduced or recaptured under
paragraphs (d)(1)(i) and (ii) of this
section, HUD will consider the sum of
commitments or expenditures, as
applicable, from the fiscal year grant
being examined, as well as from
previous and subsequent grants. The
sum must be greater than the amount of
the fiscal year grant being examined and
all previous grants.
§ 92.771
HTF Grant Agreement.
Allocated and reallocated funds will
be made available pursuant to an HTF
Grant Agreement.
§ 92.772 Program disbursement and
information system.
(a) General. The HTF Treasury
account is managed through a
computerized disbursement and
information system established by HUD.
The system disburses HTF funds that
are allocated or reallocated, and collects
and reports information on the use of
funds in the HTF Treasury account. The
grantee must report on the receipt and
use of all program income in HUD’s
computerized disbursement and
information system. The grantee must
develop and maintain a system to
ensure that each recipient and
subgrantee uses HTF funds in
accordance with the requirements of
this subpart and that any requirements
or conditions under which the HTF
funds were provided.
(b) Project set-up. (1) After the grantee
executes the HTF Grant Agreement,
submits the applicable banking and
security documents, and commits funds
to a specific local project, the grantee
shall identify (set up) specific activities
(i.e., projects) in the disbursement and
information system. Investments that
require the set-up of projects in the
system are the acquisition, new
construction, or rehabilitation of
housing, and operating cost assistance.
The grantee is required to enter
complete project set-up information at
the time of project set-up.
(2) If the project set-up information is
not completed within 20 days of the
initial project set-up, the project may be
canceled by the system. In addition, a
project that has been committed in the
system for 12 months without an initial
disbursement of funds may be canceled
by the system.
(c) Disbursement of HTF Funds. (1)
After complete project set-up
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information is entered into the
disbursement and information system,
HTF funds for the project may be drawn
down from the HTF Treasury account
by the grantee by electronic funds
transfer. The funds will be deposited in
the HTF local account of the grantee
within 72 hours of the disbursement
request. Any drawdown of funds in the
HTF Treasury account is conditioned
upon the provision of satisfactory
information by the grantee about the
project and compliance with other
procedures, as specified by HUD.
(2) Funds drawn from the HTF
Treasury account are subject to the
Intergovernmental Cooperation Act (31
U.S.C. 6501 et seq.) and regulations at 31
CFR part 205.
(3) Funds in the HTF local account
must be disbursed before requests are
made for funds in the HTF Treasury
account.
(4) The grantee will be paid on an
advance basis, provided it complies
with the requirements of this subpart.
(d) Project completion. (1) Complete
project completion information must be
entered into the disbursement and
information system, or otherwise
provided, within 120 days of the final
project drawdown. If satisfactory project
completion information is not provided,
HUD may suspend further project setups or take other corrective actions.
(2) Additional HTF funds for
development-related costs may be
committed to a project up to one year
after project completion, but the amount
of HTF funds in the project may not
exceed the maximum per-unit
development subsidy amount
established pursuant to § 92.740.
(e) Access by other participants.
Access to the disbursement and
information system by other entities
participating in the HTF program will
be governed by procedures established
by HUD.
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§ 92.773
Program income and repayments.
(a) Program income. Program income
must be treated as HTF funds and must
be used in accordance with the
requirements of this subpart. Program
income must be deposited in the
grantee’s HTF local account unless the
grantee permits a subgrantee to retain
the program income for additional HTF
projects pursuant to the written
agreement required by § 92.774. The
grantee must report the program income
received as well as the use of the
program income in the disbursement
and information system that HUD
designates for the HTF.
(b) Repayments. (1) Any HTF funds
invested in housing that does not meet
the affordability requirements for the
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period specified in § 92.746 or § 92.748,
as applicable, must be repaid by the
grantee in accordance with paragraph
(b)(3) of this section.
(2) Any HTF funds invested in a
project that is terminated before
completion, either voluntarily or
otherwise, must be repaid by the
grantee, in accordance with paragraph
(b)(3) of this section.
(3) HUD will instruct the grantee to
either repay the funds to the HTF
Treasury account or the local account.
Generally, if the HTF funds were
disbursed from the grantee’s HTF
Treasury account, they must be repaid
to the HTF Treasury account. If the HTF
funds were disbursed from the grantee’s
HTF local account, they must be repaid
to the local account.
(4) If the grantee is no longer a grantee
in the HTF program when the
repayment is made, the funds must be
remitted to HUD and reallocated in
accordance with § 92.714 of this
subpart.
§ 92.774 Grantee responsibilities; written
agreements; onsite inspections; financial
oversight.
(a) Responsibilities. The grantee is
responsible for managing the day-to-day
operations of its HTF program, ensuring
that HTF funds are used in accordance
with all program requirements and
written agreements, and taking
appropriate action when performance
problems arise. The use of subgrantees
or contractors does not relieve the
grantee of this responsibility, and
procurement contracts shall be governed
by 24 CFR 85.36 and 84.44. The
performance of subgrantees and
contractors of the grantee must be
reviewed at least annually. The grantee
must have and follow written policies,
procedures, and systems, including a
system for assessing risk of activities
and projects, and a system for
monitoring entities consistent with this
section, to ensure that the requirements
of this subpart are met.
(b) Executing a written agreement.
Before disbursing any HTF funds to any
entity, the grantee must enter into a
written agreement with that entity. The
written agreement must ensure
compliance with the requirements of
this subpart. Where HOME program
funds are used together with HTF funds,
a single written agreement meeting the
requirements of both § 92.504 and this
subpart may be used to enforce
requirements for both programs.
(c) Provisions in written agreements.
The contents of the agreement may vary
depending upon the role the entity is
asked to assume or the type of project
undertaken. This section details basic
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requirements by role and the minimum
provisions that must be included in a
written agreement.
(1) Subgrantee. The agreement must
require the subgrantee to comply with
the requirements applicable to the
grantee under this subpart. The
agreement between the grantee and the
subgrantee must include:
(i) Use of the HTF funds. The HTF
subgrantee must have a consolidated
plan under 24 CFR part 91, and the
written agreement must require that an
HTF allocation plan be part of the
subgrantee’s consolidated plan (see 24
CFR 91.220(l)(4)). The written
agreement must require that the
selection of projects by eligible
recipients will be in accordance with
the HTF allocation plan. The agreement
must describe the tasks to be performed,
a schedule for completing the tasks
(including a schedule for committing
funds to projects), a budget, and the
period of the agreement. These items
must be in sufficient detail to provide a
sound basis for the grantee to effectively
monitor performance under the
agreement.
(ii) Deadlines. The agreement must
state the time requirements for the
commitment and expenditure of HTF
funds and specify that remaining funds
will be reduced or recaptured by HUD,
as provided in § 92.770.
(iii) Audit. The agreement must state
that an audit of the subgrantee must be
conducted at least annually, in
accordance with § 92.776.
(iv) Program income. The agreement
must state if program income is to be
remitted to the grantee or to be retained
by the subgrantee for additional eligible
activities.
(v) Uniform administrative
requirements. The agreement must
require the subgrantee to comply with
applicable uniform administrative
requirements, as described in § 92.775.
(vi) Other program requirements. The
agreement must require the subgrantee
to carry out each project in compliance
with all Federal laws and regulations
described in §§ 92.760–92.764 of this
subpart.
(vii) Affirmative marketing. The
agreement must specify the subgrantee’s
affirmative marketing responsibilities,
in accordance with § 92.760.
(viii) Requests for disbursement of
funds. The agreement must specify that
the subgrantee may not request
disbursement of funds under the
agreement until the funds are needed for
payment of eligible costs. The amount of
each request must be limited to the
amount needed. Program income must
be disbursed before the subgrantee
requests funds from the grantee.
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(ix) Reversion of assets. The
agreement must specify that upon
expiration of the agreement, the
subgrantee must transfer to the grantee
any HTF funds on hand at the time of
expiration and any accounts receivable
attributable to the use of HTF funds.
(x) Records and reports. The
agreement must specify the particular
records that must be maintained and the
information or reports that must be
submitted in order to assist the grantee
in meeting its recordkeeping and
reporting requirements.
(xi) Enforcement of the agreement.
The agreement must specify remedies
for breach of the provisions of the
agreement. The agreement must specify
that, in accordance with 24 CFR 84.62
or 85.43, suspension or termination may
occur if the subgrantee materially fails
to comply with any term of the
agreement. The grantee may permit the
agreement to be terminated for
convenience, in accordance with 24
CFR 84.61 or 85.44.
(xii) Written agreement. The
agreement must require that before the
subgrantee provides HTF funds to
eligible recipients, first-time
homebuyers, or contractors, the
subgrantee must have a written
agreement that meets the requirements
of this section.
(xiii) Duration of the agreement. The
agreement must specify the duration of
the agreement.
(xiv) Fees. The agreement must
prohibit the subgrantee from charging
servicing, origination, or other fees for
the costs of administering the HTF
program.
(2) Eligible recipient. The agreement
between the grantee and the eligible
recipient selected for funding must
include:
(i) Use of the HTF funds. The
agreement must describe the use of the
HTF funds for the project, including the
tasks to be performed, a schedule for
completing the tasks and project
(including the expenditure deadline),
and a project budget. These items must
be in sufficient detail to provide a sound
basis for the grantee to effectively
monitor performance under the
agreement. If the grantee is providing
operating cost assistance, the written
agreement must include the provisions
required by § 92.731(c).
(ii) Deadlines. The agreement must
state the time requirements for the
commitment and expenditure of HTF
funds and specify that remaining funds
will be reduced or recaptured by HUD,
as provided in § 92.770.
(iii) Audit. The agreement must
specify that the recipient will submit to
the grantee a cost certification
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performed by a certified public
accountant for each project assisted
with HTF funds. The agreement must
specify that the recipient will submit to
the grantee an annual audit performed
on each project assisted with HTF
funds, beginning the first year following
the cost certification and with the final
annual audit occurring the last year of
the affordability period.
(iv) Affordability. The agreement must
specify the affordability period, require
housing assisted with HTF funds to
meet the affordability requirements of
§ 92.746 or § 92.748, as applicable, and
must require repayment of the funds if
the housing does not meet the
affordability requirements for the
specified time period. If the recipient is
undertaking a rental project, the
agreement must establish the initial
rents and the procedures for rent
increases, the number of HTF units, the
size of the HTF units, the designation of
the HTF units as fixed or floating, and
the requirement to provide the address
(e.g., street address and apartment
number) of each HTF unit no later than
the time of project completion. If the
recipient is undertaking
homeownership projects for sale to firsttime homebuyers, in accordance with
§ 92.748, the agreement must establish
the resale requirements that must be
imposed on the housing, the sales price
or the basis upon which the sales price
will be determined, and the disposition
of the sales proceeds.
(v) Project requirements. The
agreement must require the housing to
meet the property standards in
§§ 92.741–92.745 of this subpart, as
applicable, and in accordance with the
type of project assisted upon project
completion. The agreement must also
require owners of rental housing
assisted with HTF funds to maintain the
housing in compliance with § 92.745 of
this part for the duration of the
affordability period, and to comply with
the requirements of § 92.747. The
agreement may permit the recipient to
limit eligibility or give a preference to
a particular segment of the population,
only if the grantee has described any
such limited eligibility or preference in
its consolidated plan; provided,
however, that any limitation or
preference cannot violate
nondiscrimination requirements in
§ 92.760.
(vi) Other program requirements. The
agreement must require the eligible
recipient to carry out each project in
compliance with all Federal laws and
regulations described in §§ 92.760–
92.764 of this subpart.
(vii) Affirmative marketing. The
agreement must specify the recipient’s
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affirmative marketing responsibilities,
as enumerated by the grantee in
accordance with § 92.760.
(viii) Requests for disbursement of
funds. The agreement must specify that
the recipient may not request
disbursement of funds under the
agreement until the funds are needed for
payment of eligible costs. The amount of
each request must be limited to the
amount needed.
(ix) Records and reports. The
agreement must specify the particular
records that must be maintained and the
information or reports that must be
submitted in order to assist the grantee
in meeting its recordkeeping and
reporting requirements. The owner of
rental housing must annually provide
the grantee with information on rents
and occupancy of HTF-assisted units to
demonstrate compliance with § 92.746.
If the rental housing project has floating
HTF units, the owner must provide the
grantee with information regarding unit
substitution and filling vacancies so that
the project remains in compliance with
HTF rental occupancy requirements.
The agreement must specify the
reporting requirements (including
copies of financial statements) to enable
the grantee to determine the financial
condition (and continued financial
viability) of the rental project.
(x) Enforcement of the agreement. The
agreement must provide for a means of
enforcement of the affordable housing
requirements by the grantee and the
intended beneficiaries. This means of
enforcement and the affordability
requirements in § 92.746 must be
imposed by deed restrictions, covenants
running with the land, use restrictions,
or other mechanisms approved by HUD
under which the grantee and
beneficiaries may require specific
performance. In addition, the agreement
must specify remedies for breach of the
provisions of the agreement.
(xi) Duration of the agreement. The
agreement must specify the duration of
the agreement. If the housing assisted
under this agreement is rental housing,
the agreement must be in effect through
the affordability period required by the
grantee under § 92.746. If the housing
assisted under this agreement is
homeownership housing, the agreement
must be in effect at least until
completion of the project and
ownership by the first-time homebuyer.
(xii) Fees. The agreement must
prohibit project owners from charging
origination fees, parking fees, laundry
room access fees, and other fees;
however, rental project owners may
charge reasonable application fees to
prospective tenants.
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(3) First-time homebuyer. When a
grantee provides assistance to a
homebuyer, the written agreement must
include as a minimum:
(i) Use of the HTF funds. The
agreement must conform to the
requirements in § 92.748, including the
limitations on the value of the property,
principal residence requirement, leasepurchase terms, if applicable, and the
resale provisions. The agreement must
specify the amount of HTF funds, the
form of assistance (e.g., grant,
amortizing loan, deferred payment
loan), the use of the funds (e.g.,
downpayment, closing costs), and the
time by which the housing must be
acquired.
(ii) Resale restrictions. The agreement
must specify the resale restrictions
established under § 92.748 for the
specified time period.
(iii) Enforcement of the agreement.
The agreement must provide for a
means of enforcement of the affordable
housing requirements by the grantee.
This means of enforcement and the
affordability requirements in § 92.748
must be imposed by deed restrictions,
covenants running with the land, use
restrictions, or other mechanisms
approved by HUD under which the
grantee and beneficiaries may require
specific performance. In addition, the
agreement must specify remedies for
breach of the provisions of the
agreement.
(d) Onsite inspections. (1) Project
completion. The grantee must perform
an onsite inspection of each HTFassisted project at project completion to
determine that the housing meets the
property standards of §§ 92.741 through
92.744. The inspections must be in
accordance with the inspection
procedures that the grantee establishes
to meet the inspection requirements of
§§ 92.741 through 92.744.
(2) Period of affordability. (i) During
the period of affordability, the grantee
must perform onsite inspections of HTFassisted rental housing buildings to
determine compliance with the ongoing
property standards of § 92.745 and to
verify the information submitted by the
owners in accordance with the
requirements of § 92.746. The
inspections must be in accordance with
the inspection procedures that the
grantee establishes to meet the
inspection requirements of § 92.745.
(ii) The onsite inspections must occur
12 months after project completion and
at least once every 3 years thereafter
during the period of affordability.
(iii) If there are observed deficiencies
for any of the inspectable items
established by the grantee, in
accordance with the inspection
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requirements of § 92.745, a follow-up
onsite inspection must occur within 12
months, or within a reasonable time
frame established by the grantee
depending on the severity of the
deficiency, to verify that all observed
deficiencies have been corrected. Lifethreatening health and safety
deficiencies must be corrected
immediately, in accordance with
§ 92.745(a)(2).
(iv) The property owner must
annually certify to the grantee that each
building in the project is suitable for
occupancy, taking into account State
and local health, safety, and other
applicable codes, ordinances, and
requirements, and the ongoing property
standards established by the grantee to
meet the requirements of § 92.745.
(v) Inspections must be based on a
sufficient sample of units. The grantee
must select the sample. For projects
with one to four HTF-assisted units, the
inspectable items (site, building
exterior, building systems, and common
areas) for each building with HTFassisted units and 100 percent of the
HTF-assisted dwelling units must be
inspected. For projects with more than
four HTF-assisted units, the inspectable
items (site, building exterior, building
systems, and common areas) for each
building with HTF-assisted units and at
least 20 percent of the HTF-assisted
dwelling units in each building, but not
less than four HTF-assisted units in
each project and one HTF-assisted unit
in each building, must be inspected.
(e) Financial oversight. During the
period of affordability, the grantee must
examine regularly (at least annually) the
financial condition of HTF-assisted
rental housing to determine the
continued financial viability of the
housing and must take actions to correct
problems.
§ 92.775 Applicability of uniform
administrative requirements.
The uniform administrative
requirements contained in § 92.505
apply to the HTF.
§ 92.776
Audit.
(a) Audits of the grantee and
subgrantees must be conducted in
accordance with 24 CFR 84.26 and
85.26. The use of HTF grant funds by
the grantee must be audited not less
than annually to ensure compliance
with this subpart. Any financial
statement submitted by the grantee to
HUD must be reviewed by an
independent certified public
accountant, in accordance with
Statements on Standards for Accounting
and Review Services, which is issued by
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67007
the American Institute of Certified
Public Accountants.
(b) The agreement must specify that
the recipient will submit to the grantee
a cost certification performed by a
certified public accountant for each
project assisted with HTF funds. The
agreement must specify that the
recipient will submit to the grantee an
annual audit performed on each project
assisted with HTF funds, beginning the
first year following the cost certification
and with the final annual audit
occurring the last year of the
affordability period.
§ 92.777
Closeout.
HTF funds will be closed out in
accordance with procedures established
by HUD.
§ 92.778
Recordkeeping.
(a) General. Each grantee must
establish and maintain sufficient
records to enable HUD to determine
whether the grantee has met the
requirements of this subpart. At a
minimum, the following records are
needed:
(1) Program records. (i) The forms of
HTF assistance used in the program.
(ii) The subsidy layering guidelines
adopted in accordance with § 92.740.
(iii) If HTF funds are used for housing
for first-time homebuyers, the
procedures used for establishing 95
percent of the median purchase price for
the area in accordance with § 92.749, as
set forth in the Consolidated Plan.
(iv) If HTF funds are used for
acquisition of housing for
homeownership, the resale guidelines
established in accordance with § 92.748,
as set forth in the Consolidated Plan.
(v) Records documenting compliance
with the 24-month commitment
deadline of § 92.770(d)(i).
(vi) Records documenting compliance
with the 10 percent limitation on
administrative and planning costs in,
accordance with § 92.732.
(2) Project records. (i) A full
description of each project assisted with
HTF funds, including the location
(address of each unit), form of HTF
assistance, and the units assisted with
HTF funds.
(ii) The source and application of
funds for each project, including
supporting documentation, in
accordance with 24 CFR 85.20, and
records to document the eligibility and
allowability of the project costs,
including the documentation of the
actual HTF-eligible development costs
of each HTF-assisted unit (through
allocation of costs, if permissible under
§ 92.730(c)) in situations where HTF
funds are used to assist less than all of
the units in a multi-unit project.
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(iii) Records demonstrating that each
rental housing or homeownership
project meets the maximum per-unit
subsidy amount established pursuant to
§ 92.740(a), and the subsidy layering
and underwriting evaluation in
accordance with § 92.740(b).
(iv) Records (e.g., inspection reports)
demonstrating that each project meets
the property standards of §§ 92.740–
92.745 of this part at project completion.
In addition, during the period of
affordability, records for rental projects
demonstrating compliance with the
property standards, and financial
reviews and actions pursuant to
§ 92.774(a).
(v) Records demonstrating that each
family is income-eligible.
(vi) Records demonstrating that each
rental housing project meets the
affordability and income targeting
requirements of § 92.746 for the
required period. Records must be kept
for each family assisted.
(vii) Records demonstrating that each
lease for an assisted rental housing unit
complies with the tenant and
participant protections of § 92.747.
Records must be kept for each family
assisted.
(viii) Records demonstrating that the
purchase price or estimated value after
rehabilitation for each housing unit for
a first-time homebuyer does not exceed
95 percent of the median purchase price
for the area, in accordance with
§ 92.749. The records must demonstrate
how the estimated value was
determined.
(ix) Records demonstrating that each
housing unit for a first-time homebuyer
meets the affordability requirements of
§ 92.748 for the required period.
(x) Records demonstrating that a site
and neighborhood standards review was
conducted for each project that included
new construction of rental housing
assisted under this subpart, to
determine that the site meets the
requirements of § 92.726.
(xi) Records (written agreements)
demonstrating compliance with the
written agreements requirements in
§ 92.774.
(3) Financial records. (i) Records
identifying the source and application
of funds for each fiscal year, including
the annual grant and any reallocation
(identified by Federal fiscal year).
(ii) Records concerning the HTF
Treasury account and local account
required to be established and
maintained by § 92.770, including
deposits, disbursements, balances,
supporting documentation, and any
other information required by the
program disbursement and information
system established by HUD.
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(iii) Records identifying the source
and application of program income and
repayments.
(iv) Records demonstrating adequate
budget control, in accordance with 24
CFR 85.20, including evidence of
periodic account reconciliations.
(4) Program administration records.
(i) Written policies, procedures, and
systems, including a system for
assessing risk of activities and projects,
and a system for monitoring entities
consistent with this section, to ensure
that the requirements of this subpart are
met.
(ii) Records demonstrating
compliance with the applicable uniform
administrative requirements required by
§ 92.775.
(iii) Records documenting required
inspections, monitoring reviews and
audits, and the resolution of any
findings or concerns.
(5) Records concerning other Federal
requirements. (i) Equal opportunity and
fair housing records, as required under
24 CFR part 121.
(A) Data on the extent to which each
racial and ethnic group and singleheaded households (by gender of
household head) have applied for,
participated in, or benefited from, any
program or activity funded in whole or
in part with HTF funds.
(B) Documentation of actions
undertaken to meet the requirements of
24 CFR part 135, which implements
section 3 of the Housing Development
Act of 1968, as amended (12 U.S.C.
1701u).
(ii) Records demonstrating
compliance with the affirmative
marketing procedures and requirements
of § 92.760.
(iii) Records demonstrating
compliance with the lead-based paint
requirements of 24 part 35, subparts A,
B, J, K, M, and R.
(iv) Records demonstrating
compliance with requirements of
§ 92.762 regarding displacement,
relocation, and real property
acquisition.
(v) Records supporting exceptions to
the conflict-of-interest prohibition
pursuant to § 92.763.
(vi) Debarment and suspension
certifications required by 24 CFR parts
24 and 91.
(vii) Records demonstrating
compliance with § 92.764.
(viii) Records demonstrating
compliance with § 85.36(e) regarding
the grantee’s activities related to
minority business enterprise (MBE) and
women’s business enterprise (WBE).
(b) Period of record retention. All
records pertaining to each fiscal year of
HTF funds must be retained in a secure
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location for the most recent 5-year
period, except as provided below.
(1) For rental housing projects,
records may be retained for 5 years after
the project completion date, except that
records of individual tenant income
verifications, project rents, and project
inspections must be retained for the
most recent 5-year period, until 5 years
after the affordability period terminates.
(2) For homeownership housing
projects, records may be retained for 5
years after the project completion date,
except for documents imposing resale
restrictions that must be retained for 5
years after the affordability period
terminates.
(3) Written agreements must be
retained for 5 years after the agreement
terminates.
(4) Records covering displacements
and acquisitions must be retained for 5
years after the date by which all persons
displaced from the property and all
persons whose property is acquired for
the project have received the final
payment to which they are entitled, in
accordance with § 92.762.
(5) If any litigation, claim, negotiation,
audit, monitoring, inspection, or other
action has been started before the
expiration of the required record
retention period, records must be
retained until completion of the action
and resolution of all issues that arise
from it, or until the end of the required
period, whichever is later.
(c) Access to records. (1) The grantee
must provide citizens, public agencies,
and other interested parties with
reasonable access to records, consistent
with applicable State and local laws
regarding privacy and obligations of
confidentiality.
(2) HUD and the Comptroller General
of the United States, and any of their
representatives, have the right of access
to any pertinent books, documents,
papers, or other records of the grantee,
subgrantees, and recipients, in order to
make audits, examinations, excerpts,
and transcripts.
§ 92.779
Performance reports.
Each grantee must develop and
maintain a system to track the use of its
HTF funds, and submit annual
performance and management reports
on its HTF program in such format and
at such time as HUD may prescribe.
These reports must describe the
program’s accomplishments, and the
extent to which the grantee complied
with its approved allocation plan and
the requirements of this subpart. HUD
will make the performance and
management reports publicly available.
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reduction for the entity that would
otherwise apply.
Performance Reviews and Sanctions
§ 92.780
Accountability of recipients.
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The grantee shall review each
recipient to determine compliance with
the requirements of this subpart and the
terms of the written agreement in
accordance with the grantee’s policies,
procedures, and systems established
pursuant to § 92.774(a).
(a) Misuse of funds. (1)
Reimbursement requirement. If a
recipient of HTF assistance is
determined to have used HTF funds in
a manner that is materially in violation
of the requirements of this subpart or
any requirements or conditions under
which the funds were provided, the
grantee must require that, within 12
months after the determination of such
misuse, the recipient reimburse the
grantee for such misused amounts and
return to the grantee any such amounts
that remain unused or uncommitted for
use. The reimbursement is in addition
to any other remedies that may be
available under law.
(2) Determination. The grantee or
HUD may make the determination,
provided that:
(i) The grantee provides notification
and opportunity for discretionary
review to HUD; and
(ii) HUD does not subsequently
reverse the determination.
(b) Reduction for failure to obtain
return of misused funds. (1) If, in any
year, a grantee fails to obtain
reimbursement or return of the full
amount required to be reimbursed or
returned to the grantee during the year,
the amount of the grant for the grantee
for the succeeding year will be reduced
by the amount by which the amounts
required to be reimbursed or returned
exceed the amount actually reimbursed
or returned.
(2) In any case in which a failure to
obtain reimbursement or return occurs
during a year immediately preceding a
year in which HTF grants will not be
made, the grantee shall pay to HUD, for
reallocation among the other grantees,
an amount equal to the amount of the
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§ 92.781
Performance reviews.
(a) General. HUD will review the
performance of each grantee in carrying
out its responsibilities under this
subpart whenever determined necessary
by HUD, but at least annually. In
conducting performance reviews, HUD
will rely primarily on information
obtained from the grantee’s records and
reports, findings from onsite
monitoring, audit reports, and
information generated from the
disbursement and information system
established by HUD. Where applicable,
HUD may also consider relevant
information pertaining to a grantee’s
performance gained from other sources,
including citizen comments, complaint
determinations, and litigation. Reviews
to determine compliance with specific
requirements of this subpart will be
conducted as necessary, with or without
prior notice to the grantee. Onsite
comprehensive performance reviews
under the standards in paragraph (b) of
this section will be conducted after
prior notice to the grantee.
(b) Standards for comprehensive
performance review. A grantee’s
performance will be comprehensively
reviewed periodically, as prescribed by
HUD, to determine whether the grantee
has committed and expended the HTF
funds as required by § 92.770; has met
the requirements of this subpart,
particularly eligible activities, income
targeting, affordability, and property
standards; has awarded the funds in
accordance with its HTF plan and
requirements of this subpart; has
reviewed its subgrantees and recipients
to determine whether they have
satisfied the requirements of this
subpart and the terms of their written
agreements; and has met its
performance measures in its
consolidated plan.
§ 92.782
Corrective and remedial actions.
The corrective and remedial actions
contained in § 92.551 apply to the HTF,
except paragraph (c)(1)(viii).
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67009
§ 92.783 Notice and opportunity for
hearing; sanctions.
(a) If HUD finds after reasonable
notice and opportunity for hearing that
a grantee has substantially failed to
comply with any provision of this
subpart, and until HUD is satisfied that
there is no longer any such failure to
comply:
(1) HUD shall reduce the funds in the
grantee’s HTF account by the amount of
any expenditures that were not in
accordance with the requirements of
this subpart or require the grantee to
repay to HUD any amount of the HTF
grant that was not used in accordance
with the requirements of this subpart;
and
(2) HUD may do one or more of the
following:
(i) Prevent withdrawals from the
grantee’s HTF account for activities
affected by the failure to comply;
(ii) Restrict the grantee’s activities
under this subpart to activities or
recipients not affected by the failure to
comply;
(iii) Remove the State from
participation in allocations or
reallocations of funds made available
under §§ 92.710 through 92.714 of this
part; or
(iv) Terminate any HTF assistance to
the grantee. HUD may, on due notice,
suspend payments at any time after the
issuance of a notice of opportunity for
hearing pursuant to paragraph (b)(1) of
this section, pending such hearing and
a final decision, to the extent that HUD
determines such action to be necessary
to preclude the further expenditure of
funds for activities affected by the
failure to comply.
(b) Proceedings. When HUD proposes
to take action pursuant to this section,
the respondent in the proceedings will
be the grantee. Proceedings will be
conducted in accordance with 24 CFR
part 26.
Dated: September 28, 2010.
Shaun Donovan,
Secretary.
[FR Doc. 2010–27069 Filed 10–28–10; 8:45 am]
BILLING CODE P
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[Federal Register Volume 75, Number 209 (Friday, October 29, 2010)]
[Proposed Rules]
[Pages 66978-67009]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-27069]
[[Page 66977]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 91 and 92
[Docket No. FR-5246-P-02]
RIN 2506-AC30
Housing Trust Fund
AGENCY: Office of the Assistant Secretary for Community Planning and
Development, HUD.
ACTION: Proposed rule.
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SUMMARY: The Housing and Economic Recovery Act of 2008 establishes a
Housing Trust Fund (HTF) to be administered by HUD. The purpose of the
HTF is to provide grants to State governments to increase and preserve
the supply of rental housing for extremely low- and very low-income
families, including homeless families, and to increase homeownership
for extremely low- and very low-income families. This proposed rule
submits, for public comment, the regulations that will govern the HTF.
DATES: Comment due date: December 28, 2010.
ADDRESSES: Interested persons are invited to submit comments regarding
this rule to the Regulations Division, Office of General Counsel,
Department of Housing and Urban Development, 451 7th Street, SW., Room
10276, Washington, DC 20410-0500. Communications must refer to the
above docket number and title. There are two methods for submitting
public comments. All submissions must refer to the above docket number
and title.
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 20410-0001.
Electronic Submission of Comments. Interested persons may
submit comments electronically through the Federal eRulemaking Portal
at https://www.regulations.gov. HUD strongly encourages commenters to
submit comments electronically. Electronic submission of comments
allows the commenter maximum time to prepare and submit a comment,
ensures timely receipt by HUD, and enables HUD to make them immediately
available to the public. Comments submitted electronically through the
https://www.regulations.gov Web site can be viewed by other commenters
and interested members of the public. Commenters should follow the
instructions provided on that site to submit comments electronically.
Note: To receive consideration as public comments, comments must
be submitted through one of the two methods specified above. Again,
all submissions must refer to the docket number and title of the
rule.
No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
Public Inspection of Public Comments. All properly submitted
comments and communications submitted to HUD will be available for
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the
above address. Due to security measures at the HUD Headquarters
building, an advance appointment to review the public comments must be
scheduled by calling the Regulations Division at 202-708-3055 (this is
not a toll-free number). Individuals with speech or hearing impairments
may access this number through TTY by calling the Federal Information
Relay Service at 800-877-8339. Copies of all comments submitted are
available for inspection and downloading at https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Marcia Sigal, Office of Community
Planning and Development, Department of Housing and Urban Development,
451 7th Street, SW., Room 7162, Washington, DC 20410; telephone number
202-402-3002 (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 800-877-8389.
SUPPLEMENTARY INFORMATION:
I. Background
The Housing and Economic Recovery Act of 2008 (Pub. L. 110-289,
approved July 30, 2008) (HERA) was major housing legislation enacted to
reform and improve the regulation of Fannie Mae and Freddie Mac, the
government-sponsored enterprises (GSEs), strengthen neighborhoods
hardest hit by the foreclosure crisis, enhance mortgage protection and
disclosures, and maintain the availability of affordable home loans.
The reform of the GSEs is provided in the Federal Housing Finance
Regulatory Reform Act of 2008, which is found in Division A, Title I of
HERA. Section 1131 of the GSE-reform portion of HERA amended the
Federal Housing Enterprises Financial Safety and Soundness Act of 1992
(12 U.S.C. 4501 et seq.) (FHEFSSA) to add a new section 1337 entitled
``Affordable Housing Allocations'' and a new section 1338 entitled
``Housing Trust Fund.''
Section 1337 of FHEFSSA provides for the HTF to be funded with
amounts allocated by Fannie Mae and Freddie Mac. Proceeds equal to 4.2
basis points (.042%) of the GSEs' new mortgage purchases were to be
partially diverted to fund the HTF. However, because the GSEs
experienced significant declines in their respective capital reserves
in 2008, under the authority granted to the Federal Housing Finance
Agency (FHFA), the GSE's oversight agency, by Section 1367 of FHEFSSA,
Fannie Mae and Freddie Mac were placed in conservatorship in September
2008. Under Section 1337 of FHEFSSA, the Director of the FHFA has the
authority to suspend Fannie Mae's and Freddie Mac's contributions to
the HTF if such contributions were to have an adverse impact on the
financial stability of the GSEs. Shortly after being placed in
conservatorship, the GSEs were instructed by the FHFA to suspend such
contributions. However, Section 1338 of FHEFSSA provides that the HTF
may be funded with amounts appropriated, transferred, or credited to
the HTF under other provisions of law. Accordingly, HUD is proceeding
with regulatory implementation of the HTF in anticipation of future
funding through sources other than GSE proceeds.
Congress authorized the HTF with the stated purpose of: (1)
Increasing and preserving the supply of rental housing for extremely
low-income (ELI) families with incomes between 0 and 30 percent of area
median income and very low-income (VLI) families with incomes between
30 and 50 percent of area median income, including homeless families,
and (2) increasing homeownership for ELI and VLI families. HUD's
periodic reports to Congress on worst-case needs for affordable rental
housing document that shortages of affordable rental housing for ELI
and VLI families have grown increasingly more severe. A household
defined as experiencing worst-case housing needs means that the
household has an income at or below 50 percent of the area median
income, receives no housing assistance, and has a severe rent burden
(paying more than half of its income for rent) and/or lives in severely
inadequate conditions (e.g., incomplete plumbing).
As of 2007, the combined number of ELI and VLI renters with worst-
case housing needs was 5.9 million, or 37 percent of all ELI and VLI
renters (15.9 million). Furthermore, 51 percent of ELI and VLI renters
who lack housing assistance have worst-case housing needs. When the
2007 data are broken down further, worst-case needs
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occurred to 47 percent of all ELI renters and 73 percent of ELI renters
lacking housing assistance. By comparison, 24 percent of all VLI
renters and 28 percent of VLI renters lacking housing assistance have
worst-case housing needs. ELI renters are particularly burdened with
severe housing problems.
There is a shortage of low-cost rental units, as builders and
housing providers are unable to construct, finance, and operate a
sufficient supply of rental housing affordable to ELI and VLI
households. The result is that in 2007, for every 100 ELI renters
nationwide, only 44 rental units were both affordable and available for
rent or currently occupied by households in this income range. HUD
notes that more than half of the 3.8 million ELI renters who occupied
affordable units in 2007 were able to do so only because they reported
receiving government rental assistance, such as from the public
housing, project-based Section 8 or Section 202/811 programs, and the
housing choice voucher program. Other units that would have been
affordable may have been occupied by higher-income households. For
every 100 VLI and ELI renters, on average, there were only 74
affordable units available. The HTF will provide funds to produce
additional units affordable to ELI and VLI households with the greatest
need, thus increasing the supply and reducing the most critical
component of the existing shortage.
Housing Trust Fund--Formula Allocation
Section 1338 of FHEFSSA directs HUD to establish, through
regulation, the formula for distribution of amounts made available for
the HTF. The statute specifies that only certain factors are to be part
of the formula, and assigns priority to certain factors. HUD's proposed
formula for the allocation of HTF funds was submitted for public
comment in a proposed rule published on December 4, 2009 (74 FR 63938).
The allocation formula will be renumbered and published with the final
program rule in Sec. Sec. 92.710-92.714.
Housing Trust Fund--Administration of the Fund
In addition to the statutory direction to establish by regulation a
formula for the allocation of HTF funds, section 1338 of FHEFSSA
directs HUD to establish and manage the HTF, the purpose of which is to
provide grants to States for use to: (1) Increase and preserve the
supply of rental housing for ELI and VLI families, including homeless
families; and (2) increase homeownership for ELI and VLI families.
Section 1338 of FHEFSSA also directs HUD to establish regulations to
administer the HTF, and this rule proposes the regulations that will
govern the HTF.
II. This Proposed Rule
New 24 CFR Part 92 Subpart N
HUD proposes to codify the HTF regulations in a new subpart N of 24
CFR part 92. Part 92 contains the regulations for HUD's HOME Investment
Partnerships program (HOME program). Established by the National
Affordable Housing Act of 1992, the HOME program is the largest Federal
block grant program that produces affordable housing for VLI
households. The HOME program is similar in most aspects to the proposed
HTF. Each year, the HOME program allocates approximately $2 billion to
States and more than 600 localities nationwide. Since it inception in
1992, the HOME program has produced approximately one million units of
affordable rental and homeownership units. Both programs provide
funding through a formula allocation for rental housing production and
homeownership. The HOME program provides formula grants that
communities use, often in partnership with local nonprofit groups, to
fund a wide range of activities that build, buy, and/or rehabilitate
affordable housing units for rent or homeownership. The HTF will
operate in substantially the same manner, with formula grants to States
used to develop affordable housing units for rent or homeownership. In
addition, the grant activities in both programs require the same
grantee administration and HUD oversight functions.
While the HTF provides new resources targeted to producing
affordable housing primarily for ELI households, an entirely new or
different set of program regulations is not necessary in order to
implement the statutory requirements of the HTF. Many of the program
requirements applicable to the HOME program are applicable to the HTF.
Further, each State is a participating jurisdiction in the HOME
program, and all States and their designated housing entities will be
the HTF grantees. Accordingly, it is HUD's position that codifying the
HTF regulations in part 92 is a logical step that will enable HUD to:
(1) Provide a coordinated ``menu'' of production programs that State
and local governments can use to address the affordable housing needs
of low-, very low- and extremely low-income households, including those
with special needs, in their communities, and (2) simplify and
streamline program requirements for grantees, and avoid making grantees
create new or separate structures to administer HTF funds.
Additionally, HUD believes that many grantees will use HTF funds in
combination with HOME program funds to develop mixed-income housing,
and many of the applicable requirements are the same for both programs
(e.g., administrative requirements; monitoring, site and neighborhood
standards; and affirmative marketing). This approach is expected to
expedite the expenditure of HTF funds and deliver more affordable
housing sooner to households and communities.
HUD is specifically soliciting input from HTF grantees and
interested parties on HUD's proposed coordination of HOME program and
HTF regulations, as well as on additional or alternative ways to better
coordinate and use HTF funds with funding from other Federal, State,
local programs, or private sources typically used to produce mixed-
income affordable housing developments.
The Department is embarking on a number of initiatives to
incorporate and promote energy efficiency, transit-oriented
development, and other sustainability features in the development of
units and projects assisted with HUD funds. These efforts will help
reduce the impact of the property on the environment and promote a
healthier environment for building occupants, as well as reduce the
costs of utilities to help make these units affordable. In addition,
facilitating the inclusion of affordable housing for ELI and VLI
households in transit-oriented development will help ensure that
affordable housing is located in areas that are within walking distance
of transit facilities and more easily accessible to essential area
destinations such as jobs, and educational, retail, and health
services. The HTF implements the Department's commitment to further
sustainable affordable housing available for ELI households, by
requiring energy and water-efficiency features in all HTF-assisted
units. In addition, the proposed rule includes specific funding
commitment definitions that address the need to commit HTF funds early
in the development process of a Transit-Oriented Development (TOD)
project.
HUD's efforts to promote energy-efficient homes directly reflect
the Department's energy goal contained in its Fiscal Year (FY) 2010-15
Strategic Plan to ``promote energy-efficient buildings and location-
efficient communities that are healthy, affordable, and diverse.'' The
proposed
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energy and water efficiency requirements for the HTF are similar to
those of several HUD energy-efficiency and green initiatives, such as
the ``Green'' Community Housing Development Organization Notice Of
Funding Availability (HOME Competitive Reallocation of CHDO Funds to
Provide for Energy Efficient and Environmentally Friendly Housing for
Low-Income Families), the Self-Help Homeownership Opportunity Program
(SHOP) NOFA, and the Neighborhood Stabilization Program (NSP)-2 NOFA.
Fostering the development of sustainable, transit-oriented, mixed-
use communities with HTF funds is consistent with the Livability
Principles established by the Partnership for Sustainable Communities,
an interagency collaboration between HUD, the Department of
Transportation (DOT), and the Environmental Protection Agency (EPA).
This partnership aims to coordinate Federal housing, transportation,
and other infrastructure investments to provide communities with the
resources they need to build more livable and sustainable communities,
promote equitable development, and improve access to affordable
housing. Each of the three agencies is responsible for incorporating
the Livability Principles into its policies and programs, to the
maximum extent feasible.
Energy-efficiency and transit-oriented development definitions and
property standards for the HTF can be found in Sections 92.702 and
92.741-92.745, respectively. The following sections highlight key
provisions of the HTF regulations established in accordance with
section 1338 of FHEFSSA.
General Provisions
Sections 92.701-92.703 of new subpart N sets forth the general
provisions applicable to the HTF.
Section 92.701 provides an overview of the statutory basis for the
HTF, and identifies which subparts of part 92 are applicable to the
HTF. To the extent that other sections or subparts of part 92 are
applicable to the HTF, Sec. 92.701 provides that references to
``HOME'' mean ``HTF'' and that references to ``participating
jurisdictions'' mean ``HTF grantees.''
Definitions
Section 92.702 incorporates terms defined in the HOME program
regulations (24 CFR 92.2) and defines terms that are specifically
applicable to the HTF. Key definitions applicable to the HTF include
the following:
Commitment. The definition of ``commitment'' implements the
statutory requirement that HTF funds must be used or committed within 2
years of the formula allocation (grant award). Grantees must commit
funds to a specific project pursuant to legally binding agreements that
meet the requirements of written agreements in Sec. 92.774. To
facilitate TOD projects, the definition of ``commitment'' permits a
unit of general local government to acquire the land for a TOD project
in advance of having specific project plans. The definition of transit-
oriented commitment would allow the acquisition of property without the
requirement of having a specific project. The unit of general local
government has 36 months from the date of acquisition of the property
for a TOD project to commit additional funds to a specific project on
the property. To discourage the use of this provision for acquisition
of property for any purpose other than the development of HTF-assisted
units as part of transit-oriented development, the local government
where the development is to take place is required to hold title to the
property. If no commitment to a specific HTF-assisted project occurs
within 36 months from date of the acquisition of the property, the
amount of HTF funds used to pay for the property, or the current value
of the property, whichever is greater, must be repaid to the grantee's
HTF account. The amount repaid will be prorated in proportion to the
amount of HTF funds to total funds used to purchase the land.
Energy Efficiency. Several definitions are included in this rule
that will help facilitate the development of energy-efficient
residential units, including definitions of ENERGY STAR-Qualified New
Homes and WaterSense-labeled products.
Grantee. The statute allows a State or State-designated entity to
receive the HTF formula allocations. Each State may decide which agency
within the State will be the HTF grantee. For example, in many States,
there are multiple State agencies, as well as a State housing finance
agency, that administer housing programs.
Recipient. An HTF recipient means an entity that receives HTF funds
solely as a developer or owner of HTF-assisted housing. Section
1338(c)(9) of FHEFSSA requires an eligible recipient of a grant from a
State's HTF formula allocation to have demonstrated experience and
capacity to conduct an eligible activity, as evidenced by its ability
to: (i) Own, construct, rehabilitate, manage, or operate an affordable
multifamily rental housing development; (ii) design, construct,
rehabilitate, or market affordable housing for homeownership; or (iii)
provide forms of assistance, such as down payments, closing costs, or
interest-rate buy-downs for purchasers.
Section 1338(c)(9) of FHEFSSA also requires an eligible recipient
to demonstrate the ability and financial capacity to undertake, comply,
and manage the eligible activity; demonstrate its familiarity with the
requirements of any other Federal, State, or local housing program that
will be used in conjunction with such grant amounts to ensure
compliance with all applicable requirements and regulations of such
programs; and make such assurances to the grantee that it will comply
with the HTF requirements. These conditions of eligibility imposed on
recipients are incorporated in the definition of ``recipient'' found in
Sec. 92.702.
State. The term ``State'' means any State of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth
of the Northern Mariana Islands, Guam, the Virgin Islands, and American
Samoa. (See 1338 (a)(1) of FHEFSSA.)
State-Designated Entity. The statute permits a State to use a
``State-designated entity'' to receive its formula allocation.
Permissible designees for the HTF State-designated entity are: A State
housing finance agency, a Tribally designated housing entity (as such
term is defined in section 4 of the Native American Housing Assistance
and Self-Determination Act of 1997 (25 U.S.C. 4103)), or any other
qualified instrumentality of the State. (See 1338(c)(2) of FHEFSSA.)
Subgrantee. An HTF grantee may choose to distribute HTF funds
through one or more subgrantees. A subgrantee may be a State agency or
a unit of general local government. All local governments that are HTF
subgrantees must have an approved consolidated plan under 24 CFR part
91.
Allocation Formula
Reallocations
Section 92.714 describes the conditions under which HUD will
reallocate HTF funds. Consistent with the statute, funds will be
reallocated by formula in the following fiscal year. (See section
1338(c)(10) and (d) of FHEFSSA.)
Participation and Submission Requirements; Distribution of Assistance
Section 92.720 requires the State to notify HUD of its intent to
participate in the HTF program and to have a consolidated plan that
contains its HTF allocation plan required by FHEFSSA. (See section
1338(c)(8) of FHEFSSA.)
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Allocation Plan
Section 1338(c)(5)(A) of FHEFSSA provides that for a grantee to
receive an HTF grant, the grantee must submit an HTF allocation plan,
which must: (1) Describe the distribution of the grant; (2) be based on
priority housing needs, as determined by the grantee in accordance with
the HTF regulations; (3) comply with the statutory requirements
regarding activities eligible for HTF funding; and (4) include
performance goals that comply with HUD's HTF regulations. HUD has
chosen to implement the requirement for an HTF allocation plan by
amending its regulations in 24 CFR part 91 to include these
requirements in the consolidated plans of grantees and, where
applicable, subgrantees. The decision to include the HTF allocation
plan in the consolidated plan is consistent with the statutory
requirement in section 105(a) of the Cranston-Gonzalez National
Affordable Housing Act (12 U.S.C. 12705) that HUD may only provide
assistance directly to a jurisdiction if the jurisdiction submits a
comprehensive housing affordability strategy (the basic framework of
the consolidated plan) to HUD and the strategy is approved by HUD.
Sections 91.220 and 91.320 of the consolidated plan regulation are
amended to reflect the HTF allocation plan requirements.
In addition, section 1338(c)(5)(B) of FHEFSSA directs each State,
in establishing its HTF allocation plan, to: (1) Notify the public of
the establishment of the plan; (2) provide an opportunity for public
comments regarding the plan, (3) consider any public comments received
on the plan, and (4) make the completed plan available to the public.
Section 1338(c)(8)(B) of FHEFSSA requires grantees to comply with the
requirements of laws related to public participation, including laws
related to consolidated plans. Rather than establish new citizen
participation requirements, Sec. 92.720 directs States to include the
HTF allocation plan in the consolidated plan and follow the citizen
participation requirements found in the consolidated plan regulations
in 24 CFR part 91.
Section 1338(c)(5)(C) of FHEFSSA also provides that a State's
allocation plan must disclose the requirements that the State will
impose on eligible recipients that apply for grants under the State's
formula allocation. Section 1338(c)(5)(C) provides that such
requirements must include: (1) A description of the eligible activities
to be conducted using such assistance; and (2) a certification from the
eligible recipient that any housing units assisted will comply with HTF
requirements under this section. The statutory requirements are
implemented in Sec. Sec. 91.220 and 91.320.
In the case of HTF-assisted rental housing projects, the plan must
provide priority to projects that have Federal, State, or local
project-based rental assistance so that rents are affordable to ELI
families, and take into consideration the duration of the HTF-assisted
units' affordability period. (See 1338 (g)(2)(D) of FHEFSSA.) The HTF
allocation plan must consider the merits of the application in meeting
the priority housing needs of the State. The rule provides flexibility
to allow each grantee to include incentives and priorities in its HTF
allocation plan that are appropriate to the communities where housing
developed with HTF funds will be located. For example, incentives to
promote green building, the use of renewable building materials, or
sustainable development, as defined by the grantee, may be included in
its HTF allocation plan.
HUD specifically requests comments on how it may provide incentives
to encourage the use of HTF funds to develop housing affordable to ELI
households that is also accessible to transit and employment centers.
HUD is also seeking comments on what program structure or features will
encourage or assist States in allocating HTF funding in accordance with
metropolitan and regional land use and transportation plans. Similarly,
HUD is interested in hearing about how it can provide incentives to HTF
grantees and recipients to incorporate ``green building'' and
``sustainability'' features in the development of HTF-assisted
projects, such as the use of renewable building materials or other
techniques that reduce the impact of the property or site on the
environment and promote a healthier environment for building occupants.
In addition, HUD specifically requests comments on how it could include
standards or minimum requirements in the HTF regulations for specific
``green building'' or sustainable development features.
Distribution of Assistance: HTF Grantees, Subgrantees, and Recipients
Section 92.725 describes the way HTF funds will flow to the
communities and recipients, as well as the participation and submission
requirements for grantees receiving an HTF allocation. For each year
that funds are made available for the HTF, a formula grant will be
provided to each State. The State or State-designated entity is
responsible for distributing HTF funds throughout the State according
to its assessment of the priority housing needs, as identified in the
State's approved consolidated plan, and in accordance with any
priorities that may be established by HUD in allocating grants to the
States in accordance with the formula. HUD will issue notices in the
future as necessary to communicate policy priorities for the HTF.
FHEFSSA allows a State to choose to be the HTF grantee (to receive
and administer its grant) or to choose a qualified State-designated
entity to be the HTF grantee. In addition, the HTF grantee may choose
to directly fund projects (in accordance with the grantee's HTF
allocation plan in its consolidated plan), or a grantee may choose one
or more subgrantees (to administer the HTF funds and fund projects). A
subgrantee may be a State agency or a unit of general local government
that has submitted a consolidated plan under 24 CFR part 91. The
subgrantee must include an HTF allocation plan in its consolidated plan
(see 24 CFR 91.220(l)(4)) and must select projects by eligible
recipients in accordance with its HTF allocation plan.
Eligible recipients of HTF funds must meet statutorily prescribed
criteria, as promulgated through this rulemaking. An HTF recipient
means an organization, agency, or other entity (including a for-profit
entity or a nonprofit entity) that receives HTF assistance from a
grantee to be an owner or developer of an HTF-assisted project. In
order to qualify as an eligible recipient, the entity must demonstrate
its ability and financial capacity to manage the eligible activity in
compliance with all applicable HTF requirements. In addition, the
entity must demonstrate familiarity with the requirements of other
Federal, State, or local housing programs that may be used in
conjunction with HTF funds to ensure compliance with all applicable
requirements and regulations of such programs. An eligible HTF
recipient must have demonstrated experience in housing construction or
rehabilitation of rental housing or housing for homeownership; if it is
to be the owner, it must demonstrate experience in the management and
operation of affordable multifamily rental housing.
Income Targeting
Based on tabulations of American Housing Survey data, HUD estimates
that during 2007, there were about 9.2 million ELI renter households
nationwide, but only about 4.2 million units with rents affordable and
available to this income group. As a result, 64.5
[[Page 66982]]
percent of ELI renters were severely rent-burdened (paid more than 50
percent of their income for rent) or lived in severely inadequate
housing. HUD notes that more than half (51 percent) of the 3.8 million
ELI renters who occupied affordable units in 2007 were able to do so
only because they reported receiving government rental assistance, such
as from the public housing, project-based Section 8 or Section 202/811
program, and the housing choice voucher program.
By contrast, of the 6.7 million renters with incomes between 30 and
50 percent of area median income (VLI renters), only 23.6 percent had
severe rent burdens in 2007. Furthermore, there were about 7.8 million
units with rents affordable and available to VLI renters, and about one
million of these units were assisted.
FHEFSSA requires that not less than 80 percent of the HTF grant
shall be used to produce rental housing \1\ and, of this amount,
section 1338(c)(7)(A) of FHEFSSA requires that not less than 75 percent
shall be used for the benefit only of ELI families or families with
incomes at or below the poverty line (as such term is defined in
section 673 of the Omnibus Budget Reconciliation Act of 1981 (42 U.S.C.
9902), including any revision required by such section), whichever is
the greater, applicable to a family of the size involved, and not more
than 25 percent be used for the benefit only of VLI families.
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\1\ The establishment of a minimum of 80 percent of HTF funds to
be used for rental housing is derived by reading two provisions of
the statute. Section 1338(c)(10) provides that of the aggregate
amount allocated to a State or State-designated entity under section
1338, not more than 10 percent shall be used for activities under
section 1338(c)(7)(B), which are the homeownership activities.
Therefore, under section 1338, not more than 10 percent of funds can
be used for homeownership, leaving 90 percent available for the
production, preservation, and rehabilitation of rental housing.
Section 1338(c)(10)(D)(iii) limits the amount that a State or State-
designated entity may use for administrative costs for carrying out
the HTF program, to a maximum of 10 percent. Therefore, the minimum
amount available for activities under section 1338(c)(7)(A) (rental
housing production) is 80 percent.
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Under the rulemaking authority of section 1338(g) of FHEFFSA, which
provides that ``The Secretary shall issue regulations to carry out this
section [section 1338],'' the Secretary has the discretion to elaborate
upon, clarify, define and, in some instances, add to the statutory
program requirements and criteria. With respect to the allocation of
funds for ELI families or families with incomes below the poverty line,
the Secretary has the discretion to direct grantees, in any given year,
to use more than 75 percent of the HTF funds for the benefit only of
ELI families or families with incomes at or below the poverty line,
whichever is greater. For the first year in which HTF funds are made
available, the rule provides that of the amount made available for
rental and homeownership housing, grantees are to expend 100 percent of
HTF funds to provide rental and homeownership housing for ELI
households. The Secretary shall publish subsequent income targeting
requirements when HUD's allocation amounts to States are published.
Sections 92.736 and 92.737 set forth the income targeting requirements,
as required by section 1338(c)(7) of FHEFSSA, for HTF-assisted rental
units and homeownership units, respectively.
HUD recognizes that subsidizing the development and operations of
rental units targeted to ELI households can be extremely challenging.
The resources available to develop rental units targeted to ELI
households are scarce, and the financing mechanisms that are often
required to develop financially viable and sustainable projects with
units targeted to ELI households are complex and dependent on multiple
sources of both public and private funding. In implementing the HTF,
HUD's goal is to provide resources and a program structure that will
help States and local governments, as well as private and nonprofit
developers to develop energy-efficient rental housing that is
affordable to ELI households. Toward that end, Section 8 project-based
vouchers may be made available through appropriations. If Section 8
project-based vouchers are made available, HTF grantees will allocate
the vouchers concurrently with HTF funding to specific projects. These
Section 8 project-based vouchers will be administered in accordance
with the rules applicable to that program. The vouchers will help pay
for the operating costs of units constructed with HTF funds. However,
an HTF-assisted unit that has a Section 8 project-based voucher
attached to it may not also receive HTF operating cost assistance.
HUD is interested in hearing from developers of affordable rental
housing for ELI families about the ways to reduce the cost of
subsidizing this housing. What specific measures can the Department
undertake to help reduce the cost of producing rental units targeted to
ELI families? Similarly, what approaches will help to reduce operating
costs and reduce the need for ongoing operating subsidies? For example,
to what extent do energy-efficiency measures reduce the costs of
operations of these units--for both the tenants and project owners? To
what extent do tax abatements significantly reduce operating costs? If
HTF funds are used to pay for the entire development cost of these
rental units, would the absence of debt significantly impact the
financial viability of HTF-assisted units?
If grantees choose to undertake homeownership activities for ELI
households, HUD expects that grantees will ensure that the underwriting
for these units and homebuyer counseling address the precarious
financial conditions that ELI households usually experience. Shared
equity models and other types of homeownership program designs, such as
lease purchase models, may be more appropriate for HTF-assisted
homeownership activities. The Department is seeking comments from the
public about appropriate and effective approaches for homeownership
programs for ELI households. What specific measures can the Department
undertake to help reduce the cost of homeownership targeted to ELI
families? Similarly, what approaches will help to reduce operating
costs for ELI homeowners? For example, to what extent do energy-
efficiency measures reduce the costs of operations of these units?
Eligible and Prohibited Activities
Sections 92.730-92.735 reflect the statutory requirements that
govern eligible and prohibited activities, eligible project costs, and
planning and administrative costs. Allowable and prohibited fees are
also addressed in these sections.
Eligible Activities
Section 92.730 describes the HTF-eligible activities. Section
1338(c)(7) of FHEFSSA provides that HTF funds may be used for
assistance for the production, preservation, rehabilitation, and
operating costs of rental housing. The Department views the HTF as
primarily a production program meant to add units to the supply of
affordable housing for ELI and VLI households. While the statute allows
HTF funds to be used for operating costs, it does not provide a limit.
In order to achieve the goal of using HTF funds primarily for the
production of new affordable units, the Department proposes to limit
the amount of HTF funds that may be used for operating cost assistance
to 20 percent of each annual grant. In establishing this limit, the
Department assumes that HTF funds will be combined with other sources
to produce and preserve affordable units, mostly in mixed-income
projects. The Department also considered various analyses with
different scenarios, including different operating cost assistance caps
and
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different local development practices. HUD anticipates that project-
based vouchers will be made available to subsidize operating costs in
HTF-assisted units. However, if vouchers or other forms of project-
based assistance are not available for the HTF-assisted unit, it may be
necessary to use HTF funds for operating cost assistance. This limit
would make sufficient funds available to pay for operating cost
assistance if needed, while ensuring that additional affordable units
continue to be produced with HTF funds. The 20 percent limit applies to
each annual grant. Therefore, grantees will have discretion in how they
allocate funds to each project's development and operating costs.
Grantees may apply the 20 percent limit to all projects or adjust it
accordingly, as long as no more than 20 percent of each annual grant is
used for operating cost assistance.
Analyses of the use of HTF funds for both development and operating
subsidy show that the use of HTF funds for operating cost assistance
could very quickly consume each State's formula allocation and would
deter the use of HTF funds for production of additional units, as well
as preservation and rehabilitation of units, targeted to ELI
households--the primary purpose of the HTF. If Section 8 Project-Based
Vouchers are made available to HTF projects for HTF-assisted units,
limiting the amount of HTF funds available for operating cost
assistance will not hinder implementation of the HTF.
Nonetheless, HUD is seeking comments regarding how imposing this or
any restriction on the use of HTF funds for operating cost assistance
might enhance or hinder the ability of a grantee to maximize the number
of units affordable to ELI families produced, by new construction or
acquisition, with HTF funds.
Section 1338(c)(7)(B) provides that the production, preservation,
and rehabilitation of housing for homeownership, including forms of
down payment assistance, closing cost assistance, and assistance for
interest rate buy-downs, are eligible activities. HTF funds may be used
only for units that will be the principal residence of eligible
families who are first-time homebuyers.
Section 1338(c)(10)(A) of FHEFSSA provides that not more than 10
percent of the annual grant may be used for homeownership activities.
If a grantee chooses to implement a homeownership program with HTF
funds, the regulations require the grantee to perform due diligence and
underwriting analysis such that the affordability of the homeownership
units is sustainable for ELI households. In light of the distressed
housing market conditions in many jurisdictions, program techniques
such as shared equity, lease-purchase, and first options to re-purchase
HTF-assisted homeownership units in default might be practical features
to include in HTF homeownership programs.
Forms of Assistance
Section 92.730(b) provides that HTF funds may be invested as equity
investments, interest-bearing loans or advances, non-interest-bearing
loans or advances, interest subsidies, deferred payment loans, grants,
or other forms of assistance that HUD may determine to be consistent
with the goals and objectives of the HTF.
Section 92.730(c) requires that only the actual cost of development
and operation of HTF units can be charged to the program, and describes
the methods for allocating costs and determining HTF units in multiunit
projects. An HTF-assisted unit that has a Section 8 project-based
voucher attached to it may not also receive HTF operating cost
assistance.
Terminated Project
Section 92.730(d) provides that an HTF-assisted project that is
terminated before completion, either voluntarily or otherwise,
constitutes an ineligible activity, and any HTF funds invested in the
project must be repaid to the grantee's HTF account.
Prohibited Activities
Prohibited activities are set forth in Sec. 92.735. Section
1338(c)(10)(D) of FHEFSSA provides that HTF funds may not be used for:
Political activities; advocacy; lobbying, whether directly or through
other parties; counseling services; travel expenses; and preparing or
providing advice on tax returns. The prohibited use of funds for
political activities includes influencing the selection, nomination,
election, or appointment of one or more candidates to any Federal,
State, or local office as codified in section 501 of the Internal
Revenue Code of 1986 (26 U.S.C. 501). This statutory section further
provides that, subject to the exception in section 1338(c)(10)(D)(iii),
HTF funds may not be used for administrative, outreach, or other costs
of the grantee, or any other recipient of such grant amounts. The
statutory exception to this prohibition is that a grantee may use up to
10 percent of the State's HTF grant for administrative costs of
carrying out its program(s) using the HTF, including homeownership
counseling.
Eligible Project Costs
Section 92.731 sets forth the eligible project costs, which include
development hard costs, refinancing costs in conjunction with
rehabilitation, acquisition of standard projects, development related
soft costs, architectural and engineering fees, project audit costs,
staff overhead related to the development of the units, settlement
costs, impact fees, the cost to address and meet environmental and
historic preservation property standards, operating costs, relocation
costs, repayment of construction or other loans, and certain types of
costs for construction undertaken before HTF funds were committed to
the project.
Operating cost assistance, as defined in Sec. 92.731(e), may
include the cost of utilities, insurance, taxes, and scheduled payments
to a replacement reserve. The eligible amount of HTF funds per unit for
operating costs is determined based on the deficit remaining after the
monthly rent payment for the HTF-assisted unit is applied to the HTF-
assisted unit's share of monthly operating costs. The written agreement
between the grantee and the recipient must set forth the maximum amount
of the operating assistance to be provided to the HTF-assisted rental
project. The grantee may provide operating cost assistance necessary
for the project for up to 2 years from one HTF grant. However, the
written agreement may provide for renewal of operating cost assistance
during the period of affordability of the project, subject to funding
availability.
Administration and Planning Costs
As noted earlier, the administrative costs allowed in the HTF
program cannot exceed 10 percent of the annual grant. Similar to the
HOME program requirements at Sec. 92.207, eligible administrative and
planning costs are found in Sec. 92.732.
HTF and Public Housing
Section 1338(c)(7)(A) of FHEFSSA provides that HTF assistance may
be used for the production, preservation, and rehabilitation of
housing, including housing identified in section 1335(a)(1)(B) of
FHEFSSA (12 U.S.C. 4565(a)(1)(B)). (Note: The statute incorrectly
references section 1335(a)(2)(B)). The programs identified in that
section include housing projects subsidized under the project-based and
tenant-based rental assistance programs under section 8 of the United
States Housing Act of 1937 (1937 Act); the program under section 236 of
the National Housing Act; the below-market
[[Page 66984]]
interest rate mortgage program under section 221(d)(4) of the National
Housing Act (note: Section 1335(a)(1)(B) of FHEFSSA incorrectly
references the below-market interest rate mortgage program; the correct
statutory reference is section 221(d)(3)/(d)(5) of the National Housing
Act.); the supportive housing for the elderly program under section 202
of the Housing Act of 1959; the supportive housing program for persons
with disabilities under section 811 of the Cranston-Gonzalez National
Affordable Housing Act; the permanent supportive housing projects
subsidized under programs under Title IV of the McKinney-Vento Homeless
Assistance Act (42 U.S.C. 11361 et seq.); the rural rental housing
program under section 515 of the Housing Act of 1949; the low-income
housing tax credit under section 42 of the Internal Revenue Code of
1986, as amended; and comparable State and local affordable housing
programs. Although this list is not necessarily exhaustive, it is HUD's
determination that the HTF funds are not eligible to be used in
existing public housing units. Moreover, the 1937 Act provides annual
formula funding for public housing. Accordingly, Sec. 92.734 prohibits
the use of HTF funds for public housing.
Prohibited Activities and Fees
The section on prohibited activities and fees mirrors the HOME
program regulation at Sec. 92.214, except that the HTF section is
expanded to expressly cover political activities, advocacy, and
lobbying, which are ineligible under FHEFSSA.
Program Requirements
Site and Neighborhood Standards
Section 92.726 applies the site and neighborhood standards for the
HOME program, at Sec. 92.202, to the HTF. If Section 8 project-based
vouchers are made available, the Section 8 requirements related to site
and neighborhood standards will apply to an HTF-assisted unit that has
a Section 8 project-based voucher attached to it.
Income Determinations
Section 92.727 defines ``annual income'' and describes the process
for determining the annual income of tenants and homebuyers for
eligibility in HTF-assisted housing. Income from all family members
must be included when determining income eligibility. As in the HOME
program, grantees may use the definition of annual income in 24 CFR
5.609 (Section 8 program definitions) or the Internal Revenue Service
(IRS) definition of annual income from IRS Form 1040. Section 92.727(e)
provides that a State must follow HUD's regulations in 24 CFR 5.617
when making income determinations for persons with disabilities who are
tenants in HTF-assisted rental housing. For homebuyers, the grantee
must determine annual income by examining source documentation for the
entire household, or obtain written statements verifying incomes from
the household or administrators of government programs from which the
household receives assistance.
Project Requirements
Sections 92.740-92.750 establish requirements applicable to HTF-
assisted housing projects.
Maximum Per-Unit Subsidy
Section 92.740(a) establishes maximum per-unit subsidy,
underwriting, and subsidy layering requirements. The grantee must
establish maximum limitations on the amount of HTF funds the grantee
may invest on a per-unit basis.
Underwriting and Subsidy Layering
Section 92.740(b) requires the grantee to perform subsidy layering
analysis before committing HTF funds to a project. The grantee must
determine that costs are reasonable, examine the sources and uses of
funds, and ensure that the amounts available and their use are
necessary to provide quality affordable rental or homeownership housing
for ELI households for the affordability period (30 years).
Furthermore, developers or owners of HTF-assisted projects may not
receive undue returns on their investments.
Property Standards
As described below, the HTF requires energy and water efficiency
features in all HTF-assisted units. Each grantee can include incentives
and priorities in its HTF allocation plan to further promote
sustainable development that is appropriate to the communities where
housing developed with HTF funds will be located.
Applicable property standards are established at Sec. Sec. 92.741
through 92.745. This rule requires, at minimum, that all HTF-assisted
units that are newly constructed or undergoing gut rehabilitation must
be certified that they meet the guidelines for ENERGY STAR-Qualified
New Homes (for residential buildings up to 3 stories) or exceed, by 20
percent, the energy efficiency requirements of the American Society of
Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE)
Standard 90.1-2007, Appendix G: Performance Rating Method (for
residential buildings over 3 stories), as defined in Sec. 92.741. A
Home Energy Rater (HER) must inspect the units to certify that the
units meet the ENERGY STAR guidelines. HUD is aware that Home Energy
Raters may not be available in all places; therefore, the requirement
for ENERGY STAR certification will become effective 6 months from the
effective date of this rule. ENERGY STAR-labeled products must be
installed when older obsolete products are replaced as part of the
rehabilitation work for HTF-assisted units, as applicable in Sec.
92.742. All water-usage products installed in HTF-assisted units must
also be certified to meet the WaterSense requirements, in accordance
with Sec. 92.741 and Sec. 92.742.
The specific property standards addressed by Sec. Sec. 92.741
through 92.745 are as follows: Sec. 92.741 contains the property
standards for new construction and gut rehabilitation, Sec. 92.742
establishes the standards for housing undergoing other rehabilitation,
Sec. 92.743 contains the property standards for existing housing that
is acquired with HTF funds, Sec. 92.744 establishes property standards
for manufactured housing, and Sec. 92.745 establishes ongoing property
standards for rental housing during the period of affordability.
HUD requests comments from interested parties on how additional
minimum property standards may be imposed to increase the efficiency
and reduce the operating costs of HTF-assisted units.
Qualification as Affordable Housing
Sections 92.746 and 92.748 establish an affordability period of not
less than 30 years for rental housing and homeownership units assisted
with HTF funds. As stated earlier, the Department expects that HTF
funds will be combined with the other sources of private funding and
financing typically used for the development of affordable housing,
such as Low-Income Housing Tax Credits (LIHTCs). The affordability
period for HTF-assisted units is designed to work in conjunction with
the 30-year affordability period for LIHTC projects. Grantees may also
establish longer affordability periods in their HTF allocation plans.
Section 92.746(b) establishes the maximum rent (including
utilities) for HTF-assisted units at 30 percent of the annual income of
a family whose income equals 30 percent of the area median income, or
30 percent of the poverty line, whichever is greater. It is necessary
to establish fixed rents for underwriting purposes and required subsidy
layering analyses. HUD
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recognizes that some ELI tenants living in HTF-assisted units may be
rent-burdened if required to pay HTF rents. As stated earlier in this
preamble, Section 8 Project-Based Vouchers may be made available to
HTF-assisted units; these vouchers alleviate cost burdens for ELI
tenants. When project-based assistance from other HUD programs is
provided to HTF units, the rents are based on the rent requirements of
that program.
Section 92.746(e) requires that HTF project owners verify the
initial and continued eligibility of tenants living in HTF-assisted
rental units and establishes the methods by which HTF project owners
must verify tenant income. Furthermore, this section specifies that
when Section 8 Project-Based Vouchers or any other Federal rental
assistance programs are used in conjunction with an HTF-assisted rental
unit, the income verification rules and procedures of those programs
will apply instead of the requirements set forth in this subsection.
Section 92.747 establishes tenant protection, lease, and selection
requirements, and incorporates the requirements of section 1338(c)(8)
of FHEFSSA.
Section 92.748(d) establishes the HTF requirements for homebuyers.
HTF assistance to homebuyers may be provided only to first-time
homebuyers and must be for the principal residence of the homebuyer.
Before purchasing the housing, in accordance with section
1338(c)(7)(B)(iv) of FHEFSSA, the homebuyer must have completed
homeownership counseling from an organization that meets the
requirements of section 1132 of the Federal Housing Regulatory Reform
Act of 2008.
Section 92.748(f) establishes the resale requirements, as required
by section 1338(c)(7)(B)(iii), for homeownership units assisted by the
HTF. Upon resale, each HTF-assisted homeownership unit must be sold to
an income-eligible family. Each grantee that has an HTF homeownership
program must include resale restriction policies in its HTF allocation
plan. HTF grantees may adopt their HOME program resale restriction
policies, modified for income-eligible households. The grantee may also
include purchase options and right of first refusal to purchase the
HTF-assisted units upon foreclosure, in order to preserve
affordability.
Section 92.749 defines the modest housing requirements in section
1338(c)(7)(B)(ii) of FHEFSSA for HTF-assisted homeownership units. For
newly constructed housing, the value of the housing may not exceed 95
percent of the median purchase price for single-family housing in the
area. HUD intends to provide these purchase limits for each area or the
grantee can determine 95 percent of the area median purchase price in
accordance with the methodology set forth in Sec. 92.749(e).
In the event of foreclosure of HTF-assisted rental or homeownership
units, or transfer of deed in lieu of foreclosure, the affordability
period required by Sec. Sec. 92.746 and 92.748 is terminated. In order
to preserve the affordability of the housing, the grantee may include
purchase options in the HTF written agreement, such as ``right of first
refusal'' to purchase the HTF-assisted units in default. The
termination of the affordability restrictions on the project does not
terminate the grantee's repayment obligation under Sec. 92.773.
Faith-Based Organizations
Section 92.750 provides for the eligibility of faith-based
organizations to apply for and use HTF funds under the same
requirements as other recipients.
Other Federal Requirements
Sections 92.760-92.764 set forth the other Federal requirements
that are applicable to the use of HTF funds, including
nondiscrimination requirements. For example, the rule requires the
grantee to establish affirmative marketing requirements, as required in
the HOME program, and grantees must comply with Federal lead-based
paint and relocation requirements. These sections also include the
funding accountability and transparency requirements of the Federal
Funding Accountability and Transparency Act of 2006 (31 U.S.C. 6101
note), which must be met in accordance with section 1338(i) of FHEFSSA.
Program Administration
Sections 92.770-92.779 establish the conditions and requirements by
which States are to administer their HTF funds. Section 92.770
describes two HTF accounts that make up the HTF: The HTF Treasury
account, which is for HTF funds allocated or reallocated to a grantee
under the HTF formula, and the HTF local account, which is for deposits
of HTF funds disbursed from the HTF Treasury account, any program
income, and any repayments required to be made. Section 92.771 provides
that allocation and reallocation of HTF funds will be made available
pursuant to an HTF grant agreement.
Section 92.772 establishes the requirements applicable to program
disbursement and the establishment of the information system consistent
with section 1338(e) of FHEFSSA. This statutory section provides that
(1) HUD must require each grantee to develop and maintain a system to
ensure that each recipient of assistance use HTF funds in accordance
with the statute, the regulations, and any requirements or conditions
under which HTF funds were provided; and (2) establish minimum
requirements for agreements between the grantee and recipients. This
statutory section further provides that the minimum requirements must
include: (1) Appropriate periodic financial and project reporting,
record retention, and audit requirements for the duration of the
assistance to the recipient, to ensure compliance with the limitations
and requirements of the statute and regulations; and (2) any other
requirements that the Secretary determines are necessary to ensure
appropriate administration and compliance. These statutory requirements
are reflected in Sec. Sec. 92.776-92.779.
Specifically, Sec. 92.774(b) requires that before disbursing any
HTF funds to any entity, the grantee must enter into a written
agreement with that entity. The written agreement must ensure
compliance with the requirements of this subpart. Requirements for the
HTF written agreement and required provisions are specified in Sec.
92.774(c). Where HOME program funds are used together with HTF funds, a
single written agreement meeting the requirements of both Sec. 92.504
and this subpart may be used to enforce requirements for both programs.
Section 1338(g)(2) of FHEFSSA requires that HUD ensure that the use
of HTF grants by States or State-designated entities is audited not
less than annually to ensure compliance with statutory and HUD's
regulatory requirements. Section 1338(g)(2) also authorizes HUD to
audit, provide for an audit, or otherwise verify a grantee's activities
to ensure compliance with all HTF requirements. Section 1338(g)(2)
further provides that any financial statement submitted by a grantee or
recipient to HUD shall be reviewed by an independent certified public
accountant in accordance with Statements on Standards for Accounting
and Review Services, issued by the American Institute of Certified
Public Accountants. These requirements are reflected in Sec. 92.776.
Performance Review and Sanctions Review of Subgrantees and Recipients
Grantees will report on their progress and performance in meeting
the requirements of the HTF in HUD's Integrated Disbursement &
Information
[[Page 66986]]
System (IDIS) and the consolidated plan. For example, grantees will
report on the incomes of HTF beneficiaries in IDIS, and will also
demonstrate compliance with the deadlines for the commitment and
expenditure of funds by data entered into IDIS. As stated earlier, this
proposed rule would add the annual HTF allocation plan as a subsection
to the strategic plan and annual action plan. Performance benchmarks
will be established in the HTF allocation plan in conjunction with the
strategic and annual plans, and subsequent reporting on performance
will be reported to the public and HUD through the submissions and
reports associated with those plans.
Section 1338(e)(2)(B) of FHEFSSA is directed to the misuse of funds
and provides that if HUD determines, after reasonable notice and
opportunity for hearing, that a grantee has failed to comply
substantially with any provision of the HTF statutory requirements or
HUD's regulatory requirements, and until HUD is satisfied that there is
no longer any such failure to comply, HUD shall: (1) Reduce the amount
of assistance to the grantee by an amount equal to the amount of grant
amounts that were not used; (2) require the grantee to repay HUD any
amount of the grant that was not used; (3) limit the availability of
assistance to the grantee to activities or recipients not affected by
such failure to comply; or (4) terminate any assistance under this
section to the grantee. These statutory requirements are reflected in
Sec. 92.782.
Section 1338(e)(1)(B) provides that if any recipient of assistance
of HTF funds is determined to have used any such amounts in a manner
that is materially in violation of the HTF statutory requirements,
HUD's HTF regulatory requirements, or any requirements or conditions
under which such amounts were provided, the grantee shall require,
within 12 months after the determination of the misuse, that the
recipient must reimburse the grantee for the misused amounts and return
to the grantee any such amounts that remain unused or uncommitted for
use. Section 1338(e)(1)(B) provides that if a grantee makes this
determination, the grantee must first provide notification of the
determination to HUD for review and concurrence. This statutory section
authorizes HUD to reverse the determination if it disagrees. These
statutory requirements are reflected in Sec. 92.783.
Consolidated Plan Revisions
As noted earlier in this preamble, this rule also makes conforming
changes to the consolidated plan regulations at 24 Part 91 to require
information related to the HTF to be included in strategic and 5-year
State or local government strategic and annual action plans.
III. Findings and Certifications
Executive Order 12866, Regulatory Planning and Review
The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866 (entitled, ``Regulatory Planning and Review'').
This proposed rule was determined to be a ``significant regulatory
action,'' as defined in section 3(f) of the Order but not economically
significant, as provided in section 3(f)(1) of the Order. The reasons
for the determination are as follows:
As discussed above in this preamble, HERA charged HUD to establish
through regulation, the formula for the distribution of HTF grants to
States, and to follow that rule with one that implements the
programmatic requirements for the HTF. Consistent with that statutory
direction, on December 4, 2009 (74 FR 63938), HUD published a proposed
rule submitting for public comment the proposed formula for allocating
HTF funds. As the first rule to be issued in the rulemaking process for
the HTF, the formula allocation constituted, on behalf of the entire
HTF rulemaking, an economically significant regulatory action under
Executive Order 12866. The preamble to the December 2009 rule
summarized the economic impacts of the HTF program, as proposed to be
implemented through the formula issued for public comment on December
4, 2009. (For a discussion of the economic impact, please see 74 FR
63940-63941.) HUD's full economic analysis for the allocation rule is
available for inspection on HUD's Web site at https://www.huduser.org/portal/publications/pubasst/riaforhtf.html.
This proposed rule follows the December 4, 2009, allocation formula
rule by submitting for public comment the program requirements that
will govern the HTF. The economic impacts of the rulemakings
implementing the HTF are largely limited to the procedures governing
the allocation and distribution of grant funds set forth in the
December 4, 2009, proposed rule. This proposed rule does not revise the
HTF allocation formula or otherwise affect the allocation of HTF funds.
To the extent that this proposed rule has an economic impact, it
derives from the December 2009 allocation formula proposed rule. That
economic assessment may be revised to account for any new impacts
resulting from changes made at the final rule stage.