Housing Trust Fund, 5199-5244 [2015-01642]
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Vol. 80
Friday,
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January 30, 2015
Part II
Department of Housing and Urban
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24 CFR Parts 91 and 93
Housing Trust Fund; Interim Rule
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Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Rules and Regulations
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
24 CFR Parts 91 and 93
[Docket No. FR–5246–I–03]
RIN 2506–AC30
Housing Trust Fund
Office of the Assistant
Secretary for Community Planning and
Development, HUD.
ACTION: Interim rule.
AGENCY:
The Housing and Economic
Recovery Act of 2008 (HERA)
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 rule establishes the
regulations that will govern the HTF.
HUD is issuing this rule as an interim
rule. It is HUD’s intention to open this
interim rule for public comment to
solicit comments once funding is
available and the grantees gain
experience administering the HTF
program.
DATES: Effective: March 31, 2015.
FOR FURTHER INFORMATION CONTACT:
Marcia Sigal, Director, Program Policy
Division, Office of Affordable Housing
Programs, Office of Community
Planning and Development, Department
of Housing and Urban Development,
451 7th Street SW., Room 7164,
Washington, DC 20410; telephone
number 202–708–2684 (this is not a tollfree number). Persons with hearing or
speech impairments may access this
number through TTY by calling the tollfree Federal Relay Service at 800–877–
8389.
SUPPLEMENTARY INFORMATION:
SUMMARY:
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I. Executive Summary
Purpose
This interim rule establishes the
regulations that will govern HTF and
the formula that will determine how
HTF funds are distributed among
eligible grantees. The purpose of 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. HERA (Pub.
L. 1110–289, approved July 30, 2008)
establishes HTF and provides for it to be
administered by HUD.
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States and State-designated entities
are eligible grantees for HTF. Annual
formula grants will be made, of which
at least 80 percent must be used for
rental housing; up to 10 percent for
homeownership; and up to 10 percent
for the grantee’s reasonable
administrative and planning costs. HTF
funds may be used for the production or
preservation of affordable housing
through the acquisition, new
construction, reconstruction, and/or
rehabilitation of nonluxury housing
with suitable amenities.
Summary of Major Provisions
This rule contains both the program
regulations that establish how the HTF
program will be administered and the
allocation formula that establishes how
grant funds will be distributed to States.
The formula allocation, located in
subpart B of the rule, codifies language
found in the Federal Housing
Enterprises Financial Safety and
Soundness Act of 1992 (FHEFSSA) (42
U.S.C. 4502 et seq.), as revised by HERA
(see Division A of HERA), and provides
for the distribution of funds to the 50
States, the District of Columbia, Puerto
Rico, and the Insular Areas. Allocation
amounts are based on four need factors
as well as a construction cost
adjustment factor. The four need factors
are found in 24 CFR 93.51(a)–(d). These
need factors include: a State’s relative
shortage of rental housing available to
extremely low-income families; a State’s
relative shortage of rental housing
available to very low-income families;
the relative number of extremely lowincome renter households living in
substandard, overcrowded or
unaffordable units in a particular State;
and the relative number of very lowincome renter households living in
substandard, overcrowded, or
unaffordable units in a particular State.
In addition, the State’s local cost of
construction is factored in as described
in § 93.51(e).
The program regulations for HTF are
found in subparts C through J of part 93
and closely mirror the regulations for
the HOME Investment Partnerships
program located in 24 CFR part 92.
While HTF specifically targets
affordable housing for very low and
extremely low-income households,
many of the program requirements
applicable to the HOME program are
similar to those for HTF. Further, each
State is a participating jurisdiction in
the HOME program, and all States or
their designated housing entities will be
HTF grantees. Consequently, many of
the participation and submission
requirements as well as many of the
program requirements are modeled on
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provisions found in the regulations for
HOME.
Major provisions in the HTF program
regulations include: siting and
neighborhood standards; income
determinations; eligible costs and
activities; project requirements; tenant
and homeowner qualification
requirements; other Federal
requirements; program administration
regulations; and quality control
provisions. Significant changes from the
proposed rule include: removal of a
proposed incentive for transit-oriented
development; inclusion of guidelines for
a recapture provision of homeownership
funds; permitting the use of HTF funds
for public housing under certain Federal
housing programs; and a requirement
that all HTF funds be used for extremely
low-income housing when HTF is less
than $1 billion.
Costs and Benefits
The three primary impacts of this rule
include: transfers from the governmentsponsored enterprises (GSEs) and/or
Treasury to States for investment in
low-income housing; distribution
among the States based on the formula
HUD establishes for the HTF program;
and the effects of HUD’s program
administration requirements. Of these,
the largest impact is the infusion of
Federal dollars into the affordable
housing market.
Congress authorized HTF with the
stated purpose of benefiting specific
low-income populations by: (1)
Increasing and preserving the supply of
rental housing for extremely lowincome families with incomes between
0 and 30 percent of area median income
and very low-income families with
incomes between 30 and 50 percent of
area median income, including
homeless families, and (2) increasing
homeownership for very low and
extremely low-income families. The
formula in this rule is designed to
distribute funds primarily to States with
a shortage of rental housing affordable
to very low and extremely low-income
households. Specifically, this program
provides funding to add a supply of
affordable housing to markets where
there is strong evidence of an
inadequate supply.
The primary benefits of the HTF
program are expected to be similar to
the Housing Choice Voucher program.
An evaluation of the impact of receiving
a housing voucher versus not receiving
one has shown that the primary benefit
of housing assistance programs is to
reduce homelessness and housing cost
burdens. Thus, the primary benefit of
the HTF program will be the reduction
of number of homeless families and
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individuals, as well as the number of
families paying a disproportionate share
of their income for housing in relatively
tight housing markets.
HTF is a transfer to the low-income
housing sector from the GSEs and/or
Treasury. The size of the annual impact
is equivalent to the size of the total HTF
expenditures, which will vary
depending on the amount of GSE
business in a given year and any
amounts that may be appropriated,
transferred, or credited to the HTF
under any other provision of law. (See
12 U.S.C. 4568.) There will be no
allocation of grants under HTF if there
is neither revenue from GSEs nor other
funds as provided by HERA.
The formula for distributing among
the States is largely determined by the
statutory formula in FHEFSSA, which
includes the four need factors described
above, plus a construction cost
adjustment factor. In addition,
FHEFSSA directs that each of the 50
States and the District of Columbia are
to receive a minimum allocation of $3
million. HUD’s policy discretion in
choosing the weights for housing needs
factors has the impact of redistributing
allocations among States. Different
States are characterized by different
measures of housing needs as well as
construction costs. At a national level,
however, the discretion has almost no
impact because all funds are spent on
low-income housing regardless of the
State. The transfers are only among
States, re-distributing the funds
geographically.
Finally, the regulations governing
program administration are not
expected to have significant economic
impacts. Regulations for the HOME
program, which, like HTF, also provide
grants for construction of low-income
housing, served as the model for HTF
regulations. Consequently, State
grantees are already familiar with HTF’s
basic compliance requirements and
procedures, and will not have to
develop significant capacity to
participate in the program. A more
detailed cost-benefit analysis is
provided in the regulatory impact
analysis that accompanies this rule.
II. Background
HERA was major housing legislation
enacted to reform and improve the
regulation of the GSEs—Fannie Mae and
Freddie Mac, 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 Division
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A, Title I of HERA. Section 1131 of
Division A amended the Federal
Housing Enterprises Financial Safety
and Soundness Act of 1992 (12 U.S.C.
4501 et seq.) (the Act) to add a new
section 1337 entitled ‘‘Affordable
Housing Allocations’’ and a new section
1338 entitled ‘‘Housing Trust Fund.’’
Section 1337 of the Act provides for
the HTF (and other programs) to be
funded with an affordable housing setaside by Fannie Mae and Freddie Mac.
The total set-aside amount is equal to
4.2 basis points (.042 percent) of the
GSEs’ new mortgage purchases, a
portion of which is directed to the HTF.
Under section 1337 of the Act, the
Director of the Federal Housing Finance
Agency (FHFA), the independent
federal agency with oversight of the
GSEs, has the authority to suspend
Fannie Mae’s and Freddie Mac’s
affordable housing contributions if such
contributions were to have an adverse
impact on the financial stability of the
GSEs, as described in section 1337(b).
Shortly after being placed in
conservatorship in 2008, the GSEs were
instructed by the FHFA to suspend the
contributions.
On December 11, 2014, the Director of
FHFA issued a letter to the GSEs that
reinstated the GSE contributions under
section 1337, in accordance with the
following terms and conditions (which
may be supplemented or modified by
specific guidance or directive from
FHFA). During each GSE fiscal year
(which runs from January 1 to December
31), commencing with the GSE’s fiscal
year 2015 and in each fiscal year
thereafter, each GSE will set aside an
amount equal to 4.2 basis points of each
dollar of unpaid principal balance of its
total new business purchases during the
fiscal year for allocation in accordance
with section 1337(a) . Within 60
calendar days after the end of each fiscal
year commencing with fiscal year 2015
and for each fiscal year thereafter, the
GSEs will allocate to the HTF the
amount set aside unless during the
fiscal year the GSE has made a draw
from the Department of the Treasury
under the terms of the Senior Preferred
Stock Purchase Agreement (SPSPA) or
unless the allocation would cause the
GSE to have to make a draw from the
Treasury Department under the terms of
the SPSPA. If the GSE has made a draw
from the Department of the Treasury
under the terms of the SPSPA during
fiscal year 2015 or makes a draw during
a subsequent fiscal year or if the
allocation would cause the GSE to make
a draw for that fiscal year, the GSE will
make no allocation for the fiscal year for
which the draw was made or for any
fiscal year in which it is determined that
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the allocation would cause a draw, and
the set aside will be reversed for that
fiscal year.
The letter from FHFA also noted that
although the profit levels the GSEs
experienced since 2012 are not expected
to be sustainable, reasonable projections
indicate that the GSEs will remain
profitable for the foreseeable future.
FHFA continues to monitor the
financial condition of the GSEs and
retains the authority to revise or reverse
the decision at any time in accordance
with the provisions of section 1337(b).
Accordingly, HUD is proceeding with
this rule to implement the HTF.
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
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 2011, the combined
number of ELI and VLI renters with
worst-case housing needs was 8.48
million, or 44 percent of all ELI and VLI
renters (19.27 million). Because
extremely low income households also
constitute by far most (61.1 percent)
very low-income renters, nearly three
out of four (73.3 percent) households
with worst case needs had extremely
low incomes during 2011.1
There is a documented 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. In
2011, for every 100 ELI renters, on
average, there were only 36 affordable
units available, and for every 100 VLI
renters nationwide, only 65 rental units
1 See HUD’s Worse Case Housing Needs 2011
Report to Congress at https://www.huduser.org/
portal//Publications/pdf/HUD-506_WorstCase2011_
reportv3.pdf. See page 7.
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available.2 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 the Act 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 published for public
comment on December 4, 2009, at 74 FR
63938.
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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 the Act 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 the
Act also directs HUD to establish
regulations to administer the HTF, and
this rule presents the regulations that
will govern the HTF, on an interim
basis, as provided in the Summary of
this rule.
HUD’s proposed rule for the
administration of the HTF funds was
published for public comment on
October 29, 2010, at 75 FR 66978. HUD
proposed 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). The HOME
program is the largest federal block
grant program that produces affordable
housing for very low-income
households. 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, by providing formula
grants to States used to develop
affordable housing units for rent or
homeownership. In addition, the grant
activities in both programs require the
2 See HUD’s Worse Case Housing Needs 2011
Report to Congress at page 9.
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same grantee administration and HUD
oversight functions.
III. Overview of Key Changes Made in
Interim Rule
This interim rule largely adopts the
provisions of the proposed rule,
although HUD is making some changes
based on public comments and other
considerations. The following highlights
key changes made to the proposed rule
at this interim rule stage:
• The HTF regulations will be
codified in a new part 93. While the
HTF regulations have been
synchronized with the HOME program
regulations for the reasons set forth in
the preamble to the proposed rule, HUD
agrees with commenters that it would be
clearer to place the HTF regulations into
a new 24 CFR part. Therefore, the HTF
formula allocation and program
administration regulations are now
found in 24 CFR part 93.
• The HTF proposed rule was
published prior to the publication of the
HOME final rule. (The HOME final rule
published on July 24, 2013, at 78 FR
44638.) In order to synchronize the
applicable requirements of the HTF
regulations with those of the HOME
regulations, HUD has revised several
provisions in the HTF proposed rule.
The proposed provisions revised by this
interim rule include definitions, eligible
costs, eligible administrative and
planning costs, property standards,
inspections, income determinations,
tenant protections and selections. For
some of the proposed provisions
revised, only minor word changes were
made so that the language in the HTF
regulations matches the HOME
regulations, while in other sections the
exact language of certain HOME
regulations was incorporated in the HTF
regulations.
• HUD removed the proposed
regulatory sections on property
standards (§§ 92.741–92.745) that
require HTF units to meet Energy Star
and Water Sense certifications. Since
issuance of the HTF proposed rule and
the HOME program final rule, HUD
proposed, in a notice published in the
Federal Register on April 15, 2014, at
79 FR 21259, to adopt revisions to the
2006 International Energy Conservation
Code (IECC) and to the 2004 energy
codes of the American Society of
Heating, Refrigerating, and Airconditioning Engineers (ASHRAE), and
apply these revised standards to the
HUD programs covered by the Energy
Independence and Security Act of 2007
(EISA). The covered HUD programs
include the HOME program, and HUD
also applies these standards to HTF to
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synchronize with the standards to be
applied to the HOME program.
• At the proposed rule stage, HUD
proposed to facilitate the use of HTF
funds in transit-oriented development
by proposing a different definition of
commitment of HTF funds for transitoriented development projects. HUD
removes this definition in this interim
rule and instead grantees will determine
how best to use HTF funds in transitoriented development projects within
the requirements for commitment and
allocation plans established in this rule.
• HUD adds a process by which
minimum grant awards will be
determined if the amount of funds in
the HTF, in any given fiscal year, is
insufficient to award each grantee a
minimum grant of $3 million.
• The HTF regulations regarding
operating cost assistance and operating
cost reserves have been modified. In
response to public comment to allow
more flexibility for grantees to provide
operating cost assistance, the limit on
the amount of operating cost assistance
and operating cost reserves that a
grantee may award from its annual grant
was increased from 20 percent to one
third. In addition, the requirements for
operating cost reserves will differ
depending on the source of funds for the
HTF. For non-appropriated funds (i.e.,
the allocations from Fannie Mae and
Freddie Mac) that become available for
the HTF formula distribution, grantees
will be allowed to fund operating cost
reserves at the amount required for a
period of up to 30 years (the term for the
period of affordability for each HTFassisted project). However, if
appropriated funds become available for
HTF, grantees will be allowed to fund
operating cost reserve for a period of no
more than five years, as provided in the
proposed rule and retained in this
interim rule. At the proposed rule stage,
HUD did not propose to allow use of
HTF funds for public housing. This
interim rule allows the use of HTF
funds (1) in connection with the Choice
Neighborhoods (Choice), and lowincome housing tax credit (LIHTC)
programs for construction of new units
that replace existing public housing
properties; and (2) for the rehabilitation
of existing public housing units in
connection with the Rental Assistance
Demonstration, Choice and LIHTC
programs.
IV. Discussion of Public Comments and
HUD Responses
The public comment period for the
proposed formula rule closed on
February 2, 2010. HUD received 13
public comments on the proposed
formula rule. Commenters included
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local housing and community
development agencies, housing groups,
housing authorities, trade associations,
and individuals. A majority (eight) of
the commenters wrote in support of the
rule or portions of it, including a
national advocacy organization that
fully endorses the proposed rule. HUD
is not addressing these favorable
comments because they do not raise
issues which require a response. Other
comments are discussed below. The
public comments on the proposed
formula rule can be found at: https://
www.regulations.gov/
#!docketDetail;D=HUD-2009-0149.
The public comment period for the
proposed program rule closed on
December 28, 2010. HUD received 93
comment letters; commenters included
State and local housing and community
development agencies, housing groups,
housing authorities, trade associations,
and individuals. The comment letters
included general comments about the
proposed rule and statutory
requirements for the HTF, as well as
suggestions for changes to specific
provisions in the proposed rule. The
public comments on the proposed
program rule can be found at: https://
www.regulations.gov/
#!docketDetail;D=HUD-2010-0101.
Issues raised in public comments on
the proposed formula and proposed
program rule and HUD’s responses to
these comments follow.
Part 91—Consolidated Submissions for
Community Planning and Development
Programs (Consolidated Plan Revisions)
The proposed program rule proposed
to make conforming changes to the
Consolidated Plan regulations at 24 CFR
part 91 to require information related to
the HTF to be included in State or local
government strategic and annual action
plans. As stated at § 91.220 and
§ 91.320, HUD proposed to require that
the action plan must include the HTF
allocation plan.
Comments: HUD received several
comments which suggested additional
required elements be added to the
allocation plan, including: National
standards for green, healthy, sustainable
development will be met by HTF units;
caps on operating assistance; transitoriented development projects; an
explanation of the State’s decision to
use subgrantees, criteria for selecting
subgrantees, and a method for
distributing funds among subgrantees.
One commenter suggested that HUD
require the allocation plans for HTF
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funds to specifically prioritize transitoriented development. One commenter
suggested specific revisions to the
language for the sake of further clarity,
such as cross references between the
definition of HTF funds at § 92.702 in
§ 92.220(l)(4)(i) and § 92.320(k)(5)(I). A
commenter suggested that HUD require,
at § 92.725(c), that the subgrantee’s HTF
allocation plan be consistent with the
State’s HTF allocation plan.
Similarly, a commenter suggested that
HUD revise § 92.220(l)(4)(i) and
§ 92.320(k)(5)(i) so that they have
identical language and requirements.
One commenter suggested that the
housing market characteristics in the
HTF formula be added to the general
housing market characteristics required
in the consolidated plan at § 92.210(a)
and § 92.310(a). Another commenter
recommended that the rule require HTF
allocation plans to certify that the HTF
funds will not be subject to State or
local laws and policies that impose
requirements for subsidized housing
development that exceed the
requirements for similar residential
development not involving subsidies.
Two commenters stated that the
proposed rule should not restrict the
types or locations of HTF units, but
instead should retain maximum
flexibility to meet local needs.
HUD Response: HUD appreciates the
concern expressed by commenters that
HTF allocation plans at the State and
local level mirror each other so that the
HTF funds expended are targeted to the
needs identified in the state plans.
However, it is possible that a State or
State-designated entity would provide
HTF funds to different subgrantees for
different types of projects and programs
throughout the state to address various
needs. In these situations, having
identical State and local plans would
not be practicable. To address these
concerns, rather than modifying part 91
requirements related to HTF allocation
plan, at this interim rule stage, HUD
modified language at § 93.404 (§ 92.774
of the proposed rule) to require that
grantees include executed written
agreements with subgrantees that
specify allowable programs and
requirements.
An explanation of the State’s decision
to use subgrantees, criteria for selecting
subgrantees, and method for distributing
funds among subgrantees are required at
§ 91.320(k)(5). The housing market
characteristics used in the HTF formula
are reflected in the analyses required in
the consolidated plan. In response to
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comments about the locations where
HTF funds will be used, HUD notes that
the HTF statute does not preempt State
or local law, and the regulation cannot
prevent the use of HTF funds in places
that impose requirements on subsidized
projects that are not in violation of
Federal laws.
General Comments on Promulgation of
the HTF Regulations as Subpart N of
Part 92 of the Proposed Rule
HUD specifically solicited input from
HTF grantees and interested parties on
HUD’s proposed coordination of the
HOME program and HTF regulations, as
well as 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.
Comments: Some commenters
expressed concern that by including
HTF regulations in Subpart N of the
HOME program regulation, the HTF
program will lack an identity as a
separate program.
HUD Response: HUD agrees with
commenters that the regulations should
be located in a new part 93, as this
approach highlights HTF as a separate
program, and this rule codifies the
regulations in new part 93. However,
many of the requirements are the same
for both the HOME and HTF programs
(e.g., administrative requirements;
monitoring, site and neighborhood
standards; and affirmative marketing),
therefore, in moving the HTF
regulations as proposed in part 92 for
the HTF to part 93, HUD repeated the
requirements in the HOME rule that also
apply to the HTF.
Several commenters also called for
streamlining between HTF and other
programs and asked that HUD avoid
duplicative requirements. Because many
HTF grantees also administer the HOME
program, streamlining the regulations
this way will help grantees avoid having
to create entirely new or separate
structures to administer HTF funds, and
this may help grantees develop and
deliver more affordable housing sooner
to households and communities in
need.
In addressing public comments on
specific provisions in the proposed rule,
this preamble will refer to the regulatory
sections as they were originally
proposed in part 92. The following table
matches the proposed rule sections with
the new sections in this interim rule:
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Proposed
Final
Subject
Subpart A—General
92.701 .........
92.702 .........
92.703 .........
93.1 ............................................................
93.2 ............................................................
93.3 ............................................................
Overview.
Definitions.
Waivers.
Subpart B—Allocation Formula; Reallocations
92.710
92.711
92.712
92.713
92.714
.........
.........
.........
.........
.........
93.50
93.51
93.52
93.53
93.54
..........................................................
..........................................................
..........................................................
..........................................................
..........................................................
Formula Allocation.
Formula Factors.
Minimum State Allocations.
Federal Register Notice of Formula Allocations.
Reallocations by Formula.
Subpart C—Participation and Submission Requirements; Distribution of Assistance
92.720 .........
92.725 .........
93.100 ........................................................
93.101 ........................................................
Participation and Submission Requirements.
Distribution of Assistance.
Subpart D—Program Requirements
92.726 .........
92.727 .........
93.150 ........................................................
93.151 ........................................................
Site and Neighborhood Standards.
Distribution of Assistance.
Subpart E—Eligible and Prohibited Activities
92.730
92.731
92.732
92.734
92.735
.........
.........
.........
.........
.........
93.200
93.201
93.202
93.203
93.205
........................................................
........................................................
........................................................
........................................................
........................................................
Eligible Activities: General.
Eligible Project Costs.
Eligible Administrative and Planning Costs.
HTF Funds and Public Housing.
Prohibited Activities and Fees.
Subpart F—Income Targeting
92.736 .........
92.737 .........
93.250 ........................................................
93.251 ........................................................
Income Targeting: Rental Units.
Income Targeting: Homeownership.
Subpart G—Project Requirements
92.740
92.741
92.746
92.747
92.748
92.749
.........
.........
.........
.........
.........
.........
93.300
93.301
93.302
93.303
93.304
93.305
........................................................
........................................................
........................................................
........................................................
........................................................
........................................................
Maximum Per-Unit Subsidy Amount, Underwriting, and Subsidy Layering.
Property Standards.
Qualification as Affordable Housing: Rental housing.
Tenant Protections and Selection.
Qualification as Affordable Housing: Homeownership.
Qualification as Affordable Housing: Modest Housing Requirements for Homeownership.
92.750.
Subpart H—Other Federal Requirements
92.760
92.761
92.762
92.763
92.764
.........
.........
.........
.........
.........
93.350
93.351
93.352
93.353
93.354
........................................................
........................................................
........................................................
........................................................
........................................................
Other Federal Requirements and Nondiscrimination; Affirmative Marketing.
Lead-Based Paint.
Displacement, Relocation, and Acquisition.
Conflict of Interest.
Funding Accountability and Transparency Act.
Subpart I—Program Administration
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92.770
92.771
92.772
92.773
92.774
.........
.........
.........
.........
.........
93.400
93.401
93.402
93.403
93.404
........................................................
........................................................
........................................................
........................................................
........................................................
92.775
92.776
92.777
92.778
92.779
.........
.........
.........
.........
.........
93.405 ........................................................
93.406 ........................................................
....................................................................
93.408 ........................................................
....................................................................
Housing Trust Fund (HTF) Accounts.
HTF Grant Agreement.
Program Disbursement and Information System.
Program Income and Repayments.
Grantee Responsibilities; Written Agreements; Onsite Inspections; Financial Oversight.
Applicability of Uniform Administrative Requirements.
Audit.
Closeout.
Recordkeeping.
Performance reports.
Subpart J—Performance Review and Sanctions
92.780 .........
92.781 .........
92.782 .........
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93.450 ........................................................
93.451 ........................................................
93.452 ........................................................
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Accountability of Recipients.
Performance Reviews.
Corrective and Remedial Actions.
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Proposed
Final
92.783 .........
93.453 ........................................................
Subject
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Definitions Proposed § 92.702; Final
§ 93.2
In § 92.702(a), HUD proposed that
several definitions in the HOME
program regulations (24 CFR 92.2) be
applicable to the HTF. In § 92.702(b),
HUD outlined key definitions applicable
to the HTF, including: ‘‘Commitment,’’
several definitions related to energy
efficiency, ‘‘Grantee,’’ ‘‘Recipient,’’
‘‘State,’’ ‘‘State-Designated Entity,’’ and
‘‘Subgrantee.’’ HUD received several
comments regarding the language
proposed to define terms applicable to
the HTF.
Commitment
To facilitate transit-oriented
development projects, the proposed
definition of ‘‘commitment’’ permitted a
unit of general local government to
acquire the land for a transit-oriented
development project in advance of
having specific project plans.
Specifically, HUD proposed that the
unit of general local government must
hold title to the land for the transitoriented development project; the
proposed rule allowed 36 months from
the date of acquisition of the property
for a transit-oriented development
project to commit additional funds to a
specific project on the property.
Comments: HUD received several
comments regarding this proposed
definition of and deadline for
‘‘commitment’’ for transit-oriented
development projects. Some
commenters suggested the deadline to
commit additional funds to transitoriented development should be
extended to 42 months, while others
suggested 48 months, and one
commenter suggested 60 months.
Another commenter suggested that the
commitment deadline for transitoriented development should be less
than 36 months.
Some commenters stated that the
proposed definition of ‘‘commitment’’
for transit-oriented development should
be revised to allow non-local
government entities to commit the few
funds necessary to comply with the rule
and two commenters suggested that
these non-local government entities be
allowed to hold title to the transitoriented development property. A few
commenters stated that the rule’s
emphasis on transit-oriented
development gives preference to urban
areas, and asked that the rule provide a
framework for balancing transit-oriented
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Notice and Opportunity for Hearing; Sanctions.
development goals with rural areas that
have limited or no transit services.
Commenters asked HUD to instruct
States to give the same priority to
developments meeting the greatest rural
needs as is given to transit-oriented
development in urban areas. Some
commenters stated that the rule should
not mandate that all projects be located
in a sustainable community since some
States do not have fully developed
transit systems, and the rule should
provide flexibility to meet the varying
needs of States.
Another commenter suggested that
the rule should require a minimum
percentage of HTF funds be expended
for transit-oriented development and
mixed-income housing development. A
few commenters supported allowing
HTF funds to be used in combination
with other government programs to
leverage sources for creating a transitoriented development land acquisition
or land bank program. A commenter
proposed a more detailed definition for
transit-oriented development that is
intended to better target developments
that promote transit ridership and
reduce motor vehicle trips, remove the
requirements for mixed-use and mixedincome development, require that
developments within transit-oriented
development be along a walkable route,
and clarify what constitutes a ‘‘transit
facility.’’ A few commenters suggested
various methods to incentivize
development of housing for ELI families
in transit-oriented development projects
that are accessible to transit and
employment centers.
Several commenters expressed
concern over potential abuses of the
different commitment deadlines and
asked HUD to include additional
requirements in the final rule to ensure
that grantees do not tie up funds, e.g.,
to prevent local governments from using
HTF funds to serially purchase land and
hold it as if ‘‘land banking.’’ Some
commenters stated that the rule should
require that if the original land
purchased is not used for ELI
households, then the recipient must
place the planned ELI housing within
the same transit-oriented development
area. A few commenters stated that the
rule should also require that the correct
zoning be in place before property is
purchased for transit-oriented
development, and one commenter
suggested that the final rule include
specific parameters for when property
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acquisition for transit-oriented
development would be permissible.
Finally, one commenter requested that
the definition of ‘‘commitment’’ include
a mechanism to ensure project
completion, such as deadlines, progress
schedules, or a recapture mechanism.
HUD Response: HUD appreciates the
comments regarding how HUD 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. However, HUD acknowledges
and agrees with the concerns expressed
by many commenters that a separate
commitment deadline for HTF funds
used in transit-oriented development
may cause a decrease in the amount of
HTF units produced.
Transit-oriented development is not
required in the HTF statute or
regulations. As proposed, § 92.725
stated that grantees are 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 HTF allocation
plan, which is part of the State’s
consolidated and annual action plan.
These plans contain several analyses of
priority housing needs. Based on these
identified priority needs, grantees may
choose to prioritize development of
HTF-assisted units near transit access
and sustainable development.
HUD agrees with commenters that the
separate definition of commitment for
transit-oriented development could lead
to ‘‘land banking.’’ Land acquisition for
banking purposes is not an eligible
activity in the HTF statute, and HUD
does not seek to encourage the use of
HTF funds for ‘‘land banking.’’ Based on
the comments received, HUD decided
that use of HTF funds in transit-oriented
development projects is best addressed
at the State and local level, and that it
is not necessary at this time to establish
a separate definition or deadline related
to the use of HTF funds for transitoriented development projects. Each
grantee may include incentives and
priorities in its HTF allocation plan to
further promote sustainable
development that is appropriate to the
local communities where housing
developed with HTF funds will be
located.
This rule, at § 93.2, eliminates the
separate definition of commitment for
transit-oriented development.
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State-Designated Entity, Grantee,
Recipient
In the proposed rule, a Statedesignated entity was defined as 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.
Comments: One commenter
recommended that the definition of
‘‘State-designated entity’’ be revised to
include ‘‘housing community
development entity.’’ A commenter
stated that the definitions of ‘‘grantee’’
and ‘‘recipient’’ should be consistent
between HOME and HTF. Other
commenters suggested that the rule be
revised to explicitly state that public
agencies, local governments, public
housing authorities, non-profit entities,
and for-profit entities are eligible
recipients.
HUD Response: The terms ‘‘statedesignated entity’’ and ‘‘recipient’’ are
defined in the statute. This rule
includes examples of the types of
entities, such as public housing
agencies, that may be eligible recipients
providing that they meet the statutory
qualifications for a recipient.
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Extremely Low- and Very Low-Income
Families
The HTF statute contains definitions
of extremely low and very low-income
families based on percent of median
income, with adjustments for family
size (30 percent of area median income
(AMI) for extremely low and 50 percent
of AMI for very low income).
Comments: Some commenters stated
that the proposed definitions of ‘‘very
low-income families’’ and ‘‘extremely
low-income families’’ are inconsistent
with the statute. A few commenters
requested HUD provide a definition of
‘‘rural area’’ in the definition of ‘‘very
low-income families.’’ Other
commenters suggested that the HTF
should adopt the definition of ‘‘family’’
as used in the HOME program. A
commenter requested the term
‘‘household’’ replace ‘‘family’’
throughout the rule.
HUD Response: While the terms
‘‘family’’ and ‘‘household’’ do not have
the same meaning (a ‘‘household’’ can
comprised more than one family), HUD
acknowledges that the terms are
sometimes used interchangeably in
statute, regulation and guidance (i.e.,
HOME uses the part 5 definition of
‘‘family’’ at 24 CFR 5.403, and defines
household as one or more persons
residing in a unit).
HUD agrees with commenters that the
HTF statute does not allow for the same
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adjustments in income as in the HOME
program and modified the regulatory
language at § 93.2 (from § 92.702 of the
proposed rule) to reflect only the
adjustments allowed by the HTF statute.
For the purposes of the definition of
very low-income families, in this
interim rule, HUD defines the term
‘‘rural’’ based on the term
‘‘metropolitan’’ as defined by the Office
of Management and Budget. All ‘‘nonmetropolitan ’’ areas will be considered
‘‘rural.’’
Allocation Formula Proposed § 93; Final
§ 93, Subpart B
Comments: A commenter states that
the need factors should be weighted
equally to ensure fair distribution of
resources. Another commenter
specifically supports the 50 percent
weight assigned to factor 1 (shortage of
units), and the 25 percent weight
assigned to factor 3. A commenter
states, in the absence of information
about how much of an increase
California would receive compared to
the proposed allocation, and the
substantial housing needs of California’s
low and very low-income population,
that the factors should be weighted in
accordance with alternative three, under
which the first factor would be weighted
at 60 percent and the other factors
weighted at 13.3 percent. Another
commenter states that the extremely
low-income focus of this program means
that it should be a key resource for
assisting the homeless, and the formula
allocation should reflect that priority.
HUD Response: Section 1338(c)(3)(C)
of the Act requires the formula to give
priority emphasis and consideration to
the first factor in section
1338(c)(3)(B)(i), and therefore the factors
cannot be weighed equally. The
proposed rule reflected this priority
consideration by weighting this factor
higher than the other factors in the
proposed allocation formula. The
interim rule is adopting the proposal
that the two factors addressing the
needs of extremely low-income
households, Factors 1 and 3, have a
combined weight of 75 percent in
keeping with the statutory targeting of
funds.
The Regulatory Impact Analysis (RIA)
for the formula allocation HTF proposed
rule was issued on December 4, 2009,
and can be found on HUD’s Web site
(https://www.huduser.org/portal/
publications/pubasst/riaforhtf.html).
The RIA describes in detail the
alternative weight structures that HUD
analyzed in developing the HTF
allocation formula, the resulting impacts
of each alternative on the States, and the
analysis that supports HUD’s selection
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of the alternative in the proposed
allocation formula. The proposed
formula strikes a balance between the
high levels of housing needs in
California and other States, as well as
the competing priorities discussed in
the RIA.
An extremely low-income household,
by statutory definition, means a
household whose income does not
exceed 30 percent of the area median
income, with adjustments for family
size. Homeless individuals and families
who qualify as extremely low-income
will be eligible for HTF units. The
combined weight of 75 percent for the
two factors that address the needs of
extremely low-income households,
factors one and three, reflects the
statutory targeting of funds to extremely
low-income households in the proposed
formula. Furthermore, section
1338(a)(1)(A) of the Act specifically
states that the purpose of the HTF is ‘‘to
increase and preserve the supply of
rental housing for extremely low- and
very low-income families, including
homeless families . . .’’
Data Used in the Allocation Formula
Comments: A commenter states that
homeless households should be
included in the aggregate number of
extremely low-income renter
households to determine the true need.
Data are readily available from
Continuum of Care (CoC) programs and
the Homeless Management Information
System (HMIS). Another commenter
states that more detail is needed on the
sources of data the proposed formula
uses. A commenter states that HUD
should state exactly which American
Community Survey data it will use,
whether such data will be updated and
used every year, and at what point 2010
Census data will be used. The
commenter also states that HUD should
clarify which RSMeans Cost Survey data
will be used, and recommends data
specific to multifamily construction.
This commenter states that HUD should
advise what sampling method will be
used. Whatever method is used, the
commenter stated that HUD should
recognize that most multifamily
construction is in the higher-cost areas.
HUD Response: The proposed
allocation formula incorporated the
required statutory factors in section
1338(c)(3)(B). Consistent with the
Community Development Block Grant
(CDBG) and HOME formulas, the data
source used to determine the number of
extremely low-income renters with
housing problems for factor three will
be the most currently available data
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from the United States Census Bureau.3
For HTF allocations in Fiscal Year (FY)
2016, the most current data will be a
special tabulation of the latest available
three-year average data from the
American Community Survey.4 Census
standard tabulation data do not provide
counts of households by the income
breaks required by statute so HUD must
request a special tabulation of American
Community Survey data to calculate the
HTF formula. HUD is using the threeyear average data to avoid problems
with year-to-year bias in the data caused
by small samples in some of the smaller
population states. These data do not
include homeless individuals and
families.
HUD appreciates the commenter’s
view that homeless families should be
included in the count of extremely lowincome families. HUD has considered
the idea of including CoC counts or
(HMIS) counts of homeless people in
the counts for extremely low-income.
HUD has decided not to implement
these suggestions for two reasons:
• Inconsistent and incomplete data.
Neither CoC nor HMIS data are
complete for all parts of the country and
the method of data collection is
somewhat different from place to place.
That makes the data poorly suited for an
allocation formula because they do not
have full national coverage and different
data collection methods may result in
bias toward one place over another.
• Incentive bias. Even when the data
have full coverage, HUD is unlikely to
use CoC or HMIS data for any allocation
formulas because the data are being
reported by grantees. HUD is concerned
that some grantees may adjust their
method of reporting if they perceive
they might get a different funding
allocation based on that reporting.
The RSMeans construction cost data
used in the formula are the RSMeans
Square Foot Costs. Specifically, HUD
used city-level location factors for
residential construction to prepare statelevel estimates of the relative cost of
residential construction. In developing
these State estimates, HUD did not
select a subset or sample of cities.
Rather, every city with a published
location factor was included, and
location factors were weighted in
proportion to city populations. Data are
not available for rural areas or for
multifamily residential construction
specifically. However, because
construction costs are generally higher
in population centers, HUD believes
that the methodology adequately
3 See
https://www.census.gov/housing/.
https://www.census.gov/acs/www/data_
documentation/data_main/.
4 See
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accommodates the commenter’s concern
about multifamily construction in costly
areas. High-cost areas are reflected in
the use of urban data to prepare State
estimates as well as by the use of
population weighting to ensure that the
most populated cities receive their due
priority. HUD intends to use the most
recent available cost data and
population data in developing future
estimates.
Minimum Allocations
The interim rule contains a new
provision to address minimum grant
allocations. As noted earlier in this
preamble, section 1338(c)(4)(C) of the
Act directs that each of the 50 States
and the District of Columbia is to
receive a minimum grant of $3 million.
This section of the statute further
provides that if the formula amount
determined in any fiscal year would
result in an allocation of a minimum
grant of less than $3 million to any of
the 50 States or the District of Columbia,
the allocation for any such State or the
District of Columbia shall be allocated a
minimum grant of $3 million, and the
increase shall be deducted pro rata from
the allocations made to all the other
States.
The Act did not envision a situation
in which the HTF lacked sufficient
funds to award each of the 50 States and
the District of Columbia a minimum
grant of $3 million. After the deposits
are made to the HTF for a fiscal year,
section 1338(c)(4)(B) of the Act requires
HUD to make allocations to its grantees.
To give meaning to both of these
statutory sections, HUD interprets the
statute to require the allocation of grants
even if the grants are less than the $3
million minimum. If the amount for a
fiscal year is insufficient to provide the
minimum allocations, HUD will publish
a notice in the Federal Register for
comment, describing an alternative
allocation method.
Participation and Submission
Requirements; Distribution of
Assistance Proposed §§ 92.720–92.725;
Final §§ 93.100–101
Allocation Plan/Participation and
Submission Requirements § 92.720
In § 92.720, HUD proposed requiring
each 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 the
Act. HUD proposed to implement the
requirement for an HTF allocation plan
by amending its regulations in 24 CFR
91.220 and 91.320 to include these
requirements in the consolidated plans
of grantees and, where applicable,
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5207
subgrantees. Section 92.720 of the
proposed rule directed 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.
Comments: Several commenters
expressed concern that the proposed
requirements do not place enough
emphasis on public participation and
transparency.
HUD Response: HUD recognizes the
commenters’ concerns but believes the
requirements adopted in this rule
provide for sufficient public input on
the allocation of HTF funds without the
need for additional or new citizen
participation requirements. Section
92.720(b) of the proposed rule directed
States to include the HTF allocation
plan in the consolidated plan and
follow the citizen participation
requirements in the consolidated plan
regulations in 24 CFR part 91. 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.
The language is adopted in this rule
as proposed.
Distribution of Assistance: HTF
Grantees, Subgrantees, and Recipients
§ 92.725
HUD proposed that a formula grant be
provided to each State for each year that
funds are made available for the HTF. In
§ 92.725, HUD described the proposed
ways HTF funds will flow to the
communities and recipients, as well as
the participation and submission
requirements for grantees receiving an
HTF allocation.
Comments: Some commenters
suggested that HTF funds should be
allocated directly to municipalities and
local participating jurisdictions, as is
done with other Community Planning
and Development programs (e.g.,
HOME, CDBG, Emergency Solutions
Grants) because States may be unsuited
to determine local housing priorities
and unable to effectively administer the
HTF. In addition, they stated that
passing the funding through the State
delays the use of funds at the local level,
and local governments are more in tune
with local needs.
Several commenters stated that HUD’s
rule should ensure adequate allocation
to rural areas, and that allocations
should be made based on the relative or
proportional need of frontier, rural, and
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urban areas. A few commenters
suggested that the final rule should
require funding to be allocated by
formula to areas of greatest need, and
adjusted for high-cost living areas and
the lack of affordable housing.
HUD Response: States and Statedesignated entities are the only
permissible grantees in the HTF statute.
HUD does not have the authority to
designate local governments as grantees.
An HTF grantee may choose to
distribute HTF funds through one or
more subgrantees. A subgrantee may be
a State public agency or a unit of general
local government. Section 91.320(k)(5)
requires the action plan to reflect the
State’s decision to distribute HTF funds
through grants to subgrantees, and
§ 92.725(d) requires the grantee to
ensure that its subgrantees comply with
the HTF requirements and carry out the
responsibilities of the grantee. The HTF
allocation formula is statutorily
prescribed and HUD does not have the
authority to change the allocation
method. However, as described in
§ 92.725(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
(which will include the HTF allocation
plan). The HTF allocation plan must
describe the distribution of the grant
and priority housing needs, including
rural housing needs.
The language is adopted in this rule
as proposed.
Program Requirements Proposed
§§ 92.726–92.727; Final §§ 93.150
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Site and Neighborhood Standards
§ 92.726
In § 92.726, HUD proposed that the
site and neighborhood standards
contained in the HOME program
regulations at § 92.202 apply to the HTF.
Comments: A commenter suggested
that HUD adopt all the site and
neighborhood standard criteria
applicable to existing housing being
considered for project-based vouchers
rather than limiting the criteria to new
construction projects. The commenter
reasoned that HTF, unlike HOME, will
fund rehabilitation projects. Another
commenter suggested that HUD’s rule
include a provision that requires site
selection to occur in a manner that will
not exclude people with disabilities. A
commenter stated that the rule should
allow HTF funds to be held when local
opposition has delayed a project or
when exclusionary zoning is being
challenged.
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HUD Response: HUD is adopting the
site and neighborhood standards from
§ 92.202 of the proposed rule in new
§ 93.150, with an updated crossreference to the applicable standard for
new construction projects at 24 CFR
983.57(e). As with the HOME program,
HUD is not applying site and
neighborhood standards to
rehabilitation projects under HTF.
However, if project-based vouchers are
used in an HTF rehabilitation unit, the
site and neighborhood standards for
project-based vouchers will apply. In
addition, the requirements of 24 CFR
part 8 (which implement section 504 of
the Rehabilitation Act of 1973) apply to
the HTF, and specifically address the
site selection with respect to
accessibility for persons with
disabilities.
Income Determinations § 92.727
In § 92.727, HUD proposed a
definition for ‘‘annual income’’ and
described the process for determining
the annual income of tenants and
homebuyers for eligibility in HTFassisted housing.
Comments: A commenter requested
the proposed language be revised to
further clarify which set of income
determination provisions are applicable
to the HTF. Another commenter
recommended that HUD’s rule allow
residents and applicants to contest
income determinations. Another
commenter expressed concern that the
use of the Enterprise Income
Verification can pose a problem for
recently institutionalized persons, as it
can cause significant delays.
HUD Response: HUD appreciates the
suggestions but the income
determination provisions provided in
this HTF rule are those that HUD uses
in its HOME program rule, which HUD
believes work well. Therefore HUD is
not inclined to change these provisions.
The income determinations will be
made in accordance with the HTF
program requirements, which mirror the
HOME program requirements, and do
not involve the use of the Enterprise
Income Verification system.
Eligible and Prohibited Activities
Proposed §§ 92.730–92.735; Final
§§ 93.200–93.205
In §§ 92.730–92.735, HUD proposed
requirements that govern eligible and
prohibited activities, eligible project
costs, and planning and administrative
costs. Allowable and prohibited fees
were also addressed in these sections.
Eligible Activities § 92.730
In § 92.730, HUD set forth HTFeligible activities. Section 1338(c)(7)(A)
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of the Act provides that HTF funds may
be used for assistance for the
production, preservation, rehabilitation,
and operating costs of rental housing.
To achieve the goal of using HTF funds
primarily for the production of new
affordable units, HUD proposed to limit
the amount of HTF funds that may be
used for operating cost assistance to 20
percent of each annual grant.
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 the Act
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, HUD
proposed requiring grantees to perform
underwriting analysis.
Eligible Activities: General § 92.730(a)
Comments: HUD received several
comments which suggested the rule
expand the list of eligible activities. A
commenter stated that HUD’s rule
should allow for HTF funds to be used
in projects already underway. Another
commenter suggested HUD add explicit
language clarifying that HTF funding
may be used in mixed-income
developments. A few commenters
suggested that HUD’s rule permit HTF
funds to be used for development costs
associated with laundry facilities and
community space located in buildings
which are separate from residential
space. A commenter requested
additional clarification regarding the
prohibition on charging laundry access
fees does not impact the ability to
impose reasonable charges for the use of
a washer or dryer. Another commenter
recommended that HUD’s rule include
language that provides a basis for
charging impact fees, and clarifies
‘‘reasonable and necessary costs.’’ A
commenter asked for a definition of
‘‘non-luxury,’’ and stated that this
requirement, as it applies to
construction costs, is impractical to
apply. Another commenter suggested
that HUD allow grantees to charge
property owners monitoring costs for
the entire period of affordability up
front and include monitoring costs as an
eligible use of HTF funds. A commenter
recommended that refinancing costs be
included as an eligible cost.
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Several commenters objected to
allowing transitional housing as an
eligible activity because it does not meet
the intent of increasing access to rental
properties available to ELI households
and does not appear in the authorizing
statute. Another commenter expressed
concern that there may be conflicts
between fair housing laws and
transitional housing plans impacting
people with disabilities.
Another commenter stated that there
should be a greater focus on
homeownership in the final rule, and
that downpayment assistance programs
should constitute an eligible use of HTF
funds. A few commenters opposed the
first-time homebuyer restriction and
recommend the final rule permit the
rehabilitation of ELI owner-occupied
homes as a more effective means of
addressing homeownership for ELI
households. Other commenters
recommended HUD’s rule stress the
voluntary nature of using 10 percent of
HTF funds for homeownership
activities.
HUD Response: This rule makes clear
that projects underway when the HTF
rule is implemented are not eligible to
receive HTF funds. HUD does not agree
that HTF funds should be permitted to
pay costs for constructing community
space or laundry facilities in buildings
that are separate from the residential
space. Although it is sometimes
necessary to provide such space in
separate buildings, HUD believes that
States should leverage other funds to
pay such costs so that HTF funds are
used to create as many ELI and VLI
units as possible. Nothing in this
interim rule prohibits reasonable
charges for washing machines.
HUD does not believe that inclusion
of a definition of non-luxury in the HTF
rule is practical, as amenities
considered luxury change over time. For
example, air conditioning in certain
HUD-assisted housing was considered a
luxury item at one time. HTF grantees
have experience with ensuring that only
non-luxury items are included in
housing because they also administer
the HOME program, which has similar
requirements.
HUD has reconsidered making
transitional housing an eligible type of
housing in the HTF and agrees with
commenters that this type of housing is
contrary to the primary purpose of the
HTF, which is to increase the supply of
permanent affordable housing.
Transitional housing is frequently
developed to address the needs of
homeless persons, to provide housing
assistance and services that will enable
them to obtain permanent affordable
housing. The language in this section
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was revised to delete transitional
housing as an eligible type of housing.
Monitoring is an eligible
administrative cost. This interim rule
does not allow grantees to charge
property owners monitoring costs for
the entire period of affordability ‘‘up
front’’ as suggested by commenters but
does permit HTF grantees to charge
property owners monitoring fees (see
§ 93.205).
Rehabilitation of housing for existing
homeowners is not an eligible activity
in the statute. The statute restricts the
use of HTF funds for homeownership to
first-time homebuyers and limits the
amount of each annual HTF grant that
may be used for homeownership to 10
percent. Each State is allowed by the
statute to determine how it will use HTF
funds for homeownership assistance.
Downpayment assistance is an eligible
activity in the regulation.
The proposed rule made refinancing
of existing rental projects permissible as
part of rehabilitation when the
proportional cost of rehabilitation is
greater than the amount of debt
refinanced. HUD proposed these
restrictions on refinancing in order to
synchronize with the HOME program
and to facilitate the preservation and
rehabilitation of existing housing for ELI
and VLI households. These proposed
restrictions are therefore retained in this
interim rule.
Eligible Project Costs § 92.731
In § 92.731, HUD proposed eligible
project costs to 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 and
Operating Cost Assistance Reserves
(§ 92.731(e))
To achieve the goal of using HTF
funds primarily for the production of
new affordable units, HUD proposed, in
§ 92.730(a)(1), to limit the amount of
HTF funds that may be used for
operating cost assistance to 20 percent
of each annual grant. The proposed rule
stated that operating cost assistance can
be provided for the entire period of
affordability, but may be awarded only
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in two-year increments from each HTF
grant. 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 tenant 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 proposed rule also included
operating cost reserves of up to five
years worth of operating cost assistance
as an eligible activity (§ 92.731(e)(2)).
Grantees would be allowed to establish
operating cost reserves for specific HTFassisted projects if necessary to ensure
the financial feasibility of a project.
Comments: Several commenters
disagreed with the proposed 20 percent
cap on the amount of each annual grant
that may be used for operating cost
assistance and suggested that HUD
eliminate any restriction on the amount
of each annual grant that may be used
for operating cost assistance. Others
suggested increasing the cap. Still others
recommended that any limits on
operating cost assistance should be
based on each State’s housing needs and
should be left to the discretion of the
States. Commenters also recommended
that HUD impose no restriction on using
HTF funds for operating assistance in
the absence of Section 8 voucher
assistance. Some commenters stated that
HTF funding for operating assistance
should be limited to HTF-assisted units
and units being developed with HTF
funds, while others support allowing
HTF operating assistance for units
funded by other State and Federal
programs.
A commenter stated that it will be
difficult to attract investors and ensure
the long-term financial success of
projects without giving States flexibility
in determining how to apply HTF funds
toward operating assistance. Another
commenter stated that the program will
encounter underwriting challenges
regardless of operating assistance, but
depending on the mix of units, there
may be sufficient revenue generated to
support the properties. Commenters
expressed concern that the proposed
cap will limit the number of units that
can be developed with HTF funds,
particularly units that serve ELI
households.
A commenter stated that the rule must
clarify that States are permitted to limit
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and target operating assistance.
Commenters recommended that the
final rule should permit the initial HTF
grant to include sufficient funding for
operating assistance or operating
reserves to last for the entire term of
affordability. A few commenters stated
that the final rule should permit the
creation of capital reserves aimed at
increasing affordability for ELI
households.
In response to a request from HUD for
input on whether tax abatements can
significantly reduce operating costs, one
commenter stated that while tax
abatements can reduce operating cost,
local governments will hesitate to
provide tax abatements due to current
economic pressures.
A few commenters stated that the
time limits for offering operating cost
assistance and operating reserves should
be eliminated at the final rule stage.
Commenters stated that HTF-assisted
units that require operating assistance
during the first two years will almost
certainly need operating assistance
throughout the entire term of
affordability, and that grantees should
have the flexibility to provide more than
two years of assistance when faced with
underwriting or feasibility concerns.
Another commenter stated that the HTF
funding should be allowed to capitalize
Section 8 transition reserves to
encourage private lenders to underwrite
HTF-assisted projects with Section 8
project-based assistance. A few
commenters recommended that HUD
provide guidance in the HTF program
guidelines to State grantees on
underwriting standards for reinvestment
and building reserves to self-finance
rehabilitation during the period of
affordability.
Lastly, several comments were
submitted regarding the use of Section
8 vouchers in conjunction with HTF
funds. Some commenters recommended
that Section 8 vouchers be awarded
along with the HTF funding. Another
commenter asks whether there is a unitbased or project-based prohibition on
using HTF funds for operating costs
when Section 8 project-based vouchers
are also involved in the project.
HUD Response: The HTF is primarily
a production program meant to add
units to the supply of affordable housing
for ELI and VLI households. Analyses of
the use of HTF funds for both
development and operating cost
assistance showed that the use of HTF
funds for operating assistance could
very quickly consume each State’s
annual grant. This would deter the use
of HTF funds for production of
additional units, as well as preservation
and rehabilitation of units, targeted to
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ELI households—the primary purpose of
the HTF. HUD also assumes that HTF
funds will be combined with other
sources to produce and preserve
affordable units, mostly in mixedincome projects, and that the HTF will
not be the sole source of funding for
operating cost assistance. Therefore,
establishment of a cap on the amount of
HTF funding in each annual grant that
may be used for operating cost
assistance is appropriate.
However, to provide more flexibility
to grantees to develop and finance HTFassisted projects, this interim rule
establishes the cap at up to one-third of
each annual grant. This interim rule also
makes clear that the cap applies to both
amounts used for operating cost
assistance as well as the operating cost
reserves. Within this cap, each fiscal
year the grantee will have discretion in
how it awards operating cost assistance
to projects. The grantee may apply the
one-third limit to all projects or adjust
it accordingly, as long as no more than
one-third of each annual grant is used
for operating cost assistance and for
operating cost reserves.
HUD also revised the proposed rule at
this interim rule stage to address
comments about the way in which
operating cost assistance may be
provided to a project. This interim rule
establishes that a grantee may provide
operating cost assistance to a project
during the entire period of the
affordability for the project. The written
agreement between the grantee and the
owner that commits funds from an HTF
grant received in a single fiscal year may
provide operating cost assistance over a
period for multiple years as long as the
grantee to meet its five-year expenditure
deadline in § 93.400(d). Allowing such
commitment provides the grantee with
flexibility to manage its grant funds
when providing operating cost
assistance to a project; however, HUD
will recapture funds not expended by
the five-year deadline. Because
operating cost assistance is an eligible
activity and may be provided to a
project by more than one grant, the
prohibition in the rule on providing
additional HTF funds to a project during
the period of affordability (§ 93.205(a))
does not apply to renewal of funds
committed to operating cost assistance.
The grantee may renew operating cost
assistance for HTF-assisted units during
the affordability period by executing
written agreements after future fiscal
year HTF grants are awarded.
If Section 8 project-based vouchers or
other project-based rental assistance is
made available to HTF projects for HTFassisted units, HUD prohibits the use of
HTF funds available for operating cost
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assistance for those same units, but such
limitation will not hinder HTF
implementation. Section 93.200(c) of
the interim rule (§ 92.730(c) of the
proposed rule) requires that only the
actual cost of development and
operation of HTF units can be charged
to the HTF program, and describes the
methods for allocating costs and
determining HTF units in multi-unit
projects. In this interim rule, HUD does
not impose a limit on the use of Section
8 project-based vouchers in a project for
which HTF is also providing operating
cost assistance, as long as the Section 8
project-based voucher is not provided to
the same unit receiving HTF operating
cost assistance. HUD cannot guarantee
that funds for project-based Section 8 or
other project-based assistance will be
appropriated for HTF-assisted projects;
therefore, awards of HTF funding to
projects should be made based on
existing resources and underwriting.
HUD understands the need for both
capital (replacement) and operating
reserves in housing projects. When
grantees provide HTF funding for a
project, the need for annual or monthly
contributions to these reserves are
determined through the underwriting
process. Funding for capital or operating
reserves ‘‘up front’’ for the present value
of the entire amount needed over the
required period of affordability (30
years) is not possible if the HTF funds
are appropriated, as Federal funds
cannot be drawn in that manner, years
in advance of need. However, funding
for the HTF may come from nonappropriated sources, i.e., the proceeds
from GSEs as described in section 1337
of the Act. Therefore, in the interim rule
HUD establishes separate requirements
for operating cost reserves funded by
appropriated and non-appropriated
funds.
If the operating cost assistance reserve
is funded with appropriated HTF funds,
the allowable amount of the reserve may
not exceed the amount necessary to
provide operating cost assistance to the
HTF-assisted units in an HTF-assisted
project for a period of up to five years.
Because operating cost assistance
reserves are an eligible activity and may
be provided by more than one grant, the
prohibition on providing additional
HTF funds to a project during the period
of affordability (§ 93.205(a)) does not
apply to renewal of operating cost
assistance reserves. The grantee may
renew operating cost assistance reserves
for HTF-assisted units during the
affordability period by executing written
agreements after future fiscal year HTF
grants are awarded. The grantee must
demonstrate the necessity of the reserve
amount based on an analysis of
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potential deficits remaining after the
expected rent payments for the HTFassisted unit are applied to the HTFassisted unit’s expected share of
operating costs.
If the operating cost assistance reserve
is funded with non-appropriated HTF
funds, the amount necessary to fund the
reserve must be calculated using the
same methodology; however, the reserve
may be funded for the amount estimated
to be necessary for the entire period of
affordability up front, or if this amount
would exceed the cap (one-third of each
annual grant), could be funded in
phases from future grants determined to
be suitable and necessary to secure
advantageous financing. HUD will
provide guidance and training to states
about underwriting standards for
investment of HTF funds and
establishing replacement reserves to
provide necessary rehabilitation during
the period of affordability in their HTF
program guidelines.
Administration and Planning Costs
§ 92.732
As noted earlier in this preamble, the
administrative costs allowable by statute
in the HTF program cannot exceed 10
percent of the annual grant. In § 92.732,
HUD proposed eligible administrative
and planning costs similar to the HOME
program at § 92.207.
Comments: HUD received very few
comments regarding the entity eligible
for the 10 percent allocation to
administrative and planning costs. One
commenter suggested that HUD’s rule
clarify that only the agency responsible
for the award, compliance, monitoring,
and reporting of HTF funds is eligible
and another commented that these
funds should only be charged by the
subgrantee, not the grantee. Other
commenters offered recommendations
about what should and should not be
considered an eligible administrative
and planning cost. A commenter stated
that monitoring funds should be
included, another stated project delivery
costs (i.e., inspections, work write-ups)
should not be eligible to charge as
administrative costs, and another
requested clarification that the
administrative costs in § 92.732(b)(2) are
not the same as prohibited travel costs
at section 1338(c)(10)(D)(i)(V) of the Act.
Another commenter suggested that
HUD’s rule require the allocation to
administrative and planning costs be
proportional to the amount of HTF units
in the project. Another commenter
expressed concern that the 10 percent
cap on administrative costs is not
enough to cover all the monitoring
requirements. A commenter requested
that HUD make clear whether the
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amounts available for rental housing
and homeownership activities are
calculated based on the funds available
after 10 percent of the annual formula
grant is deducted for administrative
costs.
HUD Response: This interim rule
permits grantees to charge monitoring
fees to cover the costs of required
monitoring. The HTF grantee (State or
State-designated entity) may use up to
10 percent of its annual grant for
administrative costs. A grantee may
provide funding for administrative costs
to subgrantees. Program-related travel
that is eligible under § 92.732(b)(2)
remains an eligible cost in this rule, as
this is not the same type of travel
prohibited in section
1338(c)(10)(D)(i)(V) of the Act. Only
non-program-related travel is prohibited
as an eligible cost in the HTF statute.
The Act permits up to 10 percent of the
annual HTF grant to be used for
homeownership activities, and up to 10
percent of the grant for administrative
costs. Therefore, up to 10 percent of
each annual grant may be spent on
administrative costs, up to 10 percent
may be spent on eligible
homeownership activities, and the
remainder on eligible rental housing.
HTF and Public Housing and Rental
Assistance Demonstration § 92.734
HUD proposed prohibiting the use of
HTF funds for public housing, including
public housing that is developed under
the HOPE VI program.
Comments: Several commenters
requested that HUD’s rule explicitly
include public housing authorities as
eligible recipients of HTF funding.
Some commenters requested that the
development, preservation, and
rehabilitation of public housing be
allowed as an eligible activity, as the
exclusion of public housing was not
clearly mentioned in HERA or the Act;
public housing tenants meet the HTF
eligibility requirements and public
housing funding sources are inadequate
to meet the demands.
HUD Response: Public housing
agencies (PHAs) are already eligible
entities to be HTF recipients. They are
eligible to apply for HTF funding if they
have the required capacity defined in
the HTF statute and at § 93.2. PHAs, if
qualified as recipients, can compete for
HTF funding to develop HTF-assisted
projects. HUD has considered the
comments that the HTF should be
permitted to be used for public housing
projects and agrees that there is a role
for the HTF in public housing. HUD has
decided to allow the use of HTF funds
(1) in connection with the Choice and
LIHTC programs for construction of new
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units that replace existing public
housing properties; and (2) for the
rehabilitation of existing public housing
units in connection with the Rental
Assistance Demonstration (RAD),
Choice, and LIHTC programs.
When the HTF program proposed rule
was published on October 29, 2010,
RAD was not yet established. RAD was
established by HUD’s 2012
Appropriations Act (Pub. L. 112–55, 125
Stat. 552, approved November 18,
20111, at 125 Stat. 673). Consequently,
there were no public comments
submitted on the HTF program
proposed rule about the possible
interplay between HTF and RAD.
However, with RAD now an active
demonstration program, questions have
been raised to HUD about whether HTF
may used for RAD units, and HUD takes
the opportunity to address those
questions in this preamble. HTF funds
can be used in connection with RAD for
the rehabilitation of public housing
properties in which assistance will be
converted and used. HTF funds can also
be used for rehabilitation of ‘‘RAD
units’’ (that is public housing properties
in which assistance has been converted)
after conversion takes place. Such uses
are not contrary to HUD’s position that
use of HTF funds for public housing is
limited to use with other programs to
rehabilitate or replace public housing
properties, and not for the expansion of
the public housing inventory, which can
be achieved through other funding
sources.
Prohibited Activities § 92.735
HUD proposed prohibited activities in
§ 92.735. To synchronize with the
HOME program, prohibited activities
and fees at § 92.735 mirror the HOME
program regulation at § 92.214. In
addition, § 92.735 also includes
activities expressly prohibited in the
HTF statute. Section 1338(c)(10)(D) of
the Act 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. This
statutory section further provides that,
subject to the exception in section
1338(c)(10)(D)(iii) of the Act, 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 HTF grant for the
administrative costs of carrying out its
HTF-funded program, including
homeownership counseling.
Comments: A commenter stated that
several provisions, including provisions
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on renewing operating assistance and
grants for transit-oriented development
projects, seem to conflict with the
prohibition on using additional HTF
assistance for previously assisted
projects, and requested clarification.
Several commenters requested that HUD
eliminate the prohibition on using HTF
funds in developments previously
assisted with HTF. Alternatively, these
commenters recommended that the final
rule should limit the prohibition to 15
years after initial receipt of HTF funds,
and allow for exceptions to the
prohibition during the period of
affordability. Other commenters stated
that the rule should allow projects
previously receiving HTF funds to
obtain subsequent capital funds,
operational expenses, and maintenance
costs under the condition that the
period of affordability would be reset,
extended, or expanded to additional
units upon receipt of additional HTF
assistance. Another commenter stated
that the final rule should include a
provision that HUD has the ability to
waive the prohibition in exchange for an
extension of the affordability period.
HUD Response: Per the requirements
of 24 CFR 93.300, HUD expects that
HTF projects will be properly
constructed or rehabilitation with HTF
funds and underwritten to ensure that
capital needs can be addressed at the
appropriate time in the life cycle of the
property. Therefore, HUD will not
change the regulation to allow the
addition of HTF funds after 15 years, as
commenters suggested. To address
concerns about projects that may need
additional operating cost assistance
during the 30-year period of
affordability, HUD revised § 93.205(a).
Income Targeting Proposed §§ 92.736–
92.737; Interim §§ 93.250–93.251
Sections 92.736 and 92.737 of the
proposed rule set forth the proposed
income targeting requirements, as
required by section 1338(c)(7) of the
Act, for HTF-assisted rental units and
homeownership units, respectively.
The Act 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
(whichever is greater). Not more than 25
percent may be used for the benefit only
of VLI families. Under the rulemaking
authority of section 1338(g) of the Act,
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. HUD
proposed that for the first year in which
HTF funds are made available, of the
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amount made available for rental and
homeownership housing, grantees are
required to expend 100 percent of HTF
funds to provide rental and
homeownership housing for ELI
households. The proposed rule
provided that the HUD would publish
subsequent income targeting
requirements when HUD’s allocation
amounts to states are published.
Comments: HUD received many
comments opposing the proposed
targeting of 100 percent of the HTF
funds to ELI households in the first year
that funding is provided under the
program. The commenters stated that
the income targeting should not change
between the first year and subsequent
years of funding, as it will make the
HTF more difficult to administer.
Commenters also stated that this
approach to targeting is not reflective of
the statute.
Several commenters expressed
support for targeting some VLI
households in the first year of funding,
with one commenter expressing concern
that there may not be adequate local
support to target ELI households
exclusively. Other commenters
requested that HUD continue to target
100 percent of ELI households until the
shortage of ELI housing is resolved.
Several commenters expressed concern
that the proposed income targets will
limit the use of HTF funds in rural and
non-urban areas. Another commenter
recommended that the proposed
language be revised to explicitly state
that any portion of HTF funding not be
targeted to ELI households and should
be used for VLI households only.
HUD also received many comments
advising of challenges resulting from
use of HTF funds for homeownership
activities targeted at ELI households,
with many of these commenters
suggesting that HTF funding for
homeownership would be better served
targeting VLI households or other
income groups.
HUD Response: HUD is aware that
changes over time to income targeting
may require grantees to adjust their
approaches to using HTF funds to
produce affordable housing, but believes
this necessary in order to target limited
resources to ELI households. There is a
well-documented and overwhelming
need to increase the supply of housing
targeted to ELI households within each
grantee’s jurisdiction.
However, in consideration of the
comments received, at this interim rule
stage, HUD adjusted the targeting based
on the amount of resources being made
available through the HTF. With limited
resources available for production of
affordable housing targeted to ELI
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households, HUD has determined that
targeting 100 percent of HTF to ELI
households is appropriate if the amount
available in a fiscal year for HTF is less
than $1 billion. If the amount exceeds
$1 billion, grantees may spend up to 25
percent for the benefit of VLI
households. In either scenario, any
funds not used for ELI households must
be used to serve VLI households.
HUD acknowledges the commenters’
concerns regarding the difficulty of
providing homeownership assistance to
ELI households. The statute and
regulation are clear—there is no
minimum percentage of HTF funds to be
spent on homeownership, only a
maximum percentage (10 percent). If
HTF-eligible homeownership activities
are not appropriate for ELI households
in their jurisdictions, grantees are not
required to use HTF funds for
homeownership projects. HUD believes
grantees are in the best position to
determine whether a homeownership
program for ELI or VLI households is
appropriate within their jurisdictions.
Public input on the use of HTF funds for
rental housing or homeownership must
be sought through public participation
on a grantee’s proposed HTF allocation
plan.
Project Requirements Proposed
§§ 92.740–92.750; Interim §§ 93.300–
93.306
In §§ 92.740 through 92.750, HUD
proposed requirements applicable to
HTF-assisted housing projects. HUD
proposed maximum per-unit
development subsidy, underwriting,
and subsidy layering requirements at
§ 92.740. To align with the HOME rule,
the HTF proposed rule at § 92.740
mirrored the HOME Prohibited
Activities and Fees provisions in
§ 92.250, with the exception of the
maximum per-unit development
subsidy amount section. The maximum
per-unit development subsidy amount
section is now § 93.300.
Maximum Per-Unit Subsidy,
Underwriting and Subsidy Layering
§ 92.740
At § 92.740(a), HUD proposed
requiring the grantee to establish
maximum limitations on the amount of
HTF funds the grantee may invest on a
per-unit basis. In § 92.740(b), HUD
proposed requiring the grantee to
perform subsidy layering analysis before
committing HTF funds to a project.
Included in this proposed provision was
the requirement that 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
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quality affordable rental or
homeownership housing for ELI
households for the affordability period
(30 years). The proposed rule also stated
that recipients of HTF-assisted projects
may not receive undue returns on their
investments.
Comments: Of the commenters that
submitted comments on this provision,
the majority addressed the proposed
requirement that the grantee must
establish a maximum per-unit
development subsidy limit. A few
commenters opposed that the subsidy
limit be established as a total dollar
amount and suggested the requirement
be revised to allow States to set the
maximum subsidy limit as a percentage
of the project cost on a per-project basis.
Another commenter wrote that States
should have the flexibility to establish
their maximum per-unit subsidy at 100
percent of the development costs for
HTF-assisted units. A commenter
suggested that the maximum per-unit
subsidy requirement at § 92.710 be
eliminated. Finally, a commenter stated
that the per-unit subsidy limit and
subsidy layering should only take into
account capital development costs.
With respect to a subsidy layering
review, a commenter suggested that
HUD’s rule should allow a subsidy
layering review, conducted as a
requirement of another program to
satisfy the subsidy layering review for
an HTF project. Another commenter
suggested that the language in the
proposed rule be clarified so that it is
not interpreted to mean that
certification of underwriting and
subsidy layering requires HUD-specified
processes, standards, and forms because
it would be burdensome. Another
commenter suggested that HUD
establish minimum underwriting
standards for homeownership.
HUD Response: This interim rule
adopts this provision as essentially
proposed, although HUD revised the
language to more closely mirror the
language on subsidy layering from the
HOME final rule. HUD does not agree
that maximum subsidy limits should be
established based on a percentage of
total project cost. Some project costs are
not eligible HTF costs, and one of the
purposes of this requirement is to
ensure the determination of the cost of
HTF-assisted housing units includes a
cost reasonableness test. With respect to
a subsidy layering review, HUD does
not prescribe specific subsidy layering
forms or processes. The grantee may use
the subsidy layering reviews conducted
by other project funders, but a subsidy
layering review conducted by another
agency or funder does not ‘‘satisfy’’ the
proposed requirement in § 92.740(b) (in
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this rule at § 93.300(b) unless the review
is completed in accordance with the
HTF grantee’s standards.
Grantees must establish the minimum
underwriting standards for their HTFfunded homeownership programs, as
required by § 93.304.
To address comments on maximum
subsidy limits, HUD chose not to
establish national maximum subsidy
limits that would be published by HUD.
The amount of subsidy needed to
produce affordable rental units targeted
to ELI or VLI households will vary
depending upon the project proforma. It
is possible that in some projects, the
entire development cost of an HTF unit
must be paid for with HTF funds in
order to achieve affordability. For
example, it would be desirable to pay
the entire development cost of HTF
units so that they carry no debt service
because rents are likely to be
insufficient to pay for the debt service
of the units. However, to address
accountability, HUD added language to
require grantees to adopt maximum
subsidy limits that are appropriate for
non-luxury housing units, based on
reasonable and actual costs of
developing such housing in the area.
Property Standards §§ 92.741 Through
92.745, Interim § 93.301
At the proposed rule stage, HUD
proposed property standards applicable
to HTF-assisted properties at §§ 92.741
through 92.745. Section 92.741 contains
the property standards for new
construction, § 92.742 establishes the
standards for housing undergoing
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 requested 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.
Comments: Several commenters
stated that HUD’s rule should provide
more flexibility in adopting property
and energy efficiency standards and that
the proposed property standards are too
specific. A commenter stated that HUD’s
rule should specify who will conduct
the environmental reviews for HTF
projects. Several commenters stated that
the units must meet habitability
standard requirements, but not
necessarily the use of Housing Quality
Standards (HQS). Another commenter
stated that HUD’s rule should require
properties to be free of all health and
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5213
safety standards and specify the lifethreatening conditions that must be
addressed.
A commenter stated that HUD’s rule
should provide standards that will be
applied on a building-by-building basis.
A few commenters stated that the
proposed efficiency requirements will
drive up the costs of developing ELI
units. A commenter stated that for major
life systems HUD should clarify
improvements necessary to meet the
standard. Another commenter stated
that the term for the useful life is
burdensome and too expensive.
A commenter requested that buildings
seeking historic tax credits or that are
located in historic districts be provided
with an exception from property
requirements. Another commenter
stated that the property standards will
make it difficult for developers to use
HTF funding to buy existing properties
for rehabilitation.
A commenter stated that HUD’s rule
should include a ‘‘discreet’’ funding
allocation to create affordable and
accessible housing for people with
developmental disabilities. Several
commenters stated that HUD’s rule
should require ‘‘visitability’’ and
‘‘universal design.’’ Other commenters
stated that HUD’s rule should address
accessibility by requiring 100 percent of
units in new construction and
substantial rehabilitation projects be
both visitable by wheelchair users and
adaptable, and that 30 percent of the
units are fully accessible.
HUD Response: To ensure
compatibility with the HOME rule and
in an effort to ease implementation of
HTF by maintaining consistency with
the requirements of the HOME rule to
the extent feasible, this interim rule
adopts the language used in the HOME
final rule property standards section at
§ 92.251, with the exception of the
environmental review requirements.
For the HTF program, HUD proposed
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
three 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
three 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
does not adopt these proposed
requirements in this interim rule. HUD
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plans to establish new and consistent
energy and water efficiency
requirements for both the HTF program
and HOME program through separate
rulemaking. For new construction, the
interim rule adopts the energy efficiency
standards established under section 109
of the Cranston-Gonzalez National
Affordable Housing Act, so that the
standards are the same for HTF and
HOME.
HTF grantees are responsible for
ensuring compliance with these
environmental review requirements.
HUD knows of no justification to
provide a blanket exemption of HTFassisted projects seeking historic tax
credits or located in historic districts
from property requirements. While HUD
would encourage grantees to include
‘‘visitability’’ standards in the
development of HTF-assisted and other
affordable housing, these visitability
standards are not required by any
Federal statute and are not included in
this rule.
HTF Property Standards Environmental
Requirements
Comments: Several commenters
stated that the rule creates a new
definition for ‘‘wetlands.’’ These
commenters stated that HUD’s rule
should incorporate the U.S. Army Corps
of Engineers and the Environmental
Protection Agency definition in
regulations pursuant to the Clean Water
Act. A commenter stated that the
regulations for environmental
remediation, testing for toxins, and
other property standards are too
detailed. A commenter suggested that
the HTF rule should include language
permitting States to request that reports
are prepared in accordance with the
most current ASTM standard. Another
commenter stated that for HTF projects
developed within a quarter mile of a site
with an unclosed environmental case
status, the final rule should require a
written justification for determination
that the proposed site does not pose a
health and safety risk for the HTF
project. A commenter recommended
that the HTF rule require a State to
maintain files with written justification
for the State’s determination that a
proposed site does not pose a health and
safety risk for an HTF project located
within a quarter mile of a site with a
reported Federal, State, or local
environmental case status that is open.
Another commenter stated that HUD’s
rule needs to specify who will conduct
the environmental review for HTF
projects. Several commenters stated the
proposed rule was overly detailed and
the final rule should replace these
requirements with standards from the
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National Environmental Policy Act of
1969 (42 U.S.C. 4332(2)(C)). Another
commenter stated that HUD’s rule
should clarify that a single
environmental review may satisfy the
requirements for both the HTF and
project-based voucher programs, when
both sources of assistance are used.
Another commenter requested an
exception in the property requirements
for buildings seeking historic tax credits
or located in historic districts.
HUD Response: This rule adopts the
definition of ‘‘wetland’’ as defined in
HUD regulation at 24 CFR 55.2(b)(11)
and which is used for all HUD
programs. The guidance within the
regulation for environmental
remediation, testing for toxins, and
other standards must remain detailed
because the purpose of the regulations
is to assist grantees to comply with the
requirements of the regulations.
HUD agrees that its HTF rule should
not include references to the ASTM year
and rather include language that reports
should be prepared in accordance with
the most current ASTM standard. HUD
already requires HTF projects to avoid
sites located within .25 miles of a
Superfund or Comprehensive
Environmental Response,
Compensation, and Liability
Information System (CERCLIS) site or
other contaminated site reported to
Federal, State, or local authorities
without a statement in writing from the
U.S. Environmental Protection Agency
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 use of the
property.
HUD disagrees with the comment that
the HTF rule should clarify that a single
environmental review may satisfy
requirements for both HTF and projectbased voucher (PBV) programs. The
grantee that is responsible for these
environmental requirements may in
some cases be the same as the
‘‘responsible entity’’ that conducts an
environmental review under 24 CFR
part 58 for a PBV project, and much of
the environmental information needed
to comply with both requirements may
be the same. However, the HTF
environmental requirements, to be
codified at § 93.301(f), are not identical
to the environmental review
requirements under part 58 for PBV
projects. For example, the HTF
environmental requirements do not
include certain interagency consultation
and public notice requirements that are
required for PBV projects under some of
the environmental laws and authorities
cited in part 58.
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Qualification as Affordable Housing:
Rental Housing § 92.746, Interim
§ 93.302
In § 92.746(a), HUD proposed that all
HTF-assisted rental housing be
occupied only by ELI families. Section
92.746(b) proposed to establish 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.
Section 92.746(c) provided that grantees
must establish maximum monthly
allowances for utilities and services
(excluding telephone, television, and
Internet service), and must approve
rents proposed by the owner for HTF
units. Section 92.746(d) proposed to
establish an affordability period of not
less than 30 years for rental housing
assisted with HTF funds. Section
92.746(e) proposed to require 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.
Comments: Several commenters
requested that HUD adopt income-based
limits that cap the amount of rent paid
by tenants at 30 percent of household
income. Several other commenters
suggested creating operating subsidy
reserves to fund income-based rents,
and requiring a percentage of units set
aside for people with disabilities or
people who receive their income from
supplemental social security (SSI)
income. Some commenters expressed
concern about individuals whose sole
source of income is SSI, because many
of these people have incomes well
below 30 percent of AMI and without
operating subsidy for HTF-assisted units
tenants will be forced to pay a
substantial proportion of their income
toward rent (or lose the opportunity to
benefit from HTF-assisted housing).
Several commenters asked for
clarification whether there will only be
one rent limit for the HTF program or
whether there will be different rent
limits for ELI and VLI households.
Several stated that there should be a
means for limiting a tenant’s rent
burden depending on the type of rental
subsidy. Another commenter stated that
subsidy amounts should also be
adjusted downward for units not
carrying any debt to avoid oversubsidizing units. Another commenter
asked whether HUD could provide rent
and income limit levels in 5 percent
increments.
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A commenter stated that grantees
should be permitted to set utility
allowances for new projects that best
reflect the costs to tenants. Another
stated that HUD’s rule should provide
additional protections to tenants
regarding the utility allowance,
including notice, opportunity to seek
review, and allowance for utilities be
provided in the lease.
Many commenters stated that HUD
should increase the minimum period of
affordability proposed in the rule to 40,
45, or 55 years, and that HUD’s rule
should incentivize projects which agree
to longer periods of affordability.
Another commenter stated that the rule
should increase the minimum period of
affordability for non-low income
housing tax credit (LIHTC) projects, but
only if HUD develops a means for
recapitalizing projects and applying the
affordability restrictions to the land, not
the building. Several commenters stated
that the determination of the period of
affordability should be left to the
discretion of the State, or should match
the period of affordability used by other
funding sources.
HUD Response: Unlike public
housing, the HTF has no separate
annual appropriation source of funding
for operating costs. In any given year, if
no funding for the HTF is provided, it
is possible that no operating cost
assistance would be available for HTFassisted units. Therefore, while
operating costs may be paid with HTF
funds, the assistance cannot be based on
a formula that assumes income-based
rents and an annual appropriation to
pay for operating costs. For this reason,
it is necessary to establish fixed rents for
the HTF for underwriting purposes and
required subsidy layering analyses.
Section 8 project-based vouchers may be
made available to HTF-assisted units,
and these vouchers alleviate cost
burdens for ELI tenants, including
individuals whose source of income is
from Supplemental Social Security
Income.
This interim rule includes rent limits
for both extremely low-income and very
low-income households. For extremely
low-income households, rents are set at
30 percent for a households at 30
percent of the area median income. For
very low-income households, rents are
set at 30 percent for households at 50
percent of the area median income.
HUD will provide the actual rent limits
for each State.
If utility data are available on a
project-by-project basis or utilities are
individually metered, it would be
permissible to establish utility
allowances more reflective of the actual
cost for the HTF-assisted unit.
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HTF grantees are allowed to impose
longer periods of affordability, beyond
the period in the regulation. HUD
anticipates that States may adopt
criteria whereby projects will be
incentivized to adopt longer periods of
affordability.
Tenant Protections and
Selection§ 92.747, Interim § 93.303
In § 92.747, HUD proposed tenant
protection, lease, and selection
requirements, and incorporated the
requirements of section 1338(c)(8) of the
Act.
Comments: A commenter
recommended greater safeguards be
required for tenant selection, including
prohibition of local residency or
employment preferences, the use of
lottery-based selection, and strong
affirmative marketing and outreach
requirements. A few commenters
suggested HUD’s rule be revised to
include additional tenant and
homeowner protections, including the
right to organize, associate, advocate for
stronger protections without fear of
retaliation. Other commenters requested
that HUD’s rule to clarify tenant rights
regarding the applicant screening
process, the prohibition on eviction
without good cause, the lease provision
protections, and how tenants can
participate and protect their tenant
rights. A few commenters pointed out
the importance of retaining economic
diversity in projects containing HTFassisted units, and suggested that HUD’s
rule incorporate some mixed-income
standards and limits on the number of
families using vouchers. Another
commenter suggested that § 92.747(c) be
removed to permit residents to pursue a
‘‘housing first’’ model for ending
homelessness. Some commenters
requested that the protections offered to
people receiving any type of tenantbased assistance from being denied
access to HTF-assisted units be
enhanced.
A commenter provided several
comments about resident access to
judicial review. The commenter stated
that the rule should include greater
access to judicial review for tenants and
applicants, and that the regulations
should require residential leases to
include any conditions of tenancy found
in HTF allocation plans and to
explicitly state that a resident or tenant
organization may seek judicial
enforcement of plan violations which
result in injury. The commenter
recommended that grant agreements
with subgrantees and recipients should
incorporate a resident complaint review,
grievance system, and right to judicial
enforcement. Another commenter stated
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that if HUD has the right to initiate an
administrative hearing or impose
sanctions, then residents and applicants
should have the right to join as a party
to the proceeding. The commenter
stated that the right to pursue an
independent action for redress of injury
in court should be included in the rule
and incorporated into residential leases.
Another commenter stated that a
reference to the Violence Against
Women Act (42 U.S.C. 13701 et seq.)
should be added to § 92.747(c).
HUD Response: The Violence Against
Women Act of 2013 (VAWA 2013),
enacted March 7, 2013, did not specify
HTF as a covered program. The possible
applicability of VAWA to HUD
programs not listed in VAWA 2013 will
be addressed in HUD’s upcoming
proposed rule on VAWA 2013.
Section 93.303 of the rule prohibits
lease terms which require tenants
residing in HTF-assisted units to waive
their rights with respect to their
tenancy. The statute does not create any
right to judicial review; however, State
and local law may provide rights to
judicial review of HTF grantees or
landlords of HTF-assisted properties.
HUD’s proposed language is compliant
with applicable civil rights laws and
regulations, including section 504 of the
Rehabilitation Act of 1973 (29 U.S.C.
794) and implementing regulations at 24
CFR part 8, and therefore is not changed
at this interim rule stage. Additionally,
the proposed rule language did not
present problems for the particular
permanent supportive housing model
favored by several commenters, which
was their primary concern, and
therefore this language is not changed at
the interim rule stage. In fact, adopting
the suggested language would limit
flexibility to use other models of
permanent supportive housing.
Qualification as Affordable Housing:
Homeownership § 92.748, Final § 93.304
In § 92.748(a), the proposed rule
required that homeownership activities
funded by the HTF must be for first-time
homebuyers. Section 92.748(b)
proposed to require that only single
family housing, as defined in § 92.2, is
eligible for HTF-assisted
homeownership activities. Section
92.748(c) would require that all HTFassisted homeownership activities apply
to modest housing, in accordance with
§ 92.749. Section 92.748(d) proposed to
establish the requirements for HTF
requirements for first-time homebuyers
and income requirements. Section
92.748(e) proposed to establish the
period of affordability for HTF-assisted
homeownership activities. Section
92.748(f) proposed to establish the
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resale requirements for homeownership
units assisted by the HTF.
Comments: Some commenters
suggested that HUD’s rule should
include a recapture provision for
homeownership funds, as permitted
under the HOME program, and they
expressed concern that limiting
homeownership properties to resale,
without the option of recapture, will be
too burdensome for grantees and
subgrantees. Other commenters stated
that HUD’s rule should include more
language to encourage the use of land
trusts.
HUD Response: HUD agrees with
commenters that the recapture
provisions should be added to the HTF
rule. Accordingly, this rule, at § 93.304,
adopts the structure of the HOME
program requirements for recapture,
with adjustments to the subsidy
amounts to reflect the greater need for
subsidy for very low-income
homebuyers. The periods of
affordability also differ from the HOME
program to tiers that reflect the
maximum period of affordability (30
years) for the HTF program. The use of
land trusts in conjunction with the HTF
is permitted. However, HUD does not
agree that the HTF rule needs
modification to encourage the use of
land trusts; guidance and technical
assistance may be provided in the future
on this topic.
Other Federal Requirements Proposed
§ 92.760–92.764; Final § 93.350–93.355
Proposed §§ 92.760 through 92.764 set
forth other Federal requirements that are
applicable to the use of HTF funds,
including nondiscrimination,
affirmative marketing, lead-based paint,
relocation, and funding accountability
and transparency requirements.
However, the proposed regulations
inadvertently omitted a provision in
section 1337(f) of the Act that prohibits
the use of HTF funds in conjunction
with property taken by eminent domain
unless eminent domain is employed
only for a public use. The HTF
regulation at § 93.355 includes this
statutory prohibition.
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Program Administration Proposed
§ 92.770–92.779; Final § 93.400–93.409
Proposed §§ 92.770 through 92.779 set
forth the conditions and requirements
by which States are to administer their
HTF funds, including HTF accounts,
allocation and reallocation of HTF
funds, program disbursement and the
establishment of an information system,
written agreement, onsite inspections,
financial and project reporting, record
retention, and audit requirements.
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Comments: Several commenters
suggested that HUD eliminate
duplicative monitoring, review, and
inspection requirements. A few
commenters stated that if a subgrantee
receives HOME funding, the subgrantee
should be directly responsible for
compliance and alleviate grantees of the
burden of annual performance reviews.
A commenter recommended revising
the HTF audit requirements to mirror
HOME and that additional audit
requirements should be removed. A few
commenters suggested that equivalent
onsite property inspections for other
public funding programs and
construction oversight by third parties
should be allowed to satisfy the HTF
requirements to avoid duplicative
inspections. A commenter stated that
the rule should permit HOME
inspection standards rather than
Uniform Physical Conditions Standards
(UPCS) standards. Another commenter
stated that the initial inspection during
the period of affordability should be
required to occur within 24 months
instead of 12 months, as proposed, to
align with LIHTC requirements. A
commenter stated that the requirement
to follow up with an inspection within
12 months of observing a deficiency
during an onsite inspection is
burdensome and suggested that
evidence of the correction, with the
right to re-inspect, should be sufficient.
Some commenters offered
recommendations for other
administrative issues. A commenter
suggested that the project completion
date for HTF units should be the date
the project is placed in service. Another
commenter stated that HUD’s rule
should clarify that the recordkeeping
requirements in § 92.778 would allow a
grantee to delegate record maintenance
to the project owner or manager who
would make the records accessible to
the grantee.
Several commenters stated that the
rule should increase opportunities for
forgiveness under the repayment and
recapture provisions. Commenters
suggested that the rule permit a prorated
reduction of the repayment obligation
based on the extent that the affordability
period was satisfied. A commenter
suggested that this prorated reduction in
the repayment obligation also apply to
HTF-assisted housing lost through a
foreclosure action, natural events or
disasters, or similar events that are not
the result of malfeasance on the part of
the grantee or subgrantee. A few
commenters suggested that complete
forgiveness should be permitted when
there have been best faith efforts to
avoid foreclosure. A commenter stated
that the repayment provisions are too
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onerous and repayments for failed ELI
housing projects should be limited to
instances when the grantee directly
provides funds for an ineligible activity.
Some commenters offered suggestions
about the foreclosure provisions. A
commenter suggested that if HUD is the
foreclosing entity, the affordability
restrictions should not terminate and
funds should not be required to be
repaid. Another commenter suggested
that the rule should authorize HUD and
the grantee to modify the affordability
restrictions in limited circumstances
(e.g., loss of rental assistance through no
fault of the owner), if doing so is
necessary to avoid a foreclosure and
complete loss of affordable units.
Another commenter suggested that HUD
should require grantees to use purchase
options, right of first refusal, or other
preemptive rights to purchase as tools to
protect HTF-assisted housing from
foreclosure or deed in lieu of
foreclosure. Another commenter
suggested that additional data collection
requirements be required. The
commenter attached a list of 22 projectlevel data points that should be listed in
§ 92.778(a)(2)(i).
HUD Response: The HTF statute
includes mandatory monitoring,
reporting, and audit requirements. HUD
does not have the authority to change
these requirements.
Except where that statute differs, or
where policy determinations about the
HTF have been made by HUD that
preclude alignment, HUD adopted the
majority of the requirements of the
HOME program for the HTF rule, but
the HTF audit requirements cannot be
modified to mirror HOME requirements,
as suggested by a commenter, because
the HTF statute imposes different
requirements for the audit of HTFassisted projects than what is required
by the HOME program.
HUD does not agree that grantees are
relieved of responsibility for compliance
if a subgrantee receives the HTF funds.
The statute makes clear that the State or
State-designated entity is the grantee of
the HTF funds and that compliance
with all requirements, including
compliance monitoring of subgrantees,
is the responsibility of the grantee.
Moreover, HUD has no relationship
with a subgrantee and has no basis to
take action against a subgrantee.
This interim rule requires that
Uniform Physical Condition Standards
(UPCS) be incorporated into the
property standards, as is the case with
the property standards for the HOME
program. This will facilitate alignment
of HTF-assisted projects with projects
assisted by the LIHTC program and
HOME. Training and guidance will be
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provided to address some of the
concerns about implementing UPCS.
HUD has chosen not to synchronize
when project completion occurs for an
HTF-assisted projects with when an
LIHTC project is placed in service. The
HTF rule requires beneficiary reporting
that is different than that required for
LIHTCs. The project completion date
must ensure timely occupancy.
Accordingly, HUD adopts the language
as proposed.
One commenter suggested that the
rule should authorize HUD and the
grantee to modify the affordability
restrictions in limited circumstances
(e.g., loss of rental assistance through no
fault of the owner). To ensure
compatibility with the HOME rule and
in an effort to ease HTF implementation,
this interim rule contains language that
is consistent with the repayment
language in the HOME regulations. For
natural events or other disasters,
insurance proceeds should be used to
replace the lost housing. In the case of
foreclosure, repayment would not be
required if the affordability restrictions
are preserved and the project continues
to meet HTF requirements. Grantees
have the option, rather than a
requirement, of using preemptive rights
to ensure flexibility for each grantee to
ensure HTF projects remain affordable.
The repayment and foreclosure
provisions are required and the
language is adopted in this interim rule
as proposed.
Performance Review and Sanctions
Review Proposed § 92.780–92.783; Final
§ 93.450–93.453
HUD proposed that grantees report on
their progress and performance in
meeting the requirements of the HTF in
HUD’s Integrated Disbursement and
Information System (IDIS) and the
consolidated plan. The statutory
requirements for corrective and
remedial actions at section 1338(e)(1)(B)
of the Act are reflected in § 92.782. The
statutory requirements at section
1338(e)(2)(B) of the Act for notification
of determination and opportunity for
hearing and sanctions are reflected in
§ 92.783.
Comments: One commenter
recommended that performance report
on grantees be posted regularly on
public Web sites.
HUD Response: In this interim rule,
HUD moved the requirement for a HTF
performance report to the Consolidated
Plan regulations at 24 CFR part 91. The
HTF performance report is included in
the performance reports for the
consolidated plans in 24 CFR 91.520,
thereby subjecting the report to the
citizen participation plan of the grantee
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and subgrantee. In addition, the HTF
grant is subject to the requirements of
the Federal Funding Accountability and
Transparency Act of 2006 (Pub. L. 109–
282, approved September 26, 2006), as
amended by section 6202 of Public Law
110–252, approved June 30, 2008
(Transparency Act) (See § 93.354 of the
HTF regulations.) 5
Other Comments
Align the HTF With Other Programs
Comments: Some commenters
suggested that the HTF be coordinated
with and mirror the LIHTC rules to the
greatest extent possible to provide
maximum flexibility. They suggested
that LIHTC is more likely to be used in
combination with HTF funds for
development than HOME. Other
commenters suggested that the HTF
requirements should be aligned with
other program requirements (e.g., such
as those required under HUD’s Section
811 Supportive Housing for Persons
with Disabilities program, HUD’s
Housing Choice voucher program, U.S.
Department of Health and Human
Services program, Supplemental
Security Income, and U.S. Department
of Veterans Affairs) and HUD should
identify any potential conflicts between
the program requirements. A few
commenters recommended that HUD’s
HTF rule should waive requirements of
Section 8 project-based vouchers that
complicate using them in HTF projects.
A few commenters suggested that HUD
eliminate duplicative reviews and
requirements that create conflict when
the HTF is combined with other sources
of funding in development projects.
HUD Response: HUD expects that
HTF funds will be combined with other
sources of private funding and financing
typically used for the development of
affordable housing, such as LIHTCs. The
affordability period for HTF-assisted
units is consistent with the 30-year
affordability period (compliance period
plus extended use period) for LIHTC
projects. Grantees may also establish
longer affordability periods in their HTF
allocation plans. The VLI income
targeting and frequency of onsite
inspections during the period of
affordability regulations in the HTF also
align with LIHTC. Some HTF
requirements, such as ELI income
targeting and rents, are statutory and
HUD does not have the discretion to
change these statutory requirements to
5 The Transparency Act requires disclosure to the
public of all entities or organizations receiving
Federal funds, beginning in fiscal year 2007. The
disclosure of such funds can be found at the
USAspending.gov Web site, which is managed by
the Office of Management and Budget.
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5217
align with other programs. Also, the
HTF rule cannot waive the requirements
of other Federal programs. In order to
allow maximum flexibility when
combining and coordinating the HTF
with other Federal funding sources,
HUD streamlined the HTF requirements
and aligned them with other Federal
programs (e.g., HOME, LIHTC, Federal
Housing Administration (FHA), Public
Housing, and other HUD programs) to
the greatest extent possible, given
statutory constraints and policy
decisions by HUD.
Manufactured Housing
In the proposed rule, HUD stated that
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. HUD stated that 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. The proposed rule also
required that construction of all
manufactured housing must meet the
Manufactured Home Construction and
Safety Standards codified at 24 CFR part
3280. HUD noted that these standards
pre-empt State and local codes covering
the same aspects of performance for
such housing.
Comments: A commenter stated that
language should be added to the rule to
clarify that manufactured housing can
be purchased with HTF funds for both
rental and homeownership purposes.
One commenter stated that eligible
relocation costs should include one-forone replacement when manufactured
homes are demolished or converted for
another use. A commenter
recommended that the language in the
proposed rule should be changed to
clarify that HTF funds may be used to
purchase the land under manufactured
homes to preserve the affordability of
these homes, and another stated that the
requirement that the land under assisted
manufactured housing be owned or
leased will be difficult to meet. Another
commenter states that the proposed rule
conflicts with other HUD policies,
including the Model Manufactured
Home Installation Standards and
Manufactured Housing Installation
Rules and Regulations, 24 CFR parts
3285 through 3286. A commenter stated
that HUD’s rule should eliminate the
‘‘permanent foundation requirement’’ to
avoid confusion, and to align with 24
CFR parts 3285 through 3286. Another
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commenter stated that HUD’s rule
should create an exception to the
requirement that homeownership funds
be targeted to income-eligible, first-time
homebuyers because manufactured
homes are a means for older, lowincome homeowners to transition from
their current home to a more affordable
alternative, and they are often not firsttime homebuyers. Another commenter
stated that HUD’s rule should include
mobile home park infrastructure
improvements as eligible costs and give
more consideration to deteriorating park
infrastructure.
HUD Response: The HTF statute
requires that homebuyer assistance be
provided to first-time homebuyers
only—this would apply to
manufactured housing that is purchased
by eligible families with HTF assistance.
This interim rule does not prohibit
the expenditure of HTF funds on
manufactured housing that is rental
housing. A State may award HTF funds
for the development of a manufactured
housing park for rental units. The Act
does not contain any requirement for
the one-for-one replacement of housing
units if HTF funds are used in the
demolition or conversion of any unit.
If HTF funds are used to purchase
land to develop a manufactured home,
or relocate a manufactured home, the
manufactured housing must be secured
with a foundation system meeting 24
CFR part 3280.
The use of HTF funds for
infrastructure to rehabilitate the parks in
which manufactured homes are situated
is only eligible if all units are rental
housing with income eligible tenants.
Infrastructure that is not on the site of
the HTF project is not eligible for HTF
financing.
Consistent with the HOME rule, the
definition of ‘‘permanent foundation’’ in
the HTF rule means a foundation system
of supports that is capable of
transferring all design loads to the
ground that meets the requirements of
24 CFR 3282.12. This definition is also
consistent with the FHA mortgage
insurance requirements for all
manufactured homes that must be
constructed in conformance with the
Federal Manufactured Home and Safety
Standards, as evidenced by an affixed
certification label in accordance with 24
CFR 3280.11.
III. Opportunity for Further Comment
As noted in the Summary portion at
the beginning of this preamble, HUD is
issuing this rule as an interim rule. It is
HUD’s intention that following funding
of the HTF as provided in HERA, and
allocations of funds to States as
provided in this rule, HUD will open
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this interim rule for public comment to
solicit comment on how these
regulations work once funding is
available and the grantees gain
experience administering the HTF
program.
IV. 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 rule was determined to be
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, the
formula for the distribution of HTF
grants to states through regulation, 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.)
On October 29, 2010, HUD published
the proposed program rule for the HTF
(see 75 FR 66978). This interim rule
incorporates the December 4, 2009,
allocation formula rule and October 29,
2010, program rule. HUD’s full
economic analysis for the proposed
allocation rule is available for
inspection on HUD’s Web site at
https://www.huduser.org/portal/
publications/pubasst/riaforhtf.html.
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
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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
the Federal Housing Enterprises
Financial Safety and Soundness Act of
1992 (12 U.S.C. 4501 et seq.). 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 allocated to the
States, HUD has determined that the
rule will not have a significant
economic impact on a substantial
number of small entities.
Environmental Impact
A Finding of No Significant Impact
(FONSI) with respect to the
environment was made, at the proposed
rule stage, in accordance with HUD
regulations at 24 CFR part 50, which
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implement section 102(2)(C) of the
National Environmental Policy Act of
1969 (42 U.S.C. 4332(2)(C)). That
Finding remains applicable to this rule
and can be found at
www.regulations.gov under docket
number FR–5246–F–03.
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.
Unfunded Mandates Reform Act
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.
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Congressional Review Act
This rule constitutes a ‘‘major rule’’ as
defined in the Congressional Review
Act (5 U.S.C. Chapter 8). The
Congressional Review Act provides for
major rules to have a 60-day delayed
effective date.
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), and assigned an
OMB control number. 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:
List of Subjects
24 CFR Part 91
Aged, Grant programs-housing and
community development, Homeless,
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Individuals with disabilities, Low- and
moderate-income housing, Reporting
and recordkeeping requirements.
■
24 CFR Part 93
Administrative practice and
procedure, Grant programs-housing and
community development, Low- and
moderate-income housing,
Manufactured homes, Rent subsidies,
Reporting and recordkeeping
requirements.
For the reasons stated in the
preamble, HUD amends 24 CFR chapter
I as follows:
*
5219
PART 91—CONSOLIDATED
SUBMISSIONS FOR COMMUNITY
PLANNING AND DEVELOPMENT
PROGRAMS
1. The authority citation 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 93).
*
*
*
*
*
■ 3. In § 91.10, revise the first sentence
of paragraph (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. In § 91.215, revise paragraph (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 93.302 and
24 CFR 93.304 (if the jurisdiction
receives HTF funds from the State) over
a specific time period.
*
*
*
*
*
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5. In § 91.220, add paragraph (l)(5) to
read as follows:
§ 91.220
Action Plan.
*
*
*
*
(l) * * *
(5) Housing Trust Fund. (i) If the
jurisdiction receives HTF funds from
the State under 24 CFR 93.105, 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:
(A) The plan must identify priority
factors for funding that shall include the
following: geographic distribution
which is a description of the geographic
areas of the State (including areas of
low-income and minority concentration)
in which it will direct assistance during
the ensuing program year; 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 extremely low-income
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); the
location of existing affordable housing,
and the extent to which the application
makes use of non-federal funding
sources.
(B) 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 93.200) 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 93.2).
(C) The plan must provide for
performance goals, consistent with the
jurisdiction’s goals established under 24
CFR 91.215(b)(2).
(D) The plan must provide the
jurisdiction’s rehabilitation standards,
as required by 24 CFR 93.301(b).
(E) If the jurisdiction intends to use
HTF funds for first-time homebuyers, it
must set forth the guidelines for resale
or recapture, and obtain HUD’s specific,
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written approval, as required in
§ 93.304(f). Approval of the
consolidated plan or action plan under
§ 91.500 or the failure to disapprove the
consolidated plan or action plan does
not satisfy the requirement for specific
HUD approval for resale or recapture
guidelines.
(F) If the jurisdiction intends to use
HTF funds for homebuyer assistance
and does not use the HTF affordable
homeownership limits for the area
provided by HUD, it must determine 95
percent of the median area purchase
price and set forth the information in
accordance with § 93.305.
(G) The jurisdiction may limit the
beneficiaries or give preferences to a
particular segment of the extremely lowor very low-income population only if
described in the action plan.
(1) Any limitation or preference must
not violate nondiscrimination
requirements in 24 CFR 93.350, and the
jurisdiction must not limit or give
preferences to students.
(2) The jurisdiction may permit rental
housing owners to limit tenants or give
a preference in accordance with 24 CFR
93.303 only if such limitation or
preference is described in the action
plan.
(H) The plan must describe the
conditions under which the jurisdiction
will refinance existing rental housing
project debt.
(ii) [Reserved].
■ 6. In § 91.315, revise paragraph (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, and 24 CFR
93.302 for rental housing and 24 CFR
93.304 for homeownership over a
specific time period.
*
*
*
*
*
■ 7. In § 91.320, revise paragraph (k)(5)
to read as follows:
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*
§ 91.320
Action Plan.
*
*
*
*
*
(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
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submitted by eligible recipients that
meet the State’s priority housing needs.
The plan must also establish the State’s
maximum per-unit development
subsidy limit for housing assisted with
HTF funds. If the HTF funds will be
used for first-time homebuyers, it must
state the guidelines for resale and
recapture as required in 24 CFR 93.304.
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 State 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 extremely low-income
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
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 93.200) 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 93.2).
(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 93.301(b)(1).
(v) If the State intends to use HTF
funds for first-time homebuyers, it must
set forth the guidelines for resale or
recapture, and obtain HUD’s specific,
written approval, as required in
§ 93.304(f). Approval of the
consolidated plan or action plan under
§ 91.500 or the failure to disapprove the
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consolidated plan or action does not
satisfy the requirement for specific HUD
approval for resale or recapture
guidelines.
(vi) If the State intends to use HTF
funds for homebuyer assistance and
does not use the HTF affordable
homeownership limits for the area
provided by HUD, it must determine 95
percent of the median area purchase
price and set forth the information in
accordance with § 93.305.
(vii) The State may limit the
beneficiaries or give preferences to a
particular segment of the extremely lowor very low-income population only if
described in the action plan.
(A) Any limitation or preference must
not violate nondiscrimination
requirements in 24 CFR 93.350, and the
State must not limit or give preferences
to students.
(B) The State may permit rental
housing owners to limit tenants or give
a preference in accordance with 24 CFR
93.303(d)(3) only if such limitation or
preference is described in the action
plan.
(viii) The plan must describe the
conditions under which the State will
refinance existing debt.
■ 8. In § 91.520, redesignate paragraphs
(h) and (i) as paragraphs (i) and (j),
respectively and add a new paragraph
(h) to read as follows:
§ 91.520
Performance reports.
*
*
*
*
*
(h) HTF. For jurisdictions receiving
HTF funds, the report must describe the
HTF program’s accomplishments, and
the extent to which the jurisdiction
complied with its approved HTF
allocation plan and the requirements of
24 CFR part 93.
*
*
*
*
*
■ 9. Add part 93 to read as follows:
PART 93—HOUSING TRUST FUND
Subpart A—General
93.1 Overview.
93.2 Definitions.
93.3 Waivers.
Subpart B—Allocation Formula;
Reallocations
93.50 Formula allocation.
93.51 Formula factors.
93.52 Minimum allocations.
93.53 Federal Register notice of formula
allocations.
93.54 Reallocations by formula.
Subpart C—Participation and Submission
Requirements; Distribution of Assistance
93.100 Participation and submission
requirements.
93.101 Distribution of assistance.
Subpart D—Program Requirements
93.150 Site and neighborhood standards.
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93.151
Income determinations.
Subpart E—Eligible and Prohibited
Activities
93.200 Eligible activities: General.
93.201 Eligible project costs.
93.202 Eligible administrative and planning
costs.
93.203 HTF funds and public housing.
93.204 Prohibited activities and fees.
Subpart F—Income Targeting
93.250 Income targeting.
Subpart G—Project Requirements
93.300 Maximum per-unit subsidy amount,
underwriting, and subsidy layering.
93.301 Property standards.
93.302 Qualification as affordable housing:
rental housing.
93.303 Tenant protections and selection.
93.304 Qualification as affordable housing:
homeownership.
93.305 Qualification as affordable housing:
modest housing requirements for
homeownership; resale or recapture
requirements.
Subpart H—Other Federal Requirements
93.350 Other Federal requirements and
nondiscrimination; affirmative
marketing.
93.351 Lead-based paint.
93.352 Displacement, relocation, and
acquisition.
93.353 Conflict of interest.
93.354 Funding Accountability and
Transparency Act.
92.355 Eminent domain.
§ 93.2
Subpart I—Program Administration
93.400 Housing Trust Fund (HTF)
accounts.
93.401 HTF grant agreement.
93.402 Program disbursement and
information system.
93.403 Program income and repayments.
93.404 Grantee responsibilities; written
agreements; onsite inspections; financial
oversight.
93.405 Applicability of uniform
administrative requirements, cost
principles, and audits.
93.406 Audits.
93.407 Recordkeeping.
93.408 Performance reports.
Subpart J—Performance Reviews and
Sanctions
93.450 Accountability of recipients.
93.451 Performance reviews.
93.452 Corrective and remedial actions.
93.453 Notice and opportunity for hearing;
sanctions.
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Authority: 42 U.S.C. 3535(d), 12 U.S.C.
4568.
Subpart A—General
§ 93.1
Overview.
(a) This part implements the Housing
Trust Fund (HTF) program established
under section 1338 of the Federal
Housing Enterprises Financial Safety
and Soundness Act of 1992, as amended
(12 U.S.C. 4501 et seq.) (the Act). In
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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 extremely
low-income and very low-income
households, including homeless
families.
(b) Section 1337 of the Act 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 setaside 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.
The Act also provides that the HTF may
be funded with amounts appropriated,
transferred, or credited to the HTF
under other provisions of law.
Definitions.
1937 Act means the United States
Housing Act of 1937 (42 U.S.C. 1437 et
seq.).
Act means the Federal Housing
Enterprises Financial Safety and
Soundness Act of 1992, as amended (12
U.S.C. 4501 et seq).
Annual income. See § 93.151.
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.
(2) ‘‘Commit to a specific local
project’’ 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. The written
agreement for rehabilitation or new
construction of rental housing may also
provide operating cost assistance and/or
operating cost assistance reserves.
(ii) If the project consists of
acquisition of standard housing and the
grantee is providing HTF funds to a
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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 rental housing or single
family housing and the property title
will be transferred to the recipient or
family within 6 months of the
agreement date. The written agreement
for acquisition of rental housing may
also provide operating cost assistance
and/or operating cost assistance
reserves.
(iii) If the project is for renewal of
operating cost assistance or operating
cost assistance reserves, the grantee and
the recipient must have executed a
legally binding written agreement under
which HTF funds will be provided to
the recipient for operating cost
assistance or operating cost assistance
reserves for the identified HTF project.
Consolidated plan means the plan
submitted and approved in accordance
with 24 CFR part 91.
Displaced homemaker means an
individual who:
(1) Is an adult;
(2) Has not worked full-time full-year
in the labor force for a number of years,
but has, during such years, worked
primarily without remuneration to care
for the home and family; and
(3) Is unemployed or underemployed
and is experiencing difficulty in
obtaining or upgrading employment.
Extremely low-income 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.
Family has the same meaning given
that term in 24 CFR 5.403.
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.
Grantee means the State or the Statedesignated entity that receives the HTF
funds from HUD.
HTF allocation plan means the annual
submission to HUD required by the Act
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
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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.
Homeownership means ownership in
fee simple title in a 1- to 4-unit dwelling
or in a condominium unit, or equivalent
form of ownership approved by HUD.
(1) The land may be owned in fee
simple or the homeowner may have a
99-year ground lease.
(i) For housing located in the insular
areas, the ground lease must be 40 years
or more.
(ii) For housing located on Indian
trust or restricted Indian lands or a
Community Land Trust, the ground
lease must be 50 years or more.
(iii) For manufactured housing, the
ground lease must be for a period at
least equal to the applicable period of
affordability in § 93.304(e).
(2) Right to possession under a
contract for deed, installment contract,
or land contract (pursuant to which the
deed is not given until the final
payment is made) is not an equivalent
form of ownership.
(3) The ownership interest may be
subject only to the restrictions on resale
required under § 93.304; mortgages,
deeds of trust, or other liens or
instruments securing debt on the
property as approved by the grantee; or
any other restrictions or encumbrances
that do not impair the good and
marketable nature of title to the
ownership interest.
(4) The grantee must determine
whether or not ownership or
membership in a cooperative or mutual
housing project constitutes
homeownership under State law;
however, if the cooperative or mutual
housing project receives low income
housing tax credits, the ownership or
membership does not constitute
homeownership.
Household means one or more
persons occupying a housing unit.
Housing includes manufactured
housing and manufactured housing lots,
permanent housing for disabled
homeless persons, single-room
occupancy housing, and group homes.
Housing does not include emergency
shelters (including shelters for disaster
victims) or facilities such as nursing
homes, convalescent homes, hospitals,
residential treatment facilities,
correctional facilities, halfway houses,
housing for students, or dormitories
(including farmworker dormitories).
HUD means the Department of
Housing and Urban Development.
Income-eligible means a family,
homeowner, or household (as
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appropriate given the context of the
specific regulatory provision) that is
very low-income, extremely lowincome, or both, depending on the
income-targeting requirements set forth
in § 93.250.
Insular areas means Guam, the
Commonwealth of the Northern Mariana
Islands, the United States Virgin
Islands, and American Samoa.
Neighborhood means a geographic
location designated in comprehensive
plans, ordinances, or other local
documents as a neighborhood, village,
or similar geographical designation that
is within the boundary but does not
encompass the entire area of a unit of
general local government; except that if
the unit of general local government has
a population under 25,000, the
neighborhood may, but need not,
encompass the entire area of a unit of
general local government.
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 does not include 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 § 93.200(b).
Project means a site or sites together
with any building (including a
manufactured housing unit) or buildings
located on the site(s) that are under
common ownership, management, and
financing and are to be assisted with
HTF funds as a single undertaking
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under this part. The project includes all
the activities associated with the site
and building.
Project completion means that all
necessary title transfer requirements and
construction work have been performed,
the project complies with the
requirements of this part (including the
property standards under § 93.301 of
this part), 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,
except that with respect to rental
housing project completion, for the
purposes of § 93.402(d) of this part,
project completion occurs upon
completion of construction before
occupancy.
Recipient means an organization,
agency, or other entity (including a
public housing agency, or a for-profit
entity or a nonprofit entity) that receives
HTF assistance from a grantee as an
owner or developer to carry out an HTFassisted project. A recipient must:
(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.
Reconstruction means the rebuilding,
on the same lot, of housing standing on
a site at the time of project commitment,
except that housing that was destroyed
may be rebuilt on the same lot if HTF
funds are committed within 12 months
of the date of destruction. The number
of housing units on the lot may not be
decreased or increased as part of a
reconstruction project, but the number
of rooms per unit may be increased or
decreased. Reconstruction also includes
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replacing an existing substandard unit
of manufactured housing with a new or
standard unit of manufactured housing.
Reconstruction is new construction for
purposes of this part.
Shortage of standard rental units both
affordable and available to extremely
low-income renter households means
(1) For any State or other geographical
area the gap between:
(i) The number of units with complete
plumbing and kitchen facilities with a
rent that does not exceed 30 percent of
30 percent of the adjusted area median
income (AMI) as determined by HUD
that either are occupied by extremely
low-income renter households or are
vacant for rent; and
(ii) The number of extremely lowincome renter households.
(2) If the number of units described in
paragraph (1)(i) of this definition
exceeds the number of extremely lowincome households described in
paragraph (1)(ii) of this definition, there
is no shortage.
Single family housing means a one-to
four-family residence, condominium
unit, cooperative unit, combination of
manufactured housing and lot, or
manufactured housing lot.
Single parent means an individual
who:
(1) Is unmarried or legally separated
from a spouse; and
(2) Has one or more minor children of
whom the individual has custody or
joint custody, or is pregnant.
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 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.
Tribally designated housing entity has
the meaning given the term in section 4
of the Native American Housing
Assistance and Self-Determination Act
of 1997 (25 U.S.C. 4103).
Unit of general local government
means a city, town, township, county,
parish, village, or other general purpose
political subdivision of a State; and any
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agency or instrumentality thereof that is
established pursuant to legislation and
designated by the chief executive to act
on behalf of the jurisdiction with regard
to provisions of this part. When a
county is an urban county, the urban
county is the unit of general local
government for purposes of the HTF
program.
Urban county has the meaning given
the term in 24 CFR 570.3.
Very low-income renter households
means a household whose income is in
excess of 30 percent but not greater than
50 percent of the area median income,
with adjustments for smaller and larger
families, as determined by HUD.
Very low-income families means lowincome 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. ‘‘Very
low-income family’’ also includes any
family that resides in a nonmetropolitan
area that does not exceed the poverty
line applicable to the family size
involved.
§ 93.3
Waivers.
HUD may, upon a determination of
good cause and subject to statutory
limitations, waive any provision of this
part 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)).
Subpart B—Allocation Formula;
Reallocations
§ 93.50
Formula allocation.
(a) Allocations to States. HUD will
provide to the States allocations of
funds in amounts determined by the
formula described in this part.
(b) Amount available for allocation.
The amount of funds available for
allocation by the formula is the balance
remaining after providing for other
purposes authorized by Congress, in
accordance with the Act and
appropriations.
(c) Allocations for the insular areas.
The allocation amount for each insular
area is determined by multiplying the
funds available times the ratio of renter
households in each insular area to the
total number of renter households in the
50 States, the District of Columbia, the
Commonwealth of Puerto Rico, and the
insular areas.
(d) Allocations for the 50 States, the
Commonwealth of Puerto Rico, and the
District of Columbia—(1) Amounts
available for allocations. The amount of
funds that is available for allocation by
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the formula to the 50 States, the
Commonwealth of Puerto Rico, and the
District of Columbia is determined using
the most current data available from the
U.S. Census Bureau that is available for
the same year for all these geographic
areas. The amount is equal to the
balance of funds remaining after
determining formula allocations for the
insular areas under § 93.50(c). For
purposes of paragraphs (d)(1) and (2) of
this section, the term ‘‘State’’ means any
of the 50 United States, the
Commonwealth of Puerto Rico, and the
District of Columbia.
(2) Allocations. (i) Allocations to the
States are determined using the four
needs factors described in § 93.51(a)
through (d), multiplying each factor by
the amount available under § 93.51(d)(1)
by its priority weight, and summing the
four factors for each State.
(ii) The factor described in § 93.51(a)
is weighted 0.5. The factors described in
§ 93.51(b) and (d) are weighted at 0.125
and the factor described in § 93.51(c) of
this section is weighted at 0.25.
(iii) The sum of the four needs factors
for each State is then multiplied by the
construction cost factor described in
§ 93.51(e) of this section and by the total
amount of funds available for State
allocations.
§ 93.51
Formula factors.
(a) Need factor one. The ratio of the
shortage of standard rental units both
affordable and available to extremely
low-income renter households in the
State to the aggregate shortage of
standard rental units both affordable
and available to extremely low-income
renter households in all the States.
(b) Need factor two. The ratio of the
shortage of standard rental units both
affordable and available to very lowincome renter households in the State to
the aggregate shortage of standard rental
units both affordable and available to
very low-income renter households in
all the States.
(c) Need factor three. The ratio of:
(1) Extremely low-income renter
households in the State living with
either incomplete kitchen or plumbing
facilities, more than one person per
room, or paying more than 50 percent of
income for housing costs, to
(2) The aggregate number of extremely
low-income renter households living
with either incomplete kitchen or
plumbing facilities, more than one
person per room, or paying more than
50 percent of income for housing costs
in all the States.
(d) Need factor four. The ratio of very
low-income renter households in the
State paying more than 50 percent of
income on rent relative to the aggregate
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number of very low-income renter
households paying more than 50
percent of income on rent in all the
States.
(e) Construction cost factor. The
resulting sum calculated from the
factors described in paragraphs (a)
through (d) of this section shall be
multiplied by the relative cost of
construction in the state. For purposes
of calculating this factor, the term ‘‘cost
of construction’’:
(1) Means the cost of construction or
building rehabilitation in the State
relative to the national cost of
construction or building rehabilitation;
and
(2) Is calculated so that values higher
than 1.0 indicate that the State’s
construction costs are higher than the
national average, a value of 1.0 indicates
that the State’s construction costs are
exactly the same as the national average,
and values lower than 1.0 indicate that
the State’s cost of construction are lower
than the national average.
§ 93.52
Minimum allocations.
(a) In accordance with the HTF
statute, HUD is required to provide each
of the States and the District of
Columbia with a minimum grant of $3
million. If the formula amount
determined for a fiscal year is less than
$3 million to any of the 50 States or the
District of Columbia, then the allocation
to that State or the District of Columbia
is increased to $3 million, and
allocations to States and the District of
Columbia above $3 million and to the
Commonwealth of Puerto Rico and the
insular areas are adjusted by an equal
amount on a pro rata basis.
(b) If in any fiscal year, funding in the
HTF is insufficient to provide each of
the 50 States and the District of
Columbia with a minimum grant of $3
million, HUD will, through notice
published in the Federal Register for
public comment, describe an alternative
method for allocating grant funds to the
50 States and the District of Columbia.
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§ 93.53 Federal Register notice of formula
allocations.
Not later than 60 calendar days after
the date that HUD determines the
formula amounts under this subpart,
HUD will publish a notice in the
Federal Register announcing the
availability of the allocations to States.
§ 93.54
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 § 93.400(d) for failure to commit
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or expend the funds within the time
specified, or under § 93.453 for failure
to comply substantially with any
provision of this part;
(2) Any HTF funds reduced for failure
by the grantee to obtain funds required
to be reimbursed or returned under
§ 93.450; and
(3) Any HTF funds remitted to HUD
under § 93.403(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.
Subpart C—Participation and
Submission Requirements;
Distribution of Assistance
§ 93.100 Participation and submission
requirements.
(a) Notification of intent to
participate. Not later than 30 calendar
days after HUD’s publication of the
formula allocation amounts as provided
in § 93.53, the State must notify HUD in
writing of its intention to become an
HTF grantee for the first year of HTF
funding.
(b) Submission requirement. To
receive its HTF grant, the grantee must
submit a consolidated plan in
accordance with 24 CFR part 91.
§ 93.101
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.
(c) An HTF grantee may choose to
directly fund projects by eligible
recipients in accordance with the State’s
HTF allocation plan or to fund projects
by eligible recipients through one or
more subgrantees. An HTF subgrantee
that is a unit of general local
government must have a consolidated
plan under 24 CFR part 91, and 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. Because a State has
only one consolidated plan, and HTF
allocation plan for an HTF subgrantee
that is a State agency must be included
in the State’s HTF allocation plan. The
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grantee or subgrantee must determine
that the applicant is an eligible recipient
that meets the definition of ‘‘recipient’’
in § 93.2 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 part and carry
out the responsibilities of the grantee.
The grantee must annually review the
performance of subgrantees in
accordance with 24 CFR 93.404(a).
Subpart D—Program Requirements
§ 93.150
Site and neighborhood standards.
(a) General. A grantee must
administer its HTF program in a manner
that provides housing that is suitable
from the standpoint of facilitating and
furthering full compliance with the
applicable provisions of title VI of the
Civil Rights Act of 1964 (42 U.S.C.
2000d–2000d–4), the Fair Housing Act
(42 U.S.C. 3601 et seq., E.O. 11063, 3
CFR, 1959–1963 Comp., p. 652) and
HUD regulations issued pursuant
thereto; and promotes greater choice of
housing opportunities.
(b) New rental housing. In carrying
out the site and neighborhood
requirements with respect to new
construction of rental housing, a grantee
is responsible for making the
determination that proposed sites for
new construction meet the requirements
in 24 CFR 983.57(e)(2).
§ 93.151
Income determinations.
(a) General. The HTF program has
income-targeting requirements.
Therefore, the grantee must determine
that each family occupying an HTFassisted 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.
(2) The grantee may use only one
definition for each HTF-assisted
program (e.g., down payment assistance
program) that it administers and for
each rental housing project.
(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
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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 § 93.302(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 of determining annual
income. (1) Examine at least 2 months
of 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
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 which examines
each year the annual income of the
family. 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 very
low- or low-income families for the
family size of the tenant and state that
the tenant’s annual income does not
exceed this limit.
Subpart E—Eligible and Prohibited
Activities
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§ 93.200
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 one third of each
annual grant may be used for operating
cost assistance and operating cost
assistance reserves. Operating cost
assistance and operating cost assistance
reserves may be provided only to rental
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housing acquired, rehabilitated,
reconstructed, 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
housing. The specific eligible costs for
these activities are found in §§ 93.201
and 93.202. The activities and costs are
eligible only if the housing meets the
property standards in § 93.301, 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 § 93.2.
(3) HTF funds may be used to
purchase and/or rehabilitate a
manufactured housing unit, and
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 to projects. A
grantee may provide HTF funds as
equity investments, interest-bearing
loans or advances, non-interest-bearing
loans or advances, interest subsidies
consistent with the purposes of this
part, deferred payment loans, grants, or
other forms of assistance that HUD
determines to be consistent with the
purposes of this 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 units designated as HTFassisted may be reduced only in
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accordance with § 93.203, except that in
a project consisting of all HTF-assisted
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 HTFassisted 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 § 93.300(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 its
HTF account from which the funds were
drawn (i.e., local or Treasury account),
in accordance with § 93.403(b). A
project that does not meet the
requirements for affordable housing
must be terminated and the grantee
must repay the HTF funds to the
grantee’s HTF account.
§ 93.201
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 of the grantee in § 93.301;
(2) For rehabilitation, costs to meet
the property standards for rehabilitation
projects in § 93.301(b);
(3) For both new construction and
rehabilitation projects, costs:
(i) To demolish existing structures;
(ii) To make utility connections
including off-site connections from the
property line to the adjacent street; and
(iii) To make improvements to the
project site that are 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 which
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 provisions
of paragraphs (a)(3)(ii) and (iii) of this
section are also eligible in connection
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with the 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. The costs may be
paid if they were incurred not more
than 24 months before the date that HTF
funds are committed to the project and
the grantee expressly permits HTF funds
to be used to pay the costs in the written
agreement committing the funds.
(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, attorneys’
fees, private appraisal fees and fees for
an independent cost estimate, and
builders’ or developers’ fees.
(3) Costs of a project audit, including
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 § 93.350.
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(5) For new construction or
rehabilitation, 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 18 months) and
which may only be used to pay project
operating expenses, scheduled
payments to a replacement reserve, and
debt service. Any HTF funds placed in
an operating deficit reserve that remain
unexpended after the period of project
rent-up may be retained for project
reserves if permitted by the grantee.
(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. Although
these costs may be charged as project
costs, 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.
(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 § 93.200(a), HTF funds may be used
to pay for operating cost assistance and
operating cost assistance reserves, as
follows:
(1) Operating costs are 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 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
maximum amount of the operating cost
assistance to be provided to an HTFassisted rental project must be based on
the underwriting of the project and must
be specified in a written agreement
between the grantee and the recipient.
The written agreement may commit,
from a fiscal year HTF grant, funds for
operating cost assistance for a multiyear
period provided that the grantee is able
meet its expenditure deadline in
§ 93.400(d). The grantee may renew
operating cost assistance with future
fiscal year HTF grants during the
affordability period and the amount
must be based on the need for the
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operating cost assistance at the time the
assistance is renewed.
(2) An operating cost assistance
reserve may be funded by the grantee for
HTF-assisted units in a project where
the grantee determines in its
underwriting of the project the reserve
is necessary to ensure the project’s
financial feasibility. If the operating cost
assistance reserve is funded with
appropriated HTF funds, the allowable
amount of the reserve shall not exceed
the amount determined by the grantee to
be necessary to provide operating cost
assistance for HTF-assisted units, for a
period not to exceed 5 years, 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. The
grantee may renew operating cost
assistance reserves with future fiscal
year HTF grants during the affordability
period and the amount must be based
on the need for the operating cost
assistance reserve at the time the
assistance for the reserve is renewed. If
the operating cost assistance reserve is
funded with non-appropriated HTF
funds, the reserve may be funded for the
period of affordability.
(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
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, and
(2) The HTF assistance is part of the
original financing for the project and the
project meets the requirements of this
part.
(h) Construction undertaken before
the HTF funds are committed to the
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project. HTF funds cannot be used for
development hard costs, as provided in
paragraph (a) of this section, or for
acquisition, 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 professional services, as
provided in paragraph (d)(1) of this
section.
asabaliauskas on DSK5VPTVN1PROD with RULES
§ 93.202 Eligible administrative and
planning costs.
(a) General. A HTF grantee may
expend, for payment of reasonable
administrative and planning costs of the
HTF, an amount of HTF funds that is
not more than 10 percent of the sum of
each fiscal year HTF grant and of
program income deposited into its local
account or received and reported by its
subgrantees during the program year. A
HTF grantee may expend the funds
directly or may authorize its
subgrantees, if any, to expend all or a
portion of such funds, provided total
expenditures for planning and
administrative costs do not exceed the
maximum allowable amount.
Reasonable administrative and planning
costs are those 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 involves program
administration assignments, or the
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;
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(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 (a)(1)(i) through (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; and
(c) Staff and overhead. 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 evaluations (visual assessments,
inspections, and risk assessments), other
services related to assisting potential
owners, tenants and homebuyers (e.g.,
housing counseling); 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. These costs (except
homeownership counseling) may be
charged as administrative costs or as
project costs under § 93.201(d)(6) and
(f)(2), at the discretion of the grantee;
however, these costs (except
homeownership counseling) cannot be
charged to or paid by the low-income
families.
(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 in
accordance with 2 CFR part 200, subpart
E.
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(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 subpart H of this part.
§ 93.203
HTF funds and public housing.
(a) HTF funds may be used for new
construction or rehabilitation of public
housing units only in accordance with
the following:
(1) HTF funds may be used for new
construction of public housing as part of
the Choice Neighborhoods (Choice)
program under a HUD appropriation act
or for new public housing units that
have been allocated and will receive
low-income housing tax credits under
section 42 of the Internal Revenue Code
of 1986 (26 U.S.C. 42).
(2) HTF funds may be used for the
rehabilitation of existing public housing
units in which the public housing
assistance will be converted and used at
the properties under the Rental
Assistance Demonstration (RAD)
program under HUD’s 2012
Appropriations Act (Pub. L. 112–55, 125
Stat. 552, approved November 18, 2011)
or subsequent statutes. HTF funds may
also be used for the rehabilitation of
existing public housing under the
Choice program, and of existing public
housing units that have been allocated
and will receive low-income housing
tax credits under section 42 of the
Internal Revenue Code of 1986 (26
U.S.C. 42).
(b) The public housing units
constructed using funds under this part
must replace units that were removed
from a public housing agency’s public
housing inventory as part of a Choice
program grant, or as part of a mixedfinanced development under section 35
of the 1937 Act. The number of
replacement units cannot be more than
the number of units removed from the
public housing agency’s inventory. The
public housing units constructed or
rehabilitated using funds under this part
must receive Public Housing Operating
Fund assistance (and may receive Public
Housing Capital Fund assistance) under
section 9 of the 1937 Act. These units
cannot receive operating costs
assistance or operating cost assistance
reserves under this part.
(c) Except as provided in paragraph
(b) of this section, HTF-assisted housing
may not receive Operating Fund or
Capital Fund assistance under section 9
of the 1937 Act during the HTF period
of affordability.
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(d) Consistent with § 93.200(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 part.
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§ 93.204
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 or renewal of operating cost
assistance or renewal of operating cost
assistance reserve) to a project
previously assisted with HTF funds
during the period of affordability
established by the grantee in the written
agreement under § 93.404 (c)(2)(iv).
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
development subsidy amount
established pursuant to § 93.300.
(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.
(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 § 93.202(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 in § 93.202,
including housing counseling.
(6) Pay for any cost that is not eligible
under § 93.201 and § 93.202.
(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.
However, the grantee may charge
owners of rental projects reasonable
annual fees for monitoring compliance
during the period of affordability. The
fees must be based upon the average
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actual cost of performing the monitoring
of HTF-assisted rental projects. The
basis for determining the amount of the
fee must be documented and the fee
must be included in the costs of the
project as part of the project
underwriting.
(2) The grantee may also charge
nominal application fees (although
these fees are not an eligible HTF cost)
to eligible recipients, to discourage
frivolous applications. The amount of
application fees must be appropriate to
the type of application and may not
create an undue impediment to an
extremely low-income family to be able
to participate in the grantee’s program.
(3) All fees are applicable credits
under 2 CFR part 200, subpart E.
(4) In addition, the grantee must
prohibit project owners from charging
fees that are not customarily charged in
rental housing (e.g., laundry room
access fees), except that rental project
owners may charge:
(i) Reasonable application fees to
prospective tenants;
(ii) Parking fees to tenants only if such
fees are customary for rental housing
projects in the neighborhood; and
(iii) Fees for services such as bus
transportation or meals, as long as the
services are voluntary and fees are
charged for services provided.
Subpart F—Income Targeting
§ 93.250
Income targeting.
(a) In any fiscal year in which the
total amount available for allocation of
HTF funds is less than $1 billion, the
grantee must use 100 percent of its HTF
grant for the benefit of extremely lowincome families or families with
incomes at or below the poverty line
(whichever is greater). In any fiscal year
in which the total amount available for
allocation of HTF funds is greater than
$1 billion, the grantee must use at least
75 percent of its grant for the benefit of
extremely low-income families or
families with incomes at or below the
poverty line.
(b) Any grant funds not used in
accordance with paragraph (a) of this
section must be used for the benefit of
very-low income families.
Subpart G—Project Requirements
§ 93.300 Maximum per-unit development
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 of non-luxury housing,
with adjustments for the number of
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bedrooms and the geographic location of
the project. These limits must be
reasonable and based on actual costs of
developing non-luxury housing in the
area. 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 determining a
reasonable level of profit or return on
recipient’s investment in a project and
must 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 minimum, the
period of affordability in § 93.302 or
§ 93.304) and that will not provide a
profit or return on the recipient’s
investment that exceeds the grantee’s
established standards for the size, type,
and complexity of the project. The
guidelines adopted by the grantees must
require the grantee to undertake:
(1) An examination of the sources and
uses of funds for the project (including
any operating cost assistance, operating
cost assistance reserve, or project-based
rental assistance that will be provided to
the project) and a determination that the
costs are reasonable; and
(2) An assessment, at minimum, of the
current market demand in the
neighborhood in which the project will
be located, the experience of the
recipient, the financial capacity of the
recipient, and firm written financial
commitments for the project.
(3) For HTF-funded downpayment
assistance, a market analysis is not
required.
§ 93.301
Property standards.
(a) New construction projects. (1)
State and local codes, ordinances, and
zoning requirements. Housing that is
newly constructed with HTF funds must
meet all applicable State and local
codes, ordinances, and zoning
requirements. HTF-assisted new
construction projects must meet State or
local residential and building codes, as
applicable or, in the absence of a State
or local building code, the International
Residential Code or International
Building Code (as applicable to the type
of housing) of the International Code
Council. The housing must meet the
applicable requirements upon project
completion.
(2) HUD requirements. All new
construction projects must also meet the
requirements described in paragraphs
(a)(2)(i) through (v) of this section:
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(i) Accessibility. The housing must
meet the accessibility requirements of
24 CFR part 8, which implements
section 504 of the Rehabilitation Act of
1973 (29 U.S.C. 794), and Titles II and
III of the Americans with Disabilities
Act (42 U.S.C. 12131–12189)
implemented at 28 CFR parts 35 and 36,
as applicable. ‘‘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).
(ii) Energy efficiency. The housing
must meet the energy efficiency
standards established pursuant to
section 109 of the Cranston-Gonzalez
National Affordable Housing Act (42
U.S.C. 12709).
(iii) Disaster mitigation. Where
relevant, the housing must be
constructed to mitigate the impact of
potential disasters (e.g., earthquakes,
hurricanes, flooding, and wildfires), in
accordance with State and local codes,
ordinances, or other State and local
requirements, or such other
requirements as HUD may establish.
(iv) Written cost estimates,
construction contracts, and construction
documents. The grantee must ensure the
construction contract(s) and
construction documents describe the
work to be undertaken in adequate
detail so that inspections can be
conducted. The grantee must review
and approve written cost estimates for
construction and determine that costs
are reasonable.
(v) Construction progress inspections.
The grantee must conduct progress and
final inspections of construction to
ensure that work is done in accordance
with the applicable codes, the
construction contract, and construction
documents.
(b) Rehabilitation projects. All
rehabilitation that is performed using
HTF funds must meet the requirements
of this paragraph (b).
(1) Rehabilitation standards. The
grantee must establish rehabilitation
standards for all HTF-assisted housing
rehabilitation activities that set forth the
requirements that the housing must
meet upon project completion. The
grantee’s description of its standards
must be in sufficient detail to determine
the required rehabilitation work
including methods and materials. The
standards may refer to applicable codes
or they may establish requirements that
exceed the minimum requirements of
the codes. The rehabilitation standards
must address each of the following:
(i) Health and safety. The grantee’s
standards must identify life-threatening
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deficiencies that must be addressed
immediately if the housing is occupied.
(ii) Major systems. Major systems are:
structural support; roofing; cladding and
weatherproofing (e.g., windows, doors,
siding, gutters); plumbing; electrical;
and heating, ventilation, and air
conditioning. For rental housing, the
grantee’s standards must require the
grantee to estimate (based on age and
condition) the remaining useful life of
these systems, upon project completion
of each major system. For multifamily
housing projects of 26 units or more, the
grantee’s standards must require the
grantee to determine the useful life of
major systems through a capital needs
assessment of the project. For rental
housing, if the remaining useful life of
one or more major system is less than
the applicable period of affordability,
the grantee’s standards must require the
grantee to ensure that a replacement
reserve is established and monthly
payments are made to the reserve that
are adequate to repair or replace the
systems as needed. For homeownership
housing, the grantee’s standards must
require, upon project completion, each
of the major systems to have a
remaining useful life for a minimum of
5 years or for such longer period
specified by grantee, or the major
systems must be rehabilitated or
replaced as part of the rehabilitation
work.
(iii) Lead-based paint. The grantee’s
standards must require the housing to
meet the lead-based paint requirements
at 24 CFR part 35.
(iv) Accessibility. The grantee’s
standards must require the housing to
meet the accessibility requirements in
24 CFR part 8, which implements
section 504 of the Rehabilitation Act of
1973 (29 U.S.C. 794), and Titles II and
III of the Americans with Disabilities
Act (42 U.S.C. 12131–12189)
implemented at 28 CFR parts 35 and 36,
as applicable. ‘‘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).
Rehabilitation may include
improvements that are not required by
regulation or statute that permit use by
a person with disabilities.
(v) [Reserved].
(vi) Disaster mitigation. Where
relevant, the grantee’s standards must
require the housing to be improved to
mitigate the impact of potential
disasters (e.g., earthquake, hurricanes,
flooding, and wildfires) in accordance
with State and local codes, ordinances,
and requirements, or such other
requirements as HUD may establish.
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5229
(vii) State and local codes,
ordinances, and zoning requirements.
The grantee’s standards must require the
housing to meet all applicable State and
local codes, ordinances, and
requirements or, in the absence of a
State or local building code, the
International Existing Building Code of
the International Code Council.
(viii) Uniform Physical Condition
Standards. The standards of the grantee
must be such that, upon completion, the
HTF-assisted project and units will be
decent, safe, sanitary, and in good repair
as described in 24 CFR 5.703. HUD will
establish the minimum deficiencies that
must be corrected under the grantee’s
rehabilitation standards based on
inspectable items and inspected areas
from HUD-prescribed physical
inspection procedures (Uniform
Physical Conditions Standards)
pursuant to 24 CFR 5.705.
(ix) Capital Needs Assessments. For
multifamily rental housing projects of
26 or more total units, the grantee must
determine all work that will be
performed in the rehabilitation of the
housing and the long-term physical
needs of the project through a capital
needs assessment of the project.
(2) Construction documents and cost
estimates. The grantee must ensure that
the work to be undertaken will meet the
grantee’s rehabilitation standards. The
construction documents (i.e., written
scope of work to be performed) must be
in sufficient detail to establish the basis
for a uniform inspection of the housing
to determine compliance with the
grantee’s standards. The grantee must
review and approve a written cost
estimate for rehabilitation after
determining that costs are reasonable.
(3) Frequency of inspections. The
grantee must conduct an initial property
inspection to identify the deficiencies
that must be addressed. The grantee
must conduct progress and final
inspections to determine that work was
done in accordance with work writeups.
(c) Acquisition of standard housing.
(1) Existing housing that is acquired
with HTF assistance for rental housing,
and that was newly constructed or
rehabilitated less than 12 months before
the date of commitment of HTF funds,
must meet the property standards of
paragraph (a) or paragraph (b) of this
section, as applicable, for new
construction and rehabilitation projects.
The grantee must document this
compliance based upon a review of
approved building plans and
Certificates of Occupancy, and an
inspection that is conducted no earlier
than 90 calendar days before the date of
commitment of HTF assistance.
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(2) All other existing housing that is
acquired with HTF assistance for rental
housing must meet the rehabilitation
property standards requirements of
paragraph (b) of this section. The
grantee must document this compliance
based upon an inspection that is
conducted no earlier than 90 calendar
days before the date of commitment of
HTF assistance. If the property does not
meet these standards, HTF funds cannot
be used to acquire the property unless
it is rehabilitated to meet the standards
of paragraph (b) of this section.
(3) Existing housing that is acquired
for homeownership (e.g., downpayment
assistance) must be decent, safe,
sanitary, and in good repair. The grantee
must establish standards to determine
that the housing is decent, safe, sanitary,
and in good repair. At minimum, the
standards must provide that the housing
meets all applicable State and local
standards and code requirements and
the housing does not contain the
specific deficiencies proscribed by HUD
based on the applicable inspectable
items and inspected areas in HUDprescribed physical inspection
procedures (Uniform Physical Condition
Standards) issued pursuant to 24 CFR
5.705. The grantee must inspect the
housing and document this compliance
based upon an inspection that is
conducted no earlier than 90 calendar
days before the date of commitment of
HTF assistance. If the housing does not
meet these standards, the housing must
be rehabilitated to meet the standards of
this paragraph (c)(3) or it cannot be
assisted with HTF funds.
(d) Manufactured housing.
Construction of all manufactured
housing (including manufactured
housing that replaces an existing
substandard unit under the definition of
‘‘reconstruction’’) must meet the
Manufactured Home Construction and
Safety Standards codified at 24 CFR part
3280. These standards preempt State
and local codes which are not identical
to the Federal standards for the new
construction of manufactured housing.
The grantees providing HTF funds to
assist manufactured housing units 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 of
manufactured housing units. All new
manufactured housing and all
manufactured housing that replaces an
existing substandard unit under the
definition of ‘‘reconstruction’’ must be
on a permanent foundation that meets
the requirements for foundation systems
as set forth in 24 CFR 203.43f(c)(i). All
new manufactured housing (and all
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manufactured housing that replaces an
existing substandard unit under the
definition of ‘‘reconstruction’’) 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. In
HTF-funded rehabilitation of existing
manufactured housing the foundation
and anchoring must meet all applicable
State and local codes, ordinances, and
requirements or in the absence of local
or State codes, the Model Manufactured
Home Installation Standards at 24 CFR
part 3285. Manufactured housing that is
rehabilitated using HTF funds must
meet the property standards
requirements in paragraph (b) of this
section, as applicable. The grantee must
document this compliance in
accordance with inspection procedures
that the grantee has established
pursuant to § 92.301, as applicable.
(e) Ongoing property condition
standards: Rental housing—(1) Ongoing
property standards. The grantee must
establish property standards for rental
housing (including manufactured
housing) that apply throughout the
affordability period. 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
HTF rental projects. The grantee’s
ongoing property standards must
address each of the following:
(i) At a minimum, the grantee’s
ongoing property standards must
include all inspectable items and
inspectable areas specified by HUD
based on the HUD physical inspection
procedures (Uniform Physical Condition
Standards (UPCS)) prescribed by HUD
pursuant to 24 CFR 5.705.
(ii) Health and safety. The grantee’s
standards must require the housing to
be free of all health and safety defects.
The standards must identify lifethreatening deficiencies that the owner
must immediately correct and the time
frames for addressing these deficiencies.
(iii) Lead-based paint. The grantee’s
standards must require the housing to
meet the lead-based paint requirements
in 24 CFR part 35.
(2) Inspections. The grantee must
undertake ongoing property inspections,
in accordance with § 93.404.
(3) Corrective and remedial actions.
The grantee must have procedures for
ensuring that timely corrective and
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remedial actions are taken by the project
owner to address identified deficiencies.
(4) Inspection procedures. The grantee
must establish written inspection
procedures. The procedures must
include detailed inspection checklists,
description of how and by whom
inspections will be carried out, and
procedures for training and certifying
qualified inspectors. The procedures
must also describe how frequently the
property will be inspected, consistent
with section § 93.404(d).
(f) Environmental provisions—(1) New
construction projects environmental
requirements—(i) Historic
preservation—(A) Standards. 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, unless the
project activities 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 relevant Secretary of the
Interior’s Professional Qualification
Standards;
(B) Archaeological resources. If
archaeological resources or human
remains are discovered on the project
site during construction, the grantee
must consult with affected tribes and/or
descendant communities and comply
with the Native American Graves
Protection and Repatriation Act (25
U.S.C. 3001–3013), State law and/or
local ordinance (e.g., State unmarked
burial law).
(ii) Farmland. Project activities must
not result in the conversion of unique,
prime, or statewide or locally significant
agricultural properties to urban uses.
(iii) 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.
(iv) 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.
(v) 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.
(vi) Floodplains. Except as modified
below, definitions for terms used below
can be found at 24 CFR part 55.
(A) Construction and other activities
in the 100-year floodplain are to be
avoided when practicable. If there are
no practicable alternatives to new
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construction or substantial
improvement in the 100-year floodplain,
the structure must be elevated at least
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). When FEMA provides interim
flood hazard data, such as Advisory
Base Flood Elevations (ABFE) or
preliminary maps or studies, the latest
of these sources shall be used.
(B) No HTF assistance may be
approved with respect to:
(1) Any action, other than a
functionally dependent use, located in a
floodway;
(2) Any new construction critical
action located in a coastal high hazard
area, 100- or 500-year floodplain; or
(3) Any non-critical new construction
action in a coastal high hazard area,
unless the action is reconstruction
following destruction caused by a
disaster and is designed for location in
a coastal high hazard area consistent
with the FEMA National Flood
Insurance Program requirements for VZones.
(vii) Wetlands. (A) 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.
(B) 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 wetland 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.).
(viii) Explosives and hazards. Projects
must be in compliance with the
standards for acceptable separation
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distance, as set forth at 24 CFR part 51,
subpart C.
(ix) Contamination. All properties
assisted with HTF funds must 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
use of the property.
(A) All proposed multifamily (more
than four housing units) HTF projects
require a Phase I Environmental Site
Assessment (ESA–ASTM). If the Phase I
ESA identifies recognized
environmental concerns (RECs), a Phase
II (ESA–ASTM) will be required. ASTM
reports shall be prepared in accordance
with the most current ASTM standard.
Single family housing does not require
a Phase I ESA.
(B) 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 use of the
property.
(x) Noise. (A) Internal noise levels: All
activities will be developed to ensure an
interior noise level of no more than 45
decibels (dB).
(B) External noise levels:
(1) Project sites exposed to less than
or equal to 65 dB of environmental
noise are acceptable.
(2) Sites between 65 dB and less than
75 dB are acceptable with mitigation
(e.g., noise walls, careful site planning)
that result in an interior standard of 45
dB.
(3) Locations with environmental
noise levels of 75 dB or greater may not
have noise sensitive outdoor uses (e.g.,
picnic areas, tot lots, balconies, or
patios) and require sound attenuation in
the building shell to achieve the 45 dB
interior standard.
(xi) Endangered species. The grantee
must avoid all actions which could
jeopardize the continued existence of
any endangered or threatened species,
as designated by the 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.
(xii) Wild and scenic rivers. The
grantee must avoid activities that are
inconsistent with conservation
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5231
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.
(xiii) Safe drinking water. Projects
with a potable water system must use
only lead-free pipes, solder, and flux.
(xiv) Sole-source aquifers. Project
activities should avoid sites and
activities that have the potential to
contaminate sole source aquifer areas
(SSAs). 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, EPA must review the
project. EPA review is designed to
reduce the risk of ground water
contamination that could pose a health
hazard to those who use it.
(2) Rehabilitation projects
environmental requirements—(i)
Historic preservation. (A) 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, unless the project
activities 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 relevant
Secretary of the Interior’s Professional
Qualification Standards;
(B) Archaeological resources. If
archaeological resources or human
remains are discovered on the project
site during construction or
rehabilitation, the grantee must consult
with affected tribes and/or descendant
communities and comply with the
Native American Graves Protection and
Repatriation Act (25 U.S.C. 3001–3013),
State law, and/or local ordinance (e.g.,
State unmarked burial law).
(ii) Farmland. Project activities must
not result in the conversion of unique,
prime, or locally significant agricultural
properties to urban uses.
(iii) 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.
(iv) 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.
(v) Coastal zone management.
Development must be consistent with
the appropriate State coastal zone
management plan. Plans are available
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from the local coastal zone management
agency.
(vi) Floodplains. Except as modified
below, definitions for terms used below
can be found at 24 CFR part 55.
(A) 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). When FEMA provides interim
flood hazard data, such as Advisory
Base Flood Elevations (ABFE) or
preliminary maps or studies, the latest
of these sources shall be used.
(B) No HTF assistance may be
approved with respect to:
(1) Any action, other than
functionally dependent uses, located in
a floodway;
(2) Any critical action located in a
coastal high hazard area, 100- or 500year floodplain; or
(3) 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.
‘‘Any non-critical action in a coastal
high hazard area, unless the action is
reconstruction following destruction
caused by a disaster and is designed for
location in a coastal high hazard area
consistent with the FEMA National
Flood Insurance Program requirements
for V-Zones.’’
(vii) 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 wetland
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
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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.).
(viii) 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.
(ix) Contamination. All properties
assisted with HTF funds must 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
use of the property:
(A) All proposed multifamily (more
than four housing units) HTF project
activities require a Phase I
Environmental Site Assessment (ESA—
ASTM). If the Phase I ESA identifies
recognized environmental concerns
(RECs), a Phase II (ESA–ASTM) will be
required. ASTM reports shall be
prepared in accordance with the most
current ASTM standard. Single family
housing does not require a Phase I ESA.
(B) 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 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.
(x) Noise—(A) Internal noise levels.
All activities will be developed to
ensure an interior noise level of no more
than45 decibels (dB).
(B) [Reserved].
(xi) Endangered species. (A) The
grantee 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 Service as endangered or
threatened.
(B) The grantee must avoid all actions
that adversely modify the critical habitat
of such species.
(xii) Wild and scenic rivers. The
grantee 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
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Rivers System are available at the
governing departments.
(xiii) Safe drinking water. Projects
with a potable water system must use
only lead-free pipes, solder, and flux.
(xiv) 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, which could pose a
health hazard to those who use it.
(3) Acquisition projects environmental
requirements. (i)(A) Existing housing
that is acquired with HTF funds, and
has been newly constructed or
rehabilitated less than 12 months before
the commitment of HTF funds must
meet the property standards at
paragraph (f)(1) of this section.
(B) All other existing housing that is
acquired with HTF assistance must meet
the property standards requirements of
paragraph (f)(2) of this section.
(ii) If under paragraph (f)(3)(i)(A) or
paragraph (B) of this section, the
property does not meet these standards,
with the exception of the noise
standards in paragraph (f)(2) of this
section, HTF funds cannot be used to
acquire the property.
(4) Manufactured housing
environmental requirements.
Manufactured housing is subject to the
environmental standards in paragraph
(f)(1) of this section for new
construction or paragraph (f)(2) of this
section for rehabilitation, as applicable.
If an existing property does not meet
these standards, HTF funds cannot be
used to acquire the property unless it is
rehabilitated to meet the standards in
paragraph (f)(2), as applicable, with the
exception of noise standards in
paragraph (f)(2)(x).
§ 93.302 Qualification as affordable
housing: rental housing.
(a) Eligible tenants. The HTF-assisted
units in a rental housing project must be
occupied by households who are
eligible families in accordance with the
income targeting requirements in
§ 93.250.
(b) Rent limitations—(1)(i) Extremely
low-income tenants. The HTF rent plus
utilities of an extremely low-income
tenant 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
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determined by HUD, with adjustments
for the number of bedrooms in the unit.
HUD will publish the HTF rent limits
on an annual basis.
(ii) Very-low income tenants. The HTF
rent plus utilities of a very low-income
tenant shall not exceed 30 percent of the
income of a family whose annual
income equals 50 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, and the
tenant pays as a contribution toward
rent not more than 30 percent of the
tenant’s adjusted income, 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
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 a
deed restriction, covenant running with
the land, an agreement restricting the
use of the property, or other
mechanisms approved by HUD under
which the grantee and beneficiaries
have the right to 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 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
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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
§ 93.403.
(e) Tenant income. (1) The income of
each tenant must be determined initially
in accordance with § 93.151. 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
§ 93.151(c) selected by the grantee.
(2) An owner who re-examines a
tenant’s annual income through a
statement and certification in
accordance with § 93.151(a)(1)(iii) must
examine the source documentation of
the income of each tenant every 6th year
of the affordability period, except that,
for units that receive project-based
assistance, the owner must re-examine
the tenant’s annual income in
accordance with the project-based
assistance rules. Otherwise, an owner
who accepts the tenant’s statement and
certification in accordance with
§ 93.151(a)(1)(iii) 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 § 93.303.
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(i) Onsite inspections and financial
oversight. See § 93.404(d) for the
grantee’s ongoing responsibilities for
onsite inspections and financial
oversight.
§ 93.303
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
one year, unless by mutual agreement
between the tenant and the owner a
shorter period is specified.
(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; and
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(9) Mandatory supportive services.
Agreement by the tenant to accept
supportive services that are offered.
(c) Termination of tenancy. 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;
for violation of applicable Federal,
State, or local law; or for other good
cause. Good cause does not include an
increase in the tenant’s income. 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 § 93.350. 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., to pay the
rent, not to damage the housing; not to
interfere with the rights and quiet
enjoyment of other tenants);
(3) 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).
(i) Any limitation or preference must
not violate nondiscrimination
requirements in § 93.350. A limitation
or preference 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), and the limit or
preference is tailored to serve that
segment of the population.
(ii) If a project does not receive
funding from a Federal program that
limits eligibility to a particular segment
of the population, the project may have
a limitation or preference for persons
with disabilities who need services
offered at a project only if:
(A) The limitation or preference is
limited to the population of families
(including individuals) with disabilities
that significantly interfere with their
ability to obtain and maintain housing;
(B) Such families will not be able to
obtain or maintain themselves in
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housing without appropriate supportive
services; and
(C) Such services cannot be provided
in a nonsegregated setting. The families
must not be required to accept the
services offered at the project. In
advertising the project, the owner may
advertise the project as offering services
for a particular type of disability;
however, the project must be open to all
otherwise eligible persons with
disabilities who may benefit from the
services provided in the project.
(4) Do not exclude an applicant with
a voucher under the Section 8 TenantBased Assistance: Housing Choice
Voucher program (24 CFR part 982) or
an applicant participating in a HOME
tenant-based rental assistance program
(24 CFR part 92) because of the status
of the prospective tenant as a holder of
such voucher or comparable HOME
tenant-based assistance document.
(5) Provide for the selection of tenants
from a written waiting list in the
chronological order of their application,
insofar as is practicable; and
(6) Give prompt written notification to
any rejected applicant of the grounds for
any rejection.
§ 93.304 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 § 93.2.
(c) Modest housing. The housing must
be modest housing, in accordance with
§ 93.305.
(d) First-time homebuyer and income
requirements. The housing must be
acquired by a first-time homebuyer
whose family qualifies as an incomeeligible family in accordance with
§ 93.251 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 has been certified in accordance
with section 106(e) of the Housing and
Urban Development Act of 1968 (12
U.S.C. 1701x (e)).
(e) Period of affordability. The HTFassisted housing must meet the
affordability requirements for not less
than 30 years.
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(f) Resale or recapture requirements.
The grantee must establish the resale or
recapture requirements that comply
with the standards of § 93.305 and set
forth the requirements in its
consolidated plan. HUD must determine
that they are appropriate and must
specifically approve them in writing.
(g) Special considerations for single
family 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 § 93.302
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 § 93.302 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
§ 93.302 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) If there is no ratified sales contract
with an eligible homebuyer for the
housing within 9 months of the date of
completion of construction or
rehabilitation, the housing must be
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rented to an eligible tenant in
accordance with § 93.301.
(k) 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
development subsidy amount
established pursuant to § 93.300. As an
alternative to charging the cost to the
HTF program under § 93.201, the
grantee may charge the cost to the HTF
program under § 93.302 as a reasonable
administrative cost of its HTF program,
so that the additional HTF funds for the
housing are not subject to the maximum
per-unit subsidy amount.
(l) 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).
The grantee must determine that the
fees and other amounts charged to the
family by the lender for the first
mortgage financing are reasonable.
Reasonable administrative costs of the
HTF homeownership assistance can be
charged to the HTF program as a project
cost. If the grantee requires lenders to
pay a fee to participate in the HTF
program, the fee is program income to
the HTF program.
(m) 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
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(3) Refinancing loans to which HTF
loans are subordinated to ensure that
the terms of the new loan are
reasonable.
§ 93.305 Qualification as affordable
housing: modest housing requirements for
homeownership; resale or recapture
requirements.
(a) Housing that is for acquisition by
a family pursuant to § 93.304 must be
modest housing.
(1) The housing must be modest
housing as follows: The housing has a
purchase price for the type of single
family housing that does not exceed 95
percent of the median purchase price for
the area for newly constructed or
standard housing. The grantee must use
the HTF affordable homeownership
limits provided by HUD for newly
constructed housing and for existing
housing. HUD will provide limits for
affordable newly constructed housing
based on 95 percent of the median
purchase price for the area using
Federal Housing Administration (FHA)
single family mortgage program data for
newly constructed housing, with a
minimum limit based on 95 percent of
the U.S. median purchase price for new
construction for nonmetropolitan areas.
HUD will provide limits for affordable
existing housing based on 95 percent of
the median purchase price for the area
using FHA single family mortgage
program data for existing housing data
and other appropriate data that are
available nation-wide for sales of
existing housing, with a minimum limit
based on 95 percent of the state-wide
nonmetropolitan area median purchase
price using these data. For States with
no non-metropolitan areas, the
minimum purchase price is defined as
the lesser of the State non-metro or the
United States non-metro median.
(2) In lieu of the limits provided by
HUD, the grantee may determine 95
percent of the median area purchase
price for single family housing in the
jurisdiction annually, as follows: The
grantee must set forth the price for
different types of single family housing
for the jurisdiction. The grantee may
determine separate limits for existing
housing and newly constructed housing.
For housing located outside of
metropolitan areas, a grantee may
aggregate sales data from more than one
county, if the counties are contiguous
and similarly situated. The following
information must be included in the
annual action plan of the consolidated
plan submitted to HUD for review and
updated in each action plan:
(i) The 95 percent of median area
purchase price must be established in
accordance with a market analysis that
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ensured that a sufficient number of
recent housing sales are included in the
survey.
(ii) Sales must cover the requisite
number of months based on volume: For
500 or more sales per month, a onemonth reporting period; for 250 through
499 sales per month, a 2-month
reporting period; for less than 250 sales
per month, at least a 3-month reporting
period. The data must be listed in
ascending order of sales price.
(iii) The address of the listed
properties must include the location
within the grantee. Lot, square, and
subdivision data may be substituted for
the street address.
(iv) The housing sales data must
reflect all, or nearly all, of the onefamily house sales in the entire area.
(v) To determine the median, take the
middle sale on the list if an odd number
of sales, and if an even number, take the
higher of the middle numbers and
consider it the median. After identifying
the median sales price, the amount
should be multiplied by 0.95 to
determine 95 percent of the median area
purchase price.
(b) Resale or recapture requirements.
The grantee must establish the resale or
recapture requirements that comply
with the standards of this section and
set forth the requirements in its
consolidated plan. The HTF-assisted
housing must meet the affordability
requirements for not less than 30 years
if resale restrictions are used. If
recapture restrictions are used, the
affordability periods are based on the
amount of HTF funds per unit as
follows:
Homeownership
assistance HTF amount
per-unit
Under $30,000 ................
$30,000–$50,000 ............
Over $50,000 ..................
Minimum period of
affordability in
years
10
20
30
(1) Resale. 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 the housing is made
available for subsequent purchase only
to a buyer whose family qualifies as a
very low-income family and will use the
property as the family’s principal
residence. The resale requirement must
also ensure that 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
ensure that the housing will remain
affordable to a reasonable range of
income-eligible homebuyers. The
grantee must specifically define ‘‘fair
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(2) Recapture. (i) Recapture
provisions must ensure that the grantee
recoups all or a portion of the HTF
assistance to the homebuyers, if the
housing does not continue to be the
principal residence of the family for the
duration of the period of affordability.
The grantee may structure its recapture
provisions based on its program design
and market conditions. Recapture
provisions may permit the subsequent
homebuyer to assume the HTF
assistance (subject to the HTF
requirements for the remainder of the
period of affordability) if the subsequent
homebuyer is income-eligible, and no
additional HTF assistance is provided.
(ii) The following options for
recapture requirements are acceptable to
HUD. The grantee may adopt, modify, or
develop its own recapture requirements
for HUD approval. In establishing its
recapture requirements, the grantee is
subject to the limitation that, when the
recapture requirement is triggered by a
sale (voluntary or involuntary) of the
housing unit, the amount recaptured
cannot exceed the net proceeds, if any.
The net proceeds are the sales price
minus superior loan repayment (other
than HTF funds) and any closing costs.
(A) Recapture entire amount. The
grantee may recapture the entire amount
of the HTF assistance from the
homeowner.
(B) Reduction during affordability
period. The grantee may reduce the HTF
assistance amount to be recaptured on a
prorata basis for the time the
homeowner has owned and occupied
the housing measured against the
required affordability period.
(C) Shared net proceeds. If the net
proceeds are not sufficient to recapture
the full HTF assistance (or a reduced
amount as provided for in this section)
plus enable the homeowner to recover
the amount of the homeowner’s
downpayment and any capital
improvement investment made by the
owner since purchase, the grantee may
share the net proceeds. The net
proceeds are the sales price minus loan
repayment (other than HTF funds) and
closing costs. The net proceeds may be
divided proportionally as set forth in
the following mathematical formulas:
(D) Owner investment returned first.
The grantee may permit the homebuyer
to recover the homebuyer’s entire
investment (downpayment and capital
improvements made by the owner since
purchase) before recapturing the HTF
assistance.
(E) Amount subject to recapture. The
HTF assistance that is subject to
recapture is based on the amount of
HTF assistance that enabled the
homebuyer to buy the dwelling unit.
This includes any HTF assistance that
reduced the purchase price from fair
market value to an affordable price, but
excludes the amount between the cost of
producing the unit and the market value
of the property (i.e., the development
subsidy). The recaptured funds must be
used to carry out HTF-eligible activities
in accordance with the requirements of
this part. If the HTF assistance is only
used for the development subsidy and
therefore not subject to recapture, the
resale option must be used.
Subpart H—Other Federal
Requirements
agreement with the project owner
permits the rental housing project to
limit tenant eligibility or to have a
tenant preference in accordance with
§ 93.303(d)(3), the grantee must have
affirmative marketing procedures and
requirements that apply in the context
of the limited/preferred tenant
eligibility for the project.
(2) The affirmative marketing
requirements and procedures adopted
must include:
(i) Methods for informing the public,
owners, and potential tenants about
Federal fair housing laws and the
grantee’s affirmative marketing policy
(e.g., the use of the Equal Housing
Opportunity logotype or slogan in press
releases and solicitations for owners,
and written communication to fair
housing and other groups);
(ii) Requirements and practices the
grantee and owner must adhere to in
order to carry out the grantee’s
affirmative marketing procedures and
requirements (e.g., use of commercial
media, use of community contacts, use
of the Equal Housing Opportunity
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§ 93.350 Other federal requirements and
nondiscrimination; affirmative marketing.
(a) General. The Federal requirements
set forth in 24 CFR part 5, subpart A, are
applicable to participants in the HTF
program. The requirements of this
subpart include: nondiscrimination and
equal opportunity; disclosure
requirements; debarred, suspended, or
ineligible contractors; and drug-free
workplace.
(b) Affirmative marketing. (1) Each
grantee must adopt and follow
affirmative marketing procedures and
requirements for rental projects
containing five or more HTF-assisted
housing units and for homeownership
assistance programs. Affirmative
marketing steps consist of actions to
provide information and otherwise
attract eligible persons in the housing
market area to the available housing
without regard to race, color, national
origin, sex, religion, familial status, or
disability. If a grantee’s written
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return on investment’’ and
‘‘affordability to a reasonable range of
very low-income homebuyers,’’ and
specifically address how it will make
the housing affordable to an income
eligible homebuyer in the event that the
resale price necessary to provide fair
return is not affordable to the
subsequent buyer. Deed restrictions,
covenants running with the land, or
other mechanisms approved by HUD
must be used as the mechanism to
impose the resale requirements. The
affordability restrictions may terminate
upon occurrence of any of the following
termination events: foreclosure, transfer
in lieu of foreclosure, or assignment of
an FHA insured mortgage to HUD. 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.
Federal Register / Vol. 80, No. 20 / Friday, January 30, 2015 / Rules and Regulations
logotype or slogan, and display of fair
housing poster);
(iii) Procedures to be used by the
grantee and owners to inform and solicit
applications from persons in the
housing market area who are not likely
to apply for the rental housing or
homeownership assistance program
without special outreach (e.g., through
the use of community organizations,
places of worship, employment centers,
fair housing groups, or housing
counseling agencies);
(iv) Records that will be kept
describing actions taken by the grantee
and owners to affirmatively market
rental housing units and
homeownership assistance program and
records to assess the results of these
actions; and
(v) A description of how the grantee
will annually assess the success of
affirmative marketing actions and what
corrective actions will be taken where
affirmative marketing requirements are
not met.
(3) A grantee that subgrants HTF
funds to subgrantees must require each
subgrantee to either follow the grantee’s
procedures and requirements or adopt
its own affirmative marketing
procedures and requirements that meet
this section.
§ 93.351
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.
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§ 93.352 Displacement, relocation, and
acquisition.
(a) Minimizing displacement.
Consistent with the other goals and
objectives of this part, the grantee must
ensure that it has taken all reasonable
steps to minimize the displacement of
persons (families, individuals,
businesses, nonprofit organizations, and
farms) as a result of a project assisted
with HTF funds. To the extent feasible,
displaced residential tenants must be
provided a reasonable opportunity to
lease and occupy a suitable, decent,
safe, sanitary, and affordable dwelling
unit in the building/complex upon
completion of the project.
(b) Temporary relocation. The
following policies cover residential
tenants who will not be required to
move permanently but who must
relocate temporarily for the project.
Such tenants must be provided:
(1) Reimbursement for all reasonable
out-of-pocket expenses incurred in
connection with the temporary
relocation, including the cost of moving
to and from the temporarily occupied
housing and any increase in monthly
rent/utility costs.
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(2) Appropriate advisory services,
including reasonable advance written
notice of:
(i) The date and approximate duration
of the temporary relocation;
(ii) The location of the suitable,
decent, safe, and sanitary dwelling to be
made available for the temporary
period;
(iii) The terms and conditions under
which the tenant may lease and occupy
a suitable, decent, safe, and sanitary
dwelling in the building/complex upon
completion of the project; and
(iv) The provisions of paragraph (b)(1)
of this section.
(c) Relocation assistance for displaced
persons—(1) General. A displaced
person (defined in paragraph (c)(2) of
this section) must be provided
relocation assistance at the levels
described in, and in accordance with
the requirements of the Uniform
Relocation Assistance and Real Property
Acquisition Policies Act of 1970 (URA)
(42 U.S.C. 4201–4655) and 49 CFR part
24. A ‘‘displaced person’’ must be
advised of his or her rights under the
Fair Housing Act and, if the comparable
replacement dwelling used to establish
the amount of the replacement housing
payment to be provided to a minority
person is located in an area of minority
concentration, the minority person also
must be given, if possible, referrals to
comparable and suitable, decent, safe,
and sanitary replacement dwellings not
located in such areas.
(2) Displaced person. (i) For purposes
of this paragraph (c), the term
‘‘displaced person’’ means a person
(family individual, business, nonprofit
organization, or farm, including any
corporation, partnership or association)
that moves from real property or moves
personal property from real property,
permanently, as a direct result of
acquisition, rehabilitation, or
demolition for a project assisted with
HTF funds. This includes any
permanent, involuntary move for an
assisted project, including any
permanent move from the real property
that is made:
(A) After notice by the owner to move
permanently from the property, if the
move occurs on or after:
(1) The date of the submission of an
application to the grantee or HUD, if the
applicant has site control and the
application is later approved; or
(2) The date the grantee approves the
applicable site, if the applicant does not
have site control at the time of the
application; or
(B) Before the date described in
paragraph (c)(2)(i)(A) of this section, if
the grantee or HUD determines that the
displacement resulted directly from
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acquisition, rehabilitation, or
demolition for the project; or
(C) By a tenant-occupant of a dwelling
unit, if any one of the following three
situations occurs:
(1) The tenant moves after execution
of the agreement covering the
acquisition, rehabilitation, or
demolition and the move occurs before
the tenant is provided written notice
offering the tenant the opportunity to
lease and occupy a suitable, decent,
safe, and sanitary dwelling in the same
building/complex upon completion of
the project under reasonable terms and
conditions. Such reasonable terms and
conditions must include a term of at
least one year at a monthly rent and
estimated average monthly utility costs
that do not exceed the greater of:
(i) The tenant’s monthly rent before
such agreement and estimated average
monthly utility costs; or
(ii) The total tenant payment, as
determined under 24 CFR 5.628, if the
tenant is low-income, or 30 percent of
gross household income, if the tenant is
not low-income;
(2) The tenant is required to relocate
temporarily, does not return to the
building/complex, and either:
(i) The tenant is not offered payment
for all reasonable out-of-pocket
expenses incurred in connection with
the temporary relocation; or
(ii) Other conditions of the temporary
relocation are not reasonable; or
(3) The tenant is required to move to
another dwelling unit in the same
building/complex but is not offered
reimbursement for all reasonable out-ofpocket expenses incurred in connection
with the move, or other conditions of
the move are not reasonable.
(ii) Notwithstanding paragraph
(c)(2)(i) of this section, a person does
not qualify as a ‘‘displaced person’’ if:
(A) The person has been evicted for
cause based upon a serious or repeated
violation of the terms and conditions of
the lease or occupancy agreement,
violation of applicable Federal, State or
local law, or other good cause, and the
grantee determines that the eviction was
not undertaken for the purpose of
evading the obligation to provide
relocation assistance. The effective date
of any termination or refusal to renew
must be preceded by at least 30 calendar
days advance written notice to the
tenant specifying the grounds for the
action.
(B) The person moved into the
property after the submission of the
application, but before signing a lease
and commencing occupancy, was
provided written notice of the project,
its possible impact on the person (e.g.,
the person may be displaced,
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temporarily relocated, incur a rent
increase), and the fact that the person
would not qualify as a ‘‘displaced
person’’ (or for any assistance under this
section) as a result of the project;
(C) The person is ineligible under 49
CFR 24.2(g)(2); or
(D) HUD determines that the person
was not displaced as a direct result of
acquisition, rehabilitation, or
demolition for the project.
(iii) The grantee may, at any time, ask
HUD to determine whether a
displacement is or would be covered by
this rule.
(3) Initiation of negotiations. For
purposes of determining the formula for
computing replacement housing
assistance to be provided under this
paragraph (c) to a tenant displaced from
a dwelling as a direct result of privateowner rehabilitation, demolition, or
acquisition of the real property, the term
‘‘initiation of negotiations’’ means the
execution of the agreement covering the
acquisition, rehabilitation, or
demolition.
(d) Optional relocation assistance.
The grantee may provide relocation
payments and other relocation
assistance to families, individuals,
businesses, nonprofit organizations, and
farms displaced by a project assisted
with HTF funds where the displacement
is not subject to paragraph (c) of this
section. The grantee may also provide
relocation assistance to persons covered
under paragraph (c) of this section
beyond that required. For any such
assistance that is not required by State
or local law, the grantee must adopt a
written policy available to the public
that describes the optional relocation
assistance that it has elected to furnish
and provides for equal relocation
assistance within each class of
displaced persons.
(e) Real property acquisition
requirements. The acquisition of real
property for a project is subject to the
URA and the requirements of 49 CFR
part 24, subpart B.
(f) Appeals. A person who disagrees
with the grantee’s determination
concerning whether the person qualifies
as a displaced person, or the amount of
relocation assistance for which the
person may be eligible, may file a
written appeal of that determination
with the grantee.
§ 93.353
Conflict of interest.
(a) Applicability of 2 CFR 200.318. In
the procurement of property and
services by grantees and subgrantees,
the conflict of interest provisions in 2
CFR 200.318 apply. In all cases not
governed by 2 CFR 200.318, the
provisions of this section apply.
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(b) Conflicts prohibited. No persons
described in paragraph (c) of this
section who exercise or have exercised
any functions or responsibilities with
respect to activities assisted with HTF
funds or who are in a position to
participate in a decision-making process
or gain inside information with regard
to these activities may obtain a financial
interest or financial benefit from a HTFassisted activity, or have a financial
interest in any contract, subcontract, or
agreement with respect to the HTFassisted activity, or the proceeds from
such activity, either for themselves or
those with whom they have business or
immediate family ties, during their
tenure or for one year thereafter.
Immediate family ties include (whether
by blood, marriage, or adoption) the
spouse, parent (including a stepparent),
child (including a stepchild), brother,
sister (including a stepbrother or
stepsister), grandparent, grandchild, and
in-laws of a covered person.
(c) Persons covered. The conflict of
interest provisions of paragraph (b) of
this section apply to any person who is
an employee, agent, consultant, officer,
or elected official or appointed official
of the grantee or subgrantee.
(d) Exceptions: Threshold
requirements. Upon the written request
of the grantee, HUD may grant an
exception to the provisions of paragraph
(b) of this section on a case-by-case basis
when it determines that the exception
will serve to further the purposes of the
HTF and the effective and efficient
administration of the grantee’s program
or project. An exception may be
considered only after the grantee has
provided the following:
(1) A disclosure of the nature of the
conflict, accompanied by an assurance
that there has been public disclosure of
the conflict and a description of how the
public disclosure was made; and
(2) An opinion of the grantee’s
attorney that the interest for which the
exception is sought would not violate
State or local law.
(e) Factors to be considered for
exceptions. In determining whether to
grant a requested exception after the
grantee has satisfactorily met the
requirements of paragraph (d) of this
section, HUD will consider the
cumulative effect of the following
factors, where applicable:
(1) Whether the exception would
provide a significant cost benefit or an
essential degree of expertise to the
program or project which would
otherwise not be available;
(2) Whether the person affected is a
member of a group or class of income
eligible persons intended to be the
beneficiaries of the assisted activity, and
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the exception will permit such person to
receive generally the same interests or
benefits as are being made available or
provided to the group or class;
(3) Whether the affected person has
withdrawn from his or her functions or
responsibilities, or the decisionmaking
process with respect to the specific
assisted activity in question;
(4) Whether the interest or benefit was
present before the affected person was
in a position as described in paragraph
(c) of this section;
(5) Whether undue hardship will
result either to the grantee or the person
affected when weighed against the
public interest served by avoiding the
prohibited conflict; and
(6) Any other relevant considerations.
(f) Recipient—(1) General. No
recipient assisted with HTF funds (or
officer, employee, agent, elected or
appointed official, or consultant of
recipient or immediate family member
or immediate family member of an
officer, employee, agent, elected or
appointed official, or consultant of a
recipient) whether private, for-profit or
nonprofit, may occupy a HTF-assisted
affordable housing unit in a project
during the required period of
affordability specified in § 93.302(e) or
§ 93.304. This provision does not apply
to an employee or agent of the recipient
who occupies a housing unit as the
project manager or maintenance worker.
(2) Exceptions. Upon written request
of a recipient, the grantee (or
subgrantee, if authorized by the grantee)
may grant an exception to the
provisions of paragraph (f)(1) of this
section on a case-by-case basis when it
determines that the exception will serve
to further the purposes of the HTF
program and the effective and efficient
administration of the recipient’s HTFassisted project. In determining whether
to grant a requested exception, the
grantee shall consider the following
factors:
(i) Whether the person receiving the
benefit is a member of a group or class
of low-income persons intended to be
the beneficiaries of the assisted housing,
and the exception will permit such
person to receive generally the same
interests or benefits as are being made
available or provided to the group or
class;
(ii) Whether the person has
withdrawn from his or her functions or
responsibilities, or the decisionmaking
process with respect to the specific
assisted housing in question;
(iii) Whether the tenant protection
requirements of § 93.303 are being
observed;
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(iv) Whether the affirmative marketing
requirements of § 93.350 are being
observed and followed; and
(v) Any other factor relevant to the
grantee’s determination, including the
timing of the requested exception.
§ 93.401
§ 93.354 Funding Accountability and
Transparency Act.
(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 part 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, operating cost assistance, and
operating cost assistance reserves. 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 calendar days
of the date 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
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. 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.
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).
§ 92.355
Eminent domain.
No HTF funds may be used in
conjunction with property taken by
eminent domain, unless eminent
domain is employed only for a public
use, except that, public use shall not be
construed to include economic
development that primarily benefits any
private entity.
Subpart I—Program Administration
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§ 93.400 Housing Trust Fund (HTF)
accounts.
(a) General. 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 § 93.403.
(2) The HTF local account must be
interest-bearing.
(d) Reductions. HUD will reduce or
recapture funds in the HTF account by
the amount of:
(1) Any fiscal year grant funds in the
HTF Treasury account that are not
committed within 24 months after the
date of HUD’s execution of the HTF
grant agreement;
(2) Any fiscal year grant funds in the
HTF local account that are not
expended within 5 years after the date
of HUD’s execution of the HTF grant
agreement;
(3) Any amounts pursuant to § 93.453;
and
(4) Amounts that the grantee fails to
obtain and that were required to be
reimbursed or returned under § 93.450.
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HTF grant agreement.
Allocated and reallocated funds will
be made available pursuant to an HTF
grant agreement.
§ 93.402 Program disbursement and
information system.
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(3) Funds in the HTF local account
must be disbursed before requests are
made for funds in the HTF Treasury
account.
(d) Project completion. (1) Complete
project completion information must be
entered into the disbursement and
information system, or otherwise
provided, within 120 calendar days of
the date of the final project drawdown.
If satisfactory project completion
information is not provided, HUD may
suspend further project set-ups 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 § 93.300.
(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.
§ 93.403
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 part. 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 § 93.404(b). 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
period specified in § 93.302 or § 93.304,
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.
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(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 § 93.54 of this part.
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§ 93.404 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. The
performance and compliance of each
contractor and subgrantee 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 part 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 part.
(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
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 part. The agreement
between the grantee and the subgrantee
must include:
(i) Use of the HTF funds. An HTF
subgrantee that is a unit of general local
government must have a consolidated
plan under 24 CFR part 91, and the
written agreement must require that an
HTF allocation plan to be part of the
subgrantee’s consolidated plan (see 24
CFR 91.220(l)(5)). The HTF allocation
plan of an HTF subgrantee that is a State
agency is included in the grantee’s HTF
allocation plan. The grantee may impose
restrictions on the use of funds by the
subgrantee, e.g., limit to rental projects.
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
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(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 the
grantee so that the grantee can meet its
commitment and expenditure deadlines
in § 93.400.
(iii) Audit. The agreement must state
that an audit of the subgrantee must be
conducted at least annually, in
accordance with § 93.406.
(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 HTF
eligible activities.
(v) Uniform administrative
requirements. The agreement must
require the subgrantee to comply with
the requirements of 2 CFR part 200, as
described in § 93.405. The agreement
must include the information in 2 CFR
200.331.
(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 §§ 93.350–93.354 of this
part.
(vii) Affirmative marketing. The
agreement must specify the subgrantee’s
affirmative marketing responsibilities,
in accordance with § 93.350.
(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 grant funds from the grantee.
(ix) Reversion of assets. The
agreement must specify that upon
closeout of the subgrant agreement, the
subgrantee must transfer to the grantee
any HTF funds on hand 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
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that, in accordance with 2 CFR 200.338,
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 in whole or in part, in
accordance with 2 CFR 200.339.
(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 period of
performance 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, except that:
(A) The subgrantee may charge
owners of rental projects reasonable
annual fees for compliance monitoring
during the period of affordability. The
fees must be based upon the average
actual cost of performing the monitoring
of HTF-assisted rental projects. The
basis for determining the amount of the
fee amount must be documented and
the fee must be included in the costs of
the project as part of the project
underwriting;
(B) The subgrantee may charge
nominal application fees (although
these fees are not an eligible HTF cost)
to discourage frivolous applications.
The amount of application fees must be
appropriate to the type of application
and may not create an undue
impediment to an income-eligible
family’s, or other potential recipient’s
participation in the HTF program; and
(C) The subgrantee may charge
homebuyers a fee for housing
counseling.
(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 § 93.201.
(ii) Deadlines. The agreement must
state the time requirements for the
commitment and expenditure of HTF
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funds and specify that remaining funds
will be reduced or recaptured.
(iii) Audit. 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.
(iv) Affordability. The agreement must
specify the affordability period, require
housing assisted with HTF funds to
meet the affordability requirements of
§ 93.302 or § 93.304, 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
§ 93.304, the agreement must establish
the resale or recapture 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 § 93.301
of this part, 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 § 93.301 of this part for the
duration of the affordability period, and
to comply with the requirements of
§ 93.303. 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
§ 93.350.
(vi) Other program requirements. The
agreement must require the eligible
recipient to carry out each project in
compliance with all Federal laws and
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regulations described in §§ 93.350
through 93.355 of this part.
(vii) Affirmative marketing. The
agreement must specify the recipient’s
affirmative marketing responsibilities,
as enumerated by the grantee in
accordance with § 93.350.
(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 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 § 93.302.
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 § 93.302 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 § 93.302. 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;
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5241
however, rental project owners may
charge reasonable application fees to
prospective tenants.
(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 § 93.304, including the
limitations on the value of the property,
principal residence requirement, leasepurchase terms, if applicable, and the
resale or recapture 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 or recapture restrictions.
The agreement must specify the resale
or recapture restrictions established
under § 93.304 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.
The means of enforcement and the
affordability requirements in § 93.304
for resale restrictions must be imposed
by deed restrictions, covenants running
with the land, use restrictions, or other
mechanisms approved by HUD under
which the grantee 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 § 93.301. The
inspections must be in accordance with
the inspection procedures that the
grantee establishes to meet the
inspection requirements of § 93.301.
(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 § 93.301 and to
verify the information submitted by the
owners in accordance with the
requirements of § 93.302. The
inspections must be in accordance with
the inspection procedures that the
grantee establishes to meet the
inspection requirements of § 93.301.
(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
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established by the grantee, in
accordance with the inspection
requirements of § 93.301, 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. The
grantee may establish a list of nonhazardous deficiencies for which
correction can be verified by third party
documentation rather than reinspection.
The grantee must adopt a more frequent
inspection schedule for properties that
have been found to have health and
safety violations. Life-threatening health
and safety deficiencies must be
corrected immediately, in accordance
with § 93.301.
(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 § 93.301.
(v) Inspections must be based on a
statistically valid sample of units
appropriate for the size of the HTFassisted project, as set forth by HUD
through notice. 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 HTF-assisted units and
100 percent of the HTF-assisted
dwelling units 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 projects with 10 or more HTFassisted units to determine the
continued financial viability of the
housing and must take actions to correct
problems.
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§ 93.405 Applicability of uniform
administrative requirements, cost
principles, and audits.
The requirements of 2 CFR part 200
apply to the grantees and subgrantees
receiving HTF funds, except for the
following provisions: §§ 200.307,
200.311, 300.328(b), 200.329, and
200.333. If there is a conflict between
the definitions in 2 CFR part 200 and 24
CFR part 93, the definitions in part 93
govern.
§ 93.406
Audits.
(a) Audits of the grantee and
subgrantees must be conducted in
accordance with 2 CFR part 200, subpart
F. The use of HTF grant funds by the
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grantee must be audited not less than
annually to ensure compliance with this
part. 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
the American Institute of Certified
Public Accountants.
(b) The written agreement providing
HTF assistance to the recipient 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.
§ 93.407
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 part. 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 § 93.300.
(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 § 93.305, 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 § 93.304,
as set forth in the consolidated plan.
(v) Records documenting compliance
with the 24-month commitment
deadline of § 93.400(d)(l).
(vi) Records documenting compliance
with the 10 percent limitation on
administrative and planning costs in
accordance with § 93.202.
(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 2 CFR 200.333 through
200.337, and records to document the
eligibility and allowability of the project
costs, including the documentation of
the actual HTF-eligible development
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costs of each HTF-assisted unit (through
allocation of costs, if permissible under
§ 93.200(c)) where HTF funds are used
to assist less than all of the units in a
multi-unit project.
(iii) Records demonstrating that each
rental housing or homeownership
project meets the maximum per-unit
subsidy amount established pursuant to
§ 93.300(a), and the subsidy layering
and underwriting evaluation in
accordance with § 93.300.
(iv) Records (e.g., inspection reports)
demonstrating that each project meets
the property standards of § 93.301 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
§ 93.404(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 § 93.302 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 § 93.303.
Records must be kept for each family
assisted.
(viii) Records demonstrating that the
purchase price 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
§ 93.305.
(ix) Records demonstrating that each
housing unit for a first-time homebuyer
meets the affordability requirements of
§ 93.304 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 part, to determine
that the site meets the requirements of
§ 93.150.
(xi) Records (written agreements)
demonstrating compliance with the
written agreements requirements in
§ 93.404.
(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 § 93.400, including
deposits, disbursements, balances,
supporting documentation, and any
other information required by the
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program disbursement and information
system established by HUD.
(iii) Records identifying the source
and application of program income and
repayments.
(iv) Records demonstrating adequate
budget control, in accordance with 2
CFR part 200, 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 part are
met.
(ii) Records demonstrating
compliance with the applicable uniform
administrative requirements required by
§ 93.405.
(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 and Urban
Development Act of 1968, as amended
(12 U.S.C. 1701u).
(ii) Records demonstrating
compliance with the affirmative
marketing procedures and requirements
of § 93.350.
(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
§ 93.352 regarding displacement,
relocation, and real property
acquisition.
(v) Records supporting exceptions to
the conflict-of-interest prohibition
pursuant to § 93.353.
(vi) Debarment and suspension
certifications required by 24
CFR5.105(c) and 2 CFR part 2424.
(vii) Records demonstrating
compliance with § 93.354.
(viii) Records demonstrating
compliance with 2 CFR 200.321
regarding the grantee’s activities related
to minority business enterprise (MBE)
and women’s business enterprise
(WBE).
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(b) Period of record retention. All
records pertaining to each fiscal year of
HTF funds must be retained in a secure
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 or
recapture 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 § 93.352.
(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, to make
audits, examinations, excerpts, and
transcripts.
§ 93.408
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 accordance with
24 CFR 91.520. HUD will make the
performance and management reports
publicly available.
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Subpart J—Performance Reviews and
Sanctions
§ 93.450
Accountability of recipients.
The grantee shall review each
recipient to determine compliance with
the requirements of this part and the
terms of the written agreement in
accordance with the grantee’s policies,
procedures, and systems established
pursuant to § 93.404(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 part 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
reduction for the entity that would
otherwise apply.
§ 93.451
Performance reviews.
(a) General. HUD will review the
performance of each grantee in carrying
out its responsibilities under this part
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
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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 part 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 § 93.400; has met
the requirements of this part,
particularly eligible activities, income
targeting, affordability, and property
standards; has awarded the funds in
accordance with its HTF allocation plan
and requirements of this part; has
reviewed its subgrantees and recipients
to determine whether they have
satisfied the requirements of this part
and the terms of their written
agreements; and has met its
performance measures in its
consolidated plan.
§ 93.452
Corrective and remedial actions.
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(a) General. HUD will use the
procedures in this section in conducting
the performance review as provided in
§ 93.451 and in taking corrective and
remedial actions.
(b) Performance review. (1) If HUD
determines preliminarily that the
grantee has not met a requirement of
this part, the grantee will be given
notice of this determination and an
opportunity to demonstrate, within the
time prescribed by HUD (not to exceed
30 calendar days) and on the basis of
substantial facts and data, that it has
done so.
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(2) If the grantee fails to demonstrate
to HUD’s satisfaction that it has met the
requirement, HUD will take corrective
or remedial action in accordance with
this section or § 93.453.
(c) Corrective and remedial actions.
Corrective or remedial actions for a
performance deficiency (failure to meet
a provision of this part) will be designed
to prevent a continuation of the
deficiency; mitigate, to the extent
possible, its adverse effects or
consequences; and prevent its
recurrence.
(1) HUD may instruct the grantee to
submit and comply with proposals for
action to correct, mitigate, and prevent
a performance deficiency, including:
(i) Preparing and following a schedule
of actions for carrying out the affected
activities, consisting of schedules,
timetables, and milestones necessary to
implement the affected activities;
(ii) Establishing and following a
management plan that assigns
responsibilities for carrying out the
remedial actions;
(iii) Canceling or revising activities
likely to be affected by the performance
deficiency, before expending HTF funds
for the activities;
(iv) Reprogramming HTF funds that
have not yet been expended from
affected activities to other eligible
activities;
(v) Reimbursing its HTF account in
any amount not used in accordance
with the requirements of this part;
(vi) Suspending disbursement of HTF
funds for affected activities; and
(vii) Establishing procedures to ensure
compliance with HTF requirements;
(2) HUD may also change the method
of payment from an advance to
reimbursement basis and may require
supporting documentation to be
submitted for HUD review for each
payment request before payment is
made; determine the grantee to be high
risk and impose special conditions or
restrictions on the allocation in
accordance with 2 CFR 200.207 or
200.338; and take other remedies that
may be legally available.
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§ 93.453 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 part,
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 part 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 part; 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 part 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 §§ 93.50 through 93.54 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 (a) 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: January 23, 2015.
´
Julian Castro,
Secretary.
[FR Doc. 2015–01642 Filed 1–29–15; 8:45 am]
BILLING CODE 4210–67–P
E:\FR\FM\30JAR2.SGM
30JAR2
Agencies
[Federal Register Volume 80, Number 20 (Friday, January 30, 2015)]
[Rules and Regulations]
[Pages 5199-5244]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-01642]
[[Page 5199]]
Vol. 80
Friday,
No. 20
January 30, 2015
Part II
Department of Housing and Urban Development
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24 CFR Parts 91 and 93
Housing Trust Fund; Interim Rule
Federal Register / Vol. 80 , No. 20 / Friday, January 30, 2015 /
Rules and Regulations
[[Page 5200]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 91 and 93
[Docket No. FR-5246-I-03]
RIN 2506-AC30
Housing Trust Fund
AGENCY: Office of the Assistant Secretary for Community Planning and
Development, HUD.
ACTION: Interim rule.
-----------------------------------------------------------------------
SUMMARY: The Housing and Economic Recovery Act of 2008 (HERA)
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 rule establishes the regulations that will govern the HTF. HUD is
issuing this rule as an interim rule. It is HUD's intention to open
this interim rule for public comment to solicit comments once funding
is available and the grantees gain experience administering the HTF
program.
DATES: Effective: March 31, 2015.
FOR FURTHER INFORMATION CONTACT: Marcia Sigal, Director, Program Policy
Division, Office of Affordable Housing Programs, Office of Community
Planning and Development, Department of Housing and Urban Development,
451 7th Street SW., Room 7164, Washington, DC 20410; telephone number
202-708-2684 (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 Relay Service at 800-877-8389.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
Purpose
This interim rule establishes the regulations that will govern HTF
and the formula that will determine how HTF funds are distributed among
eligible grantees. The purpose of 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. HERA (Pub. L. 1110-289, approved July 30, 2008)
establishes HTF and provides for it to be administered by HUD.
States and State-designated entities are eligible grantees for HTF.
Annual formula grants will be made, of which at least 80 percent must
be used for rental housing; up to 10 percent for homeownership; and up
to 10 percent for the grantee's reasonable administrative and planning
costs. HTF funds may be used for the production or preservation of
affordable housing through the acquisition, new construction,
reconstruction, and/or rehabilitation of nonluxury housing with
suitable amenities.
Summary of Major Provisions
This rule contains both the program regulations that establish how
the HTF program will be administered and the allocation formula that
establishes how grant funds will be distributed to States. The formula
allocation, located in subpart B of the rule, codifies language found
in the Federal Housing Enterprises Financial Safety and Soundness Act
of 1992 (FHEFSSA) (42 U.S.C. 4502 et seq.), as revised by HERA (see
Division A of HERA), and provides for the distribution of funds to the
50 States, the District of Columbia, Puerto Rico, and the Insular
Areas. Allocation amounts are based on four need factors as well as a
construction cost adjustment factor. The four need factors are found in
24 CFR 93.51(a)-(d). These need factors include: a State's relative
shortage of rental housing available to extremely low-income families;
a State's relative shortage of rental housing available to very low-
income families; the relative number of extremely low-income renter
households living in substandard, overcrowded or unaffordable units in
a particular State; and the relative number of very low-income renter
households living in substandard, overcrowded, or unaffordable units in
a particular State. In addition, the State's local cost of construction
is factored in as described in Sec. 93.51(e).
The program regulations for HTF are found in subparts C through J
of part 93 and closely mirror the regulations for the HOME Investment
Partnerships program located in 24 CFR part 92. While HTF specifically
targets affordable housing for very low and extremely low-income
households, many of the program requirements applicable to the HOME
program are similar to those for HTF. Further, each State is a
participating jurisdiction in the HOME program, and all States or their
designated housing entities will be HTF grantees. Consequently, many of
the participation and submission requirements as well as many of the
program requirements are modeled on provisions found in the regulations
for HOME.
Major provisions in the HTF program regulations include: siting and
neighborhood standards; income determinations; eligible costs and
activities; project requirements; tenant and homeowner qualification
requirements; other Federal requirements; program administration
regulations; and quality control provisions. Significant changes from
the proposed rule include: removal of a proposed incentive for transit-
oriented development; inclusion of guidelines for a recapture provision
of homeownership funds; permitting the use of HTF funds for public
housing under certain Federal housing programs; and a requirement that
all HTF funds be used for extremely low-income housing when HTF is less
than $1 billion.
Costs and Benefits
The three primary impacts of this rule include: transfers from the
government-sponsored enterprises (GSEs) and/or Treasury to States for
investment in low-income housing; distribution among the States based
on the formula HUD establishes for the HTF program; and the effects of
HUD's program administration requirements. Of these, the largest impact
is the infusion of Federal dollars into the affordable housing market.
Congress authorized HTF with the stated purpose of benefiting
specific low-income populations by: (1) Increasing and preserving the
supply of rental housing for extremely low-income families with incomes
between 0 and 30 percent of area median income and very low-income
families with incomes between 30 and 50 percent of area median income,
including homeless families, and (2) increasing homeownership for very
low and extremely low-income families. The formula in this rule is
designed to distribute funds primarily to States with a shortage of
rental housing affordable to very low and extremely low-income
households. Specifically, this program provides funding to add a supply
of affordable housing to markets where there is strong evidence of an
inadequate supply.
The primary benefits of the HTF program are expected to be similar
to the Housing Choice Voucher program. An evaluation of the impact of
receiving a housing voucher versus not receiving one has shown that the
primary benefit of housing assistance programs is to reduce
homelessness and housing cost burdens. Thus, the primary benefit of the
HTF program will be the reduction of number of homeless families and
[[Page 5201]]
individuals, as well as the number of families paying a
disproportionate share of their income for housing in relatively tight
housing markets.
HTF is a transfer to the low-income housing sector from the GSEs
and/or Treasury. The size of the annual impact is equivalent to the
size of the total HTF expenditures, which will vary depending on the
amount of GSE business in a given year and any amounts that may be
appropriated, transferred, or credited to the HTF under any other
provision of law. (See 12 U.S.C. 4568.) There will be no allocation of
grants under HTF if there is neither revenue from GSEs nor other funds
as provided by HERA.
The formula for distributing among the States is largely determined
by the statutory formula in FHEFSSA, which includes the four need
factors described above, plus a construction cost adjustment factor. In
addition, FHEFSSA directs that each of the 50 States and the District
of Columbia are to receive a minimum allocation of $3 million. HUD's
policy discretion in choosing the weights for housing needs factors has
the impact of redistributing allocations among States. Different States
are characterized by different measures of housing needs as well as
construction costs. At a national level, however, the discretion has
almost no impact because all funds are spent on low-income housing
regardless of the State. The transfers are only among States, re-
distributing the funds geographically.
Finally, the regulations governing program administration are not
expected to have significant economic impacts. Regulations for the HOME
program, which, like HTF, also provide grants for construction of low-
income housing, served as the model for HTF regulations. Consequently,
State grantees are already familiar with HTF's basic compliance
requirements and procedures, and will not have to develop significant
capacity to participate in the program. A more detailed cost-benefit
analysis is provided in the regulatory impact analysis that accompanies
this rule.
II. Background
HERA was major housing legislation enacted to reform and improve
the regulation of the GSEs--Fannie Mae and Freddie Mac, 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 Division A, Title I of
HERA. Section 1131 of Division A amended the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501
et seq.) (the Act) to add a new section 1337 entitled ``Affordable
Housing Allocations'' and a new section 1338 entitled ``Housing Trust
Fund.''
Section 1337 of the Act provides for the HTF (and other programs)
to be funded with an affordable housing set-aside by Fannie Mae and
Freddie Mac. The total set-aside amount is equal to 4.2 basis points
(.042 percent) of the GSEs' new mortgage purchases, a portion of which
is directed to the HTF. Under section 1337 of the Act, the Director of
the Federal Housing Finance Agency (FHFA), the independent federal
agency with oversight of the GSEs, has the authority to suspend Fannie
Mae's and Freddie Mac's affordable housing contributions if such
contributions were to have an adverse impact on the financial stability
of the GSEs, as described in section 1337(b). Shortly after being
placed in conservatorship in 2008, the GSEs were instructed by the FHFA
to suspend the contributions.
On December 11, 2014, the Director of FHFA issued a letter to the
GSEs that reinstated the GSE contributions under section 1337, in
accordance with the following terms and conditions (which may be
supplemented or modified by specific guidance or directive from FHFA).
During each GSE fiscal year (which runs from January 1 to December 31),
commencing with the GSE's fiscal year 2015 and in each fiscal year
thereafter, each GSE will set aside an amount equal to 4.2 basis points
of each dollar of unpaid principal balance of its total new business
purchases during the fiscal year for allocation in accordance with
section 1337(a) . Within 60 calendar days after the end of each fiscal
year commencing with fiscal year 2015 and for each fiscal year
thereafter, the GSEs will allocate to the HTF the amount set aside
unless during the fiscal year the GSE has made a draw from the
Department of the Treasury under the terms of the Senior Preferred
Stock Purchase Agreement (SPSPA) or unless the allocation would cause
the GSE to have to make a draw from the Treasury Department under the
terms of the SPSPA. If the GSE has made a draw from the Department of
the Treasury under the terms of the SPSPA during fiscal year 2015 or
makes a draw during a subsequent fiscal year or if the allocation would
cause the GSE to make a draw for that fiscal year, the GSE will make no
allocation for the fiscal year for which the draw was made or for any
fiscal year in which it is determined that the allocation would cause a
draw, and the set aside will be reversed for that fiscal year.
The letter from FHFA also noted that although the profit levels the
GSEs experienced since 2012 are not expected to be sustainable,
reasonable projections indicate that the GSEs will remain profitable
for the foreseeable future. FHFA continues to monitor the financial
condition of the GSEs and retains the authority to revise or reverse
the decision at any time in accordance with the provisions of section
1337(b). Accordingly, HUD is proceeding with this rule to implement the
HTF.
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 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 2011, the combined number of ELI and
VLI renters with worst-case housing needs was 8.48 million, or 44
percent of all ELI and VLI renters (19.27 million). Because extremely
low income households also constitute by far most (61.1 percent) very
low-income renters, nearly three out of four (73.3 percent) households
with worst case needs had extremely low incomes during 2011.\1\
---------------------------------------------------------------------------
\1\ See HUD's Worse Case Housing Needs 2011 Report to Congress
at https://www.huduser.org/portal//Publications/pdf/HUD-506_WorstCase2011_reportv3.pdf. See page 7.
---------------------------------------------------------------------------
There is a documented 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. In 2011, for every 100 ELI renters, on average, there were
only 36 affordable units available, and for every 100 VLI renters
nationwide, only 65 rental units
[[Page 5202]]
available.\2\ 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.
---------------------------------------------------------------------------
\2\ See HUD's Worse Case Housing Needs 2011 Report to Congress
at page 9.
---------------------------------------------------------------------------
Housing Trust Fund--Formula Allocation
Section 1338 of the Act 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 published for public
comment on December 4, 2009, at 74 FR 63938.
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 the Act
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 the Act also directs HUD to establish regulations to
administer the HTF, and this rule presents the regulations that will
govern the HTF, on an interim basis, as provided in the Summary of this
rule.
HUD's proposed rule for the administration of the HTF funds was
published for public comment on October 29, 2010, at 75 FR 66978. HUD
proposed 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). The HOME program is the largest
federal block grant program that produces affordable housing for very
low-income households. 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, by providing 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.
III. Overview of Key Changes Made in Interim Rule
This interim rule largely adopts the provisions of the proposed
rule, although HUD is making some changes based on public comments and
other considerations. The following highlights key changes made to the
proposed rule at this interim rule stage:
The HTF regulations will be codified in a new part 93.
While the HTF regulations have been synchronized with the HOME program
regulations for the reasons set forth in the preamble to the proposed
rule, HUD agrees with commenters that it would be clearer to place the
HTF regulations into a new 24 CFR part. Therefore, the HTF formula
allocation and program administration regulations are now found in 24
CFR part 93.
The HTF proposed rule was published prior to the
publication of the HOME final rule. (The HOME final rule published on
July 24, 2013, at 78 FR 44638.) In order to synchronize the applicable
requirements of the HTF regulations with those of the HOME regulations,
HUD has revised several provisions in the HTF proposed rule. The
proposed provisions revised by this interim rule include definitions,
eligible costs, eligible administrative and planning costs, property
standards, inspections, income determinations, tenant protections and
selections. For some of the proposed provisions revised, only minor
word changes were made so that the language in the HTF regulations
matches the HOME regulations, while in other sections the exact
language of certain HOME regulations was incorporated in the HTF
regulations.
HUD removed the proposed regulatory sections on property
standards (Sec. Sec. 92.741-92.745) that require HTF units to meet
Energy Star and Water Sense certifications. Since issuance of the HTF
proposed rule and the HOME program final rule, HUD proposed, in a
notice published in the Federal Register on April 15, 2014, at 79 FR
21259, to adopt revisions to the 2006 International Energy Conservation
Code (IECC) and to the 2004 energy codes of the American Society of
Heating, Refrigerating, and Air-conditioning Engineers (ASHRAE), and
apply these revised standards to the HUD programs covered by the Energy
Independence and Security Act of 2007 (EISA). The covered HUD programs
include the HOME program, and HUD also applies these standards to HTF
to synchronize with the standards to be applied to the HOME program.
At the proposed rule stage, HUD proposed to facilitate the
use of HTF funds in transit-oriented development by proposing a
different definition of commitment of HTF funds for transit-oriented
development projects. HUD removes this definition in this interim rule
and instead grantees will determine how best to use HTF funds in
transit-oriented development projects within the requirements for
commitment and allocation plans established in this rule.
HUD adds a process by which minimum grant awards will be
determined if the amount of funds in the HTF, in any given fiscal year,
is insufficient to award each grantee a minimum grant of $3 million.
The HTF regulations regarding operating cost assistance
and operating cost reserves have been modified. In response to public
comment to allow more flexibility for grantees to provide operating
cost assistance, the limit on the amount of operating cost assistance
and operating cost reserves that a grantee may award from its annual
grant was increased from 20 percent to one third. In addition, the
requirements for operating cost reserves will differ depending on the
source of funds for the HTF. For non-appropriated funds (i.e., the
allocations from Fannie Mae and Freddie Mac) that become available for
the HTF formula distribution, grantees will be allowed to fund
operating cost reserves at the amount required for a period of up to 30
years (the term for the period of affordability for each HTF-assisted
project). However, if appropriated funds become available for HTF,
grantees will be allowed to fund operating cost reserve for a period of
no more than five years, as provided in the proposed rule and retained
in this interim rule. At the proposed rule stage, HUD did not propose
to allow use of HTF funds for public housing. This interim rule allows
the use of HTF funds (1) in connection with the Choice Neighborhoods
(Choice), and low-income housing tax credit (LIHTC) programs for
construction of new units that replace existing public housing
properties; and (2) for the rehabilitation of existing public housing
units in connection with the Rental Assistance Demonstration, Choice
and LIHTC programs.
IV. Discussion of Public Comments and HUD Responses
The public comment period for the proposed formula rule closed on
February 2, 2010. HUD received 13 public comments on the proposed
formula rule. Commenters included
[[Page 5203]]
local housing and community development agencies, housing groups,
housing authorities, trade associations, and individuals. A majority
(eight) of the commenters wrote in support of the rule or portions of
it, including a national advocacy organization that fully endorses the
proposed rule. HUD is not addressing these favorable comments because
they do not raise issues which require a response. Other comments are
discussed below. The public comments on the proposed formula rule can
be found at: https://www.regulations.gov/#!docketDetail;D=HUD-2009-0149.
The public comment period for the proposed program rule closed on
December 28, 2010. HUD received 93 comment letters; commenters included
State and local housing and community development agencies, housing
groups, housing authorities, trade associations, and individuals. The
comment letters included general comments about the proposed rule and
statutory requirements for the HTF, as well as suggestions for changes
to specific provisions in the proposed rule. The public comments on the
proposed program rule can be found at: https://www.regulations.gov/#!docketDetail;D=HUD-2010-0101.
Issues raised in public comments on the proposed formula and
proposed program rule and HUD's responses to these comments follow.
Part 91--Consolidated Submissions for Community Planning and
Development Programs (Consolidated Plan Revisions)
The proposed program rule proposed to make conforming changes to
the Consolidated Plan regulations at 24 CFR part 91 to require
information related to the HTF to be included in State or local
government strategic and annual action plans. As stated at Sec. 91.220
and Sec. 91.320, HUD proposed to require that the action plan must
include the HTF allocation plan.
Comments: HUD received several comments which suggested additional
required elements be added to the allocation plan, including: National
standards for green, healthy, sustainable development will be met by
HTF units; caps on operating assistance; transit-oriented development
projects; an explanation of the State's decision to use subgrantees,
criteria for selecting subgrantees, and a method for distributing funds
among subgrantees. One commenter suggested that HUD require the
allocation plans for HTF funds to specifically prioritize transit-
oriented development. One commenter suggested specific revisions to the
language for the sake of further clarity, such as cross references
between the definition of HTF funds at Sec. 92.702 in Sec.
92.220(l)(4)(i) and Sec. 92.320(k)(5)(I). A commenter suggested that
HUD require, at Sec. 92.725(c), that the subgrantee's HTF allocation
plan be consistent with the State's HTF allocation plan.
Similarly, a commenter suggested that HUD revise Sec.
92.220(l)(4)(i) and Sec. 92.320(k)(5)(i) so that they have identical
language and requirements. One commenter suggested that the housing
market characteristics in the HTF formula be added to the general
housing market characteristics required in the consolidated plan at
Sec. 92.210(a) and Sec. 92.310(a). Another commenter recommended that
the rule require HTF allocation plans to certify that the HTF funds
will not be subject to State or local laws and policies that impose
requirements for subsidized housing development that exceed the
requirements for similar residential development not involving
subsidies. Two commenters stated that the proposed rule should not
restrict the types or locations of HTF units, but instead should retain
maximum flexibility to meet local needs.
HUD Response: HUD appreciates the concern expressed by commenters
that HTF allocation plans at the State and local level mirror each
other so that the HTF funds expended are targeted to the needs
identified in the state plans. However, it is possible that a State or
State-designated entity would provide HTF funds to different
subgrantees for different types of projects and programs throughout the
state to address various needs. In these situations, having identical
State and local plans would not be practicable. To address these
concerns, rather than modifying part 91 requirements related to HTF
allocation plan, at this interim rule stage, HUD modified language at
Sec. 93.404 (Sec. 92.774 of the proposed rule) to require that
grantees include executed written agreements with subgrantees that
specify allowable programs and requirements.
An explanation of the State's decision to use subgrantees, criteria
for selecting subgrantees, and method for distributing funds among
subgrantees are required at Sec. 91.320(k)(5). The housing market
characteristics used in the HTF formula are reflected in the analyses
required in the consolidated plan. In response to comments about the
locations where HTF funds will be used, HUD notes that the HTF statute
does not preempt State or local law, and the regulation cannot prevent
the use of HTF funds in places that impose requirements on subsidized
projects that are not in violation of Federal laws.
General Comments on Promulgation of the HTF Regulations as Subpart N of
Part 92 of the Proposed Rule
HUD specifically solicited input from HTF grantees and interested
parties on HUD's proposed coordination of the HOME program and HTF
regulations, as well as 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.
Comments: Some commenters expressed concern that by including HTF
regulations in Subpart N of the HOME program regulation, the HTF
program will lack an identity as a separate program.
HUD Response: HUD agrees with commenters that the regulations
should be located in a new part 93, as this approach highlights HTF as
a separate program, and this rule codifies the regulations in new part
93. However, many of the requirements are the same for both the HOME
and HTF programs (e.g., administrative requirements; monitoring, site
and neighborhood standards; and affirmative marketing), therefore, in
moving the HTF regulations as proposed in part 92 for the HTF to part
93, HUD repeated the requirements in the HOME rule that also apply to
the HTF.
Several commenters also called for streamlining between HTF and
other programs and asked that HUD avoid duplicative requirements.
Because many HTF grantees also administer the HOME program,
streamlining the regulations this way will help grantees avoid having
to create entirely new or separate structures to administer HTF funds,
and this may help grantees develop and deliver more affordable housing
sooner to households and communities in need.
In addressing public comments on specific provisions in the
proposed rule, this preamble will refer to the regulatory sections as
they were originally proposed in part 92. The following table matches
the proposed rule sections with the new sections in this interim rule:
[[Page 5204]]
------------------------------------------------------------------------
Proposed Final Subject
------------------------------------------------------------------------
Subpart A--General
------------------------------------------------------------------------
92.701........................ 93.1............. Overview.
92.702........................ 93.2............. Definitions.
92.703........................ 93.3............. Waivers.
------------------------------------------------------------------------
Subpart B--Allocation Formula; Reallocations
------------------------------------------------------------------------
92.710........................ 93.50............ Formula Allocation.
92.711........................ 93.51............ Formula Factors.
92.712........................ 93.52............ Minimum State
Allocations.
92.713........................ 93.53............ Federal Register
Notice of Formula
Allocations.
92.714........................ 93.54............ Reallocations by
Formula.
------------------------------------------------------------------------
Subpart C--Participation and Submission Requirements; Distribution of
Assistance
------------------------------------------------------------------------
92.720........................ 93.100........... Participation and
Submission
Requirements.
92.725........................ 93.101........... Distribution of
Assistance.
------------------------------------------------------------------------
Subpart D--Program Requirements
------------------------------------------------------------------------
92.726........................ 93.150........... Site and Neighborhood
Standards.
92.727........................ 93.151........... Distribution of
Assistance.
------------------------------------------------------------------------
Subpart E--Eligible and Prohibited Activities
------------------------------------------------------------------------
92.730........................ 93.200........... Eligible Activities:
General.
92.731........................ 93.201........... Eligible Project
Costs.
92.732........................ 93.202........... Eligible
Administrative and
Planning Costs.
92.734........................ 93.203........... HTF Funds and Public
Housing.
92.735........................ 93.205........... Prohibited Activities
and Fees.
------------------------------------------------------------------------
Subpart F--Income Targeting
------------------------------------------------------------------------
92.736........................ 93.250........... Income Targeting:
Rental Units.
92.737........................ 93.251........... Income Targeting:
Homeownership.
------------------------------------------------------------------------
Subpart G--Project Requirements
------------------------------------------------------------------------
92.740........................ 93.300........... Maximum Per-Unit
Subsidy Amount,
Underwriting, and
Subsidy Layering.
92.741........................ 93.301........... Property Standards.
92.746........................ 93.302........... Qualification as
Affordable Housing:
Rental housing.
92.747........................ 93.303........... Tenant Protections
and Selection.
92.748........................ 93.304........... Qualification as
Affordable Housing:
Homeownership.
92.749........................ 93.305........... Qualification as
Affordable Housing:
Modest Housing
Requirements for
Homeownership.
92.750........................
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Subpart H--Other Federal Requirements
------------------------------------------------------------------------
92.760........................ 93.350........... Other Federal
Requirements and
Nondiscrimination;
Affirmative
Marketing.
92.761........................ 93.351........... Lead-Based Paint.
92.762........................ 93.352........... Displacement,
Relocation, and
Acquisition.
92.763........................ 93.353........... Conflict of Interest.
92.764........................ 93.354........... Funding
Accountability and
Transparency Act.
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Subpart I--Program Administration
------------------------------------------------------------------------
92.770........................ 93.400........... Housing Trust Fund
(HTF) Accounts.
92.771........................ 93.401........... HTF Grant Agreement.
92.772........................ 93.402........... Program Disbursement
and Information
System.
92.773........................ 93.403........... Program Income and
Repayments.
92.774........................ 93.404........... Grantee
Responsibilities;
Written Agreements;
Onsite Inspections;
Financial Oversight.
92.775........................ 93.405........... Applicability of
Uniform
Administrative
Requirements.
92.776........................ 93.406........... Audit.
92.777........................ ................. Closeout.
92.778........................ 93.408........... Recordkeeping.
92.779........................ ................. Performance reports.
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Subpart J--Performance Review and Sanctions
------------------------------------------------------------------------
92.780........................ 93.450........... Accountability of
Recipients.
92.781........................ 93.451........... Performance Reviews.
92.782........................ 93.452........... Corrective and
Remedial Actions.
[[Page 5205]]
92.783........................ 93.453........... Notice and
Opportunity for
Hearing; Sanctions.
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Definitions Proposed Sec. 92.702; Final Sec. 93.2
In Sec. 92.702(a), HUD proposed that several definitions in the
HOME program regulations (24 CFR 92.2) be applicable to the HTF. In
Sec. 92.702(b), HUD outlined key definitions applicable to the HTF,
including: ``Commitment,'' several definitions related to energy
efficiency, ``Grantee,'' ``Recipient,'' ``State,'' ``State-Designated
Entity,'' and ``Subgrantee.'' HUD received several comments regarding
the language proposed to define terms applicable to the HTF.
Commitment
To facilitate transit-oriented development projects, the proposed
definition of ``commitment'' permitted a unit of general local
government to acquire the land for a transit-oriented development
project in advance of having specific project plans. Specifically, HUD
proposed that the unit of general local government must hold title to
the land for the transit-oriented development project; the proposed
rule allowed 36 months from the date of acquisition of the property for
a transit-oriented development project to commit additional funds to a
specific project on the property.
Comments: HUD received several comments regarding this proposed
definition of and deadline for ``commitment'' for transit-oriented
development projects. Some commenters suggested the deadline to commit
additional funds to transit-oriented development should be extended to
42 months, while others suggested 48 months, and one commenter
suggested 60 months. Another commenter suggested that the commitment
deadline for transit-oriented development should be less than 36
months.
Some commenters stated that the proposed definition of
``commitment'' for transit-oriented development should be revised to
allow non-local government entities to commit the few funds necessary
to comply with the rule and two commenters suggested that these non-
local government entities be allowed to hold title to the transit-
oriented development property. A few commenters stated that the rule's
emphasis on transit-oriented development gives preference to urban
areas, and asked that the rule provide a framework for balancing
transit-oriented development goals with rural areas that have limited
or no transit services. Commenters asked HUD to instruct States to give
the same priority to developments meeting the greatest rural needs as
is given to transit-oriented development in urban areas. Some
commenters stated that the rule should not mandate that all projects be
located in a sustainable community since some States do not have fully
developed transit systems, and the rule should provide flexibility to
meet the varying needs of States.
Another commenter suggested that the rule should require a minimum
percentage of HTF funds be expended for transit-oriented development
and mixed-income housing development. A few commenters supported
allowing HTF funds to be used in combination with other government
programs to leverage sources for creating a transit-oriented
development land acquisition or land bank program. A commenter proposed
a more detailed definition for transit-oriented development that is
intended to better target developments that promote transit ridership
and reduce motor vehicle trips, remove the requirements for mixed-use
and mixed-income development, require that developments within transit-
oriented development be along a walkable route, and clarify what
constitutes a ``transit facility.'' A few commenters suggested various
methods to incentivize development of housing for ELI families in
transit-oriented development projects that are accessible to transit
and employment centers.
Several commenters expressed concern over potential abuses of the
different commitment deadlines and asked HUD to include additional
requirements in the final rule to ensure that grantees do not tie up
funds, e.g., to prevent local governments from using HTF funds to
serially purchase land and hold it as if ``land banking.'' Some
commenters stated that the rule should require that if the original
land purchased is not used for ELI households, then the recipient must
place the planned ELI housing within the same transit-oriented
development area. A few commenters stated that the rule should also
require that the correct zoning be in place before property is
purchased for transit-oriented development, and one commenter suggested
that the final rule include specific parameters for when property
acquisition for transit-oriented development would be permissible.
Finally, one commenter requested that the definition of ``commitment''
include a mechanism to ensure project completion, such as deadlines,
progress schedules, or a recapture mechanism.
HUD Response: HUD appreciates the comments regarding how HUD 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. However, HUD acknowledges and agrees with the
concerns expressed by many commenters that a separate commitment
deadline for HTF funds used in transit-oriented development may cause a
decrease in the amount of HTF units produced.
Transit-oriented development is not required in the HTF statute or
regulations. As proposed, Sec. 92.725 stated that grantees are
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 HTF allocation plan, which is part of the
State's consolidated and annual action plan. These plans contain
several analyses of priority housing needs. Based on these identified
priority needs, grantees may choose to prioritize development of HTF-
assisted units near transit access and sustainable development.
HUD agrees with commenters that the separate definition of
commitment for transit-oriented development could lead to ``land
banking.'' Land acquisition for banking purposes is not an eligible
activity in the HTF statute, and HUD does not seek to encourage the use
of HTF funds for ``land banking.'' Based on the comments received, HUD
decided that use of HTF funds in transit-oriented development projects
is best addressed at the State and local level, and that it is not
necessary at this time to establish a separate definition or deadline
related to the use of HTF funds for transit-oriented development
projects. Each grantee may include incentives and priorities in its HTF
allocation plan to further promote sustainable development that is
appropriate to the local communities where housing developed with HTF
funds will be located.
This rule, at Sec. 93.2, eliminates the separate definition of
commitment for transit-oriented development.
[[Page 5206]]
State-Designated Entity, Grantee, Recipient
In the proposed rule, a State-designated entity was defined as 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.
Comments: One commenter recommended that the definition of ``State-
designated entity'' be revised to include ``housing community
development entity.'' A commenter stated that the definitions of
``grantee'' and ``recipient'' should be consistent between HOME and
HTF. Other commenters suggested that the rule be revised to explicitly
state that public agencies, local governments, public housing
authorities, non-profit entities, and for-profit entities are eligible
recipients.
HUD Response: The terms ``state-designated entity'' and
``recipient'' are defined in the statute. This rule includes examples
of the types of entities, such as public housing agencies, that may be
eligible recipients providing that they meet the statutory
qualifications for a recipient.
Extremely Low- and Very Low-Income Families
The HTF statute contains definitions of extremely low and very low-
income families based on percent of median income, with adjustments for
family size (30 percent of area median income (AMI) for extremely low
and 50 percent of AMI for very low income).
Comments: Some commenters stated that the proposed definitions of
``very low-income families'' and ``extremely low-income families'' are
inconsistent with the statute. A few commenters requested HUD provide a
definition of ``rural area'' in the definition of ``very low-income
families.'' Other commenters suggested that the HTF should adopt the
definition of ``family'' as used in the HOME program. A commenter
requested the term ``household'' replace ``family'' throughout the
rule.
HUD Response: While the terms ``family'' and ``household'' do not
have the same meaning (a ``household'' can comprised more than one
family), HUD acknowledges that the terms are sometimes used
interchangeably in statute, regulation and guidance (i.e., HOME uses
the part 5 definition of ``family'' at 24 CFR 5.403, and defines
household as one or more persons residing in a unit).
HUD agrees with commenters that the HTF statute does not allow for
the same adjustments in income as in the HOME program and modified the
regulatory language at Sec. 93.2 (from Sec. 92.702 of the proposed
rule) to reflect only the adjustments allowed by the HTF statute.
For the purposes of the definition of very low-income families, in
this interim rule, HUD defines the term ``rural'' based on the term
``metropolitan'' as defined by the Office of Management and Budget. All
``non-metropolitan '' areas will be considered ``rural.''
Allocation Formula Proposed Sec. 93; Final Sec. 93, Subpart B
Comments: A commenter states that the need factors should be
weighted equally to ensure fair distribution of resources. Another
commenter specifically supports the 50 percent weight assigned to
factor 1 (shortage of units), and the 25 percent weight assigned to
factor 3. A commenter states, in the absence of information about how
much of an increase California would receive compared to the proposed
allocation, and the substantial housing needs of California's low and
very low-income population, that the factors should be weighted in
accordance with alternative three, under which the first factor would
be weighted at 60 percent and the other factors weighted at 13.3
percent. Another commenter states that the extremely low-income focus
of this program means that it should be a key resource for assisting
the homeless, and the formula allocation should reflect that priority.
HUD Response: Section 1338(c)(3)(C) of the Act requires the formula
to give priority emphasis and consideration to the first factor in
section 1338(c)(3)(B)(i), and therefore the factors cannot be weighed
equally. The proposed rule reflected this priority consideration by
weighting this factor higher than the other factors in the proposed
allocation formula. The interim rule is adopting the proposal that the
two factors addressing the needs of extremely low-income households,
Factors 1 and 3, have a combined weight of 75 percent in keeping with
the statutory targeting of funds.
The Regulatory Impact Analysis (RIA) for the formula allocation HTF
proposed rule was issued on December 4, 2009, and can be found on HUD's
Web site (https://www.huduser.org/portal/publications/pubasst/riaforhtf.html). The RIA describes in detail the alternative weight
structures that HUD analyzed in developing the HTF allocation formula,
the resulting impacts of each alternative on the States, and the
analysis that supports HUD's selection of the alternative in the
proposed allocation formula. The proposed formula strikes a balance
between the high levels of housing needs in California and other
States, as well as the competing priorities discussed in the RIA.
An extremely low-income household, by statutory definition, means a
household whose income does not exceed 30 percent of the area median
income, with adjustments for family size. Homeless individuals and
families who qualify as extremely low-income will be eligible for HTF
units. The combined weight of 75 percent for the two factors that
address the needs of extremely low-income households, factors one and
three, reflects the statutory targeting of funds to extremely low-
income households in the proposed formula. Furthermore, section
1338(a)(1)(A) of the Act specifically states that the purpose of the
HTF is ``to increase and preserve the supply of rental housing for
extremely low- and very low-income families, including homeless
families . . .''
Data Used in the Allocation Formula
Comments: A commenter states that homeless households should be
included in the aggregate number of extremely low-income renter
households to determine the true need. Data are readily available from
Continuum of Care (CoC) programs and the Homeless Management
Information System (HMIS). Another commenter states that more detail is
needed on the sources of data the proposed formula uses. A commenter
states that HUD should state exactly which American Community Survey
data it will use, whether such data will be updated and used every
year, and at what point 2010 Census data will be used. The commenter
also states that HUD should clarify which RSMeans Cost Survey data will
be used, and recommends data specific to multifamily construction. This
commenter states that HUD should advise what sampling method will be
used. Whatever method is used, the commenter stated that HUD should
recognize that most multifamily construction is in the higher-cost
areas.
HUD Response: The proposed allocation formula incorporated the
required statutory factors in section 1338(c)(3)(B). Consistent with
the Community Development Block Grant (CDBG) and HOME formulas, the
data source used to determine the number of extremely low-income
renters with housing problems for factor three will be the most
currently available data
[[Page 5207]]
from the United States Census Bureau.\3\ For HTF allocations in Fiscal
Year (FY) 2016, the most current data will be a special tabulation of
the latest available three-year average data from the American
Community Survey.\4\ Census standard tabulation data do not provide
counts of households by the income breaks required by statute so HUD
must request a special tabulation of American Community Survey data to
calculate the HTF formula. HUD is using the three-year average data to
avoid problems with year-to-year bias in the data caused by small
samples in some of the smaller population states. These data do not
include homeless individuals and families.
---------------------------------------------------------------------------
\3\ See https://www.census.gov/housing/.
\4\ See https://www.census.gov/acs/www/data_documentation/data_main/.
---------------------------------------------------------------------------
HUD appreciates the commenter's view that homeless families should
be included in the count of extremely low-income families. HUD has
considered the idea of including CoC counts or (HMIS) counts of
homeless people in the counts for extremely low-income. HUD has decided
not to implement these suggestions for two reasons:
Inconsistent and incomplete data. Neither CoC nor HMIS
data are complete for all parts of the country and the method of data
collection is somewhat different from place to place. That makes the
data poorly suited for an allocation formula because they do not have
full national coverage and different data collection methods may result
in bias toward one place over another.
Incentive bias. Even when the data have full coverage, HUD
is unlikely to use CoC or HMIS data for any allocation formulas because
the data are being reported by grantees. HUD is concerned that some
grantees may adjust their method of reporting if they perceive they
might get a different funding allocation based on that reporting.
The RSMeans construction cost data used in the formula are the
RSMeans Square Foot Costs. Specifically, HUD used city-level location
factors for residential construction to prepare state-level estimates
of the relative cost of residential construction. In developing these
State estimates, HUD did not select a subset or sample of cities.
Rather, every city with a published location factor was included, and
location factors were weighted in proportion to city populations. Data
are not available for rural areas or for multifamily residential
construction specifically. However, because construction costs are
generally higher in population centers, HUD believes that the
methodology adequately accommodates the commenter's concern about
multifamily construction in costly areas. High-cost areas are reflected
in the use of urban data to prepare State estimates as well as by the
use of population weighting to ensure that the most populated cities
receive their due priority. HUD intends to use the most recent
available cost data and population data in developing future estimates.
Minimum Allocations
The interim rule contains a new provision to address minimum grant
allocations. As noted earlier in this preamble, section 1338(c)(4)(C)
of the Act directs that each of the 50 States and the District of
Columbia is to receive a minimum grant of $3 million. This section of
the statute further provides that if the formula amount determined in
any fiscal year would result in an allocation of a minimum grant of
less than $3 million to any of the 50 States or the District of
Columbia, the allocation for any such State or the District of Columbia
shall be allocated a minimum grant of $3 million, and the increase
shall be deducted pro rata from the allocations made to all the other
States.
The Act did not envision a situation in which the HTF lacked
sufficient funds to award each of the 50 States and the District of
Columbia a minimum grant of $3 million. After the deposits are made to
the HTF for a fiscal year, section 1338(c)(4)(B) of the Act requires
HUD to make allocations to its grantees. To give meaning to both of
these statutory sections, HUD interprets the statute to require the
allocation of grants even if the grants are less than the $3 million
minimum. If the amount for a fiscal year is insufficient to provide the
minimum allocations, HUD will publish a notice in the Federal Register
for comment, describing an alternative allocation method.
Participation and Submission Requirements; Distribution of Assistance
Proposed Sec. Sec. 92.720-92.725; Final Sec. Sec. 93.100-101
Allocation Plan/Participation and Submission Requirements Sec. 92.720
In Sec. 92.720, HUD proposed requiring each 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 the Act. HUD
proposed to implement the requirement for an HTF allocation plan by
amending its regulations in 24 CFR 91.220 and 91.320 to include these
requirements in the consolidated plans of grantees and, where
applicable, subgrantees. Section 92.720 of the proposed rule directed
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.
Comments: Several commenters expressed concern that the proposed
requirements do not place enough emphasis on public participation and
transparency.
HUD Response: HUD recognizes the commenters' concerns but believes
the requirements adopted in this rule provide for sufficient public
input on the allocation of HTF funds without the need for additional or
new citizen participation requirements. Section 92.720(b) of the
proposed rule directed States to include the HTF allocation plan in the
consolidated plan and follow the citizen participation requirements in
the consolidated plan regulations in 24 CFR part 91. 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.
The language is adopted in this rule as proposed.
Distribution of Assistance: HTF Grantees, Subgrantees, and Recipients
Sec. 92.725
HUD proposed that a formula grant be provided to each State for
each year that funds are made available for the HTF. In Sec. 92.725,
HUD described the proposed ways HTF funds will flow to the communities
and recipients, as well as the participation and submission
requirements for grantees receiving an HTF allocation.
Comments: Some commenters suggested that HTF funds should be
allocated directly to municipalities and local participating
jurisdictions, as is done with other Community Planning and Development
programs (e.g., HOME, CDBG, Emergency Solutions Grants) because States
may be unsuited to determine local housing priorities and unable to
effectively administer the HTF. In addition, they stated that passing
the funding through the State delays the use of funds at the local
level, and local governments are more in tune with local needs.
Several commenters stated that HUD's rule should ensure adequate
allocation to rural areas, and that allocations should be made based on
the relative or proportional need of frontier, rural, and
[[Page 5208]]
urban areas. A few commenters suggested that the final rule should
require funding to be allocated by formula to areas of greatest need,
and adjusted for high-cost living areas and the lack of affordable
housing.
HUD Response: States and State-designated entities are the only
permissible grantees in the HTF statute. HUD does not have the
authority to designate local governments as grantees. An HTF grantee
may choose to distribute HTF funds through one or more subgrantees. A
subgrantee may be a State public agency or a unit of general local
government. Section 91.320(k)(5) requires the action plan to reflect
the State's decision to distribute HTF funds through grants to
subgrantees, and Sec. 92.725(d) requires the grantee to ensure that
its subgrantees comply with the HTF requirements and carry out the
responsibilities of the grantee. The HTF allocation formula is
statutorily prescribed and HUD does not have the authority to change
the allocation method. However, as described in Sec. 92.725(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 (which will include the HTF allocation plan). The HTF allocation
plan must describe the distribution of the grant and priority housing
needs, including rural housing needs.
The language is adopted in this rule as proposed.
Program Requirements Proposed Sec. Sec. 92.726-92.727; Final
Sec. Sec. 93.150
Site and Neighborhood Standards Sec. 92.726
In Sec. 92.726, HUD proposed that the site and neighborhood
standards contained in the HOME program regulations at Sec. 92.202
apply to the HTF.
Comments: A commenter suggested that HUD adopt all the site and
neighborhood standard criteria applicable to existing housing being
considered for project-based vouchers rather than limiting the criteria
to new construction projects. The commenter reasoned that HTF, unlike
HOME, will fund rehabilitation projects. Another commenter suggested
that HUD's rule include a provision that requires site selection to
occur in a manner that will not exclude people with disabilities. A
commenter stated that the rule should allow HTF funds to be held when
local opposition has delayed a project or when exclusionary zoning is
being challenged.
HUD Response: HUD is adopting the site and neighborhood standards
from Sec. 92.202 of the proposed rule in new Sec. 93.150, with an
updated cross-reference to the applicable standard for new construction
projects at 24 CFR 983.57(e). As with the HOME program, HUD is not
applying site and neighborhood standards to rehabilitation projects
under HTF. However, if project-based vouchers are used in an HTF
rehabilitation unit, the site and neighborhood standards for project-
based vouchers will apply. In addition, the requirements of 24 CFR part
8 (which implement section 504 of the Rehabilitation Act of 1973) apply
to the HTF, and specifically address the site selection with respect to
accessibility for persons with disabilities.
Income Determinations Sec. 92.727
In Sec. 92.727, HUD proposed a definition for ``annual income''
and described the process for determining the annual income of tenants
and homebuyers for eligibility in HTF-assisted housing.
Comments: A commenter requested the proposed language be revised to
further clarify which set of income determination provisions are
applicable to the HTF. Another commenter recommended that HUD's rule
allow residents and applicants to contest income determinations.
Another commenter expressed concern that the use of the Enterprise
Income Verification can pose a problem for recently institutionalized
persons, as it can cause significant delays.
HUD Response: HUD appreciates the suggestions but the income
determination provisions provided in this HTF rule are those that HUD
uses in its HOME program rule, which HUD believes work well. Therefore
HUD is not inclined to change these provisions. The income
determinations will be made in accordance with the HTF program
requirements, which mirror the HOME program requirements, and do not
involve the use of the Enterprise Income Verification system.
Eligible and Prohibited Activities Proposed Sec. Sec. 92.730-92.735;
Final Sec. Sec. 93.200-93.205
In Sec. Sec. 92.730-92.735, HUD proposed requirements that govern
eligible and prohibited activities, eligible project costs, and
planning and administrative costs. Allowable and prohibited fees were
also addressed in these sections.
Eligible Activities Sec. 92.730
In Sec. 92.730, HUD set forth HTF-eligible activities. Section
1338(c)(7)(A) of the Act provides that HTF funds may be used for
assistance for the production, preservation, rehabilitation, and
operating costs of rental housing. To achieve the goal of using HTF
funds primarily for the production of new affordable units, HUD
proposed to limit the amount of HTF funds that may be used for
operating cost assistance to 20 percent of each annual grant.
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 the Act 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, HUD proposed requiring grantees to perform underwriting
analysis.
Eligible Activities: General Sec. 92.730(a)
Comments: HUD received several comments which suggested the rule
expand the list of eligible activities. A commenter stated that HUD's
rule should allow for HTF funds to be used in projects already
underway. Another commenter suggested HUD add explicit language
clarifying that HTF funding may be used in mixed-income developments. A
few commenters suggested that HUD's rule permit HTF funds to be used
for development costs associated with laundry facilities and community
space located in buildings which are separate from residential space. A
commenter requested additional clarification regarding the prohibition
on charging laundry access fees does not impact the ability to impose
reasonable charges for the use of a washer or dryer. Another commenter
recommended that HUD's rule include language that provides a basis for
charging impact fees, and clarifies ``reasonable and necessary costs.''
A commenter asked for a definition of ``non-luxury,'' and stated that
this requirement, as it applies to construction costs, is impractical
to apply. Another commenter suggested that HUD allow grantees to charge
property owners monitoring costs for the entire period of affordability
up front and include monitoring costs as an eligible use of HTF funds.
A commenter recommended that refinancing costs be included as an
eligible cost.
[[Page 5209]]
Several commenters objected to allowing transitional housing as an
eligible activity because it does not meet the intent of increasing
access to rental properties available to ELI households and does not
appear in the authorizing statute. Another commenter expressed concern
that there may be conflicts between fair housing laws and transitional
housing plans impacting people with disabilities.
Another commenter stated that there should be a greater focus on
homeownership in the final rule, and that downpayment assistance
programs should constitute an eligible use of HTF funds. A few
commenters opposed the first-time homebuyer restriction and recommend
the final rule permit the rehabilitation of ELI owner-occupied homes as
a more effective means of addressing homeownership for ELI households.
Other commenters recommended HUD's rule stress the voluntary nature of
using 10 percent of HTF funds for homeownership activities.
HUD Response: This rule makes clear that projects underway when the
HTF rule is implemented are not eligible to receive HTF funds. HUD does
not agree that HTF funds should be permitted to pay costs for
constructing community space or laundry facilities in buildings that
are separate from the residential space. Although it is sometimes
necessary to provide such space in separate buildings, HUD believes
that States should leverage other funds to pay such costs so that HTF
funds are used to create as many ELI and VLI units as possible. Nothing
in this interim rule prohibits reasonable charges for washing machines.
HUD does not believe that inclusion of a definition of non-luxury
in the HTF rule is practical, as amenities considered luxury change
over time. For example, air conditioning in certain HUD-assisted
housing was considered a luxury item at one time. HTF grantees have
experience with ensuring that only non-luxury items are included in
housing because they also administer the HOME program, which has
similar requirements.
HUD has reconsidered making transitional housing an eligible type
of housing in the HTF and agrees with commenters that this type of
housing is contrary to the primary purpose of the HTF, which is to
increase the supply of permanent affordable housing. Transitional
housing is frequently developed to address the needs of homeless
persons, to provide housing assistance and services that will enable
them to obtain permanent affordable housing. The language in this
section was revised to delete transitional housing as an eligible type
of housing.
Monitoring is an eligible administrative cost. This interim rule
does not allow grantees to charge property owners monitoring costs for
the entire period of affordability ``up front'' as suggested by
commenters but does permit HTF grantees to charge property owners
monitoring fees (see Sec. 93.205).
Rehabilitation of housing for existing homeowners is not an
eligible activity in the statute. The statute restricts the use of HTF
funds for homeownership to first-time homebuyers and limits the amount
of each annual HTF grant that may be used for homeownership to 10
percent. Each State is allowed by the statute to determine how it will
use HTF funds for homeownership assistance. Downpayment assistance is
an eligible activity in the regulation.
The proposed rule made refinancing of existing rental projects
permissible as part of rehabilitation when the proportional cost of
rehabilitation is greater than the amount of debt refinanced. HUD
proposed these restrictions on refinancing in order to synchronize with
the HOME program and to facilitate the preservation and rehabilitation
of existing housing for ELI and VLI households. These proposed
restrictions are therefore retained in this interim rule.
Eligible Project Costs Sec. 92.731
In Sec. 92.731, HUD proposed eligible project costs to 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 and Operating Cost Assistance Reserves (Sec.
92.731(e))
To achieve the goal of using HTF funds primarily for the production
of new affordable units, HUD proposed, in Sec. 92.730(a)(1), to limit
the amount of HTF funds that may be used for operating cost assistance
to 20 percent of each annual grant. The proposed rule stated that
operating cost assistance can be provided for the entire period of
affordability, but may be awarded only in two-year increments from each
HTF grant. 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 tenant 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 proposed rule also included operating cost reserves of up to
five years worth of operating cost assistance as an eligible activity
(Sec. 92.731(e)(2)). Grantees would be allowed to establish operating
cost reserves for specific HTF-assisted projects if necessary to ensure
the financial feasibility of a project.
Comments: Several commenters disagreed with the proposed 20 percent
cap on the amount of each annual grant that may be used for operating
cost assistance and suggested that HUD eliminate any restriction on the
amount of each annual grant that may be used for operating cost
assistance. Others suggested increasing the cap. Still others
recommended that any limits on operating cost assistance should be
based on each State's housing needs and should be left to the
discretion of the States. Commenters also recommended that HUD impose
no restriction on using HTF funds for operating assistance in the
absence of Section 8 voucher assistance. Some commenters stated that
HTF funding for operating assistance should be limited to HTF-assisted
units and units being developed with HTF funds, while others support
allowing HTF operating assistance for units funded by other State and
Federal programs.
A commenter stated that it will be difficult to attract investors
and ensure the long-term financial success of projects without giving
States flexibility in determining how to apply HTF funds toward
operating assistance. Another commenter stated that the program will
encounter underwriting challenges regardless of operating assistance,
but depending on the mix of units, there may be sufficient revenue
generated to support the properties. Commenters expressed concern that
the proposed cap will limit the number of units that can be developed
with HTF funds, particularly units that serve ELI households.
A commenter stated that the rule must clarify that States are
permitted to limit
[[Page 5210]]
and target operating assistance. Commenters recommended that the final
rule should permit the initial HTF grant to include sufficient funding
for operating assistance or operating reserves to last for the entire
term of affordability. A few commenters stated that the final rule
should permit the creation of capital reserves aimed at increasing
affordability for ELI households.
In response to a request from HUD for input on whether tax
abatements can significantly reduce operating costs, one commenter
stated that while tax abatements can reduce operating cost, local
governments will hesitate to provide tax abatements due to current
economic pressures.
A few commenters stated that the time limits for offering operating
cost assistance and operating reserves should be eliminated at the
final rule stage. Commenters stated that HTF-assisted units that
require operating assistance during the first two years will almost
certainly need operating assistance throughout the entire term of
affordability, and that grantees should have the flexibility to provide
more than two years of assistance when faced with underwriting or
feasibility concerns. Another commenter stated that the HTF funding
should be allowed to capitalize Section 8 transition reserves to
encourage private lenders to underwrite HTF-assisted projects with
Section 8 project-based assistance. A few commenters recommended that
HUD provide guidance in the HTF program guidelines to State grantees on
underwriting standards for reinvestment and building reserves to self-
finance rehabilitation during the period of affordability.
Lastly, several comments were submitted regarding the use of
Section 8 vouchers in conjunction with HTF funds. Some commenters
recommended that Section 8 vouchers be awarded along with the HTF
funding. Another commenter asks whether there is a unit-based or
project-based prohibition on using HTF funds for operating costs when
Section 8 project-based vouchers are also involved in the project.
HUD Response: The HTF is primarily a production program meant to
add units to the supply of affordable housing for ELI and VLI
households. Analyses of the use of HTF funds for both development and
operating cost assistance showed that the use of HTF funds for
operating assistance could very quickly consume each State's annual
grant. This 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. HUD also
assumes that HTF funds will be combined with other sources to produce
and preserve affordable units, mostly in mixed-income projects, and
that the HTF will not be the sole source of funding for operating cost
assistance. Therefore, establishment of a cap on the amount of HTF
funding in each annual grant that may be used for operating cost
assistance is appropriate.
However, to provide more flexibility to grantees to develop and
finance HTF-assisted projects, this interim rule establishes the cap at
up to one-third of each annual grant. This interim rule also makes
clear that the cap applies to both amounts used for operating cost
assistance as well as the operating cost reserves. Within this cap,
each fiscal year the grantee will have discretion in how it awards
operating cost assistance to projects. The grantee may apply the one-
third limit to all projects or adjust it accordingly, as long as no
more than one-third of each annual grant is used for operating cost
assistance and for operating cost reserves.
HUD also revised the proposed rule at this interim rule stage to
address comments about the way in which operating cost assistance may
be provided to a project. This interim rule establishes that a grantee
may provide operating cost assistance to a project during the entire
period of the affordability for the project. The written agreement
between the grantee and the owner that commits funds from an HTF grant
received in a single fiscal year may provide operating cost assistance
over a period for multiple years as long as the grantee to meet its
five-year expenditure deadline in Sec. 93.400(d). Allowing such
commitment provides the grantee with flexibility to manage its grant
funds when providing operating cost assistance to a project; however,
HUD will recapture funds not expended by the five-year deadline.
Because operating cost assistance is an eligible activity and may be
provided to a project by more than one grant, the prohibition in the
rule on providing additional HTF funds to a project during the period
of affordability (Sec. 93.205(a)) does not apply to renewal of funds
committed to operating cost assistance. The grantee may renew operating
cost assistance for HTF-assisted units during the affordability period
by executing written agreements after future fiscal year HTF grants are
awarded.
If Section 8 project-based vouchers or other project-based rental
assistance is made available to HTF projects for HTF-assisted units,
HUD prohibits the use of HTF funds available for operating cost
assistance for those same units, but such limitation will not hinder
HTF implementation. Section 93.200(c) of the interim rule (Sec.
92.730(c) of the proposed rule) requires that only the actual cost of
development and operation of HTF units can be charged to the HTF
program, and describes the methods for allocating costs and determining
HTF units in multi-unit projects. In this interim rule, HUD does not
impose a limit on the use of Section 8 project-based vouchers in a
project for which HTF is also providing operating cost assistance, as
long as the Section 8 project-based voucher is not provided to the same
unit receiving HTF operating cost assistance. HUD cannot guarantee that
funds for project-based Section 8 or other project-based assistance
will be appropriated for HTF-assisted projects; therefore, awards of
HTF funding to projects should be made based on existing resources and
underwriting.
HUD understands the need for both capital (replacement) and
operating reserves in housing projects. When grantees provide HTF
funding for a project, the need for annual or monthly contributions to
these reserves are determined through the underwriting process. Funding
for capital or operating reserves ``up front'' for the present value of
the entire amount needed over the required period of affordability (30
years) is not possible if the HTF funds are appropriated, as Federal
funds cannot be drawn in that manner, years in advance of need.
However, funding for the HTF may come from non-appropriated sources,
i.e., the proceeds from GSEs as described in section 1337 of the Act.
Therefore, in the interim rule HUD establishes separate requirements
for operating cost reserves funded by appropriated and non-appropriated
funds.
If the operating cost assistance reserve is funded with
appropriated HTF funds, the allowable amount of the reserve may not
exceed the amount necessary to provide operating cost assistance to the
HTF-assisted units in an HTF-assisted project for a period of up to
five years. Because operating cost assistance reserves are an eligible
activity and may be provided by more than one grant, the prohibition on
providing additional HTF funds to a project during the period of
affordability (Sec. 93.205(a)) does not apply to renewal of operating
cost assistance reserves. The grantee may renew operating cost
assistance reserves for HTF-assisted units during the affordability
period by executing written agreements after future fiscal year HTF
grants are awarded. The grantee must demonstrate the necessity of the
reserve amount based on an analysis of
[[Page 5211]]
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.
If the operating cost assistance reserve is funded with non-
appropriated HTF funds, the amount necessary to fund the reserve must
be calculated using the same methodology; however, the reserve may be
funded for the amount estimated to be necessary for the entire period
of affordability up front, or if this amount would exceed the cap (one-
third of each annual grant), could be funded in phases from future
grants determined to be suitable and necessary to secure advantageous
financing. HUD will provide guidance and training to states about
underwriting standards for investment of HTF funds and establishing
replacement reserves to provide necessary rehabilitation during the
period of affordability in their HTF program guidelines.
Administration and Planning Costs Sec. 92.732
As noted earlier in this preamble, the administrative costs
allowable by statute in the HTF program cannot exceed 10 percent of the
annual grant. In Sec. 92.732, HUD proposed eligible administrative and
planning costs similar to the HOME program at Sec. 92.207.
Comments: HUD received very few comments regarding the entity
eligible for the 10 percent allocation to administrative and planning
costs. One commenter suggested that HUD's rule clarify that only the
agency responsible for the award, compliance, monitoring, and reporting
of HTF funds is eligible and another commented that these funds should
only be charged by the subgrantee, not the grantee. Other commenters
offered recommendations about what should and should not be considered
an eligible administrative and planning cost. A commenter stated that
monitoring funds should be included, another stated project delivery
costs (i.e., inspections, work write-ups) should not be eligible to
charge as administrative costs, and another requested clarification
that the administrative costs in Sec. 92.732(b)(2) are not the same as
prohibited travel costs at section 1338(c)(10)(D)(i)(V) of the Act.
Another commenter suggested that HUD's rule require the allocation to
administrative and planning costs be proportional to the amount of HTF
units in the project. Another commenter expressed concern that the 10
percent cap on administrative costs is not enough to cover all the
monitoring requirements. A commenter requested that HUD make clear
whether the amounts available for rental housing and homeownership
activities are calculated based on the funds available after 10 percent
of the annual formula grant is deducted for administrative costs.
HUD Response: This interim rule permits grantees to charge
monitoring fees to cover the costs of required monitoring. The HTF
grantee (State or State-designated entity) may use up to 10 percent of
its annual grant for administrative costs. A grantee may provide
funding for administrative costs to subgrantees. Program-related travel
that is eligible under Sec. 92.732(b)(2) remains an eligible cost in
this rule, as this is not the same type of travel prohibited in section
1338(c)(10)(D)(i)(V) of the Act. Only non-program-related travel is
prohibited as an eligible cost in the HTF statute. The Act permits up
to 10 percent of the annual HTF grant to be used for homeownership
activities, and up to 10 percent of the grant for administrative costs.
Therefore, up to 10 percent of each annual grant may be spent on
administrative costs, up to 10 percent may be spent on eligible
homeownership activities, and the remainder on eligible rental housing.
HTF and Public Housing and Rental Assistance Demonstration Sec. 92.734
HUD proposed prohibiting the use of HTF funds for public housing,
including public housing that is developed under the HOPE VI program.
Comments: Several commenters requested that HUD's rule explicitly
include public housing authorities as eligible recipients of HTF
funding. Some commenters requested that the development, preservation,
and rehabilitation of public housing be allowed as an eligible
activity, as the exclusion of public housing was not clearly mentioned
in HERA or the Act; public housing tenants meet the HTF eligibility
requirements and public housing funding sources are inadequate to meet
the demands.
HUD Response: Public housing agencies (PHAs) are already eligible
entities to be HTF recipients. They are eligible to apply for HTF
funding if they have the required capacity defined in the HTF statute
and at Sec. 93.2. PHAs, if qualified as recipients, can compete for
HTF funding to develop HTF-assisted projects. HUD has considered the
comments that the HTF should be permitted to be used for public housing
projects and agrees that there is a role for the HTF in public housing.
HUD has decided to allow the use of HTF funds (1) in connection with
the Choice and LIHTC programs for construction of new units that
replace existing public housing properties; and (2) for the
rehabilitation of existing public housing units in connection with the
Rental Assistance Demonstration (RAD), Choice, and LIHTC programs.
When the HTF program proposed rule was published on October 29,
2010, RAD was not yet established. RAD was established by HUD's 2012
Appropriations Act (Pub. L. 112-55, 125 Stat. 552, approved November
18, 20111, at 125 Stat. 673). Consequently, there were no public
comments submitted on the HTF program proposed rule about the possible
interplay between HTF and RAD. However, with RAD now an active
demonstration program, questions have been raised to HUD about whether
HTF may used for RAD units, and HUD takes the opportunity to address
those questions in this preamble. HTF funds can be used in connection
with RAD for the rehabilitation of public housing properties in which
assistance will be converted and used. HTF funds can also be used for
rehabilitation of ``RAD units'' (that is public housing properties in
which assistance has been converted) after conversion takes place. Such
uses are not contrary to HUD's position that use of HTF funds for
public housing is limited to use with other programs to rehabilitate or
replace public housing properties, and not for the expansion of the
public housing inventory, which can be achieved through other funding
sources.
Prohibited Activities Sec. 92.735
HUD proposed prohibited activities in Sec. 92.735. To synchronize
with the HOME program, prohibited activities and fees at Sec. 92.735
mirror the HOME program regulation at Sec. 92.214. In addition, Sec.
92.735 also includes activities expressly prohibited in the HTF
statute. Section 1338(c)(10)(D) of the Act 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. This
statutory section further provides that, subject to the exception in
section 1338(c)(10)(D)(iii) of the Act, 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 HTF grant
for the administrative costs of carrying out its HTF-funded program,
including homeownership counseling.
Comments: A commenter stated that several provisions, including
provisions
[[Page 5212]]
on renewing operating assistance and grants for transit-oriented
development projects, seem to conflict with the prohibition on using
additional HTF assistance for previously assisted projects, and
requested clarification. Several commenters requested that HUD
eliminate the prohibition on using HTF funds in developments previously
assisted with HTF. Alternatively, these commenters recommended that the
final rule should limit the prohibition to 15 years after initial
receipt of HTF funds, and allow for exceptions to the prohibition
during the period of affordability. Other commenters stated that the
rule should allow projects previously receiving HTF funds to obtain
subsequent capital funds, operational expenses, and maintenance costs
under the condition that the period of affordability would be reset,
extended, or expanded to additional units upon receipt of additional
HTF assistance. Another commenter stated that the final rule should
include a provision that HUD has the ability to waive the prohibition
in exchange for an extension of the affordability period.
HUD Response: Per the requirements of 24 CFR 93.300, HUD expects
that HTF projects will be properly constructed or rehabilitation with
HTF funds and underwritten to ensure that capital needs can be
addressed at the appropriate time in the life cycle of the property.
Therefore, HUD will not change the regulation to allow the addition of
HTF funds after 15 years, as commenters suggested. To address concerns
about projects that may need additional operating cost assistance
during the 30-year period of affordability, HUD revised Sec.
93.205(a).
Income Targeting Proposed Sec. Sec. 92.736-92.737; Interim Sec. Sec.
93.250-93.251
Sections 92.736 and 92.737 of the proposed rule set forth the
proposed income targeting requirements, as required by section
1338(c)(7) of the Act, for HTF-assisted rental units and homeownership
units, respectively.
The Act 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 (whichever is greater). Not more than 25 percent may
be used for the benefit only of VLI families. Under the rulemaking
authority of section 1338(g) of the Act, 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. HUD proposed that for the first year in which HTF funds are
made available, of the amount made available for rental and
homeownership housing, grantees are required to expend 100 percent of
HTF funds to provide rental and homeownership housing for ELI
households. The proposed rule provided that the HUD would publish
subsequent income targeting requirements when HUD's allocation amounts
to states are published.
Comments: HUD received many comments opposing the proposed
targeting of 100 percent of the HTF funds to ELI households in the
first year that funding is provided under the program. The commenters
stated that the income targeting should not change between the first
year and subsequent years of funding, as it will make the HTF more
difficult to administer. Commenters also stated that this approach to
targeting is not reflective of the statute.
Several commenters expressed support for targeting some VLI
households in the first year of funding, with one commenter expressing
concern that there may not be adequate local support to target ELI
households exclusively. Other commenters requested that HUD continue to
target 100 percent of ELI households until the shortage of ELI housing
is resolved. Several commenters expressed concern that the proposed
income targets will limit the use of HTF funds in rural and non-urban
areas. Another commenter recommended that the proposed language be
revised to explicitly state that any portion of HTF funding not be
targeted to ELI households and should be used for VLI households only.
HUD also received many comments advising of challenges resulting
from use of HTF funds for homeownership activities targeted at ELI
households, with many of these commenters suggesting that HTF funding
for homeownership would be better served targeting VLI households or
other income groups.
HUD Response: HUD is aware that changes over time to income
targeting may require grantees to adjust their approaches to using HTF
funds to produce affordable housing, but believes this necessary in
order to target limited resources to ELI households. There is a well-
documented and overwhelming need to increase the supply of housing
targeted to ELI households within each grantee's jurisdiction.
However, in consideration of the comments received, at this interim
rule stage, HUD adjusted the targeting based on the amount of resources
being made available through the HTF. With limited resources available
for production of affordable housing targeted to ELI households, HUD
has determined that targeting 100 percent of HTF to ELI households is
appropriate if the amount available in a fiscal year for HTF is less
than $1 billion. If the amount exceeds $1 billion, grantees may spend
up to 25 percent for the benefit of VLI households. In either scenario,
any funds not used for ELI households must be used to serve VLI
households.
HUD acknowledges the commenters' concerns regarding the difficulty
of providing homeownership assistance to ELI households. The statute
and regulation are clear--there is no minimum percentage of HTF funds
to be spent on homeownership, only a maximum percentage (10 percent).
If HTF-eligible homeownership activities are not appropriate for ELI
households in their jurisdictions, grantees are not required to use HTF
funds for homeownership projects. HUD believes grantees are in the best
position to determine whether a homeownership program for ELI or VLI
households is appropriate within their jurisdictions. Public input on
the use of HTF funds for rental housing or homeownership must be sought
through public participation on a grantee's proposed HTF allocation
plan.
Project Requirements Proposed Sec. Sec. 92.740-92.750; Interim
Sec. Sec. 93.300-93.306
In Sec. Sec. 92.740 through 92.750, HUD proposed requirements
applicable to HTF-assisted housing projects. HUD proposed maximum per-
unit development subsidy, underwriting, and subsidy layering
requirements at Sec. 92.740. To align with the HOME rule, the HTF
proposed rule at Sec. 92.740 mirrored the HOME Prohibited Activities
and Fees provisions in Sec. 92.250, with the exception of the maximum
per-unit development subsidy amount section. The maximum per-unit
development subsidy amount section is now Sec. 93.300.
Maximum Per-Unit Subsidy, Underwriting and Subsidy Layering Sec.
92.740
At Sec. 92.740(a), HUD proposed requiring the grantee to establish
maximum limitations on the amount of HTF funds the grantee may invest
on a per-unit basis. In Sec. 92.740(b), HUD proposed requiring the
grantee to perform subsidy layering analysis before committing HTF
funds to a project. Included in this proposed provision was the
requirement that 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
[[Page 5213]]
quality affordable rental or homeownership housing for ELI households
for the affordability period (30 years). The proposed rule also stated
that recipients of HTF-assisted projects may not receive undue returns
on their investments.
Comments: Of the commenters that submitted comments on this
provision, the majority addressed the proposed requirement that the
grantee must establish a maximum per-unit development subsidy limit. A
few commenters opposed that the subsidy limit be established as a total
dollar amount and suggested the requirement be revised to allow States
to set the maximum subsidy limit as a percentage of the project cost on
a per-project basis. Another commenter wrote that States should have
the flexibility to establish their maximum per-unit subsidy at 100
percent of the development costs for HTF-assisted units. A commenter
suggested that the maximum per-unit subsidy requirement at Sec. 92.710
be eliminated. Finally, a commenter stated that the per-unit subsidy
limit and subsidy layering should only take into account capital
development costs.
With respect to a subsidy layering review, a commenter suggested
that HUD's rule should allow a subsidy layering review, conducted as a
requirement of another program to satisfy the subsidy layering review
for an HTF project. Another commenter suggested that the language in
the proposed rule be clarified so that it is not interpreted to mean
that certification of underwriting and subsidy layering requires HUD-
specified processes, standards, and forms because it would be
burdensome. Another commenter suggested that HUD establish minimum
underwriting standards for homeownership.
HUD Response: This interim rule adopts this provision as
essentially proposed, although HUD revised the language to more closely
mirror the language on subsidy layering from the HOME final rule. HUD
does not agree that maximum subsidy limits should be established based
on a percentage of total project cost. Some project costs are not
eligible HTF costs, and one of the purposes of this requirement is to
ensure the determination of the cost of HTF-assisted housing units
includes a cost reasonableness test. With respect to a subsidy layering
review, HUD does not prescribe specific subsidy layering forms or
processes. The grantee may use the subsidy layering reviews conducted
by other project funders, but a subsidy layering review conducted by
another agency or funder does not ``satisfy'' the proposed requirement
in Sec. 92.740(b) (in this rule at Sec. 93.300(b) unless the review
is completed in accordance with the HTF grantee's standards.
Grantees must establish the minimum underwriting standards for
their HTF-funded homeownership programs, as required by Sec. 93.304.
To address comments on maximum subsidy limits, HUD chose not to
establish national maximum subsidy limits that would be published by
HUD. The amount of subsidy needed to produce affordable rental units
targeted to ELI or VLI households will vary depending upon the project
proforma. It is possible that in some projects, the entire development
cost of an HTF unit must be paid for with HTF funds in order to achieve
affordability. For example, it would be desirable to pay the entire
development cost of HTF units so that they carry no debt service
because rents are likely to be insufficient to pay for the debt service
of the units. However, to address accountability, HUD added language to
require grantees to adopt maximum subsidy limits that are appropriate
for non-luxury housing units, based on reasonable and actual costs of
developing such housing in the area.
Property Standards Sec. Sec. 92.741 Through 92.745, Interim Sec.
93.301
At the proposed rule stage, HUD proposed property standards
applicable to HTF-assisted properties at Sec. Sec. 92.741 through
92.745. Section 92.741 contains the property standards for new
construction, Sec. 92.742 establishes the standards for housing
undergoing 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 requested 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.
Comments: Several commenters stated that HUD's rule should provide
more flexibility in adopting property and energy efficiency standards
and that the proposed property standards are too specific. A commenter
stated that HUD's rule should specify who will conduct the
environmental reviews for HTF projects. Several commenters stated that
the units must meet habitability standard requirements, but not
necessarily the use of Housing Quality Standards (HQS). Another
commenter stated that HUD's rule should require properties to be free
of all health and safety standards and specify the life-threatening
conditions that must be addressed.
A commenter stated that HUD's rule should provide standards that
will be applied on a building-by-building basis. A few commenters
stated that the proposed efficiency requirements will drive up the
costs of developing ELI units. A commenter stated that for major life
systems HUD should clarify improvements necessary to meet the standard.
Another commenter stated that the term for the useful life is
burdensome and too expensive.
A commenter requested that buildings seeking historic tax credits
or that are located in historic districts be provided with an exception
from property requirements. Another commenter stated that the property
standards will make it difficult for developers to use HTF funding to
buy existing properties for rehabilitation.
A commenter stated that HUD's rule should include a ``discreet''
funding allocation to create affordable and accessible housing for
people with developmental disabilities. Several commenters stated that
HUD's rule should require ``visitability'' and ``universal design.''
Other commenters stated that HUD's rule should address accessibility by
requiring 100 percent of units in new construction and substantial
rehabilitation projects be both visitable by wheelchair users and
adaptable, and that 30 percent of the units are fully accessible.
HUD Response: To ensure compatibility with the HOME rule and in an
effort to ease implementation of HTF by maintaining consistency with
the requirements of the HOME rule to the extent feasible, this interim
rule adopts the language used in the HOME final rule property standards
section at Sec. 92.251, with the exception of the environmental review
requirements.
For the HTF program, HUD proposed 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 three 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 three 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 does not adopt these
proposed requirements in this interim rule. HUD
[[Page 5214]]
plans to establish new and consistent energy and water efficiency
requirements for both the HTF program and HOME program through separate
rulemaking. For new construction, the interim rule adopts the energy
efficiency standards established under section 109 of the Cranston-
Gonzalez National Affordable Housing Act, so that the standards are the
same for HTF and HOME.
HTF grantees are responsible for ensuring compliance with these
environmental review requirements. HUD knows of no justification to
provide a blanket exemption of HTF-assisted projects seeking historic
tax credits or located in historic districts from property
requirements. While HUD would encourage grantees to include
``visitability'' standards in the development of HTF-assisted and other
affordable housing, these visitability standards are not required by
any Federal statute and are not included in this rule.
HTF Property Standards Environmental Requirements
Comments: Several commenters stated that the rule creates a new
definition for ``wetlands.'' These commenters stated that HUD's rule
should incorporate the U.S. Army Corps of Engineers and the
Environmental Protection Agency definition in regulations pursuant to
the Clean Water Act. A commenter stated that the regulations for
environmental remediation, testing for toxins, and other property
standards are too detailed. A commenter suggested that the HTF rule
should include language permitting States to request that reports are
prepared in accordance with the most current ASTM standard. Another
commenter stated that for HTF projects developed within a quarter mile
of a site with an unclosed environmental case status, the final rule
should require a written justification for determination that the
proposed site does not pose a health and safety risk for the HTF
project. A commenter recommended that the HTF rule require a State to
maintain files with written justification for the State's determination
that a proposed site does not pose a health and safety risk for an HTF
project located within a quarter mile of a site with a reported
Federal, State, or local environmental case status that is open.
Another commenter stated that HUD's rule needs to specify who will
conduct the environmental review for HTF projects. Several commenters
stated the proposed rule was overly detailed and the final rule should
replace these requirements with standards from the National
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). Another
commenter stated that HUD's rule should clarify that a single
environmental review may satisfy the requirements for both the HTF and
project-based voucher programs, when both sources of assistance are
used. Another commenter requested an exception in the property
requirements for buildings seeking historic tax credits or located in
historic districts.
HUD Response: This rule adopts the definition of ``wetland'' as
defined in HUD regulation at 24 CFR 55.2(b)(11) and which is used for
all HUD programs. The guidance within the regulation for environmental
remediation, testing for toxins, and other standards must remain
detailed because the purpose of the regulations is to assist grantees
to comply with the requirements of the regulations.
HUD agrees that its HTF rule should not include references to the
ASTM year and rather include language that reports should be prepared
in accordance with the most current ASTM standard. HUD already requires
HTF projects to avoid sites located within .25 miles of a Superfund or
Comprehensive Environmental Response, Compensation, and Liability
Information System (CERCLIS) site or other contaminated site reported
to Federal, State, or local authorities without a statement in writing
from the U.S. Environmental Protection Agency 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 use of the property.
HUD disagrees with the comment that the HTF rule should clarify
that a single environmental review may satisfy requirements for both
HTF and project-based voucher (PBV) programs. The grantee that is
responsible for these environmental requirements may in some cases be
the same as the ``responsible entity'' that conducts an environmental
review under 24 CFR part 58 for a PBV project, and much of the
environmental information needed to comply with both requirements may
be the same. However, the HTF environmental requirements, to be
codified at Sec. 93.301(f), are not identical to the environmental
review requirements under part 58 for PBV projects. For example, the
HTF environmental requirements do not include certain interagency
consultation and public notice requirements that are required for PBV
projects under some of the environmental laws and authorities cited in
part 58.
Qualification as Affordable Housing: Rental Housing Sec. 92.746,
Interim Sec. 93.302
In Sec. 92.746(a), HUD proposed that all HTF-assisted rental
housing be occupied only by ELI families. Section 92.746(b) proposed to
establish 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. Section 92.746(c) provided that grantees must
establish maximum monthly allowances for utilities and services
(excluding telephone, television, and Internet service), and must
approve rents proposed by the owner for HTF units. Section 92.746(d)
proposed to establish an affordability period of not less than 30 years
for rental housing assisted with HTF funds. Section 92.746(e) proposed
to require 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.
Comments: Several commenters requested that HUD adopt income-based
limits that cap the amount of rent paid by tenants at 30 percent of
household income. Several other commenters suggested creating operating
subsidy reserves to fund income-based rents, and requiring a percentage
of units set aside for people with disabilities or people who receive
their income from supplemental social security (SSI) income. Some
commenters expressed concern about individuals whose sole source of
income is SSI, because many of these people have incomes well below 30
percent of AMI and without operating subsidy for HTF-assisted units
tenants will be forced to pay a substantial proportion of their income
toward rent (or lose the opportunity to benefit from HTF-assisted
housing).
Several commenters asked for clarification whether there will only
be one rent limit for the HTF program or whether there will be
different rent limits for ELI and VLI households. Several stated that
there should be a means for limiting a tenant's rent burden depending
on the type of rental subsidy. Another commenter stated that subsidy
amounts should also be adjusted downward for units not carrying any
debt to avoid over-subsidizing units. Another commenter asked whether
HUD could provide rent and income limit levels in 5 percent increments.
[[Page 5215]]
A commenter stated that grantees should be permitted to set utility
allowances for new projects that best reflect the costs to tenants.
Another stated that HUD's rule should provide additional protections to
tenants regarding the utility allowance, including notice, opportunity
to seek review, and allowance for utilities be provided in the lease.
Many commenters stated that HUD should increase the minimum period
of affordability proposed in the rule to 40, 45, or 55 years, and that
HUD's rule should incentivize projects which agree to longer periods of
affordability. Another commenter stated that the rule should increase
the minimum period of affordability for non-low income housing tax
credit (LIHTC) projects, but only if HUD develops a means for
recapitalizing projects and applying the affordability restrictions to
the land, not the building. Several commenters stated that the
determination of the period of affordability should be left to the
discretion of the State, or should match the period of affordability
used by other funding sources.
HUD Response: Unlike public housing, the HTF has no separate annual
appropriation source of funding for operating costs. In any given year,
if no funding for the HTF is provided, it is possible that no operating
cost assistance would be available for HTF-assisted units. Therefore,
while operating costs may be paid with HTF funds, the assistance cannot
be based on a formula that assumes income-based rents and an annual
appropriation to pay for operating costs. For this reason, it is
necessary to establish fixed rents for the HTF for underwriting
purposes and required subsidy layering analyses. Section 8 project-
based vouchers may be made available to HTF-assisted units, and these
vouchers alleviate cost burdens for ELI tenants, including individuals
whose source of income is from Supplemental Social Security Income.
This interim rule includes rent limits for both extremely low-
income and very low-income households. For extremely low-income
households, rents are set at 30 percent for a households at 30 percent
of the area median income. For very low-income households, rents are
set at 30 percent for households at 50 percent of the area median
income. HUD will provide the actual rent limits for each State.
If utility data are available on a project-by-project basis or
utilities are individually metered, it would be permissible to
establish utility allowances more reflective of the actual cost for the
HTF-assisted unit.
HTF grantees are allowed to impose longer periods of affordability,
beyond the period in the regulation. HUD anticipates that States may
adopt criteria whereby projects will be incentivized to adopt longer
periods of affordability.
Tenant Protections and SelectionSec. 92.747, Interim Sec. 93.303
In Sec. 92.747, HUD proposed tenant protection, lease, and
selection requirements, and incorporated the requirements of section
1338(c)(8) of the Act.
Comments: A commenter recommended greater safeguards be required
for tenant selection, including prohibition of local residency or
employment preferences, the use of lottery-based selection, and strong
affirmative marketing and outreach requirements. A few commenters
suggested HUD's rule be revised to include additional tenant and
homeowner protections, including the right to organize, associate,
advocate for stronger protections without fear of retaliation. Other
commenters requested that HUD's rule to clarify tenant rights regarding
the applicant screening process, the prohibition on eviction without
good cause, the lease provision protections, and how tenants can
participate and protect their tenant rights. A few commenters pointed
out the importance of retaining economic diversity in projects
containing HTF-assisted units, and suggested that HUD's rule
incorporate some mixed-income standards and limits on the number of
families using vouchers. Another commenter suggested that Sec.
92.747(c) be removed to permit residents to pursue a ``housing first''
model for ending homelessness. Some commenters requested that the
protections offered to people receiving any type of tenant-based
assistance from being denied access to HTF-assisted units be enhanced.
A commenter provided several comments about resident access to
judicial review. The commenter stated that the rule should include
greater access to judicial review for tenants and applicants, and that
the regulations should require residential leases to include any
conditions of tenancy found in HTF allocation plans and to explicitly
state that a resident or tenant organization may seek judicial
enforcement of plan violations which result in injury. The commenter
recommended that grant agreements with subgrantees and recipients
should incorporate a resident complaint review, grievance system, and
right to judicial enforcement. Another commenter stated that if HUD has
the right to initiate an administrative hearing or impose sanctions,
then residents and applicants should have the right to join as a party
to the proceeding. The commenter stated that the right to pursue an
independent action for redress of injury in court should be included in
the rule and incorporated into residential leases.
Another commenter stated that a reference to the Violence Against
Women Act (42 U.S.C. 13701 et seq.) should be added to Sec. 92.747(c).
HUD Response: The Violence Against Women Act of 2013 (VAWA 2013),
enacted March 7, 2013, did not specify HTF as a covered program. The
possible applicability of VAWA to HUD programs not listed in VAWA 2013
will be addressed in HUD's upcoming proposed rule on VAWA 2013.
Section 93.303 of the rule prohibits lease terms which require
tenants residing in HTF-assisted units to waive their rights with
respect to their tenancy. The statute does not create any right to
judicial review; however, State and local law may provide rights to
judicial review of HTF grantees or landlords of HTF-assisted
properties. HUD's proposed language is compliant with applicable civil
rights laws and regulations, including section 504 of the
Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations
at 24 CFR part 8, and therefore is not changed at this interim rule
stage. Additionally, the proposed rule language did not present
problems for the particular permanent supportive housing model favored
by several commenters, which was their primary concern, and therefore
this language is not changed at the interim rule stage. In fact,
adopting the suggested language would limit flexibility to use other
models of permanent supportive housing.
Qualification as Affordable Housing: Homeownership Sec. 92.748, Final
Sec. 93.304
In Sec. 92.748(a), the proposed rule required that homeownership
activities funded by the HTF must be for first-time homebuyers. Section
92.748(b) proposed to require that only single family housing, as
defined in Sec. 92.2, is eligible for HTF-assisted homeownership
activities. Section 92.748(c) would require that all HTF-assisted
homeownership activities apply to modest housing, in accordance with
Sec. 92.749. Section 92.748(d) proposed to establish the requirements
for HTF requirements for first-time homebuyers and income requirements.
Section 92.748(e) proposed to establish the period of affordability for
HTF-assisted homeownership activities. Section 92.748(f) proposed to
establish the
[[Page 5216]]
resale requirements for homeownership units assisted by the HTF.
Comments: Some commenters suggested that HUD's rule should include
a recapture provision for homeownership funds, as permitted under the
HOME program, and they expressed concern that limiting homeownership
properties to resale, without the option of recapture, will be too
burdensome for grantees and subgrantees. Other commenters stated that
HUD's rule should include more language to encourage the use of land
trusts.
HUD Response: HUD agrees with commenters that the recapture
provisions should be added to the HTF rule. Accordingly, this rule, at
Sec. 93.304, adopts the structure of the HOME program requirements for
recapture, with adjustments to the subsidy amounts to reflect the
greater need for subsidy for very low-income homebuyers. The periods of
affordability also differ from the HOME program to tiers that reflect
the maximum period of affordability (30 years) for the HTF program. The
use of land trusts in conjunction with the HTF is permitted. However,
HUD does not agree that the HTF rule needs modification to encourage
the use of land trusts; guidance and technical assistance may be
provided in the future on this topic.
Other Federal Requirements Proposed Sec. 92.760-92.764; Final Sec.
93.350-93.355
Proposed Sec. Sec. 92.760 through 92.764 set forth other Federal
requirements that are applicable to the use of HTF funds, including
nondiscrimination, affirmative marketing, lead-based paint, relocation,
and funding accountability and transparency requirements. However, the
proposed regulations inadvertently omitted a provision in section
1337(f) of the Act that prohibits the use of HTF funds in conjunction
with property taken by eminent domain unless eminent domain is employed
only for a public use. The HTF regulation at Sec. 93.355 includes this
statutory prohibition.
Program Administration Proposed Sec. 92.770-92.779; Final Sec.
93.400-93.409
Proposed Sec. Sec. 92.770 through 92.779 set forth the conditions
and requirements by which States are to administer their HTF funds,
including HTF accounts, allocation and reallocation of HTF funds,
program disbursement and the establishment of an information system,
written agreement, onsite inspections, financial and project reporting,
record retention, and audit requirements.
Comments: Several commenters suggested that HUD eliminate
duplicative monitoring, review, and inspection requirements. A few
commenters stated that if a subgrantee receives HOME funding, the
subgrantee should be directly responsible for compliance and alleviate
grantees of the burden of annual performance reviews. A commenter
recommended revising the HTF audit requirements to mirror HOME and that
additional audit requirements should be removed. A few commenters
suggested that equivalent onsite property inspections for other public
funding programs and construction oversight by third parties should be
allowed to satisfy the HTF requirements to avoid duplicative
inspections. A commenter stated that the rule should permit HOME
inspection standards rather than Uniform Physical Conditions Standards
(UPCS) standards. Another commenter stated that the initial inspection
during the period of affordability should be required to occur within
24 months instead of 12 months, as proposed, to align with LIHTC
requirements. A commenter stated that the requirement to follow up with
an inspection within 12 months of observing a deficiency during an
onsite inspection is burdensome and suggested that evidence of the
correction, with the right to re-inspect, should be sufficient.
Some commenters offered recommendations for other administrative
issues. A commenter suggested that the project completion date for HTF
units should be the date the project is placed in service. Another
commenter stated that HUD's rule should clarify that the recordkeeping
requirements in Sec. 92.778 would allow a grantee to delegate record
maintenance to the project owner or manager who would make the records
accessible to the grantee.
Several commenters stated that the rule should increase
opportunities for forgiveness under the repayment and recapture
provisions. Commenters suggested that the rule permit a prorated
reduction of the repayment obligation based on the extent that the
affordability period was satisfied. A commenter suggested that this
prorated reduction in the repayment obligation also apply to HTF-
assisted housing lost through a foreclosure action, natural events or
disasters, or similar events that are not the result of malfeasance on
the part of the grantee or subgrantee. A few commenters suggested that
complete forgiveness should be permitted when there have been best
faith efforts to avoid foreclosure. A commenter stated that the
repayment provisions are too onerous and repayments for failed ELI
housing projects should be limited to instances when the grantee
directly provides funds for an ineligible activity.
Some commenters offered suggestions about the foreclosure
provisions. A commenter suggested that if HUD is the foreclosing
entity, the affordability restrictions should not terminate and funds
should not be required to be repaid. Another commenter suggested that
the rule should authorize HUD and the grantee to modify the
affordability restrictions in limited circumstances (e.g., loss of
rental assistance through no fault of the owner), if doing so is
necessary to avoid a foreclosure and complete loss of affordable units.
Another commenter suggested that HUD should require grantees to use
purchase options, right of first refusal, or other preemptive rights to
purchase as tools to protect HTF-assisted housing from foreclosure or
deed in lieu of foreclosure. Another commenter suggested that
additional data collection requirements be required. The commenter
attached a list of 22 project-level data points that should be listed
in Sec. 92.778(a)(2)(i).
HUD Response: The HTF statute includes mandatory monitoring,
reporting, and audit requirements. HUD does not have the authority to
change these requirements.
Except where that statute differs, or where policy determinations
about the HTF have been made by HUD that preclude alignment, HUD
adopted the majority of the requirements of the HOME program for the
HTF rule, but the HTF audit requirements cannot be modified to mirror
HOME requirements, as suggested by a commenter, because the HTF statute
imposes different requirements for the audit of HTF-assisted projects
than what is required by the HOME program.
HUD does not agree that grantees are relieved of responsibility for
compliance if a subgrantee receives the HTF funds. The statute makes
clear that the State or State-designated entity is the grantee of the
HTF funds and that compliance with all requirements, including
compliance monitoring of subgrantees, is the responsibility of the
grantee. Moreover, HUD has no relationship with a subgrantee and has no
basis to take action against a subgrantee.
This interim rule requires that Uniform Physical Condition
Standards (UPCS) be incorporated into the property standards, as is the
case with the property standards for the HOME program. This will
facilitate alignment of HTF-assisted projects with projects assisted by
the LIHTC program and HOME. Training and guidance will be
[[Page 5217]]
provided to address some of the concerns about implementing UPCS.
HUD has chosen not to synchronize when project completion occurs
for an HTF-assisted projects with when an LIHTC project is placed in
service. The HTF rule requires beneficiary reporting that is different
than that required for LIHTCs. The project completion date must ensure
timely occupancy. Accordingly, HUD adopts the language as proposed.
One commenter suggested that the rule should authorize HUD and the
grantee to modify the affordability restrictions in limited
circumstances (e.g., loss of rental assistance through no fault of the
owner). To ensure compatibility with the HOME rule and in an effort to
ease HTF implementation, this interim rule contains language that is
consistent with the repayment language in the HOME regulations. For
natural events or other disasters, insurance proceeds should be used to
replace the lost housing. In the case of foreclosure, repayment would
not be required if the affordability restrictions are preserved and the
project continues to meet HTF requirements. Grantees have the option,
rather than a requirement, of using preemptive rights to ensure
flexibility for each grantee to ensure HTF projects remain affordable.
The repayment and foreclosure provisions are required and the language
is adopted in this interim rule as proposed.
Performance Review and Sanctions Review Proposed Sec. 92.780-92.783;
Final Sec. 93.450-93.453
HUD proposed that grantees report on their progress and performance
in meeting the requirements of the HTF in HUD's Integrated Disbursement
and Information System (IDIS) and the consolidated plan. The statutory
requirements for corrective and remedial actions at section
1338(e)(1)(B) of the Act are reflected in Sec. 92.782. The statutory
requirements at section 1338(e)(2)(B) of the Act for notification of
determination and opportunity for hearing and sanctions are reflected
in Sec. 92.783.
Comments: One commenter recommended that performance report on
grantees be posted regularly on public Web sites.
HUD Response: In this interim rule, HUD moved the requirement for a
HTF performance report to the Consolidated Plan regulations at 24 CFR
part 91. The HTF performance report is included in the performance
reports for the consolidated plans in 24 CFR 91.520, thereby subjecting
the report to the citizen participation plan of the grantee and
subgrantee. In addition, the HTF grant is subject to the requirements
of the Federal Funding Accountability and Transparency Act of 2006
(Pub. L. 109-282, approved September 26, 2006), as amended by section
6202 of Public Law 110-252, approved June 30, 2008 (Transparency Act)
(See Sec. 93.354 of the HTF regulations.) \5\
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\5\ The Transparency Act requires disclosure to the public of
all entities or organizations receiving Federal funds, beginning in
fiscal year 2007. The disclosure of such funds can be found at the
USAspending.gov Web site, which is managed by the Office of
Management and Budget.
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Other Comments
Align the HTF With Other Programs
Comments: Some commenters suggested that the HTF be coordinated
with and mirror the LIHTC rules to the greatest extent possible to
provide maximum flexibility. They suggested that LIHTC is more likely
to be used in combination with HTF funds for development than HOME.
Other commenters suggested that the HTF requirements should be aligned
with other program requirements (e.g., such as those required under
HUD's Section 811 Supportive Housing for Persons with Disabilities
program, HUD's Housing Choice voucher program, U.S. Department of
Health and Human Services program, Supplemental Security Income, and
U.S. Department of Veterans Affairs) and HUD should identify any
potential conflicts between the program requirements. A few commenters
recommended that HUD's HTF rule should waive requirements of Section 8
project-based vouchers that complicate using them in HTF projects. A
few commenters suggested that HUD eliminate duplicative reviews and
requirements that create conflict when the HTF is combined with other
sources of funding in development projects.
HUD Response: HUD expects that HTF funds will be combined with
other sources of private funding and financing typically used for the
development of affordable housing, such as LIHTCs. The affordability
period for HTF-assisted units is consistent with the 30-year
affordability period (compliance period plus extended use period) for
LIHTC projects. Grantees may also establish longer affordability
periods in their HTF allocation plans. The VLI income targeting and
frequency of onsite inspections during the period of affordability
regulations in the HTF also align with LIHTC. Some HTF requirements,
such as ELI income targeting and rents, are statutory and HUD does not
have the discretion to change these statutory requirements to align
with other programs. Also, the HTF rule cannot waive the requirements
of other Federal programs. In order to allow maximum flexibility when
combining and coordinating the HTF with other Federal funding sources,
HUD streamlined the HTF requirements and aligned them with other
Federal programs (e.g., HOME, LIHTC, Federal Housing Administration
(FHA), Public Housing, and other HUD programs) to the greatest extent
possible, given statutory constraints and policy decisions by HUD.
Manufactured Housing
In the proposed rule, HUD stated that 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. HUD stated
that 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. The proposed rule also
required that construction of all manufactured housing must meet the
Manufactured Home Construction and Safety Standards codified at 24 CFR
part 3280. HUD noted that these standards pre-empt State and local
codes covering the same aspects of performance for such housing.
Comments: A commenter stated that language should be added to the
rule to clarify that manufactured housing can be purchased with HTF
funds for both rental and homeownership purposes. One commenter stated
that eligible relocation costs should include one-for-one replacement
when manufactured homes are demolished or converted for another use. A
commenter recommended that the language in the proposed rule should be
changed to clarify that HTF funds may be used to purchase the land
under manufactured homes to preserve the affordability of these homes,
and another stated that the requirement that the land under assisted
manufactured housing be owned or leased will be difficult to meet.
Another commenter states that the proposed rule conflicts with other
HUD policies, including the Model Manufactured Home Installation
Standards and Manufactured Housing Installation Rules and Regulations,
24 CFR parts 3285 through 3286. A commenter stated that HUD's rule
should eliminate the ``permanent foundation requirement'' to avoid
confusion, and to align with 24 CFR parts 3285 through 3286. Another
[[Page 5218]]
commenter stated that HUD's rule should create an exception to the
requirement that homeownership funds be targeted to income-eligible,
first-time homebuyers because manufactured homes are a means for older,
low-income homeowners to transition from their current home to a more
affordable alternative, and they are often not first-time homebuyers.
Another commenter stated that HUD's rule should include mobile home
park infrastructure improvements as eligible costs and give more
consideration to deteriorating park infrastructure.
HUD Response: The HTF statute requires that homebuyer assistance be
provided to first-time homebuyers only--this would apply to
manufactured housing that is purchased by eligible families with HTF
assistance.
This interim rule does not prohibit the expenditure of HTF funds on
manufactured housing that is rental housing. A State may award HTF
funds for the development of a manufactured housing park for rental
units. The Act does not contain any requirement for the one-for-one
replacement of housing units if HTF funds are used in the demolition or
conversion of any unit.
If HTF funds are used to purchase land to develop a manufactured
home, or relocate a manufactured home, the manufactured housing must be
secured with a foundation system meeting 24 CFR part 3280.
The use of HTF funds for infrastructure to rehabilitate the parks
in which manufactured homes are situated is only eligible if all units
are rental housing with income eligible tenants. Infrastructure that is
not on the site of the HTF project is not eligible for HTF financing.
Consistent with the HOME rule, the definition of ``permanent
foundation'' in the HTF rule means a foundation system of supports that
is capable of transferring all design loads to the ground that meets
the requirements of 24 CFR 3282.12. This definition is also consistent
with the FHA mortgage insurance requirements for all manufactured homes
that must be constructed in conformance with the Federal Manufactured
Home and Safety Standards, as evidenced by an affixed certification
label in accordance with 24 CFR 3280.11.
III. Opportunity for Further Comment
As noted in the Summary portion at the beginning of this preamble,
HUD is issuing this rule as an interim rule. It is HUD's intention that
following funding of the HTF as provided in HERA, and allocations of
funds to States as provided in this rule, HUD will open this interim
rule for public comment to solicit comment on how these regulations
work once funding is available and the grantees gain experience
administering the HTF program.
IV. 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 rule was determined to be 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,
the formula for the distribution of HTF grants to states through
regulation, 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.)
On October 29, 2010, HUD published the proposed program rule for
the HTF (see 75 FR 66978). This interim rule incorporates the December
4, 2009, allocation formula rule and October 29, 2010, program rule.
HUD's full economic analysis for the proposed allocation rule is
available for inspection on HUD's Web site at https://www.huduser.org/portal/publications/pubasst/riaforhtf.html.
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 State-
designated 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 the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992 (12 U.S.C. 4501 et seq.). 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 allocated to the
States, HUD has determined that the rule will not have a significant
economic impact on a substantial number of small entities.
Environmental Impact
A Finding of No Significant Impact (FONSI) with respect to the
environment was made, at the proposed rule stage, in accordance with
HUD regulations at 24 CFR part 50, which
[[Page 5219]]
implement section 102(2)(C) of the National Environmental Policy Act of
1969 (42 U.S.C. 4332(2)(C)). That Finding remains applicable to this
rule and can be found at www.regulations.gov under docket number FR-
5246-F-03.
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.
Unfunded Mandates Reform Act
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.
Congressional Review Act
This rule constitutes a ``major rule'' as defined in the
Congressional Review Act (5 U.S.C. Chapter 8). The Congressional Review
Act provides for major rules to have a 60-day delayed effective date.
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), and assigned an
OMB control number. 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:
List of Subjects
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 93
Administrative practice and procedure, Grant programs-housing and
community development, Low- and moderate-income housing, Manufactured
homes, Rent subsidies, Reporting and recordkeeping requirements.
For the reasons stated in the preamble, HUD amends 24 CFR chapter I
as follows:
PART 91--CONSOLIDATED SUBMISSIONS FOR COMMUNITY PLANNING AND
DEVELOPMENT PROGRAMS
0
1. The authority citation 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.
0
2. In Sec. 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:
Sec. 91.2 Applicability.
(a) * * *
(5) The Housing Trust Fund (HTF) program (see 24 CFR part 93).
* * * * *
0
3. In Sec. 91.10, revise the first sentence of paragraph (a) to read
as follows:
Sec. 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. * * *
* * * * *
0
4. In Sec. 91.215, revise paragraph (b)(2) to read as follows:
Sec. 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 low-income,
low-income, and moderate-income 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 93.302 and 24 CFR
93.304 (if the jurisdiction receives HTF funds from the State) over a
specific time period.
* * * * *
0
5. In Sec. 91.220, add paragraph (l)(5) to read as follows:
Sec. 91.220 Action Plan.
* * * * *
(l) * * *
(5) Housing Trust Fund. (i) If the jurisdiction receives HTF funds
from the State under 24 CFR 93.105, 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:
(A) The plan must identify priority factors for funding that shall
include the following: geographic distribution which is a description
of the geographic areas of the State (including areas of low-income and
minority concentration) in which it will direct assistance during the
ensuing program year; 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 extremely low-income 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); the location of existing affordable housing, and the
extent to which the application makes use of non-federal funding
sources.
(B) 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 93.200) 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
93.2).
(C) The plan must provide for performance goals, consistent with
the jurisdiction's goals established under 24 CFR 91.215(b)(2).
(D) The plan must provide the jurisdiction's rehabilitation
standards, as required by 24 CFR 93.301(b).
(E) If the jurisdiction intends to use HTF funds for first-time
homebuyers, it must set forth the guidelines for resale or recapture,
and obtain HUD's specific,
[[Page 5220]]
written approval, as required in Sec. 93.304(f). Approval of the
consolidated plan or action plan under Sec. 91.500 or the failure to
disapprove the consolidated plan or action plan does not satisfy the
requirement for specific HUD approval for resale or recapture
guidelines.
(F) If the jurisdiction intends to use HTF funds for homebuyer
assistance and does not use the HTF affordable homeownership limits for
the area provided by HUD, it must determine 95 percent of the median
area purchase price and set forth the information in accordance with
Sec. 93.305.
(G) The jurisdiction may limit the beneficiaries or give
preferences to a particular segment of the extremely low- or very low-
income population only if described in the action plan.
(1) Any limitation or preference must not violate nondiscrimination
requirements in 24 CFR 93.350, and the jurisdiction must not limit or
give preferences to students.
(2) The jurisdiction may permit rental housing owners to limit
tenants or give a preference in accordance with 24 CFR 93.303 only if
such limitation or preference is described in the action plan.
(H) The plan must describe the conditions under which the
jurisdiction will refinance existing rental housing project debt.
(ii) [Reserved].
0
6. In Sec. 91.315, revise paragraph (b)(2) to read as follows:
Sec. 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, and 24 CFR 93.302 for rental housing and
24 CFR 93.304 for homeownership over a specific time period.
* * * * *
0
7. In Sec. 91.320, revise paragraph (k)(5) to read as follows:
Sec. 91.320 Action Plan.
* * * * *
(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 development subsidy limit for housing assisted with
HTF funds. If the HTF funds will be used for first-time homebuyers, it
must state the guidelines for resale and recapture as required in 24
CFR 93.304. 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 State 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 extremely low-
income 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 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 93.200) 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
93.2).
(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 93.301(b)(1).
(v) If the State intends to use HTF funds for first-time
homebuyers, it must set forth the guidelines for resale or recapture,
and obtain HUD's specific, written approval, as required in Sec.
93.304(f). Approval of the consolidated plan or action plan under Sec.
91.500 or the failure to disapprove the consolidated plan or action
does not satisfy the requirement for specific HUD approval for resale
or recapture guidelines.
(vi) If the State intends to use HTF funds for homebuyer assistance
and does not use the HTF affordable homeownership limits for the area
provided by HUD, it must determine 95 percent of the median area
purchase price and set forth the information in accordance with Sec.
93.305.
(vii) The State may limit the beneficiaries or give preferences to
a particular segment of the extremely low- or very low-income
population only if described in the action plan.
(A) Any limitation or preference must not violate nondiscrimination
requirements in 24 CFR 93.350, and the State must not limit or give
preferences to students.
(B) The State may permit rental housing owners to limit tenants or
give a preference in accordance with 24 CFR 93.303(d)(3) only if such
limitation or preference is described in the action plan.
(viii) The plan must describe the conditions under which the State
will refinance existing debt.
0
8. In Sec. 91.520, redesignate paragraphs (h) and (i) as paragraphs
(i) and (j), respectively and add a new paragraph (h) to read as
follows:
Sec. 91.520 Performance reports.
* * * * *
(h) HTF. For jurisdictions receiving HTF funds, the report must
describe the HTF program's accomplishments, and the extent to which the
jurisdiction complied with its approved HTF allocation plan and the
requirements of 24 CFR part 93.
* * * * *
0
9. Add part 93 to read as follows:
PART 93--HOUSING TRUST FUND
Subpart A--General
93.1 Overview.
93.2 Definitions.
93.3 Waivers.
Subpart B--Allocation Formula; Reallocations
93.50 Formula allocation.
93.51 Formula factors.
93.52 Minimum allocations.
93.53 Federal Register notice of formula allocations.
93.54 Reallocations by formula.
Subpart C--Participation and Submission Requirements; Distribution of
Assistance
93.100 Participation and submission requirements.
93.101 Distribution of assistance.
Subpart D--Program Requirements
93.150 Site and neighborhood standards.
[[Page 5221]]
93.151 Income determinations.
Subpart E--Eligible and Prohibited Activities
93.200 Eligible activities: General.
93.201 Eligible project costs.
93.202 Eligible administrative and planning costs.
93.203 HTF funds and public housing.
93.204 Prohibited activities and fees.
Subpart F--Income Targeting
93.250 Income targeting.
Subpart G--Project Requirements
93.300 Maximum per-unit subsidy amount, underwriting, and subsidy
layering.
93.301 Property standards.
93.302 Qualification as affordable housing: rental housing.
93.303 Tenant protections and selection.
93.304 Qualification as affordable housing: homeownership.
93.305 Qualification as affordable housing: modest housing
requirements for homeownership; resale or recapture requirements.
Subpart H--Other Federal Requirements
93.350 Other Federal requirements and nondiscrimination; affirmative
marketing.
93.351 Lead-based paint.
93.352 Displacement, relocation, and acquisition.
93.353 Conflict of interest.
93.354 Funding Accountability and Transparency Act.
92.355 Eminent domain.
Subpart I--Program Administration
93.400 Housing Trust Fund (HTF) accounts.
93.401 HTF grant agreement.
93.402 Program disbursement and information system.
93.403 Program income and repayments.
93.404 Grantee responsibilities; written agreements; onsite
inspections; financial oversight.
93.405 Applicability of uniform administrative requirements, cost
principles, and audits.
93.406 Audits.
93.407 Recordkeeping.
93.408 Performance reports.
Subpart J--Performance Reviews and Sanctions
93.450 Accountability of recipients.
93.451 Performance reviews.
93.452 Corrective and remedial actions.
93.453 Notice and opportunity for hearing; sanctions.
Authority: 42 U.S.C. 3535(d), 12 U.S.C. 4568.
Subpart A--General
Sec. 93.1 Overview.
(a) This part implements the Housing Trust Fund (HTF) program
established under section 1338 of the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992, as amended (12 U.S.C. 4501
et seq.) (the Act). 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 extremely low-income and very low-
income households, including homeless families.
(b) Section 1337 of the Act 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 setaside 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. The Act also provides that
the HTF may be funded with amounts appropriated, transferred, or
credited to the HTF under other provisions of law.
Sec. 93.2 Definitions.
1937 Act means the United States Housing Act of 1937 (42 U.S.C.
1437 et seq.).
Act means the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992, as amended (12 U.S.C. 4501 et seq).
Annual income. See Sec. 93.151.
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.
(2) ``Commit to a specific local project'' 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. The written agreement for rehabilitation or new
construction of rental housing may also provide operating cost
assistance and/or operating cost assistance reserves.
(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 rental housing or single family
housing and the property title will be transferred to the recipient or
family within 6 months of the agreement date. The written agreement for
acquisition of rental housing may also provide operating cost
assistance and/or operating cost assistance reserves.
(iii) If the project is for renewal of operating cost assistance or
operating cost assistance reserves, the grantee and the recipient must
have executed a legally binding written agreement under which HTF funds
will be provided to the recipient for operating cost assistance or
operating cost assistance reserves for the identified HTF project.
Consolidated plan means the plan submitted and approved in
accordance with 24 CFR part 91.
Displaced homemaker means an individual who:
(1) Is an adult;
(2) Has not worked full-time full-year in the labor force for a
number of years, but has, during such years, worked primarily without
remuneration to care for the home and family; and
(3) Is unemployed or underemployed and is experiencing difficulty
in obtaining or upgrading employment.
Extremely low-income 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.
Family has the same meaning given that term in 24 CFR 5.403.
First-time homebuyer means an individual and his or her spouse who
have not owned a home during the 3-year 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.
Grantee means the State or the State-designated entity that
receives the HTF funds from HUD.
HTF allocation plan means the annual submission to HUD required by
the Act 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
[[Page 5222]]
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.
Homeownership means ownership in fee simple title in a 1- to 4-unit
dwelling or in a condominium unit, or equivalent form of ownership
approved by HUD.
(1) The land may be owned in fee simple or the homeowner may have a
99-year ground lease.
(i) For housing located in the insular areas, the ground lease must
be 40 years or more.
(ii) For housing located on Indian trust or restricted Indian lands
or a Community Land Trust, the ground lease must be 50 years or more.
(iii) For manufactured housing, the ground lease must be for a
period at least equal to the applicable period of affordability in
Sec. 93.304(e).
(2) Right to possession under a contract for deed, installment
contract, or land contract (pursuant to which the deed is not given
until the final payment is made) is not an equivalent form of
ownership.
(3) The ownership interest may be subject only to the restrictions
on resale required under Sec. 93.304; mortgages, deeds of trust, or
other liens or instruments securing debt on the property as approved by
the grantee; or any other restrictions or encumbrances that do not
impair the good and marketable nature of title to the ownership
interest.
(4) The grantee must determine whether or not ownership or
membership in a cooperative or mutual housing project constitutes
homeownership under State law; however, if the cooperative or mutual
housing project receives low income housing tax credits, the ownership
or membership does not constitute homeownership.
Household means one or more persons occupying a housing unit.
Housing includes manufactured housing and manufactured housing
lots, permanent housing for disabled homeless persons, single-room
occupancy housing, and group homes. Housing does not include emergency
shelters (including shelters for disaster victims) or facilities such
as nursing homes, convalescent homes, hospitals, residential treatment
facilities, correctional facilities, halfway houses, housing for
students, or dormitories (including farmworker dormitories).
HUD means the Department of Housing and Urban Development.
Income-eligible means a family, homeowner, or household (as
appropriate given the context of the specific regulatory provision)
that is very low-income, extremely low-income, or both, depending on
the income-targeting requirements set forth in Sec. 93.250.
Insular areas means Guam, the Commonwealth of the Northern Mariana
Islands, the United States Virgin Islands, and American Samoa.
Neighborhood means a geographic location designated in
comprehensive plans, ordinances, or other local documents as a
neighborhood, village, or similar geographical designation that is
within the boundary but does not encompass the entire area of a unit of
general local government; except that if the unit of general local
government has a population under 25,000, the neighborhood may, but
need not, encompass the entire area of a unit of general local
government.
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 does not include 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 Sec. 93.200(b).
Project means a site or sites together with any building (including
a manufactured housing unit) or buildings located on the site(s) that
are under common ownership, management, and financing and are to be
assisted with HTF funds as a single undertaking under this part. The
project includes all the activities associated with the site and
building.
Project completion means that all necessary title transfer
requirements and construction work have been performed, the project
complies with the requirements of this part (including the property
standards under Sec. 93.301 of this part), 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, except that with respect to rental housing project completion, for
the purposes of Sec. 93.402(d) of this part, project completion occurs
upon completion of construction before occupancy.
Recipient means an organization, agency, or other entity (including
a public housing agency, or a for-profit 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:
(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.
Reconstruction means the rebuilding, on the same lot, of housing
standing on a site at the time of project commitment, except that
housing that was destroyed may be rebuilt on the same lot if HTF funds
are committed within 12 months of the date of destruction. The number
of housing units on the lot may not be decreased or increased as part
of a reconstruction project, but the number of rooms per unit may be
increased or decreased. Reconstruction also includes
[[Page 5223]]
replacing an existing substandard unit of manufactured housing with a
new or standard unit of manufactured housing. Reconstruction is new
construction for purposes of this part.
Shortage of standard rental units both affordable and available to
extremely low-income renter households means
(1) For any State or other geographical area the gap between:
(i) The number of units with complete plumbing and kitchen
facilities with a rent that does not exceed 30 percent of 30 percent of
the adjusted area median income (AMI) as determined by HUD that either
are occupied by extremely low-income renter households or are vacant
for rent; and
(ii) The number of extremely low-income renter households.
(2) If the number of units described in paragraph (1)(i) of this
definition exceeds the number of extremely low-income households
described in paragraph (1)(ii) of this definition, there is no
shortage.
Single family housing means a one-to four-family residence,
condominium unit, cooperative unit, combination of manufactured housing
and lot, or manufactured housing lot.
Single parent means an individual who:
(1) Is unmarried or legally separated from a spouse; and
(2) Has one or more minor children of whom the individual has
custody or joint custody, or is pregnant.
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 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.
Tribally designated housing entity has the meaning given the term
in section 4 of the Native American Housing Assistance and Self-
Determination Act of 1997 (25 U.S.C. 4103).
Unit of general local government means a city, town, township,
county, parish, village, or other general purpose political subdivision
of a State; and any agency or instrumentality thereof that is
established pursuant to legislation and designated by the chief
executive to act on behalf of the jurisdiction with regard to
provisions of this part. When a county is an urban county, the urban
county is the unit of general local government for purposes of the HTF
program.
Urban county has the meaning given the term in 24 CFR 570.3.
Very low-income renter households means a household whose income is
in excess of 30 percent but not greater than 50 percent of the area
median income, with adjustments for smaller and larger families, as
determined by HUD.
Very low-income 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. ``Very low-income
family'' also includes any family that resides in a nonmetropolitan
area that does not exceed the poverty line applicable to the family
size involved.
Sec. 93.3 Waivers.
HUD may, upon a determination of good cause and subject to
statutory limitations, waive any provision of this part 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)).
Subpart B--Allocation Formula; Reallocations
Sec. 93.50 Formula allocation.
(a) Allocations to States. HUD will provide to the States
allocations of funds in amounts determined by the formula described in
this part.
(b) Amount available for allocation. The amount of funds available
for allocation by the formula is the balance remaining after providing
for other purposes authorized by Congress, in accordance with the Act
and appropriations.
(c) Allocations for the insular areas. The allocation amount for
each insular area is determined by multiplying the funds available
times the ratio of renter households in each insular area to the total
number of renter households in the 50 States, the District of Columbia,
the Commonwealth of Puerto Rico, and the insular areas.
(d) Allocations for the 50 States, the Commonwealth of Puerto Rico,
and the District of Columbia--(1) Amounts available for allocations.
The amount of funds that is available for allocation by the formula to
the 50 States, the Commonwealth of Puerto Rico, and the District of
Columbia is determined using the most current data available from the
U.S. Census Bureau that is available for the same year for all these
geographic areas. The amount is equal to the balance of funds remaining
after determining formula allocations for the insular areas under Sec.
93.50(c). For purposes of paragraphs (d)(1) and (2) of this section,
the term ``State'' means any of the 50 United States, the Commonwealth
of Puerto Rico, and the District of Columbia.
(2) Allocations. (i) Allocations to the States are determined using
the four needs factors described in Sec. 93.51(a) through (d),
multiplying each factor by the amount available under Sec. 93.51(d)(1)
by its priority weight, and summing the four factors for each State.
(ii) The factor described in Sec. 93.51(a) is weighted 0.5. The
factors described in Sec. 93.51(b) and (d) are weighted at 0.125 and
the factor described in Sec. 93.51(c) of this section is weighted at
0.25.
(iii) The sum of the four needs factors for each State is then
multiplied by the construction cost factor described in Sec. 93.51(e)
of this section and by the total amount of funds available for State
allocations.
Sec. 93.51 Formula factors.
(a) Need factor one. The ratio of the shortage of standard rental
units both affordable and available to extremely low-income renter
households in the State to the aggregate shortage of standard rental
units both affordable and available to extremely low-income renter
households in all the States.
(b) Need factor two. The ratio of the shortage of standard rental
units both affordable and available to very low-income renter
households in the State to the aggregate shortage of standard rental
units both affordable and available to very low-income renter
households in all the States.
(c) Need factor three. The ratio of:
(1) Extremely low-income renter households in the State living with
either incomplete kitchen or plumbing facilities, more than one person
per room, or paying more than 50 percent of income for housing costs,
to
(2) The aggregate number of extremely low-income renter households
living with either incomplete kitchen or plumbing facilities, more than
one person per room, or paying more than 50 percent of income for
housing costs in all the States.
(d) Need factor four. The ratio of very low-income renter
households in the State paying more than 50 percent of income on rent
relative to the aggregate
[[Page 5224]]
number of very low-income renter households paying more than 50 percent
of income on rent in all the States.
(e) Construction cost factor. The resulting sum calculated from the
factors described in paragraphs (a) through (d) of this section shall
be multiplied by the relative cost of construction in the state. For
purposes of calculating this factor, the term ``cost of construction'':
(1) Means the cost of construction or building rehabilitation in
the State relative to the national cost of construction or building
rehabilitation; and
(2) Is calculated so that values higher than 1.0 indicate that the
State's construction costs are higher than the national average, a
value of 1.0 indicates that the State's construction costs are exactly
the same as the national average, and values lower than 1.0 indicate
that the State's cost of construction are lower than the national
average.
Sec. 93.52 Minimum allocations.
(a) In accordance with the HTF statute, HUD is required to provide
each of the States and the District of Columbia with a minimum grant of
$3 million. If the formula amount determined for a fiscal year is less
than $3 million to any of the 50 States or the District of Columbia,
then the allocation to that State or the District of Columbia is
increased to $3 million, and allocations to States and the District of
Columbia above $3 million and to the Commonwealth of Puerto Rico and
the insular areas are adjusted by an equal amount on a pro rata basis.
(b) If in any fiscal year, funding in the HTF is insufficient to
provide each of the 50 States and the District of Columbia with a
minimum grant of $3 million, HUD will, through notice published in the
Federal Register for public comment, describe an alternative method for
allocating grant funds to the 50 States and the District of Columbia.
Sec. 93.53 Federal Register notice of formula allocations.
Not later than 60 calendar days after the date that HUD determines
the formula amounts under this subpart, HUD will publish a notice in
the Federal Register announcing the availability of the allocations to
States.
Sec. 93.54 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 Sec. 93.400(d) for failure
to commit or expend the funds within the time specified, or under Sec.
93.453 for failure to comply substantially with any provision of this
part;
(2) Any HTF funds reduced for failure by the grantee to obtain
funds required to be reimbursed or returned under Sec. 93.450; and
(3) Any HTF funds remitted to HUD under Sec. 93.403(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.
Subpart C--Participation and Submission Requirements; Distribution
of Assistance
Sec. 93.100 Participation and submission requirements.
(a) Notification of intent to participate. Not later than 30
calendar days after HUD's publication of the formula allocation amounts
as provided in Sec. 93.53, the State must notify HUD in writing of its
intention to become an HTF grantee for the first year of HTF funding.
(b) Submission requirement. To receive its HTF grant, the grantee
must submit a consolidated plan in accordance with 24 CFR part 91.
Sec. 93.101 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 State-designated
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.
(c) An HTF grantee may choose to directly fund projects by eligible
recipients in accordance with the State's HTF allocation plan or to
fund projects by eligible recipients through one or more subgrantees.
An HTF subgrantee that is a unit of general local government must have
a consolidated plan under 24 CFR part 91, and 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. Because a State has only one consolidated plan, and
HTF allocation plan for an HTF subgrantee that is a State agency must
be included in the State's HTF allocation plan. The grantee or
subgrantee must determine that the applicant is an eligible recipient
that meets the definition of ``recipient'' in Sec. 93.2 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 part and carry out the responsibilities of the grantee. The
grantee must annually review the performance of subgrantees in
accordance with 24 CFR 93.404(a).
Subpart D--Program Requirements
Sec. 93.150 Site and neighborhood standards.
(a) General. A grantee must administer its HTF program in a manner
that provides housing that is suitable from the standpoint of
facilitating and furthering full compliance with the applicable
provisions of title VI of the Civil Rights Act of 1964 (42 U.S.C.
2000d-2000d-4), the Fair Housing Act (42 U.S.C. 3601 et seq., E.O.
11063, 3 CFR, 1959-1963 Comp., p. 652) and HUD regulations issued
pursuant thereto; and promotes greater choice of housing opportunities.
(b) New rental housing. In carrying out the site and neighborhood
requirements with respect to new construction of rental housing, a
grantee is responsible for making the determination that proposed sites
for new construction meet the requirements in 24 CFR 983.57(e)(2).
Sec. 93.151 Income determinations.
(a) General. The HTF program has income-targeting requirements.
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.
(2) The grantee may use only one definition for each HTF-assisted
program (e.g., down payment assistance program) that it administers and
for each rental housing project.
(c) Determining annual income--(1) Tenants in HTF-assisted housing.
For families who are tenants in HTF-assisted housing, the grantee must
initially determine annual income using the method in paragraph (d)(1)
of this
[[Page 5225]]
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 Sec. 93.302(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 of determining annual income. (1) Examine at least 2
months of 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 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 which
examines each year the annual income of the family. 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 very low- or low-income families for the
family size of the tenant and state that the tenant's annual income
does not exceed this limit.
Subpart E--Eligible and Prohibited Activities
Sec. 93.200 Eligible activities: General.
(a)(1) HTF funds may be used for the production, preservation, and
rehabilitation of affordable rental housing and affordable housing for
first-time 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 one third of each
annual grant may be used for operating cost assistance and operating
cost assistance reserves. Operating cost assistance and operating cost
assistance reserves may be provided only to rental housing acquired,
rehabilitated, reconstructed, or newly constructed with HTF funds. Not
more than 10 percent of the annual grant shall be used for housing for
homeownership. HTF-assisted housing must be permanent housing. The
specific eligible costs for these activities are found in Sec. Sec.
93.201 and 93.202. The activities and costs are eligible only if the
housing meets the property standards in Sec. 93.301, 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 Sec. 93.2.
(3) HTF funds may be used to purchase and/or rehabilitate a
manufactured housing unit, and 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 hook-ups 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 to projects. A grantee may provide HTF
funds as equity investments, interest-bearing loans or advances, non-
interest-bearing loans or advances, interest subsidies consistent with
the purposes of this part, deferred payment loans, grants, or other
forms of assistance that HUD determines to be consistent with the
purposes of this 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 HTF-
eligible 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 units designated as
HTF-assisted may be reduced only in accordance with Sec. 93.203,
except that in a project consisting of all HTF-assisted 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 Sec. 93.300(a).
(d) Terminated projects. An HTF-assisted 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 its HTF account from which the funds were drawn
(i.e., local or Treasury account), in accordance with Sec. 93.403(b).
A project that does not meet the requirements for affordable housing
must be terminated and the grantee must repay the HTF funds to the
grantee's HTF account.
Sec. 93.201 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 of the grantee in Sec. 93.301;
(2) For rehabilitation, costs to meet the property standards for
rehabilitation projects in Sec. 93.301(b);
(3) For both new construction and rehabilitation projects, costs:
(i) To demolish existing structures;
(ii) To make utility connections including off-site connections
from the property line to the adjacent street; and
(iii) To make improvements to the project site that are 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 which 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 provisions of paragraphs
(a)(3)(ii) and (iii) of this section are also eligible in connection
[[Page 5226]]
with the 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 HTF-assisted 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.
The costs may be paid if they were incurred not more than 24 months
before the date that HTF funds are committed to the project and the
grantee expressly permits HTF funds to be used to pay the costs in the
written agreement committing the funds.
(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, attorneys' fees, private appraisal fees and fees for an
independent cost estimate, and builders' or developers' fees.
(3) Costs of a project audit, including 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 Sec. 93.350.
(5) For new construction or rehabilitation, 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 18 months) and which may only be used to pay project
operating expenses, scheduled payments to a replacement reserve, and
debt service. Any HTF funds placed in an operating deficit reserve that
remain unexpended after the period of project rent-up may be retained
for project reserves if permitted by the grantee.
(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. Although these costs may be charged as project costs, 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.
(e) Operating cost assistance and operating cost assistance
reserves. For HTF-assisted units for which project-based assistance is
not available, when necessary and subject to the limitations in Sec.
93.200(a), HTF funds may be used to pay for operating cost assistance
and operating cost assistance reserves, as follows:
(1) Operating costs are 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 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 maximum
amount of the operating cost assistance to be provided to an HTF-
assisted rental project must be based on the underwriting of the
project and must be specified in a written agreement between the
grantee and the recipient. The written agreement may commit, from a
fiscal year HTF grant, funds for operating cost assistance for a
multiyear period provided that the grantee is able meet its expenditure
deadline in Sec. 93.400(d). The grantee may renew operating cost
assistance with future fiscal year HTF grants during the affordability
period and the amount must be based on the need for the operating cost
assistance at the time the assistance is renewed.
(2) An operating cost assistance reserve may be funded by the
grantee for HTF-assisted units in a project where the grantee
determines in its underwriting of the project the reserve is necessary
to ensure the project's financial feasibility. If the operating cost
assistance reserve is funded with appropriated HTF funds, the allowable
amount of the reserve shall not exceed the amount determined by the
grantee to be necessary to provide operating cost assistance for HTF-
assisted units, for a period not to exceed 5 years, 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. The grantee may renew
operating cost assistance reserves with future fiscal year HTF grants
during the affordability period and the amount must be based on the
need for the operating cost assistance reserve at the time the
assistance for the reserve is renewed. If the operating cost assistance
reserve is funded with non-appropriated HTF funds, the reserve may be
funded for the period of affordability.
(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 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,
and
(2) The HTF assistance is part of the original financing for the
project and the project meets the requirements of this part.
(h) Construction undertaken before the HTF funds are committed to
the
[[Page 5227]]
project. HTF funds cannot be used for development hard costs, as
provided in paragraph (a) of this section, or for acquisition,
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 professional services, as provided in paragraph
(d)(1) of this section.
Sec. 93.202 Eligible administrative and planning costs.
(a) General. A HTF grantee may expend, for payment of reasonable
administrative and planning costs of the HTF, an amount of HTF funds
that is not more than 10 percent of the sum of each fiscal year HTF
grant and of program income deposited into its local account or
received and reported by its subgrantees during the program year. A HTF
grantee may expend the funds directly or may authorize its subgrantees,
if any, to expend all or a portion of such funds, provided total
expenditures for planning and administrative costs do not exceed the
maximum allowable amount. Reasonable administrative and planning costs
are those 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
involves program administration assignments, or the 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 (a)(1)(i) through (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; and
(c) Staff and overhead. 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 evaluations (visual assessments, inspections, and risk
assessments), other services related to assisting potential owners,
tenants and homebuyers (e.g., housing counseling); 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. These costs (except
homeownership counseling) may be charged as administrative costs or as
project costs under Sec. 93.201(d)(6) and (f)(2), at the discretion of
the grantee; however, these costs (except homeownership counseling)
cannot be charged to or paid by the low-income families.
(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 in accordance with 2 CFR part 200, subpart E.
(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 subpart H of this part.
Sec. 93.203 HTF funds and public housing.
(a) HTF funds may be used for new construction or rehabilitation of
public housing units only in accordance with the following:
(1) HTF funds may be used for new construction of public housing as
part of the Choice Neighborhoods (Choice) program under a HUD
appropriation act or for new public housing units that have been
allocated and will receive low-income housing tax credits under section
42 of the Internal Revenue Code of 1986 (26 U.S.C. 42).
(2) HTF funds may be used for the rehabilitation of existing public
housing units in which the public housing assistance will be converted
and used at the properties under the Rental Assistance Demonstration
(RAD) program under HUD's 2012 Appropriations Act (Pub. L. 112-55, 125
Stat. 552, approved November 18, 2011) or subsequent statutes. HTF
funds may also be used for the rehabilitation of existing public
housing under the Choice program, and of existing public housing units
that have been allocated and will receive low-income housing tax
credits under section 42 of the Internal Revenue Code of 1986 (26
U.S.C. 42).
(b) The public housing units constructed using funds under this
part must replace units that were removed from a public housing
agency's public housing inventory as part of a Choice program grant, or
as part of a mixed-financed development under section 35 of the 1937
Act. The number of replacement units cannot be more than the number of
units removed from the public housing agency's inventory. The public
housing units constructed or rehabilitated using funds under this part
must receive Public Housing Operating Fund assistance (and may receive
Public Housing Capital Fund assistance) under section 9 of the 1937
Act. These units cannot receive operating costs assistance or operating
cost assistance reserves under this part.
(c) Except as provided in paragraph (b) of this section, HTF-
assisted housing may not receive Operating Fund or Capital Fund
assistance under section 9 of the 1937 Act during the HTF period of
affordability.
[[Page 5228]]
(d) Consistent with Sec. 93.200(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 part.
Sec. 93.204 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 or renewal of
operating cost assistance or renewal of operating cost assistance
reserve) to a project previously assisted with HTF funds during the
period of affordability established by the grantee in the written
agreement under Sec. 93.404 (c)(2)(iv). 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 development subsidy amount established pursuant to Sec.
93.300.
(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.
(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
Sec. 93.202(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 in Sec. 93.202, including
housing counseling.
(6) Pay for any cost that is not eligible under Sec. 93.201 and
Sec. 93.202.
(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. However, the grantee may
charge owners of rental projects reasonable annual fees for monitoring
compliance during the period of affordability. The fees must be based
upon the average actual cost of performing the monitoring of HTF-
assisted rental projects. The basis for determining the amount of the
fee must be documented and the fee must be included in the costs of the
project as part of the project underwriting.
(2) The grantee may also charge nominal application fees (although
these fees are not an eligible HTF cost) to eligible recipients, to
discourage frivolous applications. The amount of application fees must
be appropriate to the type of application and may not create an undue
impediment to an extremely low-income family to be able to participate
in the grantee's program.
(3) All fees are applicable credits under 2 CFR part 200, subpart
E.
(4) In addition, the grantee must prohibit project owners from
charging fees that are not customarily charged in rental housing (e.g.,
laundry room access fees), except that rental project owners may
charge:
(i) Reasonable application fees to prospective tenants;
(ii) Parking fees to tenants only if such fees are customary for
rental housing projects in the neighborhood; and
(iii) Fees for services such as bus transportation or meals, as
long as the services are voluntary and fees are charged for services
provided.
Subpart F--Income Targeting
Sec. 93.250 Income targeting.
(a) In any fiscal year in which the total amount available for
allocation of HTF funds is less than $1 billion, the grantee must use
100 percent of its HTF grant for the benefit of extremely low-income
families or families with incomes at or below the poverty line
(whichever is greater). In any fiscal year in which the total amount
available for allocation of HTF funds is greater than $1 billion, the
grantee must use at least 75 percent of its grant for the benefit of
extremely low-income families or families with incomes at or below the
poverty line.
(b) Any grant funds not used in accordance with paragraph (a) of
this section must be used for the benefit of very-low income families.
Subpart G--Project Requirements
Sec. 93.300 Maximum per-unit development 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 of non-luxury housing, with
adjustments for the number of bedrooms and the geographic location of
the project. These limits must be reasonable and based on actual costs
of developing non-luxury housing in the area. 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 determining a reasonable level of
profit or return on recipient's investment in a project and must 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 minimum, the period of affordability in Sec. 93.302 or Sec.
93.304) and that will not provide a profit or return on the recipient's
investment that exceeds the grantee's established standards for the
size, type, and complexity of the project. The guidelines adopted by
the grantees must require the grantee to undertake:
(1) An examination of the sources and uses of funds for the project
(including any operating cost assistance, operating cost assistance
reserve, or project-based rental assistance that will be provided to
the project) and a determination that the costs are reasonable; and
(2) An assessment, at minimum, of the current market demand in the
neighborhood in which the project will be located, the experience of
the recipient, the financial capacity of the recipient, and firm
written financial commitments for the project.
(3) For HTF-funded downpayment assistance, a market analysis is not
required.
Sec. 93.301 Property standards.
(a) New construction projects. (1) State and local codes,
ordinances, and zoning requirements. Housing that is newly constructed
with HTF funds must meet all applicable State and local codes,
ordinances, and zoning requirements. HTF-assisted new construction
projects must meet State or local residential and building codes, as
applicable or, in the absence of a State or local building code, the
International Residential Code or International Building Code (as
applicable to the type of housing) of the International Code Council.
The housing must meet the applicable requirements upon project
completion.
(2) HUD requirements. All new construction projects must also meet
the requirements described in paragraphs (a)(2)(i) through (v) of this
section:
[[Page 5229]]
(i) Accessibility. The housing must meet the accessibility
requirements of 24 CFR part 8, which implements section 504 of the
Rehabilitation Act of 1973 (29 U.S.C. 794), and Titles II and III of
the Americans with Disabilities Act (42 U.S.C. 12131-12189) implemented
at 28 CFR parts 35 and 36, as applicable. ``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).
(ii) Energy efficiency. The housing must meet the energy efficiency
standards established pursuant to section 109 of the Cranston-Gonzalez
National Affordable Housing Act (42 U.S.C. 12709).
(iii) Disaster mitigation. Where relevant, the housing must be
constructed to mitigate the impact of potential disasters (e.g.,
earthquakes, hurricanes, flooding, and wildfires), in accordance with
State and local codes, ordinances, or other State and local
requirements, or such other requirements as HUD may establish.
(iv) Written cost estimates, construction contracts, and
construction documents. The grantee must ensure the construction
contract(s) and construction documents describe the work to be
undertaken in adequate detail so that inspections can be conducted. The
grantee must review and approve written cost estimates for construction
and determine that costs are reasonable.
(v) Construction progress inspections. The grantee must conduct
progress and final inspections of construction to ensure that work is
done in accordance with the applicable codes, the construction
contract, and construction documents.
(b) Rehabilitation projects. All rehabilitation that is performed
using HTF funds must meet the requirements of this paragraph (b).
(1) Rehabilitation standards. The grantee must establish
rehabilitation standards for all HTF-assisted housing rehabilitation
activities that set forth the requirements that the housing must meet
upon project completion. The grantee's description of its standards
must be in sufficient detail to determine the required rehabilitation
work including methods and materials. The standards may refer to
applicable codes or they may establish requirements that exceed the
minimum requirements of the codes. The rehabilitation standards must
address each of the following:
(i) Health and safety. The grantee's standards must identify life-
threatening deficiencies that must be addressed immediately if the
housing is occupied.
(ii) Major systems. Major systems are: structural support; roofing;
cladding and weatherproofing (e.g., windows, doors, siding, gutters);
plumbing; electrical; and heating, ventilation, and air conditioning.
For rental housing, the grantee's standards must require the grantee to
estimate (based on age and condition) the remaining useful life of
these systems, upon project completion of each major system. For
multifamily housing projects of 26 units or more, the grantee's
standards must require the grantee to determine the useful life of
major systems through a capital needs assessment of the project. For
rental housing, if the remaining useful life of one or more major
system is less than the applicable period of affordability, the
grantee's standards must require the grantee to ensure that a
replacement reserve is established and monthly payments are made to the
reserve that are adequate to repair or replace the systems as needed.
For homeownership housing, the grantee's standards must require, upon
project completion, each of the major systems to have a remaining
useful life for a minimum of 5 years or for such longer period
specified by grantee, or the major systems must be rehabilitated or
replaced as part of the rehabilitation work.
(iii) Lead-based paint. The grantee's standards must require the
housing to meet the lead-based paint requirements at 24 CFR part 35.
(iv) Accessibility. The grantee's standards must require the
housing to meet the accessibility requirements in 24 CFR part 8, which
implements section 504 of the Rehabilitation Act of 1973 (29 U.S.C.
794), and Titles II and III of the Americans with Disabilities Act (42
U.S.C. 12131-12189) implemented at 28 CFR parts 35 and 36, as
applicable. ``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). Rehabilitation may include improvements that are not required by
regulation or statute that permit use by a person with disabilities.
(v) [Reserved].
(vi) Disaster mitigation. Where relevant, the grantee's standards
must require the housing to be improved to mitigate the impact of
potential disasters (e.g., earthquake, hurricanes, flooding, and
wildfires) in accordance with State and local codes, ordinances, and
requirements, or such other requirements as HUD may establish.
(vii) State and local codes, ordinances, and zoning requirements.
The grantee's standards must require the housing to meet all applicable
State and local codes, ordinances, and requirements or, in the absence
of a State or local building code, the International Existing Building
Code of the International Code Council.
(viii) Uniform Physical Condition Standards. The standards of the
grantee must be such that, upon completion, the HTF-assisted project
and units will be decent, safe, sanitary, and in good repair as
described in 24 CFR 5.703. HUD will establish the minimum deficiencies
that must be corrected under the grantee's rehabilitation standards
based on inspectable items and inspected areas from HUD-prescribed
physical inspection procedures (Uniform Physical Conditions Standards)
pursuant to 24 CFR 5.705.
(ix) Capital Needs Assessments. For multifamily rental housing
projects of 26 or more total units, the grantee must determine all work
that will be performed in the rehabilitation of the housing and the
long-term physical needs of the project through a capital needs
assessment of the project.
(2) Construction documents and cost estimates. The grantee must
ensure that the work to be undertaken will meet the grantee's
rehabilitation standards. The construction documents (i.e., written
scope of work to be performed) must be in sufficient detail to
establish the basis for a uniform inspection of the housing to
determine compliance with the grantee's standards. The grantee must
review and approve a written cost estimate for rehabilitation after
determining that costs are reasonable.
(3) Frequency of inspections. The grantee must conduct an initial
property inspection to identify the deficiencies that must be
addressed. The grantee must conduct progress and final inspections to
determine that work was done in accordance with work write-ups.
(c) Acquisition of standard housing. (1) Existing housing that is
acquired with HTF assistance for rental housing, and that was newly
constructed or rehabilitated less than 12 months before the date of
commitment of HTF funds, must meet the property standards of paragraph
(a) or paragraph (b) of this section, as applicable, for new
construction and rehabilitation projects. The grantee must document
this compliance based upon a review of approved building plans and
Certificates of Occupancy, and an inspection that is conducted no
earlier than 90 calendar days before the date of commitment of HTF
assistance.
[[Page 5230]]
(2) All other existing housing that is acquired with HTF assistance
for rental housing must meet the rehabilitation property standards
requirements of paragraph (b) of this section. The grantee must
document this compliance based upon an inspection that is conducted no
earlier than 90 calendar days before the date of commitment of HTF
assistance. If the property does not meet these standards, HTF funds
cannot be used to acquire the property unless it is rehabilitated to
meet the standards of paragraph (b) of this section.
(3) Existing housing that is acquired for homeownership (e.g.,
downpayment assistance) must be decent, safe, sanitary, and in good
repair. The grantee must establish standards to determine that the
housing is decent, safe, sanitary, and in good repair. At minimum, the
standards must provide that the housing meets all applicable State and
local standards and code requirements and the housing does not contain
the specific deficiencies proscribed by HUD based on the applicable
inspectable items and inspected areas in HUD-prescribed physical
inspection procedures (Uniform Physical Condition Standards) issued
pursuant to 24 CFR 5.705. The grantee must inspect the housing and
document this compliance based upon an inspection that is conducted no
earlier than 90 calendar days before the date of commitment of HTF
assistance. If the housing does not meet these standards, the housing
must be rehabilitated to meet the standards of this paragraph (c)(3) or
it cannot be assisted with HTF funds.
(d) Manufactured housing. Construction of all manufactured housing
(including manufactured housing that replaces an existing substandard
unit under the definition of ``reconstruction'') must meet the
Manufactured Home Construction and Safety Standards codified at 24 CFR
part 3280. These standards preempt State and local codes which are not
identical to the Federal standards for the new construction of
manufactured housing. The grantees providing HTF funds to assist
manufactured housing units 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 of manufactured housing units. All new manufactured
housing and all manufactured housing that replaces an existing
substandard unit under the definition of ``reconstruction'' must be on
a permanent foundation that meets the requirements for foundation
systems as set forth in 24 CFR 203.43f(c)(i). All new manufactured
housing (and all manufactured housing that replaces an existing
substandard unit under the definition of ``reconstruction'') must, at
the time of project completion, be connected to permanent utility hook-
ups 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.
In HTF-funded rehabilitation of existing manufactured housing the
foundation and anchoring must meet all applicable State and local
codes, ordinances, and requirements or in the absence of local or State
codes, the Model Manufactured Home Installation Standards at 24 CFR
part 3285. Manufactured housing that is rehabilitated using HTF funds
must meet the property standards requirements in paragraph (b) of this
section, as applicable. The grantee must document this compliance in
accordance with inspection procedures that the grantee has established
pursuant to Sec. 92.301, as applicable.
(e) Ongoing property condition standards: Rental housing--(1)
Ongoing property standards. The grantee must establish property
standards for rental housing (including manufactured housing) that
apply throughout the affordability period. 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 HTF rental projects. The grantee's ongoing property
standards must address each of the following:
(i) At a minimum, the grantee's ongoing property standards must
include all inspectable items and inspectable areas specified by HUD
based on the HUD physical inspection procedures (Uniform Physical
Condition Standards (UPCS)) prescribed by HUD pursuant to 24 CFR 5.705.
(ii) Health and safety. The grantee's standards must require the
housing to be free of all health and safety defects. The standards must
identify life-threatening deficiencies that the owner must immediately
correct and the time frames for addressing these deficiencies.
(iii) Lead-based paint. The grantee's standards must require the
housing to meet the lead-based paint requirements in 24 CFR part 35.
(2) Inspections. The grantee must undertake ongoing property
inspections, in accordance with Sec. 93.404.
(3) 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.
(4) Inspection procedures. The grantee must establish written
inspection procedures. The procedures must include detailed inspection
checklists, description of how and by whom inspections will be carried
out, and procedures for training and certifying qualified inspectors.
The procedures must also describe how frequently the property will be
inspected, consistent with section Sec. 93.404(d).
(f) Environmental provisions--(1) New construction projects
environmental requirements--(i) Historic preservation--(A) Standards.
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, unless the project
activities 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 relevant Secretary of the Interior's Professional
Qualification Standards;
(B) Archaeological resources. If archaeological resources or human
remains are discovered on the project site during construction, the
grantee must consult with affected tribes and/or descendant communities
and comply with the Native American Graves Protection and Repatriation
Act (25 U.S.C. 3001-3013), State law and/or local ordinance (e.g.,
State unmarked burial law).
(ii) Farmland. Project activities must not result in the conversion
of unique, prime, or statewide or locally significant agricultural
properties to urban uses.
(iii) 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.
(iv) 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.
(v) 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.
(vi) Floodplains. Except as modified below, definitions for terms
used below can be found at 24 CFR part 55.
(A) Construction and other activities in the 100-year floodplain
are to be avoided when practicable. If there are no practicable
alternatives to new
[[Page 5231]]
construction or substantial improvement in the 100-year floodplain, the
structure must be elevated at least 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). When FEMA provides
interim flood hazard data, such as Advisory Base Flood Elevations
(ABFE) or preliminary maps or studies, the latest of these sources
shall be used.
(B) No HTF assistance may be approved with respect to:
(1) Any action, other than a functionally dependent use, located in
a floodway;
(2) Any new construction critical action located in a coastal high
hazard area, 100- or 500-year floodplain; or
(3) Any non-critical new construction action in a coastal high
hazard area, unless the action is reconstruction following destruction
caused by a disaster and is designed for location in a coastal high
hazard area consistent with the FEMA National Flood Insurance Program
requirements for V-Zones.
(vii) Wetlands. (A) 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.
(B) 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 wetland 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.).
(viii) 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.
(ix) Contamination. All properties assisted with HTF funds must 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 use of the property.
(A) All proposed multifamily (more than four housing units) HTF
projects require a Phase I Environmental Site Assessment (ESA-ASTM). If
the Phase I ESA identifies recognized environmental concerns (RECs), a
Phase II (ESA-ASTM) will be required. ASTM reports shall be prepared in
accordance with the most current ASTM standard. Single family housing
does not require a Phase I ESA.
(B) 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 use of the property.
(x) Noise. (A) Internal noise levels: All activities will be
developed to ensure an interior noise level of no more than 45 decibels
(dB).
(B) External noise levels:
(1) Project sites exposed to less than or equal to 65 dB of
environmental noise are acceptable.
(2) Sites between 65 dB and less than 75 dB are acceptable with
mitigation (e.g., noise walls, careful site planning) that result in an
interior standard of 45 dB.
(3) Locations with environmental noise levels of 75 dB or greater
may not have noise sensitive outdoor uses (e.g., picnic areas, tot
lots, balconies, or patios) and require sound attenuation in the
building shell to achieve the 45 dB interior standard.
(xi) Endangered species. The grantee must avoid all actions which
could jeopardize the continued existence of any endangered or
threatened species, as designated by the 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.
(xii) Wild and scenic rivers. The grantee 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.
(xiii) Safe drinking water. Projects with a potable water system
must use only lead-free pipes, solder, and flux.
(xiv) Sole-source aquifers. Project activities should avoid sites
and activities that have the potential to contaminate sole source
aquifer areas (SSAs). 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, EPA must review the project. EPA review is designed to reduce the
risk of ground water contamination that could pose a health hazard to
those who use it.
(2) Rehabilitation projects environmental requirements--(i)
Historic preservation. (A) 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, unless the project activities 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 relevant Secretary of
the Interior's Professional Qualification Standards;
(B) Archaeological resources. If archaeological resources or human
remains are discovered on the project site during construction or
rehabilitation, the grantee must consult with affected tribes and/or
descendant communities and comply with the Native American Graves
Protection and Repatriation Act (25 U.S.C. 3001-3013), State law, and/
or local ordinance (e.g., State unmarked burial law).
(ii) Farmland. Project activities must not result in the conversion
of unique, prime, or locally significant agricultural properties to
urban uses.
(iii) 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.
(iv) 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.
(v) Coastal zone management. Development must be consistent with
the appropriate State coastal zone management plan. Plans are available
[[Page 5232]]
from the local coastal zone management agency.
(vi) Floodplains. Except as modified below, definitions for terms
used below can be found at 24 CFR part 55.
(A) 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). When FEMA provides interim flood hazard data, such as Advisory
Base Flood Elevations (ABFE) or preliminary maps or studies, the latest
of these sources shall be used.
(B) No HTF assistance may be approved with respect to:
(1) Any action, other than functionally dependent uses, located in
a floodway;
(2) Any critical action located in a coastal high hazard area, 100-
or 500-year floodplain; or
(3) 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. ``Any non-critical action in a coastal high
hazard area, unless the action is reconstruction following destruction
caused by a disaster and is designed for location in a coastal high
hazard area consistent with the FEMA National Flood Insurance Program
requirements for V-Zones.''
(vii) 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 wetland
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.).
(viii) 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.
(ix) Contamination. All properties assisted with HTF funds must 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 use of the property:
(A) All proposed multifamily (more than four housing units) HTF
project activities require a Phase I Environmental Site Assessment
(ESA--ASTM). If the Phase I ESA identifies recognized environmental
concerns (RECs), a Phase II (ESA-ASTM) will be required. ASTM reports
shall be prepared in accordance with the most current ASTM standard.
Single family housing does not require a Phase I ESA.
(B) 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 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.
(x) Noise--(A) Internal noise levels. All activities will be
developed to ensure an interior noise level of no more than45 decibels
(dB).
(B) [Reserved].
(xi) Endangered species. (A) The grantee 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
Service as endangered or threatened.
(B) The grantee must avoid all actions that adversely modify the
critical habitat of such species.
(xii) Wild and scenic rivers. The grantee 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.
(xiii) Safe drinking water. Projects with a potable water system
must use only lead-free pipes, solder, and flux.
(xiv) 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, which could
pose a health hazard to those who use it.
(3) Acquisition projects environmental requirements. (i)(A)
Existing housing that is acquired with HTF funds, and has been newly
constructed or rehabilitated less than 12 months before the commitment
of HTF funds must meet the property standards at paragraph (f)(1) of
this section.
(B) All other existing housing that is acquired with HTF assistance
must meet the property standards requirements of paragraph (f)(2) of
this section.
(ii) If under paragraph (f)(3)(i)(A) or paragraph (B) of this
section, the property does not meet these standards, with the exception
of the noise standards in paragraph (f)(2) of this section, HTF funds
cannot be used to acquire the property.
(4) Manufactured housing environmental requirements. Manufactured
housing is subject to the environmental standards in paragraph (f)(1)
of this section for new construction or paragraph (f)(2) of this
section for rehabilitation, as applicable. If an existing property does
not meet these standards, HTF funds cannot be used to acquire the
property unless it is rehabilitated to meet the standards in paragraph
(f)(2), as applicable, with the exception of noise standards in
paragraph (f)(2)(x).
Sec. 93.302 Qualification as affordable housing: rental housing.
(a) Eligible tenants. The HTF-assisted units in a rental housing
project must be occupied by households who are eligible families in
accordance with the income targeting requirements in Sec. 93.250.
(b) Rent limitations--(1)(i) Extremely low-income tenants. The HTF
rent plus utilities of an extremely low-income tenant 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
[[Page 5233]]
determined by HUD, with adjustments for the number of bedrooms in the
unit. HUD will publish the HTF rent limits on an annual basis.
(ii) Very-low income tenants. The HTF rent plus utilities of a very
low-income tenant shall not exceed 30 percent of the income of a family
whose annual income equals 50 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, and the tenant pays as a contribution toward rent not more
than 30 percent of the tenant's adjusted income, 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 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) HTF-assisted 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 a deed restriction,
covenant running with the land, an agreement restricting the use of the
property, or other mechanisms approved by HUD under which the grantee
and beneficiaries have the right to 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 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 Sec. 93.403.
(e) Tenant income. (1) The income of each tenant must be determined
initially in accordance with Sec. 93.151. 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
Sec. 93.151(c) selected by the grantee.
(2) An owner who re-examines a tenant's annual income through a
statement and certification in accordance with Sec. 93.151(a)(1)(iii)
must examine the source documentation of the income of each tenant
every 6th year of the affordability period, except that, for units that
receive project-based assistance, the owner must re-examine the
tenant's annual income in accordance with the project-based assistance
rules. Otherwise, an owner who accepts the tenant's statement and
certification in accordance with Sec. 93.151(a)(1)(iii) 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 Sec. 93.303.
(i) Onsite inspections and financial oversight. See Sec. 93.404(d)
for the grantee's ongoing responsibilities for onsite inspections and
financial oversight.
Sec. 93.303 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 one year, unless by mutual agreement between the tenant
and the owner a shorter period is specified.
(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; and
[[Page 5234]]
(9) Mandatory supportive services. Agreement by the tenant to
accept supportive services that are offered.
(c) Termination of tenancy. 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; for violation of applicable Federal,
State, or local law; or for other good cause. Good cause does not
include an increase in the tenant's income. 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 Sec. 93.350. The owner must
adopt and follow written tenant selection policies and criteria that:
(1) Limit the housing to income-eligible families;
(2) Are reasonably related to the applicants' ability to perform
the obligations of the lease (i.e., to pay the rent, not to damage the
housing; not to interfere with the rights and quiet enjoyment of other
tenants);
(3) 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).
(i) Any limitation or preference must not violate nondiscrimination
requirements in Sec. 93.350. A limitation or preference 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), and the limit or preference
is tailored to serve that segment of the population.
(ii) If a project does not receive funding from a Federal program
that limits eligibility to a particular segment of the population, the
project may have a limitation or preference for persons with
disabilities who need services offered at a project only if:
(A) The limitation or preference is limited to the population of
families (including individuals) with disabilities that significantly
interfere with their ability to obtain and maintain housing;
(B) Such families will not be able to obtain or maintain themselves
in housing without appropriate supportive services; and
(C) Such services cannot be provided in a nonsegregated setting.
The families must not be required to accept the services offered at the
project. In advertising the project, the owner may advertise the
project as offering services for a particular type of disability;
however, the project must be open to all otherwise eligible persons
with disabilities who may benefit from the services provided in the
project.
(4) Do not exclude an applicant with a voucher under the Section 8
Tenant-Based Assistance: Housing Choice Voucher program (24 CFR part
982) or an applicant participating in a HOME tenant-based rental
assistance program (24 CFR part 92) because of the status of the
prospective tenant as a holder of such voucher or comparable HOME
tenant-based assistance document.
(5) Provide for the selection of tenants from a written waiting
list in the chronological order of their application, insofar as is
practicable; and
(6) Give prompt written notification to any rejected applicant of
the grounds for any rejection.
Sec. 93.304 Qualification as affordable housing: Homeownership.
(a) Homeownership activities. Housing that is for purchase by a
first-time homebuyer must meet the affordability requirements of this
section.
(b) Single family housing. The housing must be single-family
housing, as defined at Sec. 93.2.
(c) Modest housing. The housing must be modest housing, in
accordance with Sec. 93.305.
(d) First-time homebuyer and income requirements. The housing must
be acquired by a first-time homebuyer whose family qualifies as an
income-eligible family in accordance with Sec. 93.251 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 has
been certified in accordance with section 106(e) of the Housing and
Urban Development Act of 1968 (12 U.S.C. 1701x (e)).
(e) Period of affordability. The HTF-assisted housing must meet the
affordability requirements for not less than 30 years.
(f) Resale or recapture requirements. The grantee must establish
the resale or recapture requirements that comply with the standards of
Sec. 93.305 and set forth the requirements in its consolidated plan.
HUD must determine that they are appropriate and must specifically
approve them in writing.
(g) Special considerations for single family 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 Sec. 93.302 apply
to assisted rental units, except that the grantee must impose resale
restrictions on all assisted units (owner-occupied and rental units) in
the single-family 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 Sec. 93.302 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 lease-purchase 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 Sec. 93.302 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 income-eligible family at
the time the contract is signed.
(j) If there is no ratified sales contract with an eligible
homebuyer for the housing within 9 months of the date of completion of
construction or rehabilitation, the housing must be
[[Page 5235]]
rented to an eligible tenant in accordance with Sec. 93.301.
(k) 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 first-time 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 development subsidy amount established
pursuant to Sec. 93.300. As an alternative to charging the cost to the
HTF program under Sec. 93.201, the grantee may charge the cost to the
HTF program under Sec. 93.302 as a reasonable administrative cost of
its HTF program, so that the additional HTF funds for the housing are
not subject to the maximum per-unit subsidy amount.
(l) Agreements with lending institutions. (1) The grantee may
provide homeownership assistance through written agreements with for-
profit 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). The grantee must determine that the fees and other
amounts charged to the family by the lender for the first mortgage
financing are reasonable. Reasonable administrative costs of the HTF
homeownership assistance can be charged to the HTF program as a project
cost. If the grantee requires lenders to pay a fee to participate in
the HTF program, the fee is program income to the HTF program.
(m) 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.
Sec. 93.305 Qualification as affordable housing: modest housing
requirements for homeownership; resale or recapture requirements.
(a) Housing that is for acquisition by a family pursuant to Sec.
93.304 must be modest housing.
(1) The housing must be modest housing as follows: The housing has
a purchase price for the type of single family housing that does not
exceed 95 percent of the median purchase price for the area for newly
constructed or standard housing. The grantee must use the HTF
affordable homeownership limits provided by HUD for newly constructed
housing and for existing housing. HUD will provide limits for
affordable newly constructed housing based on 95 percent of the median
purchase price for the area using Federal Housing Administration (FHA)
single family mortgage program data for newly constructed housing, with
a minimum limit based on 95 percent of the U.S. median purchase price
for new construction for nonmetropolitan areas. HUD will provide limits
for affordable existing housing based on 95 percent of the median
purchase price for the area using FHA single family mortgage program
data for existing housing data and other appropriate data that are
available nation-wide for sales of existing housing, with a minimum
limit based on 95 percent of the state-wide nonmetropolitan area median
purchase price using these data. For States with no non-metropolitan
areas, the minimum purchase price is defined as the lesser of the State
non-metro or the United States non-metro median.
(2) In lieu of the limits provided by HUD, the grantee may
determine 95 percent of the median area purchase price for single
family housing in the jurisdiction annually, as follows: The grantee
must set forth the price for different types of single family housing
for the jurisdiction. The grantee may determine separate limits for
existing housing and newly constructed housing. For housing located
outside of metropolitan areas, a grantee may aggregate sales data from
more than one county, if the counties are contiguous and similarly
situated. The following information must be included in the annual
action plan of the consolidated plan submitted to HUD for review and
updated in each action plan:
(i) The 95 percent of median area purchase price must be
established in accordance with a market analysis that ensured that a
sufficient number of recent housing sales are included in the survey.
(ii) Sales must cover the requisite number of months based on
volume: For 500 or more sales per month, a one- month reporting period;
for 250 through 499 sales per month, a 2-month reporting period; for
less than 250 sales per month, at least a 3-month reporting period. The
data must be listed in ascending order of sales price.
(iii) The address of the listed properties must include the
location within the grantee. Lot, square, and subdivision data may be
substituted for the street address.
(iv) The housing sales data must reflect all, or nearly all, of the
one- family house sales in the entire area.
(v) To determine the median, take the middle sale on the list if an
odd number of sales, and if an even number, take the higher of the
middle numbers and consider it the median. After identifying the median
sales price, the amount should be multiplied by 0.95 to determine 95
percent of the median area purchase price.
(b) Resale or recapture requirements. The grantee must establish
the resale or recapture requirements that comply with the standards of
this section and set forth the requirements in its consolidated plan.
The HTF-assisted housing must meet the affordability requirements for
not less than 30 years if resale restrictions are used. If recapture
restrictions are used, the affordability periods are based on the
amount of HTF funds per unit as follows:
------------------------------------------------------------------------
Minimum period of
Homeownership assistance HTF amount per-unit affordability in
years
------------------------------------------------------------------------
Under $30,000........................................ 10
$30,000-$50,000...................................... 20
Over $50,000......................................... 30
------------------------------------------------------------------------
(1) Resale. 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 the housing is made
available for subsequent purchase only to a buyer whose family
qualifies as a very low-income family and will use the property as the
family's principal residence. The resale requirement must also ensure
that 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 ensure that the housing will remain affordable
to a reasonable range of income-eligible homebuyers. The grantee must
specifically define ``fair
[[Page 5236]]
return on investment'' and ``affordability to a reasonable range of
very low-income homebuyers,'' and specifically address how it will make
the housing affordable to an income eligible homebuyer in the event
that the resale price necessary to provide fair return is not
affordable to the subsequent buyer. Deed restrictions, covenants
running with the land, or other mechanisms approved by HUD must be used
as the mechanism to impose the resale requirements. The affordability
restrictions may terminate upon occurrence of any of the following
termination events: foreclosure, transfer in lieu of foreclosure, or
assignment of an FHA insured mortgage to HUD. 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.
(2) Recapture. (i) Recapture provisions must ensure that the
grantee recoups all or a portion of the HTF assistance to the
homebuyers, if the housing does not continue to be the principal
residence of the family for the duration of the period of
affordability. The grantee may structure its recapture provisions based
on its program design and market conditions. Recapture provisions may
permit the subsequent homebuyer to assume the HTF assistance (subject
to the HTF requirements for the remainder of the period of
affordability) if the subsequent homebuyer is income-eligible, and no
additional HTF assistance is provided.
(ii) The following options for recapture requirements are
acceptable to HUD. The grantee may adopt, modify, or develop its own
recapture requirements for HUD approval. In establishing its recapture
requirements, the grantee is subject to the limitation that, when the
recapture requirement is triggered by a sale (voluntary or involuntary)
of the housing unit, the amount recaptured cannot exceed the net
proceeds, if any. The net proceeds are the sales price minus superior
loan repayment (other than HTF funds) and any closing costs.
(A) Recapture entire amount. The grantee may recapture the entire
amount of the HTF assistance from the homeowner.
(B) Reduction during affordability period. The grantee may reduce
the HTF assistance amount to be recaptured on a prorata basis for the
time the homeowner has owned and occupied the housing measured against
the required affordability period.
(C) Shared net proceeds. If the net proceeds are not sufficient to
recapture the full HTF assistance (or a reduced amount as provided for
in this section) plus enable the homeowner to recover the amount of the
homeowner's downpayment and any capital improvement investment made by
the owner since purchase, the grantee may share the net proceeds. The
net proceeds are the sales price minus loan repayment (other than HTF
funds) and closing costs. The net proceeds may be divided
proportionally as set forth in the following mathematical formulas:
[GRAPHIC] [TIFF OMITTED] TR30JA15.010
(D) Owner investment returned first. The grantee may permit the
homebuyer to recover the homebuyer's entire investment (downpayment and
capital improvements made by the owner since purchase) before
recapturing the HTF assistance.
(E) Amount subject to recapture. The HTF assistance that is subject
to recapture is based on the amount of HTF assistance that enabled the
homebuyer to buy the dwelling unit. This includes any HTF assistance
that reduced the purchase price from fair market value to an affordable
price, but excludes the amount between the cost of producing the unit
and the market value of the property (i.e., the development subsidy).
The recaptured funds must be used to carry out HTF-eligible activities
in accordance with the requirements of this part. If the HTF assistance
is only used for the development subsidy and therefore not subject to
recapture, the resale option must be used.
Subpart H--Other Federal Requirements
Sec. 93.350 Other federal requirements and nondiscrimination;
affirmative marketing.
(a) General. The Federal requirements set forth in 24 CFR part 5,
subpart A, are applicable to participants in the HTF program. The
requirements of this subpart include: nondiscrimination and equal
opportunity; disclosure requirements; debarred, suspended, or
ineligible contractors; and drug-free workplace.
(b) Affirmative marketing. (1) Each grantee must adopt and follow
affirmative marketing procedures and requirements for rental projects
containing five or more HTF-assisted housing units and for
homeownership assistance programs. Affirmative marketing steps consist
of actions to provide information and otherwise attract eligible
persons in the housing market area to the available housing without
regard to race, color, national origin, sex, religion, familial status,
or disability. If a grantee's written agreement with the project owner
permits the rental housing project to limit tenant eligibility or to
have a tenant preference in accordance with Sec. 93.303(d)(3), the
grantee must have affirmative marketing procedures and requirements
that apply in the context of the limited/preferred tenant eligibility
for the project.
(2) The affirmative marketing requirements and procedures adopted
must include:
(i) Methods for informing the public, owners, and potential tenants
about Federal fair housing laws and the grantee's affirmative marketing
policy (e.g., the use of the Equal Housing Opportunity logotype or
slogan in press releases and solicitations for owners, and written
communication to fair housing and other groups);
(ii) Requirements and practices the grantee and owner must adhere
to in order to carry out the grantee's affirmative marketing procedures
and requirements (e.g., use of commercial media, use of community
contacts, use of the Equal Housing Opportunity
[[Page 5237]]
logotype or slogan, and display of fair housing poster);
(iii) Procedures to be used by the grantee and owners to inform and
solicit applications from persons in the housing market area who are
not likely to apply for the rental housing or homeownership assistance
program without special outreach (e.g., through the use of community
organizations, places of worship, employment centers, fair housing
groups, or housing counseling agencies);
(iv) Records that will be kept describing actions taken by the
grantee and owners to affirmatively market rental housing units and
homeownership assistance program and records to assess the results of
these actions; and
(v) A description of how the grantee will annually assess the
success of affirmative marketing actions and what corrective actions
will be taken where affirmative marketing requirements are not met.
(3) A grantee that subgrants HTF funds to subgrantees must require
each subgrantee to either follow the grantee's procedures and
requirements or adopt its own affirmative marketing procedures and
requirements that meet this section.
Sec. 93.351 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.
Sec. 93.352 Displacement, relocation, and acquisition.
(a) Minimizing displacement. Consistent with the other goals and
objectives of this part, the grantee must ensure that it has taken all
reasonable steps to minimize the displacement of persons (families,
individuals, businesses, nonprofit organizations, and farms) as a
result of a project assisted with HTF funds. To the extent feasible,
displaced residential tenants must be provided a reasonable opportunity
to lease and occupy a suitable, decent, safe, sanitary, and affordable
dwelling unit in the building/complex upon completion of the project.
(b) Temporary relocation. The following policies cover residential
tenants who will not be required to move permanently but who must
relocate temporarily for the project. Such tenants must be provided:
(1) Reimbursement for all reasonable out-of-pocket expenses
incurred in connection with the temporary relocation, including the
cost of moving to and from the temporarily occupied housing and any
increase in monthly rent/utility costs.
(2) Appropriate advisory services, including reasonable advance
written notice of:
(i) The date and approximate duration of the temporary relocation;
(ii) The location of the suitable, decent, safe, and sanitary
dwelling to be made available for the temporary period;
(iii) The terms and conditions under which the tenant may lease and
occupy a suitable, decent, safe, and sanitary dwelling in the building/
complex upon completion of the project; and
(iv) The provisions of paragraph (b)(1) of this section.
(c) Relocation assistance for displaced persons--(1) General. A
displaced person (defined in paragraph (c)(2) of this section) must be
provided relocation assistance at the levels described in, and in
accordance with the requirements of the Uniform Relocation Assistance
and Real Property Acquisition Policies Act of 1970 (URA) (42 U.S.C.
4201-4655) and 49 CFR part 24. A ``displaced person'' must be advised
of his or her rights under the Fair Housing Act and, if the comparable
replacement dwelling used to establish the amount of the replacement
housing payment to be provided to a minority person is located in an
area of minority concentration, the minority person also must be given,
if possible, referrals to comparable and suitable, decent, safe, and
sanitary replacement dwellings not located in such areas.
(2) Displaced person. (i) For purposes of this paragraph (c), the
term ``displaced person'' means a person (family individual, business,
nonprofit organization, or farm, including any corporation, partnership
or association) that moves from real property or moves personal
property from real property, permanently, as a direct result of
acquisition, rehabilitation, or demolition for a project assisted with
HTF funds. This includes any permanent, involuntary move for an
assisted project, including any permanent move from the real property
that is made:
(A) After notice by the owner to move permanently from the
property, if the move occurs on or after:
(1) The date of the submission of an application to the grantee or
HUD, if the applicant has site control and the application is later
approved; or
(2) The date the grantee approves the applicable site, if the
applicant does not have site control at the time of the application; or
(B) Before the date described in paragraph (c)(2)(i)(A) of this
section, if the grantee or HUD determines that the displacement
resulted directly from acquisition, rehabilitation, or demolition for
the project; or
(C) By a tenant-occupant of a dwelling unit, if any one of the
following three situations occurs:
(1) The tenant moves after execution of the agreement covering the
acquisition, rehabilitation, or demolition and the move occurs before
the tenant is provided written notice offering the tenant the
opportunity to lease and occupy a suitable, decent, safe, and sanitary
dwelling in the same building/complex upon completion of the project
under reasonable terms and conditions. Such reasonable terms and
conditions must include a term of at least one year at a monthly rent
and estimated average monthly utility costs that do not exceed the
greater of:
(i) The tenant's monthly rent before such agreement and estimated
average monthly utility costs; or
(ii) The total tenant payment, as determined under 24 CFR 5.628, if
the tenant is low-income, or 30 percent of gross household income, if
the tenant is not low-income;
(2) The tenant is required to relocate temporarily, does not return
to the building/complex, and either:
(i) The tenant is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation;
or
(ii) Other conditions of the temporary relocation are not
reasonable; or
(3) The tenant is required to move to another dwelling unit in the
same building/complex but is not offered reimbursement for all
reasonable out-of-pocket expenses incurred in connection with the move,
or other conditions of the move are not reasonable.
(ii) Notwithstanding paragraph (c)(2)(i) of this section, a person
does not qualify as a ``displaced person'' if:
(A) The person has been evicted for cause based upon a serious or
repeated violation of the terms and conditions of the lease or
occupancy agreement, violation of applicable Federal, State or local
law, or other good cause, and the grantee determines that the eviction
was not undertaken for the purpose of evading the obligation to provide
relocation assistance. The effective date of any termination or refusal
to renew must be preceded by at least 30 calendar days advance written
notice to the tenant specifying the grounds for the action.
(B) The person moved into the property after the submission of the
application, but before signing a lease and commencing occupancy, was
provided written notice of the project, its possible impact on the
person (e.g., the person may be displaced,
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temporarily relocated, incur a rent increase), and the fact that the
person would not qualify as a ``displaced person'' (or for any
assistance under this section) as a result of the project;
(C) The person is ineligible under 49 CFR 24.2(g)(2); or
(D) HUD determines that the person was not displaced as a direct
result of acquisition, rehabilitation, or demolition for the project.
(iii) The grantee may, at any time, ask HUD to determine whether a
displacement is or would be covered by this rule.
(3) Initiation of negotiations. For purposes of determining the
formula for computing replacement housing assistance to be provided
under this paragraph (c) to a tenant displaced from a dwelling as a
direct result of private-owner rehabilitation, demolition, or
acquisition of the real property, the term ``initiation of
negotiations'' means the execution of the agreement covering the
acquisition, rehabilitation, or demolition.
(d) Optional relocation assistance. The grantee may provide
relocation payments and other relocation assistance to families,
individuals, businesses, nonprofit organizations, and farms displaced
by a project assisted with HTF funds where the displacement is not
subject to paragraph (c) of this section. The grantee may also provide
relocation assistance to persons covered under paragraph (c) of this
section beyond that required. For any such assistance that is not
required by State or local law, the grantee must adopt a written policy
available to the public that describes the optional relocation
assistance that it has elected to furnish and provides for equal
relocation assistance within each class of displaced persons.
(e) Real property acquisition requirements. The acquisition of real
property for a project is subject to the URA and the requirements of 49
CFR part 24, subpart B.
(f) Appeals. A person who disagrees with the grantee's
determination concerning whether the person qualifies as a displaced
person, or the amount of relocation assistance for which the person may
be eligible, may file a written appeal of that determination with the
grantee.
Sec. 93.353 Conflict of interest.
(a) Applicability of 2 CFR 200.318. In the procurement of property
and services by grantees and subgrantees, the conflict of interest
provisions in 2 CFR 200.318 apply. In all cases not governed by 2 CFR
200.318, the provisions of this section apply.
(b) Conflicts prohibited. No persons described in paragraph (c) of
this section who exercise or have exercised any functions or
responsibilities with respect to activities assisted with HTF funds or
who are in a position to participate in a decision-making process or
gain inside information with regard to these activities may obtain a
financial interest or financial benefit from a HTF-assisted activity,
or have a financial interest in any contract, subcontract, or agreement
with respect to the HTF-assisted activity, or the proceeds from such
activity, either for themselves or those with whom they have business
or immediate family ties, during their tenure or for one year
thereafter. Immediate family ties include (whether by blood, marriage,
or adoption) the spouse, parent (including a stepparent), child
(including a stepchild), brother, sister (including a stepbrother or
stepsister), grandparent, grandchild, and in-laws of a covered person.
(c) Persons covered. The conflict of interest provisions of
paragraph (b) of this section apply to any person who is an employee,
agent, consultant, officer, or elected official or appointed official
of the grantee or subgrantee.
(d) Exceptions: Threshold requirements. Upon the written request of
the grantee, HUD may grant an exception to the provisions of paragraph
(b) of this section on a case-by-case basis when it determines that the
exception will serve to further the purposes of the HTF and the
effective and efficient administration of the grantee's program or
project. An exception may be considered only after the grantee has
provided the following:
(1) A disclosure of the nature of the conflict, accompanied by an
assurance that there has been public disclosure of the conflict and a
description of how the public disclosure was made; and
(2) An opinion of the grantee's attorney that the interest for
which the exception is sought would not violate State or local law.
(e) Factors to be considered for exceptions. In determining whether
to grant a requested exception after the grantee has satisfactorily met
the requirements of paragraph (d) of this section, HUD will consider
the cumulative effect of the following factors, where applicable:
(1) Whether the exception would provide a significant cost benefit
or an essential degree of expertise to the program or project which
would otherwise not be available;
(2) Whether the person affected is a member of a group or class of
income eligible persons intended to be the beneficiaries of the
assisted activity, and the exception will permit such person to receive
generally the same interests or benefits as are being made available or
provided to the group or class;
(3) Whether the affected person has withdrawn from his or her
functions or responsibilities, or the decisionmaking process with
respect to the specific assisted activity in question;
(4) Whether the interest or benefit was present before the affected
person was in a position as described in paragraph (c) of this section;
(5) Whether undue hardship will result either to the grantee or the
person affected when weighed against the public interest served by
avoiding the prohibited conflict; and
(6) Any other relevant considerations.
(f) Recipient--(1) General. No recipient assisted with HTF funds
(or officer, employee, agent, elected or appointed official, or
consultant of recipient or immediate family member or immediate family
member of an officer, employee, agent, elected or appointed official,
or consultant of a recipient) whether private, for-profit or nonprofit,
may occupy a HTF-assisted affordable housing unit in a project during
the required period of affordability specified in Sec. 93.302(e) or
Sec. 93.304. This provision does not apply to an employee or agent of
the recipient who occupies a housing unit as the project manager or
maintenance worker.
(2) Exceptions. Upon written request of a recipient, the grantee
(or subgrantee, if authorized by the grantee) may grant an exception to
the provisions of paragraph (f)(1) of this section on a case-by-case
basis when it determines that the exception will serve to further the
purposes of the HTF program and the effective and efficient
administration of the recipient's HTF-assisted project. In determining
whether to grant a requested exception, the grantee shall consider the
following factors:
(i) Whether the person receiving the benefit is a member of a group
or class of low-income persons intended to be the beneficiaries of the
assisted housing, and the exception will permit such person to receive
generally the same interests or benefits as are being made available or
provided to the group or class;
(ii) Whether the person has withdrawn from his or her functions or
responsibilities, or the decisionmaking process with respect to the
specific assisted housing in question;
(iii) Whether the tenant protection requirements of Sec. 93.303
are being observed;
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(iv) Whether the affirmative marketing requirements of Sec. 93.350
are being observed and followed; and
(v) Any other factor relevant to the grantee's determination,
including the timing of the requested exception.
Sec. 93.354 Funding Accountability and Transparency Act.
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).
Sec. 92.355 Eminent domain.
No HTF funds may be used in conjunction with property taken by
eminent domain, unless eminent domain is employed only for a public
use, except that, public use shall not be construed to include economic
development that primarily benefits any private entity.
Subpart I--Program Administration
Sec. 93.400 Housing Trust Fund (HTF) accounts.
(a) General. 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 Sec. 93.403.
(2) The HTF local account must be interest-bearing.
(d) Reductions. HUD will reduce or recapture funds in the HTF
account by the amount of:
(1) Any fiscal year grant funds in the HTF Treasury account that
are not committed within 24 months after the date of HUD's execution of
the HTF grant agreement;
(2) Any fiscal year grant funds in the HTF local account that are
not expended within 5 years after the date of HUD's execution of the
HTF grant agreement;
(3) Any amounts pursuant to Sec. 93.453; and
(4) Amounts that the grantee fails to obtain and that were required
to be reimbursed or returned under Sec. 93.450.
Sec. 93.401 HTF grant agreement.
Allocated and reallocated funds will be made available pursuant to
an HTF grant agreement.
Sec. 93.402 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 part 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, operating cost assistance, and operating cost assistance
reserves. 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
calendar days of the date 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
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. 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.
(d) Project completion. (1) Complete project completion information
must be entered into the disbursement and information system, or
otherwise provided, within 120 calendar days of the date of the final
project drawdown. If satisfactory project completion information is not
provided, HUD may suspend further project set-ups 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 Sec. 93.300.
(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.
Sec. 93.403 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 part. 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
Sec. 93.404(b). 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 period specified in Sec.
93.302 or Sec. 93.304, 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.
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(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 Sec. 93.54 of this part.
Sec. 93.404 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. The performance and compliance of each
contractor and subgrantee 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 part 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 part.
(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 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 part. The
agreement between the grantee and the subgrantee must include:
(i) Use of the HTF funds. An HTF subgrantee that is a unit of
general local government must have a consolidated plan under 24 CFR
part 91, and the written agreement must require that an HTF allocation
plan to be part of the subgrantee's consolidated plan (see 24 CFR
91.220(l)(5)). The HTF allocation plan of an HTF subgrantee that is a
State agency is included in the grantee's HTF allocation plan. The
grantee may impose restrictions on the use of funds by the subgrantee,
e.g., limit to rental projects. 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 the grantee so that the grantee
can meet its commitment and expenditure deadlines in Sec. 93.400.
(iii) Audit. The agreement must state that an audit of the
subgrantee must be conducted at least annually, in accordance with
Sec. 93.406.
(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 HTF eligible activities.
(v) Uniform administrative requirements. The agreement must require
the subgrantee to comply with the requirements of 2 CFR part 200, as
described in Sec. 93.405. The agreement must include the information
in 2 CFR 200.331.
(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 Sec. Sec. 93.350-93.354 of this
part.
(vii) Affirmative marketing. The agreement must specify the
subgrantee's affirmative marketing responsibilities, in accordance with
Sec. 93.350.
(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 grant
funds from the grantee.
(ix) Reversion of assets. The agreement must specify that upon
closeout of the subgrant agreement, the subgrantee must transfer to the
grantee any HTF funds on hand 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 2 CFR 200.338, 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 in whole or in part, in accordance with 2 CFR 200.339.
(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
period of performance 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, except that:
(A) The subgrantee may charge owners of rental projects reasonable
annual fees for compliance monitoring during the period of
affordability. The fees must be based upon the average actual cost of
performing the monitoring of HTF-assisted rental projects. The basis
for determining the amount of the fee amount must be documented and the
fee must be included in the costs of the project as part of the project
underwriting;
(B) The subgrantee may charge nominal application fees (although
these fees are not an eligible HTF cost) to discourage frivolous
applications. The amount of application fees must be appropriate to the
type of application and may not create an undue impediment to an
income-eligible family's, or other potential recipient's participation
in the HTF program; and
(C) The subgrantee may charge homebuyers a fee for housing
counseling.
(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 Sec. 93.201.
(ii) Deadlines. The agreement must state the time requirements for
the commitment and expenditure of HTF
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funds and specify that remaining funds will be reduced or recaptured.
(iii) Audit. 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.
(iv) Affordability. The agreement must specify the affordability
period, require housing assisted with HTF funds to meet the
affordability requirements of Sec. 93.302 or Sec. 93.304, 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 first-time homebuyers,
in accordance with Sec. 93.304, the agreement must establish the
resale or recapture 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 Sec. 93.301 of this part, 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 Sec. 93.301 of this part for the duration of the affordability
period, and to comply with the requirements of Sec. 93.303. 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 Sec. 93.350.
(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 Sec. Sec. 93.350 through
93.355 of this part.
(vii) Affirmative marketing. The agreement must specify the
recipient's affirmative marketing responsibilities, as enumerated by
the grantee in accordance with Sec. 93.350.
(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 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 Sec. 93.302. 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 Sec. 93.302 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 Sec. 93.302. 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.
(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 Sec. 93.304, including the limitations on the value of
the property, principal residence requirement, lease-purchase terms, if
applicable, and the resale or recapture 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 or recapture restrictions. The agreement must specify
the resale or recapture restrictions established under Sec. 93.304 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. The means of enforcement and the affordability requirements in
Sec. 93.304 for resale restrictions must be imposed by deed
restrictions, covenants running with the land, use restrictions, or
other mechanisms approved by HUD under which the grantee 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 HTF-assisted project at project
completion to determine that the housing meets the property standards
of Sec. 93.301. The inspections must be in accordance with the
inspection procedures that the grantee establishes to meet the
inspection requirements of Sec. 93.301.
(2) Period of affordability. (i) During the period of
affordability, the grantee must perform onsite inspections of HTF-
assisted rental housing buildings to determine compliance with the
ongoing property standards of Sec. 93.301 and to verify the
information submitted by the owners in accordance with the requirements
of Sec. 93.302. The inspections must be in accordance with the
inspection procedures that the grantee establishes to meet the
inspection requirements of Sec. 93.301.
(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
[[Page 5242]]
established by the grantee, in accordance with the inspection
requirements of Sec. 93.301, 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. The grantee may establish a
list of non-hazardous deficiencies for which correction can be verified
by third party documentation rather than reinspection. The grantee must
adopt a more frequent inspection schedule for properties that have been
found to have health and safety violations. Life-threatening health and
safety deficiencies must be corrected immediately, in accordance with
Sec. 93.301.
(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 Sec. 93.301.
(v) Inspections must be based on a statistically valid sample of
units appropriate for the size of the HTF-assisted project, as set
forth by HUD through notice. 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 HTF-assisted units and 100 percent of the HTF-assisted
dwelling units 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 projects with 10 or more HTF-assisted
units to determine the continued financial viability of the housing and
must take actions to correct problems.
Sec. 93.405 Applicability of uniform administrative requirements,
cost principles, and audits.
The requirements of 2 CFR part 200 apply to the grantees and
subgrantees receiving HTF funds, except for the following provisions:
Sec. Sec. 200.307, 200.311, 300.328(b), 200.329, and 200.333. If there
is a conflict between the definitions in 2 CFR part 200 and 24 CFR part
93, the definitions in part 93 govern.
Sec. 93.406 Audits.
(a) Audits of the grantee and subgrantees must be conducted in
accordance with 2 CFR part 200, subpart F. The use of HTF grant funds
by the grantee must be audited not less than annually to ensure
compliance with this part. 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 the American Institute of
Certified Public Accountants.
(b) The written agreement providing HTF assistance to the recipient
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.
Sec. 93.407 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 part. 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
Sec. 93.300.
(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 Sec. 93.305, 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
Sec. 93.304, as set forth in the consolidated plan.
(v) Records documenting compliance with the 24-month commitment
deadline of Sec. 93.400(d)(l).
(vi) Records documenting compliance with the 10 percent limitation
on administrative and planning costs in accordance with Sec. 93.202.
(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 2 CFR 200.333
through 200.337, 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 Sec. 93.200(c))
where HTF funds are used to assist less than all of the units in a
multi-unit project.
(iii) Records demonstrating that each rental housing or
homeownership project meets the maximum per-unit subsidy amount
established pursuant to Sec. 93.300(a), and the subsidy layering and
underwriting evaluation in accordance with Sec. 93.300.
(iv) Records (e.g., inspection reports) demonstrating that each
project meets the property standards of Sec. 93.301 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 Sec.
93.404(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 Sec. 93.302 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
Sec. 93.303. Records must be kept for each family assisted.
(viii) Records demonstrating that the purchase price 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 Sec.
93.305.
(ix) Records demonstrating that each housing unit for a first-time
homebuyer meets the affordability requirements of Sec. 93.304 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 part, to determine that the site
meets the requirements of Sec. 93.150.
(xi) Records (written agreements) demonstrating compliance with the
written agreements requirements in Sec. 93.404.
(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 Sec. 93.400, including
deposits, disbursements, balances, supporting documentation, and any
other information required by the
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program disbursement and information system established by HUD.
(iii) Records identifying the source and application of program
income and repayments.
(iv) Records demonstrating adequate budget control, in accordance
with 2 CFR part 200, 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
part are met.
(ii) Records demonstrating compliance with the applicable uniform
administrative requirements required by Sec. 93.405.
(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
single-headed 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 and Urban
Development Act of 1968, as amended (12 U.S.C. 1701u).
(ii) Records demonstrating compliance with the affirmative
marketing procedures and requirements of Sec. 93.350.
(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 Sec.
93.352 regarding displacement, relocation, and real property
acquisition.
(v) Records supporting exceptions to the conflict-of-interest
prohibition pursuant to Sec. 93.353.
(vi) Debarment and suspension certifications required by 24
CFR5.105(c) and 2 CFR part 2424.
(vii) Records demonstrating compliance with Sec. 93.354.
(viii) Records demonstrating compliance with 2 CFR 200.321
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 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 or recapture 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 Sec. 93.352.
(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, to make audits, examinations, excerpts, and
transcripts.
Sec. 93.408 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 accordance with 24 CFR 91.520. HUD will make the
performance and management reports publicly available.
Subpart J--Performance Reviews and Sanctions
Sec. 93.450 Accountability of recipients.
The grantee shall review each recipient to determine compliance
with the requirements of this part and the terms of the written
agreement in accordance with the grantee's policies, procedures, and
systems established pursuant to Sec. 93.404(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 part 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
reduction for the entity that would otherwise apply.
Sec. 93.451 Performance reviews.
(a) General. HUD will review the performance of each grantee in
carrying out its responsibilities under this part 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
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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 part 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 Sec. 93.400; has met the
requirements of this part, particularly eligible activities, income
targeting, affordability, and property standards; has awarded the funds
in accordance with its HTF allocation plan and requirements of this
part; has reviewed its subgrantees and recipients to determine whether
they have satisfied the requirements of this part and the terms of
their written agreements; and has met its performance measures in its
consolidated plan.
Sec. 93.452 Corrective and remedial actions.
(a) General. HUD will use the procedures in this section in
conducting the performance review as provided in Sec. 93.451 and in
taking corrective and remedial actions.
(b) Performance review. (1) If HUD determines preliminarily that
the grantee has not met a requirement of this part, the grantee will be
given notice of this determination and an opportunity to demonstrate,
within the time prescribed by HUD (not to exceed 30 calendar days) and
on the basis of substantial facts and data, that it has done so.
(2) If the grantee fails to demonstrate to HUD's satisfaction that
it has met the requirement, HUD will take corrective or remedial action
in accordance with this section or Sec. 93.453.
(c) Corrective and remedial actions. Corrective or remedial actions
for a performance deficiency (failure to meet a provision of this part)
will be designed to prevent a continuation of the deficiency; mitigate,
to the extent possible, its adverse effects or consequences; and
prevent its recurrence.
(1) HUD may instruct the grantee to submit and comply with
proposals for action to correct, mitigate, and prevent a performance
deficiency, including:
(i) Preparing and following a schedule of actions for carrying out
the affected activities, consisting of schedules, timetables, and
milestones necessary to implement the affected activities;
(ii) Establishing and following a management plan that assigns
responsibilities for carrying out the remedial actions;
(iii) Canceling or revising activities likely to be affected by the
performance deficiency, before expending HTF funds for the activities;
(iv) Reprogramming HTF funds that have not yet been expended from
affected activities to other eligible activities;
(v) Reimbursing its HTF account in any amount not used in
accordance with the requirements of this part;
(vi) Suspending disbursement of HTF funds for affected activities;
and
(vii) Establishing procedures to ensure compliance with HTF
requirements;
(2) HUD may also change the method of payment from an advance to
reimbursement basis and may require supporting documentation to be
submitted for HUD review for each payment request before payment is
made; determine the grantee to be high risk and impose special
conditions or restrictions on the allocation in accordance with 2 CFR
200.207 or 200.338; and take other remedies that may be legally
available.
Sec. 93.453 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 part, 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 part 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 part; 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 part 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 Sec. Sec. 93.50 through
93.54 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 (a) 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: January 23, 2015.
Juli[aacute]n Castro,
Secretary.
[FR Doc. 2015-01642 Filed 1-29-15; 8:45 am]
BILLING CODE 4210-67-P