Tenant-Based Assistance: Enhanced Vouchers, 74372-74382 [2016-25520]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 81, Number 207 (Wednesday, October 26, 2016)]
[Proposed Rules]
[Pages 74372-74382]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-25520]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 982

[Docket No. FR-5585-P-01]
RIN 2577-AD00


Tenant-Based Assistance: Enhanced Vouchers

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

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This rule proposes to codify HUD's policy regarding enhanced 
vouchers, a type of tenant-based voucher provided for under section 8 
of the U.S. Housing Act of 1937 in the following four scenarios, which 
are prescribed and limited by statute: The prepayment of certain 
mortgages, the voluntary termination of the insurance contract for the 
mortgage, the termination or the expiration of a project-based section 
8 rental assistance contract, and the transaction under which a project 
that receives or has received assistance under the Flexible Subsidy 
Program is preserved as affordable housing. Specifically, this rule 
would codify existing policy concerning the eligibility criteria for 
enhanced vouchers, as well as provide rental payment standards and 
subsidy standards applicable to enhanced vouchers, the right of 
enhanced voucher holders to remain in their units, procedures for 
addressing over-housed families, and the calculation of the enhanced 
voucher housing assistance payment.

DATES: Comment Due Date: December 27, 2016.

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

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

    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at 202-402-3055 (this is 
not a toll-free number). Individuals with speech or hearing impairments 
may access this number via TTY by calling the Federal Relay Service, 
toll-free, at 800-877-8339. Copies of all comments submitted are 
available for inspection and downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For information about HUD's Public 
Housing and Voucher programs, contact Rebecca Primeaux, Director, 
Housing Voucher Management and Operations Division, Office of Public 
and Indian Housing, Department of Housing and Urban Development, 451 
7th Street, Room 4226, Washington, DC 20140, telephone number 202-708-
0477. The listed telephone number 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 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    General. Section 8(t) of the U.S. Housing Act of 1937 (1937 Act) 
(42 U.S.C. 1437f(t)) provides unified authority for families to be 
offered enhanced vouchers upon the occurrence of an ``eligibility 
event,'' which is defined in section 8(t)(2) as one of four categories 
of events that results in families in the project being eligible for 
enhanced voucher assistance under one of three statutes: (1) The Low-
Income Housing Preservation and Resident Homeownership Act of 1990, 12 
U.S.C. 4101 et seq. (LIHPRHA), (2) the Multifamily Assisted Housing 
Reform and Affordability Act of 1997, 42 U.S.C. 1437f note (MAHRA), or 
(3) of the Housing and Community Development Amendments of 1978, 42 
U.S.C. 5301 note (HCDA). The four categories of events are: (1) The 
prepayment of a mortgage that results in families residing in the 
project being eligible under section 223(f) of LIHPRHA for an enhanced 
voucher; (2) the voluntary termination of the insurance contract that 
results in families residing in the project being eligible under 
section 223(f) of LIHPRHA for an enhanced voucher; (3) the termination 
or expiration of a project-based section 8 rental assistance contract 
that results in assisted families residing in the project being 
eligible under section 515(c)(3) or section 524(d) of MAHRA for an 
enhanced voucher; \1\ and (4) a

[[Page 74373]]

transaction under which a project that receives or has received 
assistance under the Flexible Subsidy program is preserved as 
affordable housing, which results in families residing in the project 
being eligible under section 201(p) of the HCDA for an enhanced 
voucher.
---------------------------------------------------------------------------

    \1\ Section 515(c)(3) pertains to a determination by the 
Department to renew an expiring project-based section 8 contract 
with tenant-based assistance, whereas section 524(d) applies when a 
rental assistance contract to which a covered project is subject 
expires and is not renewed, whether the owner opts out by giving the 
notice required under 42 U.S.C. 1437f(c)(8)(A) or the HAP contract 
simply expires. If the HAP contract expires without the required 
notice, the owner may not evict tenants or increase their rent 
payment until notice has been given and one year elapses per 42 
U.S.C. 1437f(c)(8)(B). Families remaining during this period would 
not get enhanced vouchers because these families are already 
protected from eviction or rent increase under section 
1437f(c)(8)(B). Once the notice has been given and the required year 
has elapsed, HUD issues enhanced vouchers to any eligible family.
---------------------------------------------------------------------------

    Section 8(t) states that enhanced vouchers provided under previous 
authorities are, regardless of date that the funds were made available, 
treated and subject to the same requirements as enhanced vouchers under 
8(t). Section 8(t) was enacted as section 538, title V, Departments of 
Veterans Affairs and Housing and Urban Development, Independent 
Agencies Appropriations Act, 2000 (Pub. L. 106-74) (FY 2000 
Appropriation), and the heading of section 538 of the FY 2000 
Appropriation was ``Unified Enhanced Voucher Authority'' (see 113 Stat. 
1122). This section heading emphasizes the fact that 8(t) brings 
current and prior enhanced voucher authority under a single statute and 
unifies their legal requirements.\2\
---------------------------------------------------------------------------

    \2\ The previous voucher authorities included in 8(t) as 
currently codified are: The 10th, 11th, and 12th provisos under the 
``Preserving Existing Housing Investment'' account in title II of 
the Departments of Veterans Affairs and Housing and Urban 
Development, and Independent Agencies Appropriations Act, 1997 (Pub. 
L. 104-204; 110 Stat. 2884); the first proviso under the ``Housing 
Certificate Fund'' account in title II of the Departments of 
Veterans Affairs and Housing and Urban Development, and Independent 
Agencies Appropriations Act, 1998 (Pub. L. 105-65; 111 Stat. 1351), 
or the first proviso under the ``Housing Certificate Fund'' account 
in title II of the Departments of Veterans Affairs and Housing and 
Urban Development, and Independent Agencies Appropriations Act, 1999 
(Pub. L. 105-276; 112 Stat. 2469); and section 515(c)(3) and (4) of 
MAHRA, as in effect before October 20, 1999.
---------------------------------------------------------------------------

    Under the statute, eligibility events are: Owner decisions to opt 
out of or not renew certain Section 8 project-based contracts; owner 
prepayment of certain mortgages on the project; voluntary termination 
of mortgage insurance; the termination or expiration of the contract 
for rental assistance under section 8 of the 1937 Act (Section 8) for 
such housing project; or a transaction for preservation of a project 
that, under certain sections of the MAHRA, results in the tenants of 
the project being eligible for enhanced vouchers.
    Enhanced voucher assistance. Enhanced voucher assistance differs 
from regular housing choice voucher assistance under section 8(o) of 
the 1937 Act (42 U.S.C. 1437f(o)) in two major respects. First, a 
family eligible to receive an enhanced voucher may elect to remain in 
the project, and, if the family does so, a higher ``enhanced'' payment 
standard is used to determine the amount of subsidy when the gross rent 
exceeds the normally applicable public housing agency (PHA) payment 
standard. Second, the family must continue to contribute towards rent 
at an amount that is at least the amount the family was paying for rent 
at the time of the eligibility event.
    Section 8(t)(1)(B) of the 1937 Act (42 U.S.C. 1437f(t)(1)(B)) 
provides that for enhanced vouchers, if the gross rent for the dwelling 
unit exceeds the Section 8 payment standard under the regular voucher 
program, the amount of rental assistance provided on behalf of the 
family using the enhanced voucher shall be determined using a payment 
standard that is equal to the gross rent for the dwelling unit (as such 
rent may be increased from time-to-time). The gross rent for a unit 
leased by an enhanced voucher holder is subject to the limitation in 
section 8(o)(10)(A) of the 1937 Act (42 U.S.C. 1437f(o)(10)(A)) that 
rents shall be reasonable in comparison to rents charged for 
comparable, unassisted units in the private market, and any other 
reasonable limits prescribed by the Secretary, such as a use agreement 
that restricts the rent to an amount below the PHA-determined rent 
reasonableness cap, State rent controls, or any other similar legally 
binding, reasonable limitation.
    Preservation prepayments. A preservation prepayment occurs when an 
owner prepays a qualifying mortgage or voluntarily terminates the 
mortgage insurance on a project that meets the definition of eligible 
low-income housing under LIHPRHA, 12 U.S.C. 4119 and in such cases, 
tenant-based assistance is offered to eligible residents of projects. 
The term ``eligible low-income housing'' means any housing financed by 
a loan or mortgage--
    (A) That is--
    (i) Insured or held by the Secretary under section 221(d)(3) of the 
National Housing Act and receiving loan management assistance under 
section 8 of the United States Housing Act of 1937 due to a conversion 
from section 101 of the Housing and Urban Development Act of 1965;
    (ii) Insured or held by the Secretary and bears interest at a rate 
determined under the proviso of section 221(d)(5) of the National 
Housing Act;
    (iii) Insured, assisted, or held by the Secretary or a State or 
State agency under section 236 of the National Housing Act; or
    (iv) Held by the Secretary and formerly insured under a program 
referred to in clause (i), (ii), or (iii); and
    (B) That, under regulation or contract in effect before February 5, 
1988, is or will within 24 months become eligible for prepayment 
without prior approval of the Secretary. (12 U.S.C. 4119(1)).
    Flexible subsidy project. This is any project that receives or has 
received assistance under Section 201 of the HCDA (the flexible subsidy 
program) and which project, in accordance with section 201(p), is the 
subject of a transaction under which the project is preserved as 
affordable Housing (as determined by HUD). Such a project shall be 
considered eligible low income housing under section 229 of LIHPRHA for 
purposes of eligibility of residents for enhanced tenant-based 
assistance. HUD will determine on a case-by-case basis if a flexible 
subsidy project meets the requirements of section 201(p) concerning the 
applicability of enhanced vouchers.
    Eligible low-income housing and flexible subsidy projects 
qualifying under section 201(p) are commonly referred to in PIH 
guidance as ``preservation eligible projects.'' A family is eligible 
for enhanced voucher assistance in preservation eligible projects only 
if the resident family is residing in the preservation eligible project 
on the effective date of prepayment or voluntary termination of 
mortgage insurance (or the effective date of the transaction in the 
case of a covered flexible subsidy project), and must be income-
eligible on that effective date. Both unassisted and assisted residents 
may be eligible for enhanced voucher assistance as the result of a 
preservation prepayment.
    Eligibility requirements. In preservation-eligible projects, in 
order to be eligible for enhanced voucher assistance, the resident 
family must be either:
    A low-income family (including a very low-income family);
    A moderate-income elderly or disabled family; or
    A moderate-income family residing in a low-vacancy area.
    HUD determines whether the project where the owner is prepaying or 
voluntarily terminating the mortgage insurance is located in a low-
vacancy area. A low-income family is a family whose annual income does 
not exceed 80 percent of the median income for the area as determined 
by HUD. A moderate-income family is a family whose annual income is 
above 80 percent but does not exceed 95 percent

[[Page 74374]]

of the area median income as determined by HUD. A resident family who 
does not fall into one of those categories on the effective date of the 
prepayment or voluntary termination is not eligible for enhanced 
voucher assistance. (See notice PIH 2001-41 at p. 22).
    By agreeing to administer enhanced vouchers for families affected 
by conversion actions, the PHA does not relinquish its responsibility 
for screening potentially eligible families or its ability to deny 
assistance for any grounds allowed or provided by 24 CFR 982.552 \3\ 
and 982.553.\4\ The screening of families and decisions to deny 
admission to the program must be consistent with the PHA policy for 
screening regular admissions of families from the PHA waiting list. The 
PHA must provide a family with an opportunity for an informal review if 
it denies the family admission to the voucher program in accordance 
with the housing choice voucher regulations.
---------------------------------------------------------------------------

    \3\ Title III, section 327 of the Transportation, Treasury, 
Housing and Urban Development, The Judiciary, The District of 
Columbia, and Independent Agencies Appropriations Act, Public Law 
109-115; 42 U.S.C. 1437f(d)(1)(B)(iii); 42 U.S.C. 1437f(o)(7)(D)); 
42 U.S.C. 13662; and 42 U.S.C. 3535(o).
    \4\ 42 U.S.C. 13661-13664; 42 U.S.C. 3535(o).
---------------------------------------------------------------------------

    Voluntary termination of mortgage insurance or prepayment of 
mortgage on Section 236 projects where Section 236 rent rules remain 
applicable (decoupling actions). Where an owner voluntarily terminates 
the mortgage insurance or prepays the Section 236 mortgage in a 
preservation eligible Section 236 project and the rent setting 
requirements of the Section 236 program are still applicable to the 
project by the terms of a use agreement, the enhanced voucher rent 
would be no greater than the Section 236 Basic Rent established in 
accordance with HUD guidance. (See notice PIH 2001-41 at pp. 23-24.)
    Project Based Opt-Outs. An ``opt-out'' refers to the case of a 
contract for project-based assistance where the owner opts out of, or 
elects not to renew, an expiring contract. In such a case, enhanced 
voucher assistance, subject to appropriations, will be offered to 
income eligible families covered by the expiring contract. The project 
must consist of 4 or more dwelling units and be covered in whole or 
part by a contract for project-based assistance. For the family to be 
eligible in the event of an owner opt-out, the family must be low-
income and must be residing in a unit covered by the expiring Section 8 
project-based contract on the date the contract expires. The project-
based assistance contract must be for one of the following programs:
    The new construction or substantial rehabilitation program under 
section 8(b)(2) of the 1937 Act (as in effect before October 1, 1983);
    The property disposition program under Section 8(b) of the 1937 
Act;
    The loan management assistance program under Section 8(b) of the 
1937 Act;
    The rent supplement program under section 101 of the Housing and 
Urban Development Act of 1965, provided that at the same time there is 
also a Section 8 project-based contract at the same project that is 
expiring or terminating on the same day and will not be renewed;
    Section 8 of the 1937 Act, following conversion from assistance 
under section 101 of the Housing and Urban Development Act of 1965; or
    The moderate rehabilitation program under section 8(e)(2) of the 
1937 Act (as in effect before October 1, 1991).
    Sections 515 and 524 of MAHRA. Section 515 of MAHRA addresses 
section 8 renewals and long-term affordability commitments by owners. 
Sections 515(c)(3) and (4) of MAHRA address expiring project-based 
section 8 contracts that are renewed with tenant-based assistance. 
Covered project-based contracts are those listed above. Families living 
in units covered by the expiring project-based assistance contract 
where the project is being renewed with tenant-based assistance are 
eligible for enhanced voucher assistance. In the case of the expiration 
of a covered Section 8 project-based contract under 515(c) of MAHRA 
only, all families assisted under the expiring contract are considered 
income eligible for enhanced voucher assistance.
    Section 524(d) of MAHRA, which applies in the case of a contract 
for project-based assistance under section 8 for a covered project that 
is not renewed under section 524(a) or (b) of MAHRA (or any other 
authority), thereby resulting in the expiration of assistance, provides 
that enhanced vouchers are to be provided to families residing in the 
project on the date of the expiration of assistance.
    Other situations. If the opt-out of the Section 8 project-based 
contract by an owner occurs after the owner has prepaid the mortgage or 
voluntarily terminated the mortgage insurance of a preservation-
eligible property, families who do not meet the definition of a low-
income family may still be eligible to receive an enhanced voucher. In 
addition to meeting the usual requirement of residing in a project 
covered by the expiring contract on the date of expiration, the family 
must have also resided there on the effective date of prepayment and 
meet the income requirements for enhanced voucher eligibility for 
residents affected by a preservation prepayment (see the discussion 
under the heading ``Preservation prepayments'' in this preamble). (See 
notice PIH 2001-41 at p. 20.)
    In a case where the owner has materially violated HUD's program 
regulations or the condition of the project is not decent, safe, and 
sanitary, resulting in termination of the assistance to the project, 
the tenants would not remain in the project and would receive regular 
Section 8 tenant-based assistance. (See notice PIH 2001-41 at p. 4.)
    Questions for public comment. In addition to other relevant issues, 
HUD is interested in receiving public comments on three specific 
issues. Responses should reference specific data to be utilized in the 
determination and explain the reasoning to support recommendations.
    1. Low-income area. How should the vacancy rate for a ``low-vacancy 
area'' be defined? The low-vacancy area designation, because it can 
result in assistance being provided to families and individuals that 
are at the moderate income level, which is higher than the program 
generally is intended to serve, should be a narrow exception. In 
addition, the following should be considered:
     Whether the low-vacancy area should be based on a constant 
vacancy percentage applied universally, or whether it should vary with 
differing factors, such as area population growth, demand for rental, 
or any other relevant factors;
     Whether the low-vacancy area definition should be unique 
to this enhanced voucher program, or should be constant across all HUD 
programs that use the concept of a low-vacancy area.
    2. Separate enhanced voucher tenant screening. As proposed, this 
rule would not revise the regulations concerning discretionary or 
required tenant screening at Sec. Sec.  982.307, 982.552 and 982.553. 
As noted in this preamble, ``The screening of families and decisions to 
deny admission to the program must be consistent with the PHA policy 
for screening regular admissions of families from the PHA waiting 
list.'' HUD requests comment on whether this result is appropriate, or 
whether, to the contrary, this constitutes an unnecessary 
``rescreening'' of tenants.
    3. Right to remain. Proposed Sec.  982.309(d)(2) states, ``[t]he 
owner may

[[Page 74375]]

not terminate the tenancy of a family that exercises its right to 
remain except as provided in Sec.  982.310.'' Section 982.310 includes 
a variety of provisions under which the owner may terminate tenancy. 
HUD seeks public comment on whether, in consideration of the right to 
remain under section 8(t) of the 1937 Act (42 U.S.C. 1437f(t)), the 
exception to the right to remain under Sec.  982.310 (including any 
specific paragraphs under that section), should be removed, qualified 
or modified in some way, or made final as stated in this proposed rule.

II. This Proposed Rule

    This proposed rule would amend HUD's regulations in 24 CFR part 982 
that govern Section 8 Tenant-Based Assistance: Housing Choice Vouchers 
to codify HUD's policy on enhanced vouchers. Currently, HUD's policy is 
based on the statutory requirements, and summarized in guidance 
provided in PIH notices.\5\
---------------------------------------------------------------------------

    \5\ PIH 2001-41 on Enhanced and Regular Housing Choice Vouchers 
for Housing Conversion Actions; PIH 2010-18 on PHA Determinations of 
Rent Reasonableness in the Housing Choice Voucher (HCV) Program--
Comparable Unassisted Units; PIH 2011-46 on Determination of Rent 
Reasonableness in the Housing Choice Voucher Program; and PIH 2016-
02 on Enhanced Voucher Requirements for Over-housed Families, all at 
https://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/publications/notices.
---------------------------------------------------------------------------

    Definitions. The proposed rule would add definitions for ``enhanced 
voucher assistance,'' ``enhanced voucher housing assistance payment'' 
and ``Eligibility event'' to the definitions in Sec.  982.4. The 
definitions for ``enhanced voucher assistance'' and ``eligibility 
event'' essentially reflect the statutory requirements under section 
8(t) of the 1937 Act (42 U.S.C. 1437f(t)), including the basic 
characteristics of an enhanced voucher, along with some explanation of 
what constitutes an eligibility event. The definition of ``enhanced 
voucher housing assistance payment'' refers to the term as used in 
Sec.  982.505. Because the rule proposes to revise and reorganize Sec.  
982.515, the proposed rule would make technical amendments to the 
definitions of ``Family rent to owner'' and ``Family share'' to remove 
the references to specific paragraphs of currently codified Sec.  
982.515.
    Section 982.4 of this rule cross-references the definition of 
``extremely low-income family'' in 24 CFR part 5, subpart F. A general 
provision of the Consolidated Appropriations Act, 2014, Public Law 113-
76, added a statutory definition of ``extremely low-income families'' 
at 42 U.S.C. 1437a(b)(2), and required that this new definition, which 
would amend HUD's current regulatory definition, be implemented by HUD 
via Federal Register notice followed by rulemaking with public comment 
(see Pub. L. 113-76, Division L, Title IV, sections 238 and 243). The 
implementing notice was published at 79 FR 35940 (June 25, 2014). A 
rule for public comment including this revision, entitled 
``Streamlining Administrative Regulations for Public Housing, Housing 
Choice Voucher, Multifamily Housing, and Community Planning and 
Development Programs,'' was published at 80 FR 423 (January 6, 2015).
    Determining adjusted per-unit cost. Section 982.102 governs HUD's 
determination of costs in allocating budget authority for renewals of 
expiring funding increments. Under Sec.  982.102(e), as currently 
codified, HUD determines the adjusted per-unit cost based on data from 
the PHA's most recent HUD-approved year-end statement. This proposed 
rule would update Sec.  982.102(e)(1)(i) and (e)(3)(iii) to provide 
that HUD will use data from the PHA's most recent validated Voucher 
Management System submission.
    Eligibility and Targeting Requirements. The proposed rule would 
revise Sec.  982.201, which addresses eligibility and targeting 
requirements, to include additional eligibility criteria (but not 
targeting requirements, which do not apply to enhanced voucher holders) 
in Sec.  982.201(b)(1) for enhanced vouchers. As proposed to be 
amended, Sec.  982.201(b)(1) would provide that eligible families 
include: Families, regardless of income, residing in projects with a 
project-based Section 8 contract that has expired and is renewed under 
section 515(c) of MAHRA and its implementing regulations, which may 
include families residing in projects under section 515(c)(3) of MAHRA 
(tenant-based assistance based on a rental assistance assessment plan 
as provided in section 515(c)(2) of MAHRA) and section 515(c)(4) of 
MAHRA (enhanced voucher assistance) (See notice PIH 2001-41 at pp. 19-
20); low-income families residing in a project where the project-based 
assistance contract has expired and is not renewed (see section 524(d) 
of MAHRA, 42 U.S.C. 1437f note); certain low and moderate income 
families, as well as moderate income elderly or disabled families, 
where the mortgage insurance is voluntarily terminated or prepaid under 
the Low-Income Housing Preservation and Resident Homeownership Act of 
1990 (12 U.S.C. 4113(f)), or where the project is preserved as 
affordable housing under 12 U.S.C. 1715z-1a(p), which addresses 
assistance for troubled multifamily housing projects and provides that 
``any project that receives or has received assistance under this 
section and which is the subject of a transaction under which the 
project is preserved as affordable housing, as determined by the 
Secretary, shall be considered eligible low-income housing under 
section 229 of the Low-Income Housing Preservation and Resident 
Homeownership Act of 1990 (12 U.S.C. 4119) for purposes of eligibility 
of residents of such project for enhanced voucher assistance provided 
under section 8(t) of the United States Housing Act of 1937 . . .''.
    PHA Approval of Assisted Tenancy. The proposed rule would revise 
Sec.  982.305(a)(5) to provide for an exception to the 40 percent of 
monthly adjusted income limit at the time the family initially receives 
HCV assistance, in the case of enhanced voucher assistance. (See notice 
PIH 2001-41 at p. 8.)
    Term of Assisted Tenancy. The proposed rule would amend Sec.  
982.309 to add a new paragraph (d) that would provide that, absent 
repeated lease violation or other good cause, a family that receives an 
enhanced voucher has a right to remain in the project in which the 
family qualified for the voucher at the time of the eligibility event. 
This new paragraph (d) would implement the statutory requirement at 
section 8(t)(1)(B) of the 1937 Act (42 U.S.C. 1437f(t)(1)(B)), which 
provides that the assisted family may elect to remain in the same 
project in which the family was residing at the time of the eligibility 
event, which has been HUD's policy to date. HUD plans to issue a 
tenancy addendum to be incorporated into the owner's lease to reflect 
this right to remain under this new paragraph.
    Subsidy Standards. The proposed rule would revise Sec. Sec.  
982.402(c) and (d) to incorporate cross-references to the proposed new 
enhanced voucher rules, particularly references to oversized units and 
the payment standard.
    Voucher Tenancy: Payment Standard in Restructured Multifamily 
Housing or in Housing Converted Under Certain Conversion Actions. The 
proposed rule would revise Sec.  982.504, concerning the payment 
standard for a family in a restructured subsidized multifamily project 
where tenant-based assistance is provided to the family pursuant to 24 
CFR 402.421 when HUD has approved a restructuring plan and the 
participating administrative entity has approved the use of tenant-
based assistance to provide continued assistance for such family. This 
section would also apply to conversion actions under other 
circumstances. Specifically, these would be owner opt-outs or non-

[[Page 74376]]

renewals of Section 8 project-based contracts; owner prepayments of 
mortgages or voluntary termination of mortgage insurance on 
preservation-eligible properties; or where HUD takes an enforcement 
action against the owner, which in some cases may result in the family 
being eligible for the enhanced voucher payment standard. (See notice 
PIH 2001-41 at p. 1.) The payment standard as proposed in Sec.  
982.504(b)(2) is the gross rent for the family's unit, that is, the 
rent to owner plus the applicable PHA utility allowance for any tenant-
supplied utilities. The rent must be reasonable as determined by the 
PHA under Sec.  982.507.
    The proposed changes would comply with MAHRA regarding projects 
that have a project-based assistance contract where the project is 
eligible for restructuring, the assistance is terminated, the contract 
is renewed as tenant based assistance, and the tenants who remain are 
eligible for enhanced vouchers (see section 515(c) of MAHRA) and, 
through reorganization of Sec.  982.504, address housing converted 
under certain conversion actions, which result in families receiving 
enhanced vouchers. The proposed rule would revise paragraphs (a) and 
(b) of this section to comply with MAHRA. The payment standard for a 
family living in housing that has undergone certain other conversion 
actions would largely be addressed in a new paragraph (c). The heading 
of this section is also revised to clarify that it also addresses 
housing converted under certain conversion actions.
    Section 982.504(a) would establish the events as a result of which 
families are eligible for enhanced voucher assistance.
    New paragraph (b)(2) would establish the enhanced voucher payment 
standard, which would be the gross rent which must be reasonable, as 
determined by the PHA, based on comparable rents of private, unassisted 
units in the local area (comparability would be further defined in 
Sec.  982.507(b) as proposed to be revised by this rule).
    New paragraph (b)(3) would provide that if the rent is increased 
for an enhanced voucher family, the new gross rent shall be the payment 
standard for the unit provided such rent is determined reasonable.
    New paragraph (b)(4) would codify HUD's policy regarding enhanced 
voucher families in oversized units (that is, a family living in a unit 
of a bedroom size greater than what the family qualifies for, as 
determined by the PHA under current Sec.  982.402, which addresses 
subsidy standards). Essentially, if the family is over-housed and 
wishes to remain at the project with enhanced voucher assistance, and 
an appropriate-sized unit becomes available, the family must move to 
the appropriate sized unit within 30 days. If the family wishes to stay 
in the larger unit, their assistance payment will be based on a regular 
voucher for the appropriate-sized unit and the family will have to pay 
the remainder of the gross rent. If there is no appropriate-sized unit, 
the family may remain in the larger unit at the enhanced voucher 
payment standard for the larger unit size until an appropriate-sized 
unit or smaller unit that is not smaller than the size unit for which 
the family qualifies under the PHA's subsidy standards becomes 
available, in which case the family must move to such unit. Similarly, 
if a family becomes over-housed due to a change in family size during 
the enhanced voucher tenancy, the family may remain in the unit at the 
enhanced voucher payment standard for the larger unit size until an 
appropriate-sized or smaller sized unit, as stated in the previous 
sentence becomes available, in which case the family must move within 
30 days.
    This proposed rule would add Sec.  982.504(b)(4)(vi), which 
requires the owner of an assisted project to immediately inform the PHA 
and the over-housed family when an appropriate size unit or smaller 
size unit as stated in the previous paragraph becomes available in the 
project. If the owner does not do so, the owner can be subject to an 
enforcement action (see notice PIH 2016-02) . The rent to owner can be 
reduced to the reasonable rent for the appropriate or smaller size 
unit.
    Rent to Owner: Reasonable Rent. The proposed rule would amend 
paragraph (b) of Sec.  982.507 to clarify what is meant by assisted 
units for comparability purposes. The proposed rule would provide that 
assisted units are units that are assisted under a Federal, State, or 
local government program, including Low-Income Housing Tax Credit 
assistance, and rent-controlled or restricted units except where the 
restricting law or court order applies to voucher participants. In 
these cases, the units are not used in the comparability analysis, 
because they are ``assisted'' units (Sec.  982.507(b)(1)).
    Proposed Sec.  982.507(b)(2) would also clarify what is meant by 
assisted units for comparability purposes for projects that undergo a 
housing conversion action. The proposed rule provides that assisted 
units include units in a property undergoing a housing conversion 
action occupied by tenants who, on the date of the eligibility event, 
do not receive vouchers and where the owner chooses to continue 
charging below market rents to those families by offering lower rents, 
rent concessions, or other assistance to those families. (See notice 
PIH 2010-18 at pp. 2-3, 2011-46 at pp. 1-2.) The comparability analysis 
performed by the PHA must include the location, quality, size, type, 
and age of the unit and any amenities.
    Proposed Sec.  982.507(b)(3) would apply to unassisted units, that 
is, those not receiving any form of Federal, State, or local government 
assistance, but not to projects where the owner simply decides to 
charge below market rents. Rents for unassisted units must be 
considered when determining comparability under (b)(4).
    Proposed Sec.  982.507(b)(4) provides for comparability analysis, 
and is similar to currently codified Sec.  982.507(b). The PHA must 
consider the location, quality, size, unit type, and age of the 
contract unit; and any amenities, housing services, maintenance and 
utilities to be provided by the owner in accordance with the lease.
    Decoupling transactions. Section 982.511 of this proposed rule 
would add specificity regarding decoupling transactions. Section 236 of 
the National Housing Act, 12 U.S.C 1715z-1, authorizes decoupling 
transactions, where, although the mortgage under section 236 (mortgage 
insurance for rental or cooperative housing for low income families) is 
prepaid or refinanced, interest reduction payments (which reduce debt 
service) are retained and continued ``if the project owner enters into 
such binding commitments as the Secretary may require'' to continue to 
operate the project as low-income housing. In these decoupling 
transactions the 236 rent rules remain in effect by the terms of a use 
agreement. As such, where an owner voluntarily terminates the mortgage 
insurance on a Section 236 project or prepays the Section 236 mortgage 
in a preservation eligible Section 236 project, and the rent setting 
requirements of the Section 236 program are still applicable to the 
project, the enhanced voucher rent would be no greater than the HUD-
approved basic rent for the 236 program.
    Family Share: Family Responsibility. The proposed rule would amend 
Sec.  982.515 to add a new paragraph specifying that the current 
prohibition in Sec.  982.515 against the PHA using housing assistance 
payments or other program funds, including any administrative fee 
reserve, to pay the family share applies. The enhanced voucher housing 
assistance payment would be discussed in new Sec.  982.505(e). As 
provided in section 8(t) of the 1937

[[Page 74377]]

Act (42 U.S.C. 1437f(t)), a family that was previously assisted under a 
project-based Section 8 contract on the date of the eligibility event, 
shall, under the enhanced voucher, pay no less than the dollar amount 
of the total tenant payment on that date. Similarly, a family living in 
the project that was assisted under the regular voucher program, and 
not living in a unit assisted under the project based contract, shall, 
with an enhanced voucher, pay no less than the dollar amount of the 
family share of rent and utilities on the date of the eligibility 
event.
    A family residing in the project, but living in an unassisted unit 
(i.e., not receiving assistance under either the Section 8 project 
based contract nor receiving assistance under the regular voucher 
program), if eligible for enhanced voucher assistance, shall pay no 
less than the dollar amount of the gross rent on the date of the 
eligibility event (minimum rent). A family assisted under the enhanced 
voucher program shall pay the enhanced voucher minimum rent, 
notwithstanding any other requirement of the voucher program, even if 
it means the family pays more than 40 percent of their adjusted income 
for rent, an amount which is prohibited for initial tenancy under the 
housing choice voucher program (see Sec. Sec.  982.305(a)(5); 982.508, 
which would be revised to clarify this point in this proposed rule). 
This can occur, for example, if a family was paying for rent more than 
40 percent of their adjusted income on the date of the eligibility 
event.
    The proposed rule would provide under Sec.  982.518(d) that if the 
gross income of the family declines significantly, the enhanced voucher 
minimum rent shall be revised to an amount calculated based on a 
percentage of current monthly adjusted income, which is the greater of 
30 percent or the percentage of monthly adjusted income the family was 
paying on the date of the eligibility event. Once the minimum rent is 
changed to a percentage of income, it remains that way unless and until 
the family's income increases to an amount that the family's enhanced 
voucher minimum rent established using a percentage of income 
calculation would require the assisted family to pay an amount that is 
more than the greater of the family's original enhanced voucher minimum 
rent payment (established as of the date of the eligibility event) or 
30 percent of the family's adjusted income. At such time, the family's 
enhanced voucher minimum rent shall be determined by the PHA in 
accordance with Sec.  982.515(b)(1) using the dollar amount of the 
family's original enhanced voucher minimum rent. In no circumstance 
shall the family's enhanced voucher minimum rent be less than the 
amount established as of the date of the eligibility event.
    Section 982.518 is revised to include provisions regarding the 
enhanced voucher minimum rent. The minimum rent under the enhanced 
voucher would be the amount of rent the family was paying on the date 
of the eligibility event even if it is more than the 40 percent 
statutory limitation on the amount of adjusted income a family can 
initially pay under the voucher program. A family that was residing in 
a project that has undergone a preservation prepayment on the date of 
the eligibility event, shall, under the enhanced voucher, pay no less 
than the dollar amount of the gross rent on the date of the eligibility 
event (minimum rent). Similarly, a family living in the preservation 
eligible project on the date of the eligibility event with assistance 
under the regular voucher program may receive enhanced voucher 
assistance and shall pay no less than the enhanced voucher minimum rent
    Regular Tenancy: How to Calculate Housing Assistance Payment. The 
proposed rule would address the calculation of the enhanced voucher 
housing assistance payment in proposed new Sec.  982.505(e), and would 
add a new Sec.  982.518 to address the enhanced voucher minimum rent. 
By codifying existing policy and procedures concerning enhanced 
vouchers, HUD provides PHAs, eligible families, and interested members 
of the public with a more convenient location to find these 
requirements.
    Through this proposed rule, HUD is not making significant changes 
to the treatment of enhanced vouchers as has been carried out to date. 
Much of what is discussed in this preamble is based on statutory 
requirements and current HUD policy, but HUD welcomes comment on where 
such requirements may need further clarification or elaboration.

III. Findings and Certifications

Unfunded Mandates Reform Act

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

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.), 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
This proposed rule codifies HUD's existing policy on eligibility for 
and requirements pertaining to enhanced vouchers, which are largely 
based on statutory requirements, and with which public housing agencies 
area already familiar. As noted in the preamble, this proposed rule is 
not significantly revising treatment to date of enhanced vouchers. 
Therefore, the undersigned certifies that this rule will not have a 
significant impact on a substantial number of small entities.
    Notwithstanding HUD's view that this rule will not have a 
significant effect on a substantial number of small entities, HUD 
specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Environmental Impact

    This proposed rule does not direct, provide for assistance or loan 
and mortgage insurance for, or otherwise govern, or regulate, real 
property acquisition, disposition, leasing (other than tenant-based 
assistance), rehabilitation, alteration, demolition, or new 
construction, or establish, revise or provide for standards for 
construction or construction materials, manufactured housing, or 
occupancy. Accordingly, under 24 CFR 50.19(c)(1), this proposed rule is 
categorically excluded from environmental review under the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321).

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

[[Page 74378]]

within the meaning of the Executive Order.

Catalog of Federal Domestic Assistance Number

    The Catalog of Federal Domestic Assistance number for 24 CFR part 
982 is 14.871.

List of Subjects in 24 CFR 982

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

    Accordingly, for the reasons stated in the preamble, HUD proposes 
to amend 24 CFR part 982 as follows:

PART 982--SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER 
PROGRAM

0
1. The authority statement for part 982 continues to read as follows:

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

0
2. Revise Sec.  982.1 to read as follows:


Sec.  982.1  Programs: purpose and structure.

    (a) General description. In the HUD Housing Choice Voucher Program 
(HCV Program), HUD pays rental subsidies so eligible families can 
afford decent, safe and sanitary housing. The HCV Program is generally 
administered by State or local governmental entities called public 
housing agencies (PHAs). HUD provides housing assistance funds to the 
PHA. HUD also provides funds for PHA administration of the program.
    (b) Tenant-based and project-based assistance. HCV Program 
assistance may be ``tenant-based'' or ``project-based.'' In the 
project-based program, rental assistance is paid for families who live 
in specific housing developments or units (see 24 CFR part 983). With 
tenant-based assistance, the assisted unit is selected by the family. 
The family may rent a unit anywhere in the United States in the 
jurisdiction of a PHA that runs an HCV Program.
    (c) Tenant-based assistance. (1) To receive tenant-based 
assistance, the family selects a suitable unit. A PHA may not approve a 
tenancy unless the unit meets program housing quality standards, and 
the rent is reasonable.
    (2) After approving the tenancy, the PHA enters into a contract to 
make rental subsidy payments to the owner to subsidize occupancy by the 
family. The PHA contract with the owner only covers a single unit and a 
specific assisted family. If the family moves out of the leased unit, 
the contract with the owner terminates. The family may move to another 
unit with continued assistance so long as the family is complying with 
program requirements.
    (3) The rental subsidy is determined by a formula. The subsidy is 
based on a local ``payment standard'' that reflects the cost to lease a 
unit in the local housing market. If the rent is less than the payment 
standard, the family generally pays 30 percent of adjusted monthly 
income for rent. If the rent is more than the payment standard, the 
family pays a larger share of the rent.
0
3. Revise Sec.  982.2 to read as follows:


Sec.  982.2  Applicability.

    Part 982 is a unified statement of program requirements for the 
tenant-based HCV Program under Section 8 of the United States Housing 
Act of 1937 (42 U.S.C. 1437f).
0
4. Amend Sec.  982.4 to:
0
(a) Revise paragraph (a)(2);
0
(b) In paragraph (b), to add the definitions of ``Eligibility event,'' 
``Enhanced voucher assistance,'' and ``Enhanced voucher housing 
assistance payment'' in alphabetical order; to remove the definition of 
``Merger date,'' and to revise the definitions of ``Family rent to 
owner'' and ``Family share,'' to read as follows:


Sec.  982.4  Definitions.

    (a) * * *
    (2) Definitions concerning family income and rent. The terms 
``adjusted income,'' ``annual income,'' ``extremely low income 
family,'' ``total tenant payment,'' ``utility allowance,'' and 
``welfare assistance'' are defined in part 5, subpart F of this title.
    (b) * * *
* * * * *
    Eligibility event. A housing conversion action as to which Federal 
law requires the provision of enhanced voucher assistance to affected 
tenants who are eligible for such assistance, subject to the 
availability of appropriations. Eligibility events include the 
prepayment of the mortgage or the voluntary termination of the mortgage 
insurance contract by the owner (such as a preservation pre-payment 
under the Low-Income Housing Preservation and Resident Homeownership 
Act, 12 U.S.C. 4101 et seq. (LIHPRA)); the termination or expiration of 
the Section 8 project-based HAP contract (owner opt-out) (other than 
Project Based Vouchers, and Section 8 Moderate Rehabilitation SRO HAP 
contracts as authorized by title IV of the McKinney-Vento Homeless 
Assistance Act)); or a transaction that preserves the project as 
affordable housing under sections 515(c)(3) and (4) and 524(d) of the 
Multifamily Assisted Housing Reform and Affordability Act of 1997 (42 
U.S.C. 1437f note) (MAHRA), and section 201(p) of the Housing and 
Community Development Amendments of 1978 (12 U.S.C. 1715z-
1a(p)(Flexible Subsidy Program)). In some cases, enforcement actions by 
HUD may be eligibility events.
    Enhanced voucher assistance. Rental assistance that is authorized 
under section 8(t) of the 1937 Act (42 U.S.C. 1437f(t)) and provided to 
families residing in certain projects on the date of an eligibility 
event who elect to remain in the project. The characteristics of 
enhanced voucher assistance are:
    (1) The family pays as their family share no less than the amount 
the family was paying for rent on the date of the eligibility event; 
and
    (2) If, while the family continues to reside in the project, the 
rent for the project exceeds the regular Section 8 tenant-based payment 
standard, the amount of rental assistance provided on behalf of the 
family shall be determined using a payment standard that is equal to 
the gross rent for the dwelling unit, subject to the limitation of 
reasonableness in relation to rents of comparable unassisted units in 
the local private market (section 8(o)(10)(A) of the 1937 Act (42 
U.S.C. 1437f(o)(10)(A)) and other limits imposed by HUD. Families who 
receive enhanced vouchers are entitled to this potentially higher 
payment standard only as long as they remain in the unit.
    Enhanced voucher housing assistance payment. The gross rent for a 
unit occupied by a family receiving enhanced voucher assistance minus 
the higher of the enhanced voucher minimum rent or the total tenant 
payment.
* * * * *
    Family rent to owner. In the HCV Program, the portion of rent to 
owner paid by the family. For calculation of family rent to owner, see 
Sec.  982.515.
* * * * *
    Family share. The portion of rent and utilities paid by the family. 
For calculation of family share, see Sec.  982.515.
* * * * *
0
5. Amend Sec.  982.102 to:
0
(a) Revise paragraph (e)(1)(i) to read as follows;
0
(b) Revise paragraph (e)(3)(iii) to read as follows:


Sec.  982.102  Allocation of budget authority for renewal of expiring 
consolidated ACC funding increments.

* * * * *
    (e) * * *
    (1) Step 1: Determining monthly program expenditure--(i) Use of 
most

[[Page 74379]]

recent validated data submitted to the Voucher Management System. HUD 
will determine the PHA's monthly per unit program expenditure for the 
HCV Program (including project-based assistance) under the consolidated 
ACC with HUD using data from the PHA's most recent validated Voucher 
Management System submission.
    * * *
    (3) * * *
    (iii) Use of annual adjustment factors in effect subsequent to most 
recent validated data submitted to the Voucher Management System. HUD 
will use the Annual Adjustment Factors in effect during the time period 
subsequent to the time covered by the most recent validated data 
submitted to the Voucher Management System and the time of the 
processing of the contract funding increment to be renewed.
* * * * *
    * * *
0
6. Amend Sec.  982.152 to remove paragraph (c) and redesignate 
paragraph (d) as (c).
0
7. Amend Sec.  982.201 to:
0
(a) Revise paragraph (b)(1)(ii) to read as follows; and
0
(b) Add paragraphs (b)(1)(vii) and (viii).
    The revision and addition read as follows:


Sec.  982.201  Eligibility and Targeting.

* * * * *
    (b) * * *
    (1) * * *
    (ii) A low-income family that is ``continuously assisted'' under 
the 1937 Housing Act (which includes a low-income family residing in an 
assisted unit that qualifies for enhanced voucher assistance due to the 
expiration of a section 8 project-based HAP contract pursuant to 
section 524(d) of MAHRA);
* * * * *
    (vii) A family (regardless of income) residing in an assisted unit 
who qualifies for enhanced voucher assistance due to the expiration of 
the Section 8 project-based HAP contract and its renewal pursuant to 
section 515(c) of MAHRA and the implementing regulation; and
    (viii) A low-income family, or a moderate-income family residing in 
a low-vacancy area, or a moderate-income elderly or disabled family who 
qualifies for enhanced voucher assistance due to the prepayment of the 
mortgage or the voluntary termination of the mortgage insurance 
contract pursuant to sections 223(f) and 229 of the Low-Income Housing 
Preservation and Resident Homeownership Act of 1990 (LIHPRHA) ((12 
U.S.C. 4113(f)) and 12 U.S.C. 4119, respectively, or a transaction 
under which the project is preserved as affordable housing pursuant to 
section 201(p) of the Housing and Community Development Amendments of 
1978, (12 U.S.C. 1715z-1a(p)).
* * * * *
0
8. Amend Sec.  982.305 to revise paragraph (a)(5) to read as follows:


Sec.  982.305  PHA approval of assisted tenancy.

    (a) * * *
    (5) At the time a family initially receives tenant-based assistance 
for occupancy of a dwelling unit, and where the gross rent of the unit 
exceeds the applicable payment standard for the family, the family 
share does not exceed 40 percent of the family's monthly adjusted 
income, except in the case where the family is eligible for, and is 
receiving, enhanced voucher assistance.
* * * * *
0
9. Amend Sec.  982.309 to add paragraph (d) to read as follows:


Sec.  982.309  Term of assisted tenancy.

* * * * *
    (d) Right to remain for enhanced voucher tenancy. (1) A family that 
receives an enhanced voucher has the right to remain in the project in 
which the family qualified for enhanced voucher assistance at the time 
of the eligibility event for as long as the units are used for rental 
housing and are otherwise eligible for voucher assistance.
    (2) The owner may not terminate the tenancy of a family that 
exercises its right to remain except as provided in Sec.  982.310.
0
10. Amend Sec.  982.402 to revise paragraphs (c) and (d) to read as 
follows:


Sec.  982.402  Subsidy standards.

* * * * *
    (c) Effect of family unit size on maximum subsidy in HCV Program. 
The family unit size as determined for a family under the PHA subsidy 
standard is used to determine the maximum subsidy for a family assisted 
in the HCV Program. The PHA establishes payment standards by number of 
bedrooms. Except for an enhanced voucher family (see Sec.  982.504(b)), 
the payment standard amount for a family shall be the lower of:
    (1) The payment standard amount for the family unit size; or
    (2) The payment standard amount for the unit size of the unit 
leased by the family.
    (3) HCV Program. For a voucher tenancy, the PHA establishes payment 
standards by number of bedrooms. The payment standard for the family 
must be the lower of:
    (i) The payment standard for the family unit size; or
    (ii) The payment standard for the unit size leased by the family.
    (d) Size of unit occupied by family. (1) The family may lease an 
otherwise acceptable dwelling unit with fewer bedrooms than the family 
unit size. However, the dwelling unit shall meet the applicable HQS 
space requirements.
    (2) Except for an enhanced voucher family (see Sec.  982.504), the 
family may lease an otherwise acceptable dwelling unit with more 
bedrooms than the family unit size, provided the family would not be 
required to initially pay more than 40 percent of adjusted monthly 
income as the family share. However, utility allowances must follow 
Sec.  982.517(d).
0
11. Revise Sec.  982.504 to read as follows:


Sec.  982.504  Payment standard for family in restructured subsidized 
multifamily project, or in housing converted under certain conversion 
actions.

    (a) Restructured projects. This section applies to restructured 
subsidized multifamily projects where HCV assistance is provided to a 
family pursuant to 24 CFR 401.421 when HUD has approved a restructuring 
plan, and the participating administrative entity has approved the use 
of tenant-based assistance to provide continued assistance for such 
family. This section also applies to conversion actions involving:
    (1) Owner opt-outs or owner non-renewal of a section 8 project-
based contract;
    (2) Prepayments of the owner's mortgage;
    (3) Voluntary terminations of mortgage insurance for a 
preservation-eligible property; and
    (4) Certain HUD actions against the owner, in cases where such 
actions result in a family being eligible for the enhanced voucher 
payment standard.
    (b) Payment standard for family in restructured subsidized 
multifamily project and in housing converted under certain housing 
conversion actions. (1) Enhanced voucher assistance. This paragraph (b) 
of this section applies to families receiving enhanced voucher 
assistance under the HCV Program.
    (i) Enhanced voucher assistance is provided to an eligible family 
as a result of an eligibility event.
    (ii) In order to receive enhanced voucher assistance, an eligible 
family must remain in the project in which the family qualified for 
enhanced voucher assistance and lease a unit for which the family 
qualifies in accordance with HUD guidance;

[[Page 74380]]

    (iii) If the family chooses to move from the project in which the 
family qualified for enhanced voucher assistance, the payment standard 
is determined in accordance with Sec.  982.503. If the family moves 
from the project at any time, this Sec.  982.504 does not apply.
    (2) Enhanced voucher payment standard. The payment standard for a 
family that remains in the project in which they qualified for enhanced 
voucher assistance at the time of the eligibility event is the gross 
rent (rent to owner plus the applicable PHA utility allowance for any 
tenant-supplied utilities) for the family's unit. The rent must be 
reasonable as determined by the PHA in accordance with Sec.  982.507.
    (3) Subsequent rent increases. If an owner subsequently raises the 
rent for an enhanced voucher family in accordance with the lease, State 
and local law, and HCV Program regulations (including rent 
reasonableness requirements under Sec.  982.507), the new gross rent 
shall be the payment standard for the unit.
    (4) Enhanced voucher family residing in an oversized unit. (i) If 
the bedroom size of the family's unit exceeds the number of bedrooms 
for which the family qualifies in accordance with Sec.  982.402, the 
family is residing in an oversized unit, and the family is an over-
housed family.
    (ii) If the family wishes to remain at the project with enhanced 
voucher assistance, the over-housed family must move to an appropriate 
size unit in the project (the unit size is the same size as the number 
of bedrooms for which the family qualifies under the PHA subsidy 
standards) if one is available and the unit must meet all HCV Program 
requirements. If the family moves to the appropriate size unit, the 
payment standard for that unit is determined in accordance with 
paragraph (b)(2) of this section.
    (iii) If there are no appropriate size units available at the 
project at the time of the housing conversion action, the family may 
continue to reside in the oversized unit and the payment standard shall 
be determined based on the gross rent for the oversized unit in 
accordance with paragraph (b)(2) of this section except that if an 
appropriate size unit is not available or does not physically exist at 
the project, but a unit is available that is smaller than the family's 
current unit but not smaller than the appropriate size unit for which 
the family qualifies under the PHA subsidy standards, the family must 
move to the smaller bedroom size unit within 30 days, and the payment 
standard shall be determined based on the gross rent for the smaller 
bedroom size unit in accordance with paragraph (b)(2) of this section.
    (iv) If an appropriate size unit or smaller bedroom size unit as 
described in paragraph (b)(4)(iii) subsequently becomes available, the 
family residing in the oversized unit must move to the appropriate size 
unit or the smaller bedroom size unit as described in paragraph 
(b)(4)(iii), within 30 days, and the payment standard shall be 
determined based on the gross rent for the appropriate bedroom size or 
the smaller bedroom size unit in accordance with paragraph (b)(2) of 
this section.
    (v) If the family refuses to move to an appropriate size unit or a 
smaller bedroom size unit as described in paragraph (b)(4)(iii) of this 
section and one becomes available at the project, the payment standard 
is determined in accordance with Sec.  982.402(c)(1), that is, the 
payment standard amount for the family unit size for a regular voucher 
holder under Sec.  982.503.
    (vi) When an appropriate size unit or a smaller size unit as 
described in paragraph (b)(4)(iii) of this section becomes available in 
the project, the owner must immediately inform the PHA and the family. 
If the owner leases an appropriate size unit or a smaller bedroom size 
unit as described in paragraph (b)(4)(iii) without notifying the PHA 
and the over-housed family, an enforcement action may be taken against 
the owner and the PHA shall calculate the housing assistance payment on 
behalf of the over-housed family in accordance with 982.505(b) and the 
rent to owner shall not exceed the reasonable rent for the appropriate 
unit size or the smaller bedroom size unit as described in paragraph 
(b)(4)(iii). The family share is determined in accordance with Sec.  
982.515.
    (vii) If a decrease in family size subsequently occurs during an 
enhanced voucher tenancy, causing the family to occupy an oversized 
unit, the payment standard for the unit is calculated based on the 
gross rent for the oversized unit and in accordance with paragraph 
(b)(2) of this section until such time an appropriate size unit, or a 
smaller size unit as described in paragraph (b)(4)(iii) of this 
section, becomes available.
0
12. Amend Sec.  982.505 to:
0
(a) Revise paragraph (b);
0
(b) Revise paragraphs (c)(1) introductory text and (c)(2) to read as 
follows; and
0
(c) Add paragraph (e).
    The revisions and addition read as follows:


Sec.  982.505  How to calculate housing assistance payment.

* * * * *
    (b) Amount of monthly housing assistance payment. (1) Regular 
voucher tenancy. The PHA shall pay a monthly housing assistance payment 
on behalf of the family that is equal to the lower of:
    (i) The payment standard for the family minus the total tenant 
payment; or
    (ii) The gross rent minus the total tenant payment.
    (2) Enhanced voucher tenancy. The PHA shall pay a monthly housing 
assistance payment on behalf of the family that is equal to the 
enhanced voucher payment standard (see Sec.  982.504(b)(2)) minus the 
higher of:
    (i) The total tenant payment; or
    (ii) The enhanced voucher minimum rent as determined in accordance 
with Sec.  982.518.
    (c) Payment standard for family. (1) Except as provided in Sec.  
982.504(b), the payment standard for the family is the lower of:
* * * * *
    (2) If the PHA has established a separate payment standard amount 
for a designated part of an FMR area in accordance with Sec.  982.503 
(including an exception payment standard amount as determined in 
accordance with Sec.  982.503(b)(2) and Sec.  982.503(c)), and the 
dwelling unit is located in such designated part, the PHA must use the 
appropriate payment standard amount for such designated part to 
calculate the payment standard for the family. Where Sec.  982.504(b) 
does not apply, the payment standard for the family shall be calculated 
in accordance with this paragraph and paragraph (c)(1) of this section.
* * * * *
    (e) Enhanced voucher housing assistance payment. Regardless of 
whether the owner's gross rent after the eligibility event exceeds the 
normally applicable PHA voucher payment standard amount, the housing 
assistance payment for a family receiving enhanced voucher assistance 
is equal to the gross rent for the unit (provided such rent is 
reasonable) minus the higher of total tenant payment or the enhanced 
voucher minimum rent (see Sec.  982.518).
0
13. Amend Sec.  982.507 to revise paragraph (b), to read as follows:


Sec.  982.507  Rent to owner: Reasonable rent.

* * * * *
    (b) Comparability--(1) Assisted units. Assisted units include units 
that are assisted under a Federal, State, or local government program, 
including Low-

[[Page 74381]]

Income Housing Tax Credit assistance. Units where rents and/or rent 
increases are controlled or restricted by law or a court order are 
assisted units for purposes of determining rent comparability except in 
the case where such law or court order applies to HCV Program 
participants. With the exception of units described in paragraph (b)(2) 
of this section, assisted units do not include units for which the 
owner has simply decided to charge rents that are below what other 
tenants are charged and below what the market could actually bear. 
Rents for assisted units must not be considered when determining 
comparability.
    (2) Assisted units in projects that undergo a housing conversion 
action. Units in a property undergoing a housing conversion action 
occupied by tenants who, on the date of the eligibility event, do not 
receive vouchers are considered assisted if the owner of the project 
continues to offer and accept below market rent or offers other rent 
concessions to the impacted families. Owners, who choose to charge such 
lower rents to impacted families, must provide written notification to 
the PHA and other required documentation in accordance with HUD 
guidance.
    (3) Unassisted units. Unassisted units do not receive any form of 
Federal, State, or local government assistance including units where 
rents and/or rent increases are controlled or restricted by law or a 
court order. Units for which the owner has simply decided to charge 
rents that are below what other tenants are charged and below what the 
market could actually bear are unassisted for purposes of determining 
comparability. Rents for unassisted units must be considered when 
determining comparability in accordance with paragraph (b)(4) of this 
section.
    (4) Comparability analysis. The PHA must determine whether the rent 
to owner is a reasonable rent in comparison to rent for other 
comparable unassisted units. To make this determination, the PHA must 
consider factors such as:
    (i) The location, quality, size, unit type, and age of the contract 
unit; and
    (ii) Any amenities, housing services, maintenance and utilities to 
be provided by the owner in accordance with the lease.
* * * * *
0
14. Revise Sec.  982.508 to read as follows:


Sec.  982.508  Maximum family share at initial occupancy.

    At the time the PHA approves a tenancy for initial occupancy of a 
dwelling unit by a family with tenant-based assistance under the 
program, and where the gross rent of the unit exceeds the applicable 
payment standard for the family, except in a case where the family is 
eligible for and receives enhanced voucher assistance, the family share 
must not exceed 40 percent of the family's adjusted monthly income. The 
determination of adjusted monthly income must be based on verification 
information received by the PHA no earlier than 60 days before the date 
that a PHA issues a voucher to the family.
0
15. Add Sec.  982.511 to read as follows:


Sec.  982.511  Rent to Owner: Decoupling Transactions.

    (a) In decoupling transactions in the section 236 program, 
authorized under section 236 of the National Housing Act, 12 U.S.C. 
1715z-1, the rent to owner shall be no greater than the HUD-approved 
basic rent for the section 236 program.
    (b) The rent to owner shall be determined in accordance with 
section 236 program requirements. This determination is not subject to 
the prohibition against increasing the rent to owner during the initial 
lease term (see Sec.  982.309).
0
16. Revise Sec.  982.515 to read as follows:


Sec.  982.515  Family share: Family responsibility.

    (a) Regular and enhanced voucher tenancy. (1) The family share is 
calculated by subtracting the amount of the housing assistance payment 
from the gross rent.
    (2) The family rent to owner is calculated by subtracting the 
amount of the housing assistance payment to the owner from the rent to 
owner.
    (3) The PHA may not use housing assistance payments or other 
program funds (including any administrative fee reserve) to pay any 
part of the family share, including the family rent to owner. Payment 
of the whole family share is the responsibility of the family.
    (b) Enhanced voucher tenancy and family responsibility. The 
prohibition in Sec.  982.515(a)(3) also applies to enhanced vouchers.
0
17. Add Sec.  982.518 to read as follows:


Sec.  982.518  Enhanced voucher minimum rent.

    (a) A family receiving enhanced voucher assistance shall pay for 
rent no less than the rent the family was paying on the date of the 
eligibility event, as follows:
    (1) A family previously assisted under a Section 8 project-based 
HAP contract shall pay no less than the dollar amount of the total 
tenant payment on the date of the eligibility event;
    (2) A family previously assisted under the HCV Program shall pay no 
less than the dollar amount of the family share of rent and utilities 
on the date of the eligibility event. The voucher family may choose not 
to accept the enhanced voucher assistance, in which case all the 
regular voucher rules apply, regardless of whether the family chooses 
to remain at the property;
    (3) A family not previously assisted under a Section 8 project-
based or tenant-based HAP contract shall pay no less than the dollar 
amount of the gross rent the family was paying on the date of the 
eligibility event. The PHA utility allowance is used to calculate the 
gross rent on the date of the eligibility event if all utilities were 
not included in the rent.
    (b) A family receiving enhanced voucher assistance shall pay the 
enhanced voucher minimum rent, notwithstanding any other requirement of 
the HCV Program. For example, if the enhanced voucher minimum rent 
exceeds 40 percent of the family's monthly adjusted income, a family 
shall still pay at least the enhanced voucher minimum rent, and the 
restriction on the initial family contribution under Sec.  982.508 is 
not applicable.
    (c) The enhanced voucher minimum rent requirement remains in effect 
for a family as long as the family remains at the property in which 
they qualified for enhanced voucher assistance, but may be revised in 
accordance with paragraph (d) of this section.
    (d) If the gross income of the family receiving enhanced voucher 
assistance subsequently declines to a significant extent, in accordance 
with HUD guidance, the enhanced voucher minimum rent shall be revised 
to an amount calculated based on a percentage of current monthly 
adjusted income, provided that:
    (1) The percentage used in this calculation is the greatest of: 30 
percent of monthly adjusted income; or the percentage of monthly 
adjusted income paid by the family for rent (including the utility 
allowance for any tenant-paid utilities) on the date of the eligibility 
event;
    (2) After the minimum rent is changed from a dollar amount to a 
percentage of income calculation, the enhanced voucher minimum rent for 
the family remains that specific percentage of income and will not 
revert to a dollar amount, unless and until the family's income 
increases to an amount whereby the family's enhanced voucher minimum 
rent established by a percentage of income calculation would require 
the assisted family to pay an amount equaling more than the greater

[[Page 74382]]

of the family's original enhanced voucher minimum rent payment 
(established as of the date of the eligibility event) or 30 percent of 
the family's adjusted income based on such increase. At such time, the 
family's enhanced voucher minimum rent shall be determined by the PHA 
using the dollar amount of the family's original enhanced voucher 
minimum rent. The enhanced voucher holder's family share shall be 
determined in accordance with Sec.  982.515(a). In no circumstance 
shall the family's enhanced voucher minimum rent be less than the 
amount established as of the date of the eligibility event.

    Dated: August 29, 2016.
Lourdes Castro Ram[iacute]rez,
Principal Deputy Assistant Secretary, Office of Public and Indian 
Housing.
[FR Doc. 2016-25520 Filed 10-25-16; 8:45 am]
 BILLING CODE 4210-67-P