Rent Adjustments in the Mark-to-Market Program, 43165-43168 [2020-14436]
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Federal Register / Vol. 85, No. 137 / Thursday, July 16, 2020 / Proposed Rules
whether they should be incorporated
into the final rule.
VI. Communications by Outside Parties
to the Commissioners or Their Advisors
Written communications and
summaries or transcripts of oral
communications respecting the merits
of this proceeding, from any outside
party to any Commissioner or
Commissioner’s advisor, will be placed
on the public record. See 16 CFR
1.26(b)(5).
VII. Proposed Rule Language
List of Subjects in 16 CFR Part 323
Labeling, U.S. origin.
For the reasons stated in the
preamble, the Federal Trade
Commission proposes to add part 323 to
subchapter C, title 16 CFR as set forth
below:
PART 323—MADE IN USA LABELING
Sec.
323.1 Definitions.
323.2 Prohibited acts.
323.3 Applicability to mail order
advertising.
323.4 Enforcement.
323.5 Relation to Federal and State laws.
Authority: 15 U.S.C. 45a.
§ 323.1
Definitions.
As used in this part:
(a) The term Made in the United
States means any unqualified
representation, express or implied, that
a product or service, or a specified
component thereof, is of U.S. origin,
including, but not limited to, a
representation that such product or
service is ‘‘made,’’ ‘‘manufactured,’’
‘‘built,’’ ‘‘produced,’’ ‘‘created,’’ or
‘‘crafted’’ in the United States or in
America, or any other unqualified U.S.origin claim.
(b) The terms mail order catalog and
mail order promotional material mean
any materials, used in the direct sale or
direct offering for sale of any product or
service, that are disseminated in print or
by electronic means, and that solicit the
purchase of such product or service by
mail, telephone, electronic mail, or
some other method without examining
the actual product purchased.
§ 323.2
Prohibited acts.
In connection with promoting or
offering for sale any good or service, in
or affecting commerce, as ‘‘commerce’’
is defined in the Federal Trade
Commission Act, it is an unfair or
deceptive act or practice within the
meaning of section 5 of that Act to label
any product as Made in the United
States unless the final assembly or
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processing of the product occurs in the
United States, all significant processing
that goes into the product occurs in the
United States, and all or virtually all
ingredients or components of the
product are made and sourced in the
United States.
§ 323.3 Applicability to mail order
advertising.
To the extent that any mail order
catalog or mail order promotional
material includes a seal, mark, tag, or
stamp labeling a product Made in the
United States, such label must comply
with § 323.2 of this part.
§ 323.4
Enforcement.
Any violation of this part shall be
treated as a violation of a rule under
section 18 of the Federal Trade
Commission Act, 15 U.S.C. 57a,
regarding unfair or deceptive acts or
practices.
§ 323.5
Relation to Federal and State laws.
(a) In general. This part shall not be
construed as superseding, altering, or
affecting any other federal statute or
regulation relating to country-of-origin
labeling requirements. In addition, this
part shall not be construed as
superseding, altering, or affecting any
other State statute, regulation, order, or
interpretation relating to country-oforigin labeling requirements, except to
the extent that such statute, regulation,
order, or interpretation is inconsistent
with the provisions of this part, and
then only to the extent of the
inconsistency.
(b) Greater protection under State law.
For purposes of this section, a State
statute, regulation, order, or
interpretation is not inconsistent with
the provisions of this part if the
protection such statute, regulation,
order, or interpretation affords any
consumer is greater than the protection
provided under this part, as determined
by the Commission on its own motion
or upon the petition of any interested
party.
By direction of the Commission,
April J. Tabor,
Secretary.
[FR Doc. 2020–13902 Filed 7–15–20; 8:45 am]
BILLING CODE 6750–01–P
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DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
24 CFR Part 401
[Docket No. FR 6122–P–01]
RIN 2577–AJ48
Rent Adjustments in the Mark-toMarket Program
Office of the Assistant
Secretary for Housing—Federal Housing
Commissioner, HUD.
ACTION: Proposed rule.
AGENCY:
Under the Mark-to-Market
program, HUD preserves the
affordability of eligible multifamily
housing projects by modifying abovemarket rents while restructuring project
debt to an amount supportable by the
modified rents. This proposed rule
would revise the Mark-to-Market
program regulations to clarify that all
annual rent adjustments for projects
subject to a restructuring plan are by
application of an operating cost
adjustment factor (OCAF) established by
HUD. The current regulations contain a
provision authorizing HUD to approve a
request for a budget-based rent
adjustment in lieu of an OCAF.
However, this provision is both contrary
to the governing statutory framework
and inconsistent with Mark-to-Market
renewal contracts, which allow only
OCAF rent adjustments. The proposed
rule would conform the regulations to
the governing statutory provision, the
terms of Mark-to-Market renewal
contracts, and the programmatic
practice of adjusting rents annually only
by OCAF.
DATES: Comment Due Date: September
14, 2020.
ADDRESSES: Interested persons are
invited to submit comments regarding
this proposed rule. Copies of all
comments submitted are available for
inspection and downloading at
www.regulations.gov. To receive
consideration as public comments,
comments must be submitted through
one of two methods, specified below.
All submissions must refer to the above
docket number and title.
1. 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
SUMMARY:
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Federal Register / Vol. 85, No. 137 / Thursday, July 16, 2020 / Proposed Rules
public. Comments submitted
electronically through the
www.regulations.gov website can be
viewed by other commenters and
interested members of the public.
Commenters should follow the
instructions provided on that site to
submit comments electronically.
2. 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.
FOR FURTHER INFORMATION CONTACT:
Thomas R. Davis, Director, Office of
Recapitalization, Office of Multifamily
Housing Programs, Department of
Housing and Urban Development, 451
Seventh Street SW, Room 6106,
Washington, DC 20410; telephone
number 202–402–7549. Persons with
hearing or speech impairments may
access this number via TTY by calling
the Federal Relay Service at 1–800–877–
8339.
SUPPLEMENTARY INFORMATION:
I. History
The Multifamily Assisted Housing
Reform and Affordability Act of 1997
(Title V of Pub. L. 105–65, approved
October 27, 1997 and codified at 42
U.S.C. 1437f note) (MAHRA) authorizes
the Mark-to-Market program, which is
designed to preserve low-income rental
housing affordability while reducing the
long-term costs of federal rental
assistance. Under the program,
multifamily housing projects with
above-market rents that are subject to an
expiring contract under section 8 of the
United States Housing Act of 1937 (42
U.S.C. 1437f) (Section 8) undergo both
a restructuring of the project’s HUDinsured or HUD-held debt and an initial
renewal of its Section 8 contract so that
a new first loan is serviceable based on
modified rents.
The renewal of the Section 8 contract
is governed by section 515 of MAHRA.
Under section 515(a), HUD is required
to offer and an owner is required to
accept an initial renewal of the project’s
Section 8 contract if the renewal is in
accordance with the terms and
conditions specified in a mortgage
restructuring and rental assistance
sufficiency plan meeting the
requirements of section 514 of MAHRA
(Restructuring Plan). Under such a
Restructuring Plan, the renewal rents
are based on either comparable market
rents, as required under section
514(g)(1) of MAHRA, or a budget, as
permitted in limited circumstances
under section 514(g)(2). In either case,
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the rents are adjusted annually by an
OCAF, as required under section
514(e)(2). At the conclusion of the debtrestructuring process, HUD issues an
initial renewal contract (Mark-to-Market
Renewal Contract) for a maximum 20year term reflecting the renewal rents
and requiring annual OCAF rent
adjustments, and the owner executes a
minimum 30-year use agreement, as
required under section 514(e)(6). As
long as the use agreement remains in
place, subsequent renewals are
governed by section 515(b) of MAHRA.
HUD initially implemented MAHRA
through an interim rule published on
September 11, 1998, at 63 FR 48926
(Interim Rule), both for projects that are
subject to a Restructuring Plan (24 CFR
part 401) and those that are not (24 CFR
part 402). Consistent with section
514(e)(2) of MAHRA, the Interim Rule
required that all projects subject to a
Restructuring Plan receive annual OCAF
rent adjustments (63 FR 48948). It also
implemented section 524 of MAHRA, as
it existed then, which authorized HUD
to renew expiring Section 8 contracts for
projects that were not undergoing debtrestructuring but was silent on rent
adjustments. The Interim Rule reflected
an administrative determination that
rents for contracts renewed under
section 524 would be adjusted by an
OCAF but could be ‘‘redetermined using
a budget-based rent adjustment from
time-to-time at the discretion of HUD’’
(63 FR 48954).
HUD issued the final rule
implementing MAHRA on March 22,
2000, at 65 FR 15485 (Final Rule).
Approximately five months earlier,
however, section 524 had undergone an
extensive amendment (section 531(a) of
Pub. L. 106–74, approved October 20,
1999) that expanded and refined the
renewal terms for projects not subject to
a Restructuring Plan. As amended,
section 524 of MAHRA requires HUD to
renew a project’s expiring Section 8
contract at the request of the owner
under one of various owner-selected
options, provided that the project is
eligible and the Secretary has
determined that a Restructuring Plan is
not necessary. The options in section
524(a) require that renewal rents not
exceed market, while section 524(b)(1),
which applies to a limited universe of
projects identified in section 524(b)(2),
prescribes a renewal rent formula
unconstrained by market. Section
524(c)(1) requires annual OCAF rent
adjustments but authorizes HUD to
approve a budget-based rent adjustment
in lieu of an OCAF. Section 524(c)(1) is
explicitly limited, however, to contracts
initially renewed under section 524(a),
(b)(1), or (e)(2) of MAHRA. Relying on
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section 524(c)(1), HUD included a
provision in the Final Rule
(§ 401.412(b)) that had not appeared in
the Interim Rule purporting to allow
HUD to approve an owner’s request for
a budget-based rent adjustment in lieu
of an OCAF for projects renewed under
section 515(a) of MAHRA subject to a
Restructuring Plan.
To implement section 524(c)(1) of
MAHRA, which HUD then thought to
have relevance for projects subject to a
Restructuring Plan, the Final Rule states
with respect to § 401.412, ‘‘We . . .
added a new paragraph (b) explaining
the availability of budget-based
adjustments upon request of the owner,
subject to the approval of the Secretary,
as provided in Pub. L. 106–74’’
(emphasis added). Although the
amended section 524 has no application
to projects that are subject to a
Restructuring Plan, HUD at that time
viewed section 524 as the subsequent
renewal authority for projects subject to
a Restructuring Plan and therefore
believed that a discretionary budgetbased rent adjustment would have been
available during the term of any
subsequent renewal under section
524(a), (b)(1), or (e)(2) of MAHRA. In
this regard, the preamble to the Final
Rule states, ‘‘A Restructuring Plan will
provide for adjustments using OCAF
under this section, but this section will
not prevent HUD from offering
[subsequent] renewal with rent levels
higher than those resulting from OCAF
rent adjustments, if legally authorized’’
(emphasis added) (65 FR 15461). The
preamble to the Final Rule further
states, ‘‘We added language . . . under
which HUD . . . must offer to renew
section 8 contracts as provided in a
Restructuring Plan, subject to . . . the
renewal authority available at the time
of each contract expiration. Section 524
of MAHRA (as amended by Pub. L. 106–
74) will be the [subsequent] renewal
authority’’ (emphasis added) (65 FR
15483).
After publication of the Final Rule,
however, HUD determined that for the
life of the minimum 30-year use
agreement required under section
514(e)(6) of MAHRA, the subsequent
renewal authority for projects subject to
a Restructuring Plan is section 515(b) of
MAHRA, not section 524, and that only
after the use agreement expires and the
owner requests and is granted a
subsequent renewal contract under
section 524(a), (b)(1), or (e)(2) of
MAHRA would a discretionary budgetbased rent adjustment be available in
lieu of an OCAF under section 524(c)(1).
This determination is reflected in Markto-Market Renewal Contracts, which
were finalized in the year following
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Federal Register / Vol. 85, No. 137 / Thursday, July 16, 2020 / Proposed Rules
publication of the Final Rule and which
provide for annual rent adjustments by
an OCAF without any provision
authorizing a budget-based rent
adjustment in lieu of an OCAF.
Moreover, Mark-to-Market Renewal
Contracts explicitly state that no rent
adjustments other than an OCAF are
allowed. Consistent with these
determinations, HUD’s policy has been
not to approve a request for a budgetbased rent adjustment while a project is
subject to a Restructuring Plan despite
the apparent authority to do so under
§ 401.412(b) of the Final Rule.
Like section 515(a) of MAHRA, which
it implements, § 401.554 of the Final
Rule states that HUD will ‘‘offer to
renew or extend’’ a Section 8 contract,
as provided in a project’s Restructuring
Plan. Because the programmatic practice
is to offer to renew rather than to
extend, HUD is proposing to revise this
language accordingly. In addition, HUD
is proposing to remove a parenthetical
phrase in § 401.554 suggesting that there
may be more than one renewal authority
for projects subject to a Restructuring
Plan.
II. Justification for Change
HUD is proposing this regulatory
change to clarify the Mark-to-Market
regulatory scheme by aligning the text of
§ 401.412 with section 514(e)(2) of
MAHRA, the terms of Mark-to-Market
Renewal Contracts regarding rent
adjustments, and the programmatic
practice of adjusting rents annually only
by an OCAF. HUD believes that
removing paragraph (b) would eliminate
the misperception that a budget-based
rent adjustment is available for projects
that are subject to a Restructuring Plan.
In addition, HUD believes that removing
language in § 401.554 stating that HUD
will offer to ‘‘extend’’ Section 8
contracts, and other language that refers
to multiple renewal authorities, would
clarify these provisions.
III. Summary of Proposed Rule
HUD is proposing to remove
§ 401.412(b), which provides that HUD
may approve a request for a budgetbased rent adjustment for projects that
are subject to a Restructuring Plan.
In addition, HUD is proposing to
revise § 401.554 to remove the statement
that HUD will ‘‘extend’’ Section 8
contracts. In keeping with the
explanation above, HUD is also
proposing to remove a parenthetical
reference in § 401.554 to multiple
renewal authorities for contracts subject
to a Restructuring Plan.
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IV. Findings and Certifications
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. This proposed
rule would codify existing statutory
interpretations of the authorities granted
for the Mark-to-Market program. It does
not create compliance costs, nor does it
alter the underlying operation of the
Mark-to-Market program. Therefore, the
undersigned certifies that this proposed
rule would not have a significant
economic impact on a substantial
number of small entities.
Nevertheless, HUD is sensitive to the
fact that the uniform application of
requirements on entities of differing
sizes may place a disproportionate
burden on small entities. HUD,
therefore, is soliciting alternatives for
compliance from small entities as to
how these small entities might comply
in a way less burdensome to them.
Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501–
3520), 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 Office of Management
and Budget (OMB) control number. This
proposed rule does not change any
information collection requirements.
Executive Order 12612, Federalism
Executive Order 13132 (entitled
‘‘Federalism’’) prohibits an agency from
publishing any rule that has federalism
implications if the rule either imposes
substantial direct compliance costs on
state and local governments and is not
required by statute, or the rule preempts
state law, unless the agency meets the
consultation and funding requirements
of section 6 of the executive order. This
proposed rule would not have
federalism implications and would not
impose substantial direct compliance
costs on state and local governments or
preempt state law within the meaning of
the Executive Order.
Environmental Impact
This proposed rule governs statutorily
required establishment and review of
rent schedules and related
administrative and fiscal requirements
and procedures which do not constitute
a development decision that affects the
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43167
physical condition of specific project
areas or building sites. Accordingly,
under 24 CFR 50.19(c)(6), this proposed
rule is categorically excluded from
environmental review under the
National Environmental Policy Act of
1969 (42 U.S.C. 4321).
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104–4;
approved March 22, 1995) (UMRA)
establishes requirements for Federal
agencies to assess the effects of their
regulatory actions on state, local, and
tribal governments, and on the private
sector. This proposed rule does not
impose any Federal mandates on any
state, local, or tribal government, or on
the private sector, within the meaning of
the UMRA.
List of Subjects for 24 CFR Part 401
Grant programs—housing and
community development, Loan
programs—housing and community
development, Low and moderate
income housing, Mortgage insurance,
Mortgages, Rent subsidies, Reporting
and recordkeeping requirements.
Accordingly, for the reasons described
in the preamble, HUD proposes to
amend 24 CFR part 401 as follows:
PART 401—MULTIFAMILY HOUSING
MORTGAGE AND HOUSING
ASSISTANCE RESTRUCTURING
PROGRAM (MARK-TO-MARKET)
1. The authority for part 401
continues to read as follows:
■
Authority: 12 U.S.C. 1715z–1 and 1735f–
19(b); 42 U.S.C. 1437(c)(8), 1437f(t), 1437f
note, and 3535(d).
■
2. Revise § 401.412 to read as follows:
§ 401.412 Adjustment of rents based on
operating cost adjustment factor (OCAF).
(a) OCAF. The Restructuring Plan
must provide for annual adjustment of
the restructured rents for project-based
assistance by an OCAF determined by
HUD.
(b) Application of OCAF. HUD will
apply the OCAF to the previous year’s
contract rent less the portion of that rent
paid for debt service. This paragraph
applies to renewals of contracts that
receive restructured rents under either
section 514(g)(1) or (2) of MAHRA.
■ 3. Revise § 401.554 to read as follows:
§ 401.554 Contract renewal and
administration.
HUD will offer to renew section 8
contracts as provided in each
Restructuring Plan, subject to the
availability of appropriations and
subject to the renewal authority
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available at the time of each contract
expiration. The offer will be made by
HUD directly or through a PAE that has
contracted with HUD to be a contract
administrator for such contracts. HUD
will offer to any PAE that is qualified to
be the section 8 contract administrator
the opportunity to serve as the section
8 contract administrator for a project
restructured under a Restructuring Plan
developed by the PAE under the Markto-Market Program. Qualifications will
be determined under both statutory
requirements and requirements issued
by the appropriate office within HUD,
depending on the type of section 8
assistance that is provided.
Brian D. Montgomery,
Deputy Secretary.
[FR Doc. 2020–14436 Filed 7–15–20; 8:45 am]
BILLING CODE P
DEPARTMENT OF DEFENSE
Office of the Secretary
32 CFR Part 56
[Docket ID: DOD–2016–OS–0115]
RIN 0790–AJ04
Nondiscrimination on the Basis of
Disability in Programs or Activities
Assisted or Conducted by the DoD and
in Equal Access to Information and
Communication Technology Used by
DoD, and Procedures for Resolving
Complaints
Office of the Under Secretary of
Defense for Personnel and Readiness,
DoD.
ACTION: Proposed rule.
AGENCY:
The Department of Defense
(DoD) is proposing to amend its
regulations prohibiting unlawful
discrimination on the basis of disability
in programs or activities receiving
Federal financial assistance from, or
conducted by, DoD. These revisions
update and clarify the obligations that
section 504 of the Rehabilitation Act
imposes on recipients of Federal
financial assistance and DoD
Components, in order to incorporate
current statutory provisions,
requirements from judicial decisions,
and comparable provisions
implementing title II of the Americans
with Disabilities Act (ADA). The
regulation is further revised to
implement section 508 of the
Rehabilitation Act, as applicable to the
DoD Components, in order to provide
policy concerning accessibility of DoD
information and communication
SUMMARY:
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technology. Additionally, the regulation
provides the procedures pursuant to
sections 504 or 508 of the Rehabilitation
Act.
DATES: Comments must be received by
September 14, 2020.
ADDRESSES: You may submit comments,
identified by docket number and/or
Regulatory Information Number (RIN)
number and title, by any of the
following methods:
• Federal Rulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail: DoD cannot receive written
comments at this time due to the
COVID–19 pandemic. Comments should
be sent electronically to the docket
listed above.
Instructions: All submissions received
must include the agency name and
docket number or RIN for this Federal
Register document. The general policy
for comments and other submissions
from members of the public is to make
these submissions available for public
viewing on the internet at https://
www.regulations.gov as they are
received without change, including any
personal identifiers or contact
information.
FOR FURTHER INFORMATION CONTACT:
Randy Cooper, 703–571–9327.
SUPPLEMENTARY INFORMATION:
I. Background
This Notice of Proposed Rulemaking
(‘‘NPRM’’) proposes to amend 32 CFR
part 56, ‘‘Nondiscrimination on the
Basis of Handicap in Programs and
Activities Assisted or Conducted by the
Department of Defense’’ by updating the
nondiscrimination obligations that
section 504 imposes on recipients of
Federal financial assistance and DoD
Components; modifying this rule to
include the obligations that section 508
imposes on DoD Components; and
clarifying the complaint resolution
procedures applicable to allegations of
noncompliance.
Congress enacted section 504 to
prohibit discrimination on the basis of
disability in federally assisted and
federally conducted programs or
activities. Executive Order 11914,
‘‘Nondiscrimination with Respect to the
Handicapped in Federally Assisted
Programs,’’ authorized the then
Department of Health, Education, and
Welfare (HEW) to coordinate
enforcement of section 504. This
authority was later transferred to the
Department of Health and Human
Services. On November 2, 1980, this
authority was transferred to the
Attorney General by Executive Order
12250, ‘‘Leadership and Coordination of
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Nondiscrimination Laws’’ (45 FR
72995). On August 11, 1981, the
Department of Justice (DOJ)
promulgated a final rule, 28 CFR part
41, transferring the guidelines issued by
HEW and designating them as part of
the Attorney General’s civil rights
coordination regulations.
Consistent with the DOJ section 504
coordination regulation, on April 8,
1982, DoD promulgated 32 CFR part 56,
implementing section 504 within the
Department (47 FR 15124). Thirty-seven
years later, there is a compelling need
to clarify and update this regulation to
ensure that DoD policies reflect current
Federal law and policies regarding
discrimination on the basis of disability.
Congress has amended certain
provisions of the Rehabilitation Act of
1973, Public Law 93–112 (Sept. 26,
1973) (Rehabilitation Act), necessitating
revisions to the Department’s Section
504 federally conducted programs and
activities regulation.1 The Americans
with Disabilities Act of 1990, Public
Law 101–336 (July 26, 1990) (ADA),
revised the Rehabilitation Act to include
definitions of the terms ‘‘drugs’’ and
‘‘illegal use of drugs,’’ explaining that
these terms were to be interpreted
consistent with the principles of the
Controlled Substances Act, 21 U.S.C.
801 et seq. See 29 U.S.C. 705(10). The
ADA also amended the Rehabilitation
Act to expressly exclude from coverage
an individual who is currently engaging
in the illegal use of drugs. See 29 U.S.C.
705(10), (20)(C). The Rehabilitation Act
Amendments of 1992, Public Law 102–
569 (Oct. 29, 1992) (the 1992
Amendments), adopted the use of
‘‘person first’’ language+ e by changing
the term ‘‘handicapped person’’ to
‘‘individual with a disability’’ and
provided that the standards applied
under title I of the ADA shall apply to
determinations of employment
discrimination under section 504. More
recently, the ADA Amendments Act of
2008 (ADA Amendments Act), Public
Law 110–325 (Sept. 25, 2008), revised
the meaning and interpretation of the
definition of ‘‘disability’’ under section
504 to align them with the ADA. In
addition, there have been significant
Supreme Court decisions interpreting
section 504 requirements relating to the
principles of ‘‘direct threat’’ and
reasonable accommodation. See, e.g.,
Sch. Bd. of Nassau Cty. v. Arline, 480
1 See, e.g., Public Law 99–506 (Oct. 21, 1986);
Public Law 100–259 (Mar. 22, 1988); Public Law
100–630 (Nov. 7, 1988); Public Law 101–336 (July
26, 1990); Public Law 102–569 (Oct. 29, 1992);
Public Law 103–382 (Oct. 20, 1994); Public Law
105–220 (Aug. 7, 1998); Public Law 107–110 (Jan.
8, 2002); Public Law 110–325 (Sept. 25, 2008);
Public Law 113–128 (July 22, 2014).]
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]]>Agencies
[Federal Register Volume 85, Number 137 (Thursday, July 16, 2020)]
[Proposed Rules]
[Pages 43165-43168]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14436]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 401
[Docket No. FR 6122-P-01]
RIN 2577-AJ48
Rent Adjustments in the Mark-to-Market Program
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Proposed rule.
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SUMMARY: Under the Mark-to-Market program, HUD preserves the
affordability of eligible multifamily housing projects by modifying
above-market rents while restructuring project debt to an amount
supportable by the modified rents. This proposed rule would revise the
Mark-to-Market program regulations to clarify that all annual rent
adjustments for projects subject to a restructuring plan are by
application of an operating cost adjustment factor (OCAF) established
by HUD. The current regulations contain a provision authorizing HUD to
approve a request for a budget-based rent adjustment in lieu of an
OCAF. However, this provision is both contrary to the governing
statutory framework and inconsistent with Mark-to-Market renewal
contracts, which allow only OCAF rent adjustments. The proposed rule
would conform the regulations to the governing statutory provision, the
terms of Mark-to-Market renewal contracts, and the programmatic
practice of adjusting rents annually only by OCAF.
DATES: Comment Due Date: September 14, 2020.
ADDRESSES: Interested persons are invited to submit comments regarding
this proposed rule. Copies of all comments submitted are available for
inspection and downloading at www.regulations.gov. To receive
consideration as public comments, comments must be submitted through
one of two methods, specified below. All submissions must refer to the
above docket number and title.
1. 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
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public. Comments submitted electronically through the
www.regulations.gov website can be viewed by other commenters and
interested members of the public. Commenters should follow the
instructions provided on that site to submit comments electronically.
2. 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.
FOR FURTHER INFORMATION CONTACT: Thomas R. Davis, Director, Office of
Recapitalization, Office of Multifamily Housing Programs, Department of
Housing and Urban Development, 451 Seventh Street SW, Room 6106,
Washington, DC 20410; telephone number 202-402-7549. Persons with
hearing or speech impairments may access this number via TTY by calling
the Federal Relay Service at 1-800-877-8339.
SUPPLEMENTARY INFORMATION:
I. History
The Multifamily Assisted Housing Reform and Affordability Act of
1997 (Title V of Pub. L. 105-65, approved October 27, 1997 and codified
at 42 U.S.C. 1437f note) (MAHRA) authorizes the Mark-to-Market program,
which is designed to preserve low-income rental housing affordability
while reducing the long-term costs of federal rental assistance. Under
the program, multifamily housing projects with above-market rents that
are subject to an expiring contract under section 8 of the United
States Housing Act of 1937 (42 U.S.C. 1437f) (Section 8) undergo both a
restructuring of the project's HUD-insured or HUD-held debt and an
initial renewal of its Section 8 contract so that a new first loan is
serviceable based on modified rents.
The renewal of the Section 8 contract is governed by section 515 of
MAHRA. Under section 515(a), HUD is required to offer and an owner is
required to accept an initial renewal of the project's Section 8
contract if the renewal is in accordance with the terms and conditions
specified in a mortgage restructuring and rental assistance sufficiency
plan meeting the requirements of section 514 of MAHRA (Restructuring
Plan). Under such a Restructuring Plan, the renewal rents are based on
either comparable market rents, as required under section 514(g)(1) of
MAHRA, or a budget, as permitted in limited circumstances under section
514(g)(2). In either case, the rents are adjusted annually by an OCAF,
as required under section 514(e)(2). At the conclusion of the debt-
restructuring process, HUD issues an initial renewal contract (Mark-to-
Market Renewal Contract) for a maximum 20-year term reflecting the
renewal rents and requiring annual OCAF rent adjustments, and the owner
executes a minimum 30-year use agreement, as required under section
514(e)(6). As long as the use agreement remains in place, subsequent
renewals are governed by section 515(b) of MAHRA.
HUD initially implemented MAHRA through an interim rule published
on September 11, 1998, at 63 FR 48926 (Interim Rule), both for projects
that are subject to a Restructuring Plan (24 CFR part 401) and those
that are not (24 CFR part 402). Consistent with section 514(e)(2) of
MAHRA, the Interim Rule required that all projects subject to a
Restructuring Plan receive annual OCAF rent adjustments (63 FR 48948).
It also implemented section 524 of MAHRA, as it existed then, which
authorized HUD to renew expiring Section 8 contracts for projects that
were not undergoing debt-restructuring but was silent on rent
adjustments. The Interim Rule reflected an administrative determination
that rents for contracts renewed under section 524 would be adjusted by
an OCAF but could be ``redetermined using a budget-based rent
adjustment from time-to-time at the discretion of HUD'' (63 FR 48954).
HUD issued the final rule implementing MAHRA on March 22, 2000, at
65 FR 15485 (Final Rule). Approximately five months earlier, however,
section 524 had undergone an extensive amendment (section 531(a) of
Pub. L. 106-74, approved October 20, 1999) that expanded and refined
the renewal terms for projects not subject to a Restructuring Plan. As
amended, section 524 of MAHRA requires HUD to renew a project's
expiring Section 8 contract at the request of the owner under one of
various owner-selected options, provided that the project is eligible
and the Secretary has determined that a Restructuring Plan is not
necessary. The options in section 524(a) require that renewal rents not
exceed market, while section 524(b)(1), which applies to a limited
universe of projects identified in section 524(b)(2), prescribes a
renewal rent formula unconstrained by market. Section 524(c)(1)
requires annual OCAF rent adjustments but authorizes HUD to approve a
budget-based rent adjustment in lieu of an OCAF. Section 524(c)(1) is
explicitly limited, however, to contracts initially renewed under
section 524(a), (b)(1), or (e)(2) of MAHRA. Relying on section
524(c)(1), HUD included a provision in the Final Rule (Sec.
401.412(b)) that had not appeared in the Interim Rule purporting to
allow HUD to approve an owner's request for a budget-based rent
adjustment in lieu of an OCAF for projects renewed under section 515(a)
of MAHRA subject to a Restructuring Plan.
To implement section 524(c)(1) of MAHRA, which HUD then thought to
have relevance for projects subject to a Restructuring Plan, the Final
Rule states with respect to Sec. 401.412, ``We . . . added a new
paragraph (b) explaining the availability of budget-based adjustments
upon request of the owner, subject to the approval of the Secretary, as
provided in Pub. L. 106-74'' (emphasis added). Although the amended
section 524 has no application to projects that are subject to a
Restructuring Plan, HUD at that time viewed section 524 as the
subsequent renewal authority for projects subject to a Restructuring
Plan and therefore believed that a discretionary budget-based rent
adjustment would have been available during the term of any subsequent
renewal under section 524(a), (b)(1), or (e)(2) of MAHRA. In this
regard, the preamble to the Final Rule states, ``A Restructuring Plan
will provide for adjustments using OCAF under this section, but this
section will not prevent HUD from offering [subsequent] renewal with
rent levels higher than those resulting from OCAF rent adjustments, if
legally authorized'' (emphasis added) (65 FR 15461). The preamble to
the Final Rule further states, ``We added language . . . under which
HUD . . . must offer to renew section 8 contracts as provided in a
Restructuring Plan, subject to . . . the renewal authority available at
the time of each contract expiration. Section 524 of MAHRA (as amended
by Pub. L. 106-74) will be the [subsequent] renewal authority''
(emphasis added) (65 FR 15483).
After publication of the Final Rule, however, HUD determined that
for the life of the minimum 30-year use agreement required under
section 514(e)(6) of MAHRA, the subsequent renewal authority for
projects subject to a Restructuring Plan is section 515(b) of MAHRA,
not section 524, and that only after the use agreement expires and the
owner requests and is granted a subsequent renewal contract under
section 524(a), (b)(1), or (e)(2) of MAHRA would a discretionary
budget-based rent adjustment be available in lieu of an OCAF under
section 524(c)(1). This determination is reflected in Mark-to-Market
Renewal Contracts, which were finalized in the year following
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publication of the Final Rule and which provide for annual rent
adjustments by an OCAF without any provision authorizing a budget-based
rent adjustment in lieu of an OCAF. Moreover, Mark-to-Market Renewal
Contracts explicitly state that no rent adjustments other than an OCAF
are allowed. Consistent with these determinations, HUD's policy has
been not to approve a request for a budget-based rent adjustment while
a project is subject to a Restructuring Plan despite the apparent
authority to do so under Sec. 401.412(b) of the Final Rule.
Like section 515(a) of MAHRA, which it implements, Sec. 401.554 of
the Final Rule states that HUD will ``offer to renew or extend'' a
Section 8 contract, as provided in a project's Restructuring Plan.
Because the programmatic practice is to offer to renew rather than to
extend, HUD is proposing to revise this language accordingly. In
addition, HUD is proposing to remove a parenthetical phrase in Sec.
401.554 suggesting that there may be more than one renewal authority
for projects subject to a Restructuring Plan.
II. Justification for Change
HUD is proposing this regulatory change to clarify the Mark-to-
Market regulatory scheme by aligning the text of Sec. 401.412 with
section 514(e)(2) of MAHRA, the terms of Mark-to-Market Renewal
Contracts regarding rent adjustments, and the programmatic practice of
adjusting rents annually only by an OCAF. HUD believes that removing
paragraph (b) would eliminate the misperception that a budget-based
rent adjustment is available for projects that are subject to a
Restructuring Plan. In addition, HUD believes that removing language in
Sec. 401.554 stating that HUD will offer to ``extend'' Section 8
contracts, and other language that refers to multiple renewal
authorities, would clarify these provisions.
III. Summary of Proposed Rule
HUD is proposing to remove Sec. 401.412(b), which provides that
HUD may approve a request for a budget-based rent adjustment for
projects that are subject to a Restructuring Plan.
In addition, HUD is proposing to revise Sec. 401.554 to remove the
statement that HUD will ``extend'' Section 8 contracts. In keeping with
the explanation above, HUD is also proposing to remove a parenthetical
reference in Sec. 401.554 to multiple renewal authorities for
contracts subject to a Restructuring Plan.
IV. Findings and Certifications
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. This proposed rule
would codify existing statutory interpretations of the authorities
granted for the Mark-to-Market program. It does not create compliance
costs, nor does it alter the underlying operation of the Mark-to-Market
program. Therefore, the undersigned certifies that this proposed rule
would not have a significant economic impact on a substantial number of
small entities.
Nevertheless, HUD is sensitive to the fact that the uniform
application of requirements on entities of differing sizes may place a
disproportionate burden on small entities. HUD, therefore, is
soliciting alternatives for compliance from small entities as to how
these small entities might comply in a way less burdensome to them.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3501-3520), 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 Office of Management and Budget
(OMB) control number. This proposed rule does not change any
information collection requirements.
Executive Order 12612, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial direct compliance costs on state and local
governments and is not required by statute, or the rule preempts state
law, unless the agency meets the consultation and funding requirements
of section 6 of the executive order. This proposed rule would not have
federalism implications and would not impose substantial direct
compliance costs on state and local governments or preempt state law
within the meaning of the Executive Order.
Environmental Impact
This proposed rule governs statutorily required establishment and
review of rent schedules and related administrative and fiscal
requirements and procedures which do not constitute a development
decision that affects the physical condition of specific project areas
or building sites. Accordingly, under 24 CFR 50.19(c)(6), this proposed
rule is categorically excluded from environmental review under the
National Environmental Policy Act of 1969 (42 U.S.C. 4321).
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4; approved March 22, 1995) (UMRA) establishes requirements for Federal
agencies to assess the effects of their regulatory actions on state,
local, and tribal governments, and on the private sector. This proposed
rule does not impose any Federal mandates on any state, local, or
tribal government, or on the private sector, within the meaning of the
UMRA.
List of Subjects for 24 CFR Part 401
Grant programs--housing and community development, Loan programs--
housing and community development, Low and moderate income housing,
Mortgage insurance, Mortgages, Rent subsidies, Reporting and
recordkeeping requirements.
Accordingly, for the reasons described in the preamble, HUD
proposes to amend 24 CFR part 401 as follows:
PART 401--MULTIFAMILY HOUSING MORTGAGE AND HOUSING ASSISTANCE
RESTRUCTURING PROGRAM (MARK-TO-MARKET)
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1. The authority for part 401 continues to read as follows:
Authority: 12 U.S.C. 1715z-1 and 1735f-19(b); 42 U.S.C.
1437(c)(8), 1437f(t), 1437f note, and 3535(d).
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2. Revise Sec. 401.412 to read as follows:
Sec. 401.412 Adjustment of rents based on operating cost adjustment
factor (OCAF).
(a) OCAF. The Restructuring Plan must provide for annual adjustment
of the restructured rents for project-based assistance by an OCAF
determined by HUD.
(b) Application of OCAF. HUD will apply the OCAF to the previous
year's contract rent less the portion of that rent paid for debt
service. This paragraph applies to renewals of contracts that receive
restructured rents under either section 514(g)(1) or (2) of MAHRA.
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3. Revise Sec. 401.554 to read as follows:
Sec. 401.554 Contract renewal and administration.
HUD will offer to renew section 8 contracts as provided in each
Restructuring Plan, subject to the availability of appropriations and
subject to the renewal authority
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available at the time of each contract expiration. The offer will be
made by HUD directly or through a PAE that has contracted with HUD to
be a contract administrator for such contracts. HUD will offer to any
PAE that is qualified to be the section 8 contract administrator the
opportunity to serve as the section 8 contract administrator for a
project restructured under a Restructuring Plan developed by the PAE
under the Mark-to-Market Program. Qualifications will be determined
under both statutory requirements and requirements issued by the
appropriate office within HUD, depending on the type of section 8
assistance that is provided.
Brian D. Montgomery,
Deputy Secretary.
[FR Doc. 2020-14436 Filed 7-15-20; 8:45 am]
BILLING CODE P
