HOME Investment Partnerships Program: Program Updates and Streamlining, 46618-46680 [2024-10975]

Download as PDF 46618 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW, Room 10276, Washington, DC 20410–0500. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 24 CFR Parts 91, 92, 570, and 982 [Docket No. FR–6144–P–01] Note: To receive consideration as a public comment, comments must be submitted through one of the two methods specified above. RIN 2506–AC50 HOME Investment Partnerships Program: Program Updates and Streamlining Office of the Assistant Secretary for Community Planning and Development, Department of Housing and Urban Development, HUD. ACTION: Proposed rule. AGENCY: HUD’s HOME Investment Partnerships Program (HOME program or HOME) provides formula grants to States and units of general local government to fund a wide range of activities to produce and maintain affordable rental and homeownership housing and provides tenant-based rental assistance for low-income and very low-income households. This proposed rule would revise the current HOME regulations to update, simplify, or streamline requirements, better align the program with other Federal housing programs, and implement recent amendments to the HOME statute. This rule also includes minor revisions to the regulations for the Community Development Block Grant and Section 8 Housing Choice Voucher (HCV) Programs consistent with the implementation of proposed changes to the HOME program. DATES: Comment Due Date: July 29, 2024. ADDRESSES: There are two methods for submitting public comments. All submissions must refer to the above docket number and title. 1. Electronic Submission of Comments. Comments may be submitted 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 comments immediately available to the public. Comments submitted electronically through www.regulations.gov can be viewed by other commenters and interested members of the public. Commenters should follow the instructions provided on that website to submit comments electronically. 2. Submission of Comments by Mail. Comments may be submitted by mail to lotter on DSK11XQN23PROD with PROPOSALS2 SUMMARY: VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 Public Inspection of Public Comments. HUD will make all properly submitted comments and communications available for public inspection and copying during regular business hours at the above address. Due to security measures at the HUD Headquarters building, you must schedule an appointment in advance to review the public comments by calling the Regulations Division at 202–708– 3055 (this is not a toll-free number). HUD welcomes and is prepared to receive calls from individuals who are deaf or hard of hearing, as well as individuals with speech or communication disabilities. To learn more about how to make an accessible telephone call, please visit https:// www.fcc.gov/consumers/guides/ telecommunications-relay-service-trs. Copies of all comments submitted are available for inspection and downloading at www.regulations.gov. In accordance with 5 U.S.C. 553(b)(4), a summary of this proposed rule may be found at www.regulations.gov. FOR FURTHER INFORMATION CONTACT: Virginia Sardone, Director, Office of Affordable Housing Programs, Office of Community Planning and Development, Department of Housing and Urban Development, 451 7th Street SW, Room 7160, Washington, DC 20410; telephone number (202) 708–2684 (this is not a toll-free number). HUD welcomes and is prepared to receive calls from individuals who are deaf or hard of hearing, as well as individuals with speech or communication disabilities. To learn more about how to make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/ telecommunications-relay-service-trs. SUPPLEMENTARY INFORMATION: I. Background—The HOME Program The HOME program is authorized by title II of the Cranston-Gonzalez National Affordable Housing Act 1 (‘‘NAHA’’) and has been in operation since 1992. The HOME program provides grants to States, local jurisdictions, and consortia of local jurisdictions (collectively, participating jurisdictions or PJs) and is used, often in partnership with local nonprofit 1 42 PO 00000 U.S.C. 12721 et seq. Frm 00002 Fmt 4701 Sfmt 4702 groups, to fund a wide range of activities to build, buy, or rehabilitate affordable housing for rent or homeownership or to fund direct rental assistance to low-income people.2 HOME program funds are awarded annually as formula grants to participating jurisdictions. After the Department obligates funds to a participating jurisdiction, the Department establishes a HOME Investment Trust Fund 3 for each participating jurisdiction, providing a line of credit that a participating jurisdiction may draw upon as needed. The HOME program is the largest Federal block grant to States and local governments designed exclusively to create affordable housing for lowincome households. Each year, the program allocates approximately $1.5 billion among States and approximately 600 localities nationwide. In fiscal year 2023, participating jurisdictions completed 6,848 rental housing units and 4,051 homebuyer units, assisted 2,717 low-income homeowners to repair their homes, and provided tenant-based rental assistance to 13,016 low-income households. HOME funds are most often used as gap financing for rental projects, particularly for projects that have been awarded Low-Income Housing Credits (26 U.S.C. 42) (‘‘LIHTC’’). Currently, there are 245,122 HOME-assisted rental units operating in their periods of affordability (i.e., subject to ongoing HOME income and rent requirements). The HOME program is designed to reinforce several important values and principles of community development. First, the HOME program’s flexibility empowers people and communities to design and implement strategies tailored to their own needs and priorities. Second, the HOME program’s emphasis on consolidated planning expands and strengthens partnerships among all levels of government and the relationship with the private sector in the development of affordable housing. Third, the HOME program’s technical assistance activities and set-aside for qualified community housing development organizations help to build the capacity of and partnerships with these community-based nonprofit organizations. Fourth, the HOME program’s requirement that participating jurisdictions match 25 cents of every dollar in program funds helps to mobilize community resources in support of affordable housing. 2 See HUD’s HOME Investment Partnerships Program web page at https://www.hud.gov/ program_offices/comm_planning/home. 3 HUD’s regulations for the HOME Investment Trust Fund can be found at 24 CFR 92.500. E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules While participating jurisdictions may undertake housing development activities directly, they also may provide HOME funds to for profit developers, public agencies, or private non-profit organizations to develop affordable housing for rent or sale to income-eligible households. Participating jurisdictions may provide HOME funds for affordable housing as grants, direct loans, loan guarantees, or other forms of credit enhancement, or for rental assistance or security deposits. Non-development activities such as tenant-based rental assistance or downpayment assistance for homeownership are generally administered by the participating jurisdiction, another public agency, or a non-profit organization as subrecipients acting on behalf of the participating jurisdiction. The participating jurisdiction ensures compliance with HOME affordability requirements during the required period of affordability through the execution and recording of regulatory agreements on HOME-assisted housing and other enforceable measures such as deed restrictions or similar instruments. All HOME-assisted units must be occupied by income-eligible households. HOMEassisted rental units must have their rents approved by the participating jurisdiction and require owners to restrict the rent paid by tenants to amounts at or below the HUD-published maximum HOME rent limits. Owners of HOME-assisted rental housing must follow their adopted written tenant selection policies and criteria and select tenants from a written waiting list in chronological order of their application, insofar as practicable. Owners of HOME-assisted rental housing must also affirmatively market the availability of units in a manner likely to reach eligible tenants. Generally, participating jurisdictions maintain information on HOME-assisted rental housing (e.g., websites, brochures, fliers) that prospective tenants may access to identify housing opportunities. HOMEassisted housing for homebuyers is also subject to a period of affordability. If the HOME-assisted homeownership housing is sold during the period of affordability, either the property must be sold at an affordable price to another low-income homebuyer or all or a portion of any purchase assistance provided to the seller must be recaptured from the net proceeds of the sale. The HOME program regulations are codified in 24 CFR part 92 and were last substantively revised on July 24, 2013 VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 (the 2013 HOME Final Rule).4 The 2013 HOME Final Rule focused on improving a participating jurisdiction’s performance and accountability to HOME grant funds and addressing a participating jurisdiction’s operational challenges as it adopted more complex program designs and its portfolio of existing projects grew. In 2016, the Department issued an interim regulation,5 finalized on September 22, 2022 (‘‘the 2022 HOME Final Rule’’),6 that implemented a grant-specific method for determining compliance with the 24-month commitment and CHDO set-aside commitment deadlines. The 2022 HOME Final Rule also eliminated the use of first-in-first-out accounting for fiscal year 2015 and later HOME grants. The HOME program provisions contained in title II of NAHA are prescriptive and the statute has not been significantly revised since the HOME program was last reauthorized by Congress in 1992. The constraints of prescriptive statutory authority that have not been significantly revised in over 30 years limits the scope of changes that the Department can propose to the HOME program regulations. Working within these limitations, the Department conducted a comprehensive review of title II of NAHA and current HOME program regulations to determine whether previously unrecognized opportunities might exist to revise current regulatory provisions. In creating this proposed rule, the Department focused on its commitment to equity and wealthbuilding and considered input from stakeholders throughout the years on the most challenging aspects of administering and using HOME funds to provide affordable housing. Through this proposed rule, the Department seeks to reduce burden and increase flexibility for participating jurisdictions and other program participants, while adhering to statutory intent and requiring responsible management of State and local HOME programs. II. This Proposed Rule HUD proposes to make multiple changes to 24 CFR part 92. The proposed changes include significant revisions to the community housing development organization (CHDO) requirements, a change in the approach to HOME rents, simplified requirements for small-scale rental projects, enhanced flexibility in HOME tenant-based rental assistance (‘‘TBRA’’) programs, and 4 78 FR 44627. FR 86947 (Dec. 2, 2016). 6 87 FR 57821. 5 81 PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 46619 simplified provisions and new flexibilities for community land trusts (CLTs). The proposed rule would significantly strengthen and expand tenant protections by requiring that a HOME tenancy addendum with a set of uniform tenant protections be appended to the leases of all tenants of HOMEassisted rental housing units. HUD also proposes requiring that a HOME tenancy addendum with a streamlined set of uniform tenant protections be appended to the leases of all tenants receiving TBRA. Additionally, HUD proposes to create incentives for meeting a more advanced property standard that incorporates green building standards, higher levels of energy efficiency, and innovative building techniques in new construction, reconstruction, and rehabilitation of housing. The proposed rule would also clarify the resale requirements for homeownership housing and would make technical amendments and simplifications to conform provisions to certain changes made in the 2013 HOME Final Rule. HUD’s proposed changes are described more fully in each of the sections below. This proposed rule incorporates changes made by the Housing Opportunity Through Modernization Act of 2016 (HOTMA), published in the Federal Register on February 14, 2023 (88 FR 9600) (‘‘HOTMA Final Rule’’), Economic Growth Regulatory Relief and Consumer Protection Act: Implementation of National Standards for the Physical Inspection of Real Estate (NSPIRE), published in the Federal Register on May 11, 2023 (88 FR 30442) (‘‘NSPIRE Final Rule’’). This proposed rule also updates citations, in paragraphs where other changes are being made, to citations to conform with recent changes to the Office of Management and Budget (OMB) regulations at 2 CFR part 200. HUD intends to publish a future rulemaking to ensure that all citations throughout HUD’s regulations are consistent with these changes. This proposed rule also proposes further revisions to the changes made to 24 CFR part 92 by the HOTMA Final Rule, and the NSPIRE Final Rule. A. Changes to the HOME Program Regulations (24 CFR Part 92) 1. Definitions (24 CFR 92.2) Removal of definitions related to 24 CFR part 92, subpart M. HUD proposes to remove the definition of ‘‘ADDI Funds,’’ ‘‘Displaced homemaker,’’ and ‘‘First-Time Homebuyer’’ because the Department proposes to delete 24 CFR part 92, subpart M, which implemented E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 46620 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules the American Dream Downpayment Initiative (ADDI) and associated definitions. Commitment. HUD proposes to make two minor changes to the definition of ‘‘commitment.’’ This term is currently defined to generally mean that a participating jurisdiction has executed a legally binding agreement with a State recipient, a subrecipient, or a contractor to use a specific amount of HOME funds for a specified use or for a specified local project. The proposed rule would make a technical correction in paragraph (1) of the definition to change the word ‘‘official’’ to ‘‘officials’’ in the description of an agreement between the participating jurisdiction and a subrecipient that is controlled by the participating jurisdiction. The proposed rule would also replace the term ‘‘downpayment assistance’’ with ‘‘homeownership assistance.’’ The use of the term ‘‘downpayment assistance’’ was a drafting error which unintentionally implied that written agreements with State recipients or subrecipients to provide other forms of homeownership assistance (i.e., direct financial assistance to homebuyers or rehabilitation assistance to low-income homeowners) do not constitute commitments. The proposed rule would also remove ‘‘or subrecipient’’ from paragraph (2)(ii)(A) of the definition because a subrecipient, unlike a State recipient, is not permitted to acquire or assist standard housing with HOME funds it administers. This change would conform to proposed clarifications in the definitions of ‘‘State recipient’’ and ‘‘subrecipient.’’ Community housing development organization. HUD proposes to revise paragraph (4) of the ‘‘community housing development organization’’ (CHDO) definition to clarify the three options for meeting the requirement that the CHDO be a private nonprofit organization that is tax exempt. The proposed rule would insert the language ‘‘Is tax exempt as follows:’’ and add paragraphs (i), (ii), and (iii) to paragraph (4) to distinguish the three options to meet the tax exempt requirement. The first option is a tax exemption ruling from the Internal Revenue Service (IRS) under section 501(c)(3) or (4) of the Internal Revenue Code of 1986 and would be paragraph (4)(i). The second option’s current language ‘‘is classified as a subordinate of a central organization non-profit under section 905 of the Internal Revenue Code of 1986’’ reflects the Department’s decision in the 2013 HOME Final Rule to accommodate the IRS’s recognition of a group of subordinate organizations as tax exempt if they are affiliated with a VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 central organization.7 To avoid the need for each of the subordinate organizations to apply for an exemption individually, the IRS provides the central organization with a group exemption letter which is a ruling or determination issued to the central organization (generally, a State, regional, or national organization) which holds that one or more subordinate organizations (usually a post, unit, chapter, or local) are exempt from Federal income tax by virtue of being subordinate organizations of the central organization. In order to benefit from a group exemption letter, the subordinate organization must be listed in the 501(c)(3) or (4) central organization’s group exemption letter. Rather than the general reference to section 905 of the Internal Revenue Code (IRC) in the current language, the proposed language in paragraph (4)(ii) of the CHDO definition would describe the applicable IRS requirement. The third option in paragraph (4) has also been revised in proposed paragraph (4)(iii) to clarify that a private nonprofit organization is tax exempt if it is wholly owned by a community housing development organization that meets the requirement of the definition in § 92.2, including either paragraph (4)(i) or (ii), and is disregarded as an entity separate from its owner organization for federal tax purposes. The 2013 HOME Final Rule included this option to permit private nonprofit organizations that were wholly owned by a CHDO to meet the tax exempt requirement in paragraph (4). However, the language for this third option in the 2013 HOME Final Rule was confusing. The proposed paragraph (4)(iii) would clarify that a private nonprofit organization may also meet the tax exempt requirement because its owner organization (that qualifies as a CHDO) has a 501(c)(3) or (4) ruling or is a subordinate organization included in a 501(c)(3) or (4) central organization’s group exemption letter by the IRS. As part of the Department’s effort to provide more community-based nonprofit organizations access to the HOME CHDO set-aside within the constraints of NAHA, the proposed rule would revise several provisions of the CHDO definition to make it easier for these organizations to meet the lowincome board representation and staff capacity requirements in § 92.2. These proposed changes, when combined with the proposed revisions to the required role of the CHDO as owner, developer, 7 See 26 CFR 1.6033–2(a)(2)(ii)(I); Rev. Proc. 80– 27, 1980–1 C.B. 677, available at https:// www.irs.gov/pub/irs-tege/rp1980-27.pdf. PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 or sponsor of housing at § 92.300, would enable more community-based housing organizations to qualify as CHDOs and access the CHDO set-side. The first proposed change would revise paragraph (5) of the CHDO definition to make the limitation on public officials and employees of a governmental entity on the CHDO governing board less restrictive. The regulations currently require an individual who is an employee or public official of any governmental entity to be limited to one-third of the CHDO board members. The proposed rule would revise paragraph (5) of the definition to apply this requirement only to officials and employees of the participating jurisdiction designating the CHDO and, if the CHDO was created by a governmental entity (e.g., public housing agency), to officials and employees of the governmental entity. This change would mean that officials or employees of other governmental entities besides the participating jurisdiction designating the CHDO or governmental entity that created the CHDO (e.g., employees of other units of general local government, public school teachers, university professors) would not be required to be counted toward the one-third board membership limitation on officials or employees. The proposed requirements would also clarify that no governmental entity (which includes the participating jurisdiction) may appoint more than one-third of the organization’s board members and that those board members are not permitted to appoint any of the remaining members of the board. In addition, paragraph (8)(i) of the current definition of CHDO requires a CHDO to reserve at least one-third of the membership of its governing board for residents of low-income neighborhood organizations, other low-income community residents, or elected representatives of low-income neighborhood organizations. The proposed rule would broaden eligible low-income representatives required in paragraph (8)(i) by permitting (1) an individual designated by a low-income neighborhood organization to qualify as a low-income representative, rather than only elected leadership of these organizations and (2) an authorized representative of a nonprofit organizations in the community that addresses the housing or supportive service needs of residents of low-income neighborhoods to qualify as a lowincome representative. Examples of ‘‘nonprofit organizations in the community’’ include homeless providers, Community Action Agencies, Fair Housing Initiatives Program E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules providers, Legal Aid, disability rights organizations, and victim service providers. These proposed changes would facilitate State and local participating jurisdiction efforts to identify more organizations that can undertake activities using CHDO setaside funds. Further, State and consortia participating jurisdictions located in rural areas face unique challenges in identifying organizations that can meet the governing board and capacity requirements to become CHDOs. To help address these challenges, the Department also proposes to revise the provision in paragraph 8(i) of the CHDO definition that defines the term ‘‘community’’ for rural areas as ‘‘a neighborhood or neighborhoods, town, village, county, or multi-county area (but not the entire State)’’ to remove the text in parentheses. This change would permit CHDOs operating in rural areas to count qualified low-income representatives from anywhere in the State toward the low-income board representation requirement. This change to the definition of ‘‘community’’ for rural areas would also apply to paragraph (10) of the CHDO definition, effectively permitting an organization that wishes to operate as a CHDO in a rural area to meet the requirement that it have at least a one-year history serving the community with a service history anywhere in the State. This change would make it possible for nonprofits with statewide service areas to qualify as CHDOs and increase the use of CHDO set-aside funds in rural areas. HUD proposes to make numerous revisions to paragraph (9) of the CHDO definition, which includes the statutory requirement that an organization have demonstrated staff capacity to qualify as a CHDO. The proposed rule would broaden the requirement that an organization have demonstrated capacity for carrying out projects assisted with HOME funds to also include housing projects assisted with other Federal funds, LIHTC, or local and State affordable housing funds. In addition, the proposed rule would improve the clarity of paragraph (9) by adding paragraphs (i), (ii), and (iii) to separately address the requirements for developer, owner, and sponsor. The proposed rule would ease the current prohibition in paragraph (9) of the CHDO definition against using the capacity or experience of volunteers to meet the demonstrated capacity requirement. The Department made this prohibition more explicit in the 2013 HOME Final Rule to implement the staff capacity provision contained in the VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 Consolidated and Further Continuing Appropriations Act of 2012 (Pub. L. 112–55) and the Consolidated and Further Continuing Appropriations Act of 2013 (Pub. L. 113–6), which required CHDOs to have staff with demonstrated development experience. Because the connection of volunteers to an organization may be tenuous or temporary, using the capacity of volunteers to meet demonstrated staff capacity is inconsistent with both NAHA and with the provisions in the Consolidated and Further Continuing Appropriations Acts. The proposed rule would, however, permit participating jurisdictions to consider the capacity and experience of volunteers who are board members or officers of the organization in determining whether an organization meets the CHDO capacity requirements, provided that the volunteer is not compensated by or their services are not donated by another organization. Specific solicitation of comment #1. The Department specifically solicits public comment about any additional changes it should consider, within statutory constraints, that will improve CHDO availability and capacity in rural areas. Community land trust. HUD proposes to add the definition of ‘‘community land trust’’ (CLT) to § 92.2. Section 233(f) of NAHA (42 U.S.C. 12773(f)) contains a definition of community land trust which the statute expressly states is only for the purposes of establishing the specific characteristics of CLTs that qualify to receive CHDO technical assistance funding. This statutory definition in section 233(f) of NAHA, which was developed in 1990, is not reflective of actual CLTs operating in participating jurisdictions. However, in the absence of a separate regulatory definition or any other definition of CLT in another Federal program, the Department applied the statutory definition in section 233(f) in the implementation of the amendment to NAHA in the Consolidated Appropriations Act, 2016 (Pub. L. 114– 113). The amendment permitted CLTs to hold and exercise purchase options, rights of first refusal, or other preemptive rights to preserve the affordability of the housing developed by the CLT. Recognizing the problems in applying a CLT definition for HOME that the statute expressly states is only for the purpose of allowing qualifying CLTs to receive CHDO technical assistance funding, the Department proposes a regulatory definition of CLT that encompasses the purposes for which CLTs are formed and which would PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 46621 generally apply in the HOME program, except where stated otherwise in the proposed rule. The proposed regulatory definition would require a community land trust to be a nonprofit organization that has the development and maintenance of housing that is permanently affordable to low and moderate-income persons as its primary purposes, uses enforceable mechanisms to require housing and related improvements on land held by the CLT to be affordable to low- and moderateincome persons for at least 30 years, and retains a right of first refusal or preemptive right to purchase the affordable housing on land held by the CLT to maintain long-term affordability. Adoption of the proposed regulatory definition for CLT would allow the Department to discontinue application of the CLT definition expressly specified only for CHDO technical assistance in all other uses of HOME funds. Homeownership. The proposed rule would make a technical correction to the definition of ‘‘homeownership’’ in § 92.2, striking the words ‘‘in a’’ from the phrase ‘‘1- to 4-unit dwelling or in a condominium unit . . . .’’ The proposed rule would also revise paragraph (4) of the definition by deleting ‘‘Tax’’ from the referenced term ‘‘Low-Income Housing Tax Credits’’ and adding the IRC statutory citation for the term. The changed term ‘‘Low-Income Housing Credits’’ would match the title of section 42 of the IRC. Period of Affordability. HUD proposes to add the definition of ‘‘period of affordability,’’ which is used throughout 24 CFR part 92. The definition would (1) clarify that the term means the required period specified in § 92.252 and § 92.254 during which the requirements of part 92 apply to HOMEassisted housing and (2) distinguish the required period specified in § 92.252 and § 92.254 from an extended period of affordability or additional compliance period that a participating jurisdiction may impose on HOME-assisted housing. The proposed rule would also make technical corrections in numerous sections of part 92 by replacing ‘‘affordability period’’ with ‘‘period of affordability.’’ Program Income. HUD proposes to make minor changes to the definition of ‘‘program income.’’ First, the phrase ‘‘at any time’’ is added to the definition to clarify that program income is gross income received by the participating jurisdiction, State recipient, or a subrecipient directly generated from the use of HOME funds or matching contributions ‘‘at any time’’ and is not bound by a specific timeframe such as E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 46622 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules the period of affordability or closeout of the HOME grant. The proposed rule would also remove the term ‘‘subrecipient’’ from the beginning of paragraph (2) of the ‘‘program income’’ definition that refers to ownership of rental property. This change would clarify that a subrecipient, by definition, is a governmental entity or nonprofit organization selected by the participating jurisdiction to administer all or some of the participating jurisdiction’s HOME program to produce affordable housing, provide homeownership assistance, or provide TBRA and cannot, in that capacity, also receive HOME funds to be an owner or developer of affordable housing. The proposed rule would also remove ‘‘sponsor’’ from the parenthetical in paragraph (2) of the ‘‘program income’’ definition because only a CHDO may be a ‘‘sponsor’’ and, pursuant to § 92.300(a)(4), a ‘‘sponsor’’ must be a project ‘‘owner’’ or ‘‘developer.’’ Therefore, the inclusion of ‘‘sponsor’’ in paragraph (2) of the definition is duplicative and would be deleted in the definition for clarity. The proposed definition of ‘‘program income’’ would also clarify that the amount of gross income from the use, rental, or sale of real property received by the project owner or developer that must be paid to the participating jurisdiction, subrecipient or State recipient is program income. Finally, the proposed rule would further clarify in paragraph (3) that program income includes payments and repayments of grants, loans, or investments made using HOME funds or matching contributions, including such payments and repayments made after the period of affordability, and is not limited to the payment of loans made using HOME funds or matching contributions. Reconstruction. HUD proposes to revise the definition of ‘‘reconstruction’’ to clarify that, although reconstruction is considered rehabilitation for purposes of the HOME program, the property standards for new construction in § 92.251 apply to all HOME-assisted reconstruction projects. Single family housing. HUD proposes to revise the definition of ‘‘single family housing’’ to improve the clarity of the term. The current definition states that single family housing is a one-to-four family residence, condominium unit, combination of manufactured housing unit and lot, or manufactured housing lot. The proposed change would revise ‘‘family’’ to ‘‘unit’’ to reflect current program practice and guidance, changing the definition to a one-to-four‘‘unit’’ residence, condominium unit, VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 cooperative unit, combination of manufactured housing and lot, or manufactured housing lot. The proposed change would clarify that the defined term is based on units and not occupancy. Small-scale housing. HUD proposes to add the definition of ‘‘small-scale housing,’’ which would be defined as a rental housing project containing no more than four units or a homeownership project with no more than three rental units on the same site. HUD is proposing this definition to permit these types of projects to follow streamlined procedures for income determinations, ongoing physical inspections, and written tenant waiting lists. The definition and the streamlined provisions would facilitate participation of owners of small rental properties (e.g., accessory dwelling units, duplexes, triplexes, or other small rental projects) in the HOME program. State recipient. The current definition of ‘‘State recipient’’ consists of a cross reference to § 92.201(b)(2). The proposed rule would eliminate the cross reference and instead list the definition directly in § 92.2. States are not required to use State recipients, but if a State distributes HOME funds to one or more unit(s) of general local government to carry out HOME programs, the unit(s) of general local government is a ‘‘State recipient.’’ The proposed definition would also clarify that, unlike a ‘‘subrecipient,’’ a ‘‘State recipient’’ is permitted to own or develop affordable housing as well as administer all or some of the participating jurisdiction’s HOME programs, provide homeownership assistance, or provide TBRA. This change further distinguishes a ‘‘State recipient’’ from a ‘‘subrecipient.’’. Subrecipient. HUD proposes to make changes to the definition of ‘‘subrecipient.’’ To be consistent with the proposed change to the definition of ‘‘commitment,’’ the term ‘‘downpayment assistance’’ as it is used in the current definition of ‘‘subrecipient’’ would be revised to ‘‘homeownership assistance.’’ Also, the term ‘‘public agency’’ as it is used in the current definition of ‘‘subrecipient’’ would be revised to ‘‘governmental entity’’ because ‘‘governmental entity’’ is used throughout part 92, whereas ‘‘public agency’’ is only used in the current ‘‘subrecipient’’ definition. These proposed changes would also reflect the current practice to permit entities such as a public housing authority, housing finance agency, or redevelopment authority to be subrecipients. The proposed rule would also remove the word ‘‘solely’’ to clarify that a PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 governmental entity or nonprofit organization that receives HOME funds as a developer or owner of a housing project is not acting as a ‘‘subrecipient,’’ even if it also receives funds from the participating jurisdiction to administer other HOME-funded activities as a ‘‘subrecipient.’’ Subject to the requirements of part 92, a governmental entity or nonprofit organization may be an owner or developer of a housing project under a written agreement to acquire, rehabilitate, or construct the housing, while also operating as a ‘‘subrecipient’’ of other HOME programs or activities (i.e., not the housing program in which it is an owner or developer) under a separate written agreement with the participating jurisdiction. Tenant-based rental assistance. The proposed rule would revise the definition of ‘‘tenant-based rental assistance’’ to replace the use of the term ‘‘dwelling’’ with ‘‘housing’’ to align with the requirements for TBRA in § 92.209 which applies to ‘‘housing.’’ 2. Formula Allocation (24 CFR 92.50) The proposed rule would remove the use of the term ‘‘poor household’’ in the formula allocation section and replace it with ‘‘households below the poverty line.’’ The proposed term reflects the actual data that HUD uses for this formula factor when determining annual HOME allocations. 3. Consortia (24 CFR 92.101) The proposed rule would revise § 92.101(a) to permit, under certain conditions, a unit of general local government that is separated by a body of water from the other units of general local government belonging to a consortium and only accessible to the public through a permanent means other than a connecting road, bridge, railway, or highway to be considered geographically contiguous for purposes of inclusion in a HOME consortium. The consortium would be required to demonstrate that the unit of general local government separated by the body of water is part of the same housing market and local commuting area as one or more members of the consortium. This change would allow a unit of general local government that is separated from one or more other consortium members by a body of water but that is accessible by ferry, for example, to become a member of the consortium. In the past, the Department had no regulatory basis for approving these units of general local government to be consortium members. HUD anticipates this change would allow E:\FR\FM\29MYP2.SGM 29MYP2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 some consortia to increase members or new consortia to form. The proposed rule would add language to § 92.101(d) to clarify the relationship between a representative unit of general local government (frequently referred to as the lead entity) and member units of general local government in a consortium. The proposed revision explains that, while member units of general local government in a consortium are not subrecipients, the requirements for subrecipients, including the written agreement requirements at § 92.504(c)(2), apply when the representative unit of general local government distributes HOME funds to member units of general local government in a consortium. This change would not affect the requirement in § 92.101(a)(2)(ii) for a legally binding cooperation agreement between all members of a consortium. The proposed rule would add language that describes the effect of a change to the representative unit of general local government of a consortium. If a consortium changes the representative unit of general local government but the membership of the consortium does not change, the consortium is considered to be the same unit of general local government. However, the proposed rule states that if a representative unit of general local government of a consortium changes, and the composition of the consortium also changes because one or more members have been added or removed from the consortium, then the consortium is considered a new unit of general local government and must comply with all applicable consolidated plan requirements in 24 CFR part 91. The Department already treats a consortium as the same unit of general local government if only the representative unit of general local government changes. With this proposed rule change, HUD would codify this approach. This change is proposed to help consortia that are contemplating a change to the representative unit of general local government or other membership to understand the programmatic consequences of those decisions. 4. Distribution of Assistance (24 CFR 92.201) The proposed rule would add a sentence to the end of § 92.201(a)(2) clarifying that a participating jurisdiction may not commit funds to a project within the boundaries of a contiguous local jurisdiction until it has secured the required financial contribution of the jurisdiction in which VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 the project is located. The sentence would clarify the necessary preconditions for using HOME funds outside of a participating jurisdiction’s geographic boundaries and would prevent a participating jurisdiction from providing HOME funds to a project that does not have the support of the jurisdiction or community where it is located. The proposed rule would also remove the definition of State recipient from § 92.201(b)(2) and add it to the definitions section of § 92.2 where it will be easier for practitioners to locate. Other proposed changes to clarify the definition are discussed in the preamble for § 92.2. 5. Income Determinations (24 CFR 92.203) In the HOTMA Final Rule, published on February 14, 2023,8 the Department revised the income regulations for the Public Housing, Section 8, Community Development Block Grant (CDBG), HOME, Housing Trust Fund, Housing Opportunities for Persons With AIDS, Supportive Housing for the Elderly, and Supportive Housing for Persons with Disabilities programs. The effective date of the regulatory changes made through the HOTMA Final Rule is January 1, 2024.9 As part of the HOTMA Final Rule, the Department comprehensively revised the HOME regulation (effective January 1, 2024) at § 92.203 to align the HOME income regulations with income regulations from other HUD and Federal programs that HOME funds were most likely to be used with, most notably the Section 8 program. To that end, the Department required that participating jurisdictions use income determinations made by owners and program administrators in section 8 project-based voucher and rental assistance programs instead of requiring the participating jurisdiction to engage in a separate, duplicative income review. The Department also allowed participating jurisdictions to use income determinations made by public housing agencies or other providers of Federal tenant-based rental assistance instead of requiring the participating jurisdiction to engage in a separate, duplicative income review. As the Department was preparing guidance and training participating jurisdictions and others on how to implement the requirements of the HOTMA Final Rule, the Department 8 88 FR 9600. clarity, the revisions HUD is proposing in this section of this proposed rule are revisions to the regulations as they will exist after the effective date of the HOTMA Final Rule on January 1, 2024. 9 For PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 46623 determined there were still ways to be clearer about a participating jurisdiction’s responsibilities regarding income determinations, including when HOME funds are used in a project with either Federal project-based or tenantbased rental assistance or subsidy programs. HUD is proposing to revise the paragraph heading of § 92.203(a) to read ‘‘Income eligibility’’ to more closely align with the purpose of the paragraph. The Department is also proposing to remove the first sentence of § 92.203(a) because it is confusing and is not necessary to the requirements in § 92.203. The first sentence of the current § 92.203(a) states that income targeting requirements apply to both a participating jurisdiction’s HOME program and to its HOME projects. While the statement is true, § 92.203 does not establish the HOME income targeting requirements which are contained in § 92.216. By removing the first sentence of the current § 92.203(a), the second sentence of the current § 92.203(a) would be revised to make it the lead-in sentence to the three options of determining income eligibility for HOME under § 92.203(a). HUD believes this elimination of unnecessary and confusing verbiage would better allow participating jurisdictions to understand HOME income requirements. The proposed rule would revise the paragraph heading of § 92.203(b) from ‘‘Required documentation for annual income calculations’’ to ‘‘Determining and documenting annual income’’ and the paragraph heading of § 92.203(c) from ‘‘Defining income for eligibility’’ to ‘‘Definitions of annual income’’ to reflect the requirements more accurately in each paragraph. The citation to § 92.252 in § 92.203(b)(1) would also be revised to conform to the renumbering of paragraph (h) to (g) in § 92.252 and the citation to § 92.252(b)(2)(i) in § 92.203(f)(1)(ii) would also be revised to ‘‘§ 92.252(a)(2)(ii) or (iii)’’ to conform to the revisions in § 92.252. The proposed rule would also revise the second sentence of § 92.203(b)(1)(ii) to add ‘‘by the participating jurisdiction or owner’’ at the end. The proposed rule would also add the requirement currently in § 92.252(g) to the end of paragraph (ii) of § 92.203(b)(1) that if there is evidence that a tenant’s statement and certification failed to completely and accurately state information about the family’s size or income, a tenant’s income must be reexamined in accordance with § 92.203(b)(1)(i). The proposed rule would revise § 92.203(b)(1)(iii) to clarify that the method requires the government E:\FR\FM\29MYP2.SGM 29MYP2 46624 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 program to examine the annual income of the family each year and to be a program that provides government benefits to the family. The proposed rule would also revise § 92.203(d) to clarify when the participating jurisdiction is permitted to use the definitions of ‘‘annual income’’ in § 92.203(c). Specifically, the proposed rule would further clarify that when the participating jurisdiction is accepting a public housing agency, owner, or rental assistance provider’s determination of annual and adjusted income for units assisted by a Federal or State projectbased rental subsidy program or tenants receiving Federal tenant-based rental assistance in a rental housing project, the participating jurisdiction must calculate annual income in accordance with § 92.203(c)(1) for the rental housing project so there is consistency in the definition of annual income throughout the project. The proposed rule would revise the heading of paragraph (d) of this section from ‘‘Using income definitions’’ to ‘‘Use of income definitions’’ and would remove the third sentence of paragraph (d) because it may be read to either conflict with or duplicate requirements in paragraph (c) of this section. In addition, the proposed rule would make other minor revisions to paragraph (d) for clarity. The proposed rule would also make several technical corrections to § 92.203(d). The last sentence of paragraph (d) cites to ‘‘paragraph (c)(i) of this section.’’ This is a drafting error, and the citation should be corrected to ‘‘paragraph (c)(1) of this section.’’ The citations to 24 CFR part 5 requirements in the section would also be revised for consistency with the format of citations to 24 CFR part 5 in other sections of the current regulation. 6. Eligible Activities: General (24 CFR 92.205) The proposed rule would revise § 92.205(a)(2) to clarify that acquisition of vacant land or demolition may only be undertaken for a project that will provide affordable housing and meets the requirements for a specific local project in paragraph (2)(i) of the definition of ‘‘commitment’’ in § 92.2. Commitment of HOME funds to a specific local project can only occur for an identifiable project for which all necessary financing has been secured, a budget and schedule have been established, and underwriting has been completed and under which construction is scheduled to start within 12 months of the execution date of the written agreement. Although the provision at § 92.205(a)(2) has been in the HOME regulations since inception VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 of the HOME program, some participating jurisdictions continue to mistakenly believe that HOME funds can be used to acquire land without the development of affordable housing (e.g., ‘‘land banking’’) or to demolish buildings with no intention to build new affordable housing (e.g., elimination of slums or blight). This provision would be revised to further clarify the requirement that an affordable housing project must be completed when HOME funds are used for the acquisition of vacant land or demolition. The Department proposes to move the text at the end of paragraph (b)(1) that states that a participating jurisdiction establishes the terms of HOME assistance (e.g., loan terms) subject to the requirements of the regulation to a new paragraph (b)(3) and would revise the language to better emphasize and clarify that the terms of assistance are established by the participating jurisdiction, subject to the requirements of this part. HUD is proposing to revise § 92.205(e)(2) to clarify that if project completion, as defined in § 92.2, does not occur within 4 years from the date that the participating jurisdiction committed funds to a specific local project, then the project is terminated and the participating jurisdiction must repay all funds invested in the project. There remains a great deal of confusion surrounding the 4-year deadline, and the Department is again clarifying that a project must meet the requirements of part 92 in order to be considered complete. HUD already has a clear definition of project completion and hopes that using the same terminology will better enable participating jurisdictions to comply with the regulations. 7. Eligible Project Costs (24 CFR 92.206) The proposed rule would make several technical corrections to § 92.206. These corrections would update the citation in § 92.206(a)(1) regarding new construction standards to § 92.251(a), update the citation in § 92.206(a)(2) regarding rehabilitation standards to § 92.251(b), and revise § 92.206(b) to change ‘‘affordability period’’ to ‘‘period of affordability.’’ The proposed rule would revise § 92.206(b)(2)(ii) to change ‘‘over an extended affordability period’’ to ‘‘over the minimum period of affordability of 15 years.’’ The proposed rule would also revise paragraph (c) to clarify that the costs of securing a long-term ground lease are eligible acquisition costs and permitted in the development of HOMEassisted housing. HUD also proposes to PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 revise paragraph (d)(1) to add the costs of conducting environmental assessments and reviews to the list of permissible development costs that could be reimbursed with HOME funds if the cost is incurred not more than 24 months before the date that HOME funds are committed to the project and the participating jurisdiction expressly permits HOME funds to be used to pay the costs in the written agreement committing the funds. Lack of funding for necessary environmental studies of sites proposed for development can be an obstacle to the provision of affordable housing. The proposed rule would also remove the current § 92.206(d)(8) because the costs of environment reviews and assessments have been added to paragraph (d)(1) and replace it with the cost of property insurance during development as one of the eligible related soft costs in paragraph (d). 8. Eligible Administrative and Planning Costs (24 CFR 92.207) The Department proposes to revise § 92.207(e) to remove the term ‘‘under a cost allocation plan prepared’’ from the regulation. This is an oversimplification of the underlying requirements in 2 CFR part 200, subpart E and HUD is proposing the removal of the language to reduce confusion and improve clarity. 9. Eligible Community Housing Development Organization (CHDO) Operating Expense and Capacity Building Costs (24 CFR 92.208) Through this proposed rule, the Department seeks to correct a drafting error made in the 2013 HOME Final Rule that created an unintended barrier to using CHDO operating expense and capacity building funding provided through HOME to assist organizations to meet the requirements for CHDO designation. Paragraph (9) of the definition of CHDO in § 92.2 requires that a CHDO have demonstrated capacity to be designated as a CHDO, while the current § 92.208 limits operating and capacity building assistance to organizations that are CHDOs. These provisions inadvertently prohibit the use of CHDO operating or capacity building funds to assist an organization that meets all other provisions of the CHDO definition except the demonstrated capacity requirement. The proposed rule would add a new paragraph (c) to § 92.208 stating that an organization that meets the definition of ‘‘community housing development organization’’ in § 92.2 except for the capacity requirement in paragraph (9) may receive HOME funds E:\FR\FM\29MYP2.SGM 29MYP2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 for operating expenses and capacity building costs in order to develop demonstrated capacity and qualify as a CHDO. This change would make it possible for a nonprofit organization to receive the necessary financial assistance to attain CHDO designation. Pursuant to § 92.300(e), a participating jurisdiction may only provide operating or capacity building funds to an organization to which it expects to commit CHDO set-aside funds for a project within 24 months. 10. Tenant-Based Rental Assistance: Eligible Costs and Requirements (24 CFR 92.209) The proposed rule would revise § 92.209(c)(1) to eliminate the requirement that adjusted income be determined annually for families receiving TBRA. Because TBRA contracts are limited by statute to two years and must be executed every time a tenant enters into a new lease, the proposed rule would permit a participating jurisdiction to provide TBRA to a family and not redetermine adjusted income during the contract’s period of assistance. Rather, proposed § 92.209(c)(1) would only require the participating jurisdiction to determine adjusted income before execution of a new contract or renewal of an existing rental assistance contract. A family receiving TBRA whose income decreases during the term of the contract is still permitted to request an income redetermination by the participating jurisdiction during the term of the rental assistance contract so the family’s subsidy can be recalculated. However, as is the case under the current regulations, the choice to redetermine adjusted income of a family that experienced a change in income during the term of the contract is a participating jurisdiction’s program design decision and would be based upon the participating jurisdiction’s policies and procedures. This means that unless the participating jurisdiction has a written policy and a rental assistance contract that requires a family’s subsidy be redetermined based upon changes in income during the period of assistance, the family’s payment toward rent will not change due to changes in income during the contract term. Consistent with HUD’s Plan for Bridging the Wealth Gap: An Agenda for Economic Justice and Asset Building for Renters,10 biennial income redeterminations would facilitate family savings and improve housing stability 10 See https://www.hud.gov/sites/dfiles/PIH/ documents/Bridging_Wealth_Gap.pdf. VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 by facilitating longer stays in housing and avoiding evictions or economic displacement from housing. Reducing the frequency of income determinations would also significantly reduce administrative burden on participating jurisdiction staff and on participating landlords, potentially expanding units available to families receiving TBRA. The proposed rule would revise the first sentence of § 92.209(c)(2)(iv) by adding the word ‘‘assistance’’ to ‘‘rental payments’’ to further clarify that this is describing TBRA payments. The proposed rule also clarifies that when all or a portion of the homebuyertenant’s monthly contribution toward rent is set aside for closing costs or a downpayment, it must be set aside in accordance with the lease-purchase agreement. These clarifications are required because the Department determined that some participating jurisdictions were not explicitly stating that all or a portion of a tenant’s contribution to rent was being set aside for closing costs or a downpayment on the housing in the lease-purchase agreement or providing for how the set aside would occur. The proposed rule would revise § 92.209(c)(3) to clarify that a participating jurisdiction may select and provide TBRA to low-income families currently residing in housing units that will be rehabilitated or acquired with HOME funds. The low-income family may choose to use the TBRA in a unit rehabilitated or acquired with HOME funds or in other qualified housing. Using TBRA funds in this manner may reduce displacement or assist in decreasing the cost of compliance with the Uniform Relocation Assistance and Real Property Acquisition Policies Act (42 U.S.C. 4601 et seq.) (URA), which applies to the use of HOME funds for a project involving acquisition, rehabilitation, or demolition. The proposed rule would revise § 92.209(g) to update the reference to § 92.253 to specify § 92.253(a)–(c) and (d)(2). The proposed rule would revise § 92.209(h)(2) to permit participating jurisdictions to establish hardship policies that provide exceptions to the requirement that families receiving TBRA contribute a minimum amount toward rent. Some families receiving TBRA have little or no income. Due to this, some families may be unable to comply with the requirement for a minimum tenant contribution toward rent or compliance with the requirement may be detrimental to the family (e.g., use limited financial resources that are needed for medical care and other necessities). This revision would align HOME with other Federal tenant-based PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 46625 rental assistance programs in permitting a participating jurisdiction to provide relief to a family from a minimum tenant contribution in its TBRA program by increasing the assistance in accordance with the participating jurisdiction’s written policies. The Department proposes to further clarify the basis of the rent standard that a participating jurisdiction may use for its TBRA program by adding the specific regulatory citation of 24 CFR 982.503 for the Section 8 HCV payment standard to § 92.209(h)(3)(ii). With the inclusion of the specific regulatory citation, a participating jurisdiction that chooses to use the Section 8 HCV program payment standard as its TBRA payment standard will be able to quickly locate the referenced requirements. The proposed rule would revise § 92.209(i) to clarify the requirement that the participating jurisdiction must inspect the housing initially to mean that the participating jurisdiction must determine compliance with the property standards at § 92.251 at the time of entering into a rental assistance contract. The proposed rule would require that initially and annually thereafter, the participating jurisdiction must determine that the housing complies with its property standards and is decent, safe, sanitary, and in good repair in accordance with § 92.251(f). Currently, program participants are required to inspect housing annually. Under § 92.251(f)(4)(ii) of this proposed rule, HUD would allow program participants to forego their own inspection and instead rely on an inspection conducted for another HUD program under 24 CFR part 5, subpart G. Section 92.251(f)(4)(ii) would also allow HUD to identify other alternative inspection standards through Federal Register notice which may count for the annual inspection. This proposed change would reduce administrative burden on the participating jurisdiction for performing inspections and the burden on property owners from undergoing multiple inspections by multiple parties using the same inspection standards, while posing minimal risk of substandard units being occupied by tenants assisted with TBRA. The requirement that the participating jurisdiction must reinspect annually for compliance with the property standards at § 92.251 after determining initial compliance is not proposed to be changed. The participating jurisdiction may determine compliance with the property standards at § 92.251 annually, under the same methods available to the participating jurisdiction in the initial determination. E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 46626 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules The proposed rule would make several revisions to § 92.209(j). First, the use of ‘‘dwelling’’ would be replaced with ‘‘housing’’ in paragraph (j)(1) to specify that the use of TBRA is for housing and not ‘‘dwelling units’’ which part 92 does not define. Second, § 92.209(j)(5) would be revised to remove ‘‘Housing Quality Standard’’ to align with the proposed changes in § 92.209(i). Third, as further discussed below, the proposed rule would also add a new § 92.209(j)(6) to prohibit the use of surety bonds or security deposit insurance as a form of security deposit in units occupied by families receiving TBRA. Some participating jurisdictions have asked about the use of surety bonds and security deposit insurance in their TBRA programs while others have requested that the Department provide them with an interpretation that surety bonds or security deposit insurance constituted a security deposit. In response, the Department investigated the nature of surety bonds and security deposit insurance and determined as a matter of law that they are not security deposits within the meaning of NAHA nor are they treated as such under state statutes. Moreover, surety bonds or security deposit insurance may disadvantage tenants without necessarily benefitting landlords. Generally, tenants pay the cost of purchasing the surety bond or security deposit insurance in lieu of a security deposit. The surety bond obligates the bond issuer to repair all covered damage to the unit attributed to the tenant but may have coverage limits and is dependent upon the financial sufficiency of the issuer’s fund. For security deposit insurance, a tenant pays a premium to purchase a policy from an insurance company that provides coverage to the landlord, as insured party, for most claims for damages to a unit. Even if there is no damage to the unit, the premium for the surety bond or security deposit insurance is not refundable to the tenant. However, if the bond issuer or the insurance company refuses to cover the damages, the landlord may be forced to litigate against both the bond issuer or insurer and the tenant for damages under the terms of the lease and may be left with little or no recourse beyond obtaining judgment liens against each, potentially damaging the tenant’s credit and forcing a tenant to obtain legal counsel. The proposed prohibition on the use of surety bonds and security deposit insurance as a form of security deposit is a change made throughout the proposed rule. HUD does not believe VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 that prohibiting the use of surety bonds and security deposit insurance will impact a family’s access to the rental housing market. Section 92.209 continues to allow participating jurisdictions to use HOME funds as loans or grants for security deposits. The proposed rule would also remove § 92.209(l) because paragraph (l) implements section 212(a)(3)(D) of NAHA which is an outdated provision that applies only when the participating jurisdiction receives Federal assistance under section 1437f of the U.S. Housing Act of 1937 (the ‘‘1937 Act’’) (42 U.S.C. 1437f) (i.e., section 8 program) to be used for TBRA. 11. Troubled HOME-Assisted Rental Housing Projects (24 CFR 92.210) The proposed rule would amend § 92.210(a) to clarify that HUD may consider the physical condition of the housing or financial viability when preserving HOME-assisted units at risk of failure or foreclosure. The use of the term ‘‘Headquarters’’ is proposed to be removed in § 92.210(c) for phrasing consistency with other parts of the proposed rule; however, all approvals under § 92.210 must still be made by HUD Headquarters. The Department has provided technical assistance for workouts to several participating jurisdictions with troubled projects, and physical viability is as much a consideration as financial viability when determining whether to permit additional flexibilities to preserve the affordability of a project. The physical viability of a property may be negatively impacted due to unanticipated extreme weather conditions or emergencies such as fire, flooding, and earthquakes. Changes to physical characteristics and factors may substantively impact the physical viability of a project, including unexpected structural or design issues, deferred maintenance due to unanticipated financial limitations, or unforeseen capital needs. Further, in determining the long-term viability of a project, the Department must consider the property’s physical condition and needs in its review. Therefore, the proposed rule would revise the provisions of § 92.210 to permit HUD to consider preservation of a project based on the substantive deterioration of a project’s physical viability due to unforeseen circumstances. It would also allow HUD to consider the future physical viability of a project in determining whether a project may access the flexibilities under § 92.210. The proposed rule would also clarify in § 92.210(a) that a HOME-assisted rental project is no longer financially PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 viable if its operating costs significantly exceed its operating revenue and reserves and if it has insufficient resources to cover necessary capital repair costs. The proposed rule would revise the current requirement that the Department consider the likelihood of ‘‘long-term viability’’ to include physical viability and replace with the likelihood of the project’s ‘‘long-term physical and financial viability to preserve affordability.’’ The Department’s consideration of a project’s ‘‘long-term’’ physical and financial viability does not mean that the Department will not consider projects that are near the end of their HOME periods of affordability nor does it mean that the Department’s considerations of viability will be limited to a project’s ‘‘long-term’’ performance. The proposed rule would revise § 92.210(b) to change the amount of additional HOME funds a participating jurisdiction may invest in a troubled HOME-assisted rental project to make it financially and physically viable during the period of affordability. The total investment (original investment plus additional investment) must be the amount needed to address the physical and financial viability of the project and may not exceed the HOME per-unit subsidy limit in effect at the time of the additional investment. The use of HOME funds may include, but is not limited to, rehabilitation of the HOME units and recapitalization of project reserves to fund capital costs. The Department also proposes to clarify that it may impose conditions on the investment of additional HOME funds, including requiring the participating jurisdiction to extend the period of affordability, increase the number of HOME-assisted units, and/or change the number or designation of Low HOME rent and High HOME rent units. The proposed rule would revise § 92.210(c) to clarify that even if there are no additional HOME funds invested in the troubled HOME-assisted rental project, the Department may, through written approval, permit participating jurisdictions to not only reduce the total number of HOME units but change the designation of units from Low HOME rent units to High HOME rent units in troubled projects with more than the minimum number of Low HOME rent units. Pursuant to 42 U.S.C. 12745 and 24 CFR 92.252, HOME requires at least 20 percent of HOME-assisted units in a project be restricted as Low HOME rent units with the other HOME-assisted units restricted as High HOME rent units. Low HOME rent units must be occupied by those at 50 percent of the E:\FR\FM\29MYP2.SGM 29MYP2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 Area Median Income (‘‘AMI’’) and below, while High HOME rent units must be occupied by those at 80 percent AMI and below. Further, in accordance with the requirements for HOME rent limits set forth in § 92.252, the Low HOME rent units are restricted at lower rent levels than High HOME rent units. The Department has reviewed several troubled project requests in which converting Low HOME rent units to High HOME rent units (when there are more than the required minimum 20 percent Low HOME rent units) is sufficient to preserve the project by increasing the ongoing rental revenue to the project to cover project expenses and financially stabilize the property. Permitting participating jurisdictions to undertake such actions for troubled HOME-assisted rental projects will support and preserve HOME units through the required period of affordability. 12. Pre-Award Costs (24 CFR 92.212) The proposed rule would add a new paragraph (b)(2) to address pre-award costs in a fiscal year when there is not a timely appropriation by Congress for the HOME program. The proposed rule would permit a participating jurisdiction, in a year when there is not a timely appropriation, to incur eligible administrative and planning costs as of the beginning of its program year or the date that the Department receives the consolidated plan describing the HOME allocation to which the costs will be charged, whichever is earlier. The proposed rule would also establish that an appropriation is not timely if the appropriation to the HOME program was signed into law less than 90 days before a participating jurisdiction’s program year start date. The Department has waived the current § 92.212(b) to permit pre-award costs under these conditions for many of the past fiscal years. The delay in the receipt of annual appropriations by the Department may have negative consequences for participating jurisdictions, including interruption of activities. Adding this new language to § 92.212(b) would avoid the need for approvals of a waiver of this requirement each year that there is a delayed appropriation and would assist participating jurisdictions to better plan for such years to minimize their impact. 13. Prohibited Activities and Fees (24 CFR 92.214) The proposed rule would make several revisions to § 92.214 to expand, revise, and clarify the prohibited activities and fees for which HOME funds cannot be used. The proposed VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 revisions to § 92.214 are described more thoroughly in the text that follows. The proposed rule would revise § 92.214(a)(6) to add that investing additional HOME funds in a troubled project in accordance with § 92.210 is an exception to the requirement that a participating jurisdiction cannot provide additional HOME funds to a previously assisted project. Section 92.214(a)(6) would also be amended to explicitly state that the maximum perunit subsidy applicable to a project receiving additional HOME funds within one year of project completion is the maximum per-unit subsidy applicable at the time of project underwriting. The proposed rule would further revise § 92.214(a)(6) to align with the new definition of period of affordability added as a defined term to § 92.2. The proposed rule would make minor revisions to § 92.214(a)(7) to improve clarity and readability. The proposed rule would add a new paragraph (10) to § 92.214(a). As noted in the TBRA preamble discussion on § 92.209(j), the Department is concerned that surety bonds, security deposit insurance, and similar instruments disadvantage tenants as the tenant pays the cost of purchasing the bond or insurance in lieu of a security deposit but does not recoup any of the cost of the bond or security deposit policy upon vacating the unit. In addition, if there is damage to the unit, the bond issuer or insurer may pursue the tenant to cover any costs incurred to repair damage, negatively affecting the tenant’s credit or forcing the tenant to secure legal counsel. In response to these concerns, the proposed rule would prohibit the use of HOME funds for surety bonds, security deposit insurance, or similar instruments in lieu of or in addition to a security deposit in units occupied by TBRA by adding a new paragraph (10) to § 92.214(a). The proposed rule would add language similar to that in the proposed § 92.214(a)(10) in a new paragraph (i) of § 92.214(b)(3) to prohibit project owners from charging for surety bonds, security deposit insurance, or similar instruments in lieu of or in addition to a security deposit in units. The proposed rule would also add a new paragraph (iii) to § 92.214(b)(3) to explicitly prohibit project owners from charging fees to inspect units or correct deficiencies in the property condition of units or common areas of the project that were not caused by the tenant. The costs associated with normal wear and tear or damage to a unit or common areas of a project that are not the result of negligence, recklessness, or PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 46627 intentional acts by the tenant, must be paid from project operations and not passed on to the tenant. Finally, to accommodate the proposed revisions to § 92.214(b)(3), the proposed rule would add a new paragraph (4) to § 92.214(b), which would detail the fees that owners are permitted to charge tenants. 14. Income Targeting: Tenant-Based Rental Assistance and Rental Units (24 CFR 92.216) HUD proposes to revise § 92.216(a)(2) and (b)(2) to replace the use of the term ‘‘dwelling’’ with ‘‘housing’’ which is the accurate term for application of the requirement. While part 92 uses ‘‘housing’’ and ‘‘dwelling’’ interchangeably, these terms have been revised over the years to have separate definitions in other programs. Therefore, to avoid confusion, HUD would revise part 92 to replace ‘‘dwelling’’ with ‘‘housing,’’ where appropriate. 15. Income Targeting: Homeownership (24 CFR 92.217) HUD proposes to revise § 92.217 to replace the use of the term ‘‘dwelling’’ with ‘‘housing.’’ 16. Recognition of Matching Contribution (24 CFR 92.219) The proposed rule would add the term ‘‘tenant protection requirements’’ in § 92.219(a)(2)(ii) to clarify the substance of the requirements at § 92.253(a)–(c) and (d)(2) that are cited to in the regulation. The regulatory citations for § 92.253 would also be updated to reflect the changes to this section. 17. Match Credit (24 CFR 92.221) The proposed rule would revise § 92.221(b) to clarify the requirements a participating jurisdiction must meet when using excess match contributions earned in a previous year, also referred to as ‘‘carry-over’’ or ‘‘carried over’’ match to meet a later year’s HOME match obligation. In 2015, HUD’s Office of Inspector General issued an audit report on HOME matching contributions that found widespread problems with participating jurisdictions not adequately documenting the validity and eligibility of match contributions.11 Specifically, the HUD Inspector General found that many participating jurisdictions did not maintain required match logs or that logs were insufficient, did not identify all contributions in their carry-over match balances, 11 See HUD OIG Audit Report Number: 2015–KC– 0002, available at https://www.hudoig.gov/sites/ default/files/documents/2015-KC-0002.pdf. E:\FR\FM\29MYP2.SGM 29MYP2 46628 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 included nonexistent contributions in their carry-over balances, and did not fully support matching contributions they credited toward meeting their 25 percent match obligation. To ensure that these deficiencies do not continue, the Department proposes to add a new paragraph (1) to § 92.221(b) to explicitly require a participating jurisdiction to have documentation supporting the source, eligibility, and value of match contributions that have been carried over from previous years at the time that they apply the contribution toward their match obligation. The proposed rule would also add a new paragraph (2) to § 92.221(b) to require participating jurisdictions to maintain records related to the source (i.e., the project to which the contribution was made), eligibility, and amount of match contributions for 5 years from the date that they apply the match credit toward their match liability. The proposed rule would include conforming changes to the recordkeeping provisions at § 92.508(a)(2)(ix) to describe the scope and retention period that would apply for records of carried over match contributions. 18. Maximum Per-Unit Subsidy Amount, Underwriting, and Subsidy Layering (24 CFR 92.250) The proposed rule would make several revisions to the HOME program’s maximum per-unit subsidy limits regulations at § 92.250. Section 212(e) of NAHA (42 U.S.C. 12742(e)) requires the Department to establish limits on the amount of HOME funds that may be invested on a per-unit basis. For multifamily housing, NAHA requires that such maximum per-unit subsidy limits not be less than the perunit limitations set forth in the mortgage insurance program authorized in section 221(d)(3) of the National Housing Act (12 U.S.C. 1715l) (‘‘section 221(d)(3) limitations’’), as adjusted by HUD to reflect the costs of land and construction in the area that exceeds the national average of such costs, up to 240 percent of the base mortgage limits. The Department has additional authority to adjust the 240 percent limits further based on the market area, number of bedrooms, eligible activity type (e.g., homeownership, rental), and work performed (e.g., rehabilitation, new construction). Notwithstanding the statutory language, the Department has historically implemented a maximum cap on the amount of HOME funds that may be used for the subsidy. However, after further review of the statutory language and Congressional record of the amendments made to title II of VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 NAHA by section 206 of the Housing and Community Development Act of 1992 (Pub. L. 102–550), the Department has determined that Congress intended the adjusted 221(d)(3) limitations to establish a floor, rather than a cap, for the maximum subsidy amount. Due to the discontinuation of the section 221(d)(3) mortgage insurance program, the Department must establish an alternate benchmark as the maximum subsidy limit for the HOME program. The Department is currently operating under an interim policy that directs participating jurisdictions to use the basic mortgage limitations for section 234 of the National Housing Act’s Condominium Housing, for elevatortype projects (‘‘section 234 limitations’’), in place of the discontinued section 221(d)(3) limitations.12 The Department is currently adjusting the section 234 limitations using the High Cost Percentages that the Department calculates for its mortgage insurance programs. The Department chose this policy because it determined in 2015 that ‘‘[o]ver time, the limits issued by HUD for the Section 234 program have been identical to the 221(d)(3) limits.’’ 13 As the section 234 limitations were identical to the section 221(d)(3) limitations prior to the discontinuation of the section 221(d)(3) limitations, the Department still believes that the section 234 limitations are a reasonable alternative to the section 221(d)(3) limitations and consistent with section 212(e) of NAHA. However, due to HUD’s determination that Congress intended the adjusted 221(d)(3) limitations to establish a floor, rather than a cap, for the maximum subsidy amount, HUD proposes to codify that the total amount of HOME funds that a participating jurisdiction may invest on a per-unit basis may not exceed the per unit dollar limits established by HUD in accordance with the requirements in section 212(e) of NAHA rather than codify the section 234 limitations. At § 92.250(a), HUD proposes to publish the methodology for determining maximum per-unit subsidy amounts in accordance with section 212(e) through a notice published in the Federal Register with the opportunity for comment. The proposed rule would also clarify § 92.250(a) by stating that HUD will use that methodology to publish the maximum per-unit subsidy limits for the area in which the housing is located 12 See Notice CPD–15–003, ‘‘Interim Policy on Maximum Per-Unit Subsidy Limits for the HOME Program,’’ available at https://www.hud.gov/sites/ documents/15-03CPDN.PDF. 13 Id. at 2. PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 annually, in accordance with the published methodology, and will make adjustments annually. HUD intends to publish these limits on HUD’s website. Section 212(e) of NAHA requires that the Department consider on a marketper-market basis the cost of multifamily construction that meets State and local housing and building codes and the costs of land, with inflationary adjustments. HUD declines to maintain its use of the section 234 limitations for HOME because the section 234 limitations may not align with section 212(e) in the future, such as if the cost of multifamily construction or market conditions of the participating jurisdiction require a higher limit under section 212(e). Therefore, revising § 92.250 to refer to the statutory requirements and the process for publishing a methodology in accordance with the statutory requirements would avoid the need to waive or change HOME regulations to align with section 212(e) in the future. The proposed rule would revise § 92.250(a) to require HUD to determine maximum per-unit subsidy limits for HOME on an annual basis in accordance with the statute and publish those limits (i.e., on the HUD website or by notice).14 Based on the Congressional record clarifying the intent of section 212(e) of NAHA,15 the Department has determined that the statutory requirement provides much greater direction on the use of the section 221(d)(3) limitations as a floor while allowing for adjustments to the limitations based on specific criteria that affect project costs. To implement a revised methodology for the annual determination of the maximum per unit subsidy limit, HUD intends to issue a Federal Register notice in conjunction with this HOME rulemaking process. The notice for the revised methodology would identify an existing limit (e.g., mortgage insurance limit) or outline a proposed method for establishing a limit in accordance with section 212(e) and request comments from industry stakeholders and the public. This would provide HUD with the opportunity to perform a higher level of review of current development and construction costs, evaluate ongoing changes in costs due to changes in building codes and industry practices, determine whether different eligible activities (i.e., 14 See 42 U.S.C. 12742(e)(1)–(3). House Report 102–760, 1992 U.S.C.C.A.N. 3281 at Page 3301, which clarified that Public Law 102–550 amending Section 212 of NAHA, ‘‘[a]mends cost limits requirements to establish minimum cost limits equal to the per unit dollar limitation for the section 221(d)(3) program, as adjusted . . .’’ 15 See E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules homeownership vs. rental) should have different methodologies, and to consider and respond to comments in the implementation of the revised methodology. Until a revised methodology is finalized, HUD would establish the maximum per unit subsidy limit as 270 percent of the section 234 limitations. The proposed rule would also add a new paragraph (c) to § 92.250 to permit a participating jurisdiction to exceed the maximum per-unit subsidy described in § 92.250(a) by 5 percent for a project that meets one of the acceptable Green Building standards enumerated by the Department. HUD shall allow participating jurisdictions and developers this flexibility because the Department is pursuing groundbreaking and innovative program designs in addressing the ambitious climate and green energy goals set by HUD leadership. By providing the flexibility to participating jurisdictions to exceed the per unit maximum subsidy limit by up to 5 percent to cover increased costs, HUD would be incentivizing participating jurisdictions and owners to create projects that meet a physical condition standard that involves the use of durable green building materials, innovative building methods, and renewable energy systems. The Department recognizes that the development of affordable housing that meets a green building standard and is more resilient to extreme weather events and climate change will result in increases to the costs of production. The Department believes that permitting a participating jurisdiction to exceed the maximum per-unit subsidy described in § 92.250(a) by up to 5 percent will sufficiently enable the participating jurisdiction and developer to absorb the higher costs associated with complying with a higher standard as well as some additional development costs unrelated to meeting the green building standard. The qualifying standards will be published in the Federal Register or HUD website. Specific solicitation of comment #2: The Department specifically requests public comment from participating jurisdictions, developers, and other affected members of the public about the green building standards that the Department should establish in the Federal Register. In addition, the Department seeks public comment about stakeholder experiences regarding the percentage increase in the cost of constructing or rehabilitating affordable housing to a green building standard and whether a 5 percent increase in the maximum per unit subsidy limit is sufficient. Finally, the Department VerDate Sep<11>2014 19:31 May 28, 2024 Jkt 262001 requests public comment on whether permitting participating jurisdictions to exceed the maximum per unit subsidy limit by an amount in excess of the additional costs of green building measures (i.e., to provide additional HOME funds to cover a larger portion of other HOME-eligible development costs),would create a sufficient incentive to developers and owners to meet green building standards in projects that would otherwise not be designed to meet those standards. In addition, the proposed rule would amend the language at § 92.250(b)(3)(i) to clarify that a participating jurisdiction must underwrite a homeowner’s ability to repay the HOME-assistance for a homeowner rehabilitation project only if the assistance is provided as an amortizing loan. 19. Property Standards (24 CFR 92.251) Changes to § 92.251 Generally The proposed rule would retitle § 92.251 as ‘‘Property standards and inspections.’’ The proposed rule would move the inspection and financial oversight requirements currently at § 92.504(d) to the applicable paragraphs in § 92.251 to consolidate the property standards and inspection requirements in one section of the regulation. In addition, the Department proposes several revisions to the property standards applicable to HOME-assisted properties to implement statutory energy efficiency requirements; impose carbon monoxide detector requirements; incorporate green building standards when a participating jurisdiction elects to exceed the maximum per unit subsidy limit for a project pursuant to proposed § 92.250(c); provide administrative relief to reduce duplicative physical inspections and provide additional flexibility for smallscale housing; and correct an inadvertent limitation on homebuyer acquisition programs. Finally, the proposed rule also incorporates further conforming regulatory changes to the NSPIRE Final Rule.16 The specifics of these changes are described in further detail below. Changes to Paragraph (a) The proposed rule would reorganize § 92.251(a) by creating a new paragraph (a)(2) which would contain and expand upon the requirements for construction progress inspections currently in § 92.251(a)(2)(v). The rest of the current paragraph (a)(2) would be moved to a new paragraph (a)(3). In addition, the completion inspection requirements 16 88 PO 00000 FR 30442 (May 11, 2023). Frm 00013 Fmt 4701 Sfmt 4702 46629 currently imposed at § 92.504(d)(1)(i) would be added to the proposed paragraph (a)(2) (for new construction) and paragraph (b)(3) (for rehabilitation). Redesignated paragraph (a)(3) would also be revised to clarify that the listed requirements in paragraphs (a)(3)(i) through (vii) must be met by projects upon project completion, unless an earlier deadline is otherwise specified by the applicable statute, regulation, or standard. For example, the accessibility requirement in paragraph (a)(3)(i) of § 92.251 must be met prior to project completion, and the project must comply with the required deadline under the applicable statute or regulation. The proposed rule at § 92.251(a)(3)(ii) would codify the statutory requirement that all HOME-assisted rental and homebuyer new construction projects meet the energy efficiency standards promulgated by HUD in accordance with section 109 of NAHA,17 including any revisions adopted by HUD and the U.S. Department of Agriculture (USDA). The 2013 HOME Final Rule did not include energy efficiency standards in § 92.251 because HUD intended to propose new standards for energy and water efficiency in a separate proposed rule. Pursuant to sections 215(a)(1)(F) and (b)(4) of NAHA (42 U.S.C. 12745(a)(1)(F) and (b)(4)), all newly constructed HOME-assisted housing must meet the energy efficiency codes promulgated by the Secretary in accordance with section 109 of NAHA (42 U.S.C. 12709). In addition, the Energy Independence and Security Act of 2007 (EISA) (Pub. L. 110–140) established procedures for HUD and the USDA to adopt periodic revisions to the International Energy Conservation Code (IECC) and to ANSI/ASHRAE/IES Standard 90.1: Energy Standard for Buildings, Except Low-Rise Residential Buildings (ASHRAE 90.1), subject to a determination by HUD and USDA that the revised energy codes do not negatively affect the availability or affordability of new construction of single and multifamily housing covered by EISA, and a determination by the Secretary of Energy that the revised codes ‘‘would improve energy efficiency.’’ Carbon Monoxide Detector Requirements In the NSPIRE Final Rule, the Department codified carbon monoxide detection requirements in Public Law 116–20 for certain covered programs at 17 42 E:\FR\FM\29MYP2.SGM U.S.C. 12709. 29MYP2 46630 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules 24 CFR 5.703(d)(6).18 Because HOME is not a covered program subject to these statutory carbon monoxide detection requirements, the Department determined that rulemaking is necessary to implement these changes for the HOME program. Consequently, the proposed rule would add new paragraphs at § 92.251(a)(3)(vi) (for new construction) and § 92.251(b)(1)(xi) (for rehabilitation) and amends § 92.251(c)(3) (for acquisition of standard housing for homeownership) to impose carbon monoxide detection requirements for all HOME-assisted projects which will be adopted by HUD through a notice published in the Federal Register. The Department intends to evaluate the specific standards for installation of carbon monoxide alarms or detectors at 24 CFR 5.703(d)(6) for feasibility in new construction, rehabilitation, and homebuyer acquisition projects, respectively. Smoke Detector Requirements lotter on DSK11XQN23PROD with PROPOSALS2 Similar to the carbon monoxide detector requirements implemented through the 2021 Consolidated Appropriations Act, described above, the 2023 Consolidated Appropriations Act 19 created additional smoke alarm requirements in federally assisted housing. These requirements apply to several HUD programs but not HOME. These requirements include that federally assisted housing comply with National Fire Protection Association Standard (NFPA) 72, or any successor standard, to use hardwired smoke alarms or sealed and tamper resistant smoke alarms with ten-year non rechargeable, nonreplaceable batteries, that provide notification for persons with hearing loss. These requirements take effect December 29, 2024. HUD believes that in most jurisdictions similar requirements already exist, as 18 See section 101, ‘‘Carbon Monoxide Alarms or Detectors in Federally Insured Housing’’ of Title I of Division Q, Financial Services Provisions and Intellectual Property, of the Consolidated Appropriations Act, 2021 (Pub. L. 116–260), 134 Stat. 2162 (2020), which included amendments to section 3(a) and 8 of the United States Housing Act of 1937 (42 U.S.C. 1437a(a) and 42 U.S.C. 1437(f) (the ‘‘1937 Act’’), section 202(j) of the Housing Act of 1959 (12 U.S.C. 1701q(j)), and sections 811(j) and 856 of the NAHA (42 U.S.C. 8013(j) and 42 U.S.C. 12905). 19 See section 601, ‘‘Smoke Alarms in Federally Assisted Housing’’ of Title VI of Division AA, Financial Services Matters, of the Consolidated Appropriations Act, 2023 (Pub. L. 117–328), 136 Stat. 4459 (2022), which included amendments to section 3(a) and 8 of the 1937 Act, section 202(j) of the Housing Act of 1959 (12 U.S.C. 1701q(j)), and sections 811(j) and 856 of the NAHA (42 U.S.C. 8013(j) and 42 U.S.C. 12905). VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 many jurisdictions already align with NFPA 72. HUD is still working to provide guidance on these requirements for covered programs. This proposed rule does not include proposed regulatory text to align with the 2023 Consolidated Appropriations Act’s smoke alarm requirements. However, HUD requests public comment on how such requirements would impact participating jurisdictions, owners, and developers of HOME-assisted housing. HUD is particularly interested in public comment on the feasibility of these requirements in HOME-funded homeownership programs that do not include rehabilitation or construction of housing (e.g., downpayment assistance programs). HUD is considering, at the final rule stage, revising the HOME regulations consistent with the forthcoming HUD guidance on these statutory requirements. Specific solicitation of comment #3: The Department specifically seeks public comment on the proposal to require HOME-assisted units comply with NFPA 72, or any successor standard, to use hardwired smoke alarms or sealed or tamper resistant smoke alarms with ten-year non rechargeable, nonreplaceable batteries, that provide notification for persons with hearing loss. The Department is particularly interested in public comment on the feasibility of these requirements in HOME-funded homeownership programs that do not include rehabilitation or construction of housing (e.g., downpayment assistance programs). Green Building Standard HUD proposes to add paragraphs (a)(3)(vii) (for new construction) and (b)(1)(xii) (for rehabilitation) to § 92.251 to correspond with HUD’s proposal at § 92.250(c) to require the housing meet one of the qualifying green building standards published in the Federal Register or HUD website when a participating jurisdiction exceeds the maximum per-unit subsidy limit pursuant to the proposed § 92.250(c), upon completion of the project. Changes to Paragraph (f) The proposed rule would require participating jurisdictions to establish written property standards that meet the minimum requirements at § 92.251(f)(1) for housing occupied by tenants assisted with TBRA, including compliance with State and local codes and ordinances, health and safety, and lead-based paint requirements. The proposed rule would also retitle § 92.251(f) as ‘‘Ongoing property condition standards and PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 inspections: Rental housing and housing occupied by tenants receiving HOME tenant-based rental assistance.’’ The Department also proposes to make a minor amendment to paragraph (f)(1)(i) to add the term ‘‘HOME’’ before ‘‘rental housing’’ to clarify that the Federal Register notice which HUD will publish will be specific to the HOME program. Project Inspections Through the NSPIRE Final Rule, the Department improved alignment of the HOME inspection standards with the standards of other HUD-assisted housing programs. The Department understands that HOME is frequently one of many financing sources in a multifamily rental development project and, therefore, HOME projects are often subject to the requirements of many other public and private funding sources. Consequently, HUD is proposing to provide administrative relief in this proposed rule by adding to § 92.251 paragraphs (b)(1)(viii)(A) (for rehabilitation projects), (f)(3)(i)(B) (for ongoing inspections of rental housing), and (f)(4)(ii) (for housing occupied by tenants receiving TBRA) to permit a participating jurisdiction to accept the completion or ongoing inspection, as applicable, conducted for another funding source in accordance with the National Standards for the Condition of HUD housing (24 CFR part 5, subpart G) or an alternative inspection standard, which HUD may establish through Federal Register notice to determine that the project and units are decent, safe, sanitary, and in good repair. The participating jurisdiction must still conduct initial and progress inspections of rehabilitation projects and determine compliance with the participating jurisdiction’s HOME rehabilitation standards, State and local codes, ordinances, and zoning requirements. Under this proposed rule, a participating jurisdiction may accept an inspection performed under the Uniform Physical Condition Standards prior to the NSPIRE effective date. Inspections that occur after the effective date of NSPIRE for HOME and used by the participating jurisdiction to verify the housing is decent, safe, sanitary, and in good repair must be conducted under NSPIRE or an alternative inspection standard, as described in the proposed § 92.251. For ongoing inspections of rental housing, HUD proposes to amend paragraph (f)(3) to permit a participating jurisdiction to accept an inspection that occurred within the past 12 months. However, the Department encourages participating jurisdictions to align the E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules project’s ongoing inspection schedule with the schedule of inspections of other HUD programs or funders. The proposed rule would require that a participating jurisdiction perform an onsite inspection within 12 months after project completion and every three years during the period of affordability. The participating jurisdiction may not accept the determination of another funder under § 92.251 for the first ongoing inspection occurring 12 months after project completion but may accept the determination of another funder in accordance with § 92.251 every three years thereafter. For ongoing annual inspections for housing with tenants receiving TBRA, HUD proposes to insert a new paragraph (f)(4) for TBRA to state that a participating jurisdiction may accept an inspection performed for another funding source in accordance with § 92.251 that occurred within the past three months. The Department proposes a shorter timeframe for accepting inspections of TBRA units performed by other funders under § 92.251 because TBRA ongoing inspections are required annually after initial occupancy while inspections of HOME-assisted rental projects may be conducted every three years during the period of affordability. The proposed rule would also add § 92.251(b)(1)(viii)(B) (for rehabilitation projects) and includes language at § 92.251(f)(3)(i)(B) (for ongoing inspections of rental housing) and § 92.251(f)(4)(ii) (for housing occupied by tenants receiving TBRA) to require that the participating jurisdiction document a determination by another funder that the project and unit(s) are decent, safe, sanitary, and in good repair. To document a determination means that the participating jurisdiction must obtain the inspection report that indicates that all deficiencies have been corrected. These paragraphs would also clarify that when the participating jurisdiction documents a determination by another funder under § 92.251, it is not required to conduct a duplicative HOME on-site inspection. The proposed rule would restructure paragraph (c)(3) and add paragraph (c)(3)(ii) to eliminate the requirement at § 92.251(c)(3) that a homebuyer acquisition project (e.g., downpayment assistance) that does not meet HOME property standards must be rehabilitated or it cannot be acquired with HOME funds. This requirement was added in the 2013 HOME Final Rule and the Department is concerned that it had the unintended impact of reducing the supply of housing available for purchase by HOME-assisted homebuyers by prohibiting rehabilitation after the VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 HOME-assisted acquisition to meet required property standards. Currently, a home that does not meet property standards cannot be purchased with HOME funds. Also, the Department understands that sellers are often unwilling to perform rehabilitation to a home prior to its acquisition by a HOME-assisted homebuyer, making many properties ineligible for purchase with HOME funds. The proposed rule would add paragraph (c)(3)(ii) to § 92.251 to permit housing to be purchased by a homebuyer prior to compliance with HOME property standards if the homebuyer written agreement with the participating jurisdiction requires the project to meet HOME property standards within six months of acquisition and determines that funds are secured for rehabilitation. The participating jurisdiction would be required to conduct a final inspection within six months of the title transfer to determine compliance with the required property standards. Through this proposed rule, the inspection standards for periodic on-site inspections of HOME-assisted rental housing including frequency of inspections, inspection samples, and annual certifications by owners at § 92.504(d)(1)(ii) would be moved to a new paragraph (f)(3). The inspection sample requirements in the proposed rule at § 92.251(f)(3)(iii) would require that the sample of units for an onsite inspection be a random sample rather than a statistically valid sample. While the Department’s software creates a statistically valid sample of units for its inspection of HUD-assisted housing conducted using the NSPIRE Standards, HUD is proposing this change because it is concerned that participating jurisdictions do not have software capability to develop a statistically valid sample of units. In addition, participating jurisdictions have sought guidance about the requirement currently at § 92.504(d)(1)(ii)(D) regarding what constitutes a sample size appropriate for the size of the HOMEassisted project. Consequently, in the proposed § 92.251(f)(3)(iii) the Department would require inspection of a sample size of 20% of the HOMEassisted units in a project, except for a project with one to four HOME-assisted units where the requirement that 100% of the units be inspected remains unchanged. When conducting inspections, the jurisdiction should consider the project’s compliance with accessibility requirements as determined by 24 CFR part 8, which implements Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), Titles II and III of the Americans PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 46631 with Disabilities Act (42 U.S.C. 12131– 12189) implemented at 28 CFR parts 35 and 36, and the Fair Housing Act (42 U.S.C. 3601–19) implemented at 24 CFR part 100, as applicable. These accessibility requirements apply to a project as a whole, including both HOME and non-HOME-assisted units. Where practicable, HUD recommends a participating jurisdiction select a random sample of units using a methodology that captures different unit types, features, and accessibility designations, and to the extent feasible, that the same units are not inspected in every inspection. Specific solicitation of comment #4: The Department specifically seeks public comment on the proposal to require that a participating jurisdiction inspect at least 20% of the HOMEassisted units during its ongoing on-site inspections of rental housing. In addition, the proposed rule would move the requirements § 92.504(d)(1)(iii) for annual on-site inspections of HOME-assisted housing occupied by tenants receiving TBRA to a new paragraph (f)(4) and clarify that inspections must determine whether the housing meets the property standards in § 92.251(f)(1). The proposed rule would move the financial oversight requirements for HOME-assisted rental projects currently at § 92.504(d)(2) to § 92.251(f)(3)(iv). This change is proposed to consolidate the other periodic review requirements for rental housing during the period of affordability into one section of the regulation. In addition, the proposed rule would clarify the Department’s intent that the financial oversight requirements apply to rental projects with 10 or more HOME-assisted units, which was discussed in the preamble to the 2013 HOME Final Rule but has remained a source of confusion for participating jurisdictions. HUD proposes to move the requirements for re-inspections and the requirement to adopt a more frequent inspection schedule as the result of health and safety deficiencies currently at § 92.504(d)(1)(ii)(B) to the corrective and remedial action requirements of § 92.251, which HUD proposes to move to paragraph (f)(5). Relatedly, pursuant to section 226(c) of NAHA.20 the proposed rule would provide an exception for small-scale housing from the requirement that a participating jurisdiction must adopt a more frequent inspection schedule for properties that have been found to have health and safety deficiencies. If all health and safety deficiencies are corrected, the 20 42 E:\FR\FM\29MYP2.SGM U.S.C. 12756(c). 29MYP2 46632 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 proposed rule would permit but not require a participating jurisdiction to adopt a more frequent inspection schedule for small-scale housing. In the future, the Department hopes to simplify ongoing inspections for smallscale rental housing projects by developing a streamlined list of specific deficiencies for which participating jurisdictions would inspect. The changes described in this paragraph correspond to the administrative relief provided for small-scale housing at § 92.252. The Department also proposes to move the requirements currently at § 92.251(f)(5) to paragraph (g) of § 92.251 and revise the new § 92.251(g) to add further clarity to the requirements for inspection procedures. Specific solicitation of comment #5: The Department specifically requests public comment from participating jurisdictions and program participants regarding the challenges they have encountered in using HOME funds to assist small-scale housing, as defined in this proposed rule. The Department also requests public comment regarding the costs and benefits of the changes that HUD is proposing for small-scale housing in requirements for the frequency of income determinations and inspections and the use of alternative waiting lists. 20. Qualification as Affordable Housing: Rental Housing (24 CFR 92.252) The Department most recently revised § 92.252 in the HOTMA Final Rule.21 Those changes become effective on January 1, 2024. The changes made to § 92.252(b)(2) in the HOTMA Final Rule divided the Low HOME Rent limit provision in § 92.252(b)(2) into paragraphs (b)(2)(i) and (b)(2)(ii) to separate the conditions that a HOMEassisted unit that also receives Federal or State project-based rental subsidy must meet in order for a project owner to charge the maximum rent allowable under the Federal or State project-based rental subsidy program. The HOTMA Final Rule also revised § 92.252(h). These provisions are being renumbered, reorganized, and revised in the proposed § 92.252(g). The proposed rule would amend the introductory text of § 92.252 to eliminate the requirement that a participating jurisdiction must submit a marketing plan to HUD for any HOMEassisted rental units that have not achieved initial occupancy within six months of project completion in IDIS. The participating jurisdiction would still be required to take action to ensure 21 88 FR 9600 at 9612, 9614–9615. VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 the unit is rented if the unit is not occupied within six months and repay the HOME investment if the unit does not achieve initial occupancy within 18 months. The Department does not currently approve marketing plans, so this change would provide administrative relief to participating jurisdictions without eliminating the requirement that participating jurisdictions work with the project owner to develop and implement a marketing plan to meet the deadline for initial occupancy. This change does not revise any affirmative marketing requirements in § 92.351. The proposed rule would also implement several changes to the rent limits at § 92.252 for HOME-assisted rental housing. The proposed rule would reorganize the general requirements that are currently in effect and apply to all rent limits by moving these requirements to the introductory text of § 92.252(a) rather than repeating the requirements in each paragraph. These general requirements include that the rent for a HOME-assisted unit must not exceed the rent limits, the Department will publish the HOME rent limits on an annual basis, with adjustments for number of bedrooms in the unit, the participating jurisdiction may designate (in its written agreement with the owner) more than the minimum HOME units (both High HOME and Low HOME rent units) in a rental housing project, and the rent limits apply to the rent plus the utilities or utility allowance. The proposed rule would also remove several duplicative requirements in § 92.252 to improve clarity and readability. The proposed rule would reorganize § 92.252 by moving the requirements for High HOME Rent limits in § 92.252(a), Low HOME Rent limits in § 92.252(b), and SRO Housing rent limits in § 92.252(c) to the proposed § 92.252(a)(1), (a)(2), and (a)(3), respectively. The proposed rule would title the proposed § 92.252(a) as ‘‘HOME Rent Limits,’’ title the proposed § 92.252(a)(1) as ‘‘High HOME Rent Limits,’’ title the proposed § 92.252(a)(2) as ‘‘Low HOME Rent Limits,’’ and title the proposed § 92.252(a)(3) as ‘‘HOME Rent Limits for SRO Projects.’’ The Housing and Economic Recovery Act of 2008 (HERA) (Pub. L. 110–289, 122 Stat. 2654, approved July 30, 2008) amended the 1937 Act and made comprehensive and significant reforms to HUD’s Section 8 Tenant-Based Voucher and Project-Based Voucher programs. Many of the required regulatory changes at 24 CFR parts 982 were implemented through ‘‘The Housing and Economic Recovery Act of PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 2008 (HERA): Changes to the Section 8 Tenant-Based Voucher and Section 8 Project-Based Voucher Programs,’’ final rule (79 FR 36146), published on June 25, 2014 (the ‘‘HERA Final Rule’’). One of the changes required by section 2835(a)(2) of HERA added section 8(o)(10)(F) to the 1937 Act (42 U.S.C. 1437f(o)(10)(F)) which streamlined the procedure for determining the rent reasonableness standard for assistance under the section 8 tenant-based voucher program in units receiving LIHTC or HOME funds. HUD fully implemented this streamlined process for LIHTC units in the HERA Final Rule. However, the HERA Final Rule did not fully implement the streamlined process for HOME-assisted units. Instead, as explained in the HERA Final Rule, the rent reasonableness requirements at § 982.507 for HOME-assisted units included a placeholder pending a future HOME rulemaking (which had just been completed in 2013) to revise conflicting HOME regulations. HUD anticipated that the future HOME rulemaking would revise the HOME regulations at 24 CFR part 92 to prevent participating jurisdictions and owners of HOMEassisted projects from being in noncompliance with HOME rent limits when receiving the rent amount determined by a public housing authority (PHA), pursuant to the rent reasonableness process established by HERA for a tenant with a section 8 housing choice voucher (HCV). As described in detail in this section, HUD is now proposing to make the required revisions to § 92.252 to align HOME rent limit requirements with the rent reasonableness requirements for HOMEassisted units in the proposed § 982.507(c)(3). The proposed changes would prevent the participating jurisdiction and an owner of HOMEassisted units from being in noncompliance with HOME rent limits when a PHA complies with the 1937 Act, as amended by HERA, in its HCV rent payments to owners. Section D. of the proposed rule discusses the proposed changes to § 982.507(c)(3) to fully implement the HERA section 8 HCV rent reasonableness process for HOME-assisted units. The proposed rule would implement the following changes to remove conflicts with the proposed rent requirements for the section 8 HCV program at § 982.507(c)(3). HUD proposes to remove the applicability of the HOME rent limits in § 92.252 to payments provided under a Federal or State rental assistance or subsidy program. This change in proposed § 92.252(a) would revise current E:\FR\FM\29MYP2.SGM 29MYP2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 program requirements in § 92.252 by permitting an owner to receive the rent determined by a PHA, in accordance with proposed § 982.507(c)(3), or under another Federal or State rental assistance or subsidy program even though the rent for HCV or another Federal or State rental assistance or subsidy program exceeds the HOME rent limits. HUD would still implement the requirements for rents in section 215(a) of NAHA (42 U.S.C. 12745(a)) by continuing to apply the HOME rent limits to the rent and utilities required to be paid by the tenant. This change would align the HOME program with the changes to the 1937 Act required by HERA for the PHA’s determination of rent for HCV in HOME units. As the PHA must determine the HCV rent in compliance with sections 8(o)(10)(A) and (F) of the 1937 Act (42 U.S.C. 1437f(o)(10)(A) and (F)) as proposed in § 982.507(c)(3), the proposed changes to § 92.252 would prevent an owner from being in noncompliance with HOME rent limit requirements when receiving the required rent from a PHA on behalf of a tenant with HCV. Additionally, the existing rent limit requirements in § 92.252 can be confusing for owners and these revisions would provide additional clarity so that participating jurisdictions and owners understand that the HOME rent limit requirements do not conflict with the rent requirements for Federal rental assistance or subsidy programs or LIHTC.22 These proposed changes also align with the LIHTC requirements for rent, including when there is section 8 HCV assistance and other comparable forms of rental assistance applicable to the unit or household.23 As discussed in further detail in the Regulatory Impact Assessment, estimates of increased potential annual gross rent collection arising from the proposed changes to HOME rent limits would only be fully realized if all HOME units have tenants that receive rental assistance. Precise data on how many tenants in HOME units that also receive tenant-based rental assistance like HCV does not exist, but it is unlikely that a majority of HOME units without a project-based subsidy are occupied by tenants with a tenant-based subsidy. Data reported to HUD at the time of initial HOME rental project 22 The rent limits under the Low-Income Housing Credits or LIHTC are governed by 26 U.S.C. 42(g)(2)(A). 23 Under 26 U.S.C. 42(g)(2)(B)(i), LIHTC gross rent does not include any payment under section 8 of the United States Housing Act of 1937 (42 USCS § 1437f) or any comparable rental assistance program applicable to either the rental unit or the household occupying the unit. VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 lease-up suggests that 24 to 30 percent of tenants in units without project-based subsidies receive HCVs. HUD anticipates that the changes in the proposed rule to conform to the changes by HERA, will result in an annual increase in payments to property owners of roughly $78–$125 million, which is approximately 0.3 to 0.5 percent of HCV’s budget authority for rental assistance in FY 2023. The proposed changes therefore may potentially leave PHAs unable to provide rental assistance to 6,000– 11,000 households that they otherwise would have if the PHAs had provided rental assistance payments up to the current HOME rent limits rather than the reasonable rent determined by a PHA. It is also possible that future Congressional appropriations would cover the same number of vouchers regardless of relatively small changes in per voucher costs, in which case the number of assisted households would not be affected. Nonetheless, Congress specifically provided for these proposed changes for HOME units in HERA and under the proposed rule, HOME rent limits would still apply to the rent and utilities paid by the tenant. The only impacts on tenants and prospective tenants are that tenants with HCVs or other tenant-based rental assistance would become more desirable to owners, and that residents of HOMEassisted projects could experience improved housing conditions (since some projects would see improved cash flow). The proposed revisions would make the treatment of payments consistent under Federal or State project-based and tenant-based rental assistance programs for both High HOME and Low HOME rent units. As a result, the proposed revisions would also decrease administrative burden for participating jurisdictions and owners. Consequently, a participating jurisdiction may focus its monitoring and enforcement of HOME rent limit requirements on the amount that is required to be paid by the tenant to an owner rather than on whether payments for rent under a Federal or State tenant-based or project-based rental assistance or subsidy program meet the Low HOME and High HOME rent limit requirements. The Department also proposes to move the requirement that subsequent rents for a project are not required to be lower than the HOME rent limits for the project in effect at the time of project commitment from § 92.252(f) to the proposed § 92.252(a). The proposed revision would clarify that the rent floor for a project is established at the time of commitment of HOME funds to the PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 46633 project and may apply to rents at the time of initial occupancy as well as subsequent rents. The proposed § 92.252(a)(2)(i) would clarify that the maximum rent is 30 percent of the annual income of a family whose income equals 50 percent of AMI, as determined by HUD, except when 30 percent of the annual income of a family with income at 50 percent AMI is higher than the fair market rent under the proposed § 92.252(a)(1)(i). This change would clarify that the only circumstance in which the High HOME Rent would be lower than the Low HOME Rent is if the fair market rent permitted in § 92.252(a)(1)(i) is lower than 30 percent of the annual income of a family whose income equals 50 percent AMI, as described in the proposed § 92.252(a)(2)(i). This proposed change is appropriate because the Department does not establish the 65 percent AMI rent limit, as permitted under § 92.252(a)(1)(ii), to be lower than the 50 percent AMI rent limit in § 92.252(a)(2)(i). As a result, there is no need to continue using ‘‘applicable rent’’ in the proposed § 92.252(a)(2)(i). The proposed revisions would clarify that if the fair market rent, as permitted under § 92.252(a)(1)(i), is lower than the rent limit of 30 percent of the annual income of a family whose income equals 50 percent AMI, as determined by HUD, the Low HOME rent limit in § 92.252(a)(2)(i) is the fair market rent permitted under the High HOME rent limit at § 92.252(a)(1)(i). HUD is also proposing other changes to remove conflicts with the changes implemented by HERA in the proposed § 92.252(a)(2)(ii). The proposed rule would revise the current requirements at § 92.252(b)(2)(i) and (ii) by removing § 92.252(b)(2)(i) which currently applies to Low HOME rent units with tenantbased rental assistance and revising § 92.252(b)(2)(ii) to be the proposed § 92.252(a)(2)(ii). The proposed § 92.252(a)(2)(ii) would conform the requirement on rent contribution by the family to the proposed change that the HOME rent limits do not apply to payments provided under a Federal or State rental assistance or subsidy program by removing references to ‘‘Federal or State project-based rental subsidy’’ and ‘‘Federal or State projectbased rental subsidy program.’’ In the 2013 HOME Final Rule, the Department removed the discretion for a participating jurisdiction to use the local PHA utility allowance and required the use of the HUD Utility Model or a project-specific utility allowance based on the utilities used in the project. The Department identified and explained the permissible methods E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 46634 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules of determining the utility allowance for a HOME-assisted rental project that align with LIHTC.24 The purpose of the change in the 2013 HOME Final Rule was to require more accurate utility allowances and reward energy efficiency measures with the possibility of higher rental revenue to the owner. In doing so, the Department unintentionally created a conflict between the HOME program and the Section 8 project-based voucher (PBV) and HUD Veterans Affairs Supportive Housing (HUD–VASH) PBV programs, which require the use of a local PHA’s utility allowance. Due to these conflicting requirements, the Department has approved numerous waivers of this requirement in § 92.252 when HOME and PBVs or HUD–VASH PBVs are combined in the same projects. Consequently, the proposed rule at § 92.252(b) would restore the option to use the local PHA’s utility allowance for HOME-assisted rental projects to realign utility allowance requirements in HOME and PBVs. Specific solicitation of comment #6: Rather than permitting all HOMEassisted projects to use the local PHA’s utility allowance, should HUD limit the use of the PHA utility allowance to only HOME-assisted projects which also receive PBV or HUD–VASH PBV assistance? The proposed rule would clarify the period of affordability requirements in proposed § 92.252(d) by removing ‘‘not less than’’ to require that HOMEassisted units meet the program requirements for the required period of affordability, beginning from the date of project completion, to prevent further confusion that the period of affordability must be more than the required period in the table in § 92.252 and to specify that the period of affordability starts at project completion. The proposed rule would also clarify in proposed § 92.252(d) that the affordability requirements for HOME rental housing include the applicable rent limits, period of affordability, and income requirements. The Department would also clarify that the means of enforcement for the affordability requirements include deed or use restrictions, liens on real property, a covenant running with the land, a recorded agreement restricting the use of the property, or any other mechanism approved in writing by HUD, under which the participating jurisdiction has 24 HOMEfires Vol. 13, No. 2 Guidance on How to Establish Utility Allowances for HOME-Assisted Rental Units, available at https:// www.hudexchange.info/resource/5034/homefiresvol-13-no-2-guidance-on-how-to-establish-utilityallowances-for-home-assisted-rental-units/. VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 the right to require specific performance. The Department also proposes to revise § 92.252, as well as §§ 92.254 and 92.504, to make the means of enforcement for affordability requirements consistent throughout the proposed rule. The proposed § 92.252(e)(3) would also increase the minimum number of days for prior written notice of any increase in rents for HOME-assisted units from not less than 30 days to not less than 60 days. Due to changes to the rent limit requirements in § 92.252(a), this proposed rule would renumber § 92.252(a) through (i). The proposed rule would also update terminology to be consistent throughout the section. This includes revising the use of the term ‘‘maximum rent limit’’ to ‘‘rent limit’’ in paragraphs (a), (c), and (e) because the applicable rent limit is the maximum rent and the use of the term ‘‘maximum rent limit’’ in some places is confusing. In addition, the proposed rule would update any references to the renumbered paragraphs throughout the rule. While the proposed rule in paragraph (b) would realign utility allowance requirements in HOME and PBVs, the proposed rule would still require that the utility allowance account for energy efficiency measures of the project. Despite this requirement, the Department recognizes that certain Federal or State tax credits and other incentives are available to owners of affordable housing projects in order to encourage energy retrofits and the installation of solar and/or wind facilities. Often these types of incentive programs require that the low-income tenants of the affordable rental housing receive financial benefit from the energy efficiency measures. Because the participating jurisdiction is required to update the project’s utility allowance annually and must account for any energy efficiency measure of the project, the utility allowance provided to the tenant would likely decrease following any energy efficiency upgrades. This decrease in the utility allowance could therefore result in a financial benefit to the owner rather than the tenant. In addition, because the tenant may receive no financial benefit, the owner may not receive the tax credit or other incentives. Ultimately, as proposed, the HOME utility allowance requirements may disincentivize energy efficiency upgrades. As described below, HUD seeks public comment on how to avoid disincentivizing energy efficiency upgrades. Specific solicitation of comment #7: The Department seeks input on whether and how the rule should facilitate the PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 conveyance of a financial benefit to lowincome tenants when the project owner makes energy efficiency upgrades such as the installation of small-scale wind or solar facilities in connection with an eligible Federal or State program. HUD has issued guidance that currently describes how certain utility discounts or rebates can be treated under HUD income and utility allowance regulations.25 HOME is subject to the same income requirements under 24 CFR 5.609 as other program areas issuing guidance on the treatment of these discounts and rebates. The Department therefore also requests comment from the public on whether to go farther than this guidance for HOME projects through this HOME rulemaking. For example, should HUD maintain the same utility allowance for the project following energy efficiency upgrades to allow the tenant to realize the benefit of decreased utility costs? Both the current income regulations at 24 CFR 5.609 and 24 CFR 5.609 as revised in the HOTMA Final Rule exclude lump-sum additions to assets, as well as non-recurring income. However, if a HUD program provided a recurring financial benefit directly to a low-income tenant, should the rule exclude this income from the HOME income determinations? Specific solicitation of comment #8: The Department specifically requests public comment from participating jurisdictions, developers, and other affected members of the public about the appropriateness of the length of the HUD-required periods of affordability for HOME-assisted rental housing. The current regulation at 24 CFR 92.252(e) establishes periods of 5 years for a perunit HOME investment of under $15,000, 10 years for a per-unit investment between $15,000 and $40,000, and 15 years for a per-unit investment of more than $40,000, 15 years for any unit involving refinancing of existing debt, and 20 years for any unit involving new construction. Section 215(a)(1)(E) of NAHA (42 U.S.C. 12745(a)(1)(E)) requires that the period of affordability be for the remaining useful life of the HOME-assisted property, as determined by HUD, without regard to the term of the mortgage or to transfer of ownership, or for such other period that HUD determines is the longest feasible period of time consistent with sound economics 25 See https://www.hud.gov/sites/dfiles/Housing/ documents/MF_Memo_Community_Solar_Credits_ signed.pdf; https://www.hud.gov/sites/dfiles/ Housing/documents/MF_Memo_re_Community_ Solar_Credits_in_MM_Buildings.pdf; and https:// www.hud.gov/sites/dfiles/PIH/documents/ Community%20Solar%20Credits %20in%20PIH%20Programs.pdf. E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules and the purposes of NAHA. Since the Department established these periods of affordability in 1991, costs have increased significantly, LIHTCs have become the primary funding mechanism for rental housing, and the housing affordability crisis in the country has worsened significantly. The Department seeks input about whether the length of the periods of affordability and the dollar thresholds and activity thresholds that are the basis of the current periods of affordability remain appropriate. In addition, the Department seeks input about any project feasibility challenges of the current HOME periods of affordability and factors that the HUD should consider in contemplating changes to the current periods of affordability. Through this rule, the Department proposes to streamline procedures and simplify requirements in proposed §§ 92.252(g)(1), 92.253(e)(5), and 92.251(f)(5)(i) for small-scale rental housing projects (one to four total units) for reexamination of annual income, tenant selection, and ongoing physical inspections. Section 226(c) of NAHA permits HUD to provide streamlined procedures in monitoring compliance with HOME requirements for smallscale housing when HUD determines it is appropriate. While current HOME requirements may be standard for larger rental projects managed by professional landlords or property management companies, the requirements can be a significant disincentive to participation in the program for landlords or wouldbe landlords of small-scale properties such as homeowners adding an accessory dwelling unit (ADU) or HOME-assisted homebuyers purchasing duplexes or triplexes. Such small-scale projects may be an attainable method for participating jurisdictions with less resources to address their rental housing needs while generating income or supporting owner-occupants (irrespective of whether their own unit is HOME-assisted). Reducing administrative burden would make HOME a viable funding option for such programs that create ADUs or provide financing for resident landlords. The proposed rule would revise § 92.252 to clarify requirements for tenant income re-examination, align with the requirements in § 92.203(a) and (b), and to provide flexibilities for smallscale housing, multifamily projects with a period of affordability of ten years or more, and for units with Federal or State project-based subsidy or tenant-based rental assistance. The proposed rule would revise the first paragraph of proposed § 92.252(g) to recognize the exceptions from § 92.203(b)(1)(i) for a VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 participating jurisdiction that accepts an annual income determination in accordance with § 92.203(a)(1) or (2) or determines income in accordance with § 92.203(b)(2). Currently, § 92.203(a)(1) requires a participating jurisdiction to accept a Federal or state project-based subsidy provider’s determination of a family’s annual income if a family is applying for a HOME unit assisted by a Federal or state project-based subsidy program. Similarly, pursuant to § 92.203(a)(2), a participating jurisdiction has the option to accept a rental assistance provider’s determination of a family’s annual income if the family is applying for a HOME unit and is receiving tenantbased rental assistance (e.g., a Housing Choice Voucher). This rule’s revision to proposed § 92.252(g) would make the regulations at § 92.203 consistent with proposed § 92.252(g). The proposed rule would also revise the first paragraph in proposed § 92.252(g) to require the participating jurisdiction to require the owner to re-examine each tenant’s annual income in accordance with the option in § 92.203(b)(1) that the participating jurisdiction selects and includes in the written agreement. The proposed rule would add paragraphs (1) through (3) to proposed § 92.252(g) to establish exceptions to this general reexamination requirement. The proposed rule would reduce burdens on landlords of small-scale housing by adding paragraph (g)(1) to § 92.252 to permit a participating jurisdiction to permit an owner of smallscale housing to reexamine each tenant’s annual income every three years rather than annually. For owners of small-scale housing that select the option at § 92.203(b)(1)(ii) and are located in participating jurisdictions which permit owners of small-scale housing to reexamine a tenant’s annual income every three years, the proposed rule would except these owners of small-scale housing from the requirement to obtain annual selfcertifications from their tenants within the three-year period following completion of these tenants’ income examinations. This proposed change to the schedule of reexamining tenant annual income for small-scale housing would have a minimal effect on the landlord’s rental income because the rent limit would not change until the tenant’s income increased above 80 percent of AMI. In addition, this proposed change aligns with the other proposed changes for small-scale housing in § 92.251 to permit a threeyear physical inspection requirement schedule rather than a risk-based PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 46635 schedule and § 92.253 to permit the participating jurisdiction, upon request by an owner of small-scale housing, to establish alternative procedures to a written waiting list for small-scale housing, subject to HUD’s written approval of the procedures and determination that the selection of a tenants from a waiting list in chronological order by the owner is impracticable. The proposed rule would add paragraph (g)(2) to § 92.252 to impose and further clarify the existing requirement for owners of a multifamily project with a period of affordability of 10 years or more. Currently, during the period of affordability, an owner may reexamine tenant income annually using a statement and certification, in accordance with § 92.203(b)(1)(ii). The proposed rule would clarify that if a participating jurisdiction permits the owner to re-examine income using a statement and certification, the participating jurisdiction must require the owner to re-examine the income of each tenant using source documentation, at minimum, every six years, in accordance with § 92.203(b)(1)(i). This reflects the same requirement currently in § 92.252(g), but the language has been revised to clarify that the participating jurisdiction must enforce compliance by the owner with this requirement. To align with the requirements in § 92.203(a), the proposed rule would also include an exception for units with Federal or State project-based subsidy or tenant-based rental assistance by adding paragraph (3) to 92.252(g). The proposed 92.252(g)(3) would except an owner from re-examining a tenant’s annual income in accordance with § 92.203(b) for HOME when a participating jurisdiction accepts an annual income determination under § 92.203(a)(1) or (2). The proposed rule would renumber the existing § 92.252(i)(2) to § 92.252(h)(2) and makes several changes to the proposed § 92.252(h)(2) to improve readability and clarity regarding over-income tenant requirements. In addition to creating new paragraphs (h)(2)(i) and (ii), the proposed rule would clarify in the proposed § 92.252(h)(2)(i) that the participating jurisdiction may permit tenants of HOME-assisted units subject to rent restrictions under LIHTC to pay the rent amount required under LIHTC requirements. In the proposed § 92.252(h)(2)(ii), HUD would further clarify that an over-income tenant in a floating HOME-assisted unit must pay a rent amount no greater than the fair E:\FR\FM\29MYP2.SGM 29MYP2 46636 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules market rent for comparable, non-HOMEassisted units in the neighborhood. In proposed § 92.252(i), the proposed rule would also explicitly prohibit the use of surety bonds, security deposit insurance, or similar instruments to be used in lieu of or in addition to a security deposit in HOME-assisted units. The proposed revisions to § 92.252(j) and (k) update citations to conform with the redesignation of the current § 92.253(d) as § 92.253(e) and the Department’s proposal to move the requirements for on-site inspections and financial oversight of rental projects from § 92.504(d) to § 92.251(f) respectively. lotter on DSK11XQN23PROD with PROPOSALS2 21. Tenant Protections and Selection (24 CFR 92.253) The Department is proposing significant revisions to the tenant protections and selection provisions in § 92.253, consistent with the priorities set out in the Administration’s Renters’ Bill of Rights.26 HUD’s proposed revisions to the HOME program in § 92.253 would provide a robust set of tenant protections appropriate to the HOME program. These tenant protections are based on the Department’s review of existing HUD programs (e.g., the Section 8 PBV program 27 and the public housing program 28), a number of State statutes and local ordinances (e.g., Virginia,29 Washington, DC,30 California,31 Texas,32 and Florida 33), and the Military Housing Privatization Initiative 34). To implement the new tenant protections, HUD is proposing in § 92.253(a)(4) to require that all tenants in HOMEassisted rental housing units or receiving TBRA have a new HOME tenancy addendum appended to their lease. This HOME tenancy addendum would include the new tenant protections listed in § 92.253(b). Through this proposed rule, the Department would replace the list of prohibited lease terms currently in 26 Available at https://www.whitehouse.gov/wpcontent/uploads/2023/01/White-House-Blueprintfor-a-Renters-Bill-of-Rights.pdf. 27 See HUD’s Tenancy Addendum Section 8 Project-Based Voucher Program, available at https:// www.hud.gov/sites/dfiles/OCHCO/documents/ 52530C.pdf; 24 CFR 983.256. 28 24 CFR part 966. 29 Va. Code Ann. §§ 55.1–1200 through 1262. 30 D.C. Official Code, Title. 42, Ch. 35. 31 Cal. Civ. Code, D. 2; Cal Civ. Code, D. 3, Pt. 4, T. 5. 32 Tex. Prop. Code Title 8, Ch. 92. 33 Fla. Stat. Title VI, Ch. 83.l. 34 10 U.S.C. 2890 and the Military Housing Privatization Initiative Tenant Bill of Rights, available at https://media.defense.gov/2020/May/ 18/2002302053/-1/-1/1/TENANT_ BILLOFRIGHTS.PDF. VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 § 92.253(b) with a description of the provisions that HUD will include in the HOME tenancy addendum. The proposed rule at § 92.253(a) would revise the heading of paragraph (a) to ‘‘Lease Contents’’ to more accurately describe the requirements within the paragraph, as proposed. The introductory text clarifies that the protections apply to both tenants of HOME-assisted rental housing as well as tenants receiving TBRA. The paragraph also clarifies an existing requirement that the tenant lease be in writing and adds a new requirement that the owner provide the participating jurisdiction a copy of the written lease before it is executed and when the written lease is revised. This new requirement gives the participating jurisdiction the ability to verify that the owner’s lease includes the HOME tenancy addendum and otherwise complies with the revised requirements of this section. The proposed rule at § 92.253(a)(1) would require that a tenant’s lease contain more than one convenient method to communicate directly with the owner or the property management staff, including in person, by telephone, email, or through a web portal. This provision would provide tenants with a reasonable way to contact an owner’s property management staff to request any repairs or maintenance that is necessary for the unit or the common areas of the project. Similarly, the proposed rule at § 92.253(a)(2) would require that a lease provide the participating jurisdiction’s HOME program contact information so that a tenant can contact the participating jurisdiction. The proposed rule at § 92.253(a)(3) maintains the requirement that the Violence Against Women Act (VAWA) lease requirements contained in § 92.359(e) be included in a HOME tenant’s lease, except as otherwise provided in § 92.359(b). The proposed rule at § 92.253(a)(4) would establish the requirement that a HOME tenancy addendum, as further described below, is contained in the lease. The introductory text to proposed § 92.253(b) would establish that the HOME tenancy addendum shall prevail over any conflicting provisions of the lease. The introductory text would also explain that the lease, the HOME tenancy addendum, the VAWA addendum, and any addenda required by a Federal or State affordable housing program shall constitute the sole agreement between the owner and the tenant. Specific solicitation of comment #9: The Department currently applies only the tenant protections contained in the current § 92.253(a) and (b) to tenants PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 receiving TBRA. The proposed rule would apply proposed paragraphs (a)– (c) and (d)(2) to tenants receiving TBRA, including tenants that only receive HOME security deposit assistance. The Department is seeking public comment on whether the requirements at § 92.253(b) and (d)(2) should be required for tenants that receive TBRA. If not, what tenant protection requirements should apply to tenants that receive TBRA? The proposed rule at § 92.253(b)(1) would describe tenant protections surrounding the physical condition of the tenant’s unit and the project. Section 92.253(b)(1)(i) describes the requirement that the owner maintain the physical condition of the unit and the project in accordance with the participating jurisdiction’s ongoing physical condition standards in § 92.251(f). The proposed rule at § 92.253(b)(1)(i) would establish that an owner shall repair and maintain the unit and the common areas in accordance with § 92.253(b)(1)(i). The proposed rule at § 92.253(b)(1)(ii)(A) would require that owners, as soon as practicable, provide tenants with expected time frames for maintaining and repairing units. The Department believes that this requirement is necessary to ensure transparent communications regarding when units will be repaired. The proposed rule at § 92.253(b)(1)(ii)(B) would require that owners, as soon as practicable, make repairs and perform maintenance on units and common areas in a professional manner and in accordance with the participating jurisdiction’s property standards. The Department recognizes that repairs cannot always be performed immediately but seeks to clarify that the owner is still under an obligation to perform required repairs and to do so as soon as practicable. The proposed rule at § 92.253(b)(1)(ii)(C) would prohibit owners from charging tenants for the costs of addressing normal wear and tear or damage to a unit or common areas other than that caused by the tenant’s negligence, recklessness, or intentional acts. The proposed rule at § 92.253(b)(1)(iii) would require that, when a life-threatening deficiency in the physical condition of the tenant’s unit or project impacts the tenant, the tenant shall be promptly relocated into either a housing unit that is decent, safe, sanitary, and in good repair, or placed into physically suitable lodging until repairs on the tenant’s housing unit or project are completed. The Department anticipates that tenant relocation would only be necessary if repairs could not be completed on the day the life- E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules threatening deficiency is identified, in which case the proposed rule would require that the housing unit or lodging used for tenant relocation be provided at no additional cost to the tenant. The proposed § 92.253(b)(1)(iii) would be added because the Department seeks to prevent HOME tenants from remaining in housing that poses a threat to their physical safety and from being subjected to additional costs as a result of physical housing conditions outside their control. The proposed rule at § 92.253(b)(1)(iv) would require that, where the owner controls the utilities, owners provide tenants with uninterrupted utility service in projects. The proposed rule at § 92.253(b)(1)(iv) would provide an exception to the proposed requirement for when utility services are interrupted for a reason that is beyond the control of the owner. The Department is proposing this revision to counteract a disturbing trend of so-called ‘‘self-help’’ evictions where owners use their ability to control utilities in a manner that is detrimental to tenants as a means to compel tenants to terminate their tenancy. In many States this ‘‘self-help’’ eviction practice is already illegal,35 but, by addressing this issue in the proposed HOME tenancy addendum, the proposed rule would prohibit the practice throughout HOME-assisted rental housing and TBRA. The proposed rule at § 92.253(b)(2)(i) would explain that a family has the right to reside with a foster child, foster adult, or live-in aide in the unit. The proposed requirement to allow foster children and adults to reside in a unit with a family is similar to the requirements contained in the Section 8 HCV program.36 The proposed requirement to allow a live-in aide to reside in a unit with a family is part of the nondiscrimination requirements contained in § 92.350. The proposed rule at § 92.253(b)(2)(ii) would explain that, except for shared housing arrangements in TBRA, the tenant’s household shall have exclusive use and occupancy of their unit. One of the rights of tenancy is the tenants’ exclusive use of their unit. Similar rights are contained in the HUD Section 8 project-based voucher program tenancy addendum,37 in the lease requirements for public housing 35 See, e.g., Fla. Stat. § 83.67; Va. Code Ann. § 55.1–1243.1; Cal. Civ. Code § 789.3; Mont. Code Ann. § 70–24–411. 36 24 CFR 982.551(h)(4). 37 Available at https://www.hud.gov/sites/dfiles/ OCHCO/documents/52530CENG.pdf. VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 tenants,38 and in other leases used by servicemembers.39 The proposed rule at § 92.253(b)(2)(iii) would set out the permitted situations where an owner may enter a tenant’s unit. The proposed rule at § 92.253(b)(2)(iii)(A) would allow an owner to enter a unit during reasonable hours when the owner is performing routine inspections and maintenance, making repairs to the unit, or showing the unit to prospective tenants. Before the owner may enter the unit under proposed § 92.253(b)(2)(iii)(A), the owner must give the tenant at least 2 days’ notice, which must include the purpose for entering the unit. The proposed rule at § 92.253(b)(2)(iii)(B) would allow an owner to enter a unit at any time, without advance notice, if the owner has a reasonable belief that an emergency requires entry to the unit. The proposed rule at § 92.253(b)(2)(iii)(C) would require that an owner that enters a unit when the tenant and all adult members of the household are absent from the unit must provide a written statement to the tenant explaining the date, time, and purpose of their entry of the unit. The proposed rule at § 92.253(b)(2)(iv) would describe a tenant’s rights to reasonable access and use of the common areas of the project. This language is proposed to clarify HUD’s existing policy and explicitly prohibit owners from having separate amenities such as gyms, pools, spas, elevators, rooftop gardens, storage areas, and playrooms that only non-assisted tenants can access or use. The proposed rule at § 92.253(b)(2)(v) would provide tenants the right to organize, create tenant associations, convene meetings, distribute literature, and post information at a project. Tenants have these explicit protections in other HUD programs, including HUD Multifamily Housing programs.40 This is also a tenant right provided in a number of jurisdictions.41 The Department proposes to add these explicit protections to the HOME program because the Department has found that tenant organizations are especially helpful in providing tenants with representation in addressing community-wide issues and that tenant organizations may provide a more 38 24 CFR 966.4(d). 10 U.S.C. 2890. 40 See 24 CFR part 964 for tenant participation and tenant opportunities in public housing; 24 CFR part 245 for tenant participation in Multifamily Housing projects. 41 See D.C. Official Code § 42–3505.06; New York Consolidated Laws, Real Property Law—RPP § 230; Cal. Civ Code § 1942.6. 39 See PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 46637 sufficient counterweight to owners of larger projects who are not compliant with lease provisions or HUD requirements. The proposed rule at § 92.253(b)(2)(vi) would state that a tenant may not be required to accept supportive services that are offered at the housing unless the tenant is living in transitional housing and such services are required in connection with that housing. This language is proposed to clarify HUD’s existing policy and is part of the prohibited lease provisions in the current § 92.253(b)(9). The proposed rule at § 92.253(b)(3) would describe certain notices that must be provided to a tenant by an owner. The proposed rule at § 92.253(b)(3)(i) would require that an owner notify a tenant in writing of the specific grounds for any proposed adverse action by an owner. These actions can be a variety of different actions, including charging a tenant for tenant-caused damages. This proposed requirement is similar to requirements of other HUD programs such as HUD’s public housing program.42 The proposed rule at § 92.253(b)(3)(ii) would require that a tenant be notified within 5 business days of any changes in ownership to the project, including through a foreclosure. The proposed rule at § 92.253(b)(3)(ii) would also require that owners provide tenants with 30 days’ notice of an impending sale or impending foreclosure of the property. These proposed requirements are similar to requirements contained in a variety of State statutes 43 and the Department proposes these policies so that tenants are informed about changes in ownership in their projects. Requiring that tenants receive notice of this potential change earlier in the process helps better prepare those tenants for these and other disruptive impacts that occur when there is a change of ownership at a project. Changes in ownership of a project may lead to more extensive changes in properties, including rehabilitation of units or termination of affordability restrictions. As such, reasonable notification requirements would allow tenants to better prepare for any future changes to their housing. Section 92.253(b)(3)(iii) clarifies the existing lease prohibition contained at § 92.253(b)(4), which prohibits an owner from instituting a lawsuit against the tenant without providing the tenant with notice. 42 See 24 CFR 966.4(e)(8). e.g., Va. Code Ann. § 55.1–1237; Md Code, Real Property § 7–105.11. 43 See, E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 46638 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules The proposed rule at § 92.253(b)(4) would describe and further specify a tenant’s rights to available legal proceedings and remedies. Most of the proposed § 92.253(b)(4) reflects tenant protections that already exist in the existing HOME rule, which are proposed to be revised for inclusion in the tenancy addendum or for clarification. The proposed rule would renumber and slightly rephrase, for the purposes of the HOME tenancy addendum, the prohibited lease terms from the current § 92.253(b)(1)–(3) to § 92.253(b)(4)(i)– (iii), respectively. The proposed rule at § 92.253(b)(4)(iv) would provide additional clarification that a tenant has the right to independent legal representation in any legal proceedings in connection with the lease. A tenant is not required to appoint the owner as attorney-in-fact as part of the lease and has the right to independent counsel that can assist the tenant in any dispute relating to their lease, including nonbinding arbitration or alternative dispute resolution processes that can precede a civil court proceeding. Preliminary studies have demonstrated that when a tenant has representation, a court is less likely to execute a warrant of eviction or enter a decision in favor of the owner.44 While the Department is not proposing to provide HOME tenants with funds to obtain counsel, given the benefits that counsel can provide, the Department believes it is necessary to clarify that tenants always have the right to independent counsel. The proposed rule at § 92.253(b)(4)(iv)(B) and (C) reframes the current regulatory requirements for prohibited lease terms contained in § 92.253(b)(4) and (5) into affirmative tenant protections for inclusion in the HOME tenancy addendum. The proposed § 92.253(b)(4)(iv)(B) and (C) explains that a tenant may not be required to waive any right to a trial by jury or waive the tenant’s right to appeal or otherwise challenge a court decision in connection with a lease. Similarly, the proposed rule at § 92.253(b)(4)(v) would reframe the current prohibited lease term contained in § 92.253(b)(8) into a tenant protection. The proposed affirmative tenant protection in § 92.253(b)(4)(v) states that a tenant may only be required through the lease to agree to pay the owner’s attorney’s fees or other legal costs if the tenant loses the court proceeding with the owner. 44 See Ellen, I.G., O’Regan, K., House, S. and Brenner, R., 2021, Do lawyers matter? Early evidence on eviction patterns after the rollout of universal access to Counsel in New York City, Housing Policy Debate, 31(3–5), pp.540–561. VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 The proposed rule at § 92.253(b)(5)(i) would state that an owner may not unreasonably interfere with the tenant’s comfort, safety, or enjoyment of a rental unit or retaliate against a tenant. The proposed rule at § 92.253(b)(5)(i)(A)–(E) would provide that retaliation includes, but is not limited to, an owner’s attempts, during a tenant’s lease, to recover possession of the housing unit in a way that is not consistent with HUD requirements, decrease the services to be provided to the unit, interfere with a tenant’s rights to privacy under State or local law, harass a household or their lawful guests, or refuse to honor the terms of the lease. The proposed rule at § 92.253(b)(5)(ii) would describe the rights that a tenant may exercise without fear of retaliation by an owner. These rights of tenancy that a tenant may exercise include, but are not limited to, a tenant’s rights to report inadequate housing conditions of the housing unit or project to the owner, participating jurisdiction, code enforcement officials, or HUD; the ability to request enforcement of the lease or any protection guaranteed under 24 CFR part 92; and the ability to request or obtain enforcement of any applicable protections under Federal, State, or local law. The Department believes that tenants must be able to exercise their rights under their lease and applicable law free from worry of reprisal or coercion. Several States have also prohibited retaliation against tenants when the tenant has complained to a governmental agency responsible for code enforcement, made a complaint to or filed a legal action against the owner, organized or has become a member of a tenant’s organization, or has testified in a court proceeding against the owner.45 Moreover, the Department believes that establishing this as a right within the lease itself will assist in addressing situations where owners retaliate against persons with disabilities that request reasonable accommodations in HUD-assisted housing units. The proposed rule at § 92.253(b)(6) would establish confidentiality requirements to safeguard a tenant or applicant’s personally identifiable information. The proposed rule at § 92.253(c) would establish new security deposit requirements for HOME-assisted rental housing and TBRA. Under these proposed requirements, security deposits must be refundable and may be no greater than two months’ rent. The proposed rule would also prohibit the 45 See, e.g., Fla. Stat. § 83.64; Tex. Prop Code § 92.331; Mont. Code § 70–24–431. PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 use of surety bonds or security deposit insurance to be used in lieu of or in addition to security deposits. Additionally, proposed § 92.253(c) would also provide that if an owner charges any amount against a tenant’s security deposit, then the tenant must be provided a list of all items charged against the security deposit and be promptly refunded the remainder of the security deposit balance. The proposed change to § 92.253(c) is distinct from the current HOME regulation, which does not require refundable security deposits or that the owner identify the individual charges made against a security deposit. This proposed change is consistent with various State statutes 46 and other HUD programs 47 and provides another layer of protection for tenants in HOMEassisted rental housing and with TBRA.48 The proposed rule at § 92.253(d) would revise the termination of tenancy provisions for both HOME-assisted rental housing and TBRA currently found at § 92.253(c). Currently, the rules are silent on what protections apply to termination of tenancy for tenants with tenant-based rental assistance, as tenantbased rental assistance is not subject to the termination of tenancy provisions in the current rule at § 92.253(c). The proposed rule at § 92.253(d)(1)(i) would clarify that an owner may not terminate the tenancy of any tenant or household member or refuse to renew the lease of a tenant except for serious or repeated violation of the terms and conditions of the lease; for violation of applicable Federal, State, or local law; for completion of the tenancy period for transitional housing or failure to follow any required transitional housing supportive services plan; or for other good cause. The Department is proposing this clarification to the language currently found at § 92.253(c) in response to questions about situations where an owner wishes to evict a member of the household but not the entire household. The Department recognizes that other HUD programs are more specific about the requirements that apply when expelling a single member of the household and is proposing these revisions to clarify the 46 See, e.g., Tex. Prop Code § 92.104; SDCL § 43– 32–24; Md. Code, Real. Prop. § 8–203. 47 See HUD’s Section 8 Project-Based Voucher Program Tenancy Addendum, part B.12, available at https://www.hud.gov/sites/dfiles/OCHCO/ documents/52530CENG.pdf. See also 24 CFR 960.509(b)(3)(v) for public housing requirements related to security deposits. 48 Disputes surrounding the retention of a security deposit, if they arise, would typically remain a matter of state or local landlord-tenant law. E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules termination of tenancy requirements that apply to each household member. The proposed rule at § 92.253(d)(1)(i)(A)–(D) would provide a more detailed explanation of ‘‘good cause’’ to terminate or refuse to renew a tenancy. The proposed rule at § 92.253(d)(1)(i)(A) would clarify that a tenant’s assets or the type of income or assets that the tenant possesses is not good cause to terminate or refuse to renew a tenancy. This was clarified in the preamble to the HOTMA Final Rule. In that rule, the Department stated that ‘‘[a] HOME PJ may only terminate the tenancy or refuse to renew the lease of a tenant of rental housing assisted with HOME funds for good cause, as defined in § 92.253(c), which does not include having the type of assets or an amount of assets in excess of the limitations in § 5.618.’’ 49 Because § 92.253 was not part of the HOTMA Final Rule, the Department proposes to use this opportunity to codify the requirements in proposed § 92.253(d)(1)(i)(A). The proposed rule at § 92.253(d)(1)(i)(B) would describe other bases for other good cause, such as when a tenant creates a documented nuisance under applicable state or local law or when a tenant unreasonably refuses to provide the owner access to the unit to allow the owner to repair the unit. The Department holds these to be reasonable grounds for other good cause in other HUD programs, most notably the Section 8 PBV program,50 and proposes to align HOME requirements with these other programs. The proposed rule at § 92.253(d)(1)(i)(C) would establish that other good cause can also include where an owner must terminate a tenancy to comply with an order by a governmental entity or court that requires the tenant vacate the project or unit or a local ordinance that necessitates vacating the project or unit. In these instances, the Department believes it is reasonable for an owner to terminate a tenancy or refuse to renew a lease. Depending upon the nature of the order, under the proposed rule, the owner may still be found in violation of other HOME program requirements and their written agreement with the participating jurisdiction. For instance, if a governmental entity or court order to vacate was caused by the owner’s failure to maintain the property condition, then the owner of the HOME rental housing may still be found in violation of the 49 88 FR 9600, 9613 (Feb. 14, 2023). PBV Tenancy Addendum, Part B, paragraph 8.d, available at https://www.hud.gov/ sites/dfiles/OCHCO/documents/52530CENG.pdf. 50 See VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 participating jurisdiction’s ongoing property condition standards. The Department proposes to revise the notice requirements for termination or refusal to renew tenancy, currently found in § 92.253(c). The proposed rule at § 92.253(d)(1)(i)(D) would clarify that in order for an owner to establish good cause for a violation of applicable Federal, state, or local law, there must be a record of conviction for a crime during the tenancy period that has a direct bearing on the tenant’s continued tenancy in the HOME rental housing project, such as a violation of law that affects the safety of persons or property. The proposed rule would also clarify that an owner shall not use a record of arrest, parole or probation, or current indictment to establish a violation of applicable Federal, state, or local law. However, the proposed rule at § 92.253(d)(1)(i)(D) would further clarify that good cause based on a violation of applicable Federal, state, or local law cannot be based on a violation that occurred prior to tenancy, a violation that does not have a direct bearing on a tenant’s continued tenancy, or a basis other than a record of conviction. An owner may consider any mitigating circumstances relevant to whether the tenant will commit further violations of the lease or applicable Federal, State, or local law. The proposed rule at § 92.253(d)(1)(ii) would require that owners provide 60 days’ notice instead of 30 days’ notice before the termination of tenancy. The Department recognizes that this proposed 60-day notice period extends beyond the 30-day notification requirement for nonpayment of rent recently proposed in the proposed rule entitled 30-Day Notification Requirement Prior to Termination of Lease for Nonpayment of Rent 51 (‘‘30Day Notice Rule’’). One of the proposed changes in the 30-Day Notice Rule is to amend several program regulations to align HUD programs to require written notification of at least 30 days prior to lease termination resulting from nonpayment of rent. However, the programs with regulations that would be amended under the 30-Day Notice Rule do not have the same minimum 30-day statutory notice period that HOME has in 42 U.S.C. 12755(b). Moreover, the 30Day Notice Rule was describing termination of tenancy for a specific ground, nonpayment of rent, and not the HOME statutory considerations in 42 U.S.C. 12755(b), which include good cause, as discussed throughout this preamble. Recognizing the challenges of 51 88 PO 00000 FR 83877. Frm 00023 Fmt 4701 Sfmt 4702 46639 obtaining new affordable housing and to reduce the probability that a tenant will become homeless, the proposed rule’s increase to the notice period to 60 days would provide HOME tenants with a sufficient period of time to locate and secure a new rental unit. This increased notice period above the statutory minimum would also allow tenants to have additional time to object to or cure violations in order to reverse the termination. HUD believes that the public interest in avoiding increased homelessness significantly outweighs the risk that this proposed change to increase the notice period would disincentivize developers and owners from participating in the HOME program. The Department is also proposing to require that owners provide the participating jurisdiction with a copy of the notice to vacate to assist the participating jurisdiction with monitoring the HOME units or units with TBRA as well as to help the participating jurisdiction answer any questions it receives from the tenant. The proposed rule at § 92.253(d)(1)(ii) would also provide that the 60-day notice period is not required if the termination of tenancy or refusal to renew is due to a direct threat to the safety of the tenants or employees of the housing or an imminent and serious threat to the property. This proposal would codify section 235 of Division L of the Consolidated Appropriations Act of 2016, Public Law 114–113, which revised section 225(b) of NAHA (42 U.S.C. 12755(b)) to specifically add, ‘‘Such [60]-day waiting period is not required if the grounds for the termination or refusal to renew involve a direct threat to the safety of the tenants or employees of the housing, or an imminent and serious threat to the property (and the termination or refusal to renew is in accordance with the requirements of State or local law).’’ Determining whether a person poses a direct threat to the safety of the tenants or employees of the housing, or an imminent and serious threat to the property is a fact-sensitive determination. There can be many different factors that an owner may choose to consider when making that determination, such as the nature of the conduct, the tenant’s past conduct, and the evidence that the owner has in their records. Moreover, even if the proposed 60-day notice period is not required pursuant to § 92.253(d)(1)(ii), any termination of tenancy or refusal to renew must comply with the requirements at § 92.253(d)(1)(iii). The proposed rule at § 92.253(d)(1)(iii) would clarify that E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 46640 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules terminating or refusing to renew a tenancy must be in accordance with Federal, State, local law, and the requirements of 24 CFR part 92, including requirements related to fair housing, nondiscrimination, and VAWA. The proposed rule at § 92.253(d)(1)(v) would clarify that an owner may not perform a constructive or so-called ‘‘self-help’’ eviction where the owner takes actions such as locking a tenant out of their unit or stopping utility services to a tenant’s units. These actions are already considered a violation of HUD’s current rules at § 92.253(c) but the proposed § 92.253(d)(1)(v) provides further clarification. The proposed rule at § 92.253(d)(1)(v) would also clarify that an owner may not create a hostile living environment or refuse to make reasonable accommodations in order to cause a tenant to terminate their tenancy. This proposal is consistent with the Department’s policy of prohibiting retaliation, as previously described. Additionally, an owner’s refusal to provide a reasonable accommodation in accordance with Federal requirements would also constitute a violation of the current HOME nondiscrimination requirements at § 92.350, as well as Federal nondiscrimination requirements under applicable Federal civil rights and fair housing laws.52 The proposed rule at § 92.253(d)(2) would provide the requirements for terminating or refusing to renew the tenancy of a tenant assisted with TBRA. The proposed rule at the introductory text to § 92.253(d)(2)(i) would establish a requirement that the participating jurisdiction must adopt written standards for termination or refusal to renew a tenancy in the TBRA program. The Department believes by codifying this requirement, it would provide both participating jurisdictions and owners with more definitive requirements on how to permissibly terminate or refuse to renew a tenancy. To that end, the Department is also proposing to require that the written standards for terminating or refusing to renew a tenancy for a tenant assisted with TBRA be included in the lease or in the rental assistance contract between the participating jurisdiction and the tenant. As proposed, the written standards included in the lease or rental assistance contract must provide a good cause standard for terminating or refusing to renew a tenancy. The proposed rule does not modify a participating jurisdiction’s discretion to provide 52 See e.g., 24 CFR 5.105(a). VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 TBRA to a tenant to lease a new unit even if an owner has terminated the family’s tenancy or refused to renew the lease under § 92.253(d)(2). The proposed rule at § 92.253(d)(2)(i)(A)–(F) would include the standard for termination or refusal to renew a tenancy for good cause for TBRA. This proposed good cause standard includes many of the same types of good cause justifications that are proposed for HOME rental housing under § 92.253(d)(1)(i), including serious or repeated violation of the terms and conditions of the lease; violation of applicable Federal, State, or local law through a record of conviction of a crime that beards directly on continued tenancy; when a tenant creates a documented nuisance under applicable state or local law or when a tenant unreasonably refuses to provide the owner access to the unit to allow the owner to repair the unit; when an owner must terminate a tenancy to comply with an order issued by a governmental entity or court that requires the tenant vacate the project or unit; or a local ordinance that necessitates vacating the residential real property. Similar to the proposed changes in § 92.253(d)(1)(i)(D), HUD’s proposed language in § 92.253(d)(2)(i)(B) would also clarify that good cause based on a violation of applicable Federal, state, or local law shall be based on a record of conviction of a crime that bears directly on the tenant’s continued tenancy and not a record of arrest, parole or probation, or current indictment. This does not affect good cause based on a direct threat to the safety of the tenants or employees of the housing or an imminent and serious threat to the property. The proposed rule would further clarify that good cause based on a violation of applicable Federal, state, or local law must not be based on a violation that occurred prior to tenancy, a violation that does not have a direct bearing on one’s continued tenancy, or a violation that does not result in a record of conviction. An owner may consider any mitigating circumstances relevant to whether the tenant will commit further violations of the lease or applicable Federal, State, or local law. The proposed rule at § 92.253(d)(2)(i)(D) would also include reasons for good cause termination or refusal to renew a tenancy that are common in private rental markets. These proposed good cause reasons include when an owner intends to withdraw the unit from the rental market so that the owner can occupy the unit; to allow an owner’s family member to occupy the unit; or to demolish or substantially rehabilitate the unit. These PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 circumstances are sufficient basis to terminate or refuse to renew a tenancy under the Section 8 HCV program and to take a unit off the rental market in most States. The Department also believes that requiring a more onerous standard would negatively impact the ability of tenants to utilize TBRA in privately held units. The proposed rule at § 92.253(d)(2)(i)(E) would also clarify that an owner is not required to maintain tenancy after the termination of the rental assistance contract. This proposed clarification mirrors similar provisions in the project-based voucher program tenancy addendum, where the lease automatically terminates if the Housing Assistance Payments contract terminates or if the PHA terminates assistance to the tenant.53 Specific solicitation of comment #10: Currently, a rental assistance contract can be between a participating jurisdiction and either an owner or a tenant. The Department is also aware of many participating jurisdictions that have tri-party rental assistance contracts where the owner, the tenant, and the participating jurisdiction all sign the rental assistance contract. The Department is seeking feedback on whether a rental assistance contract should always be executed by an owner so that the participating jurisdiction can require that the HOME-assisted tenant’s lease contain the HOME tenancy addendum and that the owner follow all applicable TBRA requirements. The proposed rule at § 92.253(d)(2)(ii) would require that an owner provide a tenant assisted with TBRA with a written or otherwise accessible notice to vacate the unit that specifies the grounds for the action at least 30 days before termination of the tenancy. This proposed requirement would codify the requirement contained in section 4024(c)(1) of the Coronavirus Aid, Relief, and Economic Security (‘‘CARES’’) Act (15 U.S.C. 9508(c)(1)), which requires that the lessor of a covered dwelling unit ‘‘may not require the tenant to vacate the covered dwelling unit before the date that is 30 days after the date on which the lessor provides the tenant with a notice to vacate.’’ In previous guidance, the Department has determined that units receiving TBRA are covered dwelling units as defined by the CARES Act.54 In 53 See HUD’s Section 8 Project-Based Voucher Program Tenancy Addendum, part B.9 and 10, as applicable, available at https://www.hud.gov/sites/ dfiles/OCHCO/documents/52530CENG.pdf. 54 See the HOME Investment Partnerships Program FAQs (May 1, 2020), available at https:// www.hud.gov/sites/dfiles/CPD/documents/HOMEFAQs-COVID-19.pdf. E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules this proposed rule, the Department would specify that the minimum 30-day notice period does not apply if the termination or refusal to renew tenancy is due to a direct threat to the safety of the tenants or employees of the housing or an imminent and serious threat to the property, as specified in section 235 of Division L of the Consolidated Appropriations Act of 2016 (Pub. L. 114–113), which revised section 225(b) of NAHA (42 U.S.C. 12755(b)). Even if the proposed 30-day notice period is not required pursuant to § 92.253(d)(2)(ii), any termination of tenancy or refusal to renew must comply with the requirements at § 92.253(d)(2)(iii). The Department also proposes that owners provide participating jurisdictions with a copy of the notice to vacate within 5 business days of when the notice is served to the tenant. This proposed change would allow a participating jurisdiction to better monitor its TBRA program and enables the participating jurisdiction to further assist the tenant in finding a new unit to use their TBRA. Similar to the HOME rental housing provisions in proposed § 92.253(d)(1)(iii), the proposed rule at § 92.253(d)(2)(iii) would require a termination of or refusal to renew tenancy to be in accordance with Federal, State, local law, and the requirements of part 92. The proposed rule would further clarify that this includes but is not limited to complying with fair housing, nondiscrimination, and VAWA requirements. HUD notes that in a forthcoming rulemaking, HUD will propose changes related to VAWA requirements, including in part 92. HUD will invite the public to comment on those proposed VAWA requirements in its future VAWA rulemaking. The proposed rule at § 92.253(d)(iv) would also clarify that an owner may not perform a constructive or so-called ‘‘self-help’’ eviction where the owner takes actions such as locking a tenant out of their unit or stopping utilities services to a tenant’s unit. The proposed rule would redesignate the current provisions on tenant selection at § 92.253(d) to § 92.253(e). The current § 92.253(d)(4) states that owners of HOME rental housing may not exclude an applicant on the basis of holding a housing choice voucher or certificate. The proposed rule would broaden the current requirement at § 92.253(d)(4), which would be redesignated as § 92.253(e)(4), to include an applicant with Federal or State tenant-based rental assistance. This proposal is consistent with the intent of NAHA and it better enables applicants to utilize their Federal or State TBRA. The proposed rule also VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 revises the language in current § 92.253(d)(3)(ii), which is proposed to be redesignated as § 92.253(e)(3)(ii), to further clarify that projects with preferences or limitations for persons with disabilities must be open to all eligible persons with disabilities. The Department also proposes to further clarify that an owner may advertise the project as offering various supportive services, including a description of the specific supportive services available, which may aid persons with disabilities in determining whether the supportive services may meet their needs. The Department also proposes revisions to the HOME waiting list requirements, currently at § 92.253(d)(5) but proposed to be redesignated to § 92.253(e)(5). The proposed rule at § 92.253(e)(5) would allow a participating jurisdiction, upon request by an owner of a small-scale housing project, to establish alternative waiting list procedures for the selection of tenants, subject to HUD’s written approval of the procedures and determination that the selection of a tenants from a waiting list in chronological order by the owner is impracticable. The proposed rule is providing this flexibility because the use and maintenance of a waiting list for a small-scale housing project is often impracticable as the lower availability and turnover of such units in a project, particularly when there is only one rental unit, may result in a list of applicants that are no longer interested in the unit or are unreachable when the unit becomes available. Owners of small-scale housing often do not have the same capacity as owners of larger multifamily properties to continuously update a waiting list to maintain an accurate list of applicants to enable leasing as soon as the unit becomes available. The Department believes this proposed change would better assist private owners of smaller rental properties that wish to participate in the HOME program by reducing their administrative burden and recognizing that the selection of a tenant from a waiting list is not practicable for some small-scale projects. The proposed rule at § 92.253(f) would add a new provision regarding health and safety, which would require that if a participating jurisdiction has actual knowledge of an environmental, health, or safety hazard affecting a project, unit, or HOME tenants, that the participating jurisdiction inform the owner and tenants of the nature, date, and scope of such hazards. The Department believes this is a reasonable requirement in light of recent environmental hazards like those in PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 46641 Jackson, Mississippi; Flint, Michigan; and East Palestine, Ohio. Similarly, the proposed rule at § 92.253(f) would require that if an owner has actual knowledge of an environmental, health, or safety hazard affecting a project, unit, or HOME tenants, that the owner inform the participating jurisdiction. The proposed rule would clarify that this notification requirement only applies for hazards discovered after the environmental review process because all hazards discovered during that process will have been corrected or mitigated, or have a satisfactory mitigation plan in place, in accordance with the requirements in 24 CFR part 50 or part 58. 22. Qualification as Affordable Housing: Homeownership (24 CFR 92.254) The proposed rule would reformat § 92.254(a)(2) to improve clarity and readability. Specifically, the proposed rule would add a new paragraph § 92.254(a)(2)(iv) to clarify the process a participating jurisdiction must follow if it chooses to determine its own 95 percent of median purchase price for the area in lieu of using limits provided by HUD. The proposed rule would make corresponding changes to § 92.254(a)(2)(iii), including moving portions of the text from § 92.254(a)(2)(iii) to the proposed § 92.254(a)(2)(iv), which permits a participating jurisdiction to determine the 95 percent of the median purchase price for the area, consistent with the proposed § 92.254(a)(2)(iv). The proposed rule would move language in § 92.254(a)(2)(iii) to § 92.254(a)(2)(iv)(A) and revise certain requirements. Specifically, the current regulation at § 92.254(a)(2)(iii) states that a participating jurisdiction developing its own 95 percent of median purchase price for the area must set forth the price for ‘‘different types of single family housing.’’ This language is vague and confusing. The proposed rule at § 92.254(a)(2)(iv)(A) would clarify that the participating jurisdiction must set forth the 95 percent median price limits for the area on single family housing of one, two, three, and four units. The proposed rule would also move requirements from the current regulation at § 92.254(a)(2)(iii) to § 92.254(a)(2)(iv)(B) and (C) and clarify that the requirements at the proposed § 92.254(a)(2)(iv)(B) apply to the 95 percent median price limits for the area on housing located outside of metropolitan areas. The proposed rule also reorganizes and lists the required information in each action plan in proposed § 92.254(a)(2)(iv)(C) for clarity and readability. E:\FR\FM\29MYP2.SGM 29MYP2 46642 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 HUD proposes to revise § 92.254(a)(3) to extend the deadline for the sale of a homebuyer unit acquired, rehabilitated, or constructed with HOME funds from 9 to 12 months. If a HOME-assisted homebuyer unit is not sold before the proposed 12-month sales deadline, the unit must be restricted as an affordable rental unit under § 92.252 and rented to an eligible tenant in accordance with the rental housing requirements of § 92.252. This means that any homebuyer unit that is not sold to a qualified homebuyer by the deadline or restricted as a HOME-assisted rental unit in accordance with § 92.252 does not qualify as affordable housing under 24 CFR part 92 and therefore, the participating jurisdiction must repay the HOME funds to its local HOME account in accordance with § 92.503(b)(1). Specific solicitation of comment #11: The Department requests public comment on whether the existing 9month deadline for the sale of homebuyer units acquired, rehabilitated, or constructed with HOME funds is reasonable and whether extending the deadline to 12 months would increase the use of HOME funds for homeownership programs. The proposed rule at § 92.254(a)(3) would also clarify that the rental requirements at § 92.252, including the period of affordability in § 92.252(d), apply to HOME-assisted homebuyer housing that fails to sell by the proposed 12-month deadline. In response to ongoing misunderstandings by participating jurisdictions of this requirement, proposed revisions in § 92.254(a)(3) would more explicitly state that if a unit intended for homeownership has not been sold to an eligible homebuyer by the proposed 12month deadline, the participating jurisdiction must immediately convert the unit to HOME-assisted rental housing that meets the requirements in § 92.252 and impose the required affordability restrictions for the appropriate rental housing period of affordability (which differs from the period of affordability for homebuyer housing). If at some future time the participating jurisdiction permits an owner to sell or otherwise convey a unit that converted from a homebuyer activity to a rental activity pursuant to § 92.254(a)(3), the participating VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 jurisdiction may permit the sale in accordance with § 92.255. HUD proposes to revise § 92.254(a)(5)(i) to address questions regarding the appropriate process for determining the sale price of housing at resale. When a HOME-assisted homebuyer sells a property during the period of affordability, section 215(b)(3) of NAHA requires a participating jurisdiction to sell the unit to another low-income homebuyer at a price that is affordable to a reasonable range of lowincome homebuyers and that provides the original homeowner with a fair return on their investment. The current HOME regulations do not clearly define how a participating jurisdiction must set a resale price that both provides for a fair return to the original homebuyer and is affordable to a reasonable range of low-income homebuyers. The proposed rule at § 92.254(a)(5)(i) would clarify that the resale price, subject to market conditions, is the homeowner’s ‘‘fair return on investment’’ added to the original purchase price of the housing. Participating jurisdictions have communicated various challenges in implementing the statutory requirements that a HOME-assisted unit at resale must be sold to another lowincome homebuyer at a price that is (1) affordable to a reasonable range of lowincome homebuyers and (2) provides the original homebuyer with a fair return on their investment, including the homeowner’s investment and improvements made to the property. It is difficult for participating jurisdictions to create a resale formula that provides a fair return to the homeowner at a price that is affordable to a range of lowincome homebuyers, without additional HOME assistance to the subsequent homebuyer. To assist participating jurisdictions that choose to impose resale provisions, HUD proposes to amend § 92.254(a)(5)(i) to add four permissible resale formulas that comply with these requirements in a new proposed paragraph (A). The Department believes that providing compliant resale formulas will help participating jurisdictions avoid noncompliance with the resale requirements and provide clarity and fairness to homebuyers. Specifically, the Department proposes to add paragraphs (A)(1) through (4) to PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 § 92.254(a)(5)(i) to describe the four permissible resale formulas: (1) itemized formula, (2) appraisal formula, (3) index formula, and (4) fixed-rate formula. These proposed resale formulas would be used to determine a HOME-assisted homebuyer’s fair return on investment and the resale price. Variations of the proposed itemized formula are commonly used in State and local homebuyer programs not funded by the HOME program, while the appraisal, indexed, and fixed-rate formulas are commonly used by community land trusts and other advocates of shared appreciation models.55 Though HUD is providing these four different permissible resale formulas, the proposed rule would not require participating jurisdictions to use any of the formulas and participating jurisdictions may continue to design their own resale provisions, subject to HUD review and approval. The four resale formulas in the proposed rule are described below. The proposed rule at § 92.254(a)(5)(i)(A)(1) would establish an itemized resale formula, which determines the homeowner’s fair return on investment by multiplying a clearly defined, publicly accessible index or standard (e.g., change in consumer price index, median area income, or median purchase price over the term of ownership) by the sum of the homeowner’s downpayment, equity from the payment of mortgage principal, and the value of any capital improvements. This itemized resale formula would permit a participating jurisdiction to decide whether it will depreciate the value of the capital improvements and whether the formula will take into consideration any reduction in value due to damage or deferred maintenance of the property. 55 Shared appreciation homeownership models create long-term, affordable homeownership opportunities by imposing restrictions on the resale of subsidized housing units. See HUD’s Office of Policy Development and Research Policy Matters (Fall 2012) for additional information, available at https://www.huduser.gov/portal/periodicals/em/ fall12/highlight3.html. E:\FR\FM\29MYP2.SGM 29MYP2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules 46643 Change in clearly defined, publicly accessible index or standard MULTIPLIED BY (Homeowner :S- downpayment + sum ofall homeowner principal payments+ value of capital improvements)) ( MINUS OPTIONAL (Depreciation ofcapital improvements + property damage+ delayed or deferred maintenance) EQUALS Fair return Originalsales price+ Fair return = Resale price The proposed rule at § 92.254(a)(5)(i)(A)(2) would establish an appraisal-based resale formula, which determines a homeowner’s fair return on investment based on the amount of market appreciation, if any, realized over the term of ownership. The amount of market appreciation over the term of ownership would be determined by subtracting the appraised value of the property at the time of initial purchase from the appraised value at the time of resale. The fair return on investment would be determined by multiplying the amount of market appreciation over the term of homeownership by a clearly defined, publicly accessible standard or index. Given the complexity and skill required to conduct an appraisal, the proposed rule would require State-licensed or certified third-party appraisers to conduct the appraisals. Clearly defined, publicly accessible index or standard x (New appraisal- initial appraisal) = Fair return Original sales price+ Fair return= Resale price The proposed rule at § 92.254(a)(5)(i)(A)(3) would establish an index resale formula, which determines a homeowner’s fair return based on the value of the homeowner’s investment adjusted in proportion to changes in a specified index, such as the Consumer Price Index or U.S Housing Price Index. Using the proposed index formula, the homeowner’s fair return on investment would be calculated by multiplying the change in the index during the term of ownership by the sum of the original purchase price and the value of any capital improvements. The proposed rule would permit a participating jurisdiction to decide whether to depreciate the value of any capital improvements and/or take into consideration any reduction in value due to damage or delayed maintenance of the property. Change in clearly defined,public(J, accessible index MULTIPLIED BY ( (Original purchase price + value of capital improvements) ) :MINUS OPTIONAL (Depreciation ofcapital improvements + property damage + delayed or deferred maintenance) EQUALS Fair return Original sales price + Fair return= Resale price § 92.254(a)(5)(i)(A)(1) and (A)(3), the proposed rule would permit the participating jurisdiction to choose whether to depreciate the value of any capital improvements made to the property and/or take into consideration any reduction in value due to damage or delayed maintenance of the property. EP29MY24.008</GPH> multiplying the fixed percentage by the number of years the homeowner owned and occupied the home, with the resulting rate multiplied by the sum of the original purchase price of the home and the value of any capital improvements. Like the itemized and indexed formulas proposed in VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 E:\FR\FM\29MYP2.SGM 29MYP2 EP29MY24.006</GPH> EP29MY24.007</GPH> lotter on DSK11XQN23PROD with PROPOSALS2 The proposed rule at § 92.254(a)(5)(i)(A)(4) would establish a fixed-rate formula, which determines a homeowner’s fair return on investment by applying a fixed percentage increase to the homeowner’s investment each year they own the unit. The fair return on investment would be determined by 46644 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules (Fixed rate x length ofhomeownership) MULTIPUED BY ( (Original purchase price + value ofcapital improvements) ) MINUS OPTIONAL (Depreciation ofcapital improvements + property damage + delayed or deferred maintenance) EQUALS Fair return The proposed rule would redesignate the text in the current paragraph (A) of § 92.254(a)(5)(i) as § 92.254(a)(5)(i)(B) and (C) and the current paragraph (B) of § 92.254(a)(5)(i) would be redesignated as § 92.254(a)(5)(i)(D). The proposed rule would also move the last sentence of the current paragraph § 92.254(a)(5)(i)(A) into the proposed § 92.254(b) under the title, ‘‘Preserving affordable housing that was previously assisted with HOME funds.’’ To make it easier to locate requirements related to the use of enforcement mechanisms, termination of affordability restrictions in specific circumstances, the presumption of affordability requirements, and the preservation of affordability, the proposed rule would clarify and revise these requirements in the proposed paragraphs (B), (C), and (D) of § 92.254(a)(5)(i) and § 92.254(b), respectively. The current regulatory provision in § 92.254(a)(5)(i)(A) states that ‘‘deed restrictions, covenants running with the land, or other similar mechanisms must be used as the mechanism to impose the resale requirements.’’ HUD is proposing to revise § 92.254(a)(5)(i)(A) in the proposed § 92.254(a)(5)(i)(B) to clarify that a recorded agreement restricting the use of the property and the imposition of ‘‘use restrictions’’ are both permissible methods of enforcing affordability requirements. This is a clarification of existing policy as each of these types of enforcement mechanisms would be considered ‘‘similar mechanisms’’ under the current rule. The proposed rule at § 92.254(a)(5)(i)(B) would also require written HUD approval of any means of enforcement other than the ones expressly listed to enforce resale provisions. The proposed rule at § 92.254(a)(5)(i)(C) would clarify the minimum period of affordability if the owner of record before a termination event obtains an ownership interest in the property after the event. The proposed rule at § 92.254(a)(5)(i)(D) would incorporate the text of the current § 92.254(a)(5)(i)(B), except that it would remove the specific references to VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 Empowerment Zone or Enterprise Community applications under 24 CFR 597 which are no longer applicable, as the incentives and authority to accept applications have expired. The proposed rule would redesignate the current introductory text in § 92.254(a)(5)(ii) and provision at § 92.254(a)(5)(ii)(A) as § 92.254(a)(5)(ii)(A) and § 92.254(a)(5)(ii)(B), respectively. These proposed revisions improve clarity and the organization of § 92.254(a)(5)(ii). The text of the current paragraphs at § 92.254(a)(5)(ii)(A)(1)–(5) would be redesignated as § 92.254(a)(5)(ii)(B)(1)– (5) and HUD proposes revisions to the proposed § 92.254(a)(5)(ii)(B)(5), as described below. The proposed rule at § 92.254(a)(5)(ii)(B)(5) would be revised to state that the HOME investment subject to recapture is the amount of HOME funds that directly assisted the homebuyer to purchase the unit. The current regulation states that the amount subject to recapture is the amount of HOME assistance that enabled the homebuyer to buy the dwelling unit. The Department has found the current regulatory language to be problematic because participating jurisdictions have incorrectly based the amount of HOME funds subject to recapture on the total amount of HOME funds invested in the project, instead of the direct assistance to the homebuyer that enabled the homebuyer to purchase the unit (i.e., downpayment assistance and any HOME assistance that reduced the purchase price from fair market value to an affordable price). The proposed revision would improve the clarity of this requirement. The proposed rule at § 92.254(a)(7) would be revised to improve the clarity and readability of the paragraph. In addition, to better reflect the requirements of the paragraph, the proposed rule at § 92.254(a)(7) would be retitled as ‘‘Homebuyer assistance for lease-purchase.’’ The proposed rule at § 92.254(a)(7) would also be revised to clarify that in homeownership projects that receive HOME funds for acquisition, rehabilitation, or new PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 construction, the participating jurisdiction may assist a homebuyer through an existing lease-purchase program if the lease-purchase agreement is executed between the owner and homebuyer prior to the completion of the acquisition, construction, or rehabilitation. The proposed rule at § 92.254(a)(7) would also clarify that if HOME funds are used to construct or rehabilitate the housing unit, the housing must be purchased within 36 months of the execution of the leasepurchase agreement. Further, if HOME funds are used to acquire housing to be resold to an eligible homebuyer, the proposed rule would require the unit to be purchased within 42 months of executing the lease-purchase agreement. The proposed rule at § 92.254(a)(7) would also clarify that a unit under a lease-purchase agreement is subject to the homeownership affordability requirements of § 92.254 unless the unit fails to sell within the required timeframes. If a unit fails to sell to an eligible homebuyer within the required timeframe, the unit must become affordable rental housing that complies with the requirements in § 92.252. Finally, the proposed rule at § 92.254(a)(7) would clarify that the participating jurisdiction must verify the income eligibility of a household at the time of signing the lease-purchase agreement and include the income of all members living in the housing. The proposed rule would redesignate the current § 92.254(b), (c), (d), (e), and (f) as § 92.254(c), (d), (e), (f) and (g), respectively. The Department proposes to consolidate the current requirements at § 92.254(a)(5)(i)(A) and § 92.254(a)(9) into proposed § 92.254(b) and substantially revise requirements on a participating jurisdiction’s authority to use purchase options, rights of first refusal, or other preemptive rights to preserve affordability, including the use of preemptive rights to purchase housing before foreclosure, to improve the effectiveness, organization, and clarity of the rule. The proposed rule at § 92.254(b) would revise the current heading of § 92.254(a)(9) by deleting the words E:\FR\FM\29MYP2.SGM 29MYP2 EP29MY24.009</GPH> lotter on DSK11XQN23PROD with PROPOSALS2 Original sales price+ Fairrehmi = Resale price lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules ‘‘that was previously.’’ The proposed rule would also add an introductory sentence to clarify that ‘‘preserving affordability of housing assisted with HOME funds’’ is permitted when there is a termination event threatening the affordability restrictions (e.g., foreclosure, transfer in lieu of foreclosure or assignment of an FHAinsured mortgage to HUD) and provides that a participating jurisdiction may take certain actions in accordance with proposed § 92.254(b)(1)–(3) to preserve the affordability of HOME-assisted housing. The proposed rule would specify in § 92.254(b)(1) that the actions to preserve affordability include exercising purchase options, rights of first refusal, or other preemptive rights to obtain ownership of the housing before foreclosure, subject to the requirements in proposed § 92.254(b)(1)(i)–(iv). The proposed rule would add § 92.254(b)(1)(i)–(iv) to require the participating jurisdiction that acquires housing under § 92.254(b)(1) to sell the housing to a new eligible homebuyer within 6 months of the date that the participating jurisdiction obtains ownership (§ 92.254(b)(1)(i)) and impose a period of affordability for the eligible homebuyer that is equal to the remaining period of affordability of the former homeowner, unless the participating jurisdiction provides additional direct HOME assistance to the new eligible homebuyer (§ 92.254(b)(1)(ii)). If the participating jurisdiction provides additional direct HOME assistance to the eligible homebuyer, the proposed § 92.254(b)(1)(iii) would require the period of affordability to be recalculated in accordance with § 92.254(a)(4). The proposed § 92.254(b)(1)(iii) and § 92.254(b)(2)(iv) would revise the current requirements in § 92.254(a)(9)(ii) to state that when additional HOME funds directly assist the eligible homebuyer, the additional investment or cost must be treated as a new project. The proposed rule would also move the requirement on maximum per-unit subsidy amount in the current § 92.254(a)(9)(iii) and revise the requirement in the proposed § 92.254(b)(1)(iv) to establish that the total HOME funds for a project is the original HOME investment plus additional investment and the total HOME funds must not exceed the perunit subsidy limit in § 92.250(a) in effect at the time of the additional investment, subject to HUD approval. HUD is proposing to permit the participating jurisdiction to use additional HOME funds for certain costs to preserve affordability of HOME- VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 assisted units. The provisions currently at § 92.254(a)(9)(i)(A)–(D) would be redesignated as § 92.254(b)(2)(i)–(iv) and would be revised to include additional eligible costs and requirements and specify whether costs are treated as amendments to the original project or a new project. HUD proposes that the costs described in the proposed § 92.254(b)(2)(i)–(iii) be treated as amendments to the original project and the cost described in § 92.254(b)(2)(iv) be treated as a new project because the costs in proposed § 92.254(b)(2)(i)–(iii) are costs to obtain and prepare the HOME-assisted housing for resale while the cost in § 92.254(b)(2)(iv) is direct assistance to a new eligible homebuyer for a new homeownership activity. The proposed rule at § 92.254(b)(2)(ii) would also require that when a participating jurisdiction uses additional HOME funds to undertake necessary rehabilitation of the housing, the housing must be rehabilitated to meet the applicable property standards in § 92.251. HUD is also revising the current § 92.254(a)(9)(iii) by moving the provision that allows participating jurisdictions the flexibility to charge certain costs as administrative costs under § 92.207 into a new § 92.254(b)(2)(v). The proposed rule would add new paragraphs at § 92.254(b)(3)(i)–(iv) to codify the amendments to NAHA in the Consolidated Appropriations Act, 2016 (Pub. L. 114–113) that CLTs may hold and exercise purchase options, rights of first refusal, or other preemptive rights to purchase housing to preserve affordability, including but not limited to the right to purchase the housing in lieu of foreclosure. The proposed rule at § 92.254(b)(3)(i), (ii), (iii), and (iv) would each establish the conditions under which a participating jurisdiction may permit a CLT to exercise these rights. Specifically, the proposed rule at § 92.254(b)(3)(i) would require the CLT to obtain ownership of the housing subject to existing HOME affordability restrictions. The proposed rule at § 92.254(b)(3)(ii) would require the CLT to resell the housing within 6 months to an eligible homebuyer that will use the housing as their principal residence in accordance with § 92.254(a)(3). The proposed rule at § 92.254(b)(3)(iii) would require the CLT to impose a period of affordability that is equal to the remaining period of affordability of the former owner. Finally, the proposed rule at § 92.254(b)(3)(iv) would prohibit the participating jurisdiction from providing additional HOME funds to the CLT to obtain ownership, rehabilitate the housing, hold the housing pending PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 46645 resale to another homebuyer, or provide downpayment assistance to the subsequent eligible homebuyer. The proposed rule would redesignate the current § 92.254(e) as § 92.254(f) and further clarify the requirement at § 92.254(e). Some participating jurisdictions contract with for-profit and nonprofit organizations that provide private, first mortgage financing so that these organizations may also provide HOME homeownership financing to eligible homebuyers in conjunction with the first mortgage. The 2013 HOME Final Rule added § 92.254(e) to establish safeguards to prevent inappropriate provisions of HOME funds in such situations. Although the purpose and applicability of the current § 92.254(e) are described in the preamble of the 2013 HOME Final Rule, many HOME stakeholders mistakenly believe that these provisions apply to all entities that provide HOME-funded homeownership assistance. The proposed rule at § 92.254(f) would make it explicit that participating jurisdictions must have proper oversight over these lending organizations through the execution of an appropriate written agreement. Specifically, the proposed rule at § 92.254(f) would clarify that participating jurisdictions may provide HOME funds through a forprofit lending institution that is a contractor, or provide HOME funds to a nonprofit lending institution as a contractor or subrecipient, so that the institution may provide HOME homeownership assistance in conjunction with first mortgage financing. In addition to proposing to redesignate the current § 92.254(f) as § 92.254(g), the Department would make several revisions to the homebuyer underwriting requirements in the proposed § 92.254(g)(1). The current regulations require a participating jurisdiction to establish written underwriting standards that evaluate the housing debt and overall debt of the family, the appropriateness of the amount of assistance, monthly expenses of the family, assets available to acquire the housing, and financial resources to sustain homeownership. Affordable housing advocates have argued that the current regulation may inadvertently exclude households that have overall debt and monthly expenses that exceed a participating jurisdiction’s underwriting standards, yet the household otherwise demonstrates an ability to sustain a mortgage. To address these concerns and streamline this portion of the regulation, the proposed rule at § 92.254(g)(1) would revise the underwriting standards by eliminating E:\FR\FM\29MYP2.SGM 29MYP2 46646 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 the need to evaluate both the housing debt and overall debt of the family and instead would require the participating jurisdiction to evaluate the overall debt of the family projected after purchase of the housing. In addition, the proposed rule at § 92.254(g)(1) would eliminate the requirement that a participating jurisdiction evaluate the monthly expenses of the family. The current regulation at § 92.254(f)(1) also requires a participating jurisdiction to establish written policies for underwriting standards for homeownership assistance to determine that the amount of assistance a homebuyer receives is neither more or less than necessary to sustain homeownership. However, the amount of HOME assistance required by a homebuyer may exceed the amount a participating jurisdiction has determined as reasonable given the amount of available HOME funds. Consequently, the proposed rule at § 92.254(g)(1) would require participating jurisdictions to establish a standard to determine the maximum amount of direct HOME assistance that it may provide a family. The proposed paragraph would also more explicitly state that a participating jurisdiction may not provide a single, fixed amount of assistance to every homebuyer receiving assistance in the participating jurisdiction’s homebuyer program, irrespective of the homebuyer’s income, assets, or other circumstances because such a program design does not take into account the individual financial circumstances of each homebuyer. 23. Purchase of HOME Units by In-Place Tenants (24 CFR 92.255) The proposed rule would revise § 92.255 to clarify the requirements for the purchase of a HOME-assisted rental unit during its period of affordability by an existing tenant. This section, currently titled ‘‘Converting rental units to homeownership units for existing tenants,’’ would be retitled as ‘‘Purchase of HOME units by in-place tenants’’ to reflect the proposed requirements of § 92.255 more accurately. The proposed rule would retain the requirement that a tenant’s refusal to purchase the unit is not good cause for termination of tenancy or a reason not to renew the lease. The proposed rule would also clarify that a participating jurisdiction may not permit an owner to sell and a tenant to buy an existing HOME-assisted rental unit through a lease-purchase program. The proposed rule would maintain the current requirement in paragraph (a) of this section that a tenant qualify for homeownership in accordance with the VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 requirements of § 92.254. This means that the tenant must qualify as lowincome at the time of purchase. If the tenant is not assisted with additional HOME funds to purchase the unit, the proposed rule would require the period of affordability to equal the remaining period of affordability of the rental unit. However, if additional HOME funds are provided to the tenant to purchase the unit, the period of affordability would be the greater of the remaining period of affordability if the unit had remained a rental unit or the required period based on the amount of direct homebuyer assistance provided. 24. Set-Aside for Community Housing Development Organizations (CHDOs) (24 CFR 92.300). To maintain the program’s effectiveness, it is essential that HOME funds be provided only to developers that have adequate development experience and financial stability to complete projects timely, on-budget, and at a high level of quality. Since the beginning of the HOME program, there have been challenges with CHDOs not having the required substantial expertise to meet the development capacity standards and the requirement that 15 percent of each HOME allocation be used only for housing, owned, developed, or sponsored by organizations that qualify as CHDOs, as defined at § 92.2. Section 231(a) of NAHA 56 and § 92.300 require a participating jurisdiction to reserve not less than 15 percent of its HOME allocation for investment only in housing to be ‘‘owned, developed or sponsored’’ by a CHDO. The current regulations at § 92.300(a)(2), (a)(3), and (a)(4) establish the requirements for a project to be ‘‘owned,’’ ‘‘developed,’’ or ‘‘sponsored’’ by a CHDO respectively. Rental housing is ‘‘owned’’ by a CHDO if the CHDO is the owner in fee simple absolute of the affordable rental housing 57 and where HOME funds are used for new construction or rehabilitation of the housing, the CHDO hires and oversees the developer that rehabilitates or constructs the housing. Rental housing is ‘‘developed’’ by a CHDO if the CHDO is the owner of the housing in fee simple absolute 63 and the developer of the housing to be constructed or rehabilitated. The CHDO, when acting as a developer of rental housing, must be in ‘‘sole charge of all aspects of the development project.’’ Pursuant to 56 42 U.S.C. 12771(a). accordance with § 92.300, the CHDO may have a long-term ground lease when rental housing is ‘‘owned’’ or ‘‘developed’’ by a CHDO. 57 In PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 § 92.300(a)(2) and (3), when rental housing is ‘‘owned’’ or ‘‘developed’’ by a CHDO, the CHDO must own the housing during development and throughout the period of affordability in § 92.252. For rental housing to be ‘‘sponsored’’ by a CHDO, a CHDO must comply with the current § 92.300(a)(4) which requires the housing to be ‘‘owned,’’ as defined in § 92.300(a)(2), or ‘‘developed,’’ as defined in § 92.300(a)(3), by: a subsidiary of the CHDO, a limited partnership of which the CHDO or its subsidiary is the sole general partner, or a limited liability company of which the CHDO or its subsidiary is the sole managing member. The current § 92.300(a)(4) also provides a second rental sponsorship role under which the CHDO develops the housing project and conveys it to another nonprofit at a predetermined time. For homeownership housing, the current § 92.300(a)(6) requires housing that is ‘‘developed’’ by a CHDO to be in ‘‘sole charge of construction.’’ NAHA and part 92 only permit an entity that qualifies as a CHDO to act as a sponsor in the development of affordable housing. The proposed rule would correct a drafting error throughout § 92.300 by changing ‘‘community development housing organizations’’ to ‘‘community housing development organizations.’’ The proposed rule also makes technical edits to wording in § 92.300(a)(3), (a)(4), (a)(6), and (a)(6)(i). Paragraph § 92.300(a)(5)(iii) would be revised to add the word ‘‘private’’ to the reference to nonprofit organizations so it refers to ‘‘private’’ nonprofit organizations and a technical correction to paragraph § 92.300(e) would add the word ‘‘must’’ before describing written agreement requirements. The proposed rule would clarify the requirement in § 92.300(a)(2) that when rental housing is ‘‘owned’’ by the CHDO, the CHDO must oversee or, at minimum, hire or contract with an experienced project manager to oversee all aspects of the development. While HUD requires the CHDO to oversee all aspects of the development, the current requirement at § 92.300(a)(2) only explicitly states that at minimum, the CHDO must hire or contract with an experienced project manager. The revision clarifies that hiring or contracting with an experienced project manager is the minimum standard to meet the requirement that a CHDO oversee all aspects of the development when rental housing is ‘‘owned’’ by the CHDO. Through the proposed rule, HUD is proposing to make it substantially easier for many community-based nonprofit organizations to access the CHDO set- E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules aside as ‘‘developers’’ by revising § 92.300(a)(3) to permit the CHDO to share responsibilities in the development process, provided that the CHDO remains in charge of (i.e., maintains decision-making authority over) these responsibilities. The responsibilities that may be shared include: selecting the site, obtaining permit approvals and all project financing, selecting architects, engineers, and general contractors, overseeing project progress, and determining the reasonableness of costs. The Department believes this revision would assist many organizations to augment their development expertise, while preserving the statutory intent that the CHDO be in charge of project development decisions in the interest of low-income community residents. The proposed rule at § 92.300(a)(4) would also be amended so that the sponsor provisions require the CHDO or its subsidiary to be the managing general partner rather than the sole general partner of a limited partnership. The proposed rule at § 92.300(a)(4) would also allow the CHDO or its subsidiary to be the managing member of a limited liability company rather than require the CHDO to be the sole managing member of a limited liability company. In response to ongoing questions from participating jurisdictions, the proposed rule at § 92.300(a)(4)(ii) would clarify that the set-aside funds are provided by the participating jurisdiction directly to the owner of the project. This is a statutory requirement of the HOME program under section 226 of NAHA (42 U.S.C. 12756) and is currently required in the rule. This change to add paragraph (ii) to § 92.300(a)(4) would further clarify that HOME funds are only provided by a participating jurisdiction (or its subrecipient) directly to the entity that owns the project. The proposed rule would eliminate the requirement that rental housing developed pursuant to § 92.300(a)(3) or sponsored pursuant to § 92.300(a)(4) continue to be owned by a CHDO throughout the period of affordability. These provisions requiring ownership of the housing for the entire period of affordability by the CHDO that ‘‘developed’’ or ‘‘sponsored’’ the housing have created difficulties when the status of the CHDO that developed or sponsored the project changes (e.g., a bankruptcy, decrease in capacity, or other business necessity) and acquisition of the housing by another CHDO must occur. These difficulties include finding another qualified CHDO that has the capacity to own the project and the administrative burden in transferring the project to another VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 CHDO, which may take a significant amount of time. In many instances, finding another CHDO that is willing and has capacity to assume ownership of the housing is often not feasible. Such difficulties have jeopardized efforts to preserve the housing’s affordability. Through the proposed change to § 92.300(a)(3) and § 92.300(a)(4), HUD is seeking to enable ownership transfers that are necessary to sustain the CHDO projects in operation and maintain compliance with HOME requirements. While the proposed rule provides flexibility in ongoing ownership of rental housing that is ‘‘developed’’ or ‘‘sponsored’’ by a CHDO, the proposed rule would maintain the ongoing ownership requirements for rental housing that is ‘‘owned’’ by a CHDO, pursuant to the CHDO ownership provisions at § 92.300(a)(2). The proposed rule at § 92.300(a)(5) would also revise the sponsor provisions to conform to the new requirements for housing that is ‘‘developed’’ by a CHDO under proposed § 92.300(a)(3) and make minor clarifications that a CHDO sponsors rental housing if the CHDO develops the rental housing ‘‘in accordance with § 92.300(a)(3)’’ and agrees to convey ‘‘the project’’ to an identified private nonprofit organization at a predetermined time after completion of the project. With respect to homeownership housing assisted with CHDO set-aside funds, the proposed rule would revise § 92.300(a)(6) to permit the CHDO to share the developer role with another entity provided that the CHDO is in charge of (i.e., maintains decisionmaking authority over) all aspects of the development process, including selecting the site, obtaining permit approvals and all project financing, selecting architects, engineers, and general contractors, overseeing project progress, determining the reasonableness of costs, identifying eligible homebuyers, and overseeing the sale of homeownership units. The proposed rule at § 92.300(a)(7) would further clarify that a participating jurisdiction must determine the form of assistance in accordance with § 92.205(b) that it will provide to a CHDO for a rental housing project under § 92.300(a)(4) and must provide the assistance directly to the entity that owns the project. HUD also proposes to make technical corrections to the language at § 92.300(a)(7) for readability. The proposed rule at § 92.300(b) would also permit nonprofit organizations that meet all the provisions of the ‘‘community housing development organization’’ definition in PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 46647 § 92.2, except for the capacity requirement in paragraph (9) of that definition, to be assisted with the capacity building funding authorized by § 92.300(b) in order to obtain the demonstrated capacity required to qualify as a CHDO. 25. Housing Education and Organizational Support (24 CFR 92.302) The proposed rule would designate all but the first sentence of the current language in § 92.302 as a new paragraph (a). The proposed paragraph (a) would include the current text in § 92.302 regarding HUD’s Federal Register notice. The first sentence currently in § 92.302 regarding HUD’s authority to provide education and organization support services would remain in the introductory text to § 92.302. The proposed rule would also add paragraph (b) to § 92.302 to add the definition for CLT and requirements specific to the use of technical assistance funding by a CLT in section 233(f) of NAHA (42 U.S.C. 12773(f)), implemented by section 213(a)(13) of the Housing and Community Development Act of 1992 (Pub. L. 102– 550). The proposed rule would establish that HUD may provide housing education and organizational support, as described in § 92.302, to a CLT, only if CLT meets the definition of a ‘‘community housing development organization’’ at § 92.2, except for the requirements in paragraphs (9) and (10) of the definition of CLT. The requirements would also include that the CLT is established to complete the activities in § 92.302(b)(3), the CLT carries out the activities in § 92.302(b)(3), the CLT’s corporate membership is open to residents of a particular geographic area, as specified in the organization’s bylaws, and the CLT’s board of directors includes a majority of members who are elected by the corporate membership and is composed of equal numbers of lessees pursuant to paragraph (b)(2)(ii), members who are not lessees, and any other category of persons described in the organization’s bylaws. The applicability of the definition and requirements for a CLT at § 92.302(b) would be limited to the use of HOME funds under § 92.302. 26. Displacement, Relocation, and Acquisition (24 CFR 92.353) The proposed rule would amend the last sentence of § 92.353(c)(2)(ii)(A), which describes persons not displaced as including persons whose tenancy was terminated under § 92.253(d). The last sentence would be amended to conform to the change of written notice E:\FR\FM\29MYP2.SGM 29MYP2 46648 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules requirements contained in § 92.253(d) instead of the current 30-day notice requirement. The proposed rule would amend the sentence in § 92.353(c)(2)(ii)(C) to explain that for purposes of determining eligibility for assistance under the URA, a person is not displaced if they meet the definition of ‘‘persons not displaced’’ contained in the URA at 49 CFR 24.2. This is to correct an error in the current citation. 27. Conflict of Interest (24 CFR 92.356) The proposed rule would amend § 92.356(d)(1) to revise the description of the meaning of ‘‘public disclosure.’’ The proposed § 92.356(d)(1) would state that public disclosure is considered a combination of various communication formats, including but not limited to publication on the recipient’s website, electronic mailings, media advertisements, and display in public areas such as libraries, grocery store bulletin boards, and neighborhood centers. The proposed rule at § 92.356(d)(1) would also require evidence of the public disclosure, of the nature of the conflict, and a description of how the public disclosure was made. The proposed rule at § 92.356(e) would insert a new paragraph (2) to add whether an opportunity was provided for open competitive bidding or negotiations as a factor to be considered for exceptions under § 92.356(e). lotter on DSK11XQN23PROD with PROPOSALS2 28. Reallocation by Formula (24 CFR 92.454) The proposed rule would add a new paragraph (5) to § 92.454(a) that would explicitly allow HUD to reallocate HOME funds that become available due to reductions in grants pursuant to § 92.551 or § 92.552. While HUD applies this requirement for reallocation of funds in practice, the Department would codify the practice in this proposed rule. The proposed rule would also revise § 92.454(b) to specify that participating jurisdictions from which the reductions in funds occurred under § 92.551 or § 92.552 would not be included in the reallocation of these funds. 29. The HOME Investment Trust Fund (24 CFR 92.500) The proposed rule would revise § 92.500(c)(2)(ii) to clarify the requirements for when a participating jurisdiction may establish a second local account of the HOME Investment Trust Fund. Specifically, the proposed rule at § 92.500(c)(2)(ii) would state that a participating jurisdiction may establish a second local account if, among other requirements, the participating VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 jurisdiction has its own local affordable housing trust fund used for matching contributions to the HOME program and the statute or local ordinance governing the local affordable housing trust fund requires repayments from the local affordable housing trust fund to be made to the participating jurisdiction’s HOME Investment Trust Fund local account. The regulation currently uses the term ‘‘trust fund’’ for both the participating jurisdiction’s local affordable housing trust fund and its HOME Investment Trust Fund local account and the proposed change is designed to distinguish between the two types of funds and clarify the requirement. 30. Program Disbursement and Information System (24 CFR 92.502) The proposed rule would revise the requirements in § 92.502 regarding the program’s Integrated Disbursement and Information System (IDIS). First, the proposed rule at § 92.502(b) would change the paragraph heading from ‘‘Project set-up’’ to ‘‘Project funding.’’ This change would clarify that this section refers to funding an activity in IDIS after the participating jurisdiction has committed funds to a specific local project. The proposed rule at § 92.502(b) would also remove the sentence that identifies investments that require the set-up in IDIS as acquisition, new construction, or rehabilitation of housing, and TBRA investments. This proposed change is appropriate because it would avoid confusion about other investments that must be set up in IDIS that are not included in the regulation. The proposed rule at § 92.502(b) would also clarify that the participating jurisdiction is required to enter complete project set-up information before funding an activity in the data system. These changes would clarify that this requirement is about activity funding after a participating jurisdiction commits HOME funds to a specific local project and not about activity set-up. This clarification is necessary because IDIS allows a participating jurisdiction to set up an activity before having complete project set-up information. While a participating jurisdiction may set up an activity in IDIS, the participating jurisdiction cannot fund an activity (i.e., identify specific investments) before it executes the HOME Investment Partnership Agreement, submits the applicable banking and security documents, complies with the environmental requirements under 24 CFR part 58, including submission of the request for release of funds, when applicable, and commits funds to a specific local project. The addition of the written PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 agreement execution date field in IDIS helps the participating jurisdiction to comply with the requirement to commit funds to a specific local project before funding a corresponding activity in the data system. The proposed rule at § 92.502(d)(1) would remove the requirement that a participating jurisdiction provide satisfactory project completion information within 120 days of the final project drawdown. Currently, § 92.502(d)(1) requires the participating jurisdiction to provide satisfactory project completion information within 120 days of the final project drawdown or HUD may suspend other project setups or take additional corrective actions. This language is no longer needed because of the four-year project completion requirement set forth in § 92.205(e). If the participating jurisdiction is required to complete a HOME-assisted project within four years of committing funds to the project, then that time period would include entering complete project completion information into HUD’s IDIS because the definition of project completion at § 92.2 includes entering the project completion information into the IDIS established by HUD. Therefore, if a participating jurisdiction has complied with the four-year project completion requirement, it has complied with § 92.502(d) and no further HUD action is required. The proposed rule would revise § 92.502(d)(2) to specify that the maximum amount of additional HOME funds that may be committed to a project up to one year after project completion is limited by the maximum per-unit subsidy amount established under § 92.250 at the time of underwriting. Adding this specificity would align with the changes to § 92.250 and provide further clarity on the limits on HOME investments in a project. 31. Participating Jurisdiction Responsibilities; Written Agreements (24 CFR 92.504) The Department proposes several amendments to § 92.504, including revising the heading of the section to reflect the relocation of onsite inspection requirements to § 92.251. Many of the proposed amendments are intended to clarify ambiguous language, improve readability, move existing requirements to more appropriate paragraphs, and reformat certain provisions for clarity. The proposed revisions to § 92.504 are described more thoroughly below. Throughout § 92.504, the proposed rule would revise the statement ‘‘the E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules written agreement must conform’’ to ‘‘the written agreement must contain.’’ This revision would make clear the Department’s intent that the written agreement must include the applicable requirements in § 92.504. The proposed rule would amend § 92.504(b) to clarify that the required written agreement must be a legally binding agreement between the participating jurisdiction and the entity receiving HOME funds for an activity. The proposed rule would revise § 92.504(b) to require that HOME written agreements be separate and apart from financing documents such as mortgages, deeds of trust, regulatory agreements, or promissory notes. The current regulation does not specifically require a separate written agreement or use of a particular format. The Department has commonly found that when HOME written agreement requirements are made a part of other financing documents, many required provisions are not included, and the documents do not properly commit HOME funds as defined at § 92.2. The proposed change would help ensure written agreements are compliant with HOME requirements and reduce monitoring findings and other enforcement actions, including repayment of HOME funds. The required contents of the written agreement between participating jurisdictions and other entities are in § 92.504(c). The Department is proposing numerous changes throughout § 92.504, many of which are intended to revise or clarify the required contents of the written agreement based on the role an entity will assume or the type of project undertaken. The proposed rule would make a technical correction to the last sentence of § 92.504(c) introductory text to add ‘‘by role and type of entity.’’ The proposed rule would also make numerous nonsubstantive revisions to the introductory paragraph at § 92.504(c) and to § 92.504(c)(1)–(7) to add clarity to existing language and improve readability. The proposed rule would revise § 92.504(c)(1)(i) (Use of the HOME funds) to add ‘‘anticipated’’ before ‘‘type and number of housing projects’’ to specify that the written agreement must include the anticipated and not final type and number of housing projects to be funded in the description of the amount and use of the HOME funds. The proposed rule would also amend § 92.504(c)(1)(ii) (Affordability) and § 92.504(c)(1)(x) (Enforcement of Agreement) to move the requirement that the written agreement between the participating jurisdiction and the State VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 recipient include a means of enforcement of the affordability requirements from § 92.504(c)(1)(x) to § 92.504(c)(1)(ii). The proposed rule would also add the means of enforcement examples of use restrictions, a recorded agreement restricting the use of the property, and other mechanisms approved by HUD in writing, under which the participating jurisdiction has the right to require specific performance. The Department proposes this change to properly place the described requirement under paragraph § 92.504(c)(1)(ii) concerning affordability requirements rather than in § 92.504(c)(1)(x) which establishes requirements for enforcement of the written agreement. After the proposed movement of text, § 92.504(c)(1)(x) would only contain provisions relating to the enforcement of the written agreement (i.e., remedies for breach of the written agreement and suspension or termination if the State recipient materially fails to comply with any term of the agreement). The proposed rule would also revise § 92.504(c)(1)(iii) to change ‘‘if’’ to ‘‘whether’’ and remove ‘‘to be’’ for clarity. The proposed rule at § 92.504(c)(1)(ii) would remove the inclusion of ‘‘recaptured HOME funds’’ in the requirement that the agreement establish whether repayment of HOME funds must be remitted to the State or State recipient for additional eligible activities or retained by the State recipient for additional HOME activities. The Department is proposing to remove ‘‘recaptured HOME funds’’ because it does not accurately reflect the requirements between the participating jurisdiction and the State recipient. The use of ‘‘recaptured HOME funds’’ in the current provision at § 92.504(c)(1)(ii) specifically refers to funds repaid by a homeowner pursuant to § 92.254(a)(5)(ii) and its inclusion is not necessary. Section 92.504(c)(1)(ii) already specifies that the written agreement must state whether repayment of HOME funds must be paid to the State participating jurisdiction or the State recipient and such repayments include recaptured funds under § 92.254(a)(5)(ii). Conforming revisions to remove ‘‘recaptured HOME funds’’ in similar provisions within § 92.504(c)(2) would also be made through this proposed rule. The proposed rule would revise § 92.504(c)(1)(v) project requirements to add that the written agreement for HOME rental housing between the participating jurisdiction and State recipient must require the use of the HOME tenancy addendum in PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 46649 accordance with § 92.253 for all HOMEassisted units or for all HOME-assisted tenants. The proposed amendment is necessary to conform to proposed changes at § 92.253 concerning tenant protections and selection which require, among other things, that leases for HOME-assisted rental units and tenants receiving TBRA include the HOME tenancy addendum. The proposed rule would revise § 92.504(c)(1)(v) to reflect changes for TBRA by requiring the agreement to comply with the requirements at § 92.253(a)-(c) and (d)(2) concerning lease contents, HOME tenancy addendum, security deposits, and termination of tenancy. The proposed rule would amend § 92.504(c)(1)(vi) to clarify that the written agreement must include the imposition of VAWA requirements by the State participating jurisdiction on the State recipient when HOME funds are being provided to the State recipient for the provision of TBRA or the development of rental housing where the State recipient will own the housing. The proposed rule would correct two citations that have changed due to updates to 2 CFR part 200 in paragraphs § 92.504(c)(1)(x) and § 92.504(c)(2)(ix) from 2 CFR 200.338 to 2 CFR 200.339 and 2 CFR 200.339 to 2 CFR 200.340. The proposed rule would revise § 92.504(c)(1)(xi) to specify the types of entities that a State recipient may enter into a written agreement with for the use of HOME funds. These entities would be specified as a CHDO, subrecipient, homeowner, homebuyer, tenant (or landlords receiving TBRA), or contractor providing services to or on behalf of the State recipient. The Department is also proposing to further clarify the statutory and current regulatory requirements that the participating jurisdiction must ensure compliance with HOME requirements through binding contractual agreements with project owners in response to frequent questions by participating jurisdictions on this requirement. To address these frequent questions, the proposed rule would revise § 92.504(c)(1)(xi) to clarify and confirm that HOME funds must be provided directly to the owner, by the State recipient on behalf of the participating jurisdiction, under the terms and conditions of the written agreement. Further, the proposed rule would relocate from § 92.504(c)(1)(ii) to § 92.504(c)(1)(xi) the requirement that the agreement must establish that the repayment of any form of HOME funds, from an entity with which the State recipient is entering a written agreement, must be remitted to the State E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 46650 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules or, if permitted by the State, retained by the State recipient for additional eligible activities. The requirement is proposed to be relocated because the placement reflects its applicability to repayments made by entities with whom the State recipient enters written agreements. There are no substantive changes to the relocated text. In the introductory text to § 92.504(c)(2), the proposed rule would remove the definition of subrecipient because it is already a defined term in § 92.2. The proposed rule would add ‘‘the following’’ to § 92.504(c)(2) before delineating requirements of the written agreement. The proposed rule would revise § 92.504(c)(2)(i) to clarify that the written agreement between the participating jurisdiction and the subrecipient that administers some or all the participating jurisdiction’s HOME program must include the anticipated and not final type and number of housing projects to be funded in its description of the amount and use of the HOME funds for one or more programs. The addition of the term ‘‘anticipated’’ would clarify that, at the time the participating jurisdiction enters the written agreement with a subrecipient to administer the program, the exact type and number of housing projects to be funded may not be known. A change would be made to paragraph § 92.504(c)(2)(ii) to remove ‘‘to be’’ from the sentence. In paragraph § 92.504(c)(2)(xii) the term ‘‘organizations’’ would be revised to ‘‘organization.’’ The proposed rule would revise the language of § 92.504(c)(2)(iv) to conform with the proposed changes to the definition of a subrecipient. Pursuant to the ‘‘subrecipient’’ definition in § 92.2, a governmental entity or nonprofit organization is not a subrecipient if it is receiving HOME funds as the owner of a HOME rental project. The proposed rule would revise § 92.504(c)(2)(iv) to state that when the subrecipient is administering a HOME rental housing program or TBRA program on behalf of the participating jurisdiction, the written agreement between the subrecipient and the participating jurisdiction must include the subrecipient’s obligations to meet the VAWA requirements under § 92.359. The proposed rule would revise § 92.504(c)(2)(ix) to insert ‘‘written’’ before ‘‘agreement’’ in the heading and paragraph for consistency. The proposed rule would revise § 92.504(c)(2)(x) to conform to the proposed changes to § 92.504(c)(3). The proposed changes to § 92.504(c)(3), described more thoroughly below, VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 would include revisions to more accurately describe owner entities to which the requirements of § 92.504 are applicable. In response to inquiries by participating jurisdictions, the Department proposes additional revisions to § 92.504(c)(2)(x) to further clarify the statutory and regulatory requirement that the participating jurisdiction must ensure compliance with HOME requirements through binding contractual agreements with project owners. The proposed rule at § 92.504(c)(2)(x) would further clarify that HOME funds must be provided directly to the owner by the subrecipient on behalf of the participating jurisdiction under the terms and conditions of the written agreement. The proposed rule at § 92.504(c)(2)(x) would also add in the requirement that the written agreement establish whether repayment of HOME funds must be remitted to the participating jurisdiction or may be retained by the subrecipient for additional eligible activities. The proposed rule would also amend § 92.504(c)(2)(xi) to specify that the prohibited fees or charges are those listed in § 92.214. The proposed rule would add a new paragraph at § 92.504(c)(2)(xii) (Project requirements) to expressly impose the requirements that the agreement require enforcement of the project requirements in 24 CFR subpart F, as applicable and in accordance with the type of project assisted. The proposed rule at § 92.504(c)(2)(xii) would also require that for rental projects, the written agreement between the subrecipient and other entities must require that the HOME tenancy addendum is used in accordance with § 92.253 for all HOMEassisted units or for all HOME-assisted tenants. The proposed addition of this new paragraph is necessary to conform to changes at § 92.253 concerning tenant protections and selection which require, among other things, that leases for HOME-assisted rental units and tenants receiving TBRA include the HOME required tenancy addendum. The proposed new paragraph at § 92.504(c)(2)(xii) also reflects changes to § 92.253(a)–(c) and (d)(2) for TBRA by requiring the agreement between the subrecipient and the rental owner or tenant comply with the requirements concerning tenant protections, security deposits, and termination of tenancy. The proposed rule would revise the heading at § 92.504(c)(3) to ‘‘For-profit or nonprofit housing owner (other than a community housing development organization or single family owneroccupant).’’ This proposed change to the paragraph heading would remove the sponsor or developer terms so that PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 § 92.504(c)(3) would only set forth requirements for a written agreement between a for-profit or non-profit owner that is not a CHDO or single family owner occupant, as stated in the revised paragraph heading. The proposed heading revision would remove ‘‘developer’’ because a participating jurisdiction is not permitted to enter into a written agreement for HOME funds with an entity that is not (or will not be) the owner of the project and is solely managing the development process. This proposed revision would not exclude a developer that is entering into a written agreement to use HOME funds to become the owner of the project. In addition, the proposed rule would delete ‘‘sponsor’’ from the heading as the term is unnecessary and duplicative for purposes of the HOME program because the role of sponsor is only permitted for CHDOs and as the sponsor, pursuant to § 92.300, the CHDO must be the owner of the project. The proposed rule would move requirements for written agreements with CHDOs from the introductory text of § 92.504(c)(3) to § 92.504(c)(6). Similar to the proposed changes at §§ 92.504(c)(1)(xi) and 92.504(c)(2)(x), the proposed rule would revise § 92.504(c)(3) to further clarify the current requirement that the participating jurisdiction must ensure compliance with HOME requirements through binding contractual agreements with project owners by stating the requirement that HOME funds must be provided directly to the owner under the terms and conditions of the written agreement. The proposed rule would make conforming changes to § 92.504(c)(3)(i) to remove sponsor and developer in the same way those terms would be removed from the introductory text to § 92.504(c)(3). In addition, the proposed rule would revise § 92.504(c)(3)(i) to clarify that the agreement must specify the actual amount of HOME funds provided to the housing owner. In the past, participating jurisdictions have asked whether the inclusion of the final amount of HOME funds provided to a housing owner in the written agreement is required by the language in § 92.504(c)(3)(i) (i.e., ‘‘complete budget’’ and items ‘‘in sufficient detail to provide a sound basis for the participating jurisdiction to effectively monitor performance under the agreement to achieve project completion and compliance with the HOME requirements.’’). The addition of ‘‘specific amount and’’ in § 92.504(c)(3)(i) is to further clarify that the actual (not projected) amount of HOME funds provided to a housing E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules owner must be in the written agreement. While the Department recognizes that the amount of HOME funds may change from the time of commitment to project completion, the participating jurisdiction must have a written agreement with the housing owner that meets the requirements under this section, including the final amount of the HOME funds, and must amend the written agreement to include the final amount, if necessary. The proposed rule would also revise § 92.504(c)(3)(i) to clarify that the agreement must state that any and all repayments made by the owner on HOME assistance (i.e., grants or loans) must be remitted to the participating jurisdiction, unless the participating jurisdiction permits a subrecipient or State recipient to retain the funds, in accordance with HOME requirements. The proposed revision aligns with the clarification of HOME requirements regarding repayments and payments on investments of HOME funds, the use of program income, and would further assist participating jurisdictions in complying with HOME statutory and regulatory requirements when providing funds to owners. The proposed rule would amend § 92.504(c)(3)(ii) to add liens on real property and a recorded agreement restricting the use of the property as a means of enforcing the affordability requirements in § 92.252 and § 92.254 The proposed rule at § 92.504(c)(3)(ii) would also make minor clarifying changes to improve readability. The proposed rule at § 92.504(c)(3)(ii)(A) and (B) would also remove the reference to ‘‘developer’’ to conform with the changes made to the introductory text of § 92.504(c). In addition, a conforming change would be made to § 92.504(c)(3)(ii)(A) to correct a citation from § 92.252(f)(2) to § 92.252(e)(2). A conforming change would also be made to § 92.504(c)(3)(iii) to correct a citation from § 92.253(d) to § 92.253(e). A technical correction would be made to § 92.504(c)(3)(vii) to add ‘‘or use’’ before ‘‘restrictions’’ to add specificity. As described earlier in this proposed rule, the Department is proposing significant changes to the tenant protections in § 92.253. To ensure compliance with these changes, the proposed rule would revise § 92.504(c)(3)(iii), which requires that the written agreement contain applicable project requirements in 24 CFR subpart F, to explicitly require that the written agreement require compliance with tenant protections in § 92.253. VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 The proposed rule at the introductory text to § 92.504(c)(3)(v), § 92.504(c)(3)(v)(A), and § 92.504(c)(3)(viii) would remove references to ‘‘sponsor’’ and ‘‘developer’’ to conform with the changes proposed to the introductory text of § 92.504(c). In addition, to improve clarity, the proposed rule would make minor, non-substantive edits to § 92.504(c)(3)(vi) and § 92.504(c)(3)(ix) to improve the readability of each paragraph. The proposed rule would change the heading of § 92.504(c)(3)(vii) from ‘‘Enforcement of the agreement’’ to ‘‘Enforcement of HOME requirements and the agreement’’ to clarify that the paragraph includes requirements regarding enforcement of the written agreement and enforcement of HOME requirements. The proposed rule would amend § 92.504(c)(3)(vii) to properly describe the means of enforcement of HOME requirements and removes the duplicative text on enforcement of affordability requirements. The proposed change is necessary to eliminate non-relevant language from § 92.504(c)(3)(vii), which is already properly covered in § 92.504(c)(3)(ii) (Affordability). The proposed rule at § 92.504(c)(3)(vii) would also incorporate minor, non-substantive edits and be reorganized to improve readability. The proposed rule would remove the current § 92.504(c)(3)(x). The CHDO provisions in the current § 92.504(c)(3)(x) would be moved to the revised requirements for written agreements between participating jurisdictions and CHDOs at § 92.504(c)(6). The proposed rule would re-number paragraph (xi) of § 92.504(c)(3) to § 92.504(c)(3)(x) and amend the proposed § 92.504(c)(3)(x) to add clarity by specifying that the agreement must state the fees that may be charged by the owner in accordance with § 92.214(b)(4) and prohibit owners from charging any of the prohibited fees in § 92.214. The proposed § 92.504(c)(3)(x) would delete the second sentence in the paragraph because it restates the requirements in § 92.214 for fees rather than describing a requirement for the written agreement. The proposed rule would also change a reference from ‘‘developer’’ to ‘‘owner’’ in § 92.504(c)(3)(x) to conform with the changes proposed to the introductory text of § 92.504(c). To improve clarity and readability, the Department proposes minor, nonsubstantive revisions to the introductory text of § 92.504(c)(4), including removing ‘‘and the length of the agreement’’ in § 92.504(c)(4)(i) because PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 46651 it duplicates § 92.504(c)(4)(iii), as well as other non-substantive revisions to § 92.504(c)(4)(ii). The Department also proposes minor revisions to the heading and introductory text to § 92.504(c)(5), § 92.504(c)(5)(i), and § 92.504(c)(5)(ii). The proposed rule would amend the heading of § 92.504(c)(5) to clarify that the paragraph also applies to an owner receiving TBRA or security deposit assistance. The amendment is necessary to address the omission of the express inclusion of owner and does not create a new requirement. The proposed rule would also add new paragraphs at § 92.504(c)(5)(i)(A) and § 92.504(c)(5)(i)(B). The proposed rule at § 92.504(c)(5)(i) would move its second sentence to the new paragraph at § 92.504(c)(5)(i)(A). The proposed new paragraph at § 92.504(c)(5)(i)(B) would reflect the proposed changes to § 92.251(c)(3) concerning the applicability of property standards to existing housing that is acquired for homeownership. The proposed rule would also revise § 92.504(c)(5)(iii) to clarify that the requirement to enter into a rental assistance contract or security deposit contract may be entered into by either tenants or owners receiving payments under a TBRA program. This proposed revision is necessary to correct the omission of ‘‘owner’’ and does not create a new requirement. The Department proposes to revise § 92.504(c)(6) to cover written agreements with CHDOs for all eligible activities or projects. The proposed rule at § 92.504(c)(6) would be organized by the HOME activity or use of assistance and would incorporate the requirements in the current paragraphs at § 92.504(c)(3)(x), § 92.504(c)(6), and § 92.504(c)(7). The proposed rule at § 92.504(c)(6) would also reflect the proposed revisions made to §§ 92.300, 92.301, and 92.303. The proposed rule at § 92.504(c)(6) would establish minimum requirements for a written agreement with a CHDO for the use of set-aside funds under § 92.300 in the proposed § 92.504(c)(6)(i), for the use of HOME funds for operating expenses in the proposed § 92.504(c)(6)(ii), and for project-specific technical assistance and site control loans or project-specific seed money loans in the proposed § 92.504(c)(6)(iii). The proposed rule would redesignate the current § 92.504(c)(6) and the current § 92.504(c)(7) as § 92.504(c)(6)(ii) and § 92.504(c)(6)(iii), respectively. The proposed rule at § 92.504(c)(6)(i) would require that an agreement for the use of set-aside funds by a CHDO must include the requirements in § 92.504(c)(3) and other E:\FR\FM\29MYP2.SGM 29MYP2 46652 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS2 additional CHDO-specific requirements. These requirements include that the agreement must identify the role of the CHDO, require that the CHDO comply with the applicable requirements in § 92.300(a) for its role, must specify whether a CHDO developing homeownership housing may retain the proceeds from the sale of the housing and the funds must be used for HOME activities or to benefit low-income families, and must require a separate written agreement between the CHDO and its co-developer that contain the provisions described in the proposed § 92.504(c)(6)(i)(C)(1)–(4) if the CHDO will be sharing developer responsibilities. The proposed rule at § 92.504(c)(6)(ii) would also clarify that if a CHDO enters into a written agreement to receive HOME funds for operating expenses, there must be separate written agreement that complies with § 92.504(c)(6) for the CHDO’s use of HOME funds for the project. The text of the proposed § 92.504(c)(6)(iii) would remain unchanged from the current text in § 92.504(c)(7) except that the term ‘‘Community housing development organization’’ would be removed from the heading. The proposed rule would redesignate paragraph § 92.504(c)(8) as § 92.504(c)(7). The proposed rule would also move the inspection and financial oversight requirements at § 92.504(d) of the existing rule to the applicable paragraphs in § 92.251 to consolidate the property standards and inspection requirements in one section of the regulation. 32. Applicability of Uniform Administrative Requirements (24 CFR 92.505) The proposed rule would revise the applicability of 2 CFR part 200 to participating jurisdictions, State recipients, and subrecipients receiving HOME funds, to exclude the additional provisions of 2 CFR 200.328 and 200.344. The Department proposes to remove 2 CFR 200.328 from 24 CFR 92.505 because HOME is subject to statutory requirements that mandate the collection of data through IDIS in order to monitor compliance with HOME requirements and HUD does not apply 2 CFR 200.328 in practice. The Department would also remove the applicability of 2 CFR 200.344 because the regulation poses significant challenges to participating jurisdictions and does not align with programmatic requirements. The proposed rule would therefore remove the applicability of 2 CFR 200.344 and establish HOMEspecific closeout procedures in § 92.507. VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 33. Closeout (24 CFR 92.507) HUD proposes to amend the HOME closeout regulations at § 92.507 to establish program-specific procedures and better align programmatic and administrative requirements for grant closeout. The existing regulation references the closeout requirements at 2 CFR 200.344, which has very specific requirements for the timing of closeouts and reporting by the participating jurisdiction after the end of the grant’s period of performance, as set forth in the HOME grant agreement. Under the proposed closeout requirements at § 92.507, HUD would provide participating jurisdictions greater flexibility to request additional time, if needed, to meet certain program requirements, such as meeting project completion requirements. HUD recognizes that there are many things that could disrupt a participating jurisdiction’s intended timeline for activity completion. To complete all program activities, including, but not limited to, satisfying reporting requirements, participating jurisdictions are permitted to request an extension of one year beyond the nine-year period of performance, as identified in the grant agreement, for good cause. The proposed rule at § 92.507(a) would codify the current closeout process for HOME grants and describe the process, including the requirements that must be completed by the participating jurisdiction prior to initiating closeout. The proposed § 92.507(a) would require the participating jurisdiction complete certain actions required for closeout in proposed § 92.507(b), and obligations and actions required post-closeout in § 92.507(c). The proposed rule would establish that HUD may report a participating jurisdiction’s material failure to comply with the terms and conditions of the award or closeout requirements to the OMB-designated integrity and performance system (currently, FAPIIS) and pursue other remedies in 2 CFR 200.339. Even if HUD approves an extension pursuant to the proposed § 92.507, a participating jurisdiction must still expend its funds by the end of the grant’s budget period. The statutory requirement that funds must be expended within the budget period or returned to the U.S. Department of Treasury cannot be revised. Further, the proposed rule would clarify that certain requirements survive grant closeout. While this is not a change from the current requirements, HUD is taking the opportunity to again clarify that closeout of a HOME grant does not PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 relieve a participating jurisdiction from project oversight in accordance with 24 CFR part 92 for as long as specified in the requirements applicable to the assisted project and participating jurisdiction. 34. Recordkeeping (24 CFR 92.508) The proposed rule would make several conforming changes in the recordkeeping section of the regulation at § 92.508 to cross reference updated citations throughout the section. The proposed rule at § 92.508(a)(2)(ix) would also add language requiring that a participating jurisdiction that will apply excess matching contribution to a future fiscal year’s liability must have records of the source of match at the time of application of the match credit and maintain the records for five years from the date of application to demonstrate compliance with the matching requirements of § 92.218 through § 92.222. The addition of this language would make it clear that participating jurisdictions must track the source and application of excess matching contributions if it is carried over and applied to future years’ matching liability. The HUD Office of Inspector General found that several participating jurisdictions were not keeping adequate records of matching contributions during its audit of the HOME matching requirement.58 These participating jurisdictions mistakenly thought that once matching funds were credited that the participating jurisdiction no longer needed to identify the source of the match when some or all of the matching funds were carried over to the subsequent year. This resulted in participating jurisdictions not being able to adequately identify the source of the carried over matching contribution. The proposed change would require participating jurisdictions to keep records demonstrating compliance with the matching requirements specifically for excess match carried forward from one year to the next. The proposed rule at § 92.508(a)(3)(iii) would also be revised to add recordkeeping requirements demonstrating that a project complied with one of the comprehensive green building standards established by HUD if the participating jurisdiction used the higher maximum per-unit subsidy limitation permitted for such project under § 92.250(c). HUD proposes to revise the recordkeeping requirement at § 92.508(a)(3)(iv) to reflect that the proposed rule would move the on-site 58 HUD Office of Inspector General, Publication Report Number 2015–KC–0002. E:\FR\FM\29MYP2.SGM 29MYP2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules inspection standards and financial review requirements from § 92.504(d) to § 92.251(f). 35. Corrective and Remedial Actions (24 CFR 92.551) The proposed rule would add a new paragraph (3) to § 92.551(c). The proposed § 92.551(c)(3) would codify HUD’s existing practice to permit a participating jurisdiction to correct a performance deficiency by voluntarily agreeing to a reduction in its HOME grants by an amount equal to the amount of any expenditures that were not in compliance with HOME requirements. lotter on DSK11XQN23PROD with PROPOSALS2 36. Notice and Opportunity for Hearing; Sanctions (24 CFR 92.552) The proposed rule would add three new paragraphs at § 92.552(a)(1)(v), § 92.552(a)(1)(vi), and § 92.552(a)(1)(vii). These new paragraphs would reflect existing sanctions that HUD has the discretion to impose. The new proposed § 92.552(a)(2)(v) would codify the existing sanction that HUD may reduce a participating jurisdiction’s HOME grants by an amount equal to the amount of any expenditures that were not in compliance with HOME requirements. The proposed rule at § 92.552(a)(2)(vi) would also add that HUD may revoke a jurisdiction’s designation as a participating jurisdiction. This addition makes § 92.552 consistent with § 92.107 because that revocation power is already permitted under that section, as authorized by section 216(9) of NAHA (42 U.S.C. 12746(9)). The Department is also revising § 92.552(a)(2) to add paragraph (vii) to make the section consistent with an existing sanction permitted under 2 CFR part 200 that applies to HOME funds. The proposed § 92.552(a)(2)(vii) would provide participating jurisdictions with additional notice that HUD may terminate the assistance in whole or in part in accordance with 2 CFR 200.340 to enforce program requirements. 37. American Dream Downpayment Assistance Initiative (24 CFR Part 92, Subpart M) The proposed rule removes subpart M of the HOME regulations, which codified the regulatory requirements for the American Dream Downpayment Initiative (ADDI) program. ADDI was authorized in 2003 and included a sunset provision, which stated that ‘‘Secretary shall have no authority to make grants under this Act after December 31, 2007.’’ ADDI funds were last appropriated in 2008. HOME participating jurisdictions used VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 American Dream Downpayment Initiative grants for downpayment assistance to low-income, first-time homebuyers. The Department has closed out all American Dream Downpayment Initiative grants. Definitions applicable to ADDI and not used in the HOME program are also removed. Given that the ADDI program is no longer active, subpart M of the HOME regulations is not necessary. B. Conforming Changes to 24 CFR Parts 91, 570, and 982 1. Change to 24 CFR Part 91 The proposed rule would make minor conforming changes to 24 CFR part 91 to update citations consistent with the proposed changes to 24 CFR part 92. HUD would also remove § 91.220(l)(2)(viii) and § 91.320(k)(2)(viii) because those paragraphs are no longer applicable given that the ADDI program is no longer active. 2. Change to 24 CFR 570.200 The proposed rule would address preaward costs for the annual CDBG program by clarifying the effective date of the grant agreement. The proposed change would fix the effective date of an entitlement grant agreement as of the date HUD executes the grant agreement. The Department has waived § 570.200(h) for pre-award costs of grantees in many of the past Federal fiscal years to allow the effective date of a grantee’s grant agreement for a Federal fiscal year with delayed enactment of the appropriation to be the earlier of the grantee’s program year start date or the date that the Consolidated Plan (with the grantee’s actual allocation amounts) is received by HUD. The proposed change at § 570.200(h) would assist grantees to better prepare for a Federal fiscal year when there is not a timely appropriation and eliminate the need for the Department to issue waivers of the requirements in § 570.200 when a timely appropriation has not been made by Congress. 3. Change to 24 CFR 982.507 The procedure for determining the rent reasonableness standard for tenantbased assistance under the HCV program in units receiving LIHTC or assistance under the HOME program was streamlined by section 2835(a)(2) of HERA. This HERA provision added section 8(o)(10)(F) to the 1937 Act. HUD fully implemented this streamlined process in its regulations for LIHTC units through the HERA Final Rule.59 The HERA Final Rule did not fully 59 79 PO 00000 FR 36146. Frm 00037 Fmt 4701 Sfmt 4702 46653 implement the streamlined process for HOME program units. Instead, as explained in the HERA Final Rule, the HCV rent reasonableness requirements for HOME units would be addressed as part of a separate HOME program rulemaking that would cover HOME rent requirements for both non-voucher families and voucher families. The HERA Final Rule reserved § 982.507(c)(3) to be amended accordingly as part of that future HOME program rulemaking. This proposed rule would revise § 982.507 to fully implement the HERA streamlined HCV rent reasonableness process for HOME assisted units. In accordance with section 8(o)(10)(F) of the 1937 Act (42 U.S.C. 1437f(o)(10)(F)), § 982.507(c)(3) would provide that if the rent requested by the owner exceeds the HOME rents for non-voucher families, the PHA must determine that the rent to the owner is a reasonable rent and the rent shall not exceed the lesser of (1) the reasonable rent and (2) the payment standard established by the PHA for the unit size involved. Additionally, HUD is proposing a technical revision to § 982.507(c)(2) to provide greater clarity with respect to the rent reasonableness requirements for LIHTC units. The current regulatory text in § 982.507(c)(2) provides that the PHA must ‘‘perform a rent comparability study in accordance with program regulations’’ if the rent requested by the owner exceeds the LIHTC rents for nonvoucher families. This rent comparability determination is the same process the PHA undertakes for nonLIHTC HCV units under § 982.507(b) to determine that the rent to owner is a reasonable rent in comparison to rent for other comparable units. Consequently, HUD proposes to revise the wording of § 982.507(c)(2) to clarify that the PHA is required to determine the rent to owner is a reasonable rent in accordance with paragraph (b) of § 982.507 and not some separate process. III. Findings and Certifications Regulatory Review—Executive Orders 12866, 13563, and 14094 Under Executive Order 12866 (Regulatory Planning and Review), a determination must be made whether a regulatory action is significant and, therefore, subject to review by the Office of Management and Budget in accordance with the requirements of the order. Executive Order 13563 (Improving Regulations and Regulatory Review) directs executive agencies to analyze regulations that are ‘‘outmoded, ineffective, insufficient, or excessively E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 46654 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned.’’ Executive Order 13563 also directs that, where relevant, feasible, and consistent with regulatory objectives, and to the extent permitted by law, agencies are to identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public. Executive Order 14094 (Modernizing Regulatory Review) amends section 3(f) of Executive Order 12866, among other things. Updating the HOME program regulation is consistent with the objectives of Executive Order 13563 to reduce burden, as well as the goal of modifying and streamlining regulations that are outmoded and ineffective. This proposed rule would make many changes to the HOME program regulations, which were first promulgated in 1991, and have not been significantly updated since 2013. The proposed rule would: revise CHDO qualification requirements for community-based non-profit housing organizations to access CHDO set-aside funds to own, develop, and sponsor affordable housing; revise HOME rent requirements to implement statutory changes made to the U.S. Housing Act of 1937 by section 2835(a)(2) of HERA; facilitate the use of HOME funds for small one-to four-unit rental projects; incentivize inclusion of ambitious Green Building standards in new construction, reconstruction and rehabilitation projects; and expand flexibilities for community land trusts to participate in the HOME program. The proposed rule would also provide enhanced flexibility in TBRA programs; strengthen and expand tenant protections; and clarify the resale requirements for homeownership housing. The proposed rule would also include technical amendments or simplifications to certain changes made in the 2013 HOME Final Rule, the HOTMA Final Rule, and the NSPIRE Final Rule. The proposed rule was determined to be a significant regulatory action under section 3(f) of Executive Order 12866, as amended (although not an economically significant regulatory action under the order). HUD prepared a regulatory impact analysis (RIA) that addresses the costs and benefits of the proposed rule. HUD’s RIA is part of the docket file for this rule at https://www.regulations.gov. As described in the RIA, HUD anticipates that the economic impact of the proposed rule would be almost entirely within the HOME program. In other words, the proposed changes to the HOME program would affect what VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 participating jurisdictions do with the HOME funds they receive from HUD and how projects that accept this funding source can operate. Many of the proposed policy adjustments would only have a practical impact if participating jurisdictions choose to respond to them by altering how they use HOME funds. HUD strongly encourages the public to view the docket file. 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 aims to improve the HOME program by making several changes to its Federal regulations that would increase flexibility for grantees in using their HOME grants, streamline administrative requirements, implement statutory changes regarding rent restrictions in HOME rental projects, and enhance tenant protections for HOME-assisted rental households. As described in the RIA that HUD prepared, HUD anticipates that the economic impacts of the proposed rule would be almost entirely within the HOME program. In other words, the proposed changes to the HOME program would affect what participating jurisdictions do with the HOME funds they receive from HUD and how projects that accept this funding source can operate. Many of the proposed policy adjustments would only have a practical impact if participating jurisdictions choose to respond to them by altering how they use HOME funds. For the reasons presented, the undersigned certifies that this rule will not have a significant economic impact on a substantial number of small entities. Environmental Impact A Finding of No Significant Impact (FONSI) with respect to the environment has been made in accordance with HUD regulations at 24 CFR part 50, which implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI is available through the Federal eRulemaking Portal at https://www.regulations.gov. The FONSI is also available for public inspection during regular business hours in the Regulations Division, Office of General Counsel, Room 10276, Department of Housing and Urban PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 Development, 451 Seventh Street SW, Washington, DC 20410–0500. Due to security measures at the HUD Headquarters building, you must schedule an appointment in advance to review the FONSI by calling the Regulations Division at 202–708–3055 (this is not a toll-free number). HUD welcomes and is prepared to receive calls from individuals who are deaf or hard of hearing, as well as individuals with speech or communication disabilities. To learn more about how to make an accessible telephone call, please visit https://www.fcc.gov/ consumers/guides/telecommunicationsrelay-service-trs. Copies of all comments submitted are available for inspection and downloading at www.regulations.gov. Executive Order 13132, Federalism Executive Order 13132 (Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either: (i) imposes substantial direct compliance costs on State and local governments and is not required by statute, or (ii) preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This proposed rule does not have federalism implications and does not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive Order. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 (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 on the private sector. This proposed rule would not impose any Federal mandates on any State, local, or Tribal governments, or on the private sector, within the meaning of the UMRA. Paperwork Reduction Act The information collection requirements contained in this proposed rule will be submitted to the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520). In accordance with the Paperwork Reduction Act, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information, unless the collection displays a currently valid OMB control number. The proposed rule would change the annual income determination requirement for households assisted with HOME TBRA from annual to bi- E:\FR\FM\29MYP2.SGM 29MYP2 46655 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules annual, which reduces the burden hours. The proposed rule includes a new provision in 24 CFR 92.250 to increase the maximum subsidy limit allowed for HOME projects based on whether the project shall meet a more comprehensive property standard that includes Green Building criteria, which would lead to a slight increase in burden for participating jurisdictions with qualified projects. The proposed rule would amend 24 CFR 92.252 to eliminate the requirement that a participating jurisdiction must submit to HUD a marketing plan for any HOME- separate functions, and would result in a decrease in paperwork burden. The proposed changes in 24 CFR 92.300 to define the qualifications for a CHDO would result in increased applications and certification, which may lead to an increase of paperwork burden. Overall, the proposed rule results in a net decrease of burden by 28,852 total estimated annual burden hours. The burden of the information collections in this proposed rule is estimated as follows: assisted rental units that have not achieved initial occupancy within six months of project completion in IDIS, which would reduce the reporting burden on participating jurisdictions with unoccupied HOME-assisted rental units. The proposed rule adds paragraph (g)(i) to 24 CFR 92.252 to permit an owner of small-scale housing to reexamine annual income every three years, rather than annually, therefore reducing burden for income determination. The proposed tenancy lease addendum, described in 24 CFR 92.253, would replace multiple, REPORTING AND RECORDKEEPING BURDEN 24 CFR section reference Number of parties lotter on DSK11XQN23PROD with PROPOSALS2 § 92.252(g)(i) Small scale housing income determination § 92.209(c)(1) Annual income determination for TBRA .... § 92.250 Increase maximum subsidy limits for ambitious green building. § 92.253 Tenant protections (including lease addendum requirement). § 92.300 Designation of CHDOs ....................................... § 92.251 Property standards and inspection requirements. § 92.252 6-month marketing plan for unoccupied rental units. § 92.507 Grant closeout procedures ................................. In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments from member of the public and affected agencies concerning this collection of information to: (1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) Evaluate the accuracy of the agency’s estimate of the burden of the proposed collection of information; (3) Enhance the quality, utility, and clarity of the information to be collected; and (4) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated collection techniques or other forms of information technology, e.g., permitting electronic submission of responses. Interested persons are invited to submit comments regarding the information collection requirements in this rule. Comments must refer to the proposal by name and docket number (FR–6144–P–01) and must be sent to: HUD Desk Officer, Office of Management and Budget, New Executive Office Building, VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 Frequency of responses Number of responses per party Estimated average time for requirements (hours) 2,000 72,000 188 Annual .............. Annual .............. Annual .............. 1 1 1 2 0.75 2 4,000 54,000 376 6,667 Annual .............. 1 3 20,001 600 6,000 Annual .............. Annual .............. 1 1 1.5 3 900 18,000 60 Annual .............. 1 1 60 652 Annual .............. 1 1 652 Washington, DC 20503, Fax: (202) 395–6947 And Reports Liaison Officer, Office of Community Planning and Development, Department of Housing and Urban Development, Room 7233, 7th Street SW, Washington, DC 20410. List of Subjects Interested persons may submit comments regarding the information collection requirements electronically through the Federal eRulemaking Portal at https://www.regulations.gov. HUD strongly encourages commenters to submit comments electronically. Electronic submission of comments allows the commenter maximum time to prepare and submit a comment, ensures timely receipt by HUD, and enables HUD to make comments immediately available to the public. Comments submitted electronically through the https://www.regulations.gov website can be viewed by other commenters and interested member of the public. Commenters should follow the instructions provided on that site to submit comments electronically. 24 CFR Part 92 PO 00000 Frm 00039 Total estimated annual burden (hours) Fmt 4701 Sfmt 4702 24 CFR Part 91 Aged, Grant programs—housing and community development, Homeless, Individuals with disabilities, Low- and moderate-income housing, Reporting and recordkeeping requirements. Administrative practice and procedure; Low and moderate income housing; Manufactured homes; Rent subsidies; Reporting and recordkeeping requirements. 24 CFR Part 570 Administrative practice and procedure; American Samoa; Community development block grants; Grant programs—education; Grant programs—housing and community development; Guam; Indians; Loan programs—housing and community development; Low and moderate income housing; Northern Mariana Islands; Pacific Islands Trust Territory; Puerto Rico; Reporting and recordkeeping requirements; Student aid; Virgin Islands. E:\FR\FM\29MYP2.SGM 29MYP2 46656 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules 24 CFR Part 982 Grant programs—housing and community development; Grant programs—Indians; Indians; Public housing; Rent subsidies; Reporting and recordkeeping requirements. For the reasons stated above, HUD proposes to amend 24 CFR parts 91, 92, 570, and 982 as follows: PART 91—CONSOLIDATED SUBMISSIONS FOR COMMUNITY PLANNING AND DEVELOPMENT PROGRAMS 1. The authority citation for part 91 continues to read as follows: ■ Authority: 42 U.S.C. 3535(d), 3601–3619, 5301–5315, 11331–11388, 12701–12711, 12741–12756, and 12901–12912. § 91.220 [Amended] 2. In § 91.220: a. Amend paragraph (l)(2)(v) by removing the citation to ‘‘92.254(a)(2)(iii)’’ and adding, in its place, a citation to ‘‘92.254(a)(2)(iv)’’; ■ b. Amend paragraph (l)(2)(vii)(D) by removing the citation to ‘‘92.253(d)’’ and adding, in its place, a citation to ‘‘92.253(e)’’; ■ c. Remove paragraph (l)(2)(viii). ■ ■ § 91.320 [Amended] 3. In § 91.320: a. Amend paragraph (k)(2)(v) by removing the citation to ‘‘92.254(a)(2)(iii)’’ and adding, in its place, a citation to ‘‘92.254(a)(2)(iv)’’; ■ b. Amend paragraph (k)(2)(vii)(D) by removing the citation to ‘‘92.253(d)’’ and adding, in its place, a citation to ‘‘92.253(e)’’; ■ c. Remove paragraph (k)(2)(viii). ■ ■ PART 92—HOME INVESTMENT PARTNERSHIPS PROGRAM 4. The authority citation for part 92 continues to read as follows: ■ § 92.2 5. In § 92.2: a. Remove the definition of ‘‘ADDI funds’’; ■ b. Amend the definition of ‘‘Commitment’’ by removing the word ‘‘official’’ in the introductory text to paragraph (1) and adding, in its place, the word ‘‘officials’’, by removing the word ‘‘downpayment’’ in paragraph (1)(i) and adding, in its place, the word ‘‘homeownership’’, and by removing the words ‘‘or subrecipient’’ throughout paragraph (2)(ii)(A); ■ c. Amend the definition of ‘‘Community housing development organization’’ by revising paragraphs (4), (5), (8)(i), and (9); lotter on DSK11XQN23PROD with PROPOSALS2 VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 Definitions. * Authority: 42 U.S.C. 3535(d) and 12701– 12839; 12 U.S.C. 1701x. ■ ■ d. Add the definition of ‘‘Community land trust’’ in alphabetical order; ■ e. Remove the definitions of ‘‘Displaced homemaker’’ and ‘‘First time homebuyer’’; ■ f. Amend the definition of ‘‘Homeownership’’ by removing the words ‘‘or in a’’ in the introductory text to the definition and adding, in their place, the word ‘‘or’’ and by removing the words ‘‘Low Income Housing Tax Credits’’ in paragraph (4) and adding, in their place, the words ‘‘Low-Income Housing Credits (26 U.S.C. 42)’’; ■ g. Add the definition of ‘‘Period of affordability’’ in alphabetical order; ■ h. Amend the definition of ‘‘Program income’’ by revising the introductory text and paragraphs (2) and (3); ■ i. Amend the definition of ‘‘Reconstruction’’ by revising the last sentence; ■ j. Amend the definition of ‘‘Single family housing’’ by removing the words ‘‘one-to four-family’’ and adding, in their place, the words ‘‘one-to fourunit’’; ■ k. Remove the definition of ‘‘Single parent’’; ■ l. Add the definition of ‘‘Small-scale housing’’ in alphabetical order; ■ m. Revise the definition of ‘‘State recipient’’; ■ n. Amend the definition of ‘‘Subrecipient’’ by removing the words ‘‘public agency’’ and adding, in their place, the words ‘‘governmental entity’’, by removing the word ‘‘downpayment’’ and adding, in its place, the word ‘‘homeownership’’, and by removing the word ‘‘solely’’; and ■ o. Amend the definition of ‘‘Tenantbased rental assistance’’ by removing the word ‘‘dwelling’’ and adding, in its place, the word ‘‘housing’’. The revisions and additions read as follows: ■ * * * * Community housing development organization means: * * * (4) Is tax exempt as follows: (i) The private nonprofit organization has a tax exemption ruling from the Internal Revenue Service under section 501(c)(3) or (4) of the Internal Revenue Code of 1986 (26 CFR 1.501(c)(3)–1 or 1.501(c)(4)–1)); (ii) The private nonprofit organization is a subordinate organization that has been included in its 501(c)(3) or (4) central organization’s group exemption letter by the Internal Revenue Service; or, (iii) The private nonprofit organization is wholly owned by the community housing development organization, as defined in this part, and PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 is disregarded as an entity separate from its owner organization for federal tax purposes. (5) Is not a governmental entity (including the participating jurisdiction, other jurisdiction, Indian tribe, public housing authority, Indian housing authority, housing finance agency, or redevelopment authority) and is not controlled by a governmental entity. An organization that is created by a governmental entity may qualify as a community housing development organization; however, no more than one-third of the board members of the organization may be officials or employees of the participating jurisdiction or governmental entity that created the community housing development organization. Further, no governmental entity may have the right to appoint more than one-third of the organization’s board members. The board members appointed by a governmental entity and the board members that are officials or employees of the participating jurisdiction or governmental entity that created the organization may not appoint any of the remaining two-thirds of the board members. The officers or employees of a governmental entity may not be officers or employees of a community housing development organization; * * * * * (8) * * * (i) Maintaining at least one-third of its governing board’s membership for residents of low-income neighborhoods, other low-income community residents, designees of low-income neighborhood organizations, or authorized representatives of nonprofit organizations in the community that address the housing or supportive service needs of residents of low-income neighborhoods, including homeless providers, Fair Housing Initiatives Program providers, Legal Aid, disability rights organizations, and victim service providers. For urban areas, ‘‘community’’ may be a neighborhood or neighborhoods, city, county, or metropolitan area; for rural areas, it may be a neighborhood or neighborhoods, town, village, county, or multi-county area; and * * * * * (9) Has a demonstrated capacity for carrying out housing projects assisted with Federal funds, Low-Income Housing Credits (26 U.S.C. 42), or local and state affordable housing funds. (i) To satisfy this requirement and demonstrate capacity as a developer of a HOME-assisted project, the nonprofit organization must have employees or volunteers with housing development E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules experience who will work directly on the HOME-assisted project. If a nonprofit organization is demonstrating capacity using a volunteer’s experience, the volunteer must serve as a board member or officer of the nonprofit organization, and the volunteer may not be compensated by or have their services donated by another organization. For its first year of funding as a community housing development organization, an organization may satisfy this requirement through a contract with a consultant who has housing development experience to train appropriate key staff of the organization; (ii) An organization that will own housing must demonstrate capacity to act as owner of a project and meet the requirements of § 92.300(a)(2); (iii) An organization that will sponsor housing must demonstrate capacity as a developer or capacity to act as owner, as described in paragraph (9)(i) and (ii) of this definition; and * * * * * Community land trust means a nonprofit organization that: (1) Has the development and maintenance of housing that is permanently affordable to low- and moderate-income persons as its primary purposes; (2) Is not sponsored or controlled by a for-profit organization; (3) Uses a lease, covenant, agreement, or other enforceable mechanisms to require housing and related improvements on land held by the community land trust to be affordable to low- and moderate-income persons for at least 30 years; and (4) Retains a right of first refusal or preemptive right to purchase the housing and related improvements on land held by the community land trust to maintain long-term affordability. * * * * * Period of affordability means the required period, as specified in § 92.252 and § 92.254, that requirements under this part apply to HOME-assisted housing. * * * * * Program income means gross income received by the participating jurisdiction, State recipient, or a subrecipient at any time, generated from the use of HOME funds or matching contributions. When program income is generated by housing that is only partially assisted with HOME funds or matching funds, the program income shall be the amount prorated to reflect the percentage of HOME funds invested VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 46657 in the project. Program income includes, but is not limited to, the following: * * * * * (2) Gross income from the use or rental of real property, owned by the participating jurisdiction or State recipient that was acquired, rehabilitated, or constructed, with HOME funds or matching contributions, less costs incidental to generation of the income (Program income does not include gross income from the use, rental, or sale of real property received by the project owner or developer, unless all or a portion of the income must be paid to the participating jurisdiction, subrecipient, or State recipient, in which case, the amount that must be paid to the participating jurisdiction, subrecipient, or State recipient is program income.); (3) Payments and repayments on grants, loans (i.e., principal and interest), or investments made using HOME funds or matching contributions, including such payments and repayments made after the period of affordability; * * * * * Reconstruction * * * Reconstruction is rehabilitation for purposes of this part, except that the property standards for new construction in § 92.251(a) apply to all reconstruction projects. * * * * * Small-scale housing means a rental housing project of no more than four units or a homeownership project with no more than three rental units on the same site. * * * * * State recipient means a unit of general local government designated by a State participating jurisdiction to receive HOME funds to administer all or some of the State participating jurisdiction’s HOME programs, own or develop affordable housing, provide homeownership assistance, or provide tenant-based rental assistance. * * * * * the requirements of this section are met. A unit of general local government separated by a body of water that is only accessible by the public through a permanent means other than a connecting road, bridge, railway, or highway may be considered geographically contiguous if the consortium demonstrates that the unit of general local government separated by the body of water is part of the same housing market and local commuting area as one or more members of the consortium. A local commuting area is the geographic area that encompasses neighborhoods where people live and are reasonably expected to routinely travel back and forth to a common employment hub, population center, or worksite. * * * * * (d) If the representative unit of general local government distributes HOME funds to member units of general local government, the representative unit is responsible for applying to the member units of general local government the same requirements as are applicable to subrecipients, including the written agreement requirements in 24 CFR 92.504(c)(2). * * * * * (g) If a consortium changes its representative unit of general local government but retains the same membership, the consortium shall still be considered the same unit of general local government for purposes of this part. If the representative unit of general local government changes and the composition of the consortium changes, either by adding or removing individual members, then the consortium shall be a new unit of general local government for purposes of this part and shall be required to comply with all applicable consolidated plan requirements in 24 CFR part 91. ■ 8. Amend § 92.201 by adding a new sentence to the end of paragraph (a)(2), and removing the last sentence of paragraph (b)(2) to read as follows: § 92.50 § 92.201 [Amended] 6. In § 92.50, amend paragraph (c)(3) by removing the words ‘‘poor households’’ and adding, in their place, the words ‘‘households below the poverty line’’. ■ 7. Amend § 92.101 by revising paragraph (a) introductory text and paragraph (d), and adding paragraph (g) to read as follows. ■ § 92.101 Consortia. (a) A consortium of geographically contiguous units of general local government is a unit of general local government for purposes of this part if PO 00000 Frm 00041 Fmt 4701 Sfmt 4702 Distribution of assistance. (a) * * * (2) * * * A participating jurisdiction may not commit HOME funds to a project outside its jurisdiction and within the boundaries of a contiguous local jurisdiction until it has secured the financial contribution of the jurisdiction in which the project is located. * * * * * ■ 9. In § 92.203: ■ a. Revise the introductory text of paragraph (a) and the heading of paragraph (b); ■ b. Amend paragraph (b)(1) introductory text by removing the E:\FR\FM\29MYP2.SGM 29MYP2 46658 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules citation ‘‘§ 92.252(h)’’ and adding, in its place, the citation ‘‘§ 92.252(g)’’; ■ c. Revise paragraph (b)(1)(ii) and the first sentence of paragraph (b)(1)(iii); ■ d. Revise the heading of paragraph (c); ■ e. Amend paragraph (c)(1) by removing the citation to ‘‘§§ 5.609(a) and (b) of this title’’ and adding, in their place, a citation to ‘‘24 CFR 5.609(a) and (b)’’; ■ f. Revise paragraph (d); ■ g. Amend paragraph (e)(1) by removing the citation to ‘‘§ 5.618 of this title’’ and adding, in its place, a citation to ‘‘24 CFR 5.618’’, and by removing the citation to ‘‘§ 5.609(a)(2) of this title’’ and adding, in its place, a citation to ‘‘24 CFR 5.609(a)(2)’’; ■ h. Amend paragraph (e)(3) by removing the citation to ‘‘§ 5.617 of this title’’ and adding, in its place, a citation to ‘‘24 CFR 5.617’’; ■ i. Amend paragraph (f)(1)(i) by removing the citation to ‘‘§ 5.611(a) of this title’’ and adding, in its place, a citation to ‘‘24 CFR 5.611(a)’’, and by removing the citation to ‘‘§§ 5.611(c) through (e) of this title’’ and adding, in its place, a citation to ‘‘24 CFR 5.611(c) through (e)’’; ■ j. Amend paragraph (f)(1)(ii) by removing the citation to ‘‘§ 92.252(b)(2)(i)’’ and adding, in its place, a citation to ‘‘§ 92.252(a)(2)(ii) or (iii)’’, by removing the citation to ‘‘§ 5.611(a) of this title’’ and adding, in its place, a citation to ‘‘24 CFR 5.611(a)’’, and by removing the citation to ‘‘§§ 5.611(c) through (e) of this title’’ and adding, in its place, a citation to ‘‘24 CFR 5.611(c) through (e)’’; and ■ k. Amend paragraph (f)(1)(iii) by removing the citation to ‘‘§ 5.611(a) of this title’’ and adding, in its place, a citation to ‘‘24 CFR 5.611(a)’’. The revisions and additions read as follows: lotter on DSK11XQN23PROD with PROPOSALS2 § 92.203 Income determinations. (a) Income eligibility. To determine a family is income-eligible, the participating jurisdiction must determine the family’s income as follows: * * * * * (b) Determining and documenting annual income. (1) * * * (ii) Obtain from the family a written statement or, where needed due to disability, a statement in another format, of the amount of the family’s annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request. If there is evidence that a tenant’s statement and certification provided in accordance VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 with § 92.203(b)(1)(ii) failed to completely and accurately state information about the family’s size or income, a tenant’s income must be reexamined in accordance with § 92.203(b)(1)(i). (iii) Obtain a written statement from the administrator of a government program which examines the annual income of the family each year and under which the family receives benefits. * * * * * (c) Definitions of ‘‘annual income.’’ * * * * * * * * (d) Use of income definitions. A participating jurisdiction may use either of the definitions of ‘‘annual income’’ in paragraph (c) of this section, however, the participating jurisdiction may use only one definition of ‘‘annual income’’ for each HOME-assisted program (e.g., downpayment assistance program) that it administers and only one definition for each rental housing project. For rental housing projects containing units assisted by a Federal or State projectbased rental subsidy program or tenants receiving Federal tenant-based rental assistance, where a participating jurisdiction is accepting a public housing agency, owner, or rental assistance provider’s determination of annual and adjusted income, the participating jurisdiction must calculate annual income in accordance with paragraph (c)(1) of this section so that only one definition of annual income is used in the rental housing project. * * * * * ■ 10. In § 92.205: ■ a. Revise paragraph (a)(2); ■ b. Remove the last sentence of paragraph (b)(1); ■ c. Add paragraph (b)(3); and ■ d. Revise the first sentence of paragraph (e)(2). The revisions and addition read as follows: § 92.205 Eligible activities: General. (a) * * * (2) Acquisition of vacant land or demolition may only be undertaken for a project that will provide affordable housing and meets the requirements for a specific local project in paragraph (2)(i) of the definition of ‘‘commitment’’ in § 92.2. * * * * * (b) * * * (3) The participating jurisdiction must establish the terms of assistance, subject to the requirements of this part. * * * * * (e) * * * (2) If project completion, as defined in § 92.2, does not occur within 4 years of PO 00000 Frm 00042 Fmt 4701 Sfmt 4702 the date of commitment of funds for a specific local project, the project is considered to be terminated and the participating jurisdiction must repay all funds invested in the project to the participating jurisdiction’s HOME Investment Trust Fund in accordance with § 92.503(b). * * * ■ 11. In § 92.206: ■ a. Amend paragraph (a)(1) by removing the citation ‘‘§ 92.251’’ and adding, in its place, the citation ‘‘§ 92.251(a)’’; ■ b. Amend paragraph (a)(2) by removing the citation ‘‘§ 92.251’’ and adding, in its place, the citation ‘‘§ 92.251(b)’’; ■ c. Amend paragraph (b)(1) by removing the word ‘‘single-family’’ and adding, in its place, the words ‘‘single family’’; ■ d. Amend the introductory text to paragraph (b)(2) by removing the words ‘‘affordability period’’ and adding, in their place, the words ‘‘period of affordability’’; ■ e. Revise paragraphs (b)(2)(ii), (c), (d)(1), and (d)(8). The revisions read as follows: § 92.206 Eligible project costs. * * * * * (b) * * * (2) * * * (ii) Require a review of management practices to demonstrate that disinvestment in the property has not occurred, that the long term needs of the project can be met, and that the feasibility of serving the targeted population over the minimum period of affordability of 15 years can be demonstrated; * * * * * (c) Acquisition costs. Costs of acquiring improved or unimproved real property and costs for a long-term ground lease, including costs of acquisition by homebuyers. (d) * * * (1) Architectural, engineering, or related professional services required to prepare plans, drawings, specifications, work write-ups, or for HUD environmental review or other environmental studies or assessments. The costs may be paid if they were incurred not more than 24 months before the date that HOME funds are committed to the project and the participating jurisdiction expressly permits HOME funds to be used to pay the costs in the written agreement committing the funds. * * * * * (8) Cost of property insurance during development. * * * * * E:\FR\FM\29MYP2.SGM 29MYP2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules § 92.207 [Amended] 12. In § 92.207, amend paragraph (e) by removing the words ‘‘under a cost allocation plan prepared’’. ■ 13. Amend § 92.208 by adding paragraph (c) to read as follows: ■ § 92.208 Eligible community housing development organization (CHDO) operating expense and capacity building costs. * * * * * (c) An organization that meets the definition of ‘‘community housing development organization’’ in § 92.2, except for the requirements in paragraph (9) of the definition, may receive HOME funds for operating expenses and capacity building costs in accordance with paragraph (a) of this section in order to develop demonstrated capacity and qualify as a community housing development organization. ■ 14. In § 92.209: ■ a. Amend paragraph (c)(1) by removing the last sentence; ■ b. Revise paragraphs (c)(2)(iv), (c)(3), (g), (h)(2), (h)(3)(ii), (i), and (j)(5); ■ c. Amend paragraph (j)(1) by removing the word ‘‘dwelling’’ and adding, in its place, the word ‘‘housing’’; ■ d. Add paragraph (j)(6); and ■ e. Remove paragraph (l). The revisions and addition read as follows: § 92.209 Tenant-based rental assistance: Eligible costs and requirements. lotter on DSK11XQN23PROD with PROPOSALS2 * * * * * (c) * * * (2) * * * (iv) Homebuyer program. HOME tenant-based rental assistance may assist a tenant who has been identified as a potential low-income homebuyer through a lease-purchase agreement, with monthly rental assistance payments for a period up to 36 months (i.e., 24 months, with a 12-month renewal in accordance with paragraph (e) of this section). The HOME tenantbased rental assistance payment may not be used to accumulate a downpayment or closing costs for the purchase; however, all or a portion of the homebuyer-tenant’s monthly contribution toward rent may be set aside for this purpose, in accordance with the lease-purchase agreement. If a participating jurisdiction determines that the tenant has met the leasepurchase criteria and is ready to assume ownership, HOME funds may be provided for downpayment assistance in accordance with the requirements of this part. * * * * * VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 (3) Existing tenants in projects that will receive HOME assistance. A participating jurisdiction may select low-income families currently residing in housing units that will be rehabilitated or acquired with HOME funds under the participating jurisdiction’s HOME program. Participating jurisdictions using HOME funds for tenant-based rental assistance programs may establish local preferences for the provision of this assistance. Families so selected may use the tenant-based assistance in the rehabilitated or acquired housing unit or in other qualified housing. * * * * * (g) Tenant protections. The tenant must have a lease that complies with the requirements in § 92.253(a)–(c) and (d)(2). (h) * * * (2) The participating jurisdiction must establish a minimum tenant contribution to rent, except that the participating jurisdiction may establish conditions in its written policies under which a tenant would be relieved of all or a portion of the minimum contribution due to financial hardship. (3) * * * (ii) The Section 8 Housing Choice Voucher Program payment standard in 24 CFR 982.503. (i) Housing standards. The participating jurisdiction must require the housing occupied by a family receiving tenant-based rental assistance under this section to meet the participating jurisdiction’s property standards under § 92.251. Initially and annually thereafter, the participating jurisdiction must determine the housing complies with its property standards and is decent, safe, sanitary, and in good repair in accordance with § 92.251(f). * * * * * (j) * * * (5) Paragraphs (b), (c), (d), (f), (g), and (i) of this section are applicable when HOME funds are provided for security deposit assistance, except that income determinations pursuant to paragraph (c)(1) of this section and inspections pursuant to paragraph (i) of this section are required only at the time the security deposit assistance is provided. (6) Surety bonds or security deposit insurance and similar instruments may not be used in lieu of or in addition to a security deposit in units occupied by tenants receiving tenant-based rental assistance. * * * * * ■ 15. Revise § 92.210 to read as follows: PO 00000 Frm 00043 Fmt 4701 Sfmt 4702 46659 § 92.210 Troubled HOME-assisted rental housing projects. (a) The provisions of this section apply only to an existing HOMEassisted rental project that, within the HOME period of affordability, is no longer financially viable or its physical viability has substantively deteriorated due to unforeseen circumstances. For purposes of this section, a HOMEassisted rental project is no longer financially viable if its operating costs significantly exceed its operating revenue, considering project reserves and the owner is unable to pay for necessary capital repair costs. For purposes of this section, physical viability means a project’s current or future ability to maintain affordability based on the physical characteristics and factors of the project’s site and improvements. HUD may approve the actions described in paragraphs (b) and (c) of this section to strategically preserve a rental project after consideration of market needs, available resources, and the likelihood of the long-term physical and financial viability of the project in preserving affordability. (b) Notwithstanding § 92.214, a participating jurisdiction may request and HUD may permit, pursuant to a written memorandum of agreement, a participating jurisdiction to invest additional HOME funds in the existing HOME-assisted rental project. The total HOME funding for the project (original investment plus additional investment) must be necessary to improve the physical and financial viability of the project and may not exceed the per-unit subsidy limit in § 92.250(a) in effect at the time of the additional investment. The use of HOME funds may include, but is not limited to, rehabilitation of the HOME units and recapitalization of project reserves for the HOME units (to fund capital costs). If additional HOME funds are invested, HUD may impose additional conditions, including requiring the participating jurisdiction to extend the period of affordability, increase the number of HOME-assisted units, and change the number or designation of Low HOME rent and High HOME rent units. (c) HUD may, through written approval, permit the participating jurisdiction to reduce the total number of HOME-assisted units or change the designation of units from Low HOME rent units to High HOME rent units where there are more than the minimum number of Low HOME rent units in the project. In determining whether to permit a reduction in the number of HOME-assisted units, HUD will take into account the required period of E:\FR\FM\29MYP2.SGM 29MYP2 46660 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules participating jurisdiction in anticipation of carrying out a HOME project; (8) Pay delinquent taxes, fees, or charges on properties to be assisted with HOME funds; (9) Pay for any cost that is not eligible under §§ 92.206 through 92.209; or (10) Pay for surety bonds, security deposit insurance, or similar instruments in lieu of or in addition to § 92.212 Pre-award costs. a security deposit in units occupied by * * * * * tenants receiving tenant-based rental (b) Administrative and planning costs. assistance (including assistance in (1) Eligible administrative and planning paying security deposits). costs may be incurred as of the (b) * * * beginning of the participating (3) The participating jurisdiction must jurisdiction’s consolidated program year prohibit project owners from charging (see 24 CFR 91.10) or the date HUD for: receives the consolidated plan (i) Surety bonds, security deposit describing the HOME allocation to insurance, or similar instruments in lieu which the costs will be charged, of or in addition to a security deposit in whichever is later. units; (2) In any year in which timely (ii) Fees that are not customarily Congressional appropriations have not charged in rental housing (e.g., laundry been provided for the HOME program, room access fees); and a participating jurisdiction may incur (iii) Fees to inspect units or correct eligible administrative and planning deficiencies in the property condition of costs as of the beginning of its program units or common areas of the project year or the date that HUD receives its that were not caused by the tenant. consolidated plan describing the HOME (4) Rental project owners may charge: allocation to which the costs will be (i) Reasonable application fees to charged, whichever is earlier. An prospective tenants; appropriation is not timely if the (ii) Parking fees to tenants only if such appropriation was signed into law less fees are customary for rental housing than 90 days before a participating projects in the neighborhood; and jurisdiction’s program year start date. (iii) Fees for services such as bus * * * * * transportation or meals, as long as the ■ 17. Amend § 92.214 by: services are voluntary and fees are ■ a. Revising paragraphs (a)(6) through charged for services provided. (9); § 92.216 [Amended] ■ b. Adding paragraph (a)(10); ■ c. Revising paragraph (b)(3); and ■ 18. In § 92.216, amend paragraphs ■ d. Adding paragraph (b)(4). (a)(2) and (b)(2) by removing the word The revisions and additions read as ‘‘dwelling’’ and adding, in its place, the follows. word ‘‘housing’’. affordability and the amount of HOME assistance provided to the project. ■ 16. In § 92.212: ■ a. Amend paragraph (a) by removing ‘‘may incur costs’’, and adding, in its place, ‘‘may incur costs described in this section’’; and ■ b. Revise paragraph (b). The revision reads as follows: lotter on DSK11XQN23PROD with PROPOSALS2 § 92.214 Prohibited activities and fees. § 92.217 (a) * * * (6) Provide assistance (other than tenant-based rental assistance, assistance to a homebuyer to acquire housing previously assisted with HOME funds, assistance permitted under § 92.210, or assistance to preserve affordability of homeownership housing in accordance with § 92.254(b)) to a project previously assisted with HOME funds during the period of affordability. However, additional HOME funds may be committed to a project for up to one year after project completion (see § 92.502), but the amount of HOME funds in the project may not exceed the maximum per-unit subsidy amount established under § 92.250 at the time of underwriting; (7) Pay for the acquisition of property owned by the participating jurisdiction, unless such property is acquired by the VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 [Amended] 19. Amend § 92.217 by removing the word ‘‘dwelling’’ and adding, in its place, the word ‘‘housing’’. ■ 20. Amend § 92.219 by revising the first sentence of paragraphs (b)(2)(ii) and the first sentence of paragraph (b)(2)(iii) to read as follows: ■ § 92.219 Recognition of matching contribution. * * * * * (b) * * * (2) * * * (ii) The participating jurisdiction must execute, with the owner of the housing (or, if the participating jurisdiction is the owner, with the manager or developer), a written agreement that imposes and enumerates all of the affordability requirements in § 92.252 and tenant protection requirements in § 92.253(a)–(c) and PO 00000 Frm 00044 Fmt 4701 Sfmt 4702 (d)(2) or § 92.254, whichever are applicable; the property standards requirements of § 92.251; and income determinations made in accordance with § 92.203. * * * (iii) A participating jurisdiction must establish a procedure to monitor HOME match-eligible housing to ensure continued compliance with the requirements of § 92.203 (Income determinations), § 92.252 (Qualification as affordable housing: Rental housing), § 92.253(a)–(c) and (d)(2) (Tenant protections), and § 92.254 (Qualification as affordable housing: Homeownership). * * * * * * * * ■ 21. Amend § 92.221 by adding paragraphs (b)(1) and (2) to read as follows: § 92.221 Match credit. * * * * * (b) * * * (1) To apply an excess matching contribution to a future fiscal year’s match liability, the participating jurisdiction must have documentation, at the time of application, demonstrating the matching contribution complied with the matching requirements at §§ 92.218– 92.221 at the time it was made. Documentation must include project records of the type and amount of the matching contribution. (2) A participating jurisdiction must maintain the records in paragraph (b)(1) of this section for five years from the date of application of the excess matching contribution to the liability. * * * * * ■ 22. Amend § 92.250 by revising paragraphs (a) and (b)(3)(i), and adding paragraph (c) to read as follows: § 92.250 Maximum per-unit subsidy amount, underwriting, and subsidy layering. (a) Maximum per-unit subsidy amount. The total amount of HOME funds that a participating jurisdiction may invest on a per-unit basis in affordable housing may not exceed the per-unit dollar limits established by HUD in accordance with section 212(e) of the Act. HUD will publish the perunit dollar limits for the area in which the housing is located annually. HUD will publish its methodology for determining maximum per-unit dollar limits through a notice in the Federal Register with the opportunity for comment. (b) * * * (3) * * * (i) An underwriting analysis of the homeowner’s ability to repay the HOME-funded rehabilitation loan is E:\FR\FM\29MYP2.SGM 29MYP2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules required only if the loan is an amortizing loan; and * * * * * (c) A participating jurisdiction may exceed the per-unit dollar limits described in paragraph (a) of this section by up to 5 percent if the project meets one of the green building standards identified by HUD and published in the Federal Register. ■ 23. In § 92.251: ■ a. Revise the section heading and paragraph (a)(2); ■ b. Add paragraph (a)(3); ■ c. Revise paragraphs (b)(1)(vi) and (viii); ■ d. Add paragraphs (b)(1)(xi) and (xii); ■ e. Amend paragraph (b)(2) by removing the words ‘‘The construction documents’’ and adding, in their place, the words ‘‘The construction contract and documents’’; ■ f. Revise paragraph (b)(3), the first sentence of paragraph (c)(1), and paragraph (c)(3); ■ g. Revise the introductory text of paragraph (f); ■ h. Amend the introductory text of paragraph (f)(1) by removing the words ‘‘affordability period’’ and adding, in their place, the words ‘‘period of affordability’’ and by removing the words ‘‘each of the following’’ and adding, in their place, the words ‘‘all of the following’’; ■ i. Revise paragraphs (f)(1)(i), (3), (4), and (5); and ■ j. Add new paragraph (g). The revisions and additions read as follows: lotter on DSK11XQN23PROD with PROPOSALS2 § 92.251 Property standards and inspections. (a) * * * (2) Construction progress and final inspections. The participating jurisdiction must conduct on-site progress and final inspections of construction to ensure that work is done in accordance with the applicable codes, the construction contract, and construction documents. Before completing the project in the disbursement and information system established by HUD, the participating jurisdiction must perform an on-site inspection of the project to determine that all contracted work has been completed and that the project complies with the property standards and requirements in paragraph (a) of this section. All inspections performed by the participating jurisdiction must be conducted in accordance with the participating jurisdiction’s inspection procedures. (3) HUD requirements. All new construction projects must also meet the following requirements upon project VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 completion, unless an earlier deadline is otherwise required by the applicable statute, regulation, or standard: (i) Accessibility. The housing must meet the accessibility requirements of 24 CFR part 8, which implements Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), and Titles II and III of the Americans with Disabilities Act (42 U.S.C. 12131–12189) implemented at 28 CFR parts 35 and 36, as applicable. Covered multifamily dwellings, as defined at 24 CFR 100.201, must also meet the design and construction requirements at 24 CFR 100.205, which implements the Fair Housing Act (42 U.S.C. 3601–3619). (ii) Energy Efficiency Standards. Newly constructed housing shall qualify as affordable housing under this part only if it meets the energy efficiency standards promulgated by the Secretary in accordance with section 109 of the Cranston–Gonzalez National Affordable Housing Act (42 U.S.C. 12709). (iii) Disaster mitigation. Where relevant, the housing must be constructed to mitigate the impact of future disasters (e.g., earthquakes, hurricanes, flooding, and wildfires) in accordance with State and local codes and ordinances, and such other requirements that HUD may establish. (iv) Written cost estimates, construction contracts and construction documents. The participating jurisdiction must ensure the construction contract(s) and construction documents describe the work to be undertaken in adequate detail so that inspections can be conducted. The participating jurisdiction must review and approve written cost estimates for construction and determining that costs are reasonable. (v) Broadband infrastructure. For new commitments made after January 19, 2017, for a new construction housing project of a building with more than 4 rental units, the construction must include installation of broadband infrastructure, as this term is defined in 24 CFR 5.100, except where the participating jurisdiction determines and, in accordance with § 92.508(a)(3)(iv), documents the determination that: (A) The location of the new construction makes installation of broadband infrastructure infeasible; or (B) The cost of installing the infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden. (vi) Carbon monoxide detection. The common areas of a project and all units within the project must meet or exceed PO 00000 Frm 00045 Fmt 4701 Sfmt 4702 46661 the carbon monoxide detection standards adopted by HUD through Federal Register notice; and (vii) Green building standards. If a participating jurisdiction is exceeding the maximum per-unit subsidy limit pursuant to § 92.250(c), then upon completion, the housing must meet one of the green building standards established by HUD. (b) * * * (1) * * * (vi) Disaster mitigation. Where relevant, the participating jurisdiction’s standards must require the housing to be improved to mitigate the impact of future disasters (e.g., earthquake, hurricanes, flooding, and wildfires) in accordance with State and local codes and ordinances, and such other requirements that HUD may establish. * * * * * (viii) HUD housing standards. The standards of the participating jurisdiction must be such that, upon completion, the HOME-assisted project and units will be decent, safe, sanitary, and in good repair. This means that the HOME-assisted project and units will meet the standards in 24 CFR 5.703, except that paragraph (b)(1)(xi) of this section shall apply instead of the carbon monoxide detection requirements at 24 CFR 5.703(b)(2) and (d)(6). For all HOME-assisted projects and units, the requirements at 24 CFR 5.705–5.713 do not apply. At minimum, the participating jurisdiction’s rehabilitation standards must require correction of the specific deficiencies published in the Federal Register for HOME-assisted projects and units. For SRO housing, 24 CFR 5.703(d) shall only apply to the extent that the SRO unit contains the room or facility referenced in 24 CFR 5.703(d). (A) The participating jurisdiction may accept a determination made under another HUD program, upon the completion of the rehabilitation, that the HOME-assisted project and units are decent, safe, sanitary, and in good repair in an inspection conducted under the National Standards for the Condition of HUD housing (24 CFR part 5, subpart G) or an alternative inspection standard, which HUD may establish through Federal Register notice. (B) If a participating jurisdiction is accepting a determination pursuant to paragraph (b)(1)(viii)(A), then the participating jurisdiction must document the determination in accordance with § 92.508(a)(3)(iv) and is not required to perform a HOME inspection of the project and units for compliance with 24 CFR 5.703. * * * * * E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 46662 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules (xi) Carbon monoxide detection. The common areas of a project and all units within the project must meet or exceed the carbon monoxide detection standards adopted by HUD through Federal Register notice. (xii) Green building standards. If a participating jurisdiction is exceeding the maximum per-unit subsidy limit pursuant to § 92.250(c), then upon completion of the rehabilitation the housing must meet one of the green building standards established by HUD. * * * * * (3) Frequency of inspections. The participating jurisdiction must conduct an initial property inspection to identify the deficiencies that must be addressed and must conduct on-site progress and final inspections to determine that work was done in accordance with the construction contract and construction documents. Before completing the project in the disbursement and information system established by HUD, the participating jurisdiction must perform an on-site inspection of the project to determine that all contracted work has been completed and that the project complies with the property standards and requirements in paragraph (b) of this section. All inspections performed by the participating jurisdiction must be conducted in accordance with the participating jurisdiction’s inspection procedures. (c) * * * (1) Existing housing that is acquired with HOME assistance for rental housing, and that was newly constructed or rehabilitated less than 12 months before the date of commitment of HOME funds, must meet the property standards for new construction in paragraph (a) or rehabilitation in paragraph (b) of this section, as applicable. * * * * * * * * (3) Existing housing that is acquired for homeownership (e.g., downpayment assistance) must be decent, safe, sanitary, and in good repair. The participating jurisdiction must establish standards to determine that the housing is decent, safe, sanitary, and in good repair. At minimum, the standards must provide that the housing meets all applicable State and local housing quality standards and code requirements and the housing does not contain the specific deficiencies established by HUD based on the applicable standards in 24 CFR 5.703 and published in the Federal Register for HOME-assisted projects and units. The housing must also meet or exceed the carbon monoxide detection VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 standards adopted by HUD through Federal Register notice. (i) The participating jurisdiction must inspect the housing and document compliance with paragraph (c)(3) of this section based upon an inspection that is conducted no earlier than 90 days before the commitment of HOME assistance. If the housing does not meet these standards, the housing must be rehabilitated to meet the standards of paragraph (c)(3) before the acquisition, except as provided in paragraph (c)(3)(ii) of this section. (ii) If the housing will not be rehabilitated to meet the standards in paragraph (c)(3) of this section before acquisition, then the housing may still be acquired if all of the following conditions are satisfied: (A) The written agreement between the participating jurisdiction and the homebuyer requires the property to meet the standards within 6 months of acquisition with HOME assistance; (B) Funding is secured to complete the rehabilitation necessary to comply with the standards; and (C) The participating jurisdiction conducts a final inspection within six months after acquisition and determines that the property meets the standards. (iii) All inspections performed by the participating jurisdiction must be conducted in accordance with the participating jurisdiction’s inspection procedures. * * * * * (f) Ongoing property condition standards and inspections: Rental housing and housing occupied by tenants receiving HOME tenant-based rental assistance. (1) * * * (i) Compliance with State and local codes, ordinances, and requirements. The participating jurisdiction’s standards must require the housing to meet all applicable State and local code requirements and ordinances. In the absence of existing applicable State or local code requirements and ordinances, at a minimum, the participating jurisdiction’s ongoing property standards must provide that the property does not contain the specific deficiencies established by HUD based on the applicable standards in 24 CFR 5.703 and published in the Federal Register for HOME rental housing (including manufactured housing) and housing occupied by tenants receiving HOME tenant-based rental assistance. The participating jurisdiction’s property standards are not required to comply with 24 CFR 5.705 through 5.713. * * * * * (3) Ongoing inspections of HOMEassisted rental housing. During the PO 00000 Frm 00046 Fmt 4701 Sfmt 4702 period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements: (i) Frequency of inspections. The participating jurisdiction must perform an on-site inspection within 12 months after project completion and complete one of the following every 3 years during the period of affordability: (A) Perform an on-site inspection in accordance with the participating jurisdiction’s inspection procedures to determine compliance with the property standards; or (B) Accept a determination made under another HUD program, made within the past 12 months, that the HOME-assisted project and units are decent, safe, sanitary, and in good repair in an inspection conducted under the National Standards for the Condition of HUD housing (24 CFR part 5, subpart G) or an alternative inspection standard, which HUD may establish through Federal Register notice. If a participating jurisdiction is accepting a determination made under another HUD program, then the participating jurisdiction must document the determination in accordance with § 92.508(a)(3)(iv) and is not required to perform an on-site HOME inspection of the project and the units for compliance with 24 CFR 5.703. (ii) Annual certification. The owner must annually certify to the participating jurisdiction that each building and all HOME-assisted units in the project are suitable for occupancy, taking into account State and local health, safety, and other applicable codes, ordinances, and requirements, and the ongoing property standards established by the participating jurisdiction. (iii) Units inspected. Inspections must be based on a random sample of 20 percent of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units). For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOMEassisted units and the inspectable areas for each building with HOME-assisted units. E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules (iv) Financial oversight. During the period of affordability, the participating jurisdiction must examine at least annually the financial condition of projects with 10 or more HOME-assisted units to determine the continued financial viability of the housing and must take actions to correct problems, to the extent feasible. (4) Annual inspections for housing with tenants receiving HOME tenantbased rental assistance. All housing occupied by tenants receiving HOME tenant-based rental assistance must meet the property standards of paragraph (f)(1) of this section. The participating jurisdiction must annually determine the housing is decent, safe, sanitary, and in good repair through one of the following methods: (i) An annual on-site inspection in accordance with its inspection procedures for annual inspections to determine the housing meets the property standards in paragraph (f)(1) of this section; or (ii) An inspection by another HUD program conducted within the past 3 months under the National Standards for the Condition of HUD housing (24 CFR part 5, subpart G) or an alternative inspection standard, which HUD may establish through Federal Register notice. A participating jurisdiction may move its inspection cycle to align with an inspection covered by this paragraph. If a participating jurisdiction is accepting an inspection pursuant to this paragraph, then the participating jurisdiction must document the inspection’s determination that the housing is decent, safe, sanitary, and in good repair in accordance with § 92.508(a)(3)(iv) and is not required to perform a HOME inspection of the project and units for compliance with 24 CFR 5.703. (5) Corrective and remedial actions. The participating jurisdiction must have procedures for requiring that timely corrective and remedial actions are taken by the owner to address identified deficiencies. (i) Health and safety deficiencies. Health and safety deficiencies must be corrected immediately. Except for smallscale housing, the participating jurisdiction must adopt a more frequent inspection schedule for properties that have been found to have health and safety deficiencies. For small-scale housing, the participating jurisdiction may adopt a more frequent inspection schedule if the small-scale housing is found to have health and safety deficiencies, as described in its inspection procedures. (ii) Other deficiencies. If there are observed deficiencies for any of the VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 inspectable areas in the property standards established by the participating jurisdiction, in accordance with the inspection procedures, a follow-up on-site inspection to verify that deficiencies are corrected must occur within 12 months. The participating jurisdiction may establish a list of non-hazardous deficiencies for which correction can be verified by third party documentation (e.g., paid invoice for work order) rather than reinspection. (g) Inspection procedures. The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209. ■ 24. Revise § 92.252 to read as follows: § 92.252 Qualification as affordable housing: Rental housing. The HOME-assisted units in a rental housing project must be occupied by households that are eligible as lowincome families and must meet the requirements of this section to qualify as affordable housing. If the housing is not occupied by eligible tenants within six months following the date of project completion, the participating jurisdiction must revise its marketing plan to enable the project to reach required occupancy. The participating jurisdiction must repay HOME funds invested in any housing unit that has not been rented to eligible tenants within 18 months after the date of project completion. The affordability requirements in this section also apply to the HOME-assisted non-owneroccupied units in single family housing purchased with HOME funds in accordance with § 92.254. A tenant must have a written lease that complies with § 92.253. (a) HOME Rent Limits. The rent for a HOME-assisted unit must not exceed the rent limits in this section. HUD will publish the HOME rent limits on an annual basis, with adjustments for number of bedrooms in the unit. The rent limits do not apply to any payment provided under a Federal or State rental assistance or subsidy program. Regardless of changes in fair market rents and in median income over time, the rents for a project are not required to be lower than the HOME rent limits for the project in effect at the time of project commitment. The participating PO 00000 Frm 00047 Fmt 4701 Sfmt 4702 46663 jurisdiction may designate (in its written agreement with the owner) more than the minimum HOME units in a rental housing project, regardless of project size. The rent limits apply to the rent plus the utilities or utility allowance: (1) High HOME Rent Limits. The rent does not exceed the lesser of: (i) The fair market rent for existing comparable units in the area as established by HUD under 24 CFR 888.111; or (ii) 30 percent of the adjusted income of a family whose annual income equals 65 percent of the median income for the area, as determined by HUD. (2) Low HOME Rent Limits. In rental projects with five or more HOMEassisted rental units, at least 20 percent of the HOME-assisted units must be occupied by very low-income families and meet one of the following: (i) The rent does not exceed 30 percent of the annual income of a family whose income equals 50 percent of the median income for the area, as determined by HUD. If the rent determined under this paragraph is higher than the fair market rent under paragraph (a)(1) of this section, then the maximum rent for units under this paragraph is the fair market rent under paragraph (a)(1)(i) of this section; or (ii) The rent contribution of the family is not more than 30 percent of the family’s adjusted income. (3) HOME Rent Limits for SRO projects. (i) For SRO units that have both sanitary and food preparation facilities, the rent limit is the zero-bedroom fair market rent. The project must meet the requirements of paragraphs (a)(1) and (2) of this section. (ii) For SRO units that have no sanitary or food preparation facilities or only one of the two, the rent limit is 75 percent of the zero-bedroom fair market rent. The project is not required to have Low HOME rent units but must meet the occupancy requirements of paragraph (a)(2) of this section. (b) Utility allowances. The participating jurisdiction must establish maximum monthly allowances for utilities and services (excluding telephone) and update the allowances annually. The participating jurisdiction may determine the utility allowance for the project based on the type of utilities and services paid by the tenant, including any energy efficiency measures. The participating jurisdiction may use any of the following for its maximum monthly allowances: the HUD Utility Schedule Model, the utility allowance established by the local E:\FR\FM\29MYP2.SGM 29MYP2 46664 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules public housing authority, or other method approved by HUD. (c) Review and approval of rents. The participating jurisdiction must review and approve rents proposed by the owner for units, subject to the rent limits in paragraph (a) of this section. For all units subject to the rent limits in paragraph (a) of this section for which the tenant is paying utilities and services, the participating jurisdiction must ensure that the rents do not exceed the rent limits in paragraph (a) of this section minus the monthly allowances for utilities and services in paragraph (b) of this section. (d) Period of affordability. The HOME-assisted units must meet requirements under this part for the applicable period specified in the following table, beginning from project completion. (1) The affordability requirements, including the applicable rent limits, period of affordability, and income requirements: (i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership; (ii) Must be imposed by a deed or use restriction, lien on real property, a covenant running with the land, a recorded agreement restricting the use of the property, or other mechanisms approved by HUD in writing, under which the participating jurisdiction has the right to require specific performance (except that the participating jurisdiction may provide that the affordability requirements may terminate upon foreclosure or transfer in lieu of foreclosure); and (iii) Must be recorded in accordance with State recordation laws. (2) The participating jurisdiction may use purchase options, rights of first refusal, or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure in order to preserve affordability. (3) The affordability requirements shall be revived according to the original terms if, during the period of affordability, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property. (4) The termination of the affordability requirements on the project does not terminate the participating jurisdiction’s repayment obligation under § 92.503(b). Minimum period of affordability in years Rental housing activity lotter on DSK11XQN23PROD with PROPOSALS2 Rehabilitation or acquisition of existing housing per unit amount of HOME funds: Under $15,000 ............................................ $15,000 to $40,000 ........................................................................................................................................................................ Over $40,000 or rehabilitation involving refinancing ..................................................................................................................... New construction or acquisition of newly constructed housing .................................................................................................... (e) Subsequent rents during the period of affordability. (1) The HOME rent limits are recalculated on a periodic basis after HUD determines fair market rents and median incomes. HUD then publishes the updated HOME rent limits. (2) The participating jurisdiction must provide project owners with information on updated HOME rent limits so that rents may be adjusted (not to exceed the rent limits in paragraph (a) of this section) in accordance with the written agreement between the participating jurisdiction and the owner. Owners must annually provide the participating jurisdiction with information on rents and occupancy of HOME-assisted units to demonstrate compliance with this section. The participating jurisdiction must review rents for compliance and approve or disapprove them every year. (3) Any increase in rents for HOMEassisted units is subject to the provisions of outstanding leases, and in any event, the owner must provide tenants of those units not less than 60 days prior written notice before implementing any increase in rents. (f) Adjustment of HOME rent limits for an existing project. (1) Changes in fair market rents and in median income over time should be sufficient to maintain the financial VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 viability of a project within the HOME rent limits in this section. (2) HUD may adjust the HOME rent limits for a project, only if HUD finds that an adjustment is necessary to support the continued financial viability of the project and only by an amount that HUD determines is necessary to maintain continued financial viability of the project. HUD expects that this authority will be used sparingly. (g) Tenant Income. The income of each tenant must be determined initially in accordance with § 92.203(b)(1)(i) unless the participating jurisdiction accepts an annual income determination pursuant to § 92.203(a)(1) or § 92.203(a)(2) or determines income in accordance with § 92.203(b)(2). In addition, each year during the period of affordability, the participating jurisdiction must require the project owner to re-examine each tenant’s annual income in accordance with the option in § 92.203(b)(1) selected by the participating jurisdiction and included in the written agreement, except as follows: (1) A participating jurisdiction may permit an owner of small-scale housing to re-examine each tenant’s annual income every third year, instead of annually, during the period of affordability. PO 00000 Frm 00048 Fmt 4701 Sfmt 4702 5 10 15 20 (2) A participating jurisdiction that permits an owner of a multifamily project with a period of affordability of ten years or more to re-examine a tenant’s annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must re-examine the income of each tenant in accordance with § 92.203(b)(1)(i), at minimum, every sixth year during the period of affordability; and, (3) If the participating jurisdiction accepts an annual income determination pursuant to § 92.203(a)(1) or § 92.203(a)(2), an owner is not required to re-examine a tenant’s annual income in accordance with § 92.203(b) for HOME. (h) Over-income tenants. (1) HOME-assisted units continue to qualify as affordable housing despite a temporary noncompliance caused by increases in the incomes of existing tenants if actions satisfactory to HUD are being taken to ensure that all vacancies are filled in accordance with this section until the noncompliance is corrected. (2) A tenant who no longer qualifies as low-income must pay a rent amount equal to the lesser of the amount payable by the tenant under State or local law or 30 percent of the family’s adjusted income, except that: (i) A tenant of a HOME-assisted unit subject to rent restrictions under section E:\FR\FM\29MYP2.SGM 29MYP2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules 42 of the Internal Revenue Code of 1986 (26 U.S.C. 42) must pay a rent amount that complies with section 42 of the Internal Revenue Code of 1986; and (ii) A tenant in a HOME-assisted unit designated as floating pursuant to paragraph (j) of this section shall pay a rent amount no greater than the fair market rent for comparable, unassisted units in the neighborhood. (i) Surety bonds. Surety bonds or security deposit insurance and similar instruments may not be used in lieu of or in addition to a security deposit in HOME-assisted units. (j) Fixed and floating HOME units. In a project containing HOME-assisted and other units, the participating jurisdiction may designate fixed or floating HOME units. This designation must be made at the time of project commitment in the written agreement between the participating jurisdiction and the owner, and the HOME units must be identified not later than the time of initial unit occupancy. Fixed units remain the same throughout the period of affordability. Floating units are changed to maintain conformity with the requirements of this section during the period of affordability so that the total number of housing units meeting the requirements of this section remains the same, and each substituted unit is comparable in terms of size, features, and number of bedrooms to the originally designated HOME-assisted unit. (k) Tenant selection. The tenants must be selected in accordance with § 92.253(e). (l) Ongoing responsibilities. The participating jurisdiction’s responsibilities for on-site inspections and financial oversight of rental projects are set forth in § 92.251(f). ■ 25. Revise § 92.253 to read as follows: lotter on DSK11XQN23PROD with PROPOSALS2 § 92.253 Tenant protections and selection. (a) Lease Contents. For rental housing assisted with HOME funds and tenantbased rental assistance, there must be a written lease, in an accessible format if necessary due to a disability, between the tenant and owner that is for a period of not less than 1 year, unless by mutual agreement between the tenant and the owner, a shorter period is specified. Any changes to the lease must be in writing. The owner must provide the participating jurisdiction with a written lease or a revision to a written lease before it is executed. The lease shall contain: (1) More than one convenient and accessible method to communicate directly with the owner or the property management staff, including in person, VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 by telephone, email, or through a web portal; (2) The participating jurisdiction’s contact information for the HOME program; (3) The VAWA lease term/addendum required under § 92.359(e), except as otherwise provided by § 92.359(b); and (4) The HOME tenancy addendum described in paragraph (b) of this section. (b) HOME tenancy addendum. The terms of the HOME tenancy addendum shall prevail over any conflicting provisions of the lease. The terms and conditions of the written lease, the HOME tenancy addendum, the VAWA addendum listed in paragraph (a) of this section, and any addendum required by another Federal or State affordable housing program shall constitute and contain the sole and entire agreement between the owner and the tenant and no prior or contemporaneous oral or written representation or agreement between the owner or tenant shall have legal effect. The HOME tenancy addendum shall contain the following minimum requirements: (1) Physical condition of unit and project. (i) The owner shall maintain the physical condition of the unit and project so that it meets the participating jurisdiction’s property standards and State and local code requirements in accordance with § 92.251(f); (ii) With respect to maintenance and repairs to a housing unit, the owner shall: (A) Provide tenants with the expected time frames for maintaining or repairing units as soon as practicable; (B) Professionally maintain and repair units and the common areas of the project in accordance with the participating jurisdiction’s property standards as soon as practicable; and (C) Not charge a tenant for normal wear and tear or damage to the unit or common areas of a project unless due to negligence, recklessness, or intentional acts by the tenant. (iii) If the owner is required to repair a life-threatening deficiency impacting the tenant, and the repairs cannot be completed on the day the lifethreatening deficiency is identified, the tenant shall promptly be relocated into housing that is decent, safe, sanitary, and in good repair and that provides the same or a greater level of accessibility, or other physically suitable lodging, at no additional cost to the tenant, until the repairs are completed, and where it may be necessary, reasonable accommodations must continue to be provided during the relocation; PO 00000 Frm 00049 Fmt 4701 Sfmt 4702 46665 (iv) The owner shall provide tenants with continued, uninterrupted utility service in projects with ownercontrolled utility services unless the interruption is not within the control of the owner (e.g., a general power outage). (2) Use and occupancy of the unit and project. (i) A family may reside in the unit with a foster child, foster adult, and/or live-in aide; (ii) Except for shared housing in tenant-based rental assistance, the tenant’s household shall have the right to exclusive use and occupancy of the leased unit; (iii) The owner may only enter the dwelling unit: (A) When the owner provides reasonable advance notification to the tenant and enters during reasonable hours for the purpose of performing routine inspections and maintenance, for making improvement or repairs, or to show the dwelling unit for re-leasing. A written statement, or, where necessary due to disability, a statement that is accessible to the tenant, specifying the purpose of the owner’s entry delivered to the dwelling unit at least 2 days before such entry shall be considered reasonable advance notification; (B) At any time without advance notification when there is reasonable cause to believe that an emergency requiring entry to the unit exists; and (C) If the tenant and all adult members of the household are absent from the dwelling unit at the time of entry, the owner shall provide the tenant with a written statement, or, where necessary due to disability, a statement that is accessible to the tenant, specifying the date, time, and purpose of entry. (iv) The tenant’s household shall have reasonable access and use of the common areas of the project; (v) Tenants shall be able to organize, create tenant associations, convene meetings, distribute literature, and post information; and (vi) A tenant may not be required to accept supportive services that are offered unless the tenant is living in transitional housing and such supportive services are required in connection with the transitional housing. (3) Notice. (i) A tenant must be notified in writing, or, where necessary due to disability, a statement that is accessible to the tenant, of the specific grounds for any proposed adverse action by the owner. Such adverse action includes, but is not limited to, imposition of E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 46666 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules charges for damages that require maintenance and repair; (ii) An owner must notify tenants within 5 business days of any changes of ownership, including foreclosure of the property, and provide at least 30 days notice before an impending sale or foreclosure of the property; and (iii) The owner may not institute a lawsuit against the tenant without providing notice to the tenant. (4) A Tenant’s rights to available legal proceedings and remedies. (i) The tenant shall not be required by the owner to agree to be sued, admit guilt, or agree to a judgment in favor of the owner in a lawsuit brought in connection with the lease; (ii) The owner may not take, hold, or sell personal property of a household member without notice to the tenant and a court decision on the rights of the parties. This prohibition, however, does not apply to an agreement by the tenant concerning disposition of personal property remaining in the housing unit after the tenant has moved out of the unit. The owner may dispose of this personal property in accordance with State law; (iii) The tenant may hold the owner or the owner’s agents legally responsible for any action or failure to act, whether intentional or negligent; (iv) In any legal proceedings involving tenant and owner, the owner and tenant agree that the tenant shall be able to exercise the tenant’s right to: (A) Obtain independent legal representation in any legal proceedings in connection with the lease, including in any non-binding arbitration or alternative dispute resolution process; (B) Have a trial by jury where such right is available to a tenant under Federal, State, or local law; and (C) Appeal, or to otherwise challenge in court, a court decision in connection with the lease where such right is available to the tenant under Federal, State, or local law; (v) The tenant may only be required to pay the owner’s attorney’s fees or other legal costs if the tenant loses in a court proceeding between the owner and the tenant. (5) Protection against retaliation. (i) An owner may not unreasonably interfere with the tenant’s comfort, safety, or enjoyment of a rental unit or retaliate against a tenant, whether for the purpose of causing the housing to become vacant or otherwise, including but not limited to: (A) Recovery of, or attempt to recover, possession of the housing unit in a manner that is not in accordance with paragraph (d) of this section; VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 (B) Decreasing services to the housing unit (e.g., trash removal, maintenance) or increasing the obligations of a tenant in a manner that is not in accordance with the requirements of this part; (C) Interfering with a tenant’s right to privacy under applicable State or local law; (D) Harassing a household or their lawful guests; and (E) Refusing to honor the terms of the lease. (ii) A tenant may exercise any right of tenancy without fear of an owner unreasonably interfering with the tenant’s comfort, safety, or enjoyment of a rental unit or retaliating against a tenant, including but not limited to: (A) Reporting of inadequate housing conditions of the housing unit or project to the owner, the participating jurisdiction, code enforcement officials, or HUD; (B) Requesting enforcement of the written lease or any protections guaranteed under this part; and (C) Requesting or obtaining enforcement of any applicable protections under Federal, State, or local law. (6) Confidentiality. An owner will keep all records containing personally identifying information of any individual or family who applies for or lives in a HOME-assisted rental unit secure and confidential. (7) Prohibition on Discrimination. The owner shall operate housing assisted under this part in accordance with all applicable nondiscrimination and equal opportunity requirements pursuant to § 92.350 and the VAWA requirements at § 92.359; (c) Security deposits. Security deposits must be refundable and no greater than two months’ rent. Surety bonds or security deposit insurance and similar instruments may not be used in lieu of or in addition to a security deposit. Upon termination of tenancy by the owner or tenant, if the owner charges any amount against a tenant’s security deposit, the owner must give the tenant a list of all items charged against the security deposit and the amount of each item. After deducting the amount, if any, used to reimburse the owner, the owner must promptly refund the full amount of the unused balance to the tenant. (d) Termination of tenancy. (1) Rental housing assisted with HOME funds. (i) An owner may not terminate the tenancy of any tenant or household member or refuse to renew the lease of a tenant of rental housing assisted with HOME funds, except for serious or repeated violation of the terms and PO 00000 Frm 00050 Fmt 4701 Sfmt 4702 conditions of the lease; for violation of applicable Federal, State, or local law; for completion of the tenancy period for transitional housing or failure to follow any required transitional housing supportive services plan; or for other good cause. (A) Other good cause does not include an increase in the tenant’s income or assets, the amount or type of income or assets the tenant possesses, or refusal of the tenant to purchase the housing. (B) Other good cause may include when a tenant creates a documented nuisance under applicable state or local law or when a tenant unreasonably refuses to provide the owner access to the unit to allow the owner to repair the unit; and (C) Other good cause may also include when an owner must terminate a tenancy to comply with: (1) An order issued by a governmental entity or court that requires the tenant vacate the project or unit; or (2) A local ordinance that necessitates vacating the project or unit. (D) An owner may establish good cause for a violation of an applicable Federal, State, or local law through a record of conviction of a crime that bears directly on the tenant’s continued tenancy, such as a violation of law that affects the safety of persons or property. The owner shall not use a record of arrest, parole or probation, or current indictment to establish such a violation. (ii) To terminate or refuse to renew tenancy, the owner must serve a written notice to vacate upon the tenant specifying the grounds for the action at least 60 days before the termination of tenancy and provide a copy of the notice to vacate to the participating jurisdiction within 5 business days of issuing notice to the tenant. The minimum 60-day period is not required if the termination of tenancy or refusal to renew is due to a direct threat to the safety of the tenants or employees of the housing or an imminent and serious threat to the property and the termination of tenancy or refusal to renew is in accordance with the requirements of § 92.253(d)(1)(iii). (iii) The termination of tenancy or refusal to renew must be in accordance with Federal, State, local law, and the requirements of this part, including but not limited to requirements regarding fair housing, nondiscrimination, and VAWA; (iv) An owner may not terminate the tenancy or evict the tenant or household members without instituting a civil court proceeding in which the tenant or household member has the opportunity to present a defense, or before a court decision on the rights of the parties; and E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules (v) An owner may not perform a constructive eviction such as locking a tenant out of their unit or stopping service on utilities servicing the tenant’s unit. An owner may not create a hostile living environment or refuse to make a reasonable accommodation in order to cause a tenant to terminate their tenancy in a HOME-assisted unit. (2) Tenant-based rental assistance. (i) The participating jurisdiction must establish written standards for termination or refusal to renew a tenancy. The written standards must be included in the lease and/or rental assistance contract between the participating jurisdiction and the tenant. The participating jurisdiction’s written standards must require that termination or refusal to renew a tenancy be for good cause. At a minimum, good cause shall include: (A) Serious or repeated violation of the terms and conditions of the lease; (B) Violation of applicable Federal, State, or local law through a tenant’s record of conviction of a crime that bears directly on continued tenancy, such as the violation of a law that affects the safety of persons or property. The owner shall not use a record of arrest, parole or probation, or current indictment to establish such a violation; (C) When a tenant creates a documented nuisance under applicable state or local law or when a tenant unreasonably refuses to provide the owner access to the unit to allow the owner to repair the unit; (D) When an owner intends to withdraw the unit from the rental market to occupy the unit; allow an owner’s family member to occupy the unit; or demolish or substantially rehabilitate the unit; (E) Termination of the rental assistance contract; or (F) When an owner must terminate a tenancy to comply with: (1) An order issued by a governmental entity or court that requires the tenant vacate the project or unit; or (2) A local ordinance that necessitates vacating the residential real property. (ii) To terminate or refuse to renew tenancy, the owner must serve a written notice to vacate upon the tenant specifying the grounds for the action at least 30 days before the termination of tenancy and provide a copy of the notice to vacate to the participating jurisdiction within 5 business days of issuing notice to the tenant. The minimum 30-day period is not required if the termination of tenancy or refusal to renew is due to a direct threat to the safety of the tenants or employees of the housing or an imminent and serious threat to the property and the VerDate Sep<11>2014 19:41 May 28, 2024 Jkt 262001 termination of tenancy or refusal to renew is in accordance with the requirements of § 92.253(d)(2)(iii). (iii) The termination of tenancy or refusal to renew must be in accordance with Federal, State, local law, and the requirements of this part, including but not limited to requirements regarding fair housing, nondiscrimination, and VAWA. (iv) An owner may not perform a constructive eviction such as locking a tenant out of their unit or stopping service on utilities servicing the tenant’s unit. An owner may not create a hostile living environment or refuse to allow for a reasonable accommodation in order to cause a tenant to terminate their tenancy in a HOME-assisted unit. (e) Tenant selection. An owner of rental housing assisted with HOME funds must comply with the affirmative marketing requirements established by the participating jurisdiction pursuant to § 92.351(a). The owner must adopt and follow written tenant selection policies and criteria that: (1) Limit the housing to very lowincome and low-income families; (2) Are reasonably related to the applicants’ ability to perform the obligations of the lease (i.e., to pay the rent, not to damage the housing, not to interfere with the rights and quiet enjoyment of other tenants); (3) Limit eligibility or give a preference to a particular segment of the population if permitted in its written agreement with the participating jurisdiction (and only if the limitation or preference is described in the participating jurisdiction’s consolidated plan); (i) Any limitation or preference must not violate nondiscrimination requirements in § 92.350. A limitation or preference does not violate nondiscrimination requirements if the housing also receives funding from a Federal program that limits eligibility to a particular segment of the population (e.g., the Housing Opportunity for Persons with AIDS program under 24 CFR part 574, the Shelter Plus Care program under 24 CFR part 582, the Supportive Housing program under 24 CFR part 583, supportive housing for the elderly or persons with disabilities under 24 CFR part 891) and the limit or preference is tailored to serve that segment of the population; and (ii) If a project does not receive funding from a Federal program that limits eligibility to a particular segment of the population, the project may have a limitation or preference for persons with disabilities who need services offered at a project only if: PO 00000 Frm 00051 Fmt 4701 Sfmt 4702 46667 (A) The limitation or preference is limited to the population of families (including individuals) with disabilities that significantly interfere with their ability to obtain and maintain housing; (B) Such families will not be able to obtain or maintain themselves in housing without appropriate supportive services; and (C) The families must not be required to accept the services offered at the project. The owner may advertise the project as offering various supportive services, including a description of the specific supportive services available. The project must be open to all eligible persons with disabilities; (4) Do not exclude an applicant with Federal or State tenant-based rental assistance, such as an applicant with a voucher under the Housing Choice Voucher Program (24 CFR part 982) or an applicant participating in a HOME tenant-based rental assistance program, because of the status of the applicant as a holder of such type of assistance; (5) Except for small-scale housing, provide for the selection of tenants from a written waiting list in the chronological order of their application, insofar as is practicable. The participating jurisdiction, upon request by an owner of a small-scale housing project, may establish alternative procedures to a written waiting list for the selection of tenants in small-scale housing, subject to a determination that the selection of tenants from a waiting list in chronological order by the owner is impracticable and approval of the procedures in writing by HUD; (6) Give prompt written notification to any rejected applicant of the grounds for any rejection; (7) Comply with the VAWA requirements prescribed in § 92.359; and (8) Comply with the nondiscrimination requirements prescribed in § 92.350. (f) Health and Safety. In addition to the requirements in § 92.355, if a participating jurisdiction has actual knowledge of an environmental, health, or safety hazard affecting a project, unit, or HOME tenants, the participating jurisdiction must contact the affected owner and tenants and provide them with a summary of the nature, date, and scope of such hazards. If an owner has actual knowledge of an environmental, health, or safety hazard affecting their project, units within their project, or tenants residing within their projects, the owner must inform the participating jurisdiction and provide them with a summary of the nature, date, and scope of such hazards. This notification requirement only applies to E:\FR\FM\29MYP2.SGM 29MYP2 46668 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules environmental, health, and safety hazards that are discovered after an environmental review performed pursuant to § 92.352 has already taken place. ■ 26. In § 92.254: ■ a. Amend paragraph (a)(2)(iii) by removing the words ‘‘single- family’’ and adding, in their place, the words ‘‘single family’’; ■ b. Revise paragraph (a)(2)(iii); ■ c. Add paragraph (a)(2)(iv); ■ d. Revise the second sentence of paragraph (a)(3); ■ e. Amend paragraph (a)(4) by removing the words ‘‘affordability period’’ and adding, in their place, the words ‘‘period of affordability’’; ■ f. Revise paragraphs (a)(5)(i), (a)(5)(ii), (a)(6), and (a)(7); ■ g. Redesignate paragraphs (b) through (f) as paragraphs (c) through (g) and redesignate paragraph (a)(9) as paragraph (b); ■ h. Revise newly redesignated paragraph (b); and ■ i. Revise the introductory text to newly redesignated paragraph (f), and newly redesignated paragraph (g)(1). The revisions and additions read as follows: lotter on DSK11XQN23PROD with PROPOSALS2 § 92.254 Qualification as affordable housing: Homeownership. (a) * * * (2) * * * (iii) If a participating jurisdiction intends to use HOME funds for homebuyer assistance or for the rehabilitation of owner-occupied single family properties, the participating jurisdiction must use the HOME affordable homeownership limits provided by HUD for newly constructed housing and for existing housing. (A) HUD will provide limits for affordable newly constructed housing based on 95 percent of the median purchase price for the area using Federal Housing Administration (FHA) single family mortgage program data for newly constructed housing, with a minimum limit based on 95 percent of the U.S. median purchase price for new construction for nonmetropolitan areas. (B) HUD will provide limits for affordable existing housing based on 95 percent of the median purchase price for the area using FHA single family mortgage program data for existing housing and other appropriate data that are available Nation-wide for sales of existing housing, with a minimum limit based on 95 percent of the State-wide nonmetropolitan area median purchase price using this data. (iv) In lieu of the limits provided by HUD, the participating jurisdiction may VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 determine 95 percent of the median area purchase price for single family housing in the jurisdiction annually, as follows. (A) The participating jurisdiction must set forth the limits for single family housing of one, two, three, and four units, for the jurisdiction. The participating jurisdiction may determine separate limits for existing housing and newly constructed housing. (B) For the limits on housing located outside of metropolitan areas, a State may aggregate sales data from more than one county if the counties are contiguous and similarly situated. (C) The participating jurisdiction must include the following information in the annual action plan of the Consolidated Plan submitted to HUD for review and must update the information in each action plan. (1) The 95 percent of median area purchase price must be established in accordance with a market analysis that ensured that a sufficient number of recent housing sales are included in the survey; (2) Sales must cover the requisite number of months based on volume: For 500 or more sales per month, a 1-month reporting period; for 250 through 499 sales per month, a 2-month reporting period; for less than 250 sales per month, at least a 3-month reporting period. The data must be listed in ascending order of sales price; (3) The address of the listed properties must include the location within the participating jurisdiction. Lot, square, and subdivision data may be substituted for the street address; (4) The housing sales data must reflect all, or nearly all, of the single family housing sales in the entire participating jurisdiction; and (5) To determine the median, a participating jurisdiction must take the middle sale on the list if an odd number of sales, and if an even number, take the higher of the middle numbers and consider it the median. After identifying the median sales price, the amount should be multiplied by 0.95 to determine the 95 percent of the median area purchase price. * * * * * (3) * * * If there is no ratified sales contract with an eligible homebuyer for the housing within 12 months of the date of completion of construction or rehabilitation, the housing must be rented to an eligible tenant as affordable rental housing and must comply with the requirements in § 92.252, including the period of affordability in § 92.252(d). * * * * * * * * PO 00000 Frm 00052 Fmt 4701 Sfmt 4702 (5) * * * (i) Resale. Resale requirements must ensure, if the housing does not continue to be the principal residence of the family for the duration of the period of affordability, that the housing is made available for subsequent purchase only to a buyer whose family qualifies as a low-income family and will use the property as the family’s principal residence. The resale requirement must also ensure that the price at resale provides the HOME-assisted homeowner a fair return on investment (including the homeowner’s investment and any improvements) and ensure the housing will remain affordable to a reasonable range of low-income homebuyers. The resale price is the fair return on investment added to the original sales price of the property, subject to market conditions. The participating jurisdiction must specifically define ‘‘fair return on investment’’ and ‘‘affordability to a reasonable range of low-income homebuyers,’’ and specifically address how it will make the housing affordable to a low-income homebuyer in the event that the resale price necessary to provide a fair return is not affordable to the subsequent homebuyer. The period of affordability is based on the total amount of HOME funds invested in the housing. (A) Permissible methods of determining fair return and the resale price include but are not limited to the following: (1) Itemized Formula. To determine fair return on investment and resale price, the participating jurisdiction may use an itemized formula to add or subtract common, clearly defined factors that increase or decrease the value of a homeowner’s investment in the property over the term of ownership. This formula must include the value of capital improvements and the sum of the downpayment and all principal payments by the homeowner on the loan secured by the property. The formula may depreciate the value of the capital improvements and may take into consideration any reduction in value due to property damage or delayed or deferred maintenance of the property condition. The fair return on a homeowner’s investment under this formula would be calculated by taking the sum of the defined factors for the homeowner’s investment in the property over the term of ownership and multiplying this amount by a clearly defined, publicly accessible index or standard. E:\FR\FM\29MYP2.SGM 29MYP2 46669 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules Change in clearly defined, publicly accessible index or standard MULTIPLIED BY ( (Homeowner :S downpayment + sum ofall homeowner principal payments+ value ofcapital improvements)) MINUS OPTIONAL (Depreciation ofcapital improvements + property damage+ delayed or deferred maintenance) EQUALS Fair return Originalsales price+ Fair return= Resale price (2) Appraisal Formula. The participating jurisdiction may use an appraisal formula to determine fair return on investment and resale price based on the amount of market appreciation, if any, over the term of ownership. Under this method, the appraisals must be conducted by a State licensed or certified third-party appraiser. The amount of market appreciation over the term of ownership is determined by subtracting the appraised value at the time of initial purchase from the appraised value of the property at the time of resale. The fair return on a homeowner’s investment under this formula is calculated by multiplying a clearly defined, publicly accessible standard or index by the amount of market appreciation over the term of homeownership. Clearly defined, publicly accessible index or standard x (New appraisal - initial appraisal) = Fair return Original sales price + Fair return = Resale price (3) Index Formula. The participating jurisdiction may use an index formula to determine fair return on investment and resale price based on the change in value of a homeowner’s investment over the term of ownership. Index formulas adjust the value of the homeowner’s investment in proportion to changes in an index, such as the change in median household income. To determine the homeowner’s fair return using this model, the sum of the property’s original purchase price and the value of any capital improvements to the property is multiplied by the change in the specified index during the term of ownership. The formula may also depreciate the value of the capital improvements and may take into consideration any reduction in value due to property damage or delayed or deferred maintenance of the property condition. Change in clearly defined, publicly accessible index MULTIPLIED BY (Original purchase price + value ofcapital improvements) \ ( OPTIONAL (Depreciation ofcapital improvemen:::J::i,perty damage+ delayed or deferred maintenance)} EQUALS Fairretum VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 investment using this model, the fixed rate is multiplied by the number of years the homeowner owned and occupied the home (e.g., 3.5% × 10 years = 35%). The resulting rate is then multiplied by the sum of the original purchase price of the home and the value of any capital improvements to PO 00000 Frm 00053 Fmt 4701 Sfmt 4702 the property to calculate the fair return to the homeowner. The formula may also depreciate the value of the capital improvements and may take into consideration any reduction in value due to property damage or delayed or deferred maintenance of the property condition. E:\FR\FM\29MYP2.SGM 29MYP2 EP29MY24.010</GPH> EP29MY24.011</GPH> lotter on DSK11XQN23PROD with PROPOSALS2 (4) Fixed-Rate Formula. The participating jurisdiction may use a fixed-rate formula to determine the homeowner’s fair return on investment. Fixed-rate formulas adjust the value of the homeowner’s investment by a fixed percentage (rate) per year (e.g., 3.5 percent). To determine the fair return on EP29MY24.012</GPH> Original sales price+ Fair return = Resale price 46670 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules (Fixed rate x length ofhomeownership) MULI1PUED BY ( (Original purchase price + value ofcapital improvements) ) MINUS OPTIONAL (Depreciation ofcapital improvements + property damage + delayed or defe1Ted maintenance) EQUALS Fair return (B) Except as provided in paragraph (a)(5)(i)(C) of this section, deed or use restrictions, a recorded agreement restricting the use of the property, liens on real property, covenants running with the land, or other similar mechanisms approved by HUD in writing must be used to impose the resale requirements. (C) The affordability restrictions may terminate upon occurrence of any of the following termination events: foreclosure, transfer in lieu of foreclosure, or assignment of an FHA insured mortgage to HUD. If the owner of record before the termination event obtains an ownership interest in the property after the termination event, then the affordability restrictions shall be revived under the same terms prior to the termination event, including a minimum period of affordability equal to the terminated period of affordability. (D) Certain housing may be presumed to meet the resale restrictions (i.e., the housing will be available and affordable to a reasonable range of low-income homebuyers; a low-income homebuyer will occupy the housing as the family’s principal residence; and the original owner will be afforded a fair return on investment) during the period of affordability without the imposition of enforcement mechanisms by the participating jurisdiction. The presumption must be based upon a market analysis of the neighborhood in which the housing is located. The market analysis must include an evaluation of the location and characteristics of the housing and residents in the neighborhood (e.g., sale prices, age and amenities of the housing stock, incomes of residents, percentage of owner-occupants) in relation to housing and incomes in the housing market area. An analysis of the current and projected incomes of neighborhood residents for an average period of affordability for homebuyers in the neighborhood must support the conclusion that a reasonable range of low-income families will continue to qualify for mortgage financing. For example, an analysis shows that the housing is modestly priced within the VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 housing market area and that families with incomes of 65 percent to 80 percent of the area median income can afford monthly payments under average FHA terms without other government assistance and housing will remain affordable at least during the next five to seven years compared to other housing in the market area; the size and amenities of the housing are modest and substantial rehabilitation will not significantly increase the market value; the neighborhood has housing that is not currently owned by the occupants, but the participating jurisdiction is encouraging homeownership in the neighborhood by providing homeownership assistance and by making improvements to the streets, sidewalks, and other public facilities and services. If a participating jurisdiction in preparing a neighborhood revitalization strategy under § 91.215(e)(2) of its consolidated plan has incorporated the type of market data described above, that submission may serve as the required analysis under this section. If the participating jurisdiction continues to provide homeownership assistance for housing in the neighborhood, it must periodically update the market analysis to verify the original presumption of continued affordability. (ii) Recapture. (A) Recapture provisions must ensure that the participating jurisdiction recoups all or a portion of the HOME assistance provided to the homebuyers if the housing does not continue to be the principal residence of the family for the duration of the period of affordability. The participating jurisdiction may structure its recapture provisions based on its program design and market conditions. The period of affordability is based upon the amount of HOME funds that directly assisted the homebuyer to buy the dwelling unit. This amount includes any HOME assistance that assisted the homebuyer to purchase the housing or reduced the purchase price paid by the homebuyer from fair market value to an affordable price but excludes the amount of HOME assistance provided to develop the unit PO 00000 Frm 00054 Fmt 4701 Sfmt 4702 that does not assist the homebuyer or reduce the purchase price paid by the homebuyer. Recapture provisions may permit the subsequent homebuyer to assume the HOME assistance (subject to the HOME requirements for the remainder of the period of affordability) if the subsequent homebuyer is lowincome, and no additional HOME assistance is provided. (B) The following options for recapture requirements are acceptable to HUD. The participating jurisdiction may adopt, modify, or develop its own recapture requirements for HUD approval. In establishing its recapture requirements, the participating jurisdiction is subject to the limitation that when the recapture requirement is triggered by a sale (voluntary or involuntary) of the housing unit, the amount recaptured cannot exceed the net proceeds, if any. The net proceeds are the sales price minus superior loan repayment (other than HOME funds) and any closing costs. (1) Recapture entire amount. The participating jurisdiction may recapture the entire amount of the HOME investment from the homeowner. (2) Reduction during period of affordability. The participating jurisdiction may reduce the HOME investment amount to be recaptured on a pro rata basis for the time the homeowner has owned and occupied the housing measured against the required period of affordability. (3) Shared net proceeds. If the net proceeds are not sufficient to recapture the full HOME investment (or a reduced amount as provided for in paragraph (a)(5)(ii)(A)(2) of this section) plus enable the homeowner to recover the amount of the homeowner’s downpayment and any capital improvement investment made by the owner since purchase, the participating jurisdiction may share the net proceeds. The net proceeds are the sales price minus loan repayment (other than HOME funds) and closing costs. The net proceeds may be divided proportionally as set forth in the following mathematical formulas: E:\FR\FM\29MYP2.SGM 29MYP2 EP29MY24.013</GPH> lotter on DSK11XQN23PROD with PROPOSALS2 Original sales price+ Fair return = Resale price Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules 46671 HOME investment HOME investment+ homeowner investment x Net p.i:oceeds =HOME amount to be recaptun.xl. (4) Owner investment returned first. The participating jurisdiction may permit the homebuyer to recover the homebuyer’s entire investment (downpayment and capital improvements made by the owner since purchase) before recapturing the HOME investment. (5) Amount subject to recapture. The HOME investment subject to recapture is the amount of HOME funds that directly assisted the homebuyer to buy the housing. This includes the amount that assisted the homebuyer to purchase the housing or reduced the purchase price paid by the homebuyer from fair market value to an affordable price but excludes the amount of HOME assistance provided to develop the unit that did not assist the homebuyer or reduce the purchase price paid by the homebuyer. The recaptured funds must be used to carry out HOME-eligible activities in accordance with the requirements of this part. If the HOME assistance is only used for the development subsidy and therefore not subject to recapture, the resale option must be used. (6) Special considerations for single family properties with more than one unit. If the HOME funds are only used to assist a low-income homebuyer to acquire one unit in single family housing containing more than one unit and the assisted unit will be the principal residence of the homebuyer, the affordability requirements of this section apply only to the assisted unit. If HOME funds are also used to assist the low-income homebuyer to acquire one or more rental units in the single family housing, the affordability requirements of § 92.252 apply to the assisted rental units, except that the participating jurisdiction may impose resale or recapture restrictions on all assisted units (owner-occupied and rental units) in the single family housing. If resale restrictions are used, the affordability requirements on all assisted units continue for the period of affordability. If recapture restrictions are used, the affordability requirements on the assisted rental units may be terminated, at the discretion of the participating jurisdiction, upon recapture of the HOME investment. If HOME funds are used to assist only the rental units in a single family property, VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 then the requirements of § 92.252 would apply and the owner-occupied unit would not be subject to the income targeting or affordability provisions of § 92.254. (7) Homebuyer assistance for Leasepurchase. In homeownership projects that receive HOME funds for acquisition, rehabilitation, or new construction, HOME funds may be used to assist homebuyers through leasepurchase programs. The owner and homebuyer must execute a leasepurchase agreement under an existing lease-purchase program prior to the date of completion of acquisition, construction, or rehabilitation and the homebuyer must qualify as a lowincome family at the time of signing the lease-purchase agreement. If HOME funds are used for rehabilitation or new construction, the housing must be purchased by the homebuyer within 36 months of signing the lease-purchase agreement. If HOME funds are used to acquire housing that will be resold to a homebuyer, the housing must be purchased by the homebuyer within 42 months of signing the lease-purchase agreement. Owners and homebuyers that have entered into a lease-purchase agreement pursuant to the requirements in this paragraph are subject to the affordability requirements in this section unless the housing is not purchased within the required timeframes in this paragraph. If the housing is not purchased within the required timeframes in this paragraph, the housing is subject to the requirements for affordable rental housing in § 92.252. In determining the income eligibility of the family, the participating jurisdiction must include the income of all persons living in the housing. (b) Preserving affordability of housing assisted with HOME funds. When there is a termination event for affordability restrictions, a participating jurisdiction may take the following actions to preserve the affordability of the property: (1) The participating jurisdiction may exercise purchase options, rights of first refusal, or other preemptive rights to obtain ownership of the housing before foreclosure to preserve affordability, subject to the following requirements: PO 00000 Frm 00055 Fmt 4701 Sfmt 4702 (i) The housing must be sold to an eligible homebuyer in accordance with paragraph (a)(3) of this section within 6 months of the date the participating jurisdiction obtains ownership; (ii) The period of affordability for the eligible homebuyer must be equal to the remaining period of affordability of the former homeowner unless additional HOME funds are used to directly assist the eligible homebuyer (i.e., down payment assistance); (iii) If the participating jurisdiction directly assists the eligible homebuyer with additional HOME funds, then the period of affordability must be recalculated in accordance with the table in § 92.254(a)(4) based on the total amount of additional HOME funds invested. The additional investment must be treated as a new project; and (iv) The total HOME funds for a project (original investment plus additional investment) must not exceed the per-unit subsidy limit in § 92.250(a) in effect at the time of the additional investment, subject to HUD approval. (2) The participating jurisdiction may use additional HOME funds for the following costs: (i) The cost for the participating jurisdiction to obtain ownership of the HOME-assisted housing through a purchase option, right of first refusal, or other preemptive right before foreclosure or at the foreclosure sale. This cost must be treated as an amendment to the original project. The foreclosure costs to acquire housing with a HOME loan in default is an eligible cost; however, HOME funds may not be used to repay a loan made with HOME funds. (ii) The cost of the participating jurisdiction to undertake any necessary rehabilitation for the housing acquired. This includes the rehabilitation required for the housing to meet applicable property standards in § 92.251. This cost must be treated as an amendment to the original project. (iii) The cost to the participating jurisdiction of owning the housing pending resale to another homebuyer. This cost must be treated as an amendment to the original project. (iv) The cost to assist an eligible homebuyer in purchasing the housing. This cost must be treated as a cost for a new project and not as an amendment to the original project. E:\FR\FM\29MYP2.SGM 29MYP2 EP29MY24.014</GPH> lotter on DSK11XQN23PROD with PROPOSALS2 ..... , , home(>wne.rinvestment HOME investme.nt +hom«lwnerinvestme~t x Net proceeds =ai.nount to ho1neowner lotter on DSK11XQN23PROD with PROPOSALS2 46672 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules (v) As an alternative to charging costs to the HOME program under § 92.206, the participating jurisdiction may charge the costs to the HOME program under § 92.207 as a reasonable administrative cost of its HOME program. To the extent administrative funds are used, they may be reimbursed, in whole or in part, when the housing is sold to a new eligible homebuyer. (3) The participating jurisdiction may permit the Community Land Trust, as defined in § 92.2, that originally developed the HOME-assisted housing, to exercise a purchase option, right of first refusal, or other preemptive right to obtain ownership of the housing to preserve affordability, including but not limited to the right to purchase the housing in lieu of foreclosure, under the following conditions: (i) The Community Land Trust obtains ownership of the housing, subject to existing HOME affordability restrictions; (ii) The housing must be resold to an eligible homebuyer in accordance with paragraph (a)(3) of this section within 6 months; (iii) The period of affordability for the eligible homebuyer is equal to the remaining period of affordability of the former homeowner; and (iv) The participating jurisdiction may not provide additional HOME funds to the Community Land Trust to obtain ownership, rehabilitate the housing, own/hold the housing pending resale to the next homebuyer, or provide down payment assistance to the next eligible homebuyer. * * * * * (f) Providing homeownership assistance through lenders. Subject to the requirements of paragraph (f) of this section, the participating jurisdiction may provide homeownership assistance through a lending institution that is a contractor or nonprofit lending institution that is a subrecipient that also provides the first mortgage loan to a low-income family. * * * * * (g) * * * (1) Underwriting standards for homeownership assistance to determine the amount of assistance necessary to achieve sustainable homeownership. These standards must evaluate the projected overall debt of the family after the purchase of the housing, the maximum amount that a participating jurisdiction may provide a family, the appropriateness of the amount of assistance, assets available to a family to acquire the housing, and financial resources to sustain homeownership. A participating jurisdiction may not VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 provide a single, fixed amount of assistance to each homebuyer that participates in the participating jurisdiction’s homebuyer program; * * * * * ■ 27. Revise § 92.255 to read as follows: § 92.255 Purchase of HOME units by inplace tenants. (a) During a HOME-assisted rental unit’s period of affordability, the participating jurisdiction may permit an owner to sell or otherwise convey a HOME-assisted rental unit to an existing tenant in accordance with the requirements of § 92.254. However, refusal by the tenant to purchase the housing does not constitute good cause for termination of tenancy or failure to renew the lease. The participating jurisdiction may not permit the use of a lease-purchase program under this section. (b) If no additional HOME funds are used to enable the tenants to become homeowners, the homeownership units are subject to a period of affordability equal to the remaining period of affordability if the units continued as rental units. The participating jurisdiction must impose resale requirements that comply with § 92.254(a) for the required period of affordability. (c) If additional HOME funds are used to directly assist the tenants to become homeowners, the period of affordability is the remaining period of affordability if the unit had remained a rental unit or the required period under § 92.254(a)(4) for the amount of direct homeownership assistance provided, whichever is longer. § 92.258 [Amended] 28. In § 92.258: a. Amend paragraphs (a) and (b)(1) by removing the words ‘‘single-family’’ and adding, in their place, the words ‘‘single family’’; and ■ b. Amend the introductory text to paragraph (d)(3) by removing the citation ‘‘§ 92.252(e)’’ and adding, in its place, the citation ‘‘§ 92.252(d). ■ 29. In § 92.300: ■ a. Amend the introductory text of paragraph (a) by removing the words ‘‘developed or sponsored’’ and adding, in their place, the words ‘‘developed, or sponsored’’; ■ b. Revise paragraphs (a)(2) through (4) and the introductory text of paragraph (a)(5); ■ c. Amend the introductory text of paragraph (a)(5)(iii) by removing the word ‘‘nonprofit’’ and adding, in its place, the words ‘‘private nonprofit’’; ■ d. Amend the introductory text of paragraph (a)(6) by replacing ■ ■ PO 00000 Frm 00056 Fmt 4701 Sfmt 4702 ‘‘community development housing organization’’ with ‘‘community housing development organization’’ and by removing the word ‘‘new’’; ■ e. Revise paragraphs (a)(6)(i) and (ii)(A), paragraph (a)(7), and the last sentence of paragraph (b); ■ f. Amend paragraph (e) by removing the words ‘‘developed or sponsored’’ and adding, in their place, the words ‘‘developed, or sponsored’’ and by removing the words ‘‘and specifies’’ and adding, in their place, the words ‘‘and must specify’’; and ■ g. Revise the first sentence of paragraph (f). The revisions read as follows: § 92.300 Set-aside for community housing development organizations (CHDOs). (a) * * * (2) Rental housing is ‘‘owned’’ by the community housing development organization if the community housing development organization is the owner in fee simple absolute of rental housing (or has a long term ground lease) to lowincome families in accordance with § 92.252. If the housing is to be rehabilitated or constructed, the community housing development organization hires and oversees the developer that rehabilitates or constructs the housing. The community housing development organization must oversee or hire and contract with an experienced project manager to oversee all aspects of the development, including obtaining zoning, securing non-HOME financing, selecting a developer or general contractor, overseeing the progress of the work, and determining the reasonableness of costs. The community housing development organization must own the rental housing during development and for a period at least equal to the period of affordability in § 92.252. If the CHDO acquires housing that meets the property standards in § 92.251, the CHDO must own the rental housing for a period at least equal to the period of affordability in § 92.252. (3) Rental housing is ‘‘developed’’ by the community housing development organization if the community housing development organization is the owner in fee simple absolute (or has a long term ground lease) and the developer of housing that will be constructed or existing substandard housing that will be rehabilitated for rent to low-income families in accordance with § 92.252. To be the ‘‘developer,’’ the community housing development organization may share developer responsibilities with another entity but must be in charge of all aspects of the development process, including selecting the site, obtaining E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules permit approvals and all project financing, selecting architects, engineers, and general contractors, overseeing project progress, and determining the reasonableness of costs. At a minimum, the community housing development organization must own the housing until project completion. (4) Rental housing is ‘‘sponsored’’ by the community housing development organization if it is rental housing ‘‘owned’’ or ‘‘developed’’ in accordance with paragraph (a)(2) or (3) of this section, as applicable, by a subsidiary of a community housing development organization, a limited partnership of which the community housing development organization or its subsidiary is the managing general partner, or a limited liability company of which the community housing development organization or its subsidiary is the managing member. (i) The subsidiary of the community housing development organization must be a nonprofit organization and must be wholly owned by the community housing development organization. If the limited partnership or limited liability company agreement permits the community housing development organization to be removed as the managing general partner or managing member, the agreement must provide that the removal must be for cause and that the community housing development organization must be replaced with another community housing development organization. (ii) The HOME funds must be provided by the participating jurisdiction directly to the entity that owns the project. (5) HOME-assisted rental housing is also ‘‘sponsored’’ by a community housing development organization if the community housing development organization ‘‘developed’’ the rental housing project in accordance with paragraph (a)(3) of this section and agrees to convey the project to an identified private nonprofit organization at a predetermined time after completion of the project. Sponsored rental housing, as provided in this paragraph (a)(5), is subject to the following requirements: * * * * * (6) * * * (i) To be the ‘‘developer,’’ the community housing development organization may share the developer role with another entity but must be in charge of all aspects of the development process, including selecting the site, obtaining permit approvals and all project financing, selecting architects, engineers, and general contractors, VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 overseeing project progress, determining the reasonableness of costs, identifying eligible homebuyers, and overseeing the sale of homeownership units. The community housing development organization may provide direct homeownership assistance (e.g., downpayment assistance) when it sells the housing to low-income families and the community housing development organization will not be considered a subrecipient. The HOME funds for downpayment assistance shall not be greater than 10 percent of the amount of HOME funds for development of the housing. (ii) * * * (A) While proceeds retained by the community housing development organization are not subject to the requirements of this part, the participating jurisdiction must specify in the written agreement with the community housing development organization whether the proceeds are to be used for HOME-eligible activities or other housing activities to benefit low-income families. * * * * * (7) The participating jurisdiction must determine the form of assistance (e.g., grant or loan) in accordance with § 92.205(b) that it will provide to the community housing development organization for a rental housing project under paragraph (a)(4) of this section and must provide the assistance directly to the entity that owns the project. (b) * * * If during the first 24 months of its participation in the HOME Program a participating jurisdiction cannot identify a sufficient number of capable community housing development organizations, up to 20 percent of the minimum community housing development organization set aside specified in paragraph (a) of this section (but not more than $150,000 during the 24 month period) may be committed to an organization that meets the definition of ‘‘community housing development organization’’ in § 92.2, except for the requirements in paragraph (9) of the definition, in order to develop demonstrated capacity and qualify as a community housing development organization in the jurisdiction. * * * * * (f) The participating jurisdiction must ensure that a community housing development organization does not receive HOME funding for any fiscal year in an amount that provides more than $50,000 or 50 percent of the community housing development organization’s total operating expenses PO 00000 Frm 00057 Fmt 4701 Sfmt 4702 46673 in that fiscal year, whichever is greater. * * * ■ 30. Revise § 92.302 to read as follows: § 92.302 Housing education and organizational support. HUD is authorized to provide education and organizational support assistance, in conjunction with HOME funds made available to community housing development organizations in accordance with section 233 of the Act. (a) HUD will publish a notice in the Federal Register announcing the availability of funding under this section, as appropriate. The notice need not include funding for each of the eligible activities but may target funding from among the eligible activities. (b) Notwithstanding the definition of ‘‘community land trust’’ in § 92.2, HUD may provide housing education and organizational support assistance under this section to a community land trust only if the following requirements are met: (1) The community land trust meets the definition of a ‘‘community housing development organization’’ at § 92.2, except for the requirements in paragraphs (9) and (10) of the definition. (2) The community land trust is established to complete the activities in paragraph (b)(3) of this section. (3) The community land trust: (i) Acquires land to hold in perpetuity and primarily for conveyance under long-term ground leases; (ii) Transfers ownership of any structural improvements located on such leased land to the lessees; and (iii) Retains a preemptive option to purchase any such structural improvement at a price determined by formula that is designed to ensure that the improvement remains affordable to low- and moderate-income families in perpetuity; (4) The community land trust’s corporate membership is open to residents of a particular geographic area, as specified in the organization’s bylaws; and (5) The board of directors: (i) Includes a majority of members who are elected by the corporate membership; and (ii) Is composed of equal numbers of lessees pursuant to paragraph (b)(2)(ii), members who are not lessees, and any other category of persons described in the organization’s bylaws. § 92.351 [Amended] 31. Amend the last sentence of § 92.351(a)(1) by removing the words ‘‘If participating’’ and adding, in their place, the words ‘‘If the participating’’ and by removing the citation ■ E:\FR\FM\29MYP2.SGM 29MYP2 46674 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules ‘‘§ 92.253(d)(3)’’ and adding, in its place, the citation ‘‘§ 92.253(e)(3)’’. § 92.352 [Amended] 32. In § 92.352: a. Amend paragraph (a) by removing the words ‘‘the cost’’ and adding, in their place, the word ‘‘cost’’; and ■ b. Amend paragraph (b)(1) by removing the word ‘‘decisionmaking’’ and adding, in its place, the words ‘‘decision making’’. ■ 33. In § 92.353: ■ a. Revise paragraph (c)(2)(ii)(A) by removing the words ‘‘preceded by at least 30 days advance written notice to the tenant specifying the grounds for the action’’ and adding, in their place, the words ‘‘in accordance with § 92.253(d)’’; and ■ b. Revise paragraph (c)(2)(ii)(C). The revision to read as follows: ■ ■ § 92.353 Displacement, relocation, and acquisition. * * * * * (c) * * * (2) * * * (ii) * * * (C) For purposes of the URA, the person meets the definition of ‘‘persons not displaced’’ as defined in 49 CFR 24.2; or * * * * * § 92.354 [Amended] 34. Amend § 92.354, in paragraph (a)(2) by removing the word ‘‘singlefamily’’ and adding, in its place, the words ‘‘single family’’. ■ 35. In § 92.356: ■ a. Revise paragraph (d)(1); ■ b. Redesignate paragraphs (e)(2) through (6) as paragraphs (e)(3) through (7), respectively; ■ c. Add new paragraph (e)(2); and ■ d. Amend paragraph (f)(1) by removing the citation ‘‘§ 92.252(e)’’ and adding, in its place, the citation ‘‘§ 92.252(d)’’. The revisions and additions read as follows: ■ § 92.356 Conflict of interest. lotter on DSK11XQN23PROD with PROPOSALS2 * * * * * (d) * * * (1) A disclosure of the nature of the conflict, accompanied by an assurance that there has been public disclosure of the conflict (public disclosure is considered a combination of any of the following: publication on the recipient’s website, including social media; electronic mailings; media advertisements; public service announcements; and display in public areas such as libraries, grocery store bulletin boards, and neighborhood centers), evidence of the public VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 disclosure, and a description of how the public disclosure was made; and * * * * * (e) * * * (2) Whether an opportunity was provided for open competitive bidding or negotiation; * * * * * ■ 36. In § 92.454: ■ a. Amend paragraph (a)(3) by removing the word ‘‘and’’; ■ b. Amend paragraph (a)(4) by removing the text ‘‘participating jurisdiction.’’ and adding, in its place, the text ‘‘participating jurisdiction; and’’; ■ c. Add paragraph (a)(5); and ■ d. Amend paragraph (b) by removing the words ‘‘participating jurisdictions that’’ and adding, in their place, the words ‘‘participating jurisdictions whose funds were reduced under § 92.551 or that’’. The addition reads as follows: § 92.454 Reallocations by formula. (a) * * * (5) Any HOME funds available for reallocation as a result of any reductions under 24 CFR 92.551 or 92.552. * * * * * ■ 37. Amending § 92.500 by revising paragraph (c)(2)(ii) to read as follows: § 92.500 Fund. The HOME Investment Trust * * * * * (c) * * * (2) * * * (ii) The statute or local ordinance requires repayments from its own affordable housing trust fund to be made to the local account; * * * * * ■ 38. In § 92.502: ■ a. Revise paragraph (b); ■ b. Amend paragraph (c)(1) by removing the words ‘‘set-up’’; and ■ c. Revise paragraphs (d)(1) and (2). The revisions read as follows: § 92.502 Program disbursement and information system. * * * * * (b) Project funding. After the participating jurisdiction executes the HOME Investment Partnership Agreement, submits the applicable banking and security documents, complies with the environmental requirements under 24 CFR part 58 for release of funds, and commits funds to a specific local project, the participating jurisdiction may provide funding to an activity by identifying specific investments in the disbursement and information system. The participating jurisdiction is required to enter PO 00000 Frm 00058 Fmt 4701 Sfmt 4702 complete project set-up information before providing funding to the project. * * * * * (d) * * * (1) Complete project completion information must be entered into the disbursement and information system, or otherwise provided to HUD. (2) Additional HOME funds may be committed to a project up to one year after project completion, but the amount of HOME funds in the project may not exceed the maximum per-unit subsidy amount established under § 92.250 at the time of underwriting. * * * * * ■ 39. In § 92.504: ■ a. Revise the section heading and paragraph (b), and revise and republish paragraph (c); and ■ b. Remove paragraph (d). The revisions read as follows: § 92.504 Participating jurisdiction responsibilities; written agreements. * * * * * (b) Executing a written agreement. Before disbursing any HOME funds to any entity, the participating jurisdiction must enter into a legally binding written agreement with that entity. Before disbursing any HOME funds to any entity, a State recipient, subrecipient, or contractor that is administering all or a part of the HOME program on behalf of the participating jurisdiction must also enter into a legally binding written agreement with that entity. The written agreement must ensure compliance with the requirements of this part and be a separate agreement from project financing documents (e.g., mortgage or deed of trust, regulatory agreement, or promissory note). (c) Provisions in written agreements. The contents of the agreement may vary depending upon the role the entity is asked to assume or the type of project undertaken. This section details basic requirements and the minimum provisions by role and type of entity that must be included in a written agreement. (1) State recipient. The provisions in the written agreement between the State and a State recipient will depend on the program functions that the State specifies the State recipient will carry out in accordance with § 92.201(b). In accordance with § 92.201, the written agreement must either require the State recipient to comply with the requirements established by the State or require the State recipient to establish its own requirements to comply with this part, including requirements for income determinations and underwriting subsidy layering guidelines, rehabilitation standards, E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules refinancing guidelines, homebuyer program policies, and affordability. (i) Use of the HOME funds. The agreement must describe the amount and use of the HOME funds to administer one or more programs to produce affordable housing, provide downpayment assistance, or provide tenant-based rental assistance, including the anticipated type and number of housing projects to be funded (e.g. the number of single family homeowner loans to be made or number of homebuyers to receive downpayment assistance), tasks to be performed, a schedule for completing the tasks (including a schedule for committing funds to projects that meet the deadlines established by this part), a budget for each program, and any requirement for matching contributions. These items must be in sufficient detail to provide a sound basis for the State to effectively monitor performance under the agreement. (ii) Affordability. The agreement must require housing assisted with HOME funds to meet the affordability requirements of § 92.252 or § 92.254, as applicable, and must require repayment of the funds if the housing does not meet the affordability requirements for the period of affordability. The agreement must require a means of enforcement of the affordability requirements by the State participating jurisdiction or, if the State recipient will be the owner at project completion of the affordable housing, the intended beneficiaries. The means of enforcement may include liens on real property, deed or use restrictions, a recorded agreement restricting the use of the property, covenants running with the land, or other mechanisms approved by HUD in writing, under which the participating jurisdiction has the right to require specific performance. The agreement must establish whether repayment of HOME funds must be remitted to the State or retained by the State recipient for additional eligible activities. (iii) Program income. The agreement must state whether program income is to be remitted to the State or retained by the State recipient for additional eligible activities. (iv) Uniform administrative requirements. The agreement must require the State recipient to comply with applicable uniform administrative requirements, as described in § 92.505. (v) Project requirements. The agreement must require compliance with project requirements in subpart F of this part, as applicable in accordance with the type of project assisted. For any projects involving HOME rental housing, the agreement must require VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 that the HOME tenancy addendum is used in accordance with § 92.253 for all HOME-assisted units. For tenant-based rental assistance, the agreement must require compliance with the requirements at § 92.253(a)–(c) and (d)(2). (vi) Other program requirements. The agreement must require the State recipient to carry out each activity in compliance with all Federal laws and regulations described in subpart H of this part, except that the State recipient does not assume the State’s responsibilities for release of funds under § 92.352 and the intergovernmental review process in § 92.357 does not apply to the State recipient. If HOME funds are provided for development of rental housing or provision of tenant-based rental assistance, the agreement must set forth all obligations the State imposes on the State recipient in order to meet the VAWA requirements under § 92.359, including notice obligations and any obligations with respect to the emergency transfer plan (including whether the State recipient must develop its own plan or follow the State’s plan). (vii) Affirmative marketing. The agreement must specify the State recipient’s affirmative marketing responsibilities in accordance with § 92.351. (viii) Requests for disbursement of funds. The agreement must specify that the State recipient may not request disbursement of HOME funds under this agreement until the funds are needed for payment of eligible costs. The amount of each request must be limited to the amount needed. Program income must be disbursed before the State recipient requests funds from the State. (ix) Records and reports. The agreement must specify the particular records that must be maintained and the information or reports that must be submitted in order to assist the State in meeting its recordkeeping and reporting requirements. (x) Enforcement of the written agreement. The agreement must specify remedies for breach of the provisions of the written agreement. The agreement must specify that, in accordance with 2 CFR 200.339, suspension or termination may occur if the State recipient materially fails to comply with any term of the agreement. The State may permit the agreement to be terminated in whole or in part in accordance with 2 CFR 200.340. (xi) Written agreement. Before providing HOME funds to any owner, community housing development organization, subrecipient, homeowner, PO 00000 Frm 00059 Fmt 4701 Sfmt 4702 46675 homebuyer, tenant (or landlord) receiving tenant-based rental assistance, or contractor providing services to or on behalf of the State recipient, the State recipient must have a fully executed written agreement with such person or entity that meets the requirements of this section. For affordable housing assisted with HOME funds, the State recipient must provide HOME funds directly to the owner under the terms and conditions of the written agreement. The agreement must establish that any repayment on any form of assistance of HOME funds must be remitted to the State or, if permitted by the State, retained by the State recipient for additional eligible activities. (xii) Duration of the agreement. The duration of the agreement will depend on which functions the State recipient performs (e.g., whether the State recipient or the State has responsibility for monitoring rental projects for the period of affordability) and which activities are funded under the agreement. (xiii) Fees. The agreement must prohibit the State recipient and its subrecipients and community housing development organizations from charging for any of the prohibited costs listed in § 92.214, including but not limited to servicing, origination, processing, inspection, or other fees for the costs of administering a HOME program. (2) Subrecipient. The agreement must set forth and require the subrecipient to follow the participating jurisdiction’s requirements, including requirements for income determinations, underwriting and subsidy layering guidelines, rehabilitation standards, refinancing guidelines, homebuyer program policies, and affordability requirements. The agreement between the participating jurisdiction and the subrecipient must include the following: (i) Use of the HOME funds. The agreement must describe the amount and use of the HOME funds for one or more programs, including the anticipated type and number of housing projects to be funded (e.g., the number of single family homeowners loans to be made or the number of homebuyers to receive downpayment assistance), tasks to be performed, a schedule for completing the tasks (including a schedule for committing funds to projects in accordance with deadlines established by this part), a budget, any requirement for matching contributions, and the period of the agreement. These items must be in sufficient detail to provide a sound basis for the participating jurisdiction to effectively E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 46676 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules monitor performance under the agreement. (ii) Program income. The agreement must state if program income is to be remitted to the participating jurisdiction or retained by the subrecipient for additional eligible activities. (iii) Uniform administrative requirements. The agreement must require the subrecipient to comply with applicable uniform administrative requirements, as described in § 92.505. (iv) Other program requirements. The agreement must require the subrecipient to carry out each activity in compliance with all Federal laws and regulations described in subpart H of this part, except that the subrecipient does not assume the participating jurisdiction’s responsibilities for environmental review under § 92.352 and the intergovernmental review process in § 92.357 does not apply. The agreement must set forth the requirements the subrecipient must follow to enable the participating jurisdiction to carry out environmental review responsibilities before HOME funds are committed to a project. If the subrecipient is administering a HOME rental housing program or tenant-based rental assistance program on behalf of the participating jurisdiction, the participating jurisdiction must set forth in the written agreement all obligations on the subrecipient in order to meet the VAWA requirements under § 92.359, including notice obligations and obligations under the emergency transfer plan. (v) Affirmative marketing. The agreement must specify the subrecipient’s affirmative marketing responsibilities in accordance with § 92.351. (vi) Requests for disbursement of funds. The agreement must specify that the subrecipient may not request disbursement of funds under the agreement until the funds are needed for payment of eligible costs. The amount of each request must be limited to the amount needed. Program income must be disbursed before the subrecipient requests funds from the participating jurisdiction. (vii) Reversion of assets. The agreement must specify that upon expiration of the agreement, the subrecipient must transfer to the participating jurisdiction any HOME funds on hand at the time of expiration and any accounts receivable attributable to the use of HOME funds. (viii) Records and reports. The agreement must specify the particular records that must be maintained and the information or reports that must be submitted in order to assist the VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 participating jurisdiction in meeting its recordkeeping and reporting requirements. (ix) Enforcement of the written agreement. The agreement must specify remedies for breach of the provisions of the written agreement. The agreement must specify that, in accordance with 2 CFR 200.339, suspension or termination may occur if the subrecipient materially fails to comply with any term of the agreement. The participating jurisdiction may permit the agreement to be terminated in whole or in part in accordance with 2 CFR 200.340. (x) Written agreement. Before the subrecipient provides HOME funds to any owner, community housing development organization, subrecipient, homeowner, homebuyer, tenant (or landlord) receiving tenant-based rental assistance, or contractor providing services to or on behalf of the subrecipient, the subrecipient must have a fully executed written agreement with such entity that meets the requirements of this section. For housing projects assisted with HOME funds, the subrecipient must provide HOME funds directly to the owner under the terms and conditions of the written agreement. The agreement must establish whether repayment of HOME funds must be remitted to the participating jurisdiction or may be retained by the subrecipient for additional eligible activities. (xi) Fees. The agreement must prohibit the subrecipient from charging for any of the prohibited costs listed in § 92.214, including but not limited to servicing, origination, or other fees for the costs of administering the HOME program. (xii) Project requirements. The agreement must require enforcement of project requirements in subpart F of this part, as applicable in accordance with the type of project assisted. For any projects involving HOME rental housing, the agreement must require that the HOME tenancy addendum is used in accordance with § 92.253 for all HOME-assisted units. For tenant-based rental assistance, the agreement must require compliance with the requirements at § 92.253(a)–(c) and (d)(2). (3) For-profit or nonprofit housing owner (other than a community housing development organization or single family owner-occupant). The participating jurisdiction may preliminarily award HOME funds for a proposed project, contingent on conditions such as obtaining other financing for the project. This preliminary award is not a commitment to a project. The written agreement PO 00000 Frm 00060 Fmt 4701 Sfmt 4702 committing the HOME funds to the project must meet the requirements of ‘‘commit to a specific local project’’ in the definition of ‘‘commitment’’ in § 92.2. The HOME assistance must be provided directly to the owner under the terms and conditions of a written agreement that complies with the requirements of this part and contains the following: (i) Use of the HOME funds. The agreement between the participating jurisdiction and a for-profit or nonprofit housing owner must include the address of the project or the legal description of the property if a street address has not been assigned to the property, the specific amount and use of the HOME funds and other funds for the project, including the tasks to be performed for the project, a schedule for completing the tasks and the project, and a complete budget. These items must be in sufficient detail to provide a sound basis for the participating jurisdiction to effectively monitor performance under the agreement to achieve project completion and compliance with the HOME requirements. The agreement must state that any and all repayments made by the owner on HOME assistance (e.g., grants or loans) must be remitted to the participating jurisdiction, unless the participating jurisdiction permits a subrecipient or State recipient to retain the funds. (ii) Affordability. The agreement must require housing assisted with HOME funds to meet the affordability requirements of § 92.252 or § 92.254, as applicable, and must require repayment of the funds if the housing does not meet the affordability requirements for the specified period of affordability. The agreement must require a means of enforcement of the affordability requirements by the participating jurisdiction and the intended beneficiaries. The means of enforcement may include liens on real property, deed or use restrictions, a recorded agreement restricting the use of the property, covenants running with the land, or other mechanisms approved by HUD in writing, under which the participating jurisdiction has the right to require specific performance. (A) If an owner is undertaking rental projects, the agreement must establish the initial rents, the procedures for rent increases pursuant to § 92.252(e)(2), the number of HOME units, the size of the HOME units, the designation of the HOME units as fixed or floating, and include the requirement that the owner provide the address (e.g., street address and apartment number) of each HOME unit no later than the time of initial occupancy. E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules (B) If the owner is undertaking a homeownership project for sale to homebuyers in accordance with § 92.254(a), the agreement must set forth the resale or recapture requirements that must be imposed on the housing, the sales price or the basis upon which the sales price will be determined, and the disposition of the sales proceeds. Recaptured funds must be returned to the participating jurisdiction. (iii) Project requirements. As applicable and in accordance with the type of project assisted, the agreement must require compliance with the project requirements in subpart F of this part, including compliance with tenant protections in 24 CFR 92.253. The agreement may permit the owner to limit eligibility or give a preference to a particular segment of the population in accordance with § 92.253(e). (iv) Property standards. The agreement must require the housing to meet the property requirements as specified in § 92.251. The agreement must also require owners of rental housing assisted with HOME funds to maintain the housing in compliance with § 92.251 for the duration of the period of affordability. (v) Other program requirements. The agreement must require the owner to carry out each project in compliance with the following requirements of subpart H of this part: (A) The agreement must specify the owner’s affirmative marketing responsibilities as enumerated by the participating jurisdiction in accordance with § 92.351. (B) The federal and nondiscrimination requirements in § 92.350. (C) Any displacement, relocation, and acquisition requirements imposed by the participating jurisdiction consistent with § 92.353. (D) The labor requirements in § 92.354. (E) The conflict of interest provisions prescribed in § 92.356(f). (F) If HOME funds are being provided to develop rental housing, the agreement must set forth all obligations the participating jurisdiction imposes on the owner in order to meet the VAWA requirements under § 92.359, including the owner’s notice obligations and owner obligations under the emergency transfer plan. (vi) Records and reports. The agreement must specify the particular records that must be maintained and the information or reports that must be submitted in order to assist the participating jurisdiction in meeting its recordkeeping and reporting requirements. The written agreement must require the owner of rental VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 housing to annually provide the participating jurisdiction with information on rents (including rental amounts charged to the tenant), and occupancy of HOME-assisted units to demonstrate compliance with § 92.252. If the rental housing project has floating HOME units, the written agreement must require that the owner provide the participating jurisdiction with information regarding unit substitution and filling vacancies so that the project remains in compliance with § 92.252. The agreement must specify the reporting requirements (including copies of financial statements) to enable the participating jurisdiction to determine the financial condition (and continued financial viability) of the rental project. (vii) Enforcement of the written agreement. The agreement must specify remedies for breach of the provisions of the written agreement. The agreement must require a means of enforcement of the affordability requirements by the participating jurisdiction and the intended beneficiaries. The means of enforcement may include liens on real property, deed or use restrictions, a recorded agreement restricting the use of the property, covenants running with the land, or other mechanisms approved by HUD in writing, under which the participating jurisdiction has the right to require specific performance. (viii) Requests for disbursement of funds. The agreement must specify that the owner may not request disbursement of funds under the agreement until the funds are needed for payment of eligible costs. The amount of each request must be limited to the amount needed. (ix) Duration of the agreement. The agreement must specify the duration of the agreement. If the housing assisted under this agreement is rental housing, the agreement must be in effect through the period of affordability required by the participating jurisdiction under § 92.252. If the housing assisted under this agreement is homeownership housing, the agreement must be in effect at least until completion of the project and ownership by the low-income family. (x) Fees. The agreement must state the fees that may be charged by the owner in accordance with § 92.214(b)(4) and prohibit owners from charging tenants for any of the prohibited charges listed in § 92.214(b), including but not limited to fees that are not customarily charged in rental housing, such as laundry room access fees. The agreement must also prohibit the owner undertaking a homeownership project from charging servicing, origination, processing, PO 00000 Frm 00061 Fmt 4701 Sfmt 4702 46677 inspection, or other fees for the costs of providing homeownership assistance. (4) Contractor. The participating jurisdiction selects a contractor through applicable procurement procedures and requirements. The contractor provides goods or services in accordance with a written agreement (the contract). For contractors who are administering any of the participating jurisdiction’s HOME programs or specific services for one or more programs, the contract must include at a minimum the following provisions: (i) Use of the HOME funds. The agreement must describe the use of the HOME funds, including the tasks to be performed, a schedule for completing the tasks, and budget. (ii) Program requirements. The agreement must provide that the contractor is subject to the requirements in part 92 that are applicable to the participating jurisdiction, except for §§ 92.505 and 92.506, and the contractor cannot assume the participating jurisdiction responsibilities for environmental review, decision making, and action under § 92.352. The agreement must provide that the requirements at 2 CFR part 200 applicable to a contractor apply. The agreement must list the requirements applicable to the activities the contractor is administering. If applicable to the work under the contract, the agreement must set forth all obligations the participating jurisdiction imposes on the contractor in order to meet the VAWA requirements under § 92.359, including any notice obligations and any obligations under the emergency transfer plan. (iii) Duration of agreement. The agreement must specify the duration of the contract. (5) Homebuyer, homeowner, or tenant or owner receiving tenant-based rental or security deposit assistance. When a participating jurisdiction provides assistance to a homebuyer, homeowner, or tenant or owner for tenant-based rental assistance, the written agreement may take many forms depending upon the nature of assistance. At minimum, it must include the following: (i) For homebuyers, the agreement must contain the requirements in § 92.254(a), the value of the property, principal residence, lease-purchase, if applicable, and the resale or recapture provisions. (A) The agreement must specify the amount of HOME funds, the form of assistance, e.g., grant, amortizing loan, deferred payment loan, the use of the funds (e.g., down-payment, closing costs, rehabilitation), and the time by which the housing must be acquired. E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 46678 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules (B) For existing housing that is acquired for homeownership, the agreement must require the participating jurisdiction to inspect the housing to determine that the project meets the property standards in § 92.251 and require compliance with the requirements in § 92.251(c)(3). (ii) For homeowners, the agreement must contain the requirements in § 92.254(b) and specify the amount and form of HOME assistance, rehabilitation work to be undertaken, date for completion, and property standards to be met. (iii) For tenants or owners receiving payments under a HOME tenant-based rental assistance program, the rental assistance contract or the security deposit contract must meet the requirements in § 92.209 and applicable requirements in § 92.253. (6) Community housing development organization: When HOME funds are provided to a community housing development organization, the requirements in the written agreement depend upon the type of HOME assistance. At minimum, the agreement must comply with the following requirements for the type of HOME assistance: (i) Using set-aside funds under § 92.300 for affordable housing. The written agreement must contain the requirements described in paragraph (c)(3) of this section and the following additional requirements: (A) Role of community housing development organization. The agreement must state whether the community housing development organization will own, develop, or sponsor rental housing, as described in § 92.300(a)(2)–(5) and require the community housing development organization to comply with the applicable requirements in § 92.300(a), based on its role. (B) Developer of homeownership housing. If the community development organization is a ‘‘developer’’ of homeownership housing, as defined in § 92.300(a)(6), the agreement must specify whether the organization may retain proceeds from the sale of the housing and whether the proceeds are to be used for HOME-eligible or other housing activities to benefit low-income families. (C) Sharing of developer responsibilities. If the community housing development organization will share developer responsibilities with another entity pursuant to § 92.300(a)(3) or (6), the participating jurisdiction must enter into a written agreement only with the community housing development organization. The written VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 agreement must require the community housing development organization to enter into a separate agreement with the co-developer. At minimum, the agreement between the community housing development organization and its co-developer must contain the following: (1) The responsibilities of the community housing development organization and co-developer with descriptions of the responsibilities in sufficient detail to demonstrate compliance with § 92.300(a)(3) or (a)(6), as applicable; (2) A description of the amount of developer fee and other compensation, if any, to be paid to the co-developer; (3) A description of any ownership interest in the community housing development organization and if applicable, any membership or partnership interest in the owner held by the co-developer; and (4) A provision that the agreement’s terms and conditions are subject to review by the participating jurisdiction and if such terms and conditions affect a project’s compliance with HOME requirements, the terms and conditions are subject to approval by the participating jurisdiction. (ii) Receiving assistance for operating expenses. The agreement must describe the use of HOME funds for operating expenses (e.g., salaries, wages, and other employee compensation and benefits); employee education, training, and travel; rent; utilities; communication costs; taxes; insurance; equipment; and materials and supplies. If the community housing development organization is not also receiving funds for a housing project to be developed, sponsored, or owned by the community housing development organization, the agreement must provide that the community housing development organization is expected to receive funds for a project within 24 months of the date of receiving the funds for operating expenses, and must specify the terms and conditions upon which this expectation is based and the consequences of failure to receive funding for a project. If the community housing development organization is also receiving funds for a project, there must be a separate written agreement that complies with this section for the use of HOME funds for the project and the agreement must contain the applicable requirements in paragraph (c)(6)(i) of this section. (iii) Receiving assistance for projectspecific technical assistance and site control loans or project-specific seed money loans. The agreement must identify the specific site or sites and PO 00000 Frm 00062 Fmt 4701 Sfmt 4702 describe the amount and use of the HOME funds (in accordance with § 92.301), including a budget for work, a period of performance, and a schedule for completion. The agreement must also set forth the basis upon which the participating jurisdiction may waive repayment of the loans, consistent with § 92.301, if applicable. (7) Technical assistance provider to develop the capacity of community housing development organizations in the jurisdiction. The agreement must identify the specific nonprofit organization(s) to receive capacity building assistance. The agreement must describe the amount and use (scope of work) of the HOME funds, including a budget, a period of performance, and a schedule for completion. ■ 40. Amend § 92.505 by revising the first sentence to read as follows: § 92.505 Applicability of uniform administrative requirements. The requirements of 2 CFR part 200 apply to participating jurisdictions, State recipients, and subrecipients receiving HOME funds, except for the following provisions: §§ 200.306, 200.307, 200.308 (not applicable to participating jurisdictions), 200.311 (except as provided in § 92.257), 200.312, 200.328, 200.330, 200.334, 200.335, and 200.344. * * * ■ 41. Revise § 92.507 to read as follows: § 92.507 Closeout. This section specifies the procedure and actions that must be completed by a participating jurisdiction and HUD to closeout a grant. (a) Closeout process. (1) HUD will close out a grant when it determines that the participating jurisdiction has completed all required activities and closeout actions for the grant. If the participating jurisdiction fails to complete the requirements in accordance with this section, HUD may close out the Federal award with the information available. HUD may closeout individual grants or multiple grants simultaneously. (2) The participating jurisdiction must complete requirements in paragraph (b) of this section to closeout a grant. (3) Before the end of the budget period of the grant, the participating jurisdiction shall draw down funds for all financial obligations incurred under the grant from the U.S. Treasury account by electronic funds transfer. (i) At closeout, the participating jurisdiction must promptly refund any balances of unobligated cash paid in advance. All such refunds must be completed prior to submission of the information and reports required in paragraph (b) of this section. E:\FR\FM\29MYP2.SGM 29MYP2 lotter on DSK11XQN23PROD with PROPOSALS2 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules (ii) At the end of the budget period, all remaining balance of funds in the U.S. Treasury account shall be canceled and thereafter shall not be available for obligation or expenditure for any purpose, as required by 31 U.S.C. 1552(a). Any unused grant funds disbursed from the U.S. Treasury account which are in the possession of the participating jurisdiction shall be refunded to HUD or recaptured by the U.S. Treasury. (4) HUD will initiate closeout actions in the computerized disbursement and information system when the participating jurisdiction has met the requirements established in paragraph (b) of this section. (i) If the participating jurisdiction does not submit and enter all required data, information, and reports or complete the actions described in paragraph (b) of this section, HUD will proceed to close out the grant with the information available within one year of the period of performance end date. (ii) HUD may report the participating jurisdiction’s material failure to comply with the terms and conditions of the award or requirements in this section to the OMB-designated integrity and performance system (currently FAPIIS). HUD may also pursue other enforcement actions in 2 CFR 200.339. (5) A participating jurisdiction may request, and HUD may provide an extension of the period of performance or closeout deadlines provided good cause is demonstrated. (b) Actions required for closeout. A participating jurisdiction must complete the following actions for closeout of the grant: (1) Submit a complete and final Federal Financial Report for the grant to HUD within 120 days of the end date of the period of performance, as indicated in the grant agreement; (2) Complete all activities for which funds were expended; (3) Enter all data for activities in the computerized disbursement and information system established by HUD, within one year from the end of the period of performance as required by the grant agreement; (4) Demonstrate that all HOMEassisted units are occupied by eligible occupants by entering accurate beneficiary data in the computerized disbursement and information system established by HUD, within one year from the end of the period of performance, as required by the grant agreement; (5) The participating jurisdiction must comply with the requirements in 2 CFR 200.313(e) for the disposition of any equipment acquired under one or more VerDate Sep<11>2014 19:09 May 28, 2024 Jkt 262001 HOME grants, that is no longer needed for the HOME program, or for other activities previously supported by a Federal agency; (6) Resolve and close all HOME monitoring findings for the grant (if applicable); (7) Resolve and close all OIG audit findings for the grant (if applicable); (8) Resolve and close all Single Audit findings for the grant (if applicable); (9) Carry out all other responsibilities under the grant agreement and applicable laws and regulations satisfactorily; and (10) The participating jurisdiction must complete a closeout certification prepared by HUD. The certification shall identify the grant being closed out and include provisions with respect to the following: (i) Identification of any unused grant funds that were canceled by HUD; (ii) Compliance with the recordkeeping requirements in § 92.508, including maintaining program, project, financial, program administration, community housing development organization records, records concerning other Federal requirements, and such other records as necessary to carry out responsibilities for the grant by the participating jurisdiction, its State recipients, and subrecipients; (iii) Monitoring and enforcement of the requirements for all HOME-assisted units set forth in 24 CFR part 92 for the period specified in the HOME written agreement with the property owner; (iv) Compliance with use of program income, recaptured funds, and repayments in accordance with § 92.503. If the jurisdiction is not a participating jurisdiction (as a metropolitan city, urban county, or consortium member) when it receives funds, the funds are not subject to the requirements of 24 CFR part 92; (v) All actions required in 2 CFR 200.344 applicable to the grant have been taken by the participating jurisdiction; (vi) All actions required in 2 CFR 200.344 applicable to the participating jurisdiction’s subrecipients have been taken; (vii) Other provisions appropriate to any special circumstances of the grant closeout, in modification of or in addition to the obligations in paragraphs (c)(1) and (2) of this section; (viii) Acknowledge future monitoring by HUD and that findings of noncompliance may be taken into account by HUD as unsatisfactory performance of the participating jurisdiction and in any risk-based assessment of a future grant award under this part; and PO 00000 Frm 00063 Fmt 4701 Sfmt 4702 46679 (ix) Unless otherwise provided in a closeout certification, the Consolidated Plan will remain in effect after closeout until the expiration of the program year covered by the most recent Consolidated Plan. (c) Post closeout adjustments and continuing responsibilities. The closeout of a grant does not affect any of the obligations required under this part and under 2 CFR 200.345, including: (1) The right of HUD to disallow costs and recover funds on the basis of a later audit or other review. HUD must make any cost disallowance determination and notify the participating jurisdiction within the record retention period; (2) Compliance with the requirements in § 92.508; (3) Compliance with the requirements in § 92.509; (4) Records retention as required in 2 CFR 200.345, as applicable; (5) Monitoring and enforcement of the requirements for all HOME-assisted units set forth in 24 CFR part 92 for the period of affordability specified in the HOME written agreement with the property owner; (6) Compliance with use of program income, recaptured funds, and repayments in accordance with § 92.503. If the jurisdiction is not a participating jurisdiction (as a metropolitan city, urban county, or consortium member) when it receives funds, the funds are not subject to the requirements of 24 CFR part 92; (7) Compliance with the requirement in 2 CFR 200.345(a)(2) that the participating jurisdiction return any funds due as a result of a later refund, corrections, or other transactions including final indirect cost rate adjustments; and (8) Compliance with the audit requirements at 2 CFR part 200, subpart F (2 CFR 200.345(a)(4)). ■ 42. In § 92.508: ■ a. Add a sentence to the end of paragraph (a)(2)(ix); ■ b. Revise paragraph (a)(3)(iii); ■ c. Amend paragraph (a)(3)(iv) by removing the citation ‘‘§ 92.504(d)’’ and adding, in its place, the citation ‘‘§ 92.251(f)’’; ■ d. Revise paragraph (a)(3)(vi); ■ e. Amend paragraph (a)(3)(ix) by removing the words ‘‘the tenant’’ and adding, in their place, the words ‘‘the applicable tenant’’; and ■ f. Amend paragraph (a)(5)(iv) by removing the citation to ‘‘2 CFR 200.302’’ and adding, in its place, a citation to ‘‘2 CFR 200.302 and 2 CFR 200.303’’. The revisions and additions read as follows: E:\FR\FM\29MYP2.SGM 29MYP2 46680 § 92.508 Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / Proposed Rules Recordkeeping. (a) * * * (2) * * * (ix) * * * If the participating jurisdiction will apply excess matching contribution to a future fiscal year’s liability, records demonstrating compliance with the matching requirements of § 92.218 through § 92.221 for the excess amount applied, as described in § 92.221(b)(1), must be provided at the time of application, and maintained for five years from the date of application. * * * * * (3) * * * (iii) Records demonstrating that each rental housing or homeownership project meets the minimum per-unit subsidy amount of § 92.205(c), the maximum per-unit subsidy amount in accordance with the requirement in § 92.250(a), the subsidy layering and underwriting evaluation adopted in accordance with § 92.250(b), and, if applicable, compliance with a green building standard established by HUD in accordance with the requirements in § 92.250(c). * * * * * (vi) Records demonstrating that each tenant-based rental assistance project meets the written tenant selection policies and criteria of § 92.209(c), including any targeting requirements, the rent reasonableness requirements of § 92.209(f), the maximum subsidy provisions of § 92.209(h), housing standards of § 92.209(i) (including property inspection reports), security deposit requirements of § 92.209(j), and calculation of the HOME subsidy. * * * * * ■ 43.Amend § 92.551 by adding paragraph (c)(3) to read as follows: § 92.551 lotter on DSK11XQN23PROD with PROPOSALS2 * Corrective and remedial actions. * * (c) * * * VerDate Sep<11>2014 * * 19:09 May 28, 2024 Jkt 262001 (3) A participating jurisdiction may request HUD reduce grant payments by an amount equal to the amount of expenditures that did not comply with the requirements of this part. The amount of a reduction may be for the entire grant amount. ■ 44. Amend § 92.552 by removing the period at the end of paragraph (a)(2)(iv) and adding, in its place, a semicolon, and adding paragraphs (a)(2)(v) through (vii) to read as follows: agreement is the date of HUD execution of the grant agreement. For a Section 108 loan guarantee, the effective date of the grant agreement is the date of HUD execution of the grant agreement amendment for the particular loan guarantee commitment. * * * * * § 92.552 Notice and opportunity for hearing; sanctions. ■ (a) * * * (2) * * * (v) Reduce grant amounts paid to the participating jurisdiction by an amount equal to the amount of any expenditures that did not comply with the requirements of this part. The amount of a reduction may be for the entire grant amount; (vi) Revoke a jurisdiction’s designation as a participating jurisdiction; and (vii) Terminate the assistance in whole or in part in accordance with 2 CFR 200.340. * * * * * Subpart M [Removed] 45. Remove subpart M (§ 92.600 through § 92.618). ■ PART 570—COMMUNITY DEVELOPMENT BLOCK GRANTS 46. The authority citation for part 570 continues to read as follows: ■ Authority: 12 U.S.C. 1701x, 1701x–1; 42 U.S.C. 3535(d) and 5301–5320. 47. Amend § 570.200 by revising paragraph (h) introductory text to read as follows: ■ § 570.200 General policies. * * * * * (h) Reimbursement for pre-award costs. The effective date of the grant PO 00000 Frm 00064 Fmt 4701 Sfmt 9990 PART 982—SECTION 8 TENANTBASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM 48. The authority citation for part 982 continues to read as follows: Authority: 42 U.S.C. 1437f and 3535(d). 49. Amend § 982.507 by revising paragraphs (c)(2) and (3) to read as follows: ■ § 982.507 Rent to owner: Reasonable rent. * * * * * (c) * * * (2) LIHTC. If the rent requested by the owner exceeds the LIHTC rents for nonvoucher families, the PHA must determine the rent to owner is a reasonable rent in accordance with paragraph (b) of this section and the rent shall not exceed the lesser of the: (i) Reasonable rent; and (ii) The payment standard established by the PHA for the unit size involved. (3) HOME Program. If the rent requested by the owner exceeds the HOME rents for non-voucher families, the PHA must determine the rent to owner is a reasonable rent in accordance with paragraph (b) of this section and the rent shall not exceed the lesser of the: (i) Reasonable rent; and (ii) The payment standard established by the PHA for the unit size involved. * * * * * Adrianne Todman, Acting Secretary. [FR Doc. 2024–10975 Filed 5–28–24; 8:45 am] BILLING CODE 4210–67–P E:\FR\FM\29MYP2.SGM 29MYP2

Agencies

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 89, Number 104 (Wednesday, May 29, 2024)]
[Proposed Rules]
[Pages 46618-46680]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10975]



[[Page 46617]]

Vol. 89

Wednesday,

No. 104

May 29, 2024

Part III





Department of Housing and Urban Development





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24 CFR Parts 91, 92, 570, et al.





HOME Investment Partnerships Program: Program Updates and Streamlining; 
Proposed Rule

Federal Register / Vol. 89, No. 104 / Wednesday, May 29, 2024 / 
Proposed Rules

[[Page 46618]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 91, 92, 570, and 982

[Docket No. FR-6144-P-01]
RIN 2506-AC50


HOME Investment Partnerships Program: Program Updates and 
Streamlining

AGENCY: Office of the Assistant Secretary for Community Planning and 
Development, Department of Housing and Urban Development, HUD.

ACTION: Proposed rule.

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SUMMARY: HUD's HOME Investment Partnerships Program (HOME program or 
HOME) provides formula grants to States and units of general local 
government to fund a wide range of activities to produce and maintain 
affordable rental and homeownership housing and provides tenant-based 
rental assistance for low-income and very low-income households. This 
proposed rule would revise the current HOME regulations to update, 
simplify, or streamline requirements, better align the program with 
other Federal housing programs, and implement recent amendments to the 
HOME statute. This rule also includes minor revisions to the 
regulations for the Community Development Block Grant and Section 8 
Housing Choice Voucher (HCV) Programs consistent with the 
implementation of proposed changes to the HOME program.

DATES: Comment Due Date: July 29, 2024.

ADDRESSES: There are two methods for submitting public comments. All 
submissions must refer to the above docket number and title.
    1. Electronic Submission of Comments. Comments may be submitted 
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 comments immediately available 
to the public. Comments submitted electronically through 
www.regulations.gov can be viewed by other commenters and interested 
members of the public. Commenters should follow the instructions 
provided on that website to submit comments electronically.
    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.

    Note:  To receive consideration as a public comment, comments 
must be submitted through one of the two methods specified above.

    Public Inspection of Public Comments. HUD will make all properly 
submitted comments and communications available for public inspection 
and copying during regular business hours at the above address. Due to 
security measures at the HUD Headquarters building, you must schedule 
an appointment in advance to review the public comments by calling the 
Regulations Division at 202-708-3055 (this is not a toll-free number). 
HUD welcomes and is prepared to receive calls from individuals who are 
deaf or hard of hearing, as well as individuals with speech or 
communication disabilities. To learn more about how to make an 
accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs. Copies of all comments 
submitted are available for inspection and downloading at 
www.regulations.gov.
    In accordance with 5 U.S.C. 553(b)(4), a summary of this proposed 
rule may be found at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Virginia Sardone, Director, Office of 
Affordable Housing Programs, Office of Community Planning and 
Development, Department of Housing and Urban Development, 451 7th 
Street SW, Room 7160, Washington, DC 20410; telephone number (202) 708-
2684 (this is not a toll-free number). HUD welcomes and is prepared to 
receive calls from individuals who are deaf or hard of hearing, as well 
as individuals with speech or communication disabilities. To learn more 
about how to make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.

SUPPLEMENTARY INFORMATION: 

I. Background--The HOME Program

    The HOME program is authorized by title II of the Cranston-Gonzalez 
National Affordable Housing Act \1\ (``NAHA'') and has been in 
operation since 1992. The HOME program provides grants to States, local 
jurisdictions, and consortia of local jurisdictions (collectively, 
participating jurisdictions or PJs) and is used, often in partnership 
with local nonprofit groups, to fund a wide range of activities to 
build, buy, or rehabilitate affordable housing for rent or 
homeownership or to fund direct rental assistance to low-income 
people.\2\ HOME program funds are awarded annually as formula grants to 
participating jurisdictions. After the Department obligates funds to a 
participating jurisdiction, the Department establishes a HOME 
Investment Trust Fund \3\ for each participating jurisdiction, 
providing a line of credit that a participating jurisdiction may draw 
upon as needed.
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    \1\ 42 U.S.C. 12721 et seq.
    \2\ See HUD's HOME Investment Partnerships Program web page at 
https://www.hud.gov/program_offices/comm_planning/home.
    \3\ HUD's regulations for the HOME Investment Trust Fund can be 
found at 24 CFR 92.500.
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    The HOME program is the largest Federal block grant to States and 
local governments designed exclusively to create affordable housing for 
low-income households. Each year, the program allocates approximately 
$1.5 billion among States and approximately 600 localities nationwide. 
In fiscal year 2023, participating jurisdictions completed 6,848 rental 
housing units and 4,051 homebuyer units, assisted 2,717 low-income 
homeowners to repair their homes, and provided tenant-based rental 
assistance to 13,016 low-income households. HOME funds are most often 
used as gap financing for rental projects, particularly for projects 
that have been awarded Low-Income Housing Credits (26 U.S.C. 42) 
(``LIHTC''). Currently, there are 245,122 HOME-assisted rental units 
operating in their periods of affordability (i.e., subject to ongoing 
HOME income and rent requirements). The HOME program is designed to 
reinforce several important values and principles of community 
development. First, the HOME program's flexibility empowers people and 
communities to design and implement strategies tailored to their own 
needs and priorities. Second, the HOME program's emphasis on 
consolidated planning expands and strengthens partnerships among all 
levels of government and the relationship with the private sector in 
the development of affordable housing. Third, the HOME program's 
technical assistance activities and set-aside for qualified community 
housing development organizations help to build the capacity of and 
partnerships with these community-based nonprofit organizations. 
Fourth, the HOME program's requirement that participating jurisdictions 
match 25 cents of every dollar in program funds helps to mobilize 
community resources in support of affordable housing.

[[Page 46619]]

    While participating jurisdictions may undertake housing development 
activities directly, they also may provide HOME funds to for profit 
developers, public agencies, or private non-profit organizations to 
develop affordable housing for rent or sale to income-eligible 
households. Participating jurisdictions may provide HOME funds for 
affordable housing as grants, direct loans, loan guarantees, or other 
forms of credit enhancement, or for rental assistance or security 
deposits. Non-development activities such as tenant-based rental 
assistance or downpayment assistance for homeownership are generally 
administered by the participating jurisdiction, another public agency, 
or a non-profit organization as subrecipients acting on behalf of the 
participating jurisdiction.
    The participating jurisdiction ensures compliance with HOME 
affordability requirements during the required period of affordability 
through the execution and recording of regulatory agreements on HOME-
assisted housing and other enforceable measures such as deed 
restrictions or similar instruments. All HOME-assisted units must be 
occupied by income-eligible households. HOME-assisted rental units must 
have their rents approved by the participating jurisdiction and require 
owners to restrict the rent paid by tenants to amounts at or below the 
HUD-published maximum HOME rent limits. Owners of HOME-assisted rental 
housing must follow their adopted written tenant selection policies and 
criteria and select tenants from a written waiting list in 
chronological order of their application, insofar as practicable. 
Owners of HOME-assisted rental housing must also affirmatively market 
the availability of units in a manner likely to reach eligible tenants. 
Generally, participating jurisdictions maintain information on HOME-
assisted rental housing (e.g., websites, brochures, fliers) that 
prospective tenants may access to identify housing opportunities. HOME-
assisted housing for homebuyers is also subject to a period of 
affordability. If the HOME-assisted homeownership housing is sold 
during the period of affordability, either the property must be sold at 
an affordable price to another low-income homebuyer or all or a portion 
of any purchase assistance provided to the seller must be recaptured 
from the net proceeds of the sale.
    The HOME program regulations are codified in 24 CFR part 92 and 
were last substantively revised on July 24, 2013 (the 2013 HOME Final 
Rule).\4\ The 2013 HOME Final Rule focused on improving a participating 
jurisdiction's performance and accountability to HOME grant funds and 
addressing a participating jurisdiction's operational challenges as it 
adopted more complex program designs and its portfolio of existing 
projects grew. In 2016, the Department issued an interim regulation,\5\ 
finalized on September 22, 2022 (``the 2022 HOME Final Rule''),\6\ that 
implemented a grant-specific method for determining compliance with the 
24-month commitment and CHDO set-aside commitment deadlines. The 2022 
HOME Final Rule also eliminated the use of first-in-first-out 
accounting for fiscal year 2015 and later HOME grants.
---------------------------------------------------------------------------

    \4\ 78 FR 44627.
    \5\ 81 FR 86947 (Dec. 2, 2016).
    \6\ 87 FR 57821.
---------------------------------------------------------------------------

    The HOME program provisions contained in title II of NAHA are 
prescriptive and the statute has not been significantly revised since 
the HOME program was last reauthorized by Congress in 1992. The 
constraints of prescriptive statutory authority that have not been 
significantly revised in over 30 years limits the scope of changes that 
the Department can propose to the HOME program regulations. Working 
within these limitations, the Department conducted a comprehensive 
review of title II of NAHA and current HOME program regulations to 
determine whether previously unrecognized opportunities might exist to 
revise current regulatory provisions. In creating this proposed rule, 
the Department focused on its commitment to equity and wealth-building 
and considered input from stakeholders throughout the years on the most 
challenging aspects of administering and using HOME funds to provide 
affordable housing. Through this proposed rule, the Department seeks to 
reduce burden and increase flexibility for participating jurisdictions 
and other program participants, while adhering to statutory intent and 
requiring responsible management of State and local HOME programs.

II. This Proposed Rule

    HUD proposes to make multiple changes to 24 CFR part 92. The 
proposed changes include significant revisions to the community housing 
development organization (CHDO) requirements, a change in the approach 
to HOME rents, simplified requirements for small-scale rental projects, 
enhanced flexibility in HOME tenant-based rental assistance (``TBRA'') 
programs, and simplified provisions and new flexibilities for community 
land trusts (CLTs). The proposed rule would significantly strengthen 
and expand tenant protections by requiring that a HOME tenancy addendum 
with a set of uniform tenant protections be appended to the leases of 
all tenants of HOME-assisted rental housing units. HUD also proposes 
requiring that a HOME tenancy addendum with a streamlined set of 
uniform tenant protections be appended to the leases of all tenants 
receiving TBRA. Additionally, HUD proposes to create incentives for 
meeting a more advanced property standard that incorporates green 
building standards, higher levels of energy efficiency, and innovative 
building techniques in new construction, reconstruction, and 
rehabilitation of housing. The proposed rule would also clarify the 
resale requirements for homeownership housing and would make technical 
amendments and simplifications to conform provisions to certain changes 
made in the 2013 HOME Final Rule. HUD's proposed changes are described 
more fully in each of the sections below.
    This proposed rule incorporates changes made by the Housing 
Opportunity Through Modernization Act of 2016 (HOTMA), published in the 
Federal Register on February 14, 2023 (88 FR 9600) (``HOTMA Final 
Rule''), Economic Growth Regulatory Relief and Consumer Protection Act: 
Implementation of National Standards for the Physical Inspection of 
Real Estate (NSPIRE), published in the Federal Register on May 11, 2023 
(88 FR 30442) (``NSPIRE Final Rule''). This proposed rule also updates 
citations, in paragraphs where other changes are being made, to 
citations to conform with recent changes to the Office of Management 
and Budget (OMB) regulations at 2 CFR part 200. HUD intends to publish 
a future rulemaking to ensure that all citations throughout HUD's 
regulations are consistent with these changes. This proposed rule also 
proposes further revisions to the changes made to 24 CFR part 92 by the 
HOTMA Final Rule, and the NSPIRE Final Rule.

A. Changes to the HOME Program Regulations (24 CFR Part 92)

1. Definitions (24 CFR 92.2)
    Removal of definitions related to 24 CFR part 92, subpart M. HUD 
proposes to remove the definition of ``ADDI Funds,'' ``Displaced 
homemaker,'' and ``First-Time Homebuyer'' because the Department 
proposes to delete 24 CFR part 92, subpart M, which implemented

[[Page 46620]]

the American Dream Downpayment Initiative (ADDI) and associated 
definitions.
    Commitment. HUD proposes to make two minor changes to the 
definition of ``commitment.'' This term is currently defined to 
generally mean that a participating jurisdiction has executed a legally 
binding agreement with a State recipient, a subrecipient, or a 
contractor to use a specific amount of HOME funds for a specified use 
or for a specified local project. The proposed rule would make a 
technical correction in paragraph (1) of the definition to change the 
word ``official'' to ``officials'' in the description of an agreement 
between the participating jurisdiction and a subrecipient that is 
controlled by the participating jurisdiction. The proposed rule would 
also replace the term ``downpayment assistance'' with ``homeownership 
assistance.'' The use of the term ``downpayment assistance'' was a 
drafting error which unintentionally implied that written agreements 
with State recipients or subrecipients to provide other forms of 
homeownership assistance (i.e., direct financial assistance to 
homebuyers or rehabilitation assistance to low-income homeowners) do 
not constitute commitments. The proposed rule would also remove ``or 
subrecipient'' from paragraph (2)(ii)(A) of the definition because a 
subrecipient, unlike a State recipient, is not permitted to acquire or 
assist standard housing with HOME funds it administers. This change 
would conform to proposed clarifications in the definitions of ``State 
recipient'' and ``subrecipient.''
    Community housing development organization. HUD proposes to revise 
paragraph (4) of the ``community housing development organization'' 
(CHDO) definition to clarify the three options for meeting the 
requirement that the CHDO be a private nonprofit organization that is 
tax exempt. The proposed rule would insert the language ``Is tax exempt 
as follows:'' and add paragraphs (i), (ii), and (iii) to paragraph (4) 
to distinguish the three options to meet the tax exempt requirement. 
The first option is a tax exemption ruling from the Internal Revenue 
Service (IRS) under section 501(c)(3) or (4) of the Internal Revenue 
Code of 1986 and would be paragraph (4)(i). The second option's current 
language ``is classified as a subordinate of a central organization 
non-profit under section 905 of the Internal Revenue Code of 1986'' 
reflects the Department's decision in the 2013 HOME Final Rule to 
accommodate the IRS's recognition of a group of subordinate 
organizations as tax exempt if they are affiliated with a central 
organization.\7\ To avoid the need for each of the subordinate 
organizations to apply for an exemption individually, the IRS provides 
the central organization with a group exemption letter which is a 
ruling or determination issued to the central organization (generally, 
a State, regional, or national organization) which holds that one or 
more subordinate organizations (usually a post, unit, chapter, or 
local) are exempt from Federal income tax by virtue of being 
subordinate organizations of the central organization. In order to 
benefit from a group exemption letter, the subordinate organization 
must be listed in the 501(c)(3) or (4) central organization's group 
exemption letter. Rather than the general reference to section 905 of 
the Internal Revenue Code (IRC) in the current language, the proposed 
language in paragraph (4)(ii) of the CHDO definition would describe the 
applicable IRS requirement. The third option in paragraph (4) has also 
been revised in proposed paragraph (4)(iii) to clarify that a private 
nonprofit organization is tax exempt if it is wholly owned by a 
community housing development organization that meets the requirement 
of the definition in Sec.  92.2, including either paragraph (4)(i) or 
(ii), and is disregarded as an entity separate from its owner 
organization for federal tax purposes. The 2013 HOME Final Rule 
included this option to permit private nonprofit organizations that 
were wholly owned by a CHDO to meet the tax exempt requirement in 
paragraph (4). However, the language for this third option in the 2013 
HOME Final Rule was confusing. The proposed paragraph (4)(iii) would 
clarify that a private nonprofit organization may also meet the tax 
exempt requirement because its owner organization (that qualifies as a 
CHDO) has a 501(c)(3) or (4) ruling or is a subordinate organization 
included in a 501(c)(3) or (4) central organization's group exemption 
letter by the IRS.
---------------------------------------------------------------------------

    \7\ See 26 CFR 1.6033-2(a)(2)(ii)(I); Rev. Proc. 80-27, 1980-1 
C.B. 677, available at https://www.irs.gov/pub/irs-tege/rp1980-27.pdf.
---------------------------------------------------------------------------

    As part of the Department's effort to provide more community-based 
nonprofit organizations access to the HOME CHDO set-aside within the 
constraints of NAHA, the proposed rule would revise several provisions 
of the CHDO definition to make it easier for these organizations to 
meet the low-income board representation and staff capacity 
requirements in Sec.  92.2. These proposed changes, when combined with 
the proposed revisions to the required role of the CHDO as owner, 
developer, or sponsor of housing at Sec.  92.300, would enable more 
community-based housing organizations to qualify as CHDOs and access 
the CHDO set-side.
    The first proposed change would revise paragraph (5) of the CHDO 
definition to make the limitation on public officials and employees of 
a governmental entity on the CHDO governing board less restrictive. The 
regulations currently require an individual who is an employee or 
public official of any governmental entity to be limited to one-third 
of the CHDO board members. The proposed rule would revise paragraph (5) 
of the definition to apply this requirement only to officials and 
employees of the participating jurisdiction designating the CHDO and, 
if the CHDO was created by a governmental entity (e.g., public housing 
agency), to officials and employees of the governmental entity. This 
change would mean that officials or employees of other governmental 
entities besides the participating jurisdiction designating the CHDO or 
governmental entity that created the CHDO (e.g., employees of other 
units of general local government, public school teachers, university 
professors) would not be required to be counted toward the one-third 
board membership limitation on officials or employees. The proposed 
requirements would also clarify that no governmental entity (which 
includes the participating jurisdiction) may appoint more than one-
third of the organization's board members and that those board members 
are not permitted to appoint any of the remaining members of the board.
    In addition, paragraph (8)(i) of the current definition of CHDO 
requires a CHDO to reserve at least one-third of the membership of its 
governing board for residents of low-income neighborhood organizations, 
other low-income community residents, or elected representatives of 
low-income neighborhood organizations. The proposed rule would broaden 
eligible low-income representatives required in paragraph (8)(i) by 
permitting (1) an individual designated by a low-income neighborhood 
organization to qualify as a low-income representative, rather than 
only elected leadership of these organizations and (2) an authorized 
representative of a nonprofit organizations in the community that 
addresses the housing or supportive service needs of residents of low-
income neighborhoods to qualify as a low-income representative. 
Examples of ``nonprofit organizations in the community'' include 
homeless providers, Community Action Agencies, Fair Housing Initiatives 
Program

[[Page 46621]]

providers, Legal Aid, disability rights organizations, and victim 
service providers. These proposed changes would facilitate State and 
local participating jurisdiction efforts to identify more organizations 
that can undertake activities using CHDO set-aside funds.
    Further, State and consortia participating jurisdictions located in 
rural areas face unique challenges in identifying organizations that 
can meet the governing board and capacity requirements to become CHDOs. 
To help address these challenges, the Department also proposes to 
revise the provision in paragraph 8(i) of the CHDO definition that 
defines the term ``community'' for rural areas as ``a neighborhood or 
neighborhoods, town, village, county, or multi-county area (but not the 
entire State)'' to remove the text in parentheses. This change would 
permit CHDOs operating in rural areas to count qualified low-income 
representatives from anywhere in the State toward the low-income board 
representation requirement. This change to the definition of 
``community'' for rural areas would also apply to paragraph (10) of the 
CHDO definition, effectively permitting an organization that wishes to 
operate as a CHDO in a rural area to meet the requirement that it have 
at least a one-year history serving the community with a service 
history anywhere in the State. This change would make it possible for 
nonprofits with statewide service areas to qualify as CHDOs and 
increase the use of CHDO set-aside funds in rural areas.
    HUD proposes to make numerous revisions to paragraph (9) of the 
CHDO definition, which includes the statutory requirement that an 
organization have demonstrated staff capacity to qualify as a CHDO. The 
proposed rule would broaden the requirement that an organization have 
demonstrated capacity for carrying out projects assisted with HOME 
funds to also include housing projects assisted with other Federal 
funds, LIHTC, or local and State affordable housing funds. In addition, 
the proposed rule would improve the clarity of paragraph (9) by adding 
paragraphs (i), (ii), and (iii) to separately address the requirements 
for developer, owner, and sponsor.
    The proposed rule would ease the current prohibition in paragraph 
(9) of the CHDO definition against using the capacity or experience of 
volunteers to meet the demonstrated capacity requirement. The 
Department made this prohibition more explicit in the 2013 HOME Final 
Rule to implement the staff capacity provision contained in the 
Consolidated and Further Continuing Appropriations Act of 2012 (Pub. L. 
112-55) and the Consolidated and Further Continuing Appropriations Act 
of 2013 (Pub. L. 113-6), which required CHDOs to have staff with 
demonstrated development experience. Because the connection of 
volunteers to an organization may be tenuous or temporary, using the 
capacity of volunteers to meet demonstrated staff capacity is 
inconsistent with both NAHA and with the provisions in the Consolidated 
and Further Continuing Appropriations Acts. The proposed rule would, 
however, permit participating jurisdictions to consider the capacity 
and experience of volunteers who are board members or officers of the 
organization in determining whether an organization meets the CHDO 
capacity requirements, provided that the volunteer is not compensated 
by or their services are not donated by another organization.
    Specific solicitation of comment #1. The Department specifically 
solicits public comment about any additional changes it should 
consider, within statutory constraints, that will improve CHDO 
availability and capacity in rural areas.
    Community land trust. HUD proposes to add the definition of 
``community land trust'' (CLT) to Sec.  92.2. Section 233(f) of NAHA 
(42 U.S.C. 12773(f)) contains a definition of community land trust 
which the statute expressly states is only for the purposes of 
establishing the specific characteristics of CLTs that qualify to 
receive CHDO technical assistance funding. This statutory definition in 
section 233(f) of NAHA, which was developed in 1990, is not reflective 
of actual CLTs operating in participating jurisdictions. However, in 
the absence of a separate regulatory definition or any other definition 
of CLT in another Federal program, the Department applied the statutory 
definition in section 233(f) in the implementation of the amendment to 
NAHA in the Consolidated Appropriations Act, 2016 (Pub. L. 114-113). 
The amendment permitted CLTs to hold and exercise purchase options, 
rights of first refusal, or other preemptive rights to preserve the 
affordability of the housing developed by the CLT.
    Recognizing the problems in applying a CLT definition for HOME that 
the statute expressly states is only for the purpose of allowing 
qualifying CLTs to receive CHDO technical assistance funding, the 
Department proposes a regulatory definition of CLT that encompasses the 
purposes for which CLTs are formed and which would generally apply in 
the HOME program, except where stated otherwise in the proposed rule. 
The proposed regulatory definition would require a community land trust 
to be a nonprofit organization that has the development and maintenance 
of housing that is permanently affordable to low and moderate-income 
persons as its primary purposes, uses enforceable mechanisms to require 
housing and related improvements on land held by the CLT to be 
affordable to low- and moderate-income persons for at least 30 years, 
and retains a right of first refusal or preemptive right to purchase 
the affordable housing on land held by the CLT to maintain long-term 
affordability. Adoption of the proposed regulatory definition for CLT 
would allow the Department to discontinue application of the CLT 
definition expressly specified only for CHDO technical assistance in 
all other uses of HOME funds.
    Homeownership. The proposed rule would make a technical correction 
to the definition of ``homeownership'' in Sec.  92.2, striking the 
words ``in a'' from the phrase ``1- to 4-unit dwelling or in a 
condominium unit . . . .'' The proposed rule would also revise 
paragraph (4) of the definition by deleting ``Tax'' from the referenced 
term ``Low-Income Housing Tax Credits'' and adding the IRC statutory 
citation for the term. The changed term ``Low-Income Housing Credits'' 
would match the title of section 42 of the IRC.
    Period of Affordability. HUD proposes to add the definition of 
``period of affordability,'' which is used throughout 24 CFR part 92. 
The definition would (1) clarify that the term means the required 
period specified in Sec.  92.252 and Sec.  92.254 during which the 
requirements of part 92 apply to HOME-assisted housing and (2) 
distinguish the required period specified in Sec.  92.252 and Sec.  
92.254 from an extended period of affordability or additional 
compliance period that a participating jurisdiction may impose on HOME-
assisted housing. The proposed rule would also make technical 
corrections in numerous sections of part 92 by replacing 
``affordability period'' with ``period of affordability.''
    Program Income. HUD proposes to make minor changes to the 
definition of ``program income.'' First, the phrase ``at any time'' is 
added to the definition to clarify that program income is gross income 
received by the participating jurisdiction, State recipient, or a 
subrecipient directly generated from the use of HOME funds or matching 
contributions ``at any time'' and is not bound by a specific timeframe 
such as

[[Page 46622]]

the period of affordability or closeout of the HOME grant.
    The proposed rule would also remove the term ``subrecipient'' from 
the beginning of paragraph (2) of the ``program income'' definition 
that refers to ownership of rental property. This change would clarify 
that a subrecipient, by definition, is a governmental entity or 
nonprofit organization selected by the participating jurisdiction to 
administer all or some of the participating jurisdiction's HOME program 
to produce affordable housing, provide homeownership assistance, or 
provide TBRA and cannot, in that capacity, also receive HOME funds to 
be an owner or developer of affordable housing. The proposed rule would 
also remove ``sponsor'' from the parenthetical in paragraph (2) of the 
``program income'' definition because only a CHDO may be a ``sponsor'' 
and, pursuant to Sec.  92.300(a)(4), a ``sponsor'' must be a project 
``owner'' or ``developer.'' Therefore, the inclusion of ``sponsor'' in 
paragraph (2) of the definition is duplicative and would be deleted in 
the definition for clarity. The proposed definition of ``program 
income'' would also clarify that the amount of gross income from the 
use, rental, or sale of real property received by the project owner or 
developer that must be paid to the participating jurisdiction, 
subrecipient or State recipient is program income. Finally, the 
proposed rule would further clarify in paragraph (3) that program 
income includes payments and repayments of grants, loans, or 
investments made using HOME funds or matching contributions, including 
such payments and repayments made after the period of affordability, 
and is not limited to the payment of loans made using HOME funds or 
matching contributions.
    Reconstruction. HUD proposes to revise the definition of 
``reconstruction'' to clarify that, although reconstruction is 
considered rehabilitation for purposes of the HOME program, the 
property standards for new construction in Sec.  92.251 apply to all 
HOME-assisted reconstruction projects.
    Single family housing. HUD proposes to revise the definition of 
``single family housing'' to improve the clarity of the term. The 
current definition states that single family housing is a one-to-four 
family residence, condominium unit, combination of manufactured housing 
unit and lot, or manufactured housing lot. The proposed change would 
revise ``family'' to ``unit'' to reflect current program practice and 
guidance, changing the definition to a one-to-four- ``unit'' residence, 
condominium unit, cooperative unit, combination of manufactured housing 
and lot, or manufactured housing lot. The proposed change would clarify 
that the defined term is based on units and not occupancy.
    Small-scale housing. HUD proposes to add the definition of ``small-
scale housing,'' which would be defined as a rental housing project 
containing no more than four units or a homeownership project with no 
more than three rental units on the same site. HUD is proposing this 
definition to permit these types of projects to follow streamlined 
procedures for income determinations, ongoing physical inspections, and 
written tenant waiting lists. The definition and the streamlined 
provisions would facilitate participation of owners of small rental 
properties (e.g., accessory dwelling units, duplexes, triplexes, or 
other small rental projects) in the HOME program.
    State recipient. The current definition of ``State recipient'' 
consists of a cross reference to Sec.  92.201(b)(2). The proposed rule 
would eliminate the cross reference and instead list the definition 
directly in Sec.  92.2. States are not required to use State 
recipients, but if a State distributes HOME funds to one or more 
unit(s) of general local government to carry out HOME programs, the 
unit(s) of general local government is a ``State recipient.'' The 
proposed definition would also clarify that, unlike a ``subrecipient,'' 
a ``State recipient'' is permitted to own or develop affordable housing 
as well as administer all or some of the participating jurisdiction's 
HOME programs, provide homeownership assistance, or provide TBRA. This 
change further distinguishes a ``State recipient'' from a 
``subrecipient.''.
    Subrecipient. HUD proposes to make changes to the definition of 
``subrecipient.'' To be consistent with the proposed change to the 
definition of ``commitment,'' the term ``downpayment assistance'' as it 
is used in the current definition of ``subrecipient'' would be revised 
to ``homeownership assistance.'' Also, the term ``public agency'' as it 
is used in the current definition of ``subrecipient'' would be revised 
to ``governmental entity'' because ``governmental entity'' is used 
throughout part 92, whereas ``public agency'' is only used in the 
current ``subrecipient'' definition. These proposed changes would also 
reflect the current practice to permit entities such as a public 
housing authority, housing finance agency, or redevelopment authority 
to be subrecipients.
    The proposed rule would also remove the word ``solely'' to clarify 
that a governmental entity or nonprofit organization that receives HOME 
funds as a developer or owner of a housing project is not acting as a 
``subrecipient,'' even if it also receives funds from the participating 
jurisdiction to administer other HOME-funded activities as a 
``subrecipient.'' Subject to the requirements of part 92, a 
governmental entity or nonprofit organization may be an owner or 
developer of a housing project under a written agreement to acquire, 
rehabilitate, or construct the housing, while also operating as a 
``subrecipient'' of other HOME programs or activities (i.e., not the 
housing program in which it is an owner or developer) under a separate 
written agreement with the participating jurisdiction.
    Tenant-based rental assistance. The proposed rule would revise the 
definition of ``tenant-based rental assistance'' to replace the use of 
the term ``dwelling'' with ``housing'' to align with the requirements 
for TBRA in Sec.  92.209 which applies to ``housing.''
2. Formula Allocation (24 CFR 92.50)
    The proposed rule would remove the use of the term ``poor 
household'' in the formula allocation section and replace it with 
``households below the poverty line.'' The proposed term reflects the 
actual data that HUD uses for this formula factor when determining 
annual HOME allocations.
3. Consortia (24 CFR 92.101)
    The proposed rule would revise Sec.  92.101(a) to permit, under 
certain conditions, a unit of general local government that is 
separated by a body of water from the other units of general local 
government belonging to a consortium and only accessible to the public 
through a permanent means other than a connecting road, bridge, 
railway, or highway to be considered geographically contiguous for 
purposes of inclusion in a HOME consortium. The consortium would be 
required to demonstrate that the unit of general local government 
separated by the body of water is part of the same housing market and 
local commuting area as one or more members of the consortium. This 
change would allow a unit of general local government that is separated 
from one or more other consortium members by a body of water but that 
is accessible by ferry, for example, to become a member of the 
consortium. In the past, the Department had no regulatory basis for 
approving these units of general local government to be consortium 
members. HUD anticipates this change would allow

[[Page 46623]]

some consortia to increase members or new consortia to form.
    The proposed rule would add language to Sec.  92.101(d) to clarify 
the relationship between a representative unit of general local 
government (frequently referred to as the lead entity) and member units 
of general local government in a consortium. The proposed revision 
explains that, while member units of general local government in a 
consortium are not subrecipients, the requirements for subrecipients, 
including the written agreement requirements at Sec.  92.504(c)(2), 
apply when the representative unit of general local government 
distributes HOME funds to member units of general local government in a 
consortium. This change would not affect the requirement in Sec.  
92.101(a)(2)(ii) for a legally binding cooperation agreement between 
all members of a consortium.
    The proposed rule would add language that describes the effect of a 
change to the representative unit of general local government of a 
consortium. If a consortium changes the representative unit of general 
local government but the membership of the consortium does not change, 
the consortium is considered to be the same unit of general local 
government. However, the proposed rule states that if a representative 
unit of general local government of a consortium changes, and the 
composition of the consortium also changes because one or more members 
have been added or removed from the consortium, then the consortium is 
considered a new unit of general local government and must comply with 
all applicable consolidated plan requirements in 24 CFR part 91. The 
Department already treats a consortium as the same unit of general 
local government if only the representative unit of general local 
government changes. With this proposed rule change, HUD would codify 
this approach. This change is proposed to help consortia that are 
contemplating a change to the representative unit of general local 
government or other membership to understand the programmatic 
consequences of those decisions.

4. Distribution of Assistance (24 CFR 92.201)

    The proposed rule would add a sentence to the end of Sec.  
92.201(a)(2) clarifying that a participating jurisdiction may not 
commit funds to a project within the boundaries of a contiguous local 
jurisdiction until it has secured the required financial contribution 
of the jurisdiction in which the project is located. The sentence would 
clarify the necessary preconditions for using HOME funds outside of a 
participating jurisdiction's geographic boundaries and would prevent a 
participating jurisdiction from providing HOME funds to a project that 
does not have the support of the jurisdiction or community where it is 
located.
    The proposed rule would also remove the definition of State 
recipient from Sec.  92.201(b)(2) and add it to the definitions section 
of Sec.  92.2 where it will be easier for practitioners to locate. 
Other proposed changes to clarify the definition are discussed in the 
preamble for Sec.  92.2.

5. Income Determinations (24 CFR 92.203)

    In the HOTMA Final Rule, published on February 14, 2023,\8\ the 
Department revised the income regulations for the Public Housing, 
Section 8, Community Development Block Grant (CDBG), HOME, Housing 
Trust Fund, Housing Opportunities for Persons With AIDS, Supportive 
Housing for the Elderly, and Supportive Housing for Persons with 
Disabilities programs. The effective date of the regulatory changes 
made through the HOTMA Final Rule is January 1, 2024.\9\
---------------------------------------------------------------------------

    \8\ 88 FR 9600.
    \9\ For clarity, the revisions HUD is proposing in this section 
of this proposed rule are revisions to the regulations as they will 
exist after the effective date of the HOTMA Final Rule on January 1, 
2024.
---------------------------------------------------------------------------

    As part of the HOTMA Final Rule, the Department comprehensively 
revised the HOME regulation (effective January 1, 2024) at Sec.  92.203 
to align the HOME income regulations with income regulations from other 
HUD and Federal programs that HOME funds were most likely to be used 
with, most notably the Section 8 program. To that end, the Department 
required that participating jurisdictions use income determinations 
made by owners and program administrators in section 8 project-based 
voucher and rental assistance programs instead of requiring the 
participating jurisdiction to engage in a separate, duplicative income 
review. The Department also allowed participating jurisdictions to use 
income determinations made by public housing agencies or other 
providers of Federal tenant-based rental assistance instead of 
requiring the participating jurisdiction to engage in a separate, 
duplicative income review.
    As the Department was preparing guidance and training participating 
jurisdictions and others on how to implement the requirements of the 
HOTMA Final Rule, the Department determined there were still ways to be 
clearer about a participating jurisdiction's responsibilities regarding 
income determinations, including when HOME funds are used in a project 
with either Federal project-based or tenant-based rental assistance or 
subsidy programs.
    HUD is proposing to revise the paragraph heading of Sec.  92.203(a) 
to read ``Income eligibility'' to more closely align with the purpose 
of the paragraph. The Department is also proposing to remove the first 
sentence of Sec.  92.203(a) because it is confusing and is not 
necessary to the requirements in Sec.  92.203. The first sentence of 
the current Sec.  92.203(a) states that income targeting requirements 
apply to both a participating jurisdiction's HOME program and to its 
HOME projects. While the statement is true, Sec.  92.203 does not 
establish the HOME income targeting requirements which are contained in 
Sec.  92.216. By removing the first sentence of the current Sec.  
92.203(a), the second sentence of the current Sec.  92.203(a) would be 
revised to make it the lead-in sentence to the three options of 
determining income eligibility for HOME under Sec.  92.203(a). HUD 
believes this elimination of unnecessary and confusing verbiage would 
better allow participating jurisdictions to understand HOME income 
requirements.
    The proposed rule would revise the paragraph heading of Sec.  
92.203(b) from ``Required documentation for annual income 
calculations'' to ``Determining and documenting annual income'' and the 
paragraph heading of Sec.  92.203(c) from ``Defining income for 
eligibility'' to ``Definitions of annual income'' to reflect the 
requirements more accurately in each paragraph. The citation to Sec.  
92.252 in Sec.  92.203(b)(1) would also be revised to conform to the 
renumbering of paragraph (h) to (g) in Sec.  92.252 and the citation to 
Sec.  92.252(b)(2)(i) in Sec.  92.203(f)(1)(ii) would also be revised 
to ``Sec.  92.252(a)(2)(ii) or (iii)'' to conform to the revisions in 
Sec.  92.252. The proposed rule would also revise the second sentence 
of Sec.  92.203(b)(1)(ii) to add ``by the participating jurisdiction or 
owner'' at the end. The proposed rule would also add the requirement 
currently in Sec.  92.252(g) to the end of paragraph (ii) of Sec.  
92.203(b)(1) that if there is evidence that a tenant's statement and 
certification failed to completely and accurately state information 
about the family's size or income, a tenant's income must be re-
examined in accordance with Sec.  92.203(b)(1)(i).
    The proposed rule would revise Sec.  92.203(b)(1)(iii) to clarify 
that the method requires the government

[[Page 46624]]

program to examine the annual income of the family each year and to be 
a program that provides government benefits to the family. The proposed 
rule would also revise Sec.  92.203(d) to clarify when the 
participating jurisdiction is permitted to use the definitions of 
``annual income'' in Sec.  92.203(c). Specifically, the proposed rule 
would further clarify that when the participating jurisdiction is 
accepting a public housing agency, owner, or rental assistance 
provider's determination of annual and adjusted income for units 
assisted by a Federal or State project-based rental subsidy program or 
tenants receiving Federal tenant-based rental assistance in a rental 
housing project, the participating jurisdiction must calculate annual 
income in accordance with Sec.  92.203(c)(1) for the rental housing 
project so there is consistency in the definition of annual income 
throughout the project.
    The proposed rule would revise the heading of paragraph (d) of this 
section from ``Using income definitions'' to ``Use of income 
definitions'' and would remove the third sentence of paragraph (d) 
because it may be read to either conflict with or duplicate 
requirements in paragraph (c) of this section. In addition, the 
proposed rule would make other minor revisions to paragraph (d) for 
clarity. The proposed rule would also make several technical 
corrections to Sec.  92.203(d). The last sentence of paragraph (d) 
cites to ``paragraph (c)(i) of this section.'' This is a drafting 
error, and the citation should be corrected to ``paragraph (c)(1) of 
this section.''
    The citations to 24 CFR part 5 requirements in the section would 
also be revised for consistency with the format of citations to 24 CFR 
part 5 in other sections of the current regulation.
6. Eligible Activities: General (24 CFR 92.205)
    The proposed rule would revise Sec.  92.205(a)(2) to clarify that 
acquisition of vacant land or demolition may only be undertaken for a 
project that will provide affordable housing and meets the requirements 
for a specific local project in paragraph (2)(i) of the definition of 
``commitment'' in Sec.  92.2. Commitment of HOME funds to a specific 
local project can only occur for an identifiable project for which all 
necessary financing has been secured, a budget and schedule have been 
established, and underwriting has been completed and under which 
construction is scheduled to start within 12 months of the execution 
date of the written agreement. Although the provision at Sec.  
92.205(a)(2) has been in the HOME regulations since inception of the 
HOME program, some participating jurisdictions continue to mistakenly 
believe that HOME funds can be used to acquire land without the 
development of affordable housing (e.g., ``land banking'') or to 
demolish buildings with no intention to build new affordable housing 
(e.g., elimination of slums or blight). This provision would be revised 
to further clarify the requirement that an affordable housing project 
must be completed when HOME funds are used for the acquisition of 
vacant land or demolition.
    The Department proposes to move the text at the end of paragraph 
(b)(1) that states that a participating jurisdiction establishes the 
terms of HOME assistance (e.g., loan terms) subject to the requirements 
of the regulation to a new paragraph (b)(3) and would revise the 
language to better emphasize and clarify that the terms of assistance 
are established by the participating jurisdiction, subject to the 
requirements of this part.
    HUD is proposing to revise Sec.  92.205(e)(2) to clarify that if 
project completion, as defined in Sec.  92.2, does not occur within 4 
years from the date that the participating jurisdiction committed funds 
to a specific local project, then the project is terminated and the 
participating jurisdiction must repay all funds invested in the 
project. There remains a great deal of confusion surrounding the 4-year 
deadline, and the Department is again clarifying that a project must 
meet the requirements of part 92 in order to be considered complete. 
HUD already has a clear definition of project completion and hopes that 
using the same terminology will better enable participating 
jurisdictions to comply with the regulations.
7. Eligible Project Costs (24 CFR 92.206)
    The proposed rule would make several technical corrections to Sec.  
92.206. These corrections would update the citation in Sec.  
92.206(a)(1) regarding new construction standards to Sec.  92.251(a), 
update the citation in Sec.  92.206(a)(2) regarding rehabilitation 
standards to Sec.  92.251(b), and revise Sec.  92.206(b) to change 
``affordability period'' to ``period of affordability.''
    The proposed rule would revise Sec.  92.206(b)(2)(ii) to change 
``over an extended affordability period'' to ``over the minimum period 
of affordability of 15 years.'' The proposed rule would also revise 
paragraph (c) to clarify that the costs of securing a long-term ground 
lease are eligible acquisition costs and permitted in the development 
of HOME-assisted housing. HUD also proposes to revise paragraph (d)(1) 
to add the costs of conducting environmental assessments and reviews to 
the list of permissible development costs that could be reimbursed with 
HOME funds if the cost is incurred not more than 24 months before the 
date that HOME funds are committed to the project and the participating 
jurisdiction expressly permits HOME funds to be used to pay the costs 
in the written agreement committing the funds. Lack of funding for 
necessary environmental studies of sites proposed for development can 
be an obstacle to the provision of affordable housing. The proposed 
rule would also remove the current Sec.  92.206(d)(8) because the costs 
of environment reviews and assessments have been added to paragraph 
(d)(1) and replace it with the cost of property insurance during 
development as one of the eligible related soft costs in paragraph (d).
8. Eligible Administrative and Planning Costs (24 CFR 92.207)
    The Department proposes to revise Sec.  92.207(e) to remove the 
term ``under a cost allocation plan prepared'' from the regulation. 
This is an oversimplification of the underlying requirements in 2 CFR 
part 200, subpart E and HUD is proposing the removal of the language to 
reduce confusion and improve clarity.
9. Eligible Community Housing Development Organization (CHDO) Operating 
Expense and Capacity Building Costs (24 CFR 92.208)
    Through this proposed rule, the Department seeks to correct a 
drafting error made in the 2013 HOME Final Rule that created an 
unintended barrier to using CHDO operating expense and capacity 
building funding provided through HOME to assist organizations to meet 
the requirements for CHDO designation. Paragraph (9) of the definition 
of CHDO in Sec.  92.2 requires that a CHDO have demonstrated capacity 
to be designated as a CHDO, while the current Sec.  92.208 limits 
operating and capacity building assistance to organizations that are 
CHDOs. These provisions inadvertently prohibit the use of CHDO 
operating or capacity building funds to assist an organization that 
meets all other provisions of the CHDO definition except the 
demonstrated capacity requirement. The proposed rule would add a new 
paragraph (c) to Sec.  92.208 stating that an organization that meets 
the definition of ``community housing development organization'' in 
Sec.  92.2 except for the capacity requirement in paragraph (9) may 
receive HOME funds

[[Page 46625]]

for operating expenses and capacity building costs in order to develop 
demonstrated capacity and qualify as a CHDO. This change would make it 
possible for a nonprofit organization to receive the necessary 
financial assistance to attain CHDO designation. Pursuant to Sec.  
92.300(e), a participating jurisdiction may only provide operating or 
capacity building funds to an organization to which it expects to 
commit CHDO set-aside funds for a project within 24 months.
10. Tenant-Based Rental Assistance: Eligible Costs and Requirements (24 
CFR 92.209)
    The proposed rule would revise Sec.  92.209(c)(1) to eliminate the 
requirement that adjusted income be determined annually for families 
receiving TBRA. Because TBRA contracts are limited by statute to two 
years and must be executed every time a tenant enters into a new lease, 
the proposed rule would permit a participating jurisdiction to provide 
TBRA to a family and not redetermine adjusted income during the 
contract's period of assistance. Rather, proposed Sec.  92.209(c)(1) 
would only require the participating jurisdiction to determine adjusted 
income before execution of a new contract or renewal of an existing 
rental assistance contract. A family receiving TBRA whose income 
decreases during the term of the contract is still permitted to request 
an income redetermination by the participating jurisdiction during the 
term of the rental assistance contract so the family's subsidy can be 
recalculated. However, as is the case under the current regulations, 
the choice to redetermine adjusted income of a family that experienced 
a change in income during the term of the contract is a participating 
jurisdiction's program design decision and would be based upon the 
participating jurisdiction's policies and procedures. This means that 
unless the participating jurisdiction has a written policy and a rental 
assistance contract that requires a family's subsidy be redetermined 
based upon changes in income during the period of assistance, the 
family's payment toward rent will not change due to changes in income 
during the contract term.
    Consistent with HUD's Plan for Bridging the Wealth Gap: An Agenda 
for Economic Justice and Asset Building for Renters,\10\ biennial 
income redeterminations would facilitate family savings and improve 
housing stability by facilitating longer stays in housing and avoiding 
evictions or economic displacement from housing. Reducing the frequency 
of income determinations would also significantly reduce administrative 
burden on participating jurisdiction staff and on participating 
landlords, potentially expanding units available to families receiving 
TBRA.
---------------------------------------------------------------------------

    \10\ See https://www.hud.gov/sites/dfiles/PIH/documents/Bridging_Wealth_Gap.pdf.
---------------------------------------------------------------------------

    The proposed rule would revise the first sentence of Sec.  
92.209(c)(2)(iv) by adding the word ``assistance'' to ``rental 
payments'' to further clarify that this is describing TBRA payments. 
The proposed rule also clarifies that when all or a portion of the 
homebuyer-tenant's monthly contribution toward rent is set aside for 
closing costs or a downpayment, it must be set aside in accordance with 
the lease-purchase agreement. These clarifications are required because 
the Department determined that some participating jurisdictions were 
not explicitly stating that all or a portion of a tenant's contribution 
to rent was being set aside for closing costs or a downpayment on the 
housing in the lease-purchase agreement or providing for how the set 
aside would occur.
    The proposed rule would revise Sec.  92.209(c)(3) to clarify that a 
participating jurisdiction may select and provide TBRA to low-income 
families currently residing in housing units that will be rehabilitated 
or acquired with HOME funds. The low-income family may choose to use 
the TBRA in a unit rehabilitated or acquired with HOME funds or in 
other qualified housing. Using TBRA funds in this manner may reduce 
displacement or assist in decreasing the cost of compliance with the 
Uniform Relocation Assistance and Real Property Acquisition Policies 
Act (42 U.S.C. 4601 et seq.) (URA), which applies to the use of HOME 
funds for a project involving acquisition, rehabilitation, or 
demolition.
    The proposed rule would revise Sec.  92.209(g) to update the 
reference to Sec.  92.253 to specify Sec.  92.253(a)-(c) and (d)(2). 
The proposed rule would revise Sec.  92.209(h)(2) to permit 
participating jurisdictions to establish hardship policies that provide 
exceptions to the requirement that families receiving TBRA contribute a 
minimum amount toward rent. Some families receiving TBRA have little or 
no income. Due to this, some families may be unable to comply with the 
requirement for a minimum tenant contribution toward rent or compliance 
with the requirement may be detrimental to the family (e.g., use 
limited financial resources that are needed for medical care and other 
necessities). This revision would align HOME with other Federal tenant-
based rental assistance programs in permitting a participating 
jurisdiction to provide relief to a family from a minimum tenant 
contribution in its TBRA program by increasing the assistance in 
accordance with the participating jurisdiction's written policies.
    The Department proposes to further clarify the basis of the rent 
standard that a participating jurisdiction may use for its TBRA program 
by adding the specific regulatory citation of 24 CFR 982.503 for the 
Section 8 HCV payment standard to Sec.  92.209(h)(3)(ii). With the 
inclusion of the specific regulatory citation, a participating 
jurisdiction that chooses to use the Section 8 HCV program payment 
standard as its TBRA payment standard will be able to quickly locate 
the referenced requirements.
    The proposed rule would revise Sec.  92.209(i) to clarify the 
requirement that the participating jurisdiction must inspect the 
housing initially to mean that the participating jurisdiction must 
determine compliance with the property standards at Sec.  92.251 at the 
time of entering into a rental assistance contract. The proposed rule 
would require that initially and annually thereafter, the participating 
jurisdiction must determine that the housing complies with its property 
standards and is decent, safe, sanitary, and in good repair in 
accordance with Sec.  92.251(f).
    Currently, program participants are required to inspect housing 
annually. Under Sec.  92.251(f)(4)(ii) of this proposed rule, HUD would 
allow program participants to forego their own inspection and instead 
rely on an inspection conducted for another HUD program under 24 CFR 
part 5, subpart G. Section 92.251(f)(4)(ii) would also allow HUD to 
identify other alternative inspection standards through Federal 
Register notice which may count for the annual inspection. This 
proposed change would reduce administrative burden on the participating 
jurisdiction for performing inspections and the burden on property 
owners from undergoing multiple inspections by multiple parties using 
the same inspection standards, while posing minimal risk of substandard 
units being occupied by tenants assisted with TBRA. The requirement 
that the participating jurisdiction must reinspect annually for 
compliance with the property standards at Sec.  92.251 after 
determining initial compliance is not proposed to be changed. The 
participating jurisdiction may determine compliance with the property 
standards at Sec.  92.251 annually, under the same methods available to 
the participating jurisdiction in the initial determination.

[[Page 46626]]

    The proposed rule would make several revisions to Sec.  92.209(j). 
First, the use of ``dwelling'' would be replaced with ``housing'' in 
paragraph (j)(1) to specify that the use of TBRA is for housing and not 
``dwelling units'' which part 92 does not define. Second, Sec.  
92.209(j)(5) would be revised to remove ``Housing Quality Standard'' to 
align with the proposed changes in Sec.  92.209(i). Third, as further 
discussed below, the proposed rule would also add a new Sec.  
92.209(j)(6) to prohibit the use of surety bonds or security deposit 
insurance as a form of security deposit in units occupied by families 
receiving TBRA.
    Some participating jurisdictions have asked about the use of surety 
bonds and security deposit insurance in their TBRA programs while 
others have requested that the Department provide them with an 
interpretation that surety bonds or security deposit insurance 
constituted a security deposit. In response, the Department 
investigated the nature of surety bonds and security deposit insurance 
and determined as a matter of law that they are not security deposits 
within the meaning of NAHA nor are they treated as such under state 
statutes. Moreover, surety bonds or security deposit insurance may 
disadvantage tenants without necessarily benefitting landlords. 
Generally, tenants pay the cost of purchasing the surety bond or 
security deposit insurance in lieu of a security deposit. The surety 
bond obligates the bond issuer to repair all covered damage to the unit 
attributed to the tenant but may have coverage limits and is dependent 
upon the financial sufficiency of the issuer's fund. For security 
deposit insurance, a tenant pays a premium to purchase a policy from an 
insurance company that provides coverage to the landlord, as insured 
party, for most claims for damages to a unit. Even if there is no 
damage to the unit, the premium for the surety bond or security deposit 
insurance is not refundable to the tenant. However, if the bond issuer 
or the insurance company refuses to cover the damages, the landlord may 
be forced to litigate against both the bond issuer or insurer and the 
tenant for damages under the terms of the lease and may be left with 
little or no recourse beyond obtaining judgment liens against each, 
potentially damaging the tenant's credit and forcing a tenant to obtain 
legal counsel. The proposed prohibition on the use of surety bonds and 
security deposit insurance as a form of security deposit is a change 
made throughout the proposed rule. HUD does not believe that 
prohibiting the use of surety bonds and security deposit insurance will 
impact a family's access to the rental housing market. Section 92.209 
continues to allow participating jurisdictions to use HOME funds as 
loans or grants for security deposits.
    The proposed rule would also remove Sec.  92.209(l) because 
paragraph (l) implements section 212(a)(3)(D) of NAHA which is an 
outdated provision that applies only when the participating 
jurisdiction receives Federal assistance under section 1437f of the 
U.S. Housing Act of 1937 (the ``1937 Act'') (42 U.S.C. 1437f) (i.e., 
section 8 program) to be used for TBRA.
11. Troubled HOME-Assisted Rental Housing Projects (24 CFR 92.210)
    The proposed rule would amend Sec.  92.210(a) to clarify that HUD 
may consider the physical condition of the housing or financial 
viability when preserving HOME-assisted units at risk of failure or 
foreclosure. The use of the term ``Headquarters'' is proposed to be 
removed in Sec.  92.210(c) for phrasing consistency with other parts of 
the proposed rule; however, all approvals under Sec.  92.210 must still 
be made by HUD Headquarters.
    The Department has provided technical assistance for workouts to 
several participating jurisdictions with troubled projects, and 
physical viability is as much a consideration as financial viability 
when determining whether to permit additional flexibilities to preserve 
the affordability of a project. The physical viability of a property 
may be negatively impacted due to unanticipated extreme weather 
conditions or emergencies such as fire, flooding, and earthquakes. 
Changes to physical characteristics and factors may substantively 
impact the physical viability of a project, including unexpected 
structural or design issues, deferred maintenance due to unanticipated 
financial limitations, or unforeseen capital needs. Further, in 
determining the long-term viability of a project, the Department must 
consider the property's physical condition and needs in its review. 
Therefore, the proposed rule would revise the provisions of Sec.  
92.210 to permit HUD to consider preservation of a project based on the 
substantive deterioration of a project's physical viability due to 
unforeseen circumstances. It would also allow HUD to consider the 
future physical viability of a project in determining whether a project 
may access the flexibilities under Sec.  92.210.
    The proposed rule would also clarify in Sec.  92.210(a) that a 
HOME-assisted rental project is no longer financially viable if its 
operating costs significantly exceed its operating revenue and reserves 
and if it has insufficient resources to cover necessary capital repair 
costs. The proposed rule would revise the current requirement that the 
Department consider the likelihood of ``long-term viability'' to 
include physical viability and replace with the likelihood of the 
project's ``long-term physical and financial viability to preserve 
affordability.'' The Department's consideration of a project's ``long-
term'' physical and financial viability does not mean that the 
Department will not consider projects that are near the end of their 
HOME periods of affordability nor does it mean that the Department's 
considerations of viability will be limited to a project's ``long-
term'' performance.
    The proposed rule would revise Sec.  92.210(b) to change the amount 
of additional HOME funds a participating jurisdiction may invest in a 
troubled HOME-assisted rental project to make it financially and 
physically viable during the period of affordability. The total 
investment (original investment plus additional investment) must be the 
amount needed to address the physical and financial viability of the 
project and may not exceed the HOME per-unit subsidy limit in effect at 
the time of the additional investment. The use of HOME funds may 
include, but is not limited to, rehabilitation of the HOME units and 
recapitalization of project reserves to fund capital costs. The 
Department also proposes to clarify that it may impose conditions on 
the investment of additional HOME funds, including requiring the 
participating jurisdiction to extend the period of affordability, 
increase the number of HOME-assisted units, and/or change the number or 
designation of Low HOME rent and High HOME rent units.
    The proposed rule would revise Sec.  92.210(c) to clarify that even 
if there are no additional HOME funds invested in the troubled HOME-
assisted rental project, the Department may, through written approval, 
permit participating jurisdictions to not only reduce the total number 
of HOME units but change the designation of units from Low HOME rent 
units to High HOME rent units in troubled projects with more than the 
minimum number of Low HOME rent units. Pursuant to 42 U.S.C. 12745 and 
24 CFR 92.252, HOME requires at least 20 percent of HOME-assisted units 
in a project be restricted as Low HOME rent units with the other HOME-
assisted units restricted as High HOME rent units. Low HOME rent units 
must be occupied by those at 50 percent of the

[[Page 46627]]

Area Median Income (``AMI'') and below, while High HOME rent units must 
be occupied by those at 80 percent AMI and below. Further, in 
accordance with the requirements for HOME rent limits set forth in 
Sec.  92.252, the Low HOME rent units are restricted at lower rent 
levels than High HOME rent units. The Department has reviewed several 
troubled project requests in which converting Low HOME rent units to 
High HOME rent units (when there are more than the required minimum 20 
percent Low HOME rent units) is sufficient to preserve the project by 
increasing the ongoing rental revenue to the project to cover project 
expenses and financially stabilize the property. Permitting 
participating jurisdictions to undertake such actions for troubled 
HOME-assisted rental projects will support and preserve HOME units 
through the required period of affordability.
12. Pre-Award Costs (24 CFR 92.212)
    The proposed rule would add a new paragraph (b)(2) to address pre-
award costs in a fiscal year when there is not a timely appropriation 
by Congress for the HOME program. The proposed rule would permit a 
participating jurisdiction, in a year when there is not a timely 
appropriation, to incur eligible administrative and planning costs as 
of the beginning of its program year or the date that the Department 
receives the consolidated plan describing the HOME allocation to which 
the costs will be charged, whichever is earlier. The proposed rule 
would also establish that an appropriation is not timely if the 
appropriation to the HOME program was signed into law less than 90 days 
before a participating jurisdiction's program year start date. The 
Department has waived the current Sec.  92.212(b) to permit pre-award 
costs under these conditions for many of the past fiscal years. The 
delay in the receipt of annual appropriations by the Department may 
have negative consequences for participating jurisdictions, including 
interruption of activities. Adding this new language to Sec.  92.212(b) 
would avoid the need for approvals of a waiver of this requirement each 
year that there is a delayed appropriation and would assist 
participating jurisdictions to better plan for such years to minimize 
their impact.
13. Prohibited Activities and Fees (24 CFR 92.214)
    The proposed rule would make several revisions to Sec.  92.214 to 
expand, revise, and clarify the prohibited activities and fees for 
which HOME funds cannot be used. The proposed revisions to Sec.  92.214 
are described more thoroughly in the text that follows.
    The proposed rule would revise Sec.  92.214(a)(6) to add that 
investing additional HOME funds in a troubled project in accordance 
with Sec.  92.210 is an exception to the requirement that a 
participating jurisdiction cannot provide additional HOME funds to a 
previously assisted project. Section 92.214(a)(6) would also be amended 
to explicitly state that the maximum per-unit subsidy applicable to a 
project receiving additional HOME funds within one year of project 
completion is the maximum per-unit subsidy applicable at the time of 
project underwriting. The proposed rule would further revise Sec.  
92.214(a)(6) to align with the new definition of period of 
affordability added as a defined term to Sec.  92.2.
    The proposed rule would make minor revisions to Sec.  92.214(a)(7) 
to improve clarity and readability.
    The proposed rule would add a new paragraph (10) to Sec.  
92.214(a). As noted in the TBRA preamble discussion on Sec.  92.209(j), 
the Department is concerned that surety bonds, security deposit 
insurance, and similar instruments disadvantage tenants as the tenant 
pays the cost of purchasing the bond or insurance in lieu of a security 
deposit but does not recoup any of the cost of the bond or security 
deposit policy upon vacating the unit. In addition, if there is damage 
to the unit, the bond issuer or insurer may pursue the tenant to cover 
any costs incurred to repair damage, negatively affecting the tenant's 
credit or forcing the tenant to secure legal counsel. In response to 
these concerns, the proposed rule would prohibit the use of HOME funds 
for surety bonds, security deposit insurance, or similar instruments in 
lieu of or in addition to a security deposit in units occupied by TBRA 
by adding a new paragraph (10) to Sec.  92.214(a).
    The proposed rule would add language similar to that in the 
proposed Sec.  92.214(a)(10) in a new paragraph (i) of Sec.  
92.214(b)(3) to prohibit project owners from charging for surety bonds, 
security deposit insurance, or similar instruments in lieu of or in 
addition to a security deposit in units. The proposed rule would also 
add a new paragraph (iii) to Sec.  92.214(b)(3) to explicitly prohibit 
project owners from charging fees to inspect units or correct 
deficiencies in the property condition of units or common areas of the 
project that were not caused by the tenant. The costs associated with 
normal wear and tear or damage to a unit or common areas of a project 
that are not the result of negligence, recklessness, or intentional 
acts by the tenant, must be paid from project operations and not passed 
on to the tenant.
    Finally, to accommodate the proposed revisions to Sec.  
92.214(b)(3), the proposed rule would add a new paragraph (4) to Sec.  
92.214(b), which would detail the fees that owners are permitted to 
charge tenants.
14. Income Targeting: Tenant-Based Rental Assistance and Rental Units 
(24 CFR 92.216)
    HUD proposes to revise Sec.  92.216(a)(2) and (b)(2) to replace the 
use of the term ``dwelling'' with ``housing'' which is the accurate 
term for application of the requirement. While part 92 uses ``housing'' 
and ``dwelling'' interchangeably, these terms have been revised over 
the years to have separate definitions in other programs. Therefore, to 
avoid confusion, HUD would revise part 92 to replace ``dwelling'' with 
``housing,'' where appropriate.
15. Income Targeting: Homeownership (24 CFR 92.217)
    HUD proposes to revise Sec.  92.217 to replace the use of the term 
``dwelling'' with ``housing.''
16. Recognition of Matching Contribution (24 CFR 92.219)
    The proposed rule would add the term ``tenant protection 
requirements'' in Sec.  92.219(a)(2)(ii) to clarify the substance of 
the requirements at Sec.  92.253(a)-(c) and (d)(2) that are cited to in 
the regulation. The regulatory citations for Sec.  92.253 would also be 
updated to reflect the changes to this section.
17. Match Credit (24 CFR 92.221)
    The proposed rule would revise Sec.  92.221(b) to clarify the 
requirements a participating jurisdiction must meet when using excess 
match contributions earned in a previous year, also referred to as 
``carry-over'' or ``carried over'' match to meet a later year's HOME 
match obligation. In 2015, HUD's Office of Inspector General issued an 
audit report on HOME matching contributions that found widespread 
problems with participating jurisdictions not adequately documenting 
the validity and eligibility of match contributions.\11\ Specifically, 
the HUD Inspector General found that many participating jurisdictions 
did not maintain required match logs or that logs were insufficient, 
did not identify all contributions in their carry-over match balances,

[[Page 46628]]

included nonexistent contributions in their carry-over balances, and 
did not fully support matching contributions they credited toward 
meeting their 25 percent match obligation.
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    \11\ See HUD OIG Audit Report Number: 2015-KC-0002, available at 
https://www.hudoig.gov/sites/default/files/documents/2015-KC-0002.pdf.
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    To ensure that these deficiencies do not continue, the Department 
proposes to add a new paragraph (1) to Sec.  92.221(b) to explicitly 
require a participating jurisdiction to have documentation supporting 
the source, eligibility, and value of match contributions that have 
been carried over from previous years at the time that they apply the 
contribution toward their match obligation. The proposed rule would 
also add a new paragraph (2) to Sec.  92.221(b) to require 
participating jurisdictions to maintain records related to the source 
(i.e., the project to which the contribution was made), eligibility, 
and amount of match contributions for 5 years from the date that they 
apply the match credit toward their match liability. The proposed rule 
would include conforming changes to the recordkeeping provisions at 
Sec.  92.508(a)(2)(ix) to describe the scope and retention period that 
would apply for records of carried over match contributions.
18. Maximum Per-Unit Subsidy Amount, Underwriting, and Subsidy Layering 
(24 CFR 92.250)
    The proposed rule would make several revisions to the HOME 
program's maximum per-unit subsidy limits regulations at Sec.  92.250. 
Section 212(e) of NAHA (42 U.S.C. 12742(e)) requires the Department to 
establish limits on the amount of HOME funds that may be invested on a 
per-unit basis. For multifamily housing, NAHA requires that such 
maximum per-unit subsidy limits not be less than the per-unit 
limitations set forth in the mortgage insurance program authorized in 
section 221(d)(3) of the National Housing Act (12 U.S.C. 1715l) 
(``section 221(d)(3) limitations''), as adjusted by HUD to reflect the 
costs of land and construction in the area that exceeds the national 
average of such costs, up to 240 percent of the base mortgage limits. 
The Department has additional authority to adjust the 240 percent 
limits further based on the market area, number of bedrooms, eligible 
activity type (e.g., homeownership, rental), and work performed (e.g., 
rehabilitation, new construction). Notwithstanding the statutory 
language, the Department has historically implemented a maximum cap on 
the amount of HOME funds that may be used for the subsidy. However, 
after further review of the statutory language and Congressional record 
of the amendments made to title II of NAHA by section 206 of the 
Housing and Community Development Act of 1992 (Pub. L. 102-550), the 
Department has determined that Congress intended the adjusted 221(d)(3) 
limitations to establish a floor, rather than a cap, for the maximum 
subsidy amount.
    Due to the discontinuation of the section 221(d)(3) mortgage 
insurance program, the Department must establish an alternate benchmark 
as the maximum subsidy limit for the HOME program. The Department is 
currently operating under an interim policy that directs participating 
jurisdictions to use the basic mortgage limitations for section 234 of 
the National Housing Act's Condominium Housing, for elevator-type 
projects (``section 234 limitations''), in place of the discontinued 
section 221(d)(3) limitations.\12\ The Department is currently 
adjusting the section 234 limitations using the High Cost Percentages 
that the Department calculates for its mortgage insurance programs. The 
Department chose this policy because it determined in 2015 that 
``[o]ver time, the limits issued by HUD for the Section 234 program 
have been identical to the 221(d)(3) limits.'' \13\ As the section 234 
limitations were identical to the section 221(d)(3) limitations prior 
to the discontinuation of the section 221(d)(3) limitations, the 
Department still believes that the section 234 limitations are a 
reasonable alternative to the section 221(d)(3) limitations and 
consistent with section 212(e) of NAHA. However, due to HUD's 
determination that Congress intended the adjusted 221(d)(3) limitations 
to establish a floor, rather than a cap, for the maximum subsidy 
amount, HUD proposes to codify that the total amount of HOME funds that 
a participating jurisdiction may invest on a per-unit basis may not 
exceed the per unit dollar limits established by HUD in accordance with 
the requirements in section 212(e) of NAHA rather than codify the 
section 234 limitations. At Sec.  92.250(a), HUD proposes to publish 
the methodology for determining maximum per-unit subsidy amounts in 
accordance with section 212(e) through a notice published in the 
Federal Register with the opportunity for comment. The proposed rule 
would also clarify Sec.  92.250(a) by stating that HUD will use that 
methodology to publish the maximum per-unit subsidy limits for the area 
in which the housing is located annually, in accordance with the 
published methodology, and will make adjustments annually. HUD intends 
to publish these limits on HUD's website.
---------------------------------------------------------------------------

    \12\ See Notice CPD-15-003, ``Interim Policy on Maximum Per-Unit 
Subsidy Limits for the HOME Program,'' available at https://www.hud.gov/sites/documents/15-03CPDN.PDF.
    \13\ Id. at 2.
---------------------------------------------------------------------------

    Section 212(e) of NAHA requires that the Department consider on a 
market-per-market basis the cost of multifamily construction that meets 
State and local housing and building codes and the costs of land, with 
inflationary adjustments. HUD declines to maintain its use of the 
section 234 limitations for HOME because the section 234 limitations 
may not align with section 212(e) in the future, such as if the cost of 
multifamily construction or market conditions of the participating 
jurisdiction require a higher limit under section 212(e). Therefore, 
revising Sec.  92.250 to refer to the statutory requirements and the 
process for publishing a methodology in accordance with the statutory 
requirements would avoid the need to waive or change HOME regulations 
to align with section 212(e) in the future.
    The proposed rule would revise Sec.  92.250(a) to require HUD to 
determine maximum per-unit subsidy limits for HOME on an annual basis 
in accordance with the statute and publish those limits (i.e., on the 
HUD website or by notice).\14\ Based on the Congressional record 
clarifying the intent of section 212(e) of NAHA,\15\ the Department has 
determined that the statutory requirement provides much greater 
direction on the use of the section 221(d)(3) limitations as a floor 
while allowing for adjustments to the limitations based on specific 
criteria that affect project costs. To implement a revised methodology 
for the annual determination of the maximum per unit subsidy limit, HUD 
intends to issue a Federal Register notice in conjunction with this 
HOME rulemaking process. The notice for the revised methodology would 
identify an existing limit (e.g., mortgage insurance limit) or outline 
a proposed method for establishing a limit in accordance with section 
212(e) and request comments from industry stakeholders and the public. 
This would provide HUD with the opportunity to perform a higher level 
of review of current development and construction costs, evaluate 
ongoing changes in costs due to changes in building codes and industry 
practices, determine whether different eligible activities (i.e.,

[[Page 46629]]

homeownership vs. rental) should have different methodologies, and to 
consider and respond to comments in the implementation of the revised 
methodology. Until a revised methodology is finalized, HUD would 
establish the maximum per unit subsidy limit as 270 percent of the 
section 234 limitations.
---------------------------------------------------------------------------

    \14\ See 42 U.S.C. 12742(e)(1)-(3).
    \15\ See House Report 102-760, 1992 U.S.C.C.A.N. 3281 at Page 
3301, which clarified that Public Law 102-550 amending Section 212 
of NAHA, ``[a]mends cost limits requirements to establish minimum 
cost limits equal to the per unit dollar limitation for the section 
221(d)(3) program, as adjusted . . .''
---------------------------------------------------------------------------

    The proposed rule would also add a new paragraph (c) to Sec.  
92.250 to permit a participating jurisdiction to exceed the maximum 
per-unit subsidy described in Sec.  92.250(a) by 5 percent for a 
project that meets one of the acceptable Green Building standards 
enumerated by the Department. HUD shall allow participating 
jurisdictions and developers this flexibility because the Department is 
pursuing groundbreaking and innovative program designs in addressing 
the ambitious climate and green energy goals set by HUD leadership. By 
providing the flexibility to participating jurisdictions to exceed the 
per unit maximum subsidy limit by up to 5 percent to cover increased 
costs, HUD would be incentivizing participating jurisdictions and 
owners to create projects that meet a physical condition standard that 
involves the use of durable green building materials, innovative 
building methods, and renewable energy systems. The Department 
recognizes that the development of affordable housing that meets a 
green building standard and is more resilient to extreme weather events 
and climate change will result in increases to the costs of production. 
The Department believes that permitting a participating jurisdiction to 
exceed the maximum per-unit subsidy described in Sec.  92.250(a) by up 
to 5 percent will sufficiently enable the participating jurisdiction 
and developer to absorb the higher costs associated with complying with 
a higher standard as well as some additional development costs 
unrelated to meeting the green building standard. The qualifying 
standards will be published in the Federal Register or HUD website.
    Specific solicitation of comment #2: The Department specifically 
requests public comment from participating jurisdictions, developers, 
and other affected members of the public about the green building 
standards that the Department should establish in the Federal Register. 
In addition, the Department seeks public comment about stakeholder 
experiences regarding the percentage increase in the cost of 
constructing or rehabilitating affordable housing to a green building 
standard and whether a 5 percent increase in the maximum per unit 
subsidy limit is sufficient. Finally, the Department requests public 
comment on whether permitting participating jurisdictions to exceed the 
maximum per unit subsidy limit by an amount in excess of the additional 
costs of green building measures (i.e., to provide additional HOME 
funds to cover a larger portion of other HOME-eligible development 
costs),would create a sufficient incentive to developers and owners to 
meet green building standards in projects that would otherwise not be 
designed to meet those standards.
    In addition, the proposed rule would amend the language at Sec.  
92.250(b)(3)(i) to clarify that a participating jurisdiction must 
underwrite a homeowner's ability to repay the HOME-assistance for a 
homeowner rehabilitation project only if the assistance is provided as 
an amortizing loan.
19. Property Standards (24 CFR 92.251)
Changes to Sec.  92.251 Generally
    The proposed rule would retitle Sec.  92.251 as ``Property 
standards and inspections.'' The proposed rule would move the 
inspection and financial oversight requirements currently at Sec.  
92.504(d) to the applicable paragraphs in Sec.  92.251 to consolidate 
the property standards and inspection requirements in one section of 
the regulation. In addition, the Department proposes several revisions 
to the property standards applicable to HOME-assisted properties to 
implement statutory energy efficiency requirements; impose carbon 
monoxide detector requirements; incorporate green building standards 
when a participating jurisdiction elects to exceed the maximum per unit 
subsidy limit for a project pursuant to proposed Sec.  92.250(c); 
provide administrative relief to reduce duplicative physical 
inspections and provide additional flexibility for small-scale housing; 
and correct an inadvertent limitation on homebuyer acquisition 
programs. Finally, the proposed rule also incorporates further 
conforming regulatory changes to the NSPIRE Final Rule.\16\ The 
specifics of these changes are described in further detail below.
---------------------------------------------------------------------------

    \16\ 88 FR 30442 (May 11, 2023).
---------------------------------------------------------------------------

Changes to Paragraph (a)
    The proposed rule would reorganize Sec.  92.251(a) by creating a 
new paragraph (a)(2) which would contain and expand upon the 
requirements for construction progress inspections currently in Sec.  
92.251(a)(2)(v). The rest of the current paragraph (a)(2) would be 
moved to a new paragraph (a)(3). In addition, the completion inspection 
requirements currently imposed at Sec.  92.504(d)(1)(i) would be added 
to the proposed paragraph (a)(2) (for new construction) and paragraph 
(b)(3) (for rehabilitation). Redesignated paragraph (a)(3) would also 
be revised to clarify that the listed requirements in paragraphs 
(a)(3)(i) through (vii) must be met by projects upon project 
completion, unless an earlier deadline is otherwise specified by the 
applicable statute, regulation, or standard. For example, the 
accessibility requirement in paragraph (a)(3)(i) of Sec.  92.251 must 
be met prior to project completion, and the project must comply with 
the required deadline under the applicable statute or regulation.
    The proposed rule at Sec.  92.251(a)(3)(ii) would codify the 
statutory requirement that all HOME-assisted rental and homebuyer new 
construction projects meet the energy efficiency standards promulgated 
by HUD in accordance with section 109 of NAHA,\17\ including any 
revisions adopted by HUD and the U.S. Department of Agriculture (USDA). 
The 2013 HOME Final Rule did not include energy efficiency standards in 
Sec.  92.251 because HUD intended to propose new standards for energy 
and water efficiency in a separate proposed rule. Pursuant to sections 
215(a)(1)(F) and (b)(4) of NAHA (42 U.S.C. 12745(a)(1)(F) and (b)(4)), 
all newly constructed HOME-assisted housing must meet the energy 
efficiency codes promulgated by the Secretary in accordance with 
section 109 of NAHA (42 U.S.C. 12709). In addition, the Energy 
Independence and Security Act of 2007 (EISA) (Pub. L. 110-140) 
established procedures for HUD and the USDA to adopt periodic revisions 
to the International Energy Conservation Code (IECC) and to ANSI/
ASHRAE/IES Standard 90.1: Energy Standard for Buildings, Except Low-
Rise Residential Buildings (ASHRAE 90.1), subject to a determination by 
HUD and USDA that the revised energy codes do not negatively affect the 
availability or affordability of new construction of single and 
multifamily housing covered by EISA, and a determination by the 
Secretary of Energy that the revised codes ``would improve energy 
efficiency.''
---------------------------------------------------------------------------

    \17\ 42 U.S.C. 12709.
---------------------------------------------------------------------------

Carbon Monoxide Detector Requirements
    In the NSPIRE Final Rule, the Department codified carbon monoxide 
detection requirements in Public Law 116-20 for certain covered 
programs at

[[Page 46630]]

24 CFR 5.703(d)(6).\18\ Because HOME is not a covered program subject 
to these statutory carbon monoxide detection requirements, the 
Department determined that rulemaking is necessary to implement these 
changes for the HOME program. Consequently, the proposed rule would add 
new paragraphs at Sec.  92.251(a)(3)(vi) (for new construction) and 
Sec.  92.251(b)(1)(xi) (for rehabilitation) and amends Sec.  
92.251(c)(3) (for acquisition of standard housing for homeownership) to 
impose carbon monoxide detection requirements for all HOME-assisted 
projects which will be adopted by HUD through a notice published in the 
Federal Register. The Department intends to evaluate the specific 
standards for installation of carbon monoxide alarms or detectors at 24 
CFR 5.703(d)(6) for feasibility in new construction, rehabilitation, 
and homebuyer acquisition projects, respectively.
---------------------------------------------------------------------------

    \18\ See section 101, ``Carbon Monoxide Alarms or Detectors in 
Federally Insured Housing'' of Title I of Division Q, Financial 
Services Provisions and Intellectual Property, of the Consolidated 
Appropriations Act, 2021 (Pub. L. 116-260), 134 Stat. 2162 (2020), 
which included amendments to section 3(a) and 8 of the United States 
Housing Act of 1937 (42 U.S.C. 1437a(a) and 42 U.S.C. 1437(f) (the 
``1937 Act''), section 202(j) of the Housing Act of 1959 (12 U.S.C. 
1701q(j)), and sections 811(j) and 856 of the NAHA (42 U.S.C. 
8013(j) and 42 U.S.C. 12905).
---------------------------------------------------------------------------

Smoke Detector Requirements
    Similar to the carbon monoxide detector requirements implemented 
through the 2021 Consolidated Appropriations Act, described above, the 
2023 Consolidated Appropriations Act \19\ created additional smoke 
alarm requirements in federally assisted housing. These requirements 
apply to several HUD programs but not HOME. These requirements include 
that federally assisted housing comply with National Fire Protection 
Association Standard (NFPA) 72, or any successor standard, to use 
hardwired smoke alarms or sealed and tamper resistant smoke alarms with 
ten-year non rechargeable, nonreplaceable batteries, that provide 
notification for persons with hearing loss. These requirements take 
effect December 29, 2024. HUD believes that in most jurisdictions 
similar requirements already exist, as many jurisdictions already align 
with NFPA 72.
---------------------------------------------------------------------------

    \19\ See section 601, ``Smoke Alarms in Federally Assisted 
Housing'' of Title VI of Division AA, Financial Services Matters, of 
the Consolidated Appropriations Act, 2023 (Pub. L. 117-328), 136 
Stat. 4459 (2022), which included amendments to section 3(a) and 8 
of the 1937 Act, section 202(j) of the Housing Act of 1959 (12 
U.S.C. 1701q(j)), and sections 811(j) and 856 of the NAHA (42 U.S.C. 
8013(j) and 42 U.S.C. 12905).
---------------------------------------------------------------------------

    HUD is still working to provide guidance on these requirements for 
covered programs. This proposed rule does not include proposed 
regulatory text to align with the 2023 Consolidated Appropriations 
Act's smoke alarm requirements. However, HUD requests public comment on 
how such requirements would impact participating jurisdictions, owners, 
and developers of HOME-assisted housing. HUD is particularly interested 
in public comment on the feasibility of these requirements in HOME-
funded homeownership programs that do not include rehabilitation or 
construction of housing (e.g., downpayment assistance programs). HUD is 
considering, at the final rule stage, revising the HOME regulations 
consistent with the forthcoming HUD guidance on these statutory 
requirements.
    Specific solicitation of comment #3: The Department specifically 
seeks public comment on the proposal to require HOME-assisted units 
comply with NFPA 72, or any successor standard, to use hardwired smoke 
alarms or sealed or tamper resistant smoke alarms with ten-year non 
rechargeable, nonreplaceable batteries, that provide notification for 
persons with hearing loss. The Department is particularly interested in 
public comment on the feasibility of these requirements in HOME-funded 
homeownership programs that do not include rehabilitation or 
construction of housing (e.g., downpayment assistance programs).
Green Building Standard
    HUD proposes to add paragraphs (a)(3)(vii) (for new construction) 
and (b)(1)(xii) (for rehabilitation) to Sec.  92.251 to correspond with 
HUD's proposal at Sec.  92.250(c) to require the housing meet one of 
the qualifying green building standards published in the Federal 
Register or HUD website when a participating jurisdiction exceeds the 
maximum per-unit subsidy limit pursuant to the proposed Sec.  
92.250(c), upon completion of the project.
Changes to Paragraph (f)
    The proposed rule would require participating jurisdictions to 
establish written property standards that meet the minimum requirements 
at Sec.  92.251(f)(1) for housing occupied by tenants assisted with 
TBRA, including compliance with State and local codes and ordinances, 
health and safety, and lead-based paint requirements. The proposed rule 
would also retitle Sec.  92.251(f) as ``Ongoing property condition 
standards and inspections: Rental housing and housing occupied by 
tenants receiving HOME tenant-based rental assistance.''
    The Department also proposes to make a minor amendment to paragraph 
(f)(1)(i) to add the term ``HOME'' before ``rental housing'' to clarify 
that the Federal Register notice which HUD will publish will be 
specific to the HOME program.
Project Inspections
    Through the NSPIRE Final Rule, the Department improved alignment of 
the HOME inspection standards with the standards of other HUD-assisted 
housing programs. The Department understands that HOME is frequently 
one of many financing sources in a multifamily rental development 
project and, therefore, HOME projects are often subject to the 
requirements of many other public and private funding sources. 
Consequently, HUD is proposing to provide administrative relief in this 
proposed rule by adding to Sec.  92.251 paragraphs (b)(1)(viii)(A) (for 
rehabilitation projects), (f)(3)(i)(B) (for ongoing inspections of 
rental housing), and (f)(4)(ii) (for housing occupied by tenants 
receiving TBRA) to permit a participating jurisdiction to accept the 
completion or ongoing inspection, as applicable, conducted for another 
funding source in accordance with the National Standards for the 
Condition of HUD housing (24 CFR part 5, subpart G) or an alternative 
inspection standard, which HUD may establish through Federal Register 
notice to determine that the project and units are decent, safe, 
sanitary, and in good repair. The participating jurisdiction must still 
conduct initial and progress inspections of rehabilitation projects and 
determine compliance with the participating jurisdiction's HOME 
rehabilitation standards, State and local codes, ordinances, and zoning 
requirements. Under this proposed rule, a participating jurisdiction 
may accept an inspection performed under the Uniform Physical Condition 
Standards prior to the NSPIRE effective date. Inspections that occur 
after the effective date of NSPIRE for HOME and used by the 
participating jurisdiction to verify the housing is decent, safe, 
sanitary, and in good repair must be conducted under NSPIRE or an 
alternative inspection standard, as described in the proposed Sec.  
92.251.
    For ongoing inspections of rental housing, HUD proposes to amend 
paragraph (f)(3) to permit a participating jurisdiction to accept an 
inspection that occurred within the past 12 months. However, the 
Department encourages participating jurisdictions to align the

[[Page 46631]]

project's ongoing inspection schedule with the schedule of inspections 
of other HUD programs or funders. The proposed rule would require that 
a participating jurisdiction perform an on-site inspection within 12 
months after project completion and every three years during the period 
of affordability. The participating jurisdiction may not accept the 
determination of another funder under Sec.  92.251 for the first 
ongoing inspection occurring 12 months after project completion but may 
accept the determination of another funder in accordance with Sec.  
92.251 every three years thereafter.
    For ongoing annual inspections for housing with tenants receiving 
TBRA, HUD proposes to insert a new paragraph (f)(4) for TBRA to state 
that a participating jurisdiction may accept an inspection performed 
for another funding source in accordance with Sec.  92.251 that 
occurred within the past three months. The Department proposes a 
shorter timeframe for accepting inspections of TBRA units performed by 
other funders under Sec.  92.251 because TBRA ongoing inspections are 
required annually after initial occupancy while inspections of HOME-
assisted rental projects may be conducted every three years during the 
period of affordability.
    The proposed rule would also add Sec.  92.251(b)(1)(viii)(B) (for 
rehabilitation projects) and includes language at Sec.  
92.251(f)(3)(i)(B) (for ongoing inspections of rental housing) and 
Sec.  92.251(f)(4)(ii) (for housing occupied by tenants receiving TBRA) 
to require that the participating jurisdiction document a determination 
by another funder that the project and unit(s) are decent, safe, 
sanitary, and in good repair. To document a determination means that 
the participating jurisdiction must obtain the inspection report that 
indicates that all deficiencies have been corrected. These paragraphs 
would also clarify that when the participating jurisdiction documents a 
determination by another funder under Sec.  92.251, it is not required 
to conduct a duplicative HOME on-site inspection.
    The proposed rule would restructure paragraph (c)(3) and add 
paragraph (c)(3)(ii) to eliminate the requirement at Sec.  92.251(c)(3) 
that a homebuyer acquisition project (e.g., downpayment assistance) 
that does not meet HOME property standards must be rehabilitated or it 
cannot be acquired with HOME funds. This requirement was added in the 
2013 HOME Final Rule and the Department is concerned that it had the 
unintended impact of reducing the supply of housing available for 
purchase by HOME-assisted homebuyers by prohibiting rehabilitation 
after the HOME-assisted acquisition to meet required property 
standards. Currently, a home that does not meet property standards 
cannot be purchased with HOME funds. Also, the Department understands 
that sellers are often unwilling to perform rehabilitation to a home 
prior to its acquisition by a HOME-assisted homebuyer, making many 
properties ineligible for purchase with HOME funds. The proposed rule 
would add paragraph (c)(3)(ii) to Sec.  92.251 to permit housing to be 
purchased by a homebuyer prior to compliance with HOME property 
standards if the homebuyer written agreement with the participating 
jurisdiction requires the project to meet HOME property standards 
within six months of acquisition and determines that funds are secured 
for rehabilitation. The participating jurisdiction would be required to 
conduct a final inspection within six months of the title transfer to 
determine compliance with the required property standards.
    Through this proposed rule, the inspection standards for periodic 
on-site inspections of HOME-assisted rental housing including frequency 
of inspections, inspection samples, and annual certifications by owners 
at Sec.  92.504(d)(1)(ii) would be moved to a new paragraph (f)(3). The 
inspection sample requirements in the proposed rule at Sec.  
92.251(f)(3)(iii) would require that the sample of units for an onsite 
inspection be a random sample rather than a statistically valid sample. 
While the Department's software creates a statistically valid sample of 
units for its inspection of HUD-assisted housing conducted using the 
NSPIRE Standards, HUD is proposing this change because it is concerned 
that participating jurisdictions do not have software capability to 
develop a statistically valid sample of units. In addition, 
participating jurisdictions have sought guidance about the requirement 
currently at Sec.  92.504(d)(1)(ii)(D) regarding what constitutes a 
sample size appropriate for the size of the HOME-assisted project. 
Consequently, in the proposed Sec.  92.251(f)(3)(iii) the Department 
would require inspection of a sample size of 20% of the HOME-assisted 
units in a project, except for a project with one to four HOME-assisted 
units where the requirement that 100% of the units be inspected remains 
unchanged.
    When conducting inspections, the jurisdiction should consider the 
project's compliance with accessibility requirements as determined by 
24 CFR part 8, which implements Section 504 of the Rehabilitation Act 
of 1973 (29 U.S.C. 794), Titles II and III of the Americans with 
Disabilities Act (42 U.S.C. 12131-12189) implemented at 28 CFR parts 35 
and 36, and the Fair Housing Act (42 U.S.C. 3601-19) implemented at 24 
CFR part 100, as applicable. These accessibility requirements apply to 
a project as a whole, including both HOME and non-HOME-assisted units. 
Where practicable, HUD recommends a participating jurisdiction select a 
random sample of units using a methodology that captures different unit 
types, features, and accessibility designations, and to the extent 
feasible, that the same units are not inspected in every inspection.
    Specific solicitation of comment #4: The Department specifically 
seeks public comment on the proposal to require that a participating 
jurisdiction inspect at least 20% of the HOME-assisted units during its 
ongoing on-site inspections of rental housing.
    In addition, the proposed rule would move the requirements Sec.  
92.504(d)(1)(iii) for annual on-site inspections of HOME-assisted 
housing occupied by tenants receiving TBRA to a new paragraph (f)(4) 
and clarify that inspections must determine whether the housing meets 
the property standards in Sec.  92.251(f)(1).
    The proposed rule would move the financial oversight requirements 
for HOME-assisted rental projects currently at Sec.  92.504(d)(2) to 
Sec.  92.251(f)(3)(iv). This change is proposed to consolidate the 
other periodic review requirements for rental housing during the period 
of affordability into one section of the regulation. In addition, the 
proposed rule would clarify the Department's intent that the financial 
oversight requirements apply to rental projects with 10 or more HOME-
assisted units, which was discussed in the preamble to the 2013 HOME 
Final Rule but has remained a source of confusion for participating 
jurisdictions.
    HUD proposes to move the requirements for re-inspections and the 
requirement to adopt a more frequent inspection schedule as the result 
of health and safety deficiencies currently at Sec.  
92.504(d)(1)(ii)(B) to the corrective and remedial action requirements 
of Sec.  92.251, which HUD proposes to move to paragraph (f)(5). 
Relatedly, pursuant to section 226(c) of NAHA.\20\ the proposed rule 
would provide an exception for small-scale housing from the requirement 
that a participating jurisdiction must adopt a more frequent inspection 
schedule for properties that have been found to have health and safety 
deficiencies. If all health and safety deficiencies are corrected, the

[[Page 46632]]

proposed rule would permit but not require a participating jurisdiction 
to adopt a more frequent inspection schedule for small-scale housing. 
In the future, the Department hopes to simplify ongoing inspections for 
small-scale rental housing projects by developing a streamlined list of 
specific deficiencies for which participating jurisdictions would 
inspect. The changes described in this paragraph correspond to the 
administrative relief provided for small-scale housing at Sec.  92.252.
---------------------------------------------------------------------------

    \20\ 42 U.S.C. 12756(c).
---------------------------------------------------------------------------

    The Department also proposes to move the requirements currently at 
Sec.  92.251(f)(5) to paragraph (g) of Sec.  92.251 and revise the new 
Sec.  92.251(g) to add further clarity to the requirements for 
inspection procedures.
    Specific solicitation of comment #5: The Department specifically 
requests public comment from participating jurisdictions and program 
participants regarding the challenges they have encountered in using 
HOME funds to assist small-scale housing, as defined in this proposed 
rule. The Department also requests public comment regarding the costs 
and benefits of the changes that HUD is proposing for small-scale 
housing in requirements for the frequency of income determinations and 
inspections and the use of alternative waiting lists.
20. Qualification as Affordable Housing: Rental Housing (24 CFR 92.252)
    The Department most recently revised Sec.  92.252 in the HOTMA 
Final Rule.\21\ Those changes become effective on January 1, 2024. The 
changes made to Sec.  92.252(b)(2) in the HOTMA Final Rule divided the 
Low HOME Rent limit provision in Sec.  92.252(b)(2) into paragraphs 
(b)(2)(i) and (b)(2)(ii) to separate the conditions that a HOME-
assisted unit that also receives Federal or State project-based rental 
subsidy must meet in order for a project owner to charge the maximum 
rent allowable under the Federal or State project-based rental subsidy 
program.
---------------------------------------------------------------------------

    \21\ 88 FR 9600 at 9612, 9614-9615.
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    The HOTMA Final Rule also revised Sec.  92.252(h). These provisions 
are being renumbered, reorganized, and revised in the proposed Sec.  
92.252(g).
    The proposed rule would amend the introductory text of Sec.  92.252 
to eliminate the requirement that a participating jurisdiction must 
submit a marketing plan to HUD for any HOME-assisted rental units that 
have not achieved initial occupancy within six months of project 
completion in IDIS. The participating jurisdiction would still be 
required to take action to ensure the unit is rented if the unit is not 
occupied within six months and repay the HOME investment if the unit 
does not achieve initial occupancy within 18 months. The Department 
does not currently approve marketing plans, so this change would 
provide administrative relief to participating jurisdictions without 
eliminating the requirement that participating jurisdictions work with 
the project owner to develop and implement a marketing plan to meet the 
deadline for initial occupancy. This change does not revise any 
affirmative marketing requirements in Sec.  92.351.
    The proposed rule would also implement several changes to the rent 
limits at Sec.  92.252 for HOME-assisted rental housing. The proposed 
rule would reorganize the general requirements that are currently in 
effect and apply to all rent limits by moving these requirements to the 
introductory text of Sec.  92.252(a) rather than repeating the 
requirements in each paragraph. These general requirements include that 
the rent for a HOME-assisted unit must not exceed the rent limits, the 
Department will publish the HOME rent limits on an annual basis, with 
adjustments for number of bedrooms in the unit, the participating 
jurisdiction may designate (in its written agreement with the owner) 
more than the minimum HOME units (both High HOME and Low HOME rent 
units) in a rental housing project, and the rent limits apply to the 
rent plus the utilities or utility allowance. The proposed rule would 
also remove several duplicative requirements in Sec.  92.252 to improve 
clarity and readability.
    The proposed rule would reorganize Sec.  92.252 by moving the 
requirements for High HOME Rent limits in Sec.  92.252(a), Low HOME 
Rent limits in Sec.  92.252(b), and SRO Housing rent limits in Sec.  
92.252(c) to the proposed Sec.  92.252(a)(1), (a)(2), and (a)(3), 
respectively. The proposed rule would title the proposed Sec.  
92.252(a) as ``HOME Rent Limits,'' title the proposed Sec.  
92.252(a)(1) as ``High HOME Rent Limits,'' title the proposed Sec.  
92.252(a)(2) as ``Low HOME Rent Limits,'' and title the proposed Sec.  
92.252(a)(3) as ``HOME Rent Limits for SRO Projects.''
    The Housing and Economic Recovery Act of 2008 (HERA) (Pub. L. 110-
289, 122 Stat. 2654, approved July 30, 2008) amended the 1937 Act and 
made comprehensive and significant reforms to HUD's Section 8 Tenant-
Based Voucher and Project-Based Voucher programs. Many of the required 
regulatory changes at 24 CFR parts 982 were implemented through ``The 
Housing and Economic Recovery Act of 2008 (HERA): Changes to the 
Section 8 Tenant-Based Voucher and Section 8 Project-Based Voucher 
Programs,'' final rule (79 FR 36146), published on June 25, 2014 (the 
``HERA Final Rule''). One of the changes required by section 2835(a)(2) 
of HERA added section 8(o)(10)(F) to the 1937 Act (42 U.S.C. 
1437f(o)(10)(F)) which streamlined the procedure for determining the 
rent reasonableness standard for assistance under the section 8 tenant-
based voucher program in units receiving LIHTC or HOME funds. HUD fully 
implemented this streamlined process for LIHTC units in the HERA Final 
Rule. However, the HERA Final Rule did not fully implement the 
streamlined process for HOME-assisted units. Instead, as explained in 
the HERA Final Rule, the rent reasonableness requirements at Sec.  
982.507 for HOME-assisted units included a placeholder pending a future 
HOME rulemaking (which had just been completed in 2013) to revise 
conflicting HOME regulations. HUD anticipated that the future HOME 
rulemaking would revise the HOME regulations at 24 CFR part 92 to 
prevent participating jurisdictions and owners of HOME-assisted 
projects from being in non-compliance with HOME rent limits when 
receiving the rent amount determined by a public housing authority 
(PHA), pursuant to the rent reasonableness process established by HERA 
for a tenant with a section 8 housing choice voucher (HCV). As 
described in detail in this section, HUD is now proposing to make the 
required revisions to Sec.  92.252 to align HOME rent limit 
requirements with the rent reasonableness requirements for HOME-
assisted units in the proposed Sec.  982.507(c)(3). The proposed 
changes would prevent the participating jurisdiction and an owner of 
HOME-assisted units from being in noncompliance with HOME rent limits 
when a PHA complies with the 1937 Act, as amended by HERA, in its HCV 
rent payments to owners. Section D. of the proposed rule discusses the 
proposed changes to Sec.  982.507(c)(3) to fully implement the HERA 
section 8 HCV rent reasonableness process for HOME-assisted units.
    The proposed rule would implement the following changes to remove 
conflicts with the proposed rent requirements for the section 8 HCV 
program at Sec.  982.507(c)(3). HUD proposes to remove the 
applicability of the HOME rent limits in Sec.  92.252 to payments 
provided under a Federal or State rental assistance or subsidy program. 
This change in proposed Sec.  92.252(a) would revise current

[[Page 46633]]

program requirements in Sec.  92.252 by permitting an owner to receive 
the rent determined by a PHA, in accordance with proposed Sec.  
982.507(c)(3), or under another Federal or State rental assistance or 
subsidy program even though the rent for HCV or another Federal or 
State rental assistance or subsidy program exceeds the HOME rent 
limits. HUD would still implement the requirements for rents in section 
215(a) of NAHA (42 U.S.C. 12745(a)) by continuing to apply the HOME 
rent limits to the rent and utilities required to be paid by the 
tenant. This change would align the HOME program with the changes to 
the 1937 Act required by HERA for the PHA's determination of rent for 
HCV in HOME units. As the PHA must determine the HCV rent in compliance 
with sections 8(o)(10)(A) and (F) of the 1937 Act (42 U.S.C. 
1437f(o)(10)(A) and (F)) as proposed in Sec.  982.507(c)(3), the 
proposed changes to Sec.  92.252 would prevent an owner from being in 
noncompliance with HOME rent limit requirements when receiving the 
required rent from a PHA on behalf of a tenant with HCV. Additionally, 
the existing rent limit requirements in Sec.  92.252 can be confusing 
for owners and these revisions would provide additional clarity so that 
participating jurisdictions and owners understand that the HOME rent 
limit requirements do not conflict with the rent requirements for 
Federal rental assistance or subsidy programs or LIHTC.\22\ These 
proposed changes also align with the LIHTC requirements for rent, 
including when there is section 8 HCV assistance and other comparable 
forms of rental assistance applicable to the unit or household.\23\
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    \22\ The rent limits under the Low-Income Housing Credits or 
LIHTC are governed by 26 U.S.C. 42(g)(2)(A).
    \23\ Under 26 U.S.C. 42(g)(2)(B)(i), LIHTC gross rent does not 
include any payment under section 8 of the United States Housing Act 
of 1937 (42 USCS Sec.  1437f) or any comparable rental assistance 
program applicable to either the rental unit or the household 
occupying the unit.
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    As discussed in further detail in the Regulatory Impact Assessment, 
estimates of increased potential annual gross rent collection arising 
from the proposed changes to HOME rent limits would only be fully 
realized if all HOME units have tenants that receive rental assistance. 
Precise data on how many tenants in HOME units that also receive 
tenant-based rental assistance like HCV does not exist, but it is 
unlikely that a majority of HOME units without a project-based subsidy 
are occupied by tenants with a tenant-based subsidy. Data reported to 
HUD at the time of initial HOME rental project lease-up suggests that 
24 to 30 percent of tenants in units without project-based subsidies 
receive HCVs. HUD anticipates that the changes in the proposed rule to 
conform to the changes by HERA, will result in an annual increase in 
payments to property owners of roughly $78-$125 million, which is 
approximately 0.3 to 0.5 percent of HCV's budget authority for rental 
assistance in FY 2023. The proposed changes therefore may potentially 
leave PHAs unable to provide rental assistance to 6,000-11,000 
households that they otherwise would have if the PHAs had provided 
rental assistance payments up to the current HOME rent limits rather 
than the reasonable rent determined by a PHA. It is also possible that 
future Congressional appropriations would cover the same number of 
vouchers regardless of relatively small changes in per voucher costs, 
in which case the number of assisted households would not be affected. 
Nonetheless, Congress specifically provided for these proposed changes 
for HOME units in HERA and under the proposed rule, HOME rent limits 
would still apply to the rent and utilities paid by the tenant. The 
only impacts on tenants and prospective tenants are that tenants with 
HCVs or other tenant-based rental assistance would become more 
desirable to owners, and that residents of HOME-assisted projects could 
experience improved housing conditions (since some projects would see 
improved cash flow).
    The proposed revisions would make the treatment of payments 
consistent under Federal or State project-based and tenant-based rental 
assistance programs for both High HOME and Low HOME rent units. As a 
result, the proposed revisions would also decrease administrative 
burden for participating jurisdictions and owners. Consequently, a 
participating jurisdiction may focus its monitoring and enforcement of 
HOME rent limit requirements on the amount that is required to be paid 
by the tenant to an owner rather than on whether payments for rent 
under a Federal or State tenant-based or project-based rental 
assistance or subsidy program meet the Low HOME and High HOME rent 
limit requirements.
    The Department also proposes to move the requirement that 
subsequent rents for a project are not required to be lower than the 
HOME rent limits for the project in effect at the time of project 
commitment from Sec.  92.252(f) to the proposed Sec.  92.252(a). The 
proposed revision would clarify that the rent floor for a project is 
established at the time of commitment of HOME funds to the project and 
may apply to rents at the time of initial occupancy as well as 
subsequent rents.
    The proposed Sec.  92.252(a)(2)(i) would clarify that the maximum 
rent is 30 percent of the annual income of a family whose income equals 
50 percent of AMI, as determined by HUD, except when 30 percent of the 
annual income of a family with income at 50 percent AMI is higher than 
the fair market rent under the proposed Sec.  92.252(a)(1)(i). This 
change would clarify that the only circumstance in which the High HOME 
Rent would be lower than the Low HOME Rent is if the fair market rent 
permitted in Sec.  92.252(a)(1)(i) is lower than 30 percent of the 
annual income of a family whose income equals 50 percent AMI, as 
described in the proposed Sec.  92.252(a)(2)(i). This proposed change 
is appropriate because the Department does not establish the 65 percent 
AMI rent limit, as permitted under Sec.  92.252(a)(1)(ii), to be lower 
than the 50 percent AMI rent limit in Sec.  92.252(a)(2)(i). As a 
result, there is no need to continue using ``applicable rent'' in the 
proposed Sec.  92.252(a)(2)(i). The proposed revisions would clarify 
that if the fair market rent, as permitted under Sec.  92.252(a)(1)(i), 
is lower than the rent limit of 30 percent of the annual income of a 
family whose income equals 50 percent AMI, as determined by HUD, the 
Low HOME rent limit in Sec.  92.252(a)(2)(i) is the fair market rent 
permitted under the High HOME rent limit at Sec.  92.252(a)(1)(i).
    HUD is also proposing other changes to remove conflicts with the 
changes implemented by HERA in the proposed Sec.  92.252(a)(2)(ii). The 
proposed rule would revise the current requirements at Sec.  
92.252(b)(2)(i) and (ii) by removing Sec.  92.252(b)(2)(i) which 
currently applies to Low HOME rent units with tenant-based rental 
assistance and revising Sec.  92.252(b)(2)(ii) to be the proposed Sec.  
92.252(a)(2)(ii). The proposed Sec.  92.252(a)(2)(ii) would conform the 
requirement on rent contribution by the family to the proposed change 
that the HOME rent limits do not apply to payments provided under a 
Federal or State rental assistance or subsidy program by removing 
references to ``Federal or State project-based rental subsidy'' and 
``Federal or State project-based rental subsidy program.''
    In the 2013 HOME Final Rule, the Department removed the discretion 
for a participating jurisdiction to use the local PHA utility allowance 
and required the use of the HUD Utility Model or a project-specific 
utility allowance based on the utilities used in the project. The 
Department identified and explained the permissible methods

[[Page 46634]]

of determining the utility allowance for a HOME-assisted rental project 
that align with LIHTC.\24\ The purpose of the change in the 2013 HOME 
Final Rule was to require more accurate utility allowances and reward 
energy efficiency measures with the possibility of higher rental 
revenue to the owner. In doing so, the Department unintentionally 
created a conflict between the HOME program and the Section 8 project-
based voucher (PBV) and HUD Veterans Affairs Supportive Housing (HUD-
VASH) PBV programs, which require the use of a local PHA's utility 
allowance. Due to these conflicting requirements, the Department has 
approved numerous waivers of this requirement in Sec.  92.252 when HOME 
and PBVs or HUD-VASH PBVs are combined in the same projects. 
Consequently, the proposed rule at Sec.  92.252(b) would restore the 
option to use the local PHA's utility allowance for HOME-assisted 
rental projects to realign utility allowance requirements in HOME and 
PBVs.
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    \24\ HOMEfires Vol. 13, No. 2 Guidance on How to Establish 
Utility Allowances for HOME-Assisted Rental Units, available at 
https://www.hudexchange.info/resource/5034/homefires-vol-13-no-2-guidance-on-how-to-establish-utility-allowances-for-home-assisted-rental-units/.
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    Specific solicitation of comment #6: Rather than permitting all 
HOME-assisted projects to use the local PHA's utility allowance, should 
HUD limit the use of the PHA utility allowance to only HOME-assisted 
projects which also receive PBV or HUD-VASH PBV assistance?
    The proposed rule would clarify the period of affordability 
requirements in proposed Sec.  92.252(d) by removing ``not less than'' 
to require that HOME-assisted units meet the program requirements for 
the required period of affordability, beginning from the date of 
project completion, to prevent further confusion that the period of 
affordability must be more than the required period in the table in 
Sec.  92.252 and to specify that the period of affordability starts at 
project completion. The proposed rule would also clarify in proposed 
Sec.  92.252(d) that the affordability requirements for HOME rental 
housing include the applicable rent limits, period of affordability, 
and income requirements. The Department would also clarify that the 
means of enforcement for the affordability requirements include deed or 
use restrictions, liens on real property, a covenant running with the 
land, a recorded agreement restricting the use of the property, or any 
other mechanism approved in writing by HUD, under which the 
participating jurisdiction has the right to require specific 
performance. The Department also proposes to revise Sec.  92.252, as 
well as Sec. Sec.  92.254 and 92.504, to make the means of enforcement 
for affordability requirements consistent throughout the proposed rule. 
The proposed Sec.  92.252(e)(3) would also increase the minimum number 
of days for prior written notice of any increase in rents for HOME-
assisted units from not less than 30 days to not less than 60 days.
    Due to changes to the rent limit requirements in Sec.  92.252(a), 
this proposed rule would renumber Sec.  92.252(a) through (i).
    The proposed rule would also update terminology to be consistent 
throughout the section. This includes revising the use of the term 
``maximum rent limit'' to ``rent limit'' in paragraphs (a), (c), and 
(e) because the applicable rent limit is the maximum rent and the use 
of the term ``maximum rent limit'' in some places is confusing. In 
addition, the proposed rule would update any references to the 
renumbered paragraphs throughout the rule.
    While the proposed rule in paragraph (b) would realign utility 
allowance requirements in HOME and PBVs, the proposed rule would still 
require that the utility allowance account for energy efficiency 
measures of the project. Despite this requirement, the Department 
recognizes that certain Federal or State tax credits and other 
incentives are available to owners of affordable housing projects in 
order to encourage energy retrofits and the installation of solar and/
or wind facilities. Often these types of incentive programs require 
that the low-income tenants of the affordable rental housing receive 
financial benefit from the energy efficiency measures. Because the 
participating jurisdiction is required to update the project's utility 
allowance annually and must account for any energy efficiency measure 
of the project, the utility allowance provided to the tenant would 
likely decrease following any energy efficiency upgrades. This decrease 
in the utility allowance could therefore result in a financial benefit 
to the owner rather than the tenant. In addition, because the tenant 
may receive no financial benefit, the owner may not receive the tax 
credit or other incentives. Ultimately, as proposed, the HOME utility 
allowance requirements may disincentivize energy efficiency upgrades. 
As described below, HUD seeks public comment on how to avoid 
disincentivizing energy efficiency upgrades.
    Specific solicitation of comment #7: The Department seeks input on 
whether and how the rule should facilitate the conveyance of a 
financial benefit to low-income tenants when the project owner makes 
energy efficiency upgrades such as the installation of small-scale wind 
or solar facilities in connection with an eligible Federal or State 
program. HUD has issued guidance that currently describes how certain 
utility discounts or rebates can be treated under HUD income and 
utility allowance regulations.\25\ HOME is subject to the same income 
requirements under 24 CFR 5.609 as other program areas issuing guidance 
on the treatment of these discounts and rebates. The Department 
therefore also requests comment from the public on whether to go 
farther than this guidance for HOME projects through this HOME 
rulemaking. For example, should HUD maintain the same utility allowance 
for the project following energy efficiency upgrades to allow the 
tenant to realize the benefit of decreased utility costs? Both the 
current income regulations at 24 CFR 5.609 and 24 CFR 5.609 as revised 
in the HOTMA Final Rule exclude lump-sum additions to assets, as well 
as non-recurring income. However, if a HUD program provided a recurring 
financial benefit directly to a low-income tenant, should the rule 
exclude this income from the HOME income determinations?
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    \25\ See https://www.hud.gov/sites/dfiles/Housing/documents/MF_Memo_Community_Solar_Credits_signed.pdf; https://www.hud.gov/sites/dfiles/Housing/documents/MF_Memo_re_Community_Solar_Credits_in_MM_Buildings.pdf; and https://www.hud.gov/sites/dfiles/PIH/documents/Community%20Solar%20Credits%20in%20PIH%20Programs.pdf.
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    Specific solicitation of comment #8: The Department specifically 
requests public comment from participating jurisdictions, developers, 
and other affected members of the public about the appropriateness of 
the length of the HUD-required periods of affordability for HOME-
assisted rental housing. The current regulation at 24 CFR 92.252(e) 
establishes periods of 5 years for a per-unit HOME investment of under 
$15,000, 10 years for a per-unit investment between $15,000 and 
$40,000, and 15 years for a per-unit investment of more than $40,000, 
15 years for any unit involving refinancing of existing debt, and 20 
years for any unit involving new construction. Section 215(a)(1)(E) of 
NAHA (42 U.S.C. 12745(a)(1)(E)) requires that the period of 
affordability be for the remaining useful life of the HOME-assisted 
property, as determined by HUD, without regard to the term of the 
mortgage or to transfer of ownership, or for such other period that HUD 
determines is the longest feasible period of time consistent with sound 
economics

[[Page 46635]]

and the purposes of NAHA. Since the Department established these 
periods of affordability in 1991, costs have increased significantly, 
LIHTCs have become the primary funding mechanism for rental housing, 
and the housing affordability crisis in the country has worsened 
significantly. The Department seeks input about whether the length of 
the periods of affordability and the dollar thresholds and activity 
thresholds that are the basis of the current periods of affordability 
remain appropriate. In addition, the Department seeks input about any 
project feasibility challenges of the current HOME periods of 
affordability and factors that the HUD should consider in contemplating 
changes to the current periods of affordability.
    Through this rule, the Department proposes to streamline procedures 
and simplify requirements in proposed Sec. Sec.  92.252(g)(1), 
92.253(e)(5), and 92.251(f)(5)(i) for small-scale rental housing 
projects (one to four total units) for reexamination of annual income, 
tenant selection, and ongoing physical inspections. Section 226(c) of 
NAHA permits HUD to provide streamlined procedures in monitoring 
compliance with HOME requirements for small-scale housing when HUD 
determines it is appropriate. While current HOME requirements may be 
standard for larger rental projects managed by professional landlords 
or property management companies, the requirements can be a significant 
disincentive to participation in the program for landlords or would-be 
landlords of small-scale properties such as homeowners adding an 
accessory dwelling unit (ADU) or HOME-assisted homebuyers purchasing 
duplexes or triplexes. Such small-scale projects may be an attainable 
method for participating jurisdictions with less resources to address 
their rental housing needs while generating income or supporting owner-
occupants (irrespective of whether their own unit is HOME-assisted). 
Reducing administrative burden would make HOME a viable funding option 
for such programs that create ADUs or provide financing for resident 
landlords.
    The proposed rule would revise Sec.  92.252 to clarify requirements 
for tenant income re-examination, align with the requirements in Sec.  
92.203(a) and (b), and to provide flexibilities for small-scale 
housing, multifamily projects with a period of affordability of ten 
years or more, and for units with Federal or State project-based 
subsidy or tenant-based rental assistance. The proposed rule would 
revise the first paragraph of proposed Sec.  92.252(g) to recognize the 
exceptions from Sec.  92.203(b)(1)(i) for a participating jurisdiction 
that accepts an annual income determination in accordance with Sec.  
92.203(a)(1) or (2) or determines income in accordance with Sec.  
92.203(b)(2). Currently, Sec.  92.203(a)(1) requires a participating 
jurisdiction to accept a Federal or state project-based subsidy 
provider's determination of a family's annual income if a family is 
applying for a HOME unit assisted by a Federal or state project-based 
subsidy program. Similarly, pursuant to Sec.  92.203(a)(2), a 
participating jurisdiction has the option to accept a rental assistance 
provider's determination of a family's annual income if the family is 
applying for a HOME unit and is receiving tenant-based rental 
assistance (e.g., a Housing Choice Voucher). This rule's revision to 
proposed Sec.  92.252(g) would make the regulations at Sec.  92.203 
consistent with proposed Sec.  92.252(g). The proposed rule would also 
revise the first paragraph in proposed Sec.  92.252(g) to require the 
participating jurisdiction to require the owner to re-examine each 
tenant's annual income in accordance with the option in Sec.  
92.203(b)(1) that the participating jurisdiction selects and includes 
in the written agreement. The proposed rule would add paragraphs (1) 
through (3) to proposed Sec.  92.252(g) to establish exceptions to this 
general re-examination requirement.
    The proposed rule would reduce burdens on landlords of small-scale 
housing by adding paragraph (g)(1) to Sec.  92.252 to permit a 
participating jurisdiction to permit an owner of small-scale housing to 
reexamine each tenant's annual income every three years rather than 
annually. For owners of small-scale housing that select the option at 
Sec.  92.203(b)(1)(ii) and are located in participating jurisdictions 
which permit owners of small-scale housing to reexamine a tenant's 
annual income every three years, the proposed rule would except these 
owners of small-scale housing from the requirement to obtain annual 
self-certifications from their tenants within the three-year period 
following completion of these tenants' income examinations. This 
proposed change to the schedule of reexamining tenant annual income for 
small-scale housing would have a minimal effect on the landlord's 
rental income because the rent limit would not change until the 
tenant's income increased above 80 percent of AMI. In addition, this 
proposed change aligns with the other proposed changes for small-scale 
housing in Sec.  92.251 to permit a three-year physical inspection 
requirement schedule rather than a risk-based schedule and Sec.  92.253 
to permit the participating jurisdiction, upon request by an owner of 
small-scale housing, to establish alternative procedures to a written 
waiting list for small-scale housing, subject to HUD's written approval 
of the procedures and determination that the selection of a tenants 
from a waiting list in chronological order by the owner is 
impracticable.
    The proposed rule would add paragraph (g)(2) to Sec.  92.252 to 
impose and further clarify the existing requirement for owners of a 
multifamily project with a period of affordability of 10 years or more. 
Currently, during the period of affordability, an owner may re-examine 
tenant income annually using a statement and certification, in 
accordance with Sec.  92.203(b)(1)(ii). The proposed rule would clarify 
that if a participating jurisdiction permits the owner to re-examine 
income using a statement and certification, the participating 
jurisdiction must require the owner to re-examine the income of each 
tenant using source documentation, at minimum, every six years, in 
accordance with Sec.  92.203(b)(1)(i). This reflects the same 
requirement currently in Sec.  92.252(g), but the language has been 
revised to clarify that the participating jurisdiction must enforce 
compliance by the owner with this requirement.
    To align with the requirements in Sec.  92.203(a), the proposed 
rule would also include an exception for units with Federal or State 
project-based subsidy or tenant-based rental assistance by adding 
paragraph (3) to 92.252(g). The proposed 92.252(g)(3) would except an 
owner from re-examining a tenant's annual income in accordance with 
Sec.  92.203(b) for HOME when a participating jurisdiction accepts an 
annual income determination under Sec.  92.203(a)(1) or (2).
    The proposed rule would renumber the existing Sec.  92.252(i)(2) to 
Sec.  92.252(h)(2) and makes several changes to the proposed Sec.  
92.252(h)(2) to improve readability and clarity regarding over-income 
tenant requirements. In addition to creating new paragraphs (h)(2)(i) 
and (ii), the proposed rule would clarify in the proposed Sec.  
92.252(h)(2)(i) that the participating jurisdiction may permit tenants 
of HOME-assisted units subject to rent restrictions under LIHTC to pay 
the rent amount required under LIHTC requirements. In the proposed 
Sec.  92.252(h)(2)(ii), HUD would further clarify that an over-income 
tenant in a floating HOME-assisted unit must pay a rent amount no 
greater than the fair

[[Page 46636]]

market rent for comparable, non-HOME-assisted units in the 
neighborhood.
    In proposed Sec.  92.252(i), the proposed rule would also 
explicitly prohibit the use of surety bonds, security deposit 
insurance, or similar instruments to be used in lieu of or in addition 
to a security deposit in HOME-assisted units.
    The proposed revisions to Sec.  92.252(j) and (k) update citations 
to conform with the redesignation of the current Sec.  92.253(d) as 
Sec.  92.253(e) and the Department's proposal to move the requirements 
for on-site inspections and financial oversight of rental projects from 
Sec.  92.504(d) to Sec.  92.251(f) respectively.
21. Tenant Protections and Selection (24 CFR 92.253)
    The Department is proposing significant revisions to the tenant 
protections and selection provisions in Sec.  92.253, consistent with 
the priorities set out in the Administration's Renters' Bill of 
Rights.\26\ HUD's proposed revisions to the HOME program in Sec.  
92.253 would provide a robust set of tenant protections appropriate to 
the HOME program. These tenant protections are based on the 
Department's review of existing HUD programs (e.g., the Section 8 PBV 
program \27\ and the public housing program \28\), a number of State 
statutes and local ordinances (e.g., Virginia,\29\ Washington, DC,\30\ 
California,\31\ Texas,\32\ and Florida \33\), and the Military Housing 
Privatization Initiative \34\). To implement the new tenant 
protections, HUD is proposing in Sec.  92.253(a)(4) to require that all 
tenants in HOME-assisted rental housing units or receiving TBRA have a 
new HOME tenancy addendum appended to their lease. This HOME tenancy 
addendum would include the new tenant protections listed in Sec.  
92.253(b). Through this proposed rule, the Department would replace the 
list of prohibited lease terms currently in Sec.  92.253(b) with a 
description of the provisions that HUD will include in the HOME tenancy 
addendum.
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    \26\ Available at https://www.whitehouse.gov/wp-content/uploads/2023/01/White-House-Blueprint-for-a-Renters-Bill-of-Rights.pdf.
    \27\ See HUD's Tenancy Addendum Section 8 Project-Based Voucher 
Program, available at https://www.hud.gov/sites/dfiles/OCHCO/documents/52530C.pdf; 24 CFR 983.256.
    \28\ 24 CFR part 966.
    \29\ Va. Code Ann. Sec. Sec.  55.1-1200 through 1262.
    \30\ D.C. Official Code, Title. 42, Ch. 35.
    \31\ Cal. Civ. Code, D. 2; Cal Civ. Code, D. 3, Pt. 4, T. 5.
    \32\ Tex. Prop. Code Title 8, Ch. 92.
    \33\ Fla. Stat. Title VI, Ch. 83.l.
    \34\ 10 U.S.C. 2890 and the Military Housing Privatization 
Initiative Tenant Bill of Rights, available at https://media.defense.gov/2020/May/18/2002302053/-1/-1/1/TENANT_BILLOFRIGHTS.PDF.
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    The proposed rule at Sec.  92.253(a) would revise the heading of 
paragraph (a) to ``Lease Contents'' to more accurately describe the 
requirements within the paragraph, as proposed. The introductory text 
clarifies that the protections apply to both tenants of HOME-assisted 
rental housing as well as tenants receiving TBRA. The paragraph also 
clarifies an existing requirement that the tenant lease be in writing 
and adds a new requirement that the owner provide the participating 
jurisdiction a copy of the written lease before it is executed and when 
the written lease is revised. This new requirement gives the 
participating jurisdiction the ability to verify that the owner's lease 
includes the HOME tenancy addendum and otherwise complies with the 
revised requirements of this section.
    The proposed rule at Sec.  92.253(a)(1) would require that a 
tenant's lease contain more than one convenient method to communicate 
directly with the owner or the property management staff, including in 
person, by telephone, email, or through a web portal. This provision 
would provide tenants with a reasonable way to contact an owner's 
property management staff to request any repairs or maintenance that is 
necessary for the unit or the common areas of the project. Similarly, 
the proposed rule at Sec.  92.253(a)(2) would require that a lease 
provide the participating jurisdiction's HOME program contact 
information so that a tenant can contact the participating 
jurisdiction. The proposed rule at Sec.  92.253(a)(3) maintains the 
requirement that the Violence Against Women Act (VAWA) lease 
requirements contained in Sec.  92.359(e) be included in a HOME 
tenant's lease, except as otherwise provided in Sec.  92.359(b). The 
proposed rule at Sec.  92.253(a)(4) would establish the requirement 
that a HOME tenancy addendum, as further described below, is contained 
in the lease.
    The introductory text to proposed Sec.  92.253(b) would establish 
that the HOME tenancy addendum shall prevail over any conflicting 
provisions of the lease. The introductory text would also explain that 
the lease, the HOME tenancy addendum, the VAWA addendum, and any 
addenda required by a Federal or State affordable housing program shall 
constitute the sole agreement between the owner and the tenant.
    Specific solicitation of comment #9: The Department currently 
applies only the tenant protections contained in the current Sec.  
92.253(a) and (b) to tenants receiving TBRA. The proposed rule would 
apply proposed paragraphs (a)-(c) and (d)(2) to tenants receiving TBRA, 
including tenants that only receive HOME security deposit assistance. 
The Department is seeking public comment on whether the requirements at 
Sec.  92.253(b) and (d)(2) should be required for tenants that receive 
TBRA. If not, what tenant protection requirements should apply to 
tenants that receive TBRA?
    The proposed rule at Sec.  92.253(b)(1) would describe tenant 
protections surrounding the physical condition of the tenant's unit and 
the project. Section 92.253(b)(1)(i) describes the requirement that the 
owner maintain the physical condition of the unit and the project in 
accordance with the participating jurisdiction's ongoing physical 
condition standards in Sec.  92.251(f).
    The proposed rule at Sec.  92.253(b)(1)(i) would establish that an 
owner shall repair and maintain the unit and the common areas in 
accordance with Sec.  92.253(b)(1)(i). The proposed rule at Sec.  
92.253(b)(1)(ii)(A) would require that owners, as soon as practicable, 
provide tenants with expected time frames for maintaining and repairing 
units. The Department believes that this requirement is necessary to 
ensure transparent communications regarding when units will be 
repaired. The proposed rule at Sec.  92.253(b)(1)(ii)(B) would require 
that owners, as soon as practicable, make repairs and perform 
maintenance on units and common areas in a professional manner and in 
accordance with the participating jurisdiction's property standards. 
The Department recognizes that repairs cannot always be performed 
immediately but seeks to clarify that the owner is still under an 
obligation to perform required repairs and to do so as soon as 
practicable. The proposed rule at Sec.  92.253(b)(1)(ii)(C) would 
prohibit owners from charging tenants for the costs of addressing 
normal wear and tear or damage to a unit or common areas other than 
that caused by the tenant's negligence, recklessness, or intentional 
acts.
    The proposed rule at Sec.  92.253(b)(1)(iii) would require that, 
when a life-threatening deficiency in the physical condition of the 
tenant's unit or project impacts the tenant, the tenant shall be 
promptly relocated into either a housing unit that is decent, safe, 
sanitary, and in good repair, or placed into physically suitable 
lodging until repairs on the tenant's housing unit or project are 
completed. The Department anticipates that tenant relocation would only 
be necessary if repairs could not be completed on the day the life-

[[Page 46637]]

threatening deficiency is identified, in which case the proposed rule 
would require that the housing unit or lodging used for tenant 
relocation be provided at no additional cost to the tenant. The 
proposed Sec.  92.253(b)(1)(iii) would be added because the Department 
seeks to prevent HOME tenants from remaining in housing that poses a 
threat to their physical safety and from being subjected to additional 
costs as a result of physical housing conditions outside their control.
    The proposed rule at Sec.  92.253(b)(1)(iv) would require that, 
where the owner controls the utilities, owners provide tenants with 
uninterrupted utility service in projects. The proposed rule at Sec.  
92.253(b)(1)(iv) would provide an exception to the proposed requirement 
for when utility services are interrupted for a reason that is beyond 
the control of the owner. The Department is proposing this revision to 
counteract a disturbing trend of so-called ``self-help'' evictions 
where owners use their ability to control utilities in a manner that is 
detrimental to tenants as a means to compel tenants to terminate their 
tenancy. In many States this ``self-help'' eviction practice is already 
illegal,\35\ but, by addressing this issue in the proposed HOME tenancy 
addendum, the proposed rule would prohibit the practice throughout 
HOME-assisted rental housing and TBRA.
---------------------------------------------------------------------------

    \35\ See, e.g., Fla. Stat. Sec.  83.67; Va. Code Ann. Sec.  
55.1-1243.1; Cal. Civ. Code Sec.  789.3; Mont. Code Ann. Sec.  70-
24-411.
---------------------------------------------------------------------------

    The proposed rule at Sec.  92.253(b)(2)(i) would explain that a 
family has the right to reside with a foster child, foster adult, or 
live-in aide in the unit. The proposed requirement to allow foster 
children and adults to reside in a unit with a family is similar to the 
requirements contained in the Section 8 HCV program.\36\ The proposed 
requirement to allow a live-in aide to reside in a unit with a family 
is part of the nondiscrimination requirements contained in Sec.  
92.350.
---------------------------------------------------------------------------

    \36\ 24 CFR 982.551(h)(4).
---------------------------------------------------------------------------

    The proposed rule at Sec.  92.253(b)(2)(ii) would explain that, 
except for shared housing arrangements in TBRA, the tenant's household 
shall have exclusive use and occupancy of their unit. One of the rights 
of tenancy is the tenants' exclusive use of their unit. Similar rights 
are contained in the HUD Section 8 project-based voucher program 
tenancy addendum,\37\ in the lease requirements for public housing 
tenants,\38\ and in other leases used by servicemembers.\39\
---------------------------------------------------------------------------

    \37\ Available at https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf.
    \38\ 24 CFR 966.4(d).
    \39\ See 10 U.S.C. 2890.
---------------------------------------------------------------------------

    The proposed rule at Sec.  92.253(b)(2)(iii) would set out the 
permitted situations where an owner may enter a tenant's unit. The 
proposed rule at Sec.  92.253(b)(2)(iii)(A) would allow an owner to 
enter a unit during reasonable hours when the owner is performing 
routine inspections and maintenance, making repairs to the unit, or 
showing the unit to prospective tenants. Before the owner may enter the 
unit under proposed Sec.  92.253(b)(2)(iii)(A), the owner must give the 
tenant at least 2 days' notice, which must include the purpose for 
entering the unit. The proposed rule at Sec.  92.253(b)(2)(iii)(B) 
would allow an owner to enter a unit at any time, without advance 
notice, if the owner has a reasonable belief that an emergency requires 
entry to the unit. The proposed rule at Sec.  92.253(b)(2)(iii)(C) 
would require that an owner that enters a unit when the tenant and all 
adult members of the household are absent from the unit must provide a 
written statement to the tenant explaining the date, time, and purpose 
of their entry of the unit.
    The proposed rule at Sec.  92.253(b)(2)(iv) would describe a 
tenant's rights to reasonable access and use of the common areas of the 
project. This language is proposed to clarify HUD's existing policy and 
explicitly prohibit owners from having separate amenities such as gyms, 
pools, spas, elevators, rooftop gardens, storage areas, and playrooms 
that only non-assisted tenants can access or use.
    The proposed rule at Sec.  92.253(b)(2)(v) would provide tenants 
the right to organize, create tenant associations, convene meetings, 
distribute literature, and post information at a project. Tenants have 
these explicit protections in other HUD programs, including HUD 
Multifamily Housing programs.\40\ This is also a tenant right provided 
in a number of jurisdictions.\41\ The Department proposes to add these 
explicit protections to the HOME program because the Department has 
found that tenant organizations are especially helpful in providing 
tenants with representation in addressing community-wide issues and 
that tenant organizations may provide a more sufficient counterweight 
to owners of larger projects who are not compliant with lease 
provisions or HUD requirements.
---------------------------------------------------------------------------

    \40\ See 24 CFR part 964 for tenant participation and tenant 
opportunities in public housing; 24 CFR part 245 for tenant 
participation in Multifamily Housing projects.
    \41\ See D.C. Official Code Sec.  42-3505.06; New York 
Consolidated Laws, Real Property Law--RPP Sec.  230; Cal. Civ Code 
Sec.  1942.6.
---------------------------------------------------------------------------

    The proposed rule at Sec.  92.253(b)(2)(vi) would state that a 
tenant may not be required to accept supportive services that are 
offered at the housing unless the tenant is living in transitional 
housing and such services are required in connection with that housing. 
This language is proposed to clarify HUD's existing policy and is part 
of the prohibited lease provisions in the current Sec.  92.253(b)(9).
    The proposed rule at Sec.  92.253(b)(3) would describe certain 
notices that must be provided to a tenant by an owner. The proposed 
rule at Sec.  92.253(b)(3)(i) would require that an owner notify a 
tenant in writing of the specific grounds for any proposed adverse 
action by an owner. These actions can be a variety of different 
actions, including charging a tenant for tenant-caused damages. This 
proposed requirement is similar to requirements of other HUD programs 
such as HUD's public housing program.\42\
---------------------------------------------------------------------------

    \42\ See 24 CFR 966.4(e)(8).
---------------------------------------------------------------------------

    The proposed rule at Sec.  92.253(b)(3)(ii) would require that a 
tenant be notified within 5 business days of any changes in ownership 
to the project, including through a foreclosure. The proposed rule at 
Sec.  92.253(b)(3)(ii) would also require that owners provide tenants 
with 30 days' notice of an impending sale or impending foreclosure of 
the property. These proposed requirements are similar to requirements 
contained in a variety of State statutes \43\ and the Department 
proposes these policies so that tenants are informed about changes in 
ownership in their projects. Requiring that tenants receive notice of 
this potential change earlier in the process helps better prepare those 
tenants for these and other disruptive impacts that occur when there is 
a change of ownership at a project. Changes in ownership of a project 
may lead to more extensive changes in properties, including 
rehabilitation of units or termination of affordability restrictions. 
As such, reasonable notification requirements would allow tenants to 
better prepare for any future changes to their housing. Section 
92.253(b)(3)(iii) clarifies the existing lease prohibition contained at 
Sec.  92.253(b)(4), which prohibits an owner from instituting a lawsuit 
against the tenant without providing the tenant with notice.
---------------------------------------------------------------------------

    \43\ See, e.g., Va. Code Ann. Sec.  55.1-1237; Md Code, Real 
Property Sec.  7-105.11.

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

[[Page 46638]]

    The proposed rule at Sec.  92.253(b)(4) would describe and further 
specify a tenant's rights to available legal proceedings and remedies. 
Most of the proposed Sec.  92.253(b)(4) reflects tenant protections 
that already exist in the existing HOME rule, which are proposed to be 
revised for inclusion in the tenancy addendum or for clarification.
    The proposed rule would renumber and slightly rephrase, for the 
purposes of the HOME tenancy addendum, the prohibited lease terms from 
the current Sec.  92.253(b)(1)-(3) to Sec.  92.253(b)(4)(i)-(iii), 
respectively. The proposed rule at Sec.  92.253(b)(4)(iv) would provide 
additional clarification that a tenant has the right to independent 
legal representation in any legal proceedings in connection with the 
lease. A tenant is not required to appoint the owner as attorney-in-
fact as part of the lease and has the right to independent counsel that 
can assist the tenant in any dispute relating to their lease, including 
non-binding arbitration or alternative dispute resolution processes 
that can precede a civil court proceeding. Preliminary studies have 
demonstrated that when a tenant has representation, a court is less 
likely to execute a warrant of eviction or enter a decision in favor of 
the owner.\44\ While the Department is not proposing to provide HOME 
tenants with funds to obtain counsel, given the benefits that counsel 
can provide, the Department believes it is necessary to clarify that 
tenants always have the right to independent counsel.
---------------------------------------------------------------------------

    \44\ See Ellen, I.G., O'Regan, K., House, S. and Brenner, R., 
2021, Do lawyers matter? Early evidence on eviction patterns after 
the rollout of universal access to Counsel in New York City, Housing 
Policy Debate, 31(3-5), pp.540-561.
---------------------------------------------------------------------------

    The proposed rule at Sec.  92.253(b)(4)(iv)(B) and (C) reframes the 
current regulatory requirements for prohibited lease terms contained in 
Sec.  92.253(b)(4) and (5) into affirmative tenant protections for 
inclusion in the HOME tenancy addendum. The proposed Sec.  
92.253(b)(4)(iv)(B) and (C) explains that a tenant may not be required 
to waive any right to a trial by jury or waive the tenant's right to 
appeal or otherwise challenge a court decision in connection with a 
lease. Similarly, the proposed rule at Sec.  92.253(b)(4)(v) would 
reframe the current prohibited lease term contained in Sec.  
92.253(b)(8) into a tenant protection. The proposed affirmative tenant 
protection in Sec.  92.253(b)(4)(v) states that a tenant may only be 
required through the lease to agree to pay the owner's attorney's fees 
or other legal costs if the tenant loses the court proceeding with the 
owner.
    The proposed rule at Sec.  92.253(b)(5)(i) would state that an 
owner may not unreasonably interfere with the tenant's comfort, safety, 
or enjoyment of a rental unit or retaliate against a tenant. The 
proposed rule at Sec.  92.253(b)(5)(i)(A)-(E) would provide that 
retaliation includes, but is not limited to, an owner's attempts, 
during a tenant's lease, to recover possession of the housing unit in a 
way that is not consistent with HUD requirements, decrease the services 
to be provided to the unit, interfere with a tenant's rights to privacy 
under State or local law, harass a household or their lawful guests, or 
refuse to honor the terms of the lease.
    The proposed rule at Sec.  92.253(b)(5)(ii) would describe the 
rights that a tenant may exercise without fear of retaliation by an 
owner. These rights of tenancy that a tenant may exercise include, but 
are not limited to, a tenant's rights to report inadequate housing 
conditions of the housing unit or project to the owner, participating 
jurisdiction, code enforcement officials, or HUD; the ability to 
request enforcement of the lease or any protection guaranteed under 24 
CFR part 92; and the ability to request or obtain enforcement of any 
applicable protections under Federal, State, or local law. The 
Department believes that tenants must be able to exercise their rights 
under their lease and applicable law free from worry of reprisal or 
coercion. Several States have also prohibited retaliation against 
tenants when the tenant has complained to a governmental agency 
responsible for code enforcement, made a complaint to or filed a legal 
action against the owner, organized or has become a member of a 
tenant's organization, or has testified in a court proceeding against 
the owner.\45\ Moreover, the Department believes that establishing this 
as a right within the lease itself will assist in addressing situations 
where owners retaliate against persons with disabilities that request 
reasonable accommodations in HUD-assisted housing units.
---------------------------------------------------------------------------

    \45\ See, e.g., Fla. Stat. Sec.  83.64; Tex. Prop Code Sec.  
92.331; Mont. Code Sec.  70-24-431.
---------------------------------------------------------------------------

    The proposed rule at Sec.  92.253(b)(6) would establish 
confidentiality requirements to safeguard a tenant or applicant's 
personally identifiable information.
    The proposed rule at Sec.  92.253(c) would establish new security 
deposit requirements for HOME-assisted rental housing and TBRA. Under 
these proposed requirements, security deposits must be refundable and 
may be no greater than two months' rent. The proposed rule would also 
prohibit the use of surety bonds or security deposit insurance to be 
used in lieu of or in addition to security deposits. Additionally, 
proposed Sec.  92.253(c) would also provide that if an owner charges 
any amount against a tenant's security deposit, then the tenant must be 
provided a list of all items charged against the security deposit and 
be promptly refunded the remainder of the security deposit balance. The 
proposed change to Sec.  92.253(c) is distinct from the current HOME 
regulation, which does not require refundable security deposits or that 
the owner identify the individual charges made against a security 
deposit. This proposed change is consistent with various State statutes 
\46\ and other HUD programs \47\ and provides another layer of 
protection for tenants in HOME-assisted rental housing and with 
TBRA.\48\
---------------------------------------------------------------------------

    \46\ See, e.g., Tex. Prop Code Sec.  92.104; SDCL Sec.  43-32-
24; Md. Code, Real. Prop. Sec.  8-203.
    \47\ See HUD's Section 8 Project-Based Voucher Program Tenancy 
Addendum, part B.12, available at https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf. See also 24 CFR 960.509(b)(3)(v) for 
public housing requirements related to security deposits.
    \48\ Disputes surrounding the retention of a security deposit, 
if they arise, would typically remain a matter of state or local 
landlord-tenant law.
---------------------------------------------------------------------------

    The proposed rule at Sec.  92.253(d) would revise the termination 
of tenancy provisions for both HOME-assisted rental housing and TBRA 
currently found at Sec.  92.253(c). Currently, the rules are silent on 
what protections apply to termination of tenancy for tenants with 
tenant-based rental assistance, as tenant-based rental assistance is 
not subject to the termination of tenancy provisions in the current 
rule at Sec.  92.253(c).
    The proposed rule at Sec.  92.253(d)(1)(i) would clarify that an 
owner may not terminate the tenancy of any tenant or household member 
or refuse to renew the lease of a tenant except for serious or repeated 
violation of the terms and conditions of the lease; for violation of 
applicable Federal, State, or local law; for completion of the tenancy 
period for transitional housing or failure to follow any required 
transitional housing supportive services plan; or for other good cause. 
The Department is proposing this clarification to the language 
currently found at Sec.  92.253(c) in response to questions about 
situations where an owner wishes to evict a member of the household but 
not the entire household. The Department recognizes that other HUD 
programs are more specific about the requirements that apply when 
expelling a single member of the household and is proposing these 
revisions to clarify the

[[Page 46639]]

termination of tenancy requirements that apply to each household 
member.
    The proposed rule at Sec.  92.253(d)(1)(i)(A)-(D) would provide a 
more detailed explanation of ``good cause'' to terminate or refuse to 
renew a tenancy. The proposed rule at Sec.  92.253(d)(1)(i)(A) would 
clarify that a tenant's assets or the type of income or assets that the 
tenant possesses is not good cause to terminate or refuse to renew a 
tenancy. This was clarified in the preamble to the HOTMA Final Rule. In 
that rule, the Department stated that ``[a] HOME PJ may only terminate 
the tenancy or refuse to renew the lease of a tenant of rental housing 
assisted with HOME funds for good cause, as defined in Sec.  92.253(c), 
which does not include having the type of assets or an amount of assets 
in excess of the limitations in Sec.  5.618.'' \49\ Because Sec.  
92.253 was not part of the HOTMA Final Rule, the Department proposes to 
use this opportunity to codify the requirements in proposed Sec.  
92.253(d)(1)(i)(A).
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    \49\ 88 FR 9600, 9613 (Feb. 14, 2023).
---------------------------------------------------------------------------

    The proposed rule at Sec.  92.253(d)(1)(i)(B) would describe other 
bases for other good cause, such as when a tenant creates a documented 
nuisance under applicable state or local law or when a tenant 
unreasonably refuses to provide the owner access to the unit to allow 
the owner to repair the unit. The Department holds these to be 
reasonable grounds for other good cause in other HUD programs, most 
notably the Section 8 PBV program,\50\ and proposes to align HOME 
requirements with these other programs.
---------------------------------------------------------------------------

    \50\ See PBV Tenancy Addendum, Part B, paragraph 8.d, available 
at https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf.
---------------------------------------------------------------------------

    The proposed rule at Sec.  92.253(d)(1)(i)(C) would establish that 
other good cause can also include where an owner must terminate a 
tenancy to comply with an order by a governmental entity or court that 
requires the tenant vacate the project or unit or a local ordinance 
that necessitates vacating the project or unit. In these instances, the 
Department believes it is reasonable for an owner to terminate a 
tenancy or refuse to renew a lease. Depending upon the nature of the 
order, under the proposed rule, the owner may still be found in 
violation of other HOME program requirements and their written 
agreement with the participating jurisdiction. For instance, if a 
governmental entity or court order to vacate was caused by the owner's 
failure to maintain the property condition, then the owner of the HOME 
rental housing may still be found in violation of the participating 
jurisdiction's ongoing property condition standards.
    The Department proposes to revise the notice requirements for 
termination or refusal to renew tenancy, currently found in Sec.  
92.253(c).
    The proposed rule at Sec.  92.253(d)(1)(i)(D) would clarify that in 
order for an owner to establish good cause for a violation of 
applicable Federal, state, or local law, there must be a record of 
conviction for a crime during the tenancy period that has a direct 
bearing on the tenant's continued tenancy in the HOME rental housing 
project, such as a violation of law that affects the safety of persons 
or property. The proposed rule would also clarify that an owner shall 
not use a record of arrest, parole or probation, or current indictment 
to establish a violation of applicable Federal, state, or local law.
    However, the proposed rule at Sec.  92.253(d)(1)(i)(D) would 
further clarify that good cause based on a violation of applicable 
Federal, state, or local law cannot be based on a violation that 
occurred prior to tenancy, a violation that does not have a direct 
bearing on a tenant's continued tenancy, or a basis other than a record 
of conviction. An owner may consider any mitigating circumstances 
relevant to whether the tenant will commit further violations of the 
lease or applicable Federal, State, or local law.
    The proposed rule at Sec.  92.253(d)(1)(ii) would require that 
owners provide 60 days' notice instead of 30 days' notice before the 
termination of tenancy. The Department recognizes that this proposed 
60-day notice period extends beyond the 30-day notification requirement 
for nonpayment of rent recently proposed in the proposed rule entitled 
30-Day Notification Requirement Prior to Termination of Lease for 
Nonpayment of Rent \51\ (``30-Day Notice Rule''). One of the proposed 
changes in the 30-Day Notice Rule is to amend several program 
regulations to align HUD programs to require written notification of at 
least 30 days prior to lease termination resulting from nonpayment of 
rent. However, the programs with regulations that would be amended 
under the 30-Day Notice Rule do not have the same minimum 30-day 
statutory notice period that HOME has in 42 U.S.C. 12755(b). Moreover, 
the 30-Day Notice Rule was describing termination of tenancy for a 
specific ground, nonpayment of rent, and not the HOME statutory 
considerations in 42 U.S.C. 12755(b), which include good cause, as 
discussed throughout this preamble. Recognizing the challenges of 
obtaining new affordable housing and to reduce the probability that a 
tenant will become homeless, the proposed rule's increase to the notice 
period to 60 days would provide HOME tenants with a sufficient period 
of time to locate and secure a new rental unit. This increased notice 
period above the statutory minimum would also allow tenants to have 
additional time to object to or cure violations in order to reverse the 
termination. HUD believes that the public interest in avoiding 
increased homelessness significantly outweighs the risk that this 
proposed change to increase the notice period would disincentivize 
developers and owners from participating in the HOME program.
---------------------------------------------------------------------------

    \51\ 88 FR 83877.
---------------------------------------------------------------------------

    The Department is also proposing to require that owners provide the 
participating jurisdiction with a copy of the notice to vacate to 
assist the participating jurisdiction with monitoring the HOME units or 
units with TBRA as well as to help the participating jurisdiction 
answer any questions it receives from the tenant. The proposed rule at 
Sec.  92.253(d)(1)(ii) would also provide that the 60-day notice period 
is not required if the termination of tenancy or refusal to renew is 
due to a direct threat to the safety of the tenants or employees of the 
housing or an imminent and serious threat to the property. This 
proposal would codify section 235 of Division L of the Consolidated 
Appropriations Act of 2016, Public Law 114-113, which revised section 
225(b) of NAHA (42 U.S.C. 12755(b)) to specifically add, ``Such [60]-
day waiting period is not required if the grounds for the termination 
or refusal to renew involve a direct threat to the safety of the 
tenants or employees of the housing, or an imminent and serious threat 
to the property (and the termination or refusal to renew is in 
accordance with the requirements of State or local law).'' Determining 
whether a person poses a direct threat to the safety of the tenants or 
employees of the housing, or an imminent and serious threat to the 
property is a fact-sensitive determination. There can be many different 
factors that an owner may choose to consider when making that 
determination, such as the nature of the conduct, the tenant's past 
conduct, and the evidence that the owner has in their records. 
Moreover, even if the proposed 60-day notice period is not required 
pursuant to Sec.  92.253(d)(1)(ii), any termination of tenancy or 
refusal to renew must comply with the requirements at Sec.  
92.253(d)(1)(iii).
    The proposed rule at Sec.  92.253(d)(1)(iii) would clarify that

[[Page 46640]]

terminating or refusing to renew a tenancy must be in accordance with 
Federal, State, local law, and the requirements of 24 CFR part 92, 
including requirements related to fair housing, nondiscrimination, and 
VAWA.
    The proposed rule at Sec.  92.253(d)(1)(v) would clarify that an 
owner may not perform a constructive or so-called ``self-help'' 
eviction where the owner takes actions such as locking a tenant out of 
their unit or stopping utility services to a tenant's units. These 
actions are already considered a violation of HUD's current rules at 
Sec.  92.253(c) but the proposed Sec.  92.253(d)(1)(v) provides further 
clarification. The proposed rule at Sec.  92.253(d)(1)(v) would also 
clarify that an owner may not create a hostile living environment or 
refuse to make reasonable accommodations in order to cause a tenant to 
terminate their tenancy. This proposal is consistent with the 
Department's policy of prohibiting retaliation, as previously 
described. Additionally, an owner's refusal to provide a reasonable 
accommodation in accordance with Federal requirements would also 
constitute a violation of the current HOME nondiscrimination 
requirements at Sec.  92.350, as well as Federal nondiscrimination 
requirements under applicable Federal civil rights and fair housing 
laws.\52\
---------------------------------------------------------------------------

    \52\ See e.g., 24 CFR 5.105(a).
---------------------------------------------------------------------------

    The proposed rule at Sec.  92.253(d)(2) would provide the 
requirements for terminating or refusing to renew the tenancy of a 
tenant assisted with TBRA. The proposed rule at the introductory text 
to Sec.  92.253(d)(2)(i) would establish a requirement that the 
participating jurisdiction must adopt written standards for termination 
or refusal to renew a tenancy in the TBRA program. The Department 
believes by codifying this requirement, it would provide both 
participating jurisdictions and owners with more definitive 
requirements on how to permissibly terminate or refuse to renew a 
tenancy. To that end, the Department is also proposing to require that 
the written standards for terminating or refusing to renew a tenancy 
for a tenant assisted with TBRA be included in the lease or in the 
rental assistance contract between the participating jurisdiction and 
the tenant. As proposed, the written standards included in the lease or 
rental assistance contract must provide a good cause standard for 
terminating or refusing to renew a tenancy. The proposed rule does not 
modify a participating jurisdiction's discretion to provide TBRA to a 
tenant to lease a new unit even if an owner has terminated the family's 
tenancy or refused to renew the lease under Sec.  92.253(d)(2).
    The proposed rule at Sec.  92.253(d)(2)(i)(A)-(F) would include the 
standard for termination or refusal to renew a tenancy for good cause 
for TBRA. This proposed good cause standard includes many of the same 
types of good cause justifications that are proposed for HOME rental 
housing under Sec.  92.253(d)(1)(i), including serious or repeated 
violation of the terms and conditions of the lease; violation of 
applicable Federal, State, or local law through a record of conviction 
of a crime that beards directly on continued tenancy; when a tenant 
creates a documented nuisance under applicable state or local law or 
when a tenant unreasonably refuses to provide the owner access to the 
unit to allow the owner to repair the unit; when an owner must 
terminate a tenancy to comply with an order issued by a governmental 
entity or court that requires the tenant vacate the project or unit; or 
a local ordinance that necessitates vacating the residential real 
property. Similar to the proposed changes in Sec.  92.253(d)(1)(i)(D), 
HUD's proposed language in Sec.  92.253(d)(2)(i)(B) would also clarify 
that good cause based on a violation of applicable Federal, state, or 
local law shall be based on a record of conviction of a crime that 
bears directly on the tenant's continued tenancy and not a record of 
arrest, parole or probation, or current indictment. This does not 
affect good cause based on a direct threat to the safety of the tenants 
or employees of the housing or an imminent and serious threat to the 
property. The proposed rule would further clarify that good cause based 
on a violation of applicable Federal, state, or local law must not be 
based on a violation that occurred prior to tenancy, a violation that 
does not have a direct bearing on one's continued tenancy, or a 
violation that does not result in a record of conviction. An owner may 
consider any mitigating circumstances relevant to whether the tenant 
will commit further violations of the lease or applicable Federal, 
State, or local law.
    The proposed rule at Sec.  92.253(d)(2)(i)(D) would also include 
reasons for good cause termination or refusal to renew a tenancy that 
are common in private rental markets. These proposed good cause reasons 
include when an owner intends to withdraw the unit from the rental 
market so that the owner can occupy the unit; to allow an owner's 
family member to occupy the unit; or to demolish or substantially 
rehabilitate the unit. These circumstances are sufficient basis to 
terminate or refuse to renew a tenancy under the Section 8 HCV program 
and to take a unit off the rental market in most States. The Department 
also believes that requiring a more onerous standard would negatively 
impact the ability of tenants to utilize TBRA in privately held units.
    The proposed rule at Sec.  92.253(d)(2)(i)(E) would also clarify 
that an owner is not required to maintain tenancy after the termination 
of the rental assistance contract. This proposed clarification mirrors 
similar provisions in the project-based voucher program tenancy 
addendum, where the lease automatically terminates if the Housing 
Assistance Payments contract terminates or if the PHA terminates 
assistance to the tenant.\53\
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    \53\ See HUD's Section 8 Project-Based Voucher Program Tenancy 
Addendum, part B.9 and 10, as applicable, available at https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf.
---------------------------------------------------------------------------

    Specific solicitation of comment #10: Currently, a rental 
assistance contract can be between a participating jurisdiction and 
either an owner or a tenant. The Department is also aware of many 
participating jurisdictions that have tri-party rental assistance 
contracts where the owner, the tenant, and the participating 
jurisdiction all sign the rental assistance contract. The Department is 
seeking feedback on whether a rental assistance contract should always 
be executed by an owner so that the participating jurisdiction can 
require that the HOME-assisted tenant's lease contain the HOME tenancy 
addendum and that the owner follow all applicable TBRA requirements.
    The proposed rule at Sec.  92.253(d)(2)(ii) would require that an 
owner provide a tenant assisted with TBRA with a written or otherwise 
accessible notice to vacate the unit that specifies the grounds for the 
action at least 30 days before termination of the tenancy. This 
proposed requirement would codify the requirement contained in section 
4024(c)(1) of the Coronavirus Aid, Relief, and Economic Security 
(``CARES'') Act (15 U.S.C. 9508(c)(1)), which requires that the lessor 
of a covered dwelling unit ``may not require the tenant to vacate the 
covered dwelling unit before the date that is 30 days after the date on 
which the lessor provides the tenant with a notice to vacate.'' In 
previous guidance, the Department has determined that units receiving 
TBRA are covered dwelling units as defined by the CARES Act.\54\ In

[[Page 46641]]

this proposed rule, the Department would specify that the minimum 30-
day notice period does not apply if the termination or refusal to renew 
tenancy is due to a direct threat to the safety of the tenants or 
employees of the housing or an imminent and serious threat to the 
property, as specified in section 235 of Division L of the Consolidated 
Appropriations Act of 2016 (Pub. L. 114-113), which revised section 
225(b) of NAHA (42 U.S.C. 12755(b)). Even if the proposed 30-day notice 
period is not required pursuant to Sec.  92.253(d)(2)(ii), any 
termination of tenancy or refusal to renew must comply with the 
requirements at Sec.  92.253(d)(2)(iii). The Department also proposes 
that owners provide participating jurisdictions with a copy of the 
notice to vacate within 5 business days of when the notice is served to 
the tenant. This proposed change would allow a participating 
jurisdiction to better monitor its TBRA program and enables the 
participating jurisdiction to further assist the tenant in finding a 
new unit to use their TBRA.
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    \54\ See the HOME Investment Partnerships Program FAQs (May 1, 
2020), available at https://www.hud.gov/sites/dfiles/CPD/documents/HOME-FAQs-COVID-19.pdf.
---------------------------------------------------------------------------

    Similar to the HOME rental housing provisions in proposed Sec.  
92.253(d)(1)(iii), the proposed rule at Sec.  92.253(d)(2)(iii) would 
require a termination of or refusal to renew tenancy to be in 
accordance with Federal, State, local law, and the requirements of part 
92. The proposed rule would further clarify that this includes but is 
not limited to complying with fair housing, nondiscrimination, and VAWA 
requirements. HUD notes that in a forthcoming rulemaking, HUD will 
propose changes related to VAWA requirements, including in part 92. HUD 
will invite the public to comment on those proposed VAWA requirements 
in its future VAWA rulemaking. The proposed rule at Sec.  92.253(d)(iv) 
would also clarify that an owner may not perform a constructive or so-
called ``self-help'' eviction where the owner takes actions such as 
locking a tenant out of their unit or stopping utilities services to a 
tenant's unit.
    The proposed rule would redesignate the current provisions on 
tenant selection at Sec.  92.253(d) to Sec.  92.253(e). The current 
Sec.  92.253(d)(4) states that owners of HOME rental housing may not 
exclude an applicant on the basis of holding a housing choice voucher 
or certificate. The proposed rule would broaden the current requirement 
at Sec.  92.253(d)(4), which would be redesignated as Sec.  
92.253(e)(4), to include an applicant with Federal or State tenant-
based rental assistance. This proposal is consistent with the intent of 
NAHA and it better enables applicants to utilize their Federal or State 
TBRA. The proposed rule also revises the language in current Sec.  
92.253(d)(3)(ii), which is proposed to be redesignated as Sec.  
92.253(e)(3)(ii), to further clarify that projects with preferences or 
limitations for persons with disabilities must be open to all eligible 
persons with disabilities. The Department also proposes to further 
clarify that an owner may advertise the project as offering various 
supportive services, including a description of the specific supportive 
services available, which may aid persons with disabilities in 
determining whether the supportive services may meet their needs.
    The Department also proposes revisions to the HOME waiting list 
requirements, currently at Sec.  92.253(d)(5) but proposed to be 
redesignated to Sec.  92.253(e)(5). The proposed rule at Sec.  
92.253(e)(5) would allow a participating jurisdiction, upon request by 
an owner of a small-scale housing project, to establish alternative 
waiting list procedures for the selection of tenants, subject to HUD's 
written approval of the procedures and determination that the selection 
of a tenants from a waiting list in chronological order by the owner is 
impracticable. The proposed rule is providing this flexibility because 
the use and maintenance of a waiting list for a small-scale housing 
project is often impracticable as the lower availability and turnover 
of such units in a project, particularly when there is only one rental 
unit, may result in a list of applicants that are no longer interested 
in the unit or are unreachable when the unit becomes available. Owners 
of small-scale housing often do not have the same capacity as owners of 
larger multifamily properties to continuously update a waiting list to 
maintain an accurate list of applicants to enable leasing as soon as 
the unit becomes available. The Department believes this proposed 
change would better assist private owners of smaller rental properties 
that wish to participate in the HOME program by reducing their 
administrative burden and recognizing that the selection of a tenant 
from a waiting list is not practicable for some small-scale projects.
    The proposed rule at Sec.  92.253(f) would add a new provision 
regarding health and safety, which would require that if a 
participating jurisdiction has actual knowledge of an environmental, 
health, or safety hazard affecting a project, unit, or HOME tenants, 
that the participating jurisdiction inform the owner and tenants of the 
nature, date, and scope of such hazards. The Department believes this 
is a reasonable requirement in light of recent environmental hazards 
like those in Jackson, Mississippi; Flint, Michigan; and East 
Palestine, Ohio. Similarly, the proposed rule at Sec.  92.253(f) would 
require that if an owner has actual knowledge of an environmental, 
health, or safety hazard affecting a project, unit, or HOME tenants, 
that the owner inform the participating jurisdiction. The proposed rule 
would clarify that this notification requirement only applies for 
hazards discovered after the environmental review process because all 
hazards discovered during that process will have been corrected or 
mitigated, or have a satisfactory mitigation plan in place, in 
accordance with the requirements in 24 CFR part 50 or part 58.
22. Qualification as Affordable Housing: Homeownership (24 CFR 92.254)
    The proposed rule would reformat Sec.  92.254(a)(2) to improve 
clarity and readability. Specifically, the proposed rule would add a 
new paragraph Sec.  92.254(a)(2)(iv) to clarify the process a 
participating jurisdiction must follow if it chooses to determine its 
own 95 percent of median purchase price for the area in lieu of using 
limits provided by HUD. The proposed rule would make corresponding 
changes to Sec.  92.254(a)(2)(iii), including moving portions of the 
text from Sec.  92.254(a)(2)(iii) to the proposed Sec.  
92.254(a)(2)(iv), which permits a participating jurisdiction to 
determine the 95 percent of the median purchase price for the area, 
consistent with the proposed Sec.  92.254(a)(2)(iv).
    The proposed rule would move language in Sec.  92.254(a)(2)(iii) to 
Sec.  92.254(a)(2)(iv)(A) and revise certain requirements. 
Specifically, the current regulation at Sec.  92.254(a)(2)(iii) states 
that a participating jurisdiction developing its own 95 percent of 
median purchase price for the area must set forth the price for 
``different types of single family housing.'' This language is vague 
and confusing. The proposed rule at Sec.  92.254(a)(2)(iv)(A) would 
clarify that the participating jurisdiction must set forth the 95 
percent median price limits for the area on single family housing of 
one, two, three, and four units. The proposed rule would also move 
requirements from the current regulation at Sec.  92.254(a)(2)(iii) to 
Sec.  92.254(a)(2)(iv)(B) and (C) and clarify that the requirements at 
the proposed Sec.  92.254(a)(2)(iv)(B) apply to the 95 percent median 
price limits for the area on housing located outside of metropolitan 
areas. The proposed rule also reorganizes and lists the required 
information in each action plan in proposed Sec.  92.254(a)(2)(iv)(C) 
for clarity and readability.

[[Page 46642]]

    HUD proposes to revise Sec.  92.254(a)(3) to extend the deadline 
for the sale of a homebuyer unit acquired, rehabilitated, or 
constructed with HOME funds from 9 to 12 months. If a HOME-assisted 
homebuyer unit is not sold before the proposed 12-month sales deadline, 
the unit must be restricted as an affordable rental unit under Sec.  
92.252 and rented to an eligible tenant in accordance with the rental 
housing requirements of Sec.  92.252. This means that any homebuyer 
unit that is not sold to a qualified homebuyer by the deadline or 
restricted as a HOME-assisted rental unit in accordance with Sec.  
92.252 does not qualify as affordable housing under 24 CFR part 92 and 
therefore, the participating jurisdiction must repay the HOME funds to 
its local HOME account in accordance with Sec.  92.503(b)(1).
    Specific solicitation of comment #11: The Department requests 
public comment on whether the existing 9-month deadline for the sale of 
homebuyer units acquired, rehabilitated, or constructed with HOME funds 
is reasonable and whether extending the deadline to 12 months would 
increase the use of HOME funds for homeownership programs.
    The proposed rule at Sec.  92.254(a)(3) would also clarify that the 
rental requirements at Sec.  92.252, including the period of 
affordability in Sec.  92.252(d), apply to HOME-assisted homebuyer 
housing that fails to sell by the proposed 12-month deadline. In 
response to ongoing misunderstandings by participating jurisdictions of 
this requirement, proposed revisions in Sec.  92.254(a)(3) would more 
explicitly state that if a unit intended for homeownership has not been 
sold to an eligible homebuyer by the proposed 12-month deadline, the 
participating jurisdiction must immediately convert the unit to HOME-
assisted rental housing that meets the requirements in Sec.  92.252 and 
impose the required affordability restrictions for the appropriate 
rental housing period of affordability (which differs from the period 
of affordability for homebuyer housing). If at some future time the 
participating jurisdiction permits an owner to sell or otherwise convey 
a unit that converted from a homebuyer activity to a rental activity 
pursuant to Sec.  92.254(a)(3), the participating jurisdiction may 
permit the sale in accordance with Sec.  92.255.
    HUD proposes to revise Sec.  92.254(a)(5)(i) to address questions 
regarding the appropriate process for determining the sale price of 
housing at resale. When a HOME-assisted homebuyer sells a property 
during the period of affordability, section 215(b)(3) of NAHA requires 
a participating jurisdiction to sell the unit to another low-income 
homebuyer at a price that is affordable to a reasonable range of low-
income homebuyers and that provides the original homeowner with a fair 
return on their investment. The current HOME regulations do not clearly 
define how a participating jurisdiction must set a resale price that 
both provides for a fair return to the original homebuyer and is 
affordable to a reasonable range of low-income homebuyers. The proposed 
rule at Sec.  92.254(a)(5)(i) would clarify that the resale price, 
subject to market conditions, is the homeowner's ``fair return on 
investment'' added to the original purchase price of the housing.
    Participating jurisdictions have communicated various challenges in 
implementing the statutory requirements that a HOME-assisted unit at 
resale must be sold to another low-income homebuyer at a price that is 
(1) affordable to a reasonable range of low-income homebuyers and (2) 
provides the original homebuyer with a fair return on their investment, 
including the homeowner's investment and improvements made to the 
property. It is difficult for participating jurisdictions to create a 
resale formula that provides a fair return to the homeowner at a price 
that is affordable to a range of low-income homebuyers, without 
additional HOME assistance to the subsequent homebuyer. To assist 
participating jurisdictions that choose to impose resale provisions, 
HUD proposes to amend Sec.  92.254(a)(5)(i) to add four permissible 
resale formulas that comply with these requirements in a new proposed 
paragraph (A). The Department believes that providing compliant resale 
formulas will help participating jurisdictions avoid noncompliance with 
the resale requirements and provide clarity and fairness to homebuyers.
    Specifically, the Department proposes to add paragraphs (A)(1) 
through (4) to Sec.  92.254(a)(5)(i) to describe the four permissible 
resale formulas: (1) itemized formula, (2) appraisal formula, (3) index 
formula, and (4) fixed-rate formula. These proposed resale formulas 
would be used to determine a HOME-assisted homebuyer's fair return on 
investment and the resale price. Variations of the proposed itemized 
formula are commonly used in State and local homebuyer programs not 
funded by the HOME program, while the appraisal, indexed, and fixed-
rate formulas are commonly used by community land trusts and other 
advocates of shared appreciation models.\55\ Though HUD is providing 
these four different permissible resale formulas, the proposed rule 
would not require participating jurisdictions to use any of the 
formulas and participating jurisdictions may continue to design their 
own resale provisions, subject to HUD review and approval. The four 
resale formulas in the proposed rule are described below.
---------------------------------------------------------------------------

    \55\ Shared appreciation homeownership models create long-term, 
affordable homeownership opportunities by imposing restrictions on 
the resale of subsidized housing units. See HUD's Office of Policy 
Development and Research Policy Matters (Fall 2012) for additional 
information, available at https://www.huduser.gov/portal/periodicals/em/fall12/highlight3.html.
---------------------------------------------------------------------------

    The proposed rule at Sec.  92.254(a)(5)(i)(A)(1) would establish an 
itemized resale formula, which determines the homeowner's fair return 
on investment by multiplying a clearly defined, publicly accessible 
index or standard (e.g., change in consumer price index, median area 
income, or median purchase price over the term of ownership) by the sum 
of the homeowner's downpayment, equity from the payment of mortgage 
principal, and the value of any capital improvements. This itemized 
resale formula would permit a participating jurisdiction to decide 
whether it will depreciate the value of the capital improvements and 
whether the formula will take into consideration any reduction in value 
due to damage or deferred maintenance of the property.

[[Page 46643]]

[GRAPHIC] [TIFF OMITTED] TP29MY24.006

    The proposed rule at Sec.  92.254(a)(5)(i)(A)(2) would establish an 
appraisal-based resale formula, which determines a homeowner's fair 
return on investment based on the amount of market appreciation, if 
any, realized over the term of ownership. The amount of market 
appreciation over the term of ownership would be determined by 
subtracting the appraised value of the property at the time of initial 
purchase from the appraised value at the time of resale. The fair 
return on investment would be determined by multiplying the amount of 
market appreciation over the term of homeownership by a clearly 
defined, publicly accessible standard or index. Given the complexity 
and skill required to conduct an appraisal, the proposed rule would 
require State-licensed or certified third-party appraisers to conduct 
the appraisals.
[GRAPHIC] [TIFF OMITTED] TP29MY24.007

    The proposed rule at Sec.  92.254(a)(5)(i)(A)(3) would establish an 
index resale formula, which determines a homeowner's fair return based 
on the value of the homeowner's investment adjusted in proportion to 
changes in a specified index, such as the Consumer Price Index or U.S 
Housing Price Index. Using the proposed index formula, the homeowner's 
fair return on investment would be calculated by multiplying the change 
in the index during the term of ownership by the sum of the original 
purchase price and the value of any capital improvements. The proposed 
rule would permit a participating jurisdiction to decide whether to 
depreciate the value of any capital improvements and/or take into 
consideration any reduction in value due to damage or delayed 
maintenance of the property.
[GRAPHIC] [TIFF OMITTED] TP29MY24.008

    The proposed rule at Sec.  92.254(a)(5)(i)(A)(4) would establish a 
fixed-rate formula, which determines a homeowner's fair return on 
investment by applying a fixed percentage increase to the homeowner's 
investment each year they own the unit. The fair return on investment 
would be determined by multiplying the fixed percentage by the number 
of years the homeowner owned and occupied the home, with the resulting 
rate multiplied by the sum of the original purchase price of the home 
and the value of any capital improvements. Like the itemized and 
indexed formulas proposed in Sec.  92.254(a)(5)(i)(A)(1) and (A)(3), 
the proposed rule would permit the participating jurisdiction to choose 
whether to depreciate the value of any capital improvements made to the 
property and/or take into consideration any reduction in value due to 
damage or delayed maintenance of the property.

[[Page 46644]]

[GRAPHIC] [TIFF OMITTED] TP29MY24.009

    The proposed rule would redesignate the text in the current 
paragraph (A) of Sec.  92.254(a)(5)(i) as Sec.  92.254(a)(5)(i)(B) and 
(C) and the current paragraph (B) of Sec.  92.254(a)(5)(i) would be 
redesignated as Sec.  92.254(a)(5)(i)(D). The proposed rule would also 
move the last sentence of the current paragraph Sec.  
92.254(a)(5)(i)(A) into the proposed Sec.  92.254(b) under the title, 
``Preserving affordable housing that was previously assisted with HOME 
funds.'' To make it easier to locate requirements related to the use of 
enforcement mechanisms, termination of affordability restrictions in 
specific circumstances, the presumption of affordability requirements, 
and the preservation of affordability, the proposed rule would clarify 
and revise these requirements in the proposed paragraphs (B), (C), and 
(D) of Sec.  92.254(a)(5)(i) and Sec.  92.254(b), respectively.
    The current regulatory provision in Sec.  92.254(a)(5)(i)(A) states 
that ``deed restrictions, covenants running with the land, or other 
similar mechanisms must be used as the mechanism to impose the resale 
requirements.'' HUD is proposing to revise Sec.  92.254(a)(5)(i)(A) in 
the proposed Sec.  92.254(a)(5)(i)(B) to clarify that a recorded 
agreement restricting the use of the property and the imposition of 
``use restrictions'' are both permissible methods of enforcing 
affordability requirements. This is a clarification of existing policy 
as each of these types of enforcement mechanisms would be considered 
``similar mechanisms'' under the current rule. The proposed rule at 
Sec.  92.254(a)(5)(i)(B) would also require written HUD approval of any 
means of enforcement other than the ones expressly listed to enforce 
resale provisions.
    The proposed rule at Sec.  92.254(a)(5)(i)(C) would clarify the 
minimum period of affordability if the owner of record before a 
termination event obtains an ownership interest in the property after 
the event.
    The proposed rule at Sec.  92.254(a)(5)(i)(D) would incorporate the 
text of the current Sec.  92.254(a)(5)(i)(B), except that it would 
remove the specific references to Empowerment Zone or Enterprise 
Community applications under 24 CFR 597 which are no longer applicable, 
as the incentives and authority to accept applications have expired. 
The proposed rule would redesignate the current introductory text in 
Sec.  92.254(a)(5)(ii) and provision at Sec.  92.254(a)(5)(ii)(A) as 
Sec.  92.254(a)(5)(ii)(A) and Sec.  92.254(a)(5)(ii)(B), respectively. 
These proposed revisions improve clarity and the organization of Sec.  
92.254(a)(5)(ii). The text of the current paragraphs at Sec.  
92.254(a)(5)(ii)(A)(1)-(5) would be redesignated as Sec.  
92.254(a)(5)(ii)(B)(1)-(5) and HUD proposes revisions to the proposed 
Sec.  92.254(a)(5)(ii)(B)(5), as described below.
    The proposed rule at Sec.  92.254(a)(5)(ii)(B)(5) would be revised 
to state that the HOME investment subject to recapture is the amount of 
HOME funds that directly assisted the homebuyer to purchase the unit. 
The current regulation states that the amount subject to recapture is 
the amount of HOME assistance that enabled the homebuyer to buy the 
dwelling unit. The Department has found the current regulatory language 
to be problematic because participating jurisdictions have incorrectly 
based the amount of HOME funds subject to recapture on the total amount 
of HOME funds invested in the project, instead of the direct assistance 
to the homebuyer that enabled the homebuyer to purchase the unit (i.e., 
downpayment assistance and any HOME assistance that reduced the 
purchase price from fair market value to an affordable price). The 
proposed revision would improve the clarity of this requirement.
    The proposed rule at Sec.  92.254(a)(7) would be revised to improve 
the clarity and readability of the paragraph. In addition, to better 
reflect the requirements of the paragraph, the proposed rule at Sec.  
92.254(a)(7) would be retitled as ``Homebuyer assistance for lease-
purchase.'' The proposed rule at Sec.  92.254(a)(7) would also be 
revised to clarify that in homeownership projects that receive HOME 
funds for acquisition, rehabilitation, or new construction, the 
participating jurisdiction may assist a homebuyer through an existing 
lease-purchase program if the lease-purchase agreement is executed 
between the owner and homebuyer prior to the completion of the 
acquisition, construction, or rehabilitation. The proposed rule at 
Sec.  92.254(a)(7) would also clarify that if HOME funds are used to 
construct or rehabilitate the housing unit, the housing must be 
purchased within 36 months of the execution of the lease-purchase 
agreement. Further, if HOME funds are used to acquire housing to be 
resold to an eligible homebuyer, the proposed rule would require the 
unit to be purchased within 42 months of executing the lease-purchase 
agreement. The proposed rule at Sec.  92.254(a)(7) would also clarify 
that a unit under a lease-purchase agreement is subject to the 
homeownership affordability requirements of Sec.  92.254 unless the 
unit fails to sell within the required timeframes. If a unit fails to 
sell to an eligible homebuyer within the required timeframe, the unit 
must become affordable rental housing that complies with the 
requirements in Sec.  92.252. Finally, the proposed rule at Sec.  
92.254(a)(7) would clarify that the participating jurisdiction must 
verify the income eligibility of a household at the time of signing the 
lease-purchase agreement and include the income of all members living 
in the housing.
    The proposed rule would redesignate the current Sec.  92.254(b), 
(c), (d), (e), and (f) as Sec.  92.254(c), (d), (e), (f) and (g), 
respectively. The Department proposes to consolidate the current 
requirements at Sec.  92.254(a)(5)(i)(A) and Sec.  92.254(a)(9) into 
proposed Sec.  92.254(b) and substantially revise requirements on a 
participating jurisdiction's authority to use purchase options, rights 
of first refusal, or other preemptive rights to preserve affordability, 
including the use of preemptive rights to purchase housing before 
foreclosure, to improve the effectiveness, organization, and clarity of 
the rule.
    The proposed rule at Sec.  92.254(b) would revise the current 
heading of Sec.  92.254(a)(9) by deleting the words

[[Page 46645]]

``that was previously.'' The proposed rule would also add an 
introductory sentence to clarify that ``preserving affordability of 
housing assisted with HOME funds'' is permitted when there is a 
termination event threatening the affordability restrictions (e.g., 
foreclosure, transfer in lieu of foreclosure or assignment of an FHA-
insured mortgage to HUD) and provides that a participating jurisdiction 
may take certain actions in accordance with proposed Sec.  
92.254(b)(1)-(3) to preserve the affordability of HOME-assisted 
housing.
    The proposed rule would specify in Sec.  92.254(b)(1) that the 
actions to preserve affordability include exercising purchase options, 
rights of first refusal, or other preemptive rights to obtain ownership 
of the housing before foreclosure, subject to the requirements in 
proposed Sec.  92.254(b)(1)(i)-(iv). The proposed rule would add Sec.  
92.254(b)(1)(i)-(iv) to require the participating jurisdiction that 
acquires housing under Sec.  92.254(b)(1) to sell the housing to a new 
eligible homebuyer within 6 months of the date that the participating 
jurisdiction obtains ownership (Sec.  92.254(b)(1)(i)) and impose a 
period of affordability for the eligible homebuyer that is equal to the 
remaining period of affordability of the former homeowner, unless the 
participating jurisdiction provides additional direct HOME assistance 
to the new eligible homebuyer (Sec.  92.254(b)(1)(ii)). If the 
participating jurisdiction provides additional direct HOME assistance 
to the eligible homebuyer, the proposed Sec.  92.254(b)(1)(iii) would 
require the period of affordability to be recalculated in accordance 
with Sec.  92.254(a)(4). The proposed Sec.  92.254(b)(1)(iii) and Sec.  
92.254(b)(2)(iv) would revise the current requirements in Sec.  
92.254(a)(9)(ii) to state that when additional HOME funds directly 
assist the eligible homebuyer, the additional investment or cost must 
be treated as a new project. The proposed rule would also move the 
requirement on maximum per-unit subsidy amount in the current Sec.  
92.254(a)(9)(iii) and revise the requirement in the proposed Sec.  
92.254(b)(1)(iv) to establish that the total HOME funds for a project 
is the original HOME investment plus additional investment and the 
total HOME funds must not exceed the per-unit subsidy limit in Sec.  
92.250(a) in effect at the time of the additional investment, subject 
to HUD approval.
    HUD is proposing to permit the participating jurisdiction to use 
additional HOME funds for certain costs to preserve affordability of 
HOME-assisted units. The provisions currently at Sec.  
92.254(a)(9)(i)(A)-(D) would be redesignated as Sec.  92.254(b)(2)(i)-
(iv) and would be revised to include additional eligible costs and 
requirements and specify whether costs are treated as amendments to the 
original project or a new project. HUD proposes that the costs 
described in the proposed Sec.  92.254(b)(2)(i)-(iii) be treated as 
amendments to the original project and the cost described in Sec.  
92.254(b)(2)(iv) be treated as a new project because the costs in 
proposed Sec.  92.254(b)(2)(i)-(iii) are costs to obtain and prepare 
the HOME-assisted housing for resale while the cost in Sec.  
92.254(b)(2)(iv) is direct assistance to a new eligible homebuyer for a 
new homeownership activity. The proposed rule at Sec.  92.254(b)(2)(ii) 
would also require that when a participating jurisdiction uses 
additional HOME funds to undertake necessary rehabilitation of the 
housing, the housing must be rehabilitated to meet the applicable 
property standards in Sec.  92.251. HUD is also revising the current 
Sec.  92.254(a)(9)(iii) by moving the provision that allows 
participating jurisdictions the flexibility to charge certain costs as 
administrative costs under Sec.  92.207 into a new Sec.  
92.254(b)(2)(v).
    The proposed rule would add new paragraphs at Sec.  
92.254(b)(3)(i)-(iv) to codify the amendments to NAHA in the 
Consolidated Appropriations Act, 2016 (Pub. L. 114-113) that CLTs may 
hold and exercise purchase options, rights of first refusal, or other 
preemptive rights to purchase housing to preserve affordability, 
including but not limited to the right to purchase the housing in lieu 
of foreclosure. The proposed rule at Sec.  92.254(b)(3)(i), (ii), 
(iii), and (iv) would each establish the conditions under which a 
participating jurisdiction may permit a CLT to exercise these rights. 
Specifically, the proposed rule at Sec.  92.254(b)(3)(i) would require 
the CLT to obtain ownership of the housing subject to existing HOME 
affordability restrictions. The proposed rule at Sec.  92.254(b)(3)(ii) 
would require the CLT to resell the housing within 6 months to an 
eligible homebuyer that will use the housing as their principal 
residence in accordance with Sec.  92.254(a)(3). The proposed rule at 
Sec.  92.254(b)(3)(iii) would require the CLT to impose a period of 
affordability that is equal to the remaining period of affordability of 
the former owner. Finally, the proposed rule at Sec.  92.254(b)(3)(iv) 
would prohibit the participating jurisdiction from providing additional 
HOME funds to the CLT to obtain ownership, rehabilitate the housing, 
hold the housing pending resale to another homebuyer, or provide 
downpayment assistance to the subsequent eligible homebuyer.
    The proposed rule would redesignate the current Sec.  92.254(e) as 
Sec.  92.254(f) and further clarify the requirement at Sec.  92.254(e). 
Some participating jurisdictions contract with for-profit and nonprofit 
organizations that provide private, first mortgage financing so that 
these organizations may also provide HOME homeownership financing to 
eligible homebuyers in conjunction with the first mortgage. The 2013 
HOME Final Rule added Sec.  92.254(e) to establish safeguards to 
prevent inappropriate provisions of HOME funds in such situations. 
Although the purpose and applicability of the current Sec.  92.254(e) 
are described in the preamble of the 2013 HOME Final Rule, many HOME 
stakeholders mistakenly believe that these provisions apply to all 
entities that provide HOME-funded homeownership assistance. The 
proposed rule at Sec.  92.254(f) would make it explicit that 
participating jurisdictions must have proper oversight over these 
lending organizations through the execution of an appropriate written 
agreement. Specifically, the proposed rule at Sec.  92.254(f) would 
clarify that participating jurisdictions may provide HOME funds through 
a for-profit lending institution that is a contractor, or provide HOME 
funds to a nonprofit lending institution as a contractor or 
subrecipient, so that the institution may provide HOME homeownership 
assistance in conjunction with first mortgage financing.
    In addition to proposing to redesignate the current Sec.  92.254(f) 
as Sec.  92.254(g), the Department would make several revisions to the 
homebuyer underwriting requirements in the proposed Sec.  92.254(g)(1). 
The current regulations require a participating jurisdiction to 
establish written underwriting standards that evaluate the housing debt 
and overall debt of the family, the appropriateness of the amount of 
assistance, monthly expenses of the family, assets available to acquire 
the housing, and financial resources to sustain homeownership. 
Affordable housing advocates have argued that the current regulation 
may inadvertently exclude households that have overall debt and monthly 
expenses that exceed a participating jurisdiction's underwriting 
standards, yet the household otherwise demonstrates an ability to 
sustain a mortgage. To address these concerns and streamline this 
portion of the regulation, the proposed rule at Sec.  92.254(g)(1) 
would revise the underwriting standards by eliminating

[[Page 46646]]

the need to evaluate both the housing debt and overall debt of the 
family and instead would require the participating jurisdiction to 
evaluate the overall debt of the family projected after purchase of the 
housing. In addition, the proposed rule at Sec.  92.254(g)(1) would 
eliminate the requirement that a participating jurisdiction evaluate 
the monthly expenses of the family.
    The current regulation at Sec.  92.254(f)(1) also requires a 
participating jurisdiction to establish written policies for 
underwriting standards for homeownership assistance to determine that 
the amount of assistance a homebuyer receives is neither more or less 
than necessary to sustain homeownership. However, the amount of HOME 
assistance required by a homebuyer may exceed the amount a 
participating jurisdiction has determined as reasonable given the 
amount of available HOME funds. Consequently, the proposed rule at 
Sec.  92.254(g)(1) would require participating jurisdictions to 
establish a standard to determine the maximum amount of direct HOME 
assistance that it may provide a family. The proposed paragraph would 
also more explicitly state that a participating jurisdiction may not 
provide a single, fixed amount of assistance to every homebuyer 
receiving assistance in the participating jurisdiction's homebuyer 
program, irrespective of the homebuyer's income, assets, or other 
circumstances because such a program design does not take into account 
the individual financial circumstances of each homebuyer.
23. Purchase of HOME Units by In-Place Tenants (24 CFR 92.255)
    The proposed rule would revise Sec.  92.255 to clarify the 
requirements for the purchase of a HOME-assisted rental unit during its 
period of affordability by an existing tenant. This section, currently 
titled ``Converting rental units to homeownership units for existing 
tenants,'' would be retitled as ``Purchase of HOME units by in-place 
tenants'' to reflect the proposed requirements of Sec.  92.255 more 
accurately. The proposed rule would retain the requirement that a 
tenant's refusal to purchase the unit is not good cause for termination 
of tenancy or a reason not to renew the lease. The proposed rule would 
also clarify that a participating jurisdiction may not permit an owner 
to sell and a tenant to buy an existing HOME-assisted rental unit 
through a lease-purchase program.
    The proposed rule would maintain the current requirement in 
paragraph (a) of this section that a tenant qualify for homeownership 
in accordance with the requirements of Sec.  92.254. This means that 
the tenant must qualify as low-income at the time of purchase. If the 
tenant is not assisted with additional HOME funds to purchase the unit, 
the proposed rule would require the period of affordability to equal 
the remaining period of affordability of the rental unit. However, if 
additional HOME funds are provided to the tenant to purchase the unit, 
the period of affordability would be the greater of the remaining 
period of affordability if the unit had remained a rental unit or the 
required period based on the amount of direct homebuyer assistance 
provided.
24. Set-Aside for Community Housing Development Organizations (CHDOs) 
(24 CFR 92.300).
    To maintain the program's effectiveness, it is essential that HOME 
funds be provided only to developers that have adequate development 
experience and financial stability to complete projects timely, on-
budget, and at a high level of quality. Since the beginning of the HOME 
program, there have been challenges with CHDOs not having the required 
substantial expertise to meet the development capacity standards and 
the requirement that 15 percent of each HOME allocation be used only 
for housing, owned, developed, or sponsored by organizations that 
qualify as CHDOs, as defined at Sec.  92.2.
    Section 231(a) of NAHA \56\ and Sec.  92.300 require a 
participating jurisdiction to reserve not less than 15 percent of its 
HOME allocation for investment only in housing to be ``owned, developed 
or sponsored'' by a CHDO. The current regulations at Sec.  
92.300(a)(2), (a)(3), and (a)(4) establish the requirements for a 
project to be ``owned,'' ``developed,'' or ``sponsored'' by a CHDO 
respectively. Rental housing is ``owned'' by a CHDO if the CHDO is the 
owner in fee simple absolute of the affordable rental housing \57\ and 
where HOME funds are used for new construction or rehabilitation of the 
housing, the CHDO hires and oversees the developer that rehabilitates 
or constructs the housing. Rental housing is ``developed'' by a CHDO if 
the CHDO is the owner of the housing in fee simple absolute \63\ and 
the developer of the housing to be constructed or rehabilitated. The 
CHDO, when acting as a developer of rental housing, must be in ``sole 
charge of all aspects of the development project.'' Pursuant to Sec.  
92.300(a)(2) and (3), when rental housing is ``owned'' or ``developed'' 
by a CHDO, the CHDO must own the housing during development and 
throughout the period of affordability in Sec.  92.252. For rental 
housing to be ``sponsored'' by a CHDO, a CHDO must comply with the 
current Sec.  92.300(a)(4) which requires the housing to be ``owned,'' 
as defined in Sec.  92.300(a)(2), or ``developed,'' as defined in Sec.  
92.300(a)(3), by: a subsidiary of the CHDO, a limited partnership of 
which the CHDO or its subsidiary is the sole general partner, or a 
limited liability company of which the CHDO or its subsidiary is the 
sole managing member. The current Sec.  92.300(a)(4) also provides a 
second rental sponsorship role under which the CHDO develops the 
housing project and conveys it to another nonprofit at a predetermined 
time. For homeownership housing, the current Sec.  92.300(a)(6) 
requires housing that is ``developed'' by a CHDO to be in ``sole charge 
of construction.'' NAHA and part 92 only permit an entity that 
qualifies as a CHDO to act as a sponsor in the development of 
affordable housing.
---------------------------------------------------------------------------

    \56\ 42 U.S.C. 12771(a).
    \57\ In accordance with Sec.  92.300, the CHDO may have a long-
term ground lease when rental housing is ``owned'' or ``developed'' 
by a CHDO.
---------------------------------------------------------------------------

    The proposed rule would correct a drafting error throughout Sec.  
92.300 by changing ``community development housing organizations'' to 
``community housing development organizations.'' The proposed rule also 
makes technical edits to wording in Sec.  92.300(a)(3), (a)(4), (a)(6), 
and (a)(6)(i). Paragraph Sec.  92.300(a)(5)(iii) would be revised to 
add the word ``private'' to the reference to nonprofit organizations so 
it refers to ``private'' nonprofit organizations and a technical 
correction to paragraph Sec.  92.300(e) would add the word ``must'' 
before describing written agreement requirements.
    The proposed rule would clarify the requirement in Sec.  
92.300(a)(2) that when rental housing is ``owned'' by the CHDO, the 
CHDO must oversee or, at minimum, hire or contract with an experienced 
project manager to oversee all aspects of the development. While HUD 
requires the CHDO to oversee all aspects of the development, the 
current requirement at Sec.  92.300(a)(2) only explicitly states that 
at minimum, the CHDO must hire or contract with an experienced project 
manager. The revision clarifies that hiring or contracting with an 
experienced project manager is the minimum standard to meet the 
requirement that a CHDO oversee all aspects of the development when 
rental housing is ``owned'' by the CHDO.
    Through the proposed rule, HUD is proposing to make it 
substantially easier for many community-based nonprofit organizations 
to access the CHDO set-

[[Page 46647]]

aside as ``developers'' by revising Sec.  92.300(a)(3) to permit the 
CHDO to share responsibilities in the development process, provided 
that the CHDO remains in charge of (i.e., maintains decision-making 
authority over) these responsibilities. The responsibilities that may 
be shared include: selecting the site, obtaining permit approvals and 
all project financing, selecting architects, engineers, and general 
contractors, overseeing project progress, and determining the 
reasonableness of costs. The Department believes this revision would 
assist many organizations to augment their development expertise, while 
preserving the statutory intent that the CHDO be in charge of project 
development decisions in the interest of low-income community 
residents. The proposed rule at Sec.  92.300(a)(4) would also be 
amended so that the sponsor provisions require the CHDO or its 
subsidiary to be the managing general partner rather than the sole 
general partner of a limited partnership. The proposed rule at Sec.  
92.300(a)(4) would also allow the CHDO or its subsidiary to be the 
managing member of a limited liability company rather than require the 
CHDO to be the sole managing member of a limited liability company.
    In response to ongoing questions from participating jurisdictions, 
the proposed rule at Sec.  92.300(a)(4)(ii) would clarify that the set-
aside funds are provided by the participating jurisdiction directly to 
the owner of the project. This is a statutory requirement of the HOME 
program under section 226 of NAHA (42 U.S.C. 12756) and is currently 
required in the rule. This change to add paragraph (ii) to Sec.  
92.300(a)(4) would further clarify that HOME funds are only provided by 
a participating jurisdiction (or its subrecipient) directly to the 
entity that owns the project.
    The proposed rule would eliminate the requirement that rental 
housing developed pursuant to Sec.  92.300(a)(3) or sponsored pursuant 
to Sec.  92.300(a)(4) continue to be owned by a CHDO throughout the 
period of affordability. These provisions requiring ownership of the 
housing for the entire period of affordability by the CHDO that 
``developed'' or ``sponsored'' the housing have created difficulties 
when the status of the CHDO that developed or sponsored the project 
changes (e.g., a bankruptcy, decrease in capacity, or other business 
necessity) and acquisition of the housing by another CHDO must occur. 
These difficulties include finding another qualified CHDO that has the 
capacity to own the project and the administrative burden in 
transferring the project to another CHDO, which may take a significant 
amount of time. In many instances, finding another CHDO that is willing 
and has capacity to assume ownership of the housing is often not 
feasible. Such difficulties have jeopardized efforts to preserve the 
housing's affordability. Through the proposed change to Sec.  
92.300(a)(3) and Sec.  92.300(a)(4), HUD is seeking to enable ownership 
transfers that are necessary to sustain the CHDO projects in operation 
and maintain compliance with HOME requirements. While the proposed rule 
provides flexibility in ongoing ownership of rental housing that is 
``developed'' or ``sponsored'' by a CHDO, the proposed rule would 
maintain the ongoing ownership requirements for rental housing that is 
``owned'' by a CHDO, pursuant to the CHDO ownership provisions at Sec.  
92.300(a)(2).
    The proposed rule at Sec.  92.300(a)(5) would also revise the 
sponsor provisions to conform to the new requirements for housing that 
is ``developed'' by a CHDO under proposed Sec.  92.300(a)(3) and make 
minor clarifications that a CHDO sponsors rental housing if the CHDO 
develops the rental housing ``in accordance with Sec.  92.300(a)(3)'' 
and agrees to convey ``the project'' to an identified private nonprofit 
organization at a predetermined time after completion of the project.
    With respect to homeownership housing assisted with CHDO set-aside 
funds, the proposed rule would revise Sec.  92.300(a)(6) to permit the 
CHDO to share the developer role with another entity provided that the 
CHDO is in charge of (i.e., maintains decision-making authority over) 
all aspects of the development process, including selecting the site, 
obtaining permit approvals and all project financing, selecting 
architects, engineers, and general contractors, overseeing project 
progress, determining the reasonableness of costs, identifying eligible 
homebuyers, and overseeing the sale of homeownership units.
    The proposed rule at Sec.  92.300(a)(7) would further clarify that 
a participating jurisdiction must determine the form of assistance in 
accordance with Sec.  92.205(b) that it will provide to a CHDO for a 
rental housing project under Sec.  92.300(a)(4) and must provide the 
assistance directly to the entity that owns the project. HUD also 
proposes to make technical corrections to the language at Sec.  
92.300(a)(7) for readability.
    The proposed rule at Sec.  92.300(b) would also permit nonprofit 
organizations that meet all the provisions of the ``community housing 
development organization'' definition in Sec.  92.2, except for the 
capacity requirement in paragraph (9) of that definition, to be 
assisted with the capacity building funding authorized by Sec.  
92.300(b) in order to obtain the demonstrated capacity required to 
qualify as a CHDO.
25. Housing Education and Organizational Support (24 CFR 92.302)
    The proposed rule would designate all but the first sentence of the 
current language in Sec.  92.302 as a new paragraph (a). The proposed 
paragraph (a) would include the current text in Sec.  92.302 regarding 
HUD's Federal Register notice. The first sentence currently in Sec.  
92.302 regarding HUD's authority to provide education and organization 
support services would remain in the introductory text to Sec.  92.302.
    The proposed rule would also add paragraph (b) to Sec.  92.302 to 
add the definition for CLT and requirements specific to the use of 
technical assistance funding by a CLT in section 233(f) of NAHA (42 
U.S.C. 12773(f)), implemented by section 213(a)(13) of the Housing and 
Community Development Act of 1992 (Pub. L. 102-550). The proposed rule 
would establish that HUD may provide housing education and 
organizational support, as described in Sec.  92.302, to a CLT, only if 
CLT meets the definition of a ``community housing development 
organization'' at Sec.  92.2, except for the requirements in paragraphs 
(9) and (10) of the definition of CLT. The requirements would also 
include that the CLT is established to complete the activities in Sec.  
92.302(b)(3), the CLT carries out the activities in Sec.  92.302(b)(3), 
the CLT's corporate membership is open to residents of a particular 
geographic area, as specified in the organization's bylaws, and the 
CLT's board of directors includes a majority of members who are elected 
by the corporate membership and is composed of equal numbers of lessees 
pursuant to paragraph (b)(2)(ii), members who are not lessees, and any 
other category of persons described in the organization's bylaws. The 
applicability of the definition and requirements for a CLT at Sec.  
92.302(b) would be limited to the use of HOME funds under Sec.  92.302.
26. Displacement, Relocation, and Acquisition (24 CFR 92.353)
    The proposed rule would amend the last sentence of Sec.  
92.353(c)(2)(ii)(A), which describes persons not displaced as including 
persons whose tenancy was terminated under Sec.  92.253(d). The last 
sentence would be amended to conform to the change of written notice

[[Page 46648]]

requirements contained in Sec.  92.253(d) instead of the current 30-day 
notice requirement.
    The proposed rule would amend the sentence in Sec.  
92.353(c)(2)(ii)(C) to explain that for purposes of determining 
eligibility for assistance under the URA, a person is not displaced if 
they meet the definition of ``persons not displaced'' contained in the 
URA at 49 CFR 24.2. This is to correct an error in the current 
citation.
27. Conflict of Interest (24 CFR 92.356)
    The proposed rule would amend Sec.  92.356(d)(1) to revise the 
description of the meaning of ``public disclosure.'' The proposed Sec.  
92.356(d)(1) would state that public disclosure is considered a 
combination of various communication formats, including but not limited 
to publication on the recipient's website, electronic mailings, media 
advertisements, and display in public areas such as libraries, grocery 
store bulletin boards, and neighborhood centers. The proposed rule at 
Sec.  92.356(d)(1) would also require evidence of the public 
disclosure, of the nature of the conflict, and a description of how the 
public disclosure was made. The proposed rule at Sec.  92.356(e) would 
insert a new paragraph (2) to add whether an opportunity was provided 
for open competitive bidding or negotiations as a factor to be 
considered for exceptions under Sec.  92.356(e).
28. Reallocation by Formula (24 CFR 92.454)
    The proposed rule would add a new paragraph (5) to Sec.  92.454(a) 
that would explicitly allow HUD to reallocate HOME funds that become 
available due to reductions in grants pursuant to Sec.  92.551 or Sec.  
92.552. While HUD applies this requirement for reallocation of funds in 
practice, the Department would codify the practice in this proposed 
rule. The proposed rule would also revise Sec.  92.454(b) to specify 
that participating jurisdictions from which the reductions in funds 
occurred under Sec.  92.551 or Sec.  92.552 would not be included in 
the reallocation of these funds.
29. The HOME Investment Trust Fund (24 CFR 92.500)
    The proposed rule would revise Sec.  92.500(c)(2)(ii) to clarify 
the requirements for when a participating jurisdiction may establish a 
second local account of the HOME Investment Trust Fund. Specifically, 
the proposed rule at Sec.  92.500(c)(2)(ii) would state that a 
participating jurisdiction may establish a second local account if, 
among other requirements, the participating jurisdiction has its own 
local affordable housing trust fund used for matching contributions to 
the HOME program and the statute or local ordinance governing the local 
affordable housing trust fund requires repayments from the local 
affordable housing trust fund to be made to the participating 
jurisdiction's HOME Investment Trust Fund local account. The regulation 
currently uses the term ``trust fund'' for both the participating 
jurisdiction's local affordable housing trust fund and its HOME 
Investment Trust Fund local account and the proposed change is designed 
to distinguish between the two types of funds and clarify the 
requirement.
30. Program Disbursement and Information System (24 CFR 92.502)
    The proposed rule would revise the requirements in Sec.  92.502 
regarding the program's Integrated Disbursement and Information System 
(IDIS). First, the proposed rule at Sec.  92.502(b) would change the 
paragraph heading from ``Project set-up'' to ``Project funding.'' This 
change would clarify that this section refers to funding an activity in 
IDIS after the participating jurisdiction has committed funds to a 
specific local project. The proposed rule at Sec.  92.502(b) would also 
remove the sentence that identifies investments that require the set-up 
in IDIS as acquisition, new construction, or rehabilitation of housing, 
and TBRA investments. This proposed change is appropriate because it 
would avoid confusion about other investments that must be set up in 
IDIS that are not included in the regulation. The proposed rule at 
Sec.  92.502(b) would also clarify that the participating jurisdiction 
is required to enter complete project set-up information before funding 
an activity in the data system. These changes would clarify that this 
requirement is about activity funding after a participating 
jurisdiction commits HOME funds to a specific local project and not 
about activity set-up. This clarification is necessary because IDIS 
allows a participating jurisdiction to set up an activity before having 
complete project set-up information. While a participating jurisdiction 
may set up an activity in IDIS, the participating jurisdiction cannot 
fund an activity (i.e., identify specific investments) before it 
executes the HOME Investment Partnership Agreement, submits the 
applicable banking and security documents, complies with the 
environmental requirements under 24 CFR part 58, including submission 
of the request for release of funds, when applicable, and commits funds 
to a specific local project. The addition of the written agreement 
execution date field in IDIS helps the participating jurisdiction to 
comply with the requirement to commit funds to a specific local project 
before funding a corresponding activity in the data system.
    The proposed rule at Sec.  92.502(d)(1) would remove the 
requirement that a participating jurisdiction provide satisfactory 
project completion information within 120 days of the final project 
drawdown. Currently, Sec.  92.502(d)(1) requires the participating 
jurisdiction to provide satisfactory project completion information 
within 120 days of the final project drawdown or HUD may suspend other 
project set-ups or take additional corrective actions. This language is 
no longer needed because of the four-year project completion 
requirement set forth in Sec.  92.205(e). If the participating 
jurisdiction is required to complete a HOME-assisted project within 
four years of committing funds to the project, then that time period 
would include entering complete project completion information into 
HUD's IDIS because the definition of project completion at Sec.  92.2 
includes entering the project completion information into the IDIS 
established by HUD. Therefore, if a participating jurisdiction has 
complied with the four-year project completion requirement, it has 
complied with Sec.  92.502(d) and no further HUD action is required.
    The proposed rule would revise Sec.  92.502(d)(2) to specify that 
the maximum amount of additional HOME funds that may be committed to a 
project up to one year after project completion is limited by the 
maximum per-unit subsidy amount established under Sec.  92.250 at the 
time of underwriting. Adding this specificity would align with the 
changes to Sec.  92.250 and provide further clarity on the limits on 
HOME investments in a project.
31. Participating Jurisdiction Responsibilities; Written Agreements (24 
CFR 92.504)
    The Department proposes several amendments to Sec.  92.504, 
including revising the heading of the section to reflect the relocation 
of onsite inspection requirements to Sec.  92.251. Many of the proposed 
amendments are intended to clarify ambiguous language, improve 
readability, move existing requirements to more appropriate paragraphs, 
and reformat certain provisions for clarity. The proposed revisions to 
Sec.  92.504 are described more thoroughly below.
    Throughout Sec.  92.504, the proposed rule would revise the 
statement ``the

[[Page 46649]]

written agreement must conform'' to ``the written agreement must 
contain.'' This revision would make clear the Department's intent that 
the written agreement must include the applicable requirements in Sec.  
92.504.
    The proposed rule would amend Sec.  92.504(b) to clarify that the 
required written agreement must be a legally binding agreement between 
the participating jurisdiction and the entity receiving HOME funds for 
an activity. The proposed rule would revise Sec.  92.504(b) to require 
that HOME written agreements be separate and apart from financing 
documents such as mortgages, deeds of trust, regulatory agreements, or 
promissory notes. The current regulation does not specifically require 
a separate written agreement or use of a particular format. The 
Department has commonly found that when HOME written agreement 
requirements are made a part of other financing documents, many 
required provisions are not included, and the documents do not properly 
commit HOME funds as defined at Sec.  92.2. The proposed change would 
help ensure written agreements are compliant with HOME requirements and 
reduce monitoring findings and other enforcement actions, including 
repayment of HOME funds.
    The required contents of the written agreement between 
participating jurisdictions and other entities are in Sec.  92.504(c). 
The Department is proposing numerous changes throughout Sec.  92.504, 
many of which are intended to revise or clarify the required contents 
of the written agreement based on the role an entity will assume or the 
type of project undertaken. The proposed rule would make a technical 
correction to the last sentence of Sec.  92.504(c) introductory text to 
add ``by role and type of entity.'' The proposed rule would also make 
numerous non-substantive revisions to the introductory paragraph at 
Sec.  92.504(c) and to Sec.  92.504(c)(1)-(7) to add clarity to 
existing language and improve readability.
    The proposed rule would revise Sec.  92.504(c)(1)(i) (Use of the 
HOME funds) to add ``anticipated'' before ``type and number of housing 
projects'' to specify that the written agreement must include the 
anticipated and not final type and number of housing projects to be 
funded in the description of the amount and use of the HOME funds. The 
proposed rule would also amend Sec.  92.504(c)(1)(ii) (Affordability) 
and Sec.  92.504(c)(1)(x) (Enforcement of Agreement) to move the 
requirement that the written agreement between the participating 
jurisdiction and the State recipient include a means of enforcement of 
the affordability requirements from Sec.  92.504(c)(1)(x) to Sec.  
92.504(c)(1)(ii). The proposed rule would also add the means of 
enforcement examples of use restrictions, a recorded agreement 
restricting the use of the property, and other mechanisms approved by 
HUD in writing, under which the participating jurisdiction has the 
right to require specific performance.
    The Department proposes this change to properly place the described 
requirement under paragraph Sec.  92.504(c)(1)(ii) concerning 
affordability requirements rather than in Sec.  92.504(c)(1)(x) which 
establishes requirements for enforcement of the written agreement. 
After the proposed movement of text, Sec.  92.504(c)(1)(x) would only 
contain provisions relating to the enforcement of the written agreement 
(i.e., remedies for breach of the written agreement and suspension or 
termination if the State recipient materially fails to comply with any 
term of the agreement). The proposed rule would also revise Sec.  
92.504(c)(1)(iii) to change ``if'' to ``whether'' and remove ``to be'' 
for clarity.
    The proposed rule at Sec.  92.504(c)(1)(ii) would remove the 
inclusion of ``recaptured HOME funds'' in the requirement that the 
agreement establish whether repayment of HOME funds must be remitted to 
the State or State recipient for additional eligible activities or 
retained by the State recipient for additional HOME activities. The 
Department is proposing to remove ``recaptured HOME funds'' because it 
does not accurately reflect the requirements between the participating 
jurisdiction and the State recipient. The use of ``recaptured HOME 
funds'' in the current provision at Sec.  92.504(c)(1)(ii) specifically 
refers to funds repaid by a homeowner pursuant to Sec.  
92.254(a)(5)(ii) and its inclusion is not necessary. Section 
92.504(c)(1)(ii) already specifies that the written agreement must 
state whether repayment of HOME funds must be paid to the State 
participating jurisdiction or the State recipient and such repayments 
include recaptured funds under Sec.  92.254(a)(5)(ii). Conforming 
revisions to remove ``recaptured HOME funds'' in similar provisions 
within Sec.  92.504(c)(2) would also be made through this proposed 
rule.
    The proposed rule would revise Sec.  92.504(c)(1)(v) project 
requirements to add that the written agreement for HOME rental housing 
between the participating jurisdiction and State recipient must require 
the use of the HOME tenancy addendum in accordance with Sec.  92.253 
for all HOME-assisted units or for all HOME-assisted tenants. The 
proposed amendment is necessary to conform to proposed changes at Sec.  
92.253 concerning tenant protections and selection which require, among 
other things, that leases for HOME-assisted rental units and tenants 
receiving TBRA include the HOME tenancy addendum. The proposed rule 
would revise Sec.  92.504(c)(1)(v) to reflect changes for TBRA by 
requiring the agreement to comply with the requirements at Sec.  
92.253(a)-(c) and (d)(2) concerning lease contents, HOME tenancy 
addendum, security deposits, and termination of tenancy.
    The proposed rule would amend Sec.  92.504(c)(1)(vi) to clarify 
that the written agreement must include the imposition of VAWA 
requirements by the State participating jurisdiction on the State 
recipient when HOME funds are being provided to the State recipient for 
the provision of TBRA or the development of rental housing where the 
State recipient will own the housing.
    The proposed rule would correct two citations that have changed due 
to updates to 2 CFR part 200 in paragraphs Sec.  92.504(c)(1)(x) and 
Sec.  92.504(c)(2)(ix) from 2 CFR 200.338 to 2 CFR 200.339 and 2 CFR 
200.339 to 2 CFR 200.340.
    The proposed rule would revise Sec.  92.504(c)(1)(xi) to specify 
the types of entities that a State recipient may enter into a written 
agreement with for the use of HOME funds. These entities would be 
specified as a CHDO, subrecipient, homeowner, homebuyer, tenant (or 
landlords receiving TBRA), or contractor providing services to or on 
behalf of the State recipient. The Department is also proposing to 
further clarify the statutory and current regulatory requirements that 
the participating jurisdiction must ensure compliance with HOME 
requirements through binding contractual agreements with project owners 
in response to frequent questions by participating jurisdictions on 
this requirement. To address these frequent questions, the proposed 
rule would revise Sec.  92.504(c)(1)(xi) to clarify and confirm that 
HOME funds must be provided directly to the owner, by the State 
recipient on behalf of the participating jurisdiction, under the terms 
and conditions of the written agreement. Further, the proposed rule 
would relocate from Sec.  92.504(c)(1)(ii) to Sec.  92.504(c)(1)(xi) 
the requirement that the agreement must establish that the repayment of 
any form of HOME funds, from an entity with which the State recipient 
is entering a written agreement, must be remitted to the State

[[Page 46650]]

or, if permitted by the State, retained by the State recipient for 
additional eligible activities. The requirement is proposed to be 
relocated because the placement reflects its applicability to 
repayments made by entities with whom the State recipient enters 
written agreements. There are no substantive changes to the relocated 
text.
    In the introductory text to Sec.  92.504(c)(2), the proposed rule 
would remove the definition of subrecipient because it is already a 
defined term in Sec.  92.2. The proposed rule would add ``the 
following'' to Sec.  92.504(c)(2) before delineating requirements of 
the written agreement.
    The proposed rule would revise Sec.  92.504(c)(2)(i) to clarify 
that the written agreement between the participating jurisdiction and 
the subrecipient that administers some or all the participating 
jurisdiction's HOME program must include the anticipated and not final 
type and number of housing projects to be funded in its description of 
the amount and use of the HOME funds for one or more programs. The 
addition of the term ``anticipated'' would clarify that, at the time 
the participating jurisdiction enters the written agreement with a 
subrecipient to administer the program, the exact type and number of 
housing projects to be funded may not be known. A change would be made 
to paragraph Sec.  92.504(c)(2)(ii) to remove ``to be'' from the 
sentence. In paragraph Sec.  92.504(c)(2)(xii) the term 
``organizations'' would be revised to ``organization.''
    The proposed rule would revise the language of Sec.  
92.504(c)(2)(iv) to conform with the proposed changes to the definition 
of a subrecipient. Pursuant to the ``subrecipient'' definition in Sec.  
92.2, a governmental entity or nonprofit organization is not a 
subrecipient if it is receiving HOME funds as the owner of a HOME 
rental project. The proposed rule would revise Sec.  92.504(c)(2)(iv) 
to state that when the subrecipient is administering a HOME rental 
housing program or TBRA program on behalf of the participating 
jurisdiction, the written agreement between the subrecipient and the 
participating jurisdiction must include the subrecipient's obligations 
to meet the VAWA requirements under Sec.  92.359.
    The proposed rule would revise Sec.  92.504(c)(2)(ix) to insert 
``written'' before ``agreement'' in the heading and paragraph for 
consistency. The proposed rule would revise Sec.  92.504(c)(2)(x) to 
conform to the proposed changes to Sec.  92.504(c)(3). The proposed 
changes to Sec.  92.504(c)(3), described more thoroughly below, would 
include revisions to more accurately describe owner entities to which 
the requirements of Sec.  92.504 are applicable. In response to 
inquiries by participating jurisdictions, the Department proposes 
additional revisions to Sec.  92.504(c)(2)(x) to further clarify the 
statutory and regulatory requirement that the participating 
jurisdiction must ensure compliance with HOME requirements through 
binding contractual agreements with project owners. The proposed rule 
at Sec.  92.504(c)(2)(x) would further clarify that HOME funds must be 
provided directly to the owner by the subrecipient on behalf of the 
participating jurisdiction under the terms and conditions of the 
written agreement. The proposed rule at Sec.  92.504(c)(2)(x) would 
also add in the requirement that the written agreement establish 
whether repayment of HOME funds must be remitted to the participating 
jurisdiction or may be retained by the subrecipient for additional 
eligible activities. The proposed rule would also amend Sec.  
92.504(c)(2)(xi) to specify that the prohibited fees or charges are 
those listed in Sec.  92.214.
    The proposed rule would add a new paragraph at Sec.  
92.504(c)(2)(xii) (Project requirements) to expressly impose the 
requirements that the agreement require enforcement of the project 
requirements in 24 CFR subpart F, as applicable and in accordance with 
the type of project assisted. The proposed rule at Sec.  
92.504(c)(2)(xii) would also require that for rental projects, the 
written agreement between the subrecipient and other entities must 
require that the HOME tenancy addendum is used in accordance with Sec.  
92.253 for all HOME-assisted units or for all HOME-assisted tenants. 
The proposed addition of this new paragraph is necessary to conform to 
changes at Sec.  92.253 concerning tenant protections and selection 
which require, among other things, that leases for HOME-assisted rental 
units and tenants receiving TBRA include the HOME required tenancy 
addendum. The proposed new paragraph at Sec.  92.504(c)(2)(xii) also 
reflects changes to Sec.  92.253(a)-(c) and (d)(2) for TBRA by 
requiring the agreement between the subrecipient and the rental owner 
or tenant comply with the requirements concerning tenant protections, 
security deposits, and termination of tenancy.
    The proposed rule would revise the heading at Sec.  92.504(c)(3) to 
``For-profit or nonprofit housing owner (other than a community housing 
development organization or single family owner-occupant).'' This 
proposed change to the paragraph heading would remove the sponsor or 
developer terms so that Sec.  92.504(c)(3) would only set forth 
requirements for a written agreement between a for-profit or non-profit 
owner that is not a CHDO or single family owner occupant, as stated in 
the revised paragraph heading. The proposed heading revision would 
remove ``developer'' because a participating jurisdiction is not 
permitted to enter into a written agreement for HOME funds with an 
entity that is not (or will not be) the owner of the project and is 
solely managing the development process. This proposed revision would 
not exclude a developer that is entering into a written agreement to 
use HOME funds to become the owner of the project. In addition, the 
proposed rule would delete ``sponsor'' from the heading as the term is 
unnecessary and duplicative for purposes of the HOME program because 
the role of sponsor is only permitted for CHDOs and as the sponsor, 
pursuant to Sec.  92.300, the CHDO must be the owner of the project.
    The proposed rule would move requirements for written agreements 
with CHDOs from the introductory text of Sec.  92.504(c)(3) to Sec.  
92.504(c)(6). Similar to the proposed changes at Sec. Sec.  
92.504(c)(1)(xi) and 92.504(c)(2)(x), the proposed rule would revise 
Sec.  92.504(c)(3) to further clarify the current requirement that the 
participating jurisdiction must ensure compliance with HOME 
requirements through binding contractual agreements with project owners 
by stating the requirement that HOME funds must be provided directly to 
the owner under the terms and conditions of the written agreement.
    The proposed rule would make conforming changes to Sec.  
92.504(c)(3)(i) to remove sponsor and developer in the same way those 
terms would be removed from the introductory text to Sec.  
92.504(c)(3). In addition, the proposed rule would revise Sec.  
92.504(c)(3)(i) to clarify that the agreement must specify the actual 
amount of HOME funds provided to the housing owner. In the past, 
participating jurisdictions have asked whether the inclusion of the 
final amount of HOME funds provided to a housing owner in the written 
agreement is required by the language in Sec.  92.504(c)(3)(i) (i.e., 
``complete budget'' and items ``in sufficient detail to provide a sound 
basis for the participating jurisdiction to effectively monitor 
performance under the agreement to achieve project completion and 
compliance with the HOME requirements.''). The addition of ``specific 
amount and'' in Sec.  92.504(c)(3)(i) is to further clarify that the 
actual (not projected) amount of HOME funds provided to a housing

[[Page 46651]]

owner must be in the written agreement. While the Department recognizes 
that the amount of HOME funds may change from the time of commitment to 
project completion, the participating jurisdiction must have a written 
agreement with the housing owner that meets the requirements under this 
section, including the final amount of the HOME funds, and must amend 
the written agreement to include the final amount, if necessary.
    The proposed rule would also revise Sec.  92.504(c)(3)(i) to 
clarify that the agreement must state that any and all repayments made 
by the owner on HOME assistance (i.e., grants or loans) must be 
remitted to the participating jurisdiction, unless the participating 
jurisdiction permits a subrecipient or State recipient to retain the 
funds, in accordance with HOME requirements. The proposed revision 
aligns with the clarification of HOME requirements regarding repayments 
and payments on investments of HOME funds, the use of program income, 
and would further assist participating jurisdictions in complying with 
HOME statutory and regulatory requirements when providing funds to 
owners.
    The proposed rule would amend Sec.  92.504(c)(3)(ii) to add liens 
on real property and a recorded agreement restricting the use of the 
property as a means of enforcing the affordability requirements in 
Sec.  92.252 and Sec.  92.254 The proposed rule at Sec.  
92.504(c)(3)(ii) would also make minor clarifying changes to improve 
readability. The proposed rule at Sec.  92.504(c)(3)(ii)(A) and (B) 
would also remove the reference to ``developer'' to conform with the 
changes made to the introductory text of Sec.  92.504(c).
    In addition, a conforming change would be made to Sec.  
92.504(c)(3)(ii)(A) to correct a citation from Sec.  92.252(f)(2) to 
Sec.  92.252(e)(2). A conforming change would also be made to Sec.  
92.504(c)(3)(iii) to correct a citation from Sec.  92.253(d) to Sec.  
92.253(e). A technical correction would be made to Sec.  
92.504(c)(3)(vii) to add ``or use'' before ``restrictions'' to add 
specificity.
    As described earlier in this proposed rule, the Department is 
proposing significant changes to the tenant protections in Sec.  
92.253. To ensure compliance with these changes, the proposed rule 
would revise Sec.  92.504(c)(3)(iii), which requires that the written 
agreement contain applicable project requirements in 24 CFR subpart F, 
to explicitly require that the written agreement require compliance 
with tenant protections in Sec.  92.253.
    The proposed rule at the introductory text to Sec.  
92.504(c)(3)(v), Sec.  92.504(c)(3)(v)(A), and Sec.  92.504(c)(3)(viii) 
would remove references to ``sponsor'' and ``developer'' to conform 
with the changes proposed to the introductory text of Sec.  92.504(c). 
In addition, to improve clarity, the proposed rule would make minor, 
non-substantive edits to Sec.  92.504(c)(3)(vi) and Sec.  
92.504(c)(3)(ix) to improve the readability of each paragraph.
    The proposed rule would change the heading of Sec.  
92.504(c)(3)(vii) from ``Enforcement of the agreement'' to 
``Enforcement of HOME requirements and the agreement'' to clarify that 
the paragraph includes requirements regarding enforcement of the 
written agreement and enforcement of HOME requirements. The proposed 
rule would amend Sec.  92.504(c)(3)(vii) to properly describe the means 
of enforcement of HOME requirements and removes the duplicative text on 
enforcement of affordability requirements. The proposed change is 
necessary to eliminate non-relevant language from Sec.  
92.504(c)(3)(vii), which is already properly covered in Sec.  
92.504(c)(3)(ii) (Affordability). The proposed rule at Sec.  
92.504(c)(3)(vii) would also incorporate minor, non-substantive edits 
and be reorganized to improve readability.
    The proposed rule would remove the current Sec.  92.504(c)(3)(x). 
The CHDO provisions in the current Sec.  92.504(c)(3)(x) would be moved 
to the revised requirements for written agreements between 
participating jurisdictions and CHDOs at Sec.  92.504(c)(6). The 
proposed rule would re-number paragraph (xi) of Sec.  92.504(c)(3) to 
Sec.  92.504(c)(3)(x) and amend the proposed Sec.  92.504(c)(3)(x) to 
add clarity by specifying that the agreement must state the fees that 
may be charged by the owner in accordance with Sec.  92.214(b)(4) and 
prohibit owners from charging any of the prohibited fees in Sec.  
92.214. The proposed Sec.  92.504(c)(3)(x) would delete the second 
sentence in the paragraph because it restates the requirements in Sec.  
92.214 for fees rather than describing a requirement for the written 
agreement. The proposed rule would also change a reference from 
``developer'' to ``owner'' in Sec.  92.504(c)(3)(x) to conform with the 
changes proposed to the introductory text of Sec.  92.504(c).
    To improve clarity and readability, the Department proposes minor, 
non-substantive revisions to the introductory text of Sec.  
92.504(c)(4), including removing ``and the length of the agreement'' in 
Sec.  92.504(c)(4)(i) because it duplicates Sec.  92.504(c)(4)(iii), as 
well as other non-substantive revisions to Sec.  92.504(c)(4)(ii). The 
Department also proposes minor revisions to the heading and 
introductory text to Sec.  92.504(c)(5), Sec.  92.504(c)(5)(i), and 
Sec.  92.504(c)(5)(ii). The proposed rule would amend the heading of 
Sec.  92.504(c)(5) to clarify that the paragraph also applies to an 
owner receiving TBRA or security deposit assistance. The amendment is 
necessary to address the omission of the express inclusion of owner and 
does not create a new requirement. The proposed rule would also add new 
paragraphs at Sec.  92.504(c)(5)(i)(A) and Sec.  92.504(c)(5)(i)(B).
    The proposed rule at Sec.  92.504(c)(5)(i) would move its second 
sentence to the new paragraph at Sec.  92.504(c)(5)(i)(A). The proposed 
new paragraph at Sec.  92.504(c)(5)(i)(B) would reflect the proposed 
changes to Sec.  92.251(c)(3) concerning the applicability of property 
standards to existing housing that is acquired for homeownership. The 
proposed rule would also revise Sec.  92.504(c)(5)(iii) to clarify that 
the requirement to enter into a rental assistance contract or security 
deposit contract may be entered into by either tenants or owners 
receiving payments under a TBRA program. This proposed revision is 
necessary to correct the omission of ``owner'' and does not create a 
new requirement.
    The Department proposes to revise Sec.  92.504(c)(6) to cover 
written agreements with CHDOs for all eligible activities or projects. 
The proposed rule at Sec.  92.504(c)(6) would be organized by the HOME 
activity or use of assistance and would incorporate the requirements in 
the current paragraphs at Sec.  92.504(c)(3)(x), Sec.  92.504(c)(6), 
and Sec.  92.504(c)(7). The proposed rule at Sec.  92.504(c)(6) would 
also reflect the proposed revisions made to Sec. Sec.  92.300, 92.301, 
and 92.303. The proposed rule at Sec.  92.504(c)(6) would establish 
minimum requirements for a written agreement with a CHDO for the use of 
set-aside funds under Sec.  92.300 in the proposed Sec.  
92.504(c)(6)(i), for the use of HOME funds for operating expenses in 
the proposed Sec.  92.504(c)(6)(ii), and for project-specific technical 
assistance and site control loans or project-specific seed money loans 
in the proposed Sec.  92.504(c)(6)(iii).
    The proposed rule would redesignate the current Sec.  92.504(c)(6) 
and the current Sec.  92.504(c)(7) as Sec.  92.504(c)(6)(ii) and Sec.  
92.504(c)(6)(iii), respectively. The proposed rule at Sec.  
92.504(c)(6)(i) would require that an agreement for the use of set-
aside funds by a CHDO must include the requirements in Sec.  
92.504(c)(3) and other

[[Page 46652]]

additional CHDO-specific requirements. These requirements include that 
the agreement must identify the role of the CHDO, require that the CHDO 
comply with the applicable requirements in Sec.  92.300(a) for its 
role, must specify whether a CHDO developing homeownership housing may 
retain the proceeds from the sale of the housing and the funds must be 
used for HOME activities or to benefit low-income families, and must 
require a separate written agreement between the CHDO and its co-
developer that contain the provisions described in the proposed Sec.  
92.504(c)(6)(i)(C)(1)-(4) if the CHDO will be sharing developer 
responsibilities. The proposed rule at Sec.  92.504(c)(6)(ii) would 
also clarify that if a CHDO enters into a written agreement to receive 
HOME funds for operating expenses, there must be separate written 
agreement that complies with Sec.  92.504(c)(6) for the CHDO's use of 
HOME funds for the project. The text of the proposed Sec.  
92.504(c)(6)(iii) would remain unchanged from the current text in Sec.  
92.504(c)(7) except that the term ``Community housing development 
organization'' would be removed from the heading.
    The proposed rule would redesignate paragraph Sec.  92.504(c)(8) as 
Sec.  92.504(c)(7). The proposed rule would also move the inspection 
and financial oversight requirements at Sec.  92.504(d) of the existing 
rule to the applicable paragraphs in Sec.  92.251 to consolidate the 
property standards and inspection requirements in one section of the 
regulation.
32. Applicability of Uniform Administrative Requirements (24 CFR 
92.505)
    The proposed rule would revise the applicability of 2 CFR part 200 
to participating jurisdictions, State recipients, and subrecipients 
receiving HOME funds, to exclude the additional provisions of 2 CFR 
200.328 and 200.344. The Department proposes to remove 2 CFR 200.328 
from 24 CFR 92.505 because HOME is subject to statutory requirements 
that mandate the collection of data through IDIS in order to monitor 
compliance with HOME requirements and HUD does not apply 2 CFR 200.328 
in practice. The Department would also remove the applicability of 2 
CFR 200.344 because the regulation poses significant challenges to 
participating jurisdictions and does not align with programmatic 
requirements. The proposed rule would therefore remove the 
applicability of 2 CFR 200.344 and establish HOME-specific closeout 
procedures in Sec.  92.507.
33. Closeout (24 CFR 92.507)
    HUD proposes to amend the HOME closeout regulations at Sec.  92.507 
to establish program-specific procedures and better align programmatic 
and administrative requirements for grant closeout. The existing 
regulation references the closeout requirements at 2 CFR 200.344, which 
has very specific requirements for the timing of closeouts and 
reporting by the participating jurisdiction after the end of the 
grant's period of performance, as set forth in the HOME grant 
agreement. Under the proposed closeout requirements at Sec.  92.507, 
HUD would provide participating jurisdictions greater flexibility to 
request additional time, if needed, to meet certain program 
requirements, such as meeting project completion requirements. HUD 
recognizes that there are many things that could disrupt a 
participating jurisdiction's intended timeline for activity completion. 
To complete all program activities, including, but not limited to, 
satisfying reporting requirements, participating jurisdictions are 
permitted to request an extension of one year beyond the nine-year 
period of performance, as identified in the grant agreement, for good 
cause.
    The proposed rule at Sec.  92.507(a) would codify the current 
closeout process for HOME grants and describe the process, including 
the requirements that must be completed by the participating 
jurisdiction prior to initiating closeout. The proposed Sec.  92.507(a) 
would require the participating jurisdiction complete certain actions 
required for closeout in proposed Sec.  92.507(b), and obligations and 
actions required post-closeout in Sec.  92.507(c). The proposed rule 
would establish that HUD may report a participating jurisdiction's 
material failure to comply with the terms and conditions of the award 
or closeout requirements to the OMB-designated integrity and 
performance system (currently, FAPIIS) and pursue other remedies in 2 
CFR 200.339.
    Even if HUD approves an extension pursuant to the proposed Sec.  
92.507, a participating jurisdiction must still expend its funds by the 
end of the grant's budget period. The statutory requirement that funds 
must be expended within the budget period or returned to the U.S. 
Department of Treasury cannot be revised. Further, the proposed rule 
would clarify that certain requirements survive grant closeout. While 
this is not a change from the current requirements, HUD is taking the 
opportunity to again clarify that closeout of a HOME grant does not 
relieve a participating jurisdiction from project oversight in 
accordance with 24 CFR part 92 for as long as specified in the 
requirements applicable to the assisted project and participating 
jurisdiction.
34. Recordkeeping (24 CFR 92.508)
    The proposed rule would make several conforming changes in the 
recordkeeping section of the regulation at Sec.  92.508 to cross 
reference updated citations throughout the section. The proposed rule 
at Sec.  92.508(a)(2)(ix) would also add language requiring that a 
participating jurisdiction that will apply excess matching contribution 
to a future fiscal year's liability must have records of the source of 
match at the time of application of the match credit and maintain the 
records for five years from the date of application to demonstrate 
compliance with the matching requirements of Sec.  92.218 through Sec.  
92.222. The addition of this language would make it clear that 
participating jurisdictions must track the source and application of 
excess matching contributions if it is carried over and applied to 
future years' matching liability. The HUD Office of Inspector General 
found that several participating jurisdictions were not keeping 
adequate records of matching contributions during its audit of the HOME 
matching requirement.\58\ These participating jurisdictions mistakenly 
thought that once matching funds were credited that the participating 
jurisdiction no longer needed to identify the source of the match when 
some or all of the matching funds were carried over to the subsequent 
year. This resulted in participating jurisdictions not being able to 
adequately identify the source of the carried over matching 
contribution. The proposed change would require participating 
jurisdictions to keep records demonstrating compliance with the 
matching requirements specifically for excess match carried forward 
from one year to the next.
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    \58\ HUD Office of Inspector General, Publication Report Number 
2015-KC-0002.
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    The proposed rule at Sec.  92.508(a)(3)(iii) would also be revised 
to add recordkeeping requirements demonstrating that a project complied 
with one of the comprehensive green building standards established by 
HUD if the participating jurisdiction used the higher maximum per-unit 
subsidy limitation permitted for such project under Sec.  92.250(c). 
HUD proposes to revise the recordkeeping requirement at Sec.  
92.508(a)(3)(iv) to reflect that the proposed rule would move the on-
site

[[Page 46653]]

inspection standards and financial review requirements from Sec.  
92.504(d) to Sec.  92.251(f).
35. Corrective and Remedial Actions (24 CFR 92.551)
    The proposed rule would add a new paragraph (3) to Sec.  92.551(c). 
The proposed Sec.  92.551(c)(3) would codify HUD's existing practice to 
permit a participating jurisdiction to correct a performance deficiency 
by voluntarily agreeing to a reduction in its HOME grants by an amount 
equal to the amount of any expenditures that were not in compliance 
with HOME requirements.
36. Notice and Opportunity for Hearing; Sanctions (24 CFR 92.552)
    The proposed rule would add three new paragraphs at Sec.  
92.552(a)(1)(v), Sec.  92.552(a)(1)(vi), and Sec.  92.552(a)(1)(vii). 
These new paragraphs would reflect existing sanctions that HUD has the 
discretion to impose. The new proposed Sec.  92.552(a)(2)(v) would 
codify the existing sanction that HUD may reduce a participating 
jurisdiction's HOME grants by an amount equal to the amount of any 
expenditures that were not in compliance with HOME requirements. The 
proposed rule at Sec.  92.552(a)(2)(vi) would also add that HUD may 
revoke a jurisdiction's designation as a participating jurisdiction. 
This addition makes Sec.  92.552 consistent with Sec.  92.107 because 
that revocation power is already permitted under that section, as 
authorized by section 216(9) of NAHA (42 U.S.C. 12746(9)). The 
Department is also revising Sec.  92.552(a)(2) to add paragraph (vii) 
to make the section consistent with an existing sanction permitted 
under 2 CFR part 200 that applies to HOME funds. The proposed Sec.  
92.552(a)(2)(vii) would provide participating jurisdictions with 
additional notice that HUD may terminate the assistance in whole or in 
part in accordance with 2 CFR 200.340 to enforce program requirements.
37. American Dream Downpayment Assistance Initiative (24 CFR Part 92, 
Subpart M)
    The proposed rule removes subpart M of the HOME regulations, which 
codified the regulatory requirements for the American Dream Downpayment 
Initiative (ADDI) program. ADDI was authorized in 2003 and included a 
sunset provision, which stated that ``Secretary shall have no authority 
to make grants under this Act after December 31, 2007.'' ADDI funds 
were last appropriated in 2008. HOME participating jurisdictions used 
American Dream Downpayment Initiative grants for downpayment assistance 
to low-income, first-time homebuyers. The Department has closed out all 
American Dream Downpayment Initiative grants. Definitions applicable to 
ADDI and not used in the HOME program are also removed. Given that the 
ADDI program is no longer active, subpart M of the HOME regulations is 
not necessary.

B. Conforming Changes to 24 CFR Parts 91, 570, and 982

1. Change to 24 CFR Part 91
    The proposed rule would make minor conforming changes to 24 CFR 
part 91 to update citations consistent with the proposed changes to 24 
CFR part 92. HUD would also remove Sec.  91.220(l)(2)(viii) and Sec.  
91.320(k)(2)(viii) because those paragraphs are no longer applicable 
given that the ADDI program is no longer active.
2. Change to 24 CFR 570.200
    The proposed rule would address pre-award costs for the annual CDBG 
program by clarifying the effective date of the grant agreement. The 
proposed change would fix the effective date of an entitlement grant 
agreement as of the date HUD executes the grant agreement. The 
Department has waived Sec.  570.200(h) for pre-award costs of grantees 
in many of the past Federal fiscal years to allow the effective date of 
a grantee's grant agreement for a Federal fiscal year with delayed 
enactment of the appropriation to be the earlier of the grantee's 
program year start date or the date that the Consolidated Plan (with 
the grantee's actual allocation amounts) is received by HUD. The 
proposed change at Sec.  570.200(h) would assist grantees to better 
prepare for a Federal fiscal year when there is not a timely 
appropriation and eliminate the need for the Department to issue 
waivers of the requirements in Sec.  570.200 when a timely 
appropriation has not been made by Congress.
3. Change to 24 CFR 982.507
    The procedure for determining the rent reasonableness standard for 
tenant-based assistance under the HCV program in units receiving LIHTC 
or assistance under the HOME program was streamlined by section 
2835(a)(2) of HERA. This HERA provision added section 8(o)(10)(F) to 
the 1937 Act. HUD fully implemented this streamlined process in its 
regulations for LIHTC units through the HERA Final Rule.\59\ The HERA 
Final Rule did not fully implement the streamlined process for HOME 
program units. Instead, as explained in the HERA Final Rule, the HCV 
rent reasonableness requirements for HOME units would be addressed as 
part of a separate HOME program rulemaking that would cover HOME rent 
requirements for both non-voucher families and voucher families. The 
HERA Final Rule reserved Sec.  982.507(c)(3) to be amended accordingly 
as part of that future HOME program rulemaking.
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    \59\ 79 FR 36146.
---------------------------------------------------------------------------

    This proposed rule would revise Sec.  982.507 to fully implement 
the HERA streamlined HCV rent reasonableness process for HOME assisted 
units. In accordance with section 8(o)(10)(F) of the 1937 Act (42 
U.S.C. 1437f(o)(10)(F)), Sec.  982.507(c)(3) would provide that if the 
rent requested by the owner exceeds the HOME rents for non-voucher 
families, the PHA must determine that the rent to the owner is a 
reasonable rent and the rent shall not exceed the lesser of (1) the 
reasonable rent and (2) the payment standard established by the PHA for 
the unit size involved.
    Additionally, HUD is proposing a technical revision to Sec.  
982.507(c)(2) to provide greater clarity with respect to the rent 
reasonableness requirements for LIHTC units. The current regulatory 
text in Sec.  982.507(c)(2) provides that the PHA must ``perform a rent 
comparability study in accordance with program regulations'' if the 
rent requested by the owner exceeds the LIHTC rents for non-voucher 
families. This rent comparability determination is the same process the 
PHA undertakes for non-LIHTC HCV units under Sec.  982.507(b) to 
determine that the rent to owner is a reasonable rent in comparison to 
rent for other comparable units. Consequently, HUD proposes to revise 
the wording of Sec.  982.507(c)(2) to clarify that the PHA is required 
to determine the rent to owner is a reasonable rent in accordance with 
paragraph (b) of Sec.  982.507 and not some separate process.

III. Findings and Certifications

Regulatory Review--Executive Orders 12866, 13563, and 14094

    Under Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made whether a regulatory action is significant 
and, therefore, subject to review by the Office of Management and 
Budget in accordance with the requirements of the order. Executive 
Order 13563 (Improving Regulations and Regulatory Review) directs 
executive agencies to analyze regulations that are ``outmoded, 
ineffective, insufficient, or excessively

[[Page 46654]]

burdensome, and to modify, streamline, expand, or repeal them in 
accordance with what has been learned.'' Executive Order 13563 also 
directs that, where relevant, feasible, and consistent with regulatory 
objectives, and to the extent permitted by law, agencies are to 
identify and consider regulatory approaches that reduce burdens and 
maintain flexibility and freedom of choice for the public. Executive 
Order 14094 (Modernizing Regulatory Review) amends section 3(f) of 
Executive Order 12866, among other things. Updating the HOME program 
regulation is consistent with the objectives of Executive Order 13563 
to reduce burden, as well as the goal of modifying and streamlining 
regulations that are outmoded and ineffective.
    This proposed rule would make many changes to the HOME program 
regulations, which were first promulgated in 1991, and have not been 
significantly updated since 2013. The proposed rule would: revise CHDO 
qualification requirements for community-based non-profit housing 
organizations to access CHDO set-aside funds to own, develop, and 
sponsor affordable housing; revise HOME rent requirements to implement 
statutory changes made to the U.S. Housing Act of 1937 by section 
2835(a)(2) of HERA; facilitate the use of HOME funds for small one-to 
four-unit rental projects; incentivize inclusion of ambitious Green 
Building standards in new construction, reconstruction and 
rehabilitation projects; and expand flexibilities for community land 
trusts to participate in the HOME program. The proposed rule would also 
provide enhanced flexibility in TBRA programs; strengthen and expand 
tenant protections; and clarify the resale requirements for 
homeownership housing. The proposed rule would also include technical 
amendments or simplifications to certain changes made in the 2013 HOME 
Final Rule, the HOTMA Final Rule, and the NSPIRE Final Rule. The 
proposed rule was determined to be a significant regulatory action 
under section 3(f) of Executive Order 12866, as amended (although not 
an economically significant regulatory action under the order).
    HUD prepared a regulatory impact analysis (RIA) that addresses the 
costs and benefits of the proposed rule. HUD's RIA is part of the 
docket file for this rule at https://www.regulations.gov. As described 
in the RIA, HUD anticipates that the economic impact of the proposed 
rule would be almost entirely within the HOME program. In other words, 
the proposed changes to the HOME program would affect what 
participating jurisdictions do with the HOME funds they receive from 
HUD and how projects that accept this funding source can operate. Many 
of the proposed policy adjustments would only have a practical impact 
if participating jurisdictions choose to respond to them by altering 
how they use HOME funds. HUD strongly encourages the public to view the 
docket file.

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 aims to improve the HOME program by making several 
changes to its Federal regulations that would increase flexibility for 
grantees in using their HOME grants, streamline administrative 
requirements, implement statutory changes regarding rent restrictions 
in HOME rental projects, and enhance tenant protections for HOME-
assisted rental households. As described in the RIA that HUD prepared, 
HUD anticipates that the economic impacts of the proposed rule would be 
almost entirely within the HOME program. In other words, the proposed 
changes to the HOME program would affect what participating 
jurisdictions do with the HOME funds they receive from HUD and how 
projects that accept this funding source can operate. Many of the 
proposed policy adjustments would only have a practical impact if 
participating jurisdictions choose to respond to them by altering how 
they use HOME funds. For the reasons presented, the undersigned 
certifies that this rule will not have a significant economic impact on 
a substantial number of small entities.

Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment has been made in accordance with HUD regulations at 24 CFR 
part 50, which implement section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI is 
available through the Federal eRulemaking Portal at https://www.regulations.gov. The FONSI is also available for public inspection 
during regular business hours in the Regulations Division, Office of 
General Counsel, Room 10276, Department of Housing and Urban 
Development, 451 Seventh Street SW, Washington, DC 20410-0500. Due to 
security measures at the HUD Headquarters building, you must schedule 
an appointment in advance to review the FONSI by calling the 
Regulations Division at 202-708-3055 (this is not a toll-free number). 
HUD welcomes and is prepared to receive calls from individuals who are 
deaf or hard of hearing, as well as individuals with speech or 
communication disabilities. To learn more about how to make an 
accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs. Copies of all comments 
submitted are available for inspection and downloading at 
www.regulations.gov.

Executive Order 13132, Federalism

    Executive Order 13132 (Federalism) prohibits an agency from 
publishing any rule that has federalism implications if the rule 
either: (i) imposes substantial direct compliance costs on State and 
local governments and is not required by statute, or (ii) preempts 
State law, unless the agency meets the consultation and funding 
requirements of section 6 of the Executive Order. This proposed rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on State and local governments or preempt State 
law within the meaning of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (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 on the private sector. This proposed rule would 
not impose any Federal mandates on any State, local, or Tribal 
governments, or on the private sector, within the meaning of the UMRA.

Paperwork Reduction Act

    The information collection requirements contained in this proposed 
rule will be submitted to the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In 
accordance with the Paperwork Reduction Act, an agency may not conduct 
or sponsor, and a person is not required to respond to, a collection of 
information, unless the collection displays a currently valid OMB 
control number.
    The proposed rule would change the annual income determination 
requirement for households assisted with HOME TBRA from annual to bi-

[[Page 46655]]

annual, which reduces the burden hours. The proposed rule includes a 
new provision in 24 CFR 92.250 to increase the maximum subsidy limit 
allowed for HOME projects based on whether the project shall meet a 
more comprehensive property standard that includes Green Building 
criteria, which would lead to a slight increase in burden for 
participating jurisdictions with qualified projects. The proposed rule 
would amend 24 CFR 92.252 to eliminate the requirement that a 
participating jurisdiction must submit to HUD a marketing plan for any 
HOME-assisted rental units that have not achieved initial occupancy 
within six months of project completion in IDIS, which would reduce the 
reporting burden on participating jurisdictions with unoccupied HOME-
assisted rental units. The proposed rule adds paragraph (g)(i) to 24 
CFR 92.252 to permit an owner of small-scale housing to re-examine 
annual income every three years, rather than annually, therefore 
reducing burden for income determination. The proposed tenancy lease 
addendum, described in 24 CFR 92.253, would replace multiple, separate 
functions, and would result in a decrease in paperwork burden. The 
proposed changes in 24 CFR 92.300 to define the qualifications for a 
CHDO would result in increased applications and certification, which 
may lead to an increase of paperwork burden. Overall, the proposed rule 
results in a net decrease of burden by 28,852 total estimated annual 
burden hours.
    The burden of the information collections in this proposed rule is 
estimated as follows:

                                                           Reporting and Recordkeeping Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             Estimated
                                                                                                             Number of     average  time       Total
            24 CFR section reference                Number of             Frequency of responses           responses per        for          estimated
                                                     parties                                                   party       requirements    annual burden
                                                                                                                              (hours)         (hours)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   92.252(g)(i) Small scale housing income            2,000  Annual.................................               1               2           4,000
 determination.
Sec.   92.209(c)(1) Annual income determination          72,000  Annual.................................               1            0.75          54,000
 for TBRA.
Sec.   92.250 Increase maximum subsidy limits               188  Annual.................................               1               2             376
 for ambitious green building.
Sec.   92.253 Tenant protections (including               6,667  Annual.................................               1               3          20,001
 lease addendum requirement).
Sec.   92.300 Designation of CHDOs.............             600  Annual.................................               1             1.5             900
Sec.   92.251 Property standards and inspection           6,000  Annual.................................               1               3          18,000
 requirements.
Sec.   92.252 6-month marketing plan for                     60  Annual.................................               1               1              60
 unoccupied rental units.
Sec.   92.507 Grant closeout procedures........             652  Annual.................................               1               1             652
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from member of the public and affected agencies concerning this 
collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated 
collection techniques or other forms of information technology, e.g., 
permitting electronic submission of responses.
    Interested persons are invited to submit comments regarding the 
information collection requirements in this rule. Comments must refer 
to the proposal by name and docket number (FR-6144-P-01) and must be 
sent to:

HUD Desk Officer, Office of Management and Budget, New Executive Office 
Building, Washington, DC 20503, Fax: (202) 395-6947
And
Reports Liaison Officer, Office of Community Planning and Development, 
Department of Housing and Urban Development, Room 7233, 7th Street SW, 
Washington, DC 20410.

    Interested persons may submit comments regarding the information 
collection requirements electronically through the Federal eRulemaking 
Portal at https://www.regulations.gov. HUD strongly encourages 
commenters to submit comments electronically. Electronic submission of 
comments allows the commenter maximum time to prepare and submit a 
comment, ensures timely receipt by HUD, and enables HUD to make 
comments immediately available to the public. Comments submitted 
electronically through the https://www.regulations.gov website can be 
viewed by other commenters and interested member of the public. 
Commenters should follow the instructions provided on that site to 
submit comments electronically.

List of Subjects

24 CFR Part 91

    Aged, Grant programs--housing and community development, Homeless, 
Individuals with disabilities, Low- and moderate-income housing, 
Reporting and recordkeeping requirements.

24 CFR Part 92

    Administrative practice and procedure; Low and moderate income 
housing; Manufactured homes; Rent subsidies; Reporting and 
recordkeeping requirements.

24 CFR Part 570

    Administrative practice and procedure; American Samoa; Community 
development block grants; Grant programs--education; Grant programs--
housing and community development; Guam; Indians; Loan programs--
housing and community development; Low and moderate income housing; 
Northern Mariana Islands; Pacific Islands Trust Territory; Puerto Rico; 
Reporting and recordkeeping requirements; Student aid; Virgin Islands.

[[Page 46656]]

24 CFR Part 982

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

    For the reasons stated above, HUD proposes to amend 24 CFR parts 
91, 92, 570, and 982 as follows:

PART 91--CONSOLIDATED SUBMISSIONS FOR COMMUNITY PLANNING AND 
DEVELOPMENT PROGRAMS

0
1. The authority citation for part 91 continues to read as follows:

    Authority:  42 U.S.C. 3535(d), 3601-3619, 5301-5315, 11331-
11388, 12701-12711, 12741-12756, and 12901-12912.


Sec.  91.220  [Amended]

0
2. In Sec.  91.220:
0
a. Amend paragraph (l)(2)(v) by removing the citation to 
``92.254(a)(2)(iii)'' and adding, in its place, a citation to 
``92.254(a)(2)(iv)'';
0
b. Amend paragraph (l)(2)(vii)(D) by removing the citation to 
``92.253(d)'' and adding, in its place, a citation to ``92.253(e)'';
0
c. Remove paragraph (l)(2)(viii).


Sec.  91.320  [Amended]

0
3. In Sec.  91.320:
0
a. Amend paragraph (k)(2)(v) by removing the citation to 
``92.254(a)(2)(iii)'' and adding, in its place, a citation to 
``92.254(a)(2)(iv)'';
0
b. Amend paragraph (k)(2)(vii)(D) by removing the citation to 
``92.253(d)'' and adding, in its place, a citation to ``92.253(e)'';
0
c. Remove paragraph (k)(2)(viii).

PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM

0
4. The authority citation for part 92 continues to read as follows:

    Authority:  42 U.S.C. 3535(d) and 12701-12839; 12 U.S.C. 1701x.

0
5. In Sec.  92.2:
0
a. Remove the definition of ``ADDI funds'';
0
b. Amend the definition of ``Commitment'' by removing the word 
``official'' in the introductory text to paragraph (1) and adding, in 
its place, the word ``officials'', by removing the word ``downpayment'' 
in paragraph (1)(i) and adding, in its place, the word 
``homeownership'', and by removing the words ``or subrecipient'' 
throughout paragraph (2)(ii)(A);
0
c. Amend the definition of ``Community housing development 
organization'' by revising paragraphs (4), (5), (8)(i), and (9);
0
d. Add the definition of ``Community land trust'' in alphabetical 
order;
0
e. Remove the definitions of ``Displaced homemaker'' and ``First time 
homebuyer'';
0
f. Amend the definition of ``Homeownership'' by removing the words ``or 
in a'' in the introductory text to the definition and adding, in their 
place, the word ``or'' and by removing the words ``Low Income Housing 
Tax Credits'' in paragraph (4) and adding, in their place, the words 
``Low-Income Housing Credits (26 U.S.C. 42)'';
0
g. Add the definition of ``Period of affordability'' in alphabetical 
order;
0
h. Amend the definition of ``Program income'' by revising the 
introductory text and paragraphs (2) and (3);
0
i. Amend the definition of ``Reconstruction'' by revising the last 
sentence;
0
j. Amend the definition of ``Single family housing'' by removing the 
words ``one-to four-family'' and adding, in their place, the words 
``one-to four-unit'';
0
k. Remove the definition of ``Single parent'';
0
l. Add the definition of ``Small-scale housing'' in alphabetical order;
0
m. Revise the definition of ``State recipient'';
0
n. Amend the definition of ``Subrecipient'' by removing the words 
``public agency'' and adding, in their place, the words ``governmental 
entity'', by removing the word ``downpayment'' and adding, in its 
place, the word ``homeownership'', and by removing the word ``solely''; 
and
0
o. Amend the definition of ``Tenant-based rental assistance'' by 
removing the word ``dwelling'' and adding, in its place, the word 
``housing''.
    The revisions and additions read as follows:


Sec.  92.2  Definitions.

* * * * *
    Community housing development organization means: * * *
    (4) Is tax exempt as follows:
    (i) The private nonprofit organization has a tax exemption ruling 
from the Internal Revenue Service under section 501(c)(3) or (4) of the 
Internal Revenue Code of 1986 (26 CFR 1.501(c)(3)-1 or 1.501(c)(4)-1));
    (ii) The private nonprofit organization is a subordinate 
organization that has been included in its 501(c)(3) or (4) central 
organization's group exemption letter by the Internal Revenue Service; 
or,
    (iii) The private nonprofit organization is wholly owned by the 
community housing development organization, as defined in this part, 
and is disregarded as an entity separate from its owner organization 
for federal tax purposes.
    (5) Is not a governmental entity (including the participating 
jurisdiction, other jurisdiction, Indian tribe, public housing 
authority, Indian housing authority, housing finance agency, or 
redevelopment authority) and is not controlled by a governmental 
entity. An organization that is created by a governmental entity may 
qualify as a community housing development organization; however, no 
more than one-third of the board members of the organization may be 
officials or employees of the participating jurisdiction or 
governmental entity that created the community housing development 
organization. Further, no governmental entity may have the right to 
appoint more than one-third of the organization's board members. The 
board members appointed by a governmental entity and the board members 
that are officials or employees of the participating jurisdiction or 
governmental entity that created the organization may not appoint any 
of the remaining two-thirds of the board members. The officers or 
employees of a governmental entity may not be officers or employees of 
a community housing development organization;
* * * * *
    (8) * * *
    (i) Maintaining at least one-third of its governing board's 
membership for residents of low-income neighborhoods, other low-income 
community residents, designees of low-income neighborhood 
organizations, or authorized representatives of nonprofit organizations 
in the community that address the housing or supportive service needs 
of residents of low-income neighborhoods, including homeless providers, 
Fair Housing Initiatives Program providers, Legal Aid, disability 
rights organizations, and victim service providers. For urban areas, 
``community'' may be a neighborhood or neighborhoods, city, county, or 
metropolitan area; for rural areas, it may be a neighborhood or 
neighborhoods, town, village, county, or multi-county area; and
* * * * *
    (9) Has a demonstrated capacity for carrying out housing projects 
assisted with Federal funds, Low-Income Housing Credits (26 U.S.C. 42), 
or local and state affordable housing funds.
    (i) To satisfy this requirement and demonstrate capacity as a 
developer of a HOME-assisted project, the nonprofit organization must 
have employees or volunteers with housing development

[[Page 46657]]

experience who will work directly on the HOME-assisted project. If a 
nonprofit organization is demonstrating capacity using a volunteer's 
experience, the volunteer must serve as a board member or officer of 
the nonprofit organization, and the volunteer may not be compensated by 
or have their services donated by another organization. For its first 
year of funding as a community housing development organization, an 
organization may satisfy this requirement through a contract with a 
consultant who has housing development experience to train appropriate 
key staff of the organization;
    (ii) An organization that will own housing must demonstrate 
capacity to act as owner of a project and meet the requirements of 
Sec.  92.300(a)(2);
    (iii) An organization that will sponsor housing must demonstrate 
capacity as a developer or capacity to act as owner, as described in 
paragraph (9)(i) and (ii) of this definition; and
* * * * *
    Community land trust means a nonprofit organization that:
    (1) Has the development and maintenance of housing that is 
permanently affordable to low- and moderate-income persons as its 
primary purposes;
    (2) Is not sponsored or controlled by a for-profit organization;
    (3) Uses a lease, covenant, agreement, or other enforceable 
mechanisms to require housing and related improvements on land held by 
the community land trust to be affordable to low- and moderate-income 
persons for at least 30 years; and
    (4) Retains a right of first refusal or preemptive right to 
purchase the housing and related improvements on land held by the 
community land trust to maintain long-term affordability.
* * * * *
    Period of affordability means the required period, as specified in 
Sec.  92.252 and Sec.  92.254, that requirements under this part apply 
to HOME-assisted housing.
* * * * *
    Program income means gross income received by the participating 
jurisdiction, State recipient, or a subrecipient at any time, generated 
from the use of HOME funds or matching contributions. When program 
income is generated by housing that is only partially assisted with 
HOME funds or matching funds, the program income shall be the amount 
prorated to reflect the percentage of HOME funds invested in the 
project. Program income includes, but is not limited to, the following:
* * * * *
    (2) Gross income from the use or rental of real property, owned by 
the participating jurisdiction or State recipient that was acquired, 
rehabilitated, or constructed, with HOME funds or matching 
contributions, less costs incidental to generation of the income 
(Program income does not include gross income from the use, rental, or 
sale of real property received by the project owner or developer, 
unless all or a portion of the income must be paid to the participating 
jurisdiction, subrecipient, or State recipient, in which case, the 
amount that must be paid to the participating jurisdiction, 
subrecipient, or State recipient is program income.);
    (3) Payments and repayments on grants, loans (i.e., principal and 
interest), or investments made using HOME funds or matching 
contributions, including such payments and repayments made after the 
period of affordability;
* * * * *
    Reconstruction * * * Reconstruction is rehabilitation for purposes 
of this part, except that the property standards for new construction 
in Sec.  92.251(a) apply to all reconstruction projects.
* * * * *
    Small-scale housing means a rental housing project of no more than 
four units or a homeownership project with no more than three rental 
units on the same site.
* * * * *
    State recipient means a unit of general local government designated 
by a State participating jurisdiction to receive HOME funds to 
administer all or some of the State participating jurisdiction's HOME 
programs, own or develop affordable housing, provide homeownership 
assistance, or provide tenant-based rental assistance.
* * * * *


Sec.  92.50   [Amended]

0
6. In Sec.  92.50, amend paragraph (c)(3) by removing the words ``poor 
households'' and adding, in their place, the words ``households below 
the poverty line''.
0
7. Amend Sec.  92.101 by revising paragraph (a) introductory text and 
paragraph (d), and adding paragraph (g) to read as follows.


Sec.  92.101  Consortia.

    (a) A consortium of geographically contiguous units of general 
local government is a unit of general local government for purposes of 
this part if the requirements of this section are met. A unit of 
general local government separated by a body of water that is only 
accessible by the public through a permanent means other than a 
connecting road, bridge, railway, or highway may be considered 
geographically contiguous if the consortium demonstrates that the unit 
of general local government separated by the body of water is part of 
the same housing market and local commuting area as one or more members 
of the consortium. A local commuting area is the geographic area that 
encompasses neighborhoods where people live and are reasonably expected 
to routinely travel back and forth to a common employment hub, 
population center, or worksite.
* * * * *
    (d) If the representative unit of general local government 
distributes HOME funds to member units of general local government, the 
representative unit is responsible for applying to the member units of 
general local government the same requirements as are applicable to 
subrecipients, including the written agreement requirements in 24 CFR 
92.504(c)(2).
* * * * *
    (g) If a consortium changes its representative unit of general 
local government but retains the same membership, the consortium shall 
still be considered the same unit of general local government for 
purposes of this part. If the representative unit of general local 
government changes and the composition of the consortium changes, 
either by adding or removing individual members, then the consortium 
shall be a new unit of general local government for purposes of this 
part and shall be required to comply with all applicable consolidated 
plan requirements in 24 CFR part 91.
0
8. Amend Sec.  92.201 by adding a new sentence to the end of paragraph 
(a)(2), and removing the last sentence of paragraph (b)(2) to read as 
follows:


Sec.  92.201  Distribution of assistance.

    (a) * * *
    (2) * * * A participating jurisdiction may not commit HOME funds to 
a project outside its jurisdiction and within the boundaries of a 
contiguous local jurisdiction until it has secured the financial 
contribution of the jurisdiction in which the project is located.
* * * * *
0
9. In Sec.  92.203:
0
a. Revise the introductory text of paragraph (a) and the heading of 
paragraph (b);
0
b. Amend paragraph (b)(1) introductory text by removing the

[[Page 46658]]

citation ``Sec.  92.252(h)'' and adding, in its place, the citation 
``Sec.  92.252(g)'';
0
c. Revise paragraph (b)(1)(ii) and the first sentence of paragraph 
(b)(1)(iii);
0
d. Revise the heading of paragraph (c);
0
e. Amend paragraph (c)(1) by removing the citation to ``Sec. Sec.  
5.609(a) and (b) of this title'' and adding, in their place, a citation 
to ``24 CFR 5.609(a) and (b)'';
0
f. Revise paragraph (d);
0
g. Amend paragraph (e)(1) by removing the citation to ``Sec.  5.618 of 
this title'' and adding, in its place, a citation to ``24 CFR 5.618'', 
and by removing the citation to ``Sec.  5.609(a)(2) of this title'' and 
adding, in its place, a citation to ``24 CFR 5.609(a)(2)'';
0
h. Amend paragraph (e)(3) by removing the citation to ``Sec.  5.617 of 
this title'' and adding, in its place, a citation to ``24 CFR 5.617'';
0
i. Amend paragraph (f)(1)(i) by removing the citation to ``Sec.  
5.611(a) of this title'' and adding, in its place, a citation to ``24 
CFR 5.611(a)'', and by removing the citation to ``Sec. Sec.  5.611(c) 
through (e) of this title'' and adding, in its place, a citation to 
``24 CFR 5.611(c) through (e)'';
0
j. Amend paragraph (f)(1)(ii) by removing the citation to ``Sec.  
92.252(b)(2)(i)'' and adding, in its place, a citation to ``Sec.  
92.252(a)(2)(ii) or (iii)'', by removing the citation to ``Sec.  
5.611(a) of this title'' and adding, in its place, a citation to ``24 
CFR 5.611(a)'', and by removing the citation to ``Sec. Sec.  5.611(c) 
through (e) of this title'' and adding, in its place, a citation to 
``24 CFR 5.611(c) through (e)''; and
0
k. Amend paragraph (f)(1)(iii) by removing the citation to ``Sec.  
5.611(a) of this title'' and adding, in its place, a citation to ``24 
CFR 5.611(a)''.
    The revisions and additions read as follows:


Sec.  92.203  Income determinations.

    (a) Income eligibility. To determine a family is income-eligible, 
the participating jurisdiction must determine the family's income as 
follows:
* * * * *
    (b) Determining and documenting annual income.
    (1) * * *
    (ii) Obtain from the family a written statement or, where needed 
due to disability, a statement in another format, of the amount of the 
family's annual income and family size, along with a certification that 
the information is complete and accurate. The certification must state 
that the family will provide source documents upon request. If there is 
evidence that a tenant's statement and certification provided in 
accordance with Sec.  92.203(b)(1)(ii) failed to completely and 
accurately state information about the family's size or income, a 
tenant's income must be re-examined in accordance with Sec.  
92.203(b)(1)(i).
    (iii) Obtain a written statement from the administrator of a 
government program which examines the annual income of the family each 
year and under which the family receives benefits.
* * * * *
    (c) Definitions of ``annual income.'' * * *
* * * * *
    (d) Use of income definitions. A participating jurisdiction may use 
either of the definitions of ``annual income'' in paragraph (c) of this 
section, however, the participating jurisdiction may use only one 
definition of ``annual income'' for each HOME-assisted program (e.g., 
downpayment assistance program) that it administers and only one 
definition for each rental housing project. For rental housing projects 
containing units assisted by a Federal or State project-based rental 
subsidy program or tenants receiving Federal tenant-based rental 
assistance, where a participating jurisdiction is accepting a public 
housing agency, owner, or rental assistance provider's determination of 
annual and adjusted income, the participating jurisdiction must 
calculate annual income in accordance with paragraph (c)(1) of this 
section so that only one definition of annual income is used in the 
rental housing project.
* * * * *
0
10. In Sec.  92.205:
0
a. Revise paragraph (a)(2);
0
b. Remove the last sentence of paragraph (b)(1);
0
c. Add paragraph (b)(3); and
0
d. Revise the first sentence of paragraph (e)(2).
    The revisions and addition read as follows:


Sec.  92.205  Eligible activities: General.

    (a) * * *
    (2) Acquisition of vacant land or demolition may only be undertaken 
for a project that will provide affordable housing and meets the 
requirements for a specific local project in paragraph (2)(i) of the 
definition of ``commitment'' in Sec.  92.2.
* * * * *
    (b) * * *
    (3) The participating jurisdiction must establish the terms of 
assistance, subject to the requirements of this part.
* * * * *
    (e) * * *
    (2) If project completion, as defined in Sec.  92.2, does not occur 
within 4 years of the date of commitment of funds for a specific local 
project, the project is considered to be terminated and the 
participating jurisdiction must repay all funds invested in the project 
to the participating jurisdiction's HOME Investment Trust Fund in 
accordance with Sec.  92.503(b). * * *
0
11. In Sec.  92.206:
0
a. Amend paragraph (a)(1) by removing the citation ``Sec.  92.251'' and 
adding, in its place, the citation ``Sec.  92.251(a)'';
0
b. Amend paragraph (a)(2) by removing the citation ``Sec.  92.251'' and 
adding, in its place, the citation ``Sec.  92.251(b)'';
0
c. Amend paragraph (b)(1) by removing the word ``single-family'' and 
adding, in its place, the words ``single family'';
0
d. Amend the introductory text to paragraph (b)(2) by removing the 
words ``affordability period'' and adding, in their place, the words 
``period of affordability'';
0
e. Revise paragraphs (b)(2)(ii), (c), (d)(1), and (d)(8).
    The revisions read as follows:


Sec.  92.206  Eligible project costs.

* * * * *
    (b) * * *
    (2) * * *
    (ii) Require a review of management practices to demonstrate that 
disinvestment in the property has not occurred, that the long term 
needs of the project can be met, and that the feasibility of serving 
the targeted population over the minimum period of affordability of 15 
years can be demonstrated;
* * * * *
    (c) Acquisition costs. Costs of acquiring improved or unimproved 
real property and costs for a long-term ground lease, including costs 
of acquisition by homebuyers.
    (d) * * *
    (1) Architectural, engineering, or related professional services 
required to prepare plans, drawings, specifications, work write-ups, or 
for HUD environmental review or other environmental studies or 
assessments. The costs may be paid if they were incurred not more than 
24 months before the date that HOME funds are committed to the project 
and the participating jurisdiction expressly permits HOME funds to be 
used to pay the costs in the written agreement committing the funds.
* * * * *
    (8) Cost of property insurance during development.
* * * * *

[[Page 46659]]

Sec.  92.207  [Amended]

0
12. In Sec.  92.207, amend paragraph (e) by removing the words ``under 
a cost allocation plan prepared''.
0
13. Amend Sec.  92.208 by adding paragraph (c) to read as follows:


Sec.  92.208  Eligible community housing development organization 
(CHDO) operating expense and capacity building costs.

* * * * *
    (c) An organization that meets the definition of ``community 
housing development organization'' in Sec.  92.2, except for the 
requirements in paragraph (9) of the definition, may receive HOME funds 
for operating expenses and capacity building costs in accordance with 
paragraph (a) of this section in order to develop demonstrated capacity 
and qualify as a community housing development organization.
0
14. In Sec.  92.209:
0
a. Amend paragraph (c)(1) by removing the last sentence;
0
b. Revise paragraphs (c)(2)(iv), (c)(3), (g), (h)(2), (h)(3)(ii), (i), 
and (j)(5);
0
c. Amend paragraph (j)(1) by removing the word ``dwelling'' and adding, 
in its place, the word ``housing'';
0
d. Add paragraph (j)(6); and
0
e. Remove paragraph (l).
    The revisions and addition read as follows:


Sec.  92.209  Tenant-based rental assistance: Eligible costs and 
requirements.

* * * * *
    (c) * * *
    (2) * * *
    (iv) Homebuyer program. HOME tenant-based rental assistance may 
assist a tenant who has been identified as a potential low-income 
homebuyer through a lease-purchase agreement, with monthly rental 
assistance payments for a period up to 36 months (i.e., 24 months, with 
a 12-month renewal in accordance with paragraph (e) of this section). 
The HOME tenant-based rental assistance payment may not be used to 
accumulate a downpayment or closing costs for the purchase; however, 
all or a portion of the homebuyer-tenant's monthly contribution toward 
rent may be set aside for this purpose, in accordance with the lease-
purchase agreement. If a participating jurisdiction determines that the 
tenant has met the lease-purchase criteria and is ready to assume 
ownership, HOME funds may be provided for downpayment assistance in 
accordance with the requirements of this part.
* * * * *
    (3) Existing tenants in projects that will receive HOME assistance. 
A participating jurisdiction may select low-income families currently 
residing in housing units that will be rehabilitated or acquired with 
HOME funds under the participating jurisdiction's HOME program. 
Participating jurisdictions using HOME funds for tenant-based rental 
assistance programs may establish local preferences for the provision 
of this assistance. Families so selected may use the tenant-based 
assistance in the rehabilitated or acquired housing unit or in other 
qualified housing.
* * * * *
    (g) Tenant protections. The tenant must have a lease that complies 
with the requirements in Sec.  92.253(a)-(c) and (d)(2).
    (h) * * *
    (2) The participating jurisdiction must establish a minimum tenant 
contribution to rent, except that the participating jurisdiction may 
establish conditions in its written policies under which a tenant would 
be relieved of all or a portion of the minimum contribution due to 
financial hardship.
    (3) * * *
    (ii) The Section 8 Housing Choice Voucher Program payment standard 
in 24 CFR 982.503.
    (i) Housing standards. The participating jurisdiction must require 
the housing occupied by a family receiving tenant-based rental 
assistance under this section to meet the participating jurisdiction's 
property standards under Sec.  92.251. Initially and annually 
thereafter, the participating jurisdiction must determine the housing 
complies with its property standards and is decent, safe, sanitary, and 
in good repair in accordance with Sec.  92.251(f).
* * * * *
    (j) * * *
    (5) Paragraphs (b), (c), (d), (f), (g), and (i) of this section are 
applicable when HOME funds are provided for security deposit 
assistance, except that income determinations pursuant to paragraph 
(c)(1) of this section and inspections pursuant to paragraph (i) of 
this section are required only at the time the security deposit 
assistance is provided.
    (6) Surety bonds or security deposit insurance and similar 
instruments may not be used in lieu of or in addition to a security 
deposit in units occupied by tenants receiving tenant-based rental 
assistance.
* * * * *
0
15. Revise Sec.  92.210 to read as follows:


Sec.  92.210  Troubled HOME-assisted rental housing projects.

    (a) The provisions of this section apply only to an existing HOME-
assisted rental project that, within the HOME period of affordability, 
is no longer financially viable or its physical viability has 
substantively deteriorated due to unforeseen circumstances. For 
purposes of this section, a HOME-assisted rental project is no longer 
financially viable if its operating costs significantly exceed its 
operating revenue, considering project reserves and the owner is unable 
to pay for necessary capital repair costs. For purposes of this 
section, physical viability means a project's current or future ability 
to maintain affordability based on the physical characteristics and 
factors of the project's site and improvements. HUD may approve the 
actions described in paragraphs (b) and (c) of this section to 
strategically preserve a rental project after consideration of market 
needs, available resources, and the likelihood of the long-term 
physical and financial viability of the project in preserving 
affordability.
    (b) Notwithstanding Sec.  92.214, a participating jurisdiction may 
request and HUD may permit, pursuant to a written memorandum of 
agreement, a participating jurisdiction to invest additional HOME funds 
in the existing HOME-assisted rental project. The total HOME funding 
for the project (original investment plus additional investment) must 
be necessary to improve the physical and financial viability of the 
project and may not exceed the per-unit subsidy limit in Sec.  
92.250(a) in effect at the time of the additional investment. The use 
of HOME funds may include, but is not limited to, rehabilitation of the 
HOME units and recapitalization of project reserves for the HOME units 
(to fund capital costs). If additional HOME funds are invested, HUD may 
impose additional conditions, including requiring the participating 
jurisdiction to extend the period of affordability, increase the number 
of HOME-assisted units, and change the number or designation of Low 
HOME rent and High HOME rent units.
    (c) HUD may, through written approval, permit the participating 
jurisdiction to reduce the total number of HOME-assisted units or 
change the designation of units from Low HOME rent units to High HOME 
rent units where there are more than the minimum number of Low HOME 
rent units in the project. In determining whether to permit a reduction 
in the number of HOME-assisted units, HUD will take into account the 
required period of

[[Page 46660]]

affordability and the amount of HOME assistance provided to the 
project.
0
16. In Sec.  92.212:
0
a. Amend paragraph (a) by removing ``may incur costs'', and adding, in 
its place, ``may incur costs described in this section''; and
0
b. Revise paragraph (b).
    The revision reads as follows:


Sec.  92.212  Pre-award costs.

* * * * *
    (b) Administrative and planning costs. (1) Eligible administrative 
and planning costs may be incurred as of the beginning of the 
participating jurisdiction's consolidated program year (see 24 CFR 
91.10) or the date HUD receives the consolidated plan describing the 
HOME allocation to which the costs will be charged, whichever is later.
    (2) In any year in which timely Congressional appropriations have 
not been provided for the HOME program, a participating jurisdiction 
may incur eligible administrative and planning costs as of the 
beginning of its program year or the date that HUD receives its 
consolidated plan describing the HOME allocation to which the costs 
will be charged, whichever is earlier. An appropriation is not timely 
if the appropriation was signed into law less than 90 days before a 
participating jurisdiction's program year start date.
* * * * *
0
17. Amend Sec.  92.214 by:
0
a. Revising paragraphs (a)(6) through (9);
0
b. Adding paragraph (a)(10);
0
c. Revising paragraph (b)(3); and
0
d. Adding paragraph (b)(4).
    The revisions and additions read as follows.


Sec.  92.214  Prohibited activities and fees.

    (a) * * *
    (6) Provide assistance (other than tenant-based rental assistance, 
assistance to a homebuyer to acquire housing previously assisted with 
HOME funds, assistance permitted under Sec.  92.210, or assistance to 
preserve affordability of homeownership housing in accordance with 
Sec.  92.254(b)) to a project previously assisted with HOME funds 
during the period of affordability. However, additional HOME funds may 
be committed to a project for up to one year after project completion 
(see Sec.  92.502), but the amount of HOME funds in the project may not 
exceed the maximum per-unit subsidy amount established under Sec.  
92.250 at the time of underwriting;
    (7) Pay for the acquisition of property owned by the participating 
jurisdiction, unless such property is acquired by the participating 
jurisdiction in anticipation of carrying out a HOME project;
    (8) Pay delinquent taxes, fees, or charges on properties to be 
assisted with HOME funds;
    (9) Pay for any cost that is not eligible under Sec. Sec.  92.206 
through 92.209; or
    (10) Pay for surety bonds, security deposit insurance, or similar 
instruments in lieu of or in addition to a security deposit in units 
occupied by tenants receiving tenant-based rental assistance (including 
assistance in paying security deposits).
    (b) * * *
    (3) The participating jurisdiction must prohibit project owners 
from charging for:
    (i) Surety bonds, security deposit insurance, or similar 
instruments in lieu of or in addition to a security deposit in units;
    (ii) Fees that are not customarily charged in rental housing (e.g., 
laundry room access fees); and
    (iii) Fees to inspect units or correct deficiencies in the property 
condition of units or common areas of the project that were not caused 
by the tenant.
    (4) Rental project owners may charge:
    (i) Reasonable application fees to prospective tenants;
    (ii) Parking fees to tenants only if such fees are customary for 
rental housing projects in the neighborhood; and
    (iii) Fees for services such as bus transportation or meals, as 
long as the services are voluntary and fees are charged for services 
provided.


Sec.  92.216  [Amended]

0
18. In Sec.  92.216, amend paragraphs (a)(2) and (b)(2) by removing the 
word ``dwelling'' and adding, in its place, the word ``housing''.


Sec.  92.217  [Amended]

0
19. Amend Sec.  92.217 by removing the word ``dwelling'' and adding, in 
its place, the word ``housing''.
0
20. Amend Sec.  92.219 by revising the first sentence of paragraphs 
(b)(2)(ii) and the first sentence of paragraph (b)(2)(iii) to read as 
follows:


Sec.  92.219  Recognition of matching contribution.

* * * * *
    (b) * * *
    (2) * * *
    (ii) The participating jurisdiction must execute, with the owner of 
the housing (or, if the participating jurisdiction is the owner, with 
the manager or developer), a written agreement that imposes and 
enumerates all of the affordability requirements in Sec.  92.252 and 
tenant protection requirements in Sec.  92.253(a)-(c) and (d)(2) or 
Sec.  92.254, whichever are applicable; the property standards 
requirements of Sec.  92.251; and income determinations made in 
accordance with Sec.  92.203. * * *
    (iii) A participating jurisdiction must establish a procedure to 
monitor HOME match-eligible housing to ensure continued compliance with 
the requirements of Sec.  92.203 (Income determinations), Sec.  92.252 
(Qualification as affordable housing: Rental housing), Sec.  92.253(a)-
(c) and (d)(2) (Tenant protections), and Sec.  92.254 (Qualification as 
affordable housing: Homeownership). * * *
* * * * *
0
21. Amend Sec.  92.221 by adding paragraphs (b)(1) and (2) to read as 
follows:


Sec.  92.221  Match credit.

* * * * *
    (b) * * *
    (1) To apply an excess matching contribution to a future fiscal 
year's match liability, the participating jurisdiction must have 
documentation, at the time of application, demonstrating the matching 
contribution complied with the matching requirements at Sec. Sec.  
92.218-92.221 at the time it was made. Documentation must include 
project records of the type and amount of the matching contribution.
    (2) A participating jurisdiction must maintain the records in 
paragraph (b)(1) of this section for five years from the date of 
application of the excess matching contribution to the liability.
* * * * *
0
22. Amend Sec.  92.250 by revising paragraphs (a) and (b)(3)(i), and 
adding paragraph (c) to read as follows:


Sec.  92.250  Maximum per-unit subsidy amount, underwriting, and 
subsidy layering.

    (a) Maximum per-unit subsidy amount. The total amount of HOME funds 
that a participating jurisdiction may invest on a per-unit basis in 
affordable housing may not exceed the per-unit dollar limits 
established by HUD in accordance with section 212(e) of the Act. HUD 
will publish the per-unit dollar limits for the area in which the 
housing is located annually. HUD will publish its methodology for 
determining maximum per-unit dollar limits through a notice in the 
Federal Register with the opportunity for comment.
    (b) * * *
    (3) * * *
    (i) An underwriting analysis of the homeowner's ability to repay 
the HOME-funded rehabilitation loan is

[[Page 46661]]

required only if the loan is an amortizing loan; and
* * * * *
    (c) A participating jurisdiction may exceed the per-unit dollar 
limits described in paragraph (a) of this section by up to 5 percent if 
the project meets one of the green building standards identified by HUD 
and published in the Federal Register.
0
23. In Sec.  92.251:
0
a. Revise the section heading and paragraph (a)(2);
0
b. Add paragraph (a)(3);
0
c. Revise paragraphs (b)(1)(vi) and (viii);
0
d. Add paragraphs (b)(1)(xi) and (xii);
0
e. Amend paragraph (b)(2) by removing the words ``The construction 
documents'' and adding, in their place, the words ``The construction 
contract and documents'';
0
f. Revise paragraph (b)(3), the first sentence of paragraph (c)(1), and 
paragraph (c)(3);
0
g. Revise the introductory text of paragraph (f);
0
h. Amend the introductory text of paragraph (f)(1) by removing the 
words ``affordability period'' and adding, in their place, the words 
``period of affordability'' and by removing the words ``each of the 
following'' and adding, in their place, the words ``all of the 
following'';
0
i. Revise paragraphs (f)(1)(i), (3), (4), and (5); and
0
j. Add new paragraph (g).
    The revisions and additions read as follows:


Sec.  92.251  Property standards and inspections.

    (a) * * *
    (2) Construction progress and final inspections. The participating 
jurisdiction must conduct on-site progress and final inspections of 
construction to ensure that work is done in accordance with the 
applicable codes, the construction contract, and construction 
documents. Before completing the project in the disbursement and 
information system established by HUD, the participating jurisdiction 
must perform an on-site inspection of the project to determine that all 
contracted work has been completed and that the project complies with 
the property standards and requirements in paragraph (a) of this 
section. All inspections performed by the participating jurisdiction 
must be conducted in accordance with the participating jurisdiction's 
inspection procedures.
    (3) HUD requirements. All new construction projects must also meet 
the following requirements upon project completion, unless an earlier 
deadline is otherwise required by the applicable statute, regulation, 
or standard:
    (i) Accessibility. The housing must meet the accessibility 
requirements of 24 CFR part 8, which implements Section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794), and Titles II and III of 
the Americans with Disabilities Act (42 U.S.C. 12131-12189) implemented 
at 28 CFR parts 35 and 36, as applicable. Covered multifamily 
dwellings, as defined at 24 CFR 100.201, must also meet the design and 
construction requirements at 24 CFR 100.205, which implements the Fair 
Housing Act (42 U.S.C. 3601-3619).
    (ii) Energy Efficiency Standards. Newly constructed housing shall 
qualify as affordable housing under this part only if it meets the 
energy efficiency standards promulgated by the Secretary in accordance 
with section 109 of the Cranston-Gonzalez National Affordable Housing 
Act (42 U.S.C. 12709).
    (iii) Disaster mitigation. Where relevant, the housing must be 
constructed to mitigate the impact of future disasters (e.g., 
earthquakes, hurricanes, flooding, and wildfires) in accordance with 
State and local codes and ordinances, and such other requirements that 
HUD may establish.
    (iv) Written cost estimates, construction contracts and 
construction documents. The participating jurisdiction must ensure the 
construction contract(s) and construction documents describe the work 
to be undertaken in adequate detail so that inspections can be 
conducted. The participating jurisdiction must review and approve 
written cost estimates for construction and determining that costs are 
reasonable.
    (v) Broadband infrastructure. For new commitments made after 
January 19, 2017, for a new construction housing project of a building 
with more than 4 rental units, the construction must include 
installation of broadband infrastructure, as this term is defined in 24 
CFR 5.100, except where the participating jurisdiction determines and, 
in accordance with Sec.  92.508(a)(3)(iv), documents the determination 
that:
    (A) The location of the new construction makes installation of 
broadband infrastructure infeasible; or
    (B) The cost of installing the infrastructure would result in a 
fundamental alteration in the nature of its program or activity or in 
an undue financial burden.
    (vi) Carbon monoxide detection. The common areas of a project and 
all units within the project must meet or exceed the carbon monoxide 
detection standards adopted by HUD through Federal Register notice; and
    (vii) Green building standards. If a participating jurisdiction is 
exceeding the maximum per-unit subsidy limit pursuant to Sec.  
92.250(c), then upon completion, the housing must meet one of the green 
building standards established by HUD.
    (b) * * *
    (1) * * *
    (vi) Disaster mitigation. Where relevant, the participating 
jurisdiction's standards must require the housing to be improved to 
mitigate the impact of future disasters (e.g., earthquake, hurricanes, 
flooding, and wildfires) in accordance with State and local codes and 
ordinances, and such other requirements that HUD may establish.
* * * * *
    (viii) HUD housing standards. The standards of the participating 
jurisdiction must be such that, upon completion, the HOME-assisted 
project and units will be decent, safe, sanitary, and in good repair. 
This means that the HOME-assisted project and units will meet the 
standards in 24 CFR 5.703, except that paragraph (b)(1)(xi) of this 
section shall apply instead of the carbon monoxide detection 
requirements at 24 CFR 5.703(b)(2) and (d)(6). For all HOME-assisted 
projects and units, the requirements at 24 CFR 5.705-5.713 do not 
apply. At minimum, the participating jurisdiction's rehabilitation 
standards must require correction of the specific deficiencies 
published in the Federal Register for HOME-assisted projects and units. 
For SRO housing, 24 CFR 5.703(d) shall only apply to the extent that 
the SRO unit contains the room or facility referenced in 24 CFR 
5.703(d).
    (A) The participating jurisdiction may accept a determination made 
under another HUD program, upon the completion of the rehabilitation, 
that the HOME-assisted project and units are decent, safe, sanitary, 
and in good repair in an inspection conducted under the National 
Standards for the Condition of HUD housing (24 CFR part 5, subpart G) 
or an alternative inspection standard, which HUD may establish through 
Federal Register notice.
    (B) If a participating jurisdiction is accepting a determination 
pursuant to paragraph (b)(1)(viii)(A), then the participating 
jurisdiction must document the determination in accordance with Sec.  
92.508(a)(3)(iv) and is not required to perform a HOME inspection of 
the project and units for compliance with 24 CFR 5.703.
* * * * *

[[Page 46662]]

    (xi) Carbon monoxide detection. The common areas of a project and 
all units within the project must meet or exceed the carbon monoxide 
detection standards adopted by HUD through Federal Register notice.
    (xii) Green building standards. If a participating jurisdiction is 
exceeding the maximum per-unit subsidy limit pursuant to Sec.  
92.250(c), then upon completion of the rehabilitation the housing must 
meet one of the green building standards established by HUD.
* * * * *
    (3) Frequency of inspections. The participating jurisdiction must 
conduct an initial property inspection to identify the deficiencies 
that must be addressed and must conduct on-site progress and final 
inspections to determine that work was done in accordance with the 
construction contract and construction documents. Before completing the 
project in the disbursement and information system established by HUD, 
the participating jurisdiction must perform an on-site inspection of 
the project to determine that all contracted work has been completed 
and that the project complies with the property standards and 
requirements in paragraph (b) of this section. All inspections 
performed by the participating jurisdiction must be conducted in 
accordance with the participating jurisdiction's inspection procedures.
    (c) * * *
    (1) Existing housing that is acquired with HOME assistance for 
rental housing, and that was newly constructed or rehabilitated less 
than 12 months before the date of commitment of HOME funds, must meet 
the property standards for new construction in paragraph (a) or 
rehabilitation in paragraph (b) of this section, as applicable. * * *
* * * * *
    (3) Existing housing that is acquired for homeownership (e.g., 
downpayment assistance) must be decent, safe, sanitary, and in good 
repair. The participating jurisdiction must establish standards to 
determine that the housing is decent, safe, sanitary, and in good 
repair. At minimum, the standards must provide that the housing meets 
all applicable State and local housing quality standards and code 
requirements and the housing does not contain the specific deficiencies 
established by HUD based on the applicable standards in 24 CFR 5.703 
and published in the Federal Register for HOME-assisted projects and 
units. The housing must also meet or exceed the carbon monoxide 
detection standards adopted by HUD through Federal Register notice.
    (i) The participating jurisdiction must inspect the housing and 
document compliance with paragraph (c)(3) of this section based upon an 
inspection that is conducted no earlier than 90 days before the 
commitment of HOME assistance. If the housing does not meet these 
standards, the housing must be rehabilitated to meet the standards of 
paragraph (c)(3) before the acquisition, except as provided in 
paragraph (c)(3)(ii) of this section.
    (ii) If the housing will not be rehabilitated to meet the standards 
in paragraph (c)(3) of this section before acquisition, then the 
housing may still be acquired if all of the following conditions are 
satisfied:
    (A) The written agreement between the participating jurisdiction 
and the homebuyer requires the property to meet the standards within 6 
months of acquisition with HOME assistance;
    (B) Funding is secured to complete the rehabilitation necessary to 
comply with the standards; and
    (C) The participating jurisdiction conducts a final inspection 
within six months after acquisition and determines that the property 
meets the standards.
    (iii) All inspections performed by the participating jurisdiction 
must be conducted in accordance with the participating jurisdiction's 
inspection procedures.
* * * * *
    (f) Ongoing property condition standards and inspections: Rental 
housing and housing occupied by tenants receiving HOME tenant-based 
rental assistance.
    (1) * * *
    (i) Compliance with State and local codes, ordinances, and 
requirements. The participating jurisdiction's standards must require 
the housing to meet all applicable State and local code requirements 
and ordinances. In the absence of existing applicable State or local 
code requirements and ordinances, at a minimum, the participating 
jurisdiction's ongoing property standards must provide that the 
property does not contain the specific deficiencies established by HUD 
based on the applicable standards in 24 CFR 5.703 and published in the 
Federal Register for HOME rental housing (including manufactured 
housing) and housing occupied by tenants receiving HOME tenant-based 
rental assistance. The participating jurisdiction's property standards 
are not required to comply with 24 CFR 5.705 through 5.713.
* * * * *
    (3) Ongoing inspections of HOME-assisted rental housing. During the 
period of affordability, the participating jurisdiction must perform 
on-site inspections of HOME-assisted rental housing to determine 
compliance with the property standards in paragraph (f)(1) of this 
section and to verify the information submitted by owners in accordance 
with the requirements of Sec.  92.252. The participating jurisdiction 
must perform inspections in accordance with its established inspection 
procedures. These procedures, at minimum, must include the following 
requirements:
    (i) Frequency of inspections. The participating jurisdiction must 
perform an on-site inspection within 12 months after project completion 
and complete one of the following every 3 years during the period of 
affordability:
    (A) Perform an on-site inspection in accordance with the 
participating jurisdiction's inspection procedures to determine 
compliance with the property standards; or
    (B) Accept a determination made under another HUD program, made 
within the past 12 months, that the HOME-assisted project and units are 
decent, safe, sanitary, and in good repair in an inspection conducted 
under the National Standards for the Condition of HUD housing (24 CFR 
part 5, subpart G) or an alternative inspection standard, which HUD may 
establish through Federal Register notice. If a participating 
jurisdiction is accepting a determination made under another HUD 
program, then the participating jurisdiction must document the 
determination in accordance with Sec.  92.508(a)(3)(iv) and is not 
required to perform an on-site HOME inspection of the project and the 
units for compliance with 24 CFR 5.703.
    (ii) Annual certification. The owner must annually certify to the 
participating jurisdiction that each building and all HOME-assisted 
units in the project are suitable for occupancy, taking into account 
State and local health, safety, and other applicable codes, ordinances, 
and requirements, and the ongoing property standards established by the 
participating jurisdiction.
    (iii) Units inspected. Inspections must be based on a random sample 
of 20 percent of the HOME-assisted units in the project with a mix of 
unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom 
units). For projects with one-to-four HOME-assisted units, the 
participating jurisdiction must inspect 100 percent of the HOME-
assisted units and the inspectable areas for each building with HOME-
assisted units.

[[Page 46663]]

    (iv) Financial oversight. During the period of affordability, the 
participating jurisdiction must examine at least annually the financial 
condition of projects with 10 or more HOME-assisted units to determine 
the continued financial viability of the housing and must take actions 
to correct problems, to the extent feasible.
    (4) Annual inspections for housing with tenants receiving HOME 
tenant-based rental assistance. All housing occupied by tenants 
receiving HOME tenant-based rental assistance must meet the property 
standards of paragraph (f)(1) of this section. The participating 
jurisdiction must annually determine the housing is decent, safe, 
sanitary, and in good repair through one of the following methods:
    (i) An annual on-site inspection in accordance with its inspection 
procedures for annual inspections to determine the housing meets the 
property standards in paragraph (f)(1) of this section; or
    (ii) An inspection by another HUD program conducted within the past 
3 months under the National Standards for the Condition of HUD housing 
(24 CFR part 5, subpart G) or an alternative inspection standard, which 
HUD may establish through Federal Register notice. A participating 
jurisdiction may move its inspection cycle to align with an inspection 
covered by this paragraph. If a participating jurisdiction is accepting 
an inspection pursuant to this paragraph, then the participating 
jurisdiction must document the inspection's determination that the 
housing is decent, safe, sanitary, and in good repair in accordance 
with Sec.  92.508(a)(3)(iv) and is not required to perform a HOME 
inspection of the project and units for compliance with 24 CFR 5.703.
    (5) Corrective and remedial actions. The participating jurisdiction 
must have procedures for requiring that timely corrective and remedial 
actions are taken by the owner to address identified deficiencies.
    (i) Health and safety deficiencies. Health and safety deficiencies 
must be corrected immediately. Except for small-scale housing, the 
participating jurisdiction must adopt a more frequent inspection 
schedule for properties that have been found to have health and safety 
deficiencies. For small-scale housing, the participating jurisdiction 
may adopt a more frequent inspection schedule if the small-scale 
housing is found to have health and safety deficiencies, as described 
in its inspection procedures.
    (ii) Other deficiencies. If there are observed deficiencies for any 
of the inspectable areas in the property standards established by the 
participating jurisdiction, in accordance with the inspection 
procedures, a follow-up on-site inspection to verify that deficiencies 
are corrected must occur within 12 months. The participating 
jurisdiction may establish a list of non-hazardous deficiencies for 
which correction can be verified by third party documentation (e.g., 
paid invoice for work order) rather than re-inspection.
    (g) Inspection procedures. The participating jurisdiction must 
establish written inspection procedures. The procedures must include 
detailed inspection checklists, a description of how and by whom 
inspections will be carried out, and procedures for training and 
certifying qualified inspectors. For ongoing property inspections, the 
procedures must also describe how frequently the property will be 
inspected, consistent with this section and Sec.  92.209.
0
24. Revise Sec.  92.252 to read as follows:


Sec.  92.252  Qualification as affordable housing: Rental housing.

    The HOME-assisted units in a rental housing project must be 
occupied by households that are eligible as low-income families and 
must meet the requirements of this section to qualify as affordable 
housing. If the housing is not occupied by eligible tenants within six 
months following the date of project completion, the participating 
jurisdiction must revise its marketing plan to enable the project to 
reach required occupancy. The participating jurisdiction must repay 
HOME funds invested in any housing unit that has not been rented to 
eligible tenants within 18 months after the date of project completion. 
The affordability requirements in this section also apply to the HOME-
assisted non-owner-occupied units in single family housing purchased 
with HOME funds in accordance with Sec.  92.254. A tenant must have a 
written lease that complies with Sec.  92.253.
    (a) HOME Rent Limits. The rent for a HOME-assisted unit must not 
exceed the rent limits in this section. HUD will publish the HOME rent 
limits on an annual basis, with adjustments for number of bedrooms in 
the unit. The rent limits do not apply to any payment provided under a 
Federal or State rental assistance or subsidy program. Regardless of 
changes in fair market rents and in median income over time, the rents 
for a project are not required to be lower than the HOME rent limits 
for the project in effect at the time of project commitment. The 
participating jurisdiction may designate (in its written agreement with 
the owner) more than the minimum HOME units in a rental housing 
project, regardless of project size. The rent limits apply to the rent 
plus the utilities or utility allowance:
    (1) High HOME Rent Limits. The rent does not exceed the lesser of:
    (i) The fair market rent for existing comparable units in the area 
as established by HUD under 24 CFR 888.111; or
    (ii) 30 percent of the adjusted income of a family whose annual 
income equals 65 percent of the median income for the area, as 
determined by HUD.
    (2) Low HOME Rent Limits. In rental projects with five or more 
HOME-assisted rental units, at least 20 percent of the HOME-assisted 
units must be occupied by very low-income families and meet one of the 
following:
    (i) The rent does not exceed 30 percent of the annual income of a 
family whose income equals 50 percent of the median income for the 
area, as determined by HUD. If the rent determined under this paragraph 
is higher than the fair market rent under paragraph (a)(1) of this 
section, then the maximum rent for units under this paragraph is the 
fair market rent under paragraph (a)(1)(i) of this section; or
    (ii) The rent contribution of the family is not more than 30 
percent of the family's adjusted income.
    (3) HOME Rent Limits for SRO projects.
    (i) For SRO units that have both sanitary and food preparation 
facilities, the rent limit is the zero-bedroom fair market rent. The 
project must meet the requirements of paragraphs (a)(1) and (2) of this 
section.
    (ii) For SRO units that have no sanitary or food preparation 
facilities or only one of the two, the rent limit is 75 percent of the 
zero-bedroom fair market rent. The project is not required to have Low 
HOME rent units but must meet the occupancy requirements of paragraph 
(a)(2) of this section.
    (b) Utility allowances. The participating jurisdiction must 
establish maximum monthly allowances for utilities and services 
(excluding telephone) and update the allowances annually. The 
participating jurisdiction may determine the utility allowance for the 
project based on the type of utilities and services paid by the tenant, 
including any energy efficiency measures. The participating 
jurisdiction may use any of the following for its maximum monthly 
allowances: the HUD Utility Schedule Model, the utility allowance 
established by the local

[[Page 46664]]

public housing authority, or other method approved by HUD.
    (c) Review and approval of rents. The participating jurisdiction 
must review and approve rents proposed by the owner for units, subject 
to the rent limits in paragraph (a) of this section. For all units 
subject to the rent limits in paragraph (a) of this section for which 
the tenant is paying utilities and services, the participating 
jurisdiction must ensure that the rents do not exceed the rent limits 
in paragraph (a) of this section minus the monthly allowances for 
utilities and services in paragraph (b) of this section.
    (d) Period of affordability. The HOME-assisted units must meet 
requirements under this part for the applicable period specified in the 
following table, beginning from project completion.
    (1) The affordability requirements, including the applicable rent 
limits, period of affordability, and income requirements:
    (i) Apply without regard to the term of any loan or mortgage, 
repayment of the HOME investment, or the transfer of ownership;
    (ii) Must be imposed by a deed or use restriction, lien on real 
property, a covenant running with the land, a recorded agreement 
restricting the use of the property, or other mechanisms approved by 
HUD in writing, under which the participating jurisdiction has the 
right to require specific performance (except that the participating 
jurisdiction may provide that the affordability requirements may 
terminate upon foreclosure or transfer in lieu of foreclosure); and
    (iii) Must be recorded in accordance with State recordation laws.
    (2) The participating jurisdiction may use purchase options, rights 
of first refusal, or other preemptive rights to purchase the housing 
before foreclosure or deed in lieu of foreclosure in order to preserve 
affordability.
    (3) The affordability requirements shall be revived according to 
the original terms if, during the period of affordability, the owner of 
record before the foreclosure, or deed in lieu of foreclosure, or any 
entity that includes the former owner or those with whom the former 
owner has or had family or business ties, obtains an ownership interest 
in the project or property.
    (4) The termination of the affordability requirements on the 
project does not terminate the participating jurisdiction's repayment 
obligation under Sec.  92.503(b).

------------------------------------------------------------------------
                                                       Minimum period of
               Rental housing activity                  affordability in
                                                             years
------------------------------------------------------------------------
Rehabilitation or acquisition of existing housing per                  5
 unit amount of HOME funds: Under $15,000............
$15,000 to $40,000...................................                 10
Over $40,000 or rehabilitation involving refinancing.                 15
New construction or acquisition of newly constructed                  20
 housing.............................................
------------------------------------------------------------------------

    (e) Subsequent rents during the period of affordability. (1) The 
HOME rent limits are recalculated on a periodic basis after HUD 
determines fair market rents and median incomes. HUD then publishes the 
updated HOME rent limits.
    (2) The participating jurisdiction must provide project owners with 
information on updated HOME rent limits so that rents may be adjusted 
(not to exceed the rent limits in paragraph (a) of this section) in 
accordance with the written agreement between the participating 
jurisdiction and the owner. Owners must annually provide the 
participating jurisdiction with information on rents and occupancy of 
HOME-assisted units to demonstrate compliance with this section. The 
participating jurisdiction must review rents for compliance and approve 
or disapprove them every year.
    (3) Any increase in rents for HOME-assisted units is subject to the 
provisions of outstanding leases, and in any event, the owner must 
provide tenants of those units not less than 60 days prior written 
notice before implementing any increase in rents.
    (f) Adjustment of HOME rent limits for an existing project.
    (1) Changes in fair market rents and in median income over time 
should be sufficient to maintain the financial viability of a project 
within the HOME rent limits in this section.
    (2) HUD may adjust the HOME rent limits for a project, only if HUD 
finds that an adjustment is necessary to support the continued 
financial viability of the project and only by an amount that HUD 
determines is necessary to maintain continued financial viability of 
the project. HUD expects that this authority will be used sparingly.
    (g) Tenant Income. The income of each tenant must be determined 
initially in accordance with Sec.  92.203(b)(1)(i) unless the 
participating jurisdiction accepts an annual income determination 
pursuant to Sec.  92.203(a)(1) or Sec.  92.203(a)(2) or determines 
income in accordance with Sec.  92.203(b)(2). In addition, each year 
during the period of affordability, the participating jurisdiction must 
require the project owner to re-examine each tenant's annual income in 
accordance with the option in Sec.  92.203(b)(1) selected by the 
participating jurisdiction and included in the written agreement, 
except as follows:
    (1) A participating jurisdiction may permit an owner of small-scale 
housing to re-examine each tenant's annual income every third year, 
instead of annually, during the period of affordability.
    (2) A participating jurisdiction that permits an owner of a 
multifamily project with a period of affordability of ten years or more 
to re-examine a tenant's annual income through a statement and 
certification in accordance with Sec.  92.203(b)(1)(ii), must re-
examine the income of each tenant in accordance with Sec.  
92.203(b)(1)(i), at minimum, every sixth year during the period of 
affordability; and,
    (3) If the participating jurisdiction accepts an annual income 
determination pursuant to Sec.  92.203(a)(1) or Sec.  92.203(a)(2), an 
owner is not required to re-examine a tenant's annual income in 
accordance with Sec.  92.203(b) for HOME.
    (h) Over-income tenants.
    (1) HOME-assisted units continue to qualify as affordable housing 
despite a temporary noncompliance caused by increases in the incomes of 
existing tenants if actions satisfactory to HUD are being taken to 
ensure that all vacancies are filled in accordance with this section 
until the noncompliance is corrected.
    (2) A tenant who no longer qualifies as low-income must pay a rent 
amount equal to the lesser of the amount payable by the tenant under 
State or local law or 30 percent of the family's adjusted income, 
except that:
    (i) A tenant of a HOME-assisted unit subject to rent restrictions 
under section

[[Page 46665]]

42 of the Internal Revenue Code of 1986 (26 U.S.C. 42) must pay a rent 
amount that complies with section 42 of the Internal Revenue Code of 
1986; and
    (ii) A tenant in a HOME-assisted unit designated as floating 
pursuant to paragraph (j) of this section shall pay a rent amount no 
greater than the fair market rent for comparable, unassisted units in 
the neighborhood.
    (i) Surety bonds. Surety bonds or security deposit insurance and 
similar instruments may not be used in lieu of or in addition to a 
security deposit in HOME-assisted units.
    (j) Fixed and floating HOME units. In a project containing HOME-
assisted and other units, the participating jurisdiction may designate 
fixed or floating HOME units. This designation must be made at the time 
of project commitment in the written agreement between the 
participating jurisdiction and the owner, and the HOME units must be 
identified not later than the time of initial unit occupancy. Fixed 
units remain the same throughout the period of affordability. Floating 
units are changed to maintain conformity with the requirements of this 
section during the period of affordability so that the total number of 
housing units meeting the requirements of this section remains the 
same, and each substituted unit is comparable in terms of size, 
features, and number of bedrooms to the originally designated HOME-
assisted unit.
    (k) Tenant selection. The tenants must be selected in accordance 
with Sec.  92.253(e).
    (l) Ongoing responsibilities. The participating jurisdiction's 
responsibilities for on-site inspections and financial oversight of 
rental projects are set forth in Sec.  92.251(f).
0
25. Revise Sec.  92.253 to read as follows:


Sec.  92.253  Tenant protections and selection.

    (a) Lease Contents. For rental housing assisted with HOME funds and 
tenant-based rental assistance, there must be a written lease, in an 
accessible format if necessary due to a disability, between the tenant 
and owner that is for a period of not less than 1 year, unless by 
mutual agreement between the tenant and the owner, a shorter period is 
specified. Any changes to the lease must be in writing. The owner must 
provide the participating jurisdiction with a written lease or a 
revision to a written lease before it is executed. The lease shall 
contain:
    (1) More than one convenient and accessible method to communicate 
directly with the owner or the property management staff, including in 
person, by telephone, email, or through a web portal;
    (2) The participating jurisdiction's contact information for the 
HOME program;
    (3) The VAWA lease term/addendum required under Sec.  92.359(e), 
except as otherwise provided by Sec.  92.359(b); and
    (4) The HOME tenancy addendum described in paragraph (b) of this 
section.
    (b) HOME tenancy addendum. The terms of the HOME tenancy addendum 
shall prevail over any conflicting provisions of the lease. The terms 
and conditions of the written lease, the HOME tenancy addendum, the 
VAWA addendum listed in paragraph (a) of this section, and any addendum 
required by another Federal or State affordable housing program shall 
constitute and contain the sole and entire agreement between the owner 
and the tenant and no prior or contemporaneous oral or written 
representation or agreement between the owner or tenant shall have 
legal effect. The HOME tenancy addendum shall contain the following 
minimum requirements:
    (1) Physical condition of unit and project.
    (i) The owner shall maintain the physical condition of the unit and 
project so that it meets the participating jurisdiction's property 
standards and State and local code requirements in accordance with 
Sec.  92.251(f);
    (ii) With respect to maintenance and repairs to a housing unit, the 
owner shall:
    (A) Provide tenants with the expected time frames for maintaining 
or repairing units as soon as practicable;
    (B) Professionally maintain and repair units and the common areas 
of the project in accordance with the participating jurisdiction's 
property standards as soon as practicable; and
    (C) Not charge a tenant for normal wear and tear or damage to the 
unit or common areas of a project unless due to negligence, 
recklessness, or intentional acts by the tenant.
    (iii) If the owner is required to repair a life-threatening 
deficiency impacting the tenant, and the repairs cannot be completed on 
the day the life-threatening deficiency is identified, the tenant shall 
promptly be relocated into housing that is decent, safe, sanitary, and 
in good repair and that provides the same or a greater level of 
accessibility, or other physically suitable lodging, at no additional 
cost to the tenant, until the repairs are completed, and where it may 
be necessary, reasonable accommodations must continue to be provided 
during the relocation;
    (iv) The owner shall provide tenants with continued, uninterrupted 
utility service in projects with owner-controlled utility services 
unless the interruption is not within the control of the owner (e.g., a 
general power outage).
    (2) Use and occupancy of the unit and project.
    (i) A family may reside in the unit with a foster child, foster 
adult, and/or live-in aide;
    (ii) Except for shared housing in tenant-based rental assistance, 
the tenant's household shall have the right to exclusive use and 
occupancy of the leased unit;
    (iii) The owner may only enter the dwelling unit:
    (A) When the owner provides reasonable advance notification to the 
tenant and enters during reasonable hours for the purpose of performing 
routine inspections and maintenance, for making improvement or repairs, 
or to show the dwelling unit for re-leasing. A written statement, or, 
where necessary due to disability, a statement that is accessible to 
the tenant, specifying the purpose of the owner's entry delivered to 
the dwelling unit at least 2 days before such entry shall be considered 
reasonable advance notification;
    (B) At any time without advance notification when there is 
reasonable cause to believe that an emergency requiring entry to the 
unit exists; and
    (C) If the tenant and all adult members of the household are absent 
from the dwelling unit at the time of entry, the owner shall provide 
the tenant with a written statement, or, where necessary due to 
disability, a statement that is accessible to the tenant, specifying 
the date, time, and purpose of entry.
    (iv) The tenant's household shall have reasonable access and use of 
the common areas of the project;
    (v) Tenants shall be able to organize, create tenant associations, 
convene meetings, distribute literature, and post information; and
    (vi) A tenant may not be required to accept supportive services 
that are offered unless the tenant is living in transitional housing 
and such supportive services are required in connection with the 
transitional housing.
    (3) Notice.
    (i) A tenant must be notified in writing, or, where necessary due 
to disability, a statement that is accessible to the tenant, of the 
specific grounds for any proposed adverse action by the owner. Such 
adverse action includes, but is not limited to, imposition of

[[Page 46666]]

charges for damages that require maintenance and repair;
    (ii) An owner must notify tenants within 5 business days of any 
changes of ownership, including foreclosure of the property, and 
provide at least 30 days notice before an impending sale or foreclosure 
of the property; and
    (iii) The owner may not institute a lawsuit against the tenant 
without providing notice to the tenant.
    (4) A Tenant's rights to available legal proceedings and remedies.
    (i) The tenant shall not be required by the owner to agree to be 
sued, admit guilt, or agree to a judgment in favor of the owner in a 
lawsuit brought in connection with the lease;
    (ii) The owner may not take, hold, or sell personal property of a 
household member without notice to the tenant and a court decision on 
the rights of the parties. This prohibition, however, does not apply to 
an agreement by the tenant concerning disposition of personal property 
remaining in the housing unit after the tenant has moved out of the 
unit. The owner may dispose of this personal property in accordance 
with State law;
    (iii) The tenant may hold the owner or the owner's agents legally 
responsible for any action or failure to act, whether intentional or 
negligent;
    (iv) In any legal proceedings involving tenant and owner, the owner 
and tenant agree that the tenant shall be able to exercise the tenant's 
right to:
    (A) Obtain independent legal representation in any legal 
proceedings in connection with the lease, including in any non-binding 
arbitration or alternative dispute resolution process;
    (B) Have a trial by jury where such right is available to a tenant 
under Federal, State, or local law; and
    (C) Appeal, or to otherwise challenge in court, a court decision in 
connection with the lease where such right is available to the tenant 
under Federal, State, or local law;
    (v) The tenant may only be required to pay the owner's attorney's 
fees or other legal costs if the tenant loses in a court proceeding 
between the owner and the tenant.
    (5) Protection against retaliation.
    (i) An owner may not unreasonably interfere with the tenant's 
comfort, safety, or enjoyment of a rental unit or retaliate against a 
tenant, whether for the purpose of causing the housing to become vacant 
or otherwise, including but not limited to:
    (A) Recovery of, or attempt to recover, possession of the housing 
unit in a manner that is not in accordance with paragraph (d) of this 
section;
    (B) Decreasing services to the housing unit (e.g., trash removal, 
maintenance) or increasing the obligations of a tenant in a manner that 
is not in accordance with the requirements of this part;
    (C) Interfering with a tenant's right to privacy under applicable 
State or local law;
    (D) Harassing a household or their lawful guests; and
    (E) Refusing to honor the terms of the lease.
    (ii) A tenant may exercise any right of tenancy without fear of an 
owner unreasonably interfering with the tenant's comfort, safety, or 
enjoyment of a rental unit or retaliating against a tenant, including 
but not limited to:
    (A) Reporting of inadequate housing conditions of the housing unit 
or project to the owner, the participating jurisdiction, code 
enforcement officials, or HUD;
    (B) Requesting enforcement of the written lease or any protections 
guaranteed under this part; and
    (C) Requesting or obtaining enforcement of any applicable 
protections under Federal, State, or local law.
    (6) Confidentiality. An owner will keep all records containing 
personally identifying information of any individual or family who 
applies for or lives in a HOME-assisted rental unit secure and 
confidential.
    (7) Prohibition on Discrimination. The owner shall operate housing 
assisted under this part in accordance with all applicable 
nondiscrimination and equal opportunity requirements pursuant to Sec.  
92.350 and the VAWA requirements at Sec.  92.359;
    (c) Security deposits. Security deposits must be refundable and no 
greater than two months' rent. Surety bonds or security deposit 
insurance and similar instruments may not be used in lieu of or in 
addition to a security deposit. Upon termination of tenancy by the 
owner or tenant, if the owner charges any amount against a tenant's 
security deposit, the owner must give the tenant a list of all items 
charged against the security deposit and the amount of each item. After 
deducting the amount, if any, used to reimburse the owner, the owner 
must promptly refund the full amount of the unused balance to the 
tenant.
    (d) Termination of tenancy.
    (1) Rental housing assisted with HOME funds.
    (i) An owner may not terminate the tenancy of any tenant or 
household member or refuse to renew the lease of a tenant of rental 
housing assisted with HOME funds, except for serious or repeated 
violation of the terms and conditions of the lease; for violation of 
applicable Federal, State, or local law; for completion of the tenancy 
period for transitional housing or failure to follow any required 
transitional housing supportive services plan; or for other good cause.
    (A) Other good cause does not include an increase in the tenant's 
income or assets, the amount or type of income or assets the tenant 
possesses, or refusal of the tenant to purchase the housing.
    (B) Other good cause may include when a tenant creates a documented 
nuisance under applicable state or local law or when a tenant 
unreasonably refuses to provide the owner access to the unit to allow 
the owner to repair the unit; and
    (C) Other good cause may also include when an owner must terminate 
a tenancy to comply with:
    (1) An order issued by a governmental entity or court that requires 
the tenant vacate the project or unit; or
    (2) A local ordinance that necessitates vacating the project or 
unit.
    (D) An owner may establish good cause for a violation of an 
applicable Federal, State, or local law through a record of conviction 
of a crime that bears directly on the tenant's continued tenancy, such 
as a violation of law that affects the safety of persons or property. 
The owner shall not use a record of arrest, parole or probation, or 
current indictment to establish such a violation.
    (ii) To terminate or refuse to renew tenancy, the owner must serve 
a written notice to vacate upon the tenant specifying the grounds for 
the action at least 60 days before the termination of tenancy and 
provide a copy of the notice to vacate to the participating 
jurisdiction within 5 business days of issuing notice to the tenant. 
The minimum 60-day period is not required if the termination of tenancy 
or refusal to renew is due to a direct threat to the safety of the 
tenants or employees of the housing or an imminent and serious threat 
to the property and the termination of tenancy or refusal to renew is 
in accordance with the requirements of Sec.  92.253(d)(1)(iii).
    (iii) The termination of tenancy or refusal to renew must be in 
accordance with Federal, State, local law, and the requirements of this 
part, including but not limited to requirements regarding fair housing, 
nondiscrimination, and VAWA;
    (iv) An owner may not terminate the tenancy or evict the tenant or 
household members without instituting a civil court proceeding in which 
the tenant or household member has the opportunity to present a 
defense, or before a court decision on the rights of the parties; and

[[Page 46667]]

    (v) An owner may not perform a constructive eviction such as 
locking a tenant out of their unit or stopping service on utilities 
servicing the tenant's unit. An owner may not create a hostile living 
environment or refuse to make a reasonable accommodation in order to 
cause a tenant to terminate their tenancy in a HOME-assisted unit.
    (2) Tenant-based rental assistance.
    (i) The participating jurisdiction must establish written standards 
for termination or refusal to renew a tenancy. The written standards 
must be included in the lease and/or rental assistance contract between 
the participating jurisdiction and the tenant. The participating 
jurisdiction's written standards must require that termination or 
refusal to renew a tenancy be for good cause. At a minimum, good cause 
shall include:
    (A) Serious or repeated violation of the terms and conditions of 
the lease;
    (B) Violation of applicable Federal, State, or local law through a 
tenant's record of conviction of a crime that bears directly on 
continued tenancy, such as the violation of a law that affects the 
safety of persons or property. The owner shall not use a record of 
arrest, parole or probation, or current indictment to establish such a 
violation;
    (C) When a tenant creates a documented nuisance under applicable 
state or local law or when a tenant unreasonably refuses to provide the 
owner access to the unit to allow the owner to repair the unit;
    (D) When an owner intends to withdraw the unit from the rental 
market to occupy the unit; allow an owner's family member to occupy the 
unit; or demolish or substantially rehabilitate the unit;
    (E) Termination of the rental assistance contract; or
    (F) When an owner must terminate a tenancy to comply with:
    (1) An order issued by a governmental entity or court that requires 
the tenant vacate the project or unit; or
    (2) A local ordinance that necessitates vacating the residential 
real property.
    (ii) To terminate or refuse to renew tenancy, the owner must serve 
a written notice to vacate upon the tenant specifying the grounds for 
the action at least 30 days before the termination of tenancy and 
provide a copy of the notice to vacate to the participating 
jurisdiction within 5 business days of issuing notice to the tenant. 
The minimum 30-day period is not required if the termination of tenancy 
or refusal to renew is due to a direct threat to the safety of the 
tenants or employees of the housing or an imminent and serious threat 
to the property and the termination of tenancy or refusal to renew is 
in accordance with the requirements of Sec.  92.253(d)(2)(iii).
    (iii) The termination of tenancy or refusal to renew must be in 
accordance with Federal, State, local law, and the requirements of this 
part, including but not limited to requirements regarding fair housing, 
nondiscrimination, and VAWA.
    (iv) An owner may not perform a constructive eviction such as 
locking a tenant out of their unit or stopping service on utilities 
servicing the tenant's unit. An owner may not create a hostile living 
environment or refuse to allow for a reasonable accommodation in order 
to cause a tenant to terminate their tenancy in a HOME-assisted unit.
    (e) Tenant selection. An owner of rental housing assisted with HOME 
funds must comply with the affirmative marketing requirements 
established by the participating jurisdiction pursuant to Sec.  
92.351(a). The owner must adopt and follow written tenant selection 
policies and criteria that:
    (1) Limit the housing to very low-income and low-income families;
    (2) Are reasonably related to the applicants' ability to perform 
the obligations of the lease (i.e., to pay the rent, not to damage the 
housing, not to interfere with the rights and quiet enjoyment of other 
tenants);
    (3) Limit eligibility or give a preference to a particular segment 
of the population if permitted in its written agreement with the 
participating jurisdiction (and only if the limitation or preference is 
described in the participating jurisdiction's consolidated plan);
    (i) Any limitation or preference must not violate nondiscrimination 
requirements in Sec.  92.350. A limitation or preference does not 
violate nondiscrimination requirements if the housing also receives 
funding from a Federal program that limits eligibility to a particular 
segment of the population (e.g., the Housing Opportunity for Persons 
with AIDS program under 24 CFR part 574, the Shelter Plus Care program 
under 24 CFR part 582, the Supportive Housing program under 24 CFR part 
583, supportive housing for the elderly or persons with disabilities 
under 24 CFR part 891) and the limit or preference is tailored to serve 
that segment of the population; and
    (ii) If a project does not receive funding from a Federal program 
that limits eligibility to a particular segment of the population, the 
project may have a limitation or preference for persons with 
disabilities who need services offered at a project only if:
    (A) The limitation or preference is limited to the population of 
families (including individuals) with disabilities that significantly 
interfere with their ability to obtain and maintain housing;
    (B) Such families will not be able to obtain or maintain themselves 
in housing without appropriate supportive services; and
    (C) The families must not be required to accept the services 
offered at the project. The owner may advertise the project as offering 
various supportive services, including a description of the specific 
supportive services available. The project must be open to all eligible 
persons with disabilities;
    (4) Do not exclude an applicant with Federal or State tenant-based 
rental assistance, such as an applicant with a voucher under the 
Housing Choice Voucher Program (24 CFR part 982) or an applicant 
participating in a HOME tenant-based rental assistance program, because 
of the status of the applicant as a holder of such type of assistance;
    (5) Except for small-scale housing, provide for the selection of 
tenants from a written waiting list in the chronological order of their 
application, insofar as is practicable. The participating jurisdiction, 
upon request by an owner of a small-scale housing project, may 
establish alternative procedures to a written waiting list for the 
selection of tenants in small-scale housing, subject to a determination 
that the selection of tenants from a waiting list in chronological 
order by the owner is impracticable and approval of the procedures in 
writing by HUD;
    (6) Give prompt written notification to any rejected applicant of 
the grounds for any rejection;
    (7) Comply with the VAWA requirements prescribed in Sec.  92.359; 
and
    (8) Comply with the nondiscrimination requirements prescribed in 
Sec.  92.350.
    (f) Health and Safety. In addition to the requirements in Sec.  
92.355, if a participating jurisdiction has actual knowledge of an 
environmental, health, or safety hazard affecting a project, unit, or 
HOME tenants, the participating jurisdiction must contact the affected 
owner and tenants and provide them with a summary of the nature, date, 
and scope of such hazards. If an owner has actual knowledge of an 
environmental, health, or safety hazard affecting their project, units 
within their project, or tenants residing within their projects, the 
owner must inform the participating jurisdiction and provide them with 
a summary of the nature, date, and scope of such hazards. This 
notification requirement only applies to

[[Page 46668]]

environmental, health, and safety hazards that are discovered after an 
environmental review performed pursuant to Sec.  92.352 has already 
taken place.
0
26. In Sec.  92.254:
0
a. Amend paragraph (a)(2)(iii) by removing the words ``single- family'' 
and adding, in their place, the words ``single family'';
0
b. Revise paragraph (a)(2)(iii);
0
c. Add paragraph (a)(2)(iv);
0
d. Revise the second sentence of paragraph (a)(3);
0
e. Amend paragraph (a)(4) by removing the words ``affordability 
period'' and adding, in their place, the words ``period of 
affordability'';
0
f. Revise paragraphs (a)(5)(i), (a)(5)(ii), (a)(6), and (a)(7);
0
g. Redesignate paragraphs (b) through (f) as paragraphs (c) through (g) 
and redesignate paragraph (a)(9) as paragraph (b);
0
h. Revise newly redesignated paragraph (b); and
0
i. Revise the introductory text to newly redesignated paragraph (f), 
and newly redesignated paragraph (g)(1).
    The revisions and additions read as follows:


Sec.  92.254  Qualification as affordable housing: Homeownership.

    (a) * * *
    (2) * * *
    (iii) If a participating jurisdiction intends to use HOME funds for 
homebuyer assistance or for the rehabilitation of owner-occupied single 
family properties, the participating jurisdiction must use the HOME 
affordable homeownership limits provided by HUD for newly constructed 
housing and for existing housing.
    (A) HUD will provide limits for affordable newly constructed 
housing based on 95 percent of the median purchase price for the area 
using Federal Housing Administration (FHA) single family mortgage 
program data for newly constructed housing, with a minimum limit based 
on 95 percent of the U.S. median purchase price for new construction 
for nonmetropolitan areas.
    (B) HUD will provide limits for affordable existing housing based 
on 95 percent of the median purchase price for the area using FHA 
single family mortgage program data for existing housing and other 
appropriate data that are available Nation-wide for sales of existing 
housing, with a minimum limit based on 95 percent of the State-wide 
nonmetropolitan area median purchase price using this data.
    (iv) In lieu of the limits provided by HUD, the participating 
jurisdiction may determine 95 percent of the median area purchase price 
for single family housing in the jurisdiction annually, as follows.
    (A) The participating jurisdiction must set forth the limits for 
single family housing of one, two, three, and four units, for the 
jurisdiction. The participating jurisdiction may determine separate 
limits for existing housing and newly constructed housing.
    (B) For the limits on housing located outside of metropolitan 
areas, a State may aggregate sales data from more than one county if 
the counties are contiguous and similarly situated.
    (C) The participating jurisdiction must include the following 
information in the annual action plan of the Consolidated Plan 
submitted to HUD for review and must update the information in each 
action plan.
    (1) The 95 percent of median area purchase price must be 
established in accordance with a market analysis that ensured that a 
sufficient number of recent housing sales are included in the survey;
    (2) Sales must cover the requisite number of months based on 
volume: For 500 or more sales per month, a 1-month reporting period; 
for 250 through 499 sales per month, a 2-month reporting period; for 
less than 250 sales per month, at least a 3-month reporting period. The 
data must be listed in ascending order of sales price;
    (3) The address of the listed properties must include the location 
within the participating jurisdiction. Lot, square, and subdivision 
data may be substituted for the street address;
    (4) The housing sales data must reflect all, or nearly all, of the 
single family housing sales in the entire participating jurisdiction; 
and
    (5) To determine the median, a participating jurisdiction must take 
the middle sale on the list if an odd number of sales, and if an even 
number, take the higher of the middle numbers and consider it the 
median. After identifying the median sales price, the amount should be 
multiplied by 0.95 to determine the 95 percent of the median area 
purchase price.
* * * * *
    (3) * * * If there is no ratified sales contract with an eligible 
homebuyer for the housing within 12 months of the date of completion of 
construction or rehabilitation, the housing must be rented to an 
eligible tenant as affordable rental housing and must comply with the 
requirements in Sec.  92.252, including the period of affordability in 
Sec.  92.252(d). * * *
* * * * *
    (5) * * *
    (i) Resale. Resale requirements must ensure, if the housing does 
not continue to be the principal residence of the family for the 
duration of the period of affordability, that the housing is made 
available for subsequent purchase only to a buyer whose family 
qualifies as a low-income family and will use the property as the 
family's principal residence. The resale requirement must also ensure 
that the price at resale provides the HOME-assisted homeowner a fair 
return on investment (including the homeowner's investment and any 
improvements) and ensure the housing will remain affordable to a 
reasonable range of low-income homebuyers. The resale price is the fair 
return on investment added to the original sales price of the property, 
subject to market conditions. The participating jurisdiction must 
specifically define ``fair return on investment'' and ``affordability 
to a reasonable range of low-income homebuyers,'' and specifically 
address how it will make the housing affordable to a low-income 
homebuyer in the event that the resale price necessary to provide a 
fair return is not affordable to the subsequent homebuyer. The period 
of affordability is based on the total amount of HOME funds invested in 
the housing.
    (A) Permissible methods of determining fair return and the resale 
price include but are not limited to the following:
    (1) Itemized Formula. To determine fair return on investment and 
resale price, the participating jurisdiction may use an itemized 
formula to add or subtract common, clearly defined factors that 
increase or decrease the value of a homeowner's investment in the 
property over the term of ownership. This formula must include the 
value of capital improvements and the sum of the downpayment and all 
principal payments by the homeowner on the loan secured by the 
property. The formula may depreciate the value of the capital 
improvements and may take into consideration any reduction in value due 
to property damage or delayed or deferred maintenance of the property 
condition. The fair return on a homeowner's investment under this 
formula would be calculated by taking the sum of the defined factors 
for the homeowner's investment in the property over the term of 
ownership and multiplying this amount by a clearly defined, publicly 
accessible index or standard.

[[Page 46669]]

[GRAPHIC] [TIFF OMITTED] TP29MY24.010

    (2) Appraisal Formula. The participating jurisdiction may use an 
appraisal formula to determine fair return on investment and resale 
price based on the amount of market appreciation, if any, over the term 
of ownership. Under this method, the appraisals must be conducted by a 
State licensed or certified third-party appraiser. The amount of market 
appreciation over the term of ownership is determined by subtracting 
the appraised value at the time of initial purchase from the appraised 
value of the property at the time of resale. The fair return on a 
homeowner's investment under this formula is calculated by multiplying 
a clearly defined, publicly accessible standard or index by the amount 
of market appreciation over the term of homeownership.
[GRAPHIC] [TIFF OMITTED] TP29MY24.011

    (3) Index Formula. The participating jurisdiction may use an index 
formula to determine fair return on investment and resale price based 
on the change in value of a homeowner's investment over the term of 
ownership. Index formulas adjust the value of the homeowner's 
investment in proportion to changes in an index, such as the change in 
median household income. To determine the homeowner's fair return using 
this model, the sum of the property's original purchase price and the 
value of any capital improvements to the property is multiplied by the 
change in the specified index during the term of ownership. The formula 
may also depreciate the value of the capital improvements and may take 
into consideration any reduction in value due to property damage or 
delayed or deferred maintenance of the property condition.
[GRAPHIC] [TIFF OMITTED] TP29MY24.012

    (4) Fixed-Rate Formula. The participating jurisdiction may use a 
fixed-rate formula to determine the homeowner's fair return on 
investment. Fixed-rate formulas adjust the value of the homeowner's 
investment by a fixed percentage (rate) per year (e.g., 3.5 percent). 
To determine the fair return on investment using this model, the fixed 
rate is multiplied by the number of years the homeowner owned and 
occupied the home (e.g., 3.5% x 10 years = 35%). The resulting rate is 
then multiplied by the sum of the original purchase price of the home 
and the value of any capital improvements to the property to calculate 
the fair return to the homeowner. The formula may also depreciate the 
value of the capital improvements and may take into consideration any 
reduction in value due to property damage or delayed or deferred 
maintenance of the property condition.

[[Page 46670]]

[GRAPHIC] [TIFF OMITTED] TP29MY24.013

    (B) Except as provided in paragraph (a)(5)(i)(C) of this section, 
deed or use restrictions, a recorded agreement restricting the use of 
the property, liens on real property, covenants running with the land, 
or other similar mechanisms approved by HUD in writing must be used to 
impose the resale requirements.
    (C) The affordability restrictions may terminate upon occurrence of 
any of the following termination events: foreclosure, transfer in lieu 
of foreclosure, or assignment of an FHA insured mortgage to HUD. If the 
owner of record before the termination event obtains an ownership 
interest in the property after the termination event, then the 
affordability restrictions shall be revived under the same terms prior 
to the termination event, including a minimum period of affordability 
equal to the terminated period of affordability.
    (D) Certain housing may be presumed to meet the resale restrictions 
(i.e., the housing will be available and affordable to a reasonable 
range of low-income homebuyers; a low-income homebuyer will occupy the 
housing as the family's principal residence; and the original owner 
will be afforded a fair return on investment) during the period of 
affordability without the imposition of enforcement mechanisms by the 
participating jurisdiction. The presumption must be based upon a market 
analysis of the neighborhood in which the housing is located. The 
market analysis must include an evaluation of the location and 
characteristics of the housing and residents in the neighborhood (e.g., 
sale prices, age and amenities of the housing stock, incomes of 
residents, percentage of owner-occupants) in relation to housing and 
incomes in the housing market area. An analysis of the current and 
projected incomes of neighborhood residents for an average period of 
affordability for homebuyers in the neighborhood must support the 
conclusion that a reasonable range of low-income families will continue 
to qualify for mortgage financing. For example, an analysis shows that 
the housing is modestly priced within the housing market area and that 
families with incomes of 65 percent to 80 percent of the area median 
income can afford monthly payments under average FHA terms without 
other government assistance and housing will remain affordable at least 
during the next five to seven years compared to other housing in the 
market area; the size and amenities of the housing are modest and 
substantial rehabilitation will not significantly increase the market 
value; the neighborhood has housing that is not currently owned by the 
occupants, but the participating jurisdiction is encouraging 
homeownership in the neighborhood by providing homeownership assistance 
and by making improvements to the streets, sidewalks, and other public 
facilities and services. If a participating jurisdiction in preparing a 
neighborhood revitalization strategy under Sec.  91.215(e)(2) of its 
consolidated plan has incorporated the type of market data described 
above, that submission may serve as the required analysis under this 
section. If the participating jurisdiction continues to provide 
homeownership assistance for housing in the neighborhood, it must 
periodically update the market analysis to verify the original 
presumption of continued affordability.
    (ii) Recapture.
    (A) Recapture provisions must ensure that the participating 
jurisdiction recoups all or a portion of the HOME assistance provided 
to the homebuyers if the housing does not continue to be the principal 
residence of the family for the duration of the period of 
affordability. The participating jurisdiction may structure its 
recapture provisions based on its program design and market conditions. 
The period of affordability is based upon the amount of HOME funds that 
directly assisted the homebuyer to buy the dwelling unit. This amount 
includes any HOME assistance that assisted the homebuyer to purchase 
the housing or reduced the purchase price paid by the homebuyer from 
fair market value to an affordable price but excludes the amount of 
HOME assistance provided to develop the unit that does not assist the 
homebuyer or reduce the purchase price paid by the homebuyer. Recapture 
provisions may permit the subsequent homebuyer to assume the HOME 
assistance (subject to the HOME requirements for the remainder of the 
period of affordability) if the subsequent homebuyer is low-income, and 
no additional HOME assistance is provided.
    (B) The following options for recapture requirements are acceptable 
to HUD. The participating jurisdiction may adopt, modify, or develop 
its own recapture requirements for HUD approval. In establishing its 
recapture requirements, the participating jurisdiction is subject to 
the limitation that when the recapture requirement is triggered by a 
sale (voluntary or involuntary) of the housing unit, the amount 
recaptured cannot exceed the net proceeds, if any. The net proceeds are 
the sales price minus superior loan repayment (other than HOME funds) 
and any closing costs.
    (1) Recapture entire amount. The participating jurisdiction may 
recapture the entire amount of the HOME investment from the homeowner.
    (2) Reduction during period of affordability. The participating 
jurisdiction may reduce the HOME investment amount to be recaptured on 
a pro rata basis for the time the homeowner has owned and occupied the 
housing measured against the required period of affordability.
    (3) Shared net proceeds. If the net proceeds are not sufficient to 
recapture the full HOME investment (or a reduced amount as provided for 
in paragraph (a)(5)(ii)(A)(2) of this section) plus enable the 
homeowner to recover the amount of the homeowner's downpayment and any 
capital improvement investment made by the owner since purchase, the 
participating jurisdiction may share the net proceeds. The net proceeds 
are the sales price minus loan repayment (other than HOME funds) and 
closing costs. The net proceeds may be divided proportionally as set 
forth in the following mathematical formulas:

[[Page 46671]]

[GRAPHIC] [TIFF OMITTED] TP29MY24.014

    (4) Owner investment returned first. The participating jurisdiction 
may permit the homebuyer to recover the homebuyer's entire investment 
(downpayment and capital improvements made by the owner since purchase) 
before recapturing the HOME investment.
    (5) Amount subject to recapture. The HOME investment subject to 
recapture is the amount of HOME funds that directly assisted the 
homebuyer to buy the housing. This includes the amount that assisted 
the homebuyer to purchase the housing or reduced the purchase price 
paid by the homebuyer from fair market value to an affordable price but 
excludes the amount of HOME assistance provided to develop the unit 
that did not assist the homebuyer or reduce the purchase price paid by 
the homebuyer. The recaptured funds must be used to carry out HOME-
eligible activities in accordance with the requirements of this part. 
If the HOME assistance is only used for the development subsidy and 
therefore not subject to recapture, the resale option must be used.
    (6) Special considerations for single family properties with more 
than one unit. If the HOME funds are only used to assist a low-income 
homebuyer to acquire one unit in single family housing containing more 
than one unit and the assisted unit will be the principal residence of 
the homebuyer, the affordability requirements of this section apply 
only to the assisted unit. If HOME funds are also used to assist the 
low-income homebuyer to acquire one or more rental units in the single 
family housing, the affordability requirements of Sec.  92.252 apply to 
the assisted rental units, except that the participating jurisdiction 
may impose resale or recapture restrictions on all assisted units 
(owner-occupied and rental units) in the single family housing. If 
resale restrictions are used, the affordability requirements on all 
assisted units continue for the period of affordability. If recapture 
restrictions are used, the affordability requirements on the assisted 
rental units may be terminated, at the discretion of the participating 
jurisdiction, upon recapture of the HOME investment. If HOME funds are 
used to assist only the rental units in a single family property, then 
the requirements of Sec.  92.252 would apply and the owner-occupied 
unit would not be subject to the income targeting or affordability 
provisions of Sec.  92.254.
    (7) Homebuyer assistance for Lease-purchase. In homeownership 
projects that receive HOME funds for acquisition, rehabilitation, or 
new construction, HOME funds may be used to assist homebuyers through 
lease-purchase programs. The owner and homebuyer must execute a lease-
purchase agreement under an existing lease-purchase program prior to 
the date of completion of acquisition, construction, or rehabilitation 
and the homebuyer must qualify as a low-income family at the time of 
signing the lease-purchase agreement. If HOME funds are used for 
rehabilitation or new construction, the housing must be purchased by 
the homebuyer within 36 months of signing the lease-purchase agreement. 
If HOME funds are used to acquire housing that will be resold to a 
homebuyer, the housing must be purchased by the homebuyer within 42 
months of signing the lease-purchase agreement. Owners and homebuyers 
that have entered into a lease-purchase agreement pursuant to the 
requirements in this paragraph are subject to the affordability 
requirements in this section unless the housing is not purchased within 
the required timeframes in this paragraph. If the housing is not 
purchased within the required timeframes in this paragraph, the housing 
is subject to the requirements for affordable rental housing in Sec.  
92.252. In determining the income eligibility of the family, the 
participating jurisdiction must include the income of all persons 
living in the housing.
    (b) Preserving affordability of housing assisted with HOME funds. 
When there is a termination event for affordability restrictions, a 
participating jurisdiction may take the following actions to preserve 
the affordability of the property:
    (1) The participating jurisdiction may exercise purchase options, 
rights of first refusal, or other preemptive rights to obtain ownership 
of the housing before foreclosure to preserve affordability, subject to 
the following requirements:
    (i) The housing must be sold to an eligible homebuyer in accordance 
with paragraph (a)(3) of this section within 6 months of the date the 
participating jurisdiction obtains ownership;
    (ii) The period of affordability for the eligible homebuyer must be 
equal to the remaining period of affordability of the former homeowner 
unless additional HOME funds are used to directly assist the eligible 
homebuyer (i.e., down payment assistance);
    (iii) If the participating jurisdiction directly assists the 
eligible homebuyer with additional HOME funds, then the period of 
affordability must be recalculated in accordance with the table in 
Sec.  92.254(a)(4) based on the total amount of additional HOME funds 
invested. The additional investment must be treated as a new project; 
and
    (iv) The total HOME funds for a project (original investment plus 
additional investment) must not exceed the per-unit subsidy limit in 
Sec.  92.250(a) in effect at the time of the additional investment, 
subject to HUD approval.
    (2) The participating jurisdiction may use additional HOME funds 
for the following costs:
    (i) The cost for the participating jurisdiction to obtain ownership 
of the HOME-assisted housing through a purchase option, right of first 
refusal, or other preemptive right before foreclosure or at the 
foreclosure sale. This cost must be treated as an amendment to the 
original project. The foreclosure costs to acquire housing with a HOME 
loan in default is an eligible cost; however, HOME funds may not be 
used to repay a loan made with HOME funds.
    (ii) The cost of the participating jurisdiction to undertake any 
necessary rehabilitation for the housing acquired. This includes the 
rehabilitation required for the housing to meet applicable property 
standards in Sec.  92.251. This cost must be treated as an amendment to 
the original project.
    (iii) The cost to the participating jurisdiction of owning the 
housing pending resale to another homebuyer. This cost must be treated 
as an amendment to the original project.
    (iv) The cost to assist an eligible homebuyer in purchasing the 
housing. This cost must be treated as a cost for a new project and not 
as an amendment to the original project.

[[Page 46672]]

    (v) As an alternative to charging costs to the HOME program under 
Sec.  92.206, the participating jurisdiction may charge the costs to 
the HOME program under Sec.  92.207 as a reasonable administrative cost 
of its HOME program. To the extent administrative funds are used, they 
may be reimbursed, in whole or in part, when the housing is sold to a 
new eligible homebuyer.
    (3) The participating jurisdiction may permit the Community Land 
Trust, as defined in Sec.  92.2, that originally developed the HOME-
assisted housing, to exercise a purchase option, right of first 
refusal, or other preemptive right to obtain ownership of the housing 
to preserve affordability, including but not limited to the right to 
purchase the housing in lieu of foreclosure, under the following 
conditions:
    (i) The Community Land Trust obtains ownership of the housing, 
subject to existing HOME affordability restrictions;
    (ii) The housing must be resold to an eligible homebuyer in 
accordance with paragraph (a)(3) of this section within 6 months;
    (iii) The period of affordability for the eligible homebuyer is 
equal to the remaining period of affordability of the former homeowner; 
and
    (iv) The participating jurisdiction may not provide additional HOME 
funds to the Community Land Trust to obtain ownership, rehabilitate the 
housing, own/hold the housing pending resale to the next homebuyer, or 
provide down payment assistance to the next eligible homebuyer.
* * * * *
    (f) Providing homeownership assistance through lenders. Subject to 
the requirements of paragraph (f) of this section, the participating 
jurisdiction may provide homeownership assistance through a lending 
institution that is a contractor or nonprofit lending institution that 
is a subrecipient that also provides the first mortgage loan to a low-
income family.
* * * * *
    (g) * * *
    (1) Underwriting standards for homeownership assistance to 
determine the amount of assistance necessary to achieve sustainable 
homeownership. These standards must evaluate the projected overall debt 
of the family after the purchase of the housing, the maximum amount 
that a participating jurisdiction may provide a family, the 
appropriateness of the amount of assistance, assets available to a 
family to acquire the housing, and financial resources to sustain 
homeownership. A participating jurisdiction may not provide a single, 
fixed amount of assistance to each homebuyer that participates in the 
participating jurisdiction's homebuyer program;
* * * * *
0
27. Revise Sec.  92.255 to read as follows:


Sec.  92.255  Purchase of HOME units by in-place tenants.

    (a) During a HOME-assisted rental unit's period of affordability, 
the participating jurisdiction may permit an owner to sell or otherwise 
convey a HOME-assisted rental unit to an existing tenant in accordance 
with the requirements of Sec.  92.254. However, refusal by the tenant 
to purchase the housing does not constitute good cause for termination 
of tenancy or failure to renew the lease. The participating 
jurisdiction may not permit the use of a lease-purchase program under 
this section.
    (b) If no additional HOME funds are used to enable the tenants to 
become homeowners, the homeownership units are subject to a period of 
affordability equal to the remaining period of affordability if the 
units continued as rental units. The participating jurisdiction must 
impose resale requirements that comply with Sec.  92.254(a) for the 
required period of affordability.
    (c) If additional HOME funds are used to directly assist the 
tenants to become homeowners, the period of affordability is the 
remaining period of affordability if the unit had remained a rental 
unit or the required period under Sec.  92.254(a)(4) for the amount of 
direct homeownership assistance provided, whichever is longer.


Sec.  92.258  [Amended]

0
28. In Sec.  92.258:
0
a. Amend paragraphs (a) and (b)(1) by removing the words ``single-
family'' and adding, in their place, the words ``single family''; and
0
b. Amend the introductory text to paragraph (d)(3) by removing the 
citation ``Sec.  92.252(e)'' and adding, in its place, the citation 
``Sec.  92.252(d).
0
29. In Sec.  92.300:
0
a. Amend the introductory text of paragraph (a) by removing the words 
``developed or sponsored'' and adding, in their place, the words 
``developed, or sponsored'';
0
b. Revise paragraphs (a)(2) through (4) and the introductory text of 
paragraph (a)(5);
0
c. Amend the introductory text of paragraph (a)(5)(iii) by removing the 
word ``nonprofit'' and adding, in its place, the words ``private 
nonprofit'';
0
d. Amend the introductory text of paragraph (a)(6) by replacing 
``community development housing organization'' with ``community housing 
development organization'' and by removing the word ``new'';
0
e. Revise paragraphs (a)(6)(i) and (ii)(A), paragraph (a)(7), and the 
last sentence of paragraph (b);
0
f. Amend paragraph (e) by removing the words ``developed or sponsored'' 
and adding, in their place, the words ``developed, or sponsored'' and 
by removing the words ``and specifies'' and adding, in their place, the 
words ``and must specify''; and
0
g. Revise the first sentence of paragraph (f).
    The revisions read as follows:


Sec.  92.300  Set-aside for community housing development organizations 
(CHDOs).

    (a) * * *
    (2) Rental housing is ``owned'' by the community housing 
development organization if the community housing development 
organization is the owner in fee simple absolute of rental housing (or 
has a long term ground lease) to low-income families in accordance with 
Sec.  92.252. If the housing is to be rehabilitated or constructed, the 
community housing development organization hires and oversees the 
developer that rehabilitates or constructs the housing. The community 
housing development organization must oversee or hire and contract with 
an experienced project manager to oversee all aspects of the 
development, including obtaining zoning, securing non-HOME financing, 
selecting a developer or general contractor, overseeing the progress of 
the work, and determining the reasonableness of costs. The community 
housing development organization must own the rental housing during 
development and for a period at least equal to the period of 
affordability in Sec.  92.252. If the CHDO acquires housing that meets 
the property standards in Sec.  92.251, the CHDO must own the rental 
housing for a period at least equal to the period of affordability in 
Sec.  92.252.
    (3) Rental housing is ``developed'' by the community housing 
development organization if the community housing development 
organization is the owner in fee simple absolute (or has a long term 
ground lease) and the developer of housing that will be constructed or 
existing substandard housing that will be rehabilitated for rent to 
low-income families in accordance with Sec.  92.252. To be the 
``developer,'' the community housing development organization may share 
developer responsibilities with another entity but must be in charge of 
all aspects of the development process, including selecting the site, 
obtaining

[[Page 46673]]

permit approvals and all project financing, selecting architects, 
engineers, and general contractors, overseeing project progress, and 
determining the reasonableness of costs. At a minimum, the community 
housing development organization must own the housing until project 
completion.
    (4) Rental housing is ``sponsored'' by the community housing 
development organization if it is rental housing ``owned'' or 
``developed'' in accordance with paragraph (a)(2) or (3) of this 
section, as applicable, by a subsidiary of a community housing 
development organization, a limited partnership of which the community 
housing development organization or its subsidiary is the managing 
general partner, or a limited liability company of which the community 
housing development organization or its subsidiary is the managing 
member.
    (i) The subsidiary of the community housing development 
organization must be a nonprofit organization and must be wholly owned 
by the community housing development organization. If the limited 
partnership or limited liability company agreement permits the 
community housing development organization to be removed as the 
managing general partner or managing member, the agreement must provide 
that the removal must be for cause and that the community housing 
development organization must be replaced with another community 
housing development organization.
    (ii) The HOME funds must be provided by the participating 
jurisdiction directly to the entity that owns the project.
    (5) HOME-assisted rental housing is also ``sponsored'' by a 
community housing development organization if the community housing 
development organization ``developed'' the rental housing project in 
accordance with paragraph (a)(3) of this section and agrees to convey 
the project to an identified private nonprofit organization at a 
predetermined time after completion of the project. Sponsored rental 
housing, as provided in this paragraph (a)(5), is subject to the 
following requirements:
* * * * *
    (6) * * *
    (i) To be the ``developer,'' the community housing development 
organization may share the developer role with another entity but must 
be in charge of all aspects of the development process, including 
selecting the site, obtaining permit approvals and all project 
financing, selecting architects, engineers, and general contractors, 
overseeing project progress, determining the reasonableness of costs, 
identifying eligible homebuyers, and overseeing the sale of 
homeownership units. The community housing development organization may 
provide direct homeownership assistance (e.g., downpayment assistance) 
when it sells the housing to low-income families and the community 
housing development organization will not be considered a subrecipient. 
The HOME funds for downpayment assistance shall not be greater than 10 
percent of the amount of HOME funds for development of the housing.
    (ii) * * *
    (A) While proceeds retained by the community housing development 
organization are not subject to the requirements of this part, the 
participating jurisdiction must specify in the written agreement with 
the community housing development organization whether the proceeds are 
to be used for HOME-eligible activities or other housing activities to 
benefit low-income families.
* * * * *
    (7) The participating jurisdiction must determine the form of 
assistance (e.g., grant or loan) in accordance with Sec.  92.205(b) 
that it will provide to the community housing development organization 
for a rental housing project under paragraph (a)(4) of this section and 
must provide the assistance directly to the entity that owns the 
project.
    (b) * * * If during the first 24 months of its participation in the 
HOME Program a participating jurisdiction cannot identify a sufficient 
number of capable community housing development organizations, up to 20 
percent of the minimum community housing development organization set 
aside specified in paragraph (a) of this section (but not more than 
$150,000 during the 24 month period) may be committed to an 
organization that meets the definition of ``community housing 
development organization'' in Sec.  92.2, except for the requirements 
in paragraph (9) of the definition, in order to develop demonstrated 
capacity and qualify as a community housing development organization in 
the jurisdiction.
* * * * *
    (f) The participating jurisdiction must ensure that a community 
housing development organization does not receive HOME funding for any 
fiscal year in an amount that provides more than $50,000 or 50 percent 
of the community housing development organization's total operating 
expenses in that fiscal year, whichever is greater. * * *
0
30. Revise Sec.  92.302 to read as follows:


Sec.  92.302  Housing education and organizational support.

    HUD is authorized to provide education and organizational support 
assistance, in conjunction with HOME funds made available to community 
housing development organizations in accordance with section 233 of the 
Act.
    (a) HUD will publish a notice in the Federal Register announcing 
the availability of funding under this section, as appropriate. The 
notice need not include funding for each of the eligible activities but 
may target funding from among the eligible activities.
    (b) Notwithstanding the definition of ``community land trust'' in 
Sec.  92.2, HUD may provide housing education and organizational 
support assistance under this section to a community land trust only if 
the following requirements are met:
    (1) The community land trust meets the definition of a ``community 
housing development organization'' at Sec.  92.2, except for the 
requirements in paragraphs (9) and (10) of the definition.
    (2) The community land trust is established to complete the 
activities in paragraph (b)(3) of this section.
    (3) The community land trust:
    (i) Acquires land to hold in perpetuity and primarily for 
conveyance under long-term ground leases;
    (ii) Transfers ownership of any structural improvements located on 
such leased land to the lessees; and
    (iii) Retains a preemptive option to purchase any such structural 
improvement at a price determined by formula that is designed to ensure 
that the improvement remains affordable to low- and moderate-income 
families in perpetuity;
    (4) The community land trust's corporate membership is open to 
residents of a particular geographic area, as specified in the 
organization's bylaws; and
    (5) The board of directors:
    (i) Includes a majority of members who are elected by the corporate 
membership; and
    (ii) Is composed of equal numbers of lessees pursuant to paragraph 
(b)(2)(ii), members who are not lessees, and any other category of 
persons described in the organization's bylaws.


Sec.  92.351  [Amended]

0
31. Amend the last sentence of Sec.  92.351(a)(1) by removing the words 
``If participating'' and adding, in their place, the words ``If the 
participating'' and by removing the citation

[[Page 46674]]

``Sec.  92.253(d)(3)'' and adding, in its place, the citation ``Sec.  
92.253(e)(3)''.


Sec.  92.352  [Amended]

0
32. In Sec.  92.352:
0
a. Amend paragraph (a) by removing the words ``the cost'' and adding, 
in their place, the word ``cost''; and
0
b. Amend paragraph (b)(1) by removing the word ``decisionmaking'' and 
adding, in its place, the words ``decision making''.
0
33. In Sec.  92.353:
0
a. Revise paragraph (c)(2)(ii)(A) by removing the words ``preceded by 
at least 30 days advance written notice to the tenant specifying the 
grounds for the action'' and adding, in their place, the words ``in 
accordance with Sec.  92.253(d)''; and
0
b. Revise paragraph (c)(2)(ii)(C).
    The revision to read as follows:


Sec.  92.353  Displacement, relocation, and acquisition.

* * * * *
    (c) * * *
    (2) * * *
    (ii) * * *
    (C) For purposes of the URA, the person meets the definition of 
``persons not displaced'' as defined in 49 CFR 24.2; or
* * * * *


Sec.  92.354  [Amended]

0
34. Amend Sec.  92.354, in paragraph (a)(2) by removing the word 
``single-family'' and adding, in its place, the words ``single 
family''.
0
35. In Sec.  92.356:
0
a. Revise paragraph (d)(1);
0
b. Redesignate paragraphs (e)(2) through (6) as paragraphs (e)(3) 
through (7), respectively;
0
c. Add new paragraph (e)(2); and
0
d. Amend paragraph (f)(1) by removing the citation ``Sec.  92.252(e)'' 
and adding, in its place, the citation ``Sec.  92.252(d)''.
    The revisions and additions read as follows:


Sec.  92.356  Conflict of interest.

* * * * *
    (d) * * *
    (1) A disclosure of the nature of the conflict, accompanied by an 
assurance that there has been public disclosure of the conflict (public 
disclosure is considered a combination of any of the following: 
publication on the recipient's website, including social media; 
electronic mailings; media advertisements; public service 
announcements; and display in public areas such as libraries, grocery 
store bulletin boards, and neighborhood centers), evidence of the 
public disclosure, and a description of how the public disclosure was 
made; and
* * * * *
    (e) * * *
    (2) Whether an opportunity was provided for open competitive 
bidding or negotiation;
* * * * *
0
36. In Sec.  92.454:
0
a. Amend paragraph (a)(3) by removing the word ``and'';
0
b. Amend paragraph (a)(4) by removing the text ``participating 
jurisdiction.'' and adding, in its place, the text ``participating 
jurisdiction; and'';
0
c. Add paragraph (a)(5); and
0
d. Amend paragraph (b) by removing the words ``participating 
jurisdictions that'' and adding, in their place, the words 
``participating jurisdictions whose funds were reduced under Sec.  
92.551 or that''.
    The addition reads as follows:


Sec.  92.454  Reallocations by formula.

    (a) * * *
    (5) Any HOME funds available for reallocation as a result of any 
reductions under 24 CFR 92.551 or 92.552.
* * * * *
0
37. Amending Sec.  92.500 by revising paragraph (c)(2)(ii) to read as 
follows:


Sec.  92.500  The HOME Investment Trust Fund.

* * * * *
    (c) * * *
    (2) * * *
    (ii) The statute or local ordinance requires repayments from its 
own affordable housing trust fund to be made to the local account;
* * * * *
0
38. In Sec.  92.502:
0
a. Revise paragraph (b);
0
b. Amend paragraph (c)(1) by removing the words ``set-up''; and
0
c. Revise paragraphs (d)(1) and (2).
    The revisions read as follows:


Sec.  92.502  Program disbursement and information system.

* * * * *
    (b) Project funding. After the participating jurisdiction executes 
the HOME Investment Partnership Agreement, submits the applicable 
banking and security documents, complies with the environmental 
requirements under 24 CFR part 58 for release of funds, and commits 
funds to a specific local project, the participating jurisdiction may 
provide funding to an activity by identifying specific investments in 
the disbursement and information system. The participating jurisdiction 
is required to enter complete project set-up information before 
providing funding to the project.
* * * * *
    (d) * * *
    (1) Complete project completion information must be entered into 
the disbursement and information system, or otherwise provided to HUD.
    (2) Additional HOME funds may be committed to a project up to one 
year after project completion, but the amount of HOME funds in the 
project may not exceed the maximum per-unit subsidy amount established 
under Sec.  92.250 at the time of underwriting.
* * * * *
0
39. In Sec.  92.504:
0
a. Revise the section heading and paragraph (b), and revise and 
republish paragraph (c); and
0
b. Remove paragraph (d).
    The revisions read as follows:


Sec.  92.504  Participating jurisdiction responsibilities; written 
agreements.

* * * * *
    (b) Executing a written agreement. Before disbursing any HOME funds 
to any entity, the participating jurisdiction must enter into a legally 
binding written agreement with that entity. Before disbursing any HOME 
funds to any entity, a State recipient, subrecipient, or contractor 
that is administering all or a part of the HOME program on behalf of 
the participating jurisdiction must also enter into a legally binding 
written agreement with that entity. The written agreement must ensure 
compliance with the requirements of this part and be a separate 
agreement from project financing documents (e.g., mortgage or deed of 
trust, regulatory agreement, or promissory note).
    (c) Provisions in written agreements. The contents of the agreement 
may vary depending upon the role the entity is asked to assume or the 
type of project undertaken. This section details basic requirements and 
the minimum provisions by role and type of entity that must be included 
in a written agreement.
    (1) State recipient. The provisions in the written agreement 
between the State and a State recipient will depend on the program 
functions that the State specifies the State recipient will carry out 
in accordance with Sec.  92.201(b). In accordance with Sec.  92.201, 
the written agreement must either require the State recipient to comply 
with the requirements established by the State or require the State 
recipient to establish its own requirements to comply with this part, 
including requirements for income determinations and underwriting 
subsidy layering guidelines, rehabilitation standards,

[[Page 46675]]

refinancing guidelines, homebuyer program policies, and affordability.
    (i) Use of the HOME funds. The agreement must describe the amount 
and use of the HOME funds to administer one or more programs to produce 
affordable housing, provide downpayment assistance, or provide tenant-
based rental assistance, including the anticipated type and number of 
housing projects to be funded (e.g. the number of single family 
homeowner loans to be made or number of homebuyers to receive 
downpayment assistance), tasks to be performed, a schedule for 
completing the tasks (including a schedule for committing funds to 
projects that meet the deadlines established by this part), a budget 
for each program, and any requirement for matching contributions. These 
items must be in sufficient detail to provide a sound basis for the 
State to effectively monitor performance under the agreement.
    (ii) Affordability. The agreement must require housing assisted 
with HOME funds to meet the affordability requirements of Sec.  92.252 
or Sec.  92.254, as applicable, and must require repayment of the funds 
if the housing does not meet the affordability requirements for the 
period of affordability. The agreement must require a means of 
enforcement of the affordability requirements by the State 
participating jurisdiction or, if the State recipient will be the owner 
at project completion of the affordable housing, the intended 
beneficiaries. The means of enforcement may include liens on real 
property, deed or use restrictions, a recorded agreement restricting 
the use of the property, covenants running with the land, or other 
mechanisms approved by HUD in writing, under which the participating 
jurisdiction has the right to require specific performance. The 
agreement must establish whether repayment of HOME funds must be 
remitted to the State or retained by the State recipient for additional 
eligible activities.
    (iii) Program income. The agreement must state whether program 
income is to be remitted to the State or retained by the State 
recipient for additional eligible activities.
    (iv) Uniform administrative requirements. The agreement must 
require the State recipient to comply with applicable uniform 
administrative requirements, as described in Sec.  92.505.
    (v) Project requirements. The agreement must require compliance 
with project requirements in subpart F of this part, as applicable in 
accordance with the type of project assisted. For any projects 
involving HOME rental housing, the agreement must require that the HOME 
tenancy addendum is used in accordance with Sec.  92.253 for all HOME-
assisted units. For tenant-based rental assistance, the agreement must 
require compliance with the requirements at Sec.  92.253(a)-(c) and 
(d)(2).
    (vi) Other program requirements. The agreement must require the 
State recipient to carry out each activity in compliance with all 
Federal laws and regulations described in subpart H of this part, 
except that the State recipient does not assume the State's 
responsibilities for release of funds under Sec.  92.352 and the 
intergovernmental review process in Sec.  92.357 does not apply to the 
State recipient. If HOME funds are provided for development of rental 
housing or provision of tenant-based rental assistance, the agreement 
must set forth all obligations the State imposes on the State recipient 
in order to meet the VAWA requirements under Sec.  92.359, including 
notice obligations and any obligations with respect to the emergency 
transfer plan (including whether the State recipient must develop its 
own plan or follow the State's plan).
    (vii) Affirmative marketing. The agreement must specify the State 
recipient's affirmative marketing responsibilities in accordance with 
Sec.  92.351.
    (viii) Requests for disbursement of funds. The agreement must 
specify that the State recipient may not request disbursement of HOME 
funds under this agreement until the funds are needed for payment of 
eligible costs. The amount of each request must be limited to the 
amount needed. Program income must be disbursed before the State 
recipient requests funds from the State.
    (ix) Records and reports. The agreement must specify the particular 
records that must be maintained and the information or reports that 
must be submitted in order to assist the State in meeting its 
recordkeeping and reporting requirements.
    (x) Enforcement of the written agreement. The agreement must 
specify remedies for breach of the provisions of the written agreement. 
The agreement must specify that, in accordance with 2 CFR 200.339, 
suspension or termination may occur if the State recipient materially 
fails to comply with any term of the agreement. The State may permit 
the agreement to be terminated in whole or in part in accordance with 2 
CFR 200.340.
    (xi) Written agreement. Before providing HOME funds to any owner, 
community housing development organization, subrecipient, homeowner, 
homebuyer, tenant (or landlord) receiving tenant-based rental 
assistance, or contractor providing services to or on behalf of the 
State recipient, the State recipient must have a fully executed written 
agreement with such person or entity that meets the requirements of 
this section. For affordable housing assisted with HOME funds, the 
State recipient must provide HOME funds directly to the owner under the 
terms and conditions of the written agreement. The agreement must 
establish that any repayment on any form of assistance of HOME funds 
must be remitted to the State or, if permitted by the State, retained 
by the State recipient for additional eligible activities.
    (xii) Duration of the agreement. The duration of the agreement will 
depend on which functions the State recipient performs (e.g., whether 
the State recipient or the State has responsibility for monitoring 
rental projects for the period of affordability) and which activities 
are funded under the agreement.
    (xiii) Fees. The agreement must prohibit the State recipient and 
its subrecipients and community housing development organizations from 
charging for any of the prohibited costs listed in Sec.  92.214, 
including but not limited to servicing, origination, processing, 
inspection, or other fees for the costs of administering a HOME 
program.
    (2) Subrecipient. The agreement must set forth and require the 
subrecipient to follow the participating jurisdiction's requirements, 
including requirements for income determinations, underwriting and 
subsidy layering guidelines, rehabilitation standards, refinancing 
guidelines, homebuyer program policies, and affordability requirements. 
The agreement between the participating jurisdiction and the 
subrecipient must include the following:
    (i) Use of the HOME funds. The agreement must describe the amount 
and use of the HOME funds for one or more programs, including the 
anticipated type and number of housing projects to be funded (e.g., the 
number of single family homeowners loans to be made or the number of 
homebuyers to receive downpayment assistance), tasks to be performed, a 
schedule for completing the tasks (including a schedule for committing 
funds to projects in accordance with deadlines established by this 
part), a budget, any requirement for matching contributions, and the 
period of the agreement. These items must be in sufficient detail to 
provide a sound basis for the participating jurisdiction to effectively

[[Page 46676]]

monitor performance under the agreement.
    (ii) Program income. The agreement must state if program income is 
to be remitted to the participating jurisdiction or retained by the 
subrecipient for additional eligible activities.
    (iii) Uniform administrative requirements. The agreement must 
require the subrecipient to comply with applicable uniform 
administrative requirements, as described in Sec.  92.505.
    (iv) Other program requirements. The agreement must require the 
subrecipient to carry out each activity in compliance with all Federal 
laws and regulations described in subpart H of this part, except that 
the subrecipient does not assume the participating jurisdiction's 
responsibilities for environmental review under Sec.  92.352 and the 
intergovernmental review process in Sec.  92.357 does not apply. The 
agreement must set forth the requirements the subrecipient must follow 
to enable the participating jurisdiction to carry out environmental 
review responsibilities before HOME funds are committed to a project. 
If the subrecipient is administering a HOME rental housing program or 
tenant-based rental assistance program on behalf of the participating 
jurisdiction, the participating jurisdiction must set forth in the 
written agreement all obligations on the subrecipient in order to meet 
the VAWA requirements under Sec.  92.359, including notice obligations 
and obligations under the emergency transfer plan.
    (v) Affirmative marketing. The agreement must specify the 
subrecipient's affirmative marketing responsibilities in accordance 
with Sec.  92.351.
    (vi) Requests for disbursement of funds. The agreement must specify 
that the subrecipient may not request disbursement of funds under the 
agreement until the funds are needed for payment of eligible costs. The 
amount of each request must be limited to the amount needed. Program 
income must be disbursed before the subrecipient requests funds from 
the participating jurisdiction.
    (vii) Reversion of assets. The agreement must specify that upon 
expiration of the agreement, the subrecipient must transfer to the 
participating jurisdiction any HOME funds on hand at the time of 
expiration and any accounts receivable attributable to the use of HOME 
funds.
    (viii) Records and reports. The agreement must specify the 
particular records that must be maintained and the information or 
reports that must be submitted in order to assist the participating 
jurisdiction in meeting its recordkeeping and reporting requirements.
    (ix) Enforcement of the written agreement. The agreement must 
specify remedies for breach of the provisions of the written agreement. 
The agreement must specify that, in accordance with 2 CFR 200.339, 
suspension or termination may occur if the subrecipient materially 
fails to comply with any term of the agreement. The participating 
jurisdiction may permit the agreement to be terminated in whole or in 
part in accordance with 2 CFR 200.340.
    (x) Written agreement. Before the subrecipient provides HOME funds 
to any owner, community housing development organization, subrecipient, 
homeowner, homebuyer, tenant (or landlord) receiving tenant-based 
rental assistance, or contractor providing services to or on behalf of 
the subrecipient, the subrecipient must have a fully executed written 
agreement with such entity that meets the requirements of this section. 
For housing projects assisted with HOME funds, the subrecipient must 
provide HOME funds directly to the owner under the terms and conditions 
of the written agreement. The agreement must establish whether 
repayment of HOME funds must be remitted to the participating 
jurisdiction or may be retained by the subrecipient for additional 
eligible activities.
    (xi) Fees. The agreement must prohibit the subrecipient from 
charging for any of the prohibited costs listed in Sec.  92.214, 
including but not limited to servicing, origination, or other fees for 
the costs of administering the HOME program.
    (xii) Project requirements. The agreement must require enforcement 
of project requirements in subpart F of this part, as applicable in 
accordance with the type of project assisted. For any projects 
involving HOME rental housing, the agreement must require that the HOME 
tenancy addendum is used in accordance with Sec.  92.253 for all HOME-
assisted units. For tenant-based rental assistance, the agreement must 
require compliance with the requirements at Sec.  92.253(a)-(c) and 
(d)(2).
    (3) For-profit or nonprofit housing owner (other than a community 
housing development organization or single family owner-occupant). The 
participating jurisdiction may preliminarily award HOME funds for a 
proposed project, contingent on conditions such as obtaining other 
financing for the project. This preliminary award is not a commitment 
to a project. The written agreement committing the HOME funds to the 
project must meet the requirements of ``commit to a specific local 
project'' in the definition of ``commitment'' in Sec.  92.2. The HOME 
assistance must be provided directly to the owner under the terms and 
conditions of a written agreement that complies with the requirements 
of this part and contains the following:
    (i) Use of the HOME funds. The agreement between the participating 
jurisdiction and a for-profit or nonprofit housing owner must include 
the address of the project or the legal description of the property if 
a street address has not been assigned to the property, the specific 
amount and use of the HOME funds and other funds for the project, 
including the tasks to be performed for the project, a schedule for 
completing the tasks and the project, and a complete budget. These 
items must be in sufficient detail to provide a sound basis for the 
participating jurisdiction to effectively monitor performance under the 
agreement to achieve project completion and compliance with the HOME 
requirements. The agreement must state that any and all repayments made 
by the owner on HOME assistance (e.g., grants or loans) must be 
remitted to the participating jurisdiction, unless the participating 
jurisdiction permits a subrecipient or State recipient to retain the 
funds.
    (ii) Affordability. The agreement must require housing assisted 
with HOME funds to meet the affordability requirements of Sec.  92.252 
or Sec.  92.254, as applicable, and must require repayment of the funds 
if the housing does not meet the affordability requirements for the 
specified period of affordability. The agreement must require a means 
of enforcement of the affordability requirements by the participating 
jurisdiction and the intended beneficiaries. The means of enforcement 
may include liens on real property, deed or use restrictions, a 
recorded agreement restricting the use of the property, covenants 
running with the land, or other mechanisms approved by HUD in writing, 
under which the participating jurisdiction has the right to require 
specific performance.
    (A) If an owner is undertaking rental projects, the agreement must 
establish the initial rents, the procedures for rent increases pursuant 
to Sec.  92.252(e)(2), the number of HOME units, the size of the HOME 
units, the designation of the HOME units as fixed or floating, and 
include the requirement that the owner provide the address (e.g., 
street address and apartment number) of each HOME unit no later than 
the time of initial occupancy.

[[Page 46677]]

    (B) If the owner is undertaking a homeownership project for sale to 
homebuyers in accordance with Sec.  92.254(a), the agreement must set 
forth the resale or recapture requirements that must be imposed on the 
housing, the sales price or the basis upon which the sales price will 
be determined, and the disposition of the sales proceeds. Recaptured 
funds must be returned to the participating jurisdiction.
    (iii) Project requirements. As applicable and in accordance with 
the type of project assisted, the agreement must require compliance 
with the project requirements in subpart F of this part, including 
compliance with tenant protections in 24 CFR 92.253. The agreement may 
permit the owner to limit eligibility or give a preference to a 
particular segment of the population in accordance with Sec.  
92.253(e).
    (iv) Property standards. The agreement must require the housing to 
meet the property requirements as specified in Sec.  92.251. The 
agreement must also require owners of rental housing assisted with HOME 
funds to maintain the housing in compliance with Sec.  92.251 for the 
duration of the period of affordability.
    (v) Other program requirements. The agreement must require the 
owner to carry out each project in compliance with the following 
requirements of subpart H of this part:
    (A) The agreement must specify the owner's affirmative marketing 
responsibilities as enumerated by the participating jurisdiction in 
accordance with Sec.  92.351.
    (B) The federal and nondiscrimination requirements in Sec.  92.350.
    (C) Any displacement, relocation, and acquisition requirements 
imposed by the participating jurisdiction consistent with Sec.  92.353.
    (D) The labor requirements in Sec.  92.354.
    (E) The conflict of interest provisions prescribed in Sec.  
92.356(f).
    (F) If HOME funds are being provided to develop rental housing, the 
agreement must set forth all obligations the participating jurisdiction 
imposes on the owner in order to meet the VAWA requirements under Sec.  
92.359, including the owner's notice obligations and owner obligations 
under the emergency transfer plan.
    (vi) Records and reports. The agreement must specify the particular 
records that must be maintained and the information or reports that 
must be submitted in order to assist the participating jurisdiction in 
meeting its recordkeeping and reporting requirements. The written 
agreement must require the owner of rental housing to annually provide 
the participating jurisdiction with information on rents (including 
rental amounts charged to the tenant), and occupancy of HOME-assisted 
units to demonstrate compliance with Sec.  92.252. If the rental 
housing project has floating HOME units, the written agreement must 
require that the owner provide the participating jurisdiction with 
information regarding unit substitution and filling vacancies so that 
the project remains in compliance with Sec.  92.252. The agreement must 
specify the reporting requirements (including copies of financial 
statements) to enable the participating jurisdiction to determine the 
financial condition (and continued financial viability) of the rental 
project.
    (vii) Enforcement of the written agreement. The agreement must 
specify remedies for breach of the provisions of the written agreement. 
The agreement must require a means of enforcement of the affordability 
requirements by the participating jurisdiction and the intended 
beneficiaries. The means of enforcement may include liens on real 
property, deed or use restrictions, a recorded agreement restricting 
the use of the property, covenants running with the land, or other 
mechanisms approved by HUD in writing, under which the participating 
jurisdiction has the right to require specific performance.
    (viii) Requests for disbursement of funds. The agreement must 
specify that the owner may not request disbursement of funds under the 
agreement until the funds are needed for payment of eligible costs. The 
amount of each request must be limited to the amount needed.
    (ix) Duration of the agreement. The agreement must specify the 
duration of the agreement. If the housing assisted under this agreement 
is rental housing, the agreement must be in effect through the period 
of affordability required by the participating jurisdiction under Sec.  
92.252. If the housing assisted under this agreement is homeownership 
housing, the agreement must be in effect at least until completion of 
the project and ownership by the low-income family.
    (x) Fees. The agreement must state the fees that may be charged by 
the owner in accordance with Sec.  92.214(b)(4) and prohibit owners 
from charging tenants for any of the prohibited charges listed in Sec.  
92.214(b), including but not limited to fees that are not customarily 
charged in rental housing, such as laundry room access fees. The 
agreement must also prohibit the owner undertaking a homeownership 
project from charging servicing, origination, processing, inspection, 
or other fees for the costs of providing homeownership assistance.
    (4) Contractor. The participating jurisdiction selects a contractor 
through applicable procurement procedures and requirements. The 
contractor provides goods or services in accordance with a written 
agreement (the contract). For contractors who are administering any of 
the participating jurisdiction's HOME programs or specific services for 
one or more programs, the contract must include at a minimum the 
following provisions:
    (i) Use of the HOME funds. The agreement must describe the use of 
the HOME funds, including the tasks to be performed, a schedule for 
completing the tasks, and budget.
    (ii) Program requirements. The agreement must provide that the 
contractor is subject to the requirements in part 92 that are 
applicable to the participating jurisdiction, except for Sec. Sec.  
92.505 and 92.506, and the contractor cannot assume the participating 
jurisdiction responsibilities for environmental review, decision 
making, and action under Sec.  92.352. The agreement must provide that 
the requirements at 2 CFR part 200 applicable to a contractor apply. 
The agreement must list the requirements applicable to the activities 
the contractor is administering. If applicable to the work under the 
contract, the agreement must set forth all obligations the 
participating jurisdiction imposes on the contractor in order to meet 
the VAWA requirements under Sec.  92.359, including any notice 
obligations and any obligations under the emergency transfer plan.
    (iii) Duration of agreement. The agreement must specify the 
duration of the contract.
    (5) Homebuyer, homeowner, or tenant or owner receiving tenant-based 
rental or security deposit assistance. When a participating 
jurisdiction provides assistance to a homebuyer, homeowner, or tenant 
or owner for tenant-based rental assistance, the written agreement may 
take many forms depending upon the nature of assistance. At minimum, it 
must include the following:
    (i) For homebuyers, the agreement must contain the requirements in 
Sec.  92.254(a), the value of the property, principal residence, lease-
purchase, if applicable, and the resale or recapture provisions.
    (A) The agreement must specify the amount of HOME funds, the form 
of assistance, e.g., grant, amortizing loan, deferred payment loan, the 
use of the funds (e.g., down-payment, closing costs, rehabilitation), 
and the time by which the housing must be acquired.

[[Page 46678]]

    (B) For existing housing that is acquired for homeownership, the 
agreement must require the participating jurisdiction to inspect the 
housing to determine that the project meets the property standards in 
Sec.  92.251 and require compliance with the requirements in Sec.  
92.251(c)(3).
    (ii) For homeowners, the agreement must contain the requirements in 
Sec.  92.254(b) and specify the amount and form of HOME assistance, 
rehabilitation work to be undertaken, date for completion, and property 
standards to be met.
    (iii) For tenants or owners receiving payments under a HOME tenant-
based rental assistance program, the rental assistance contract or the 
security deposit contract must meet the requirements in Sec.  92.209 
and applicable requirements in Sec.  92.253.
    (6) Community housing development organization: When HOME funds are 
provided to a community housing development organization, the 
requirements in the written agreement depend upon the type of HOME 
assistance. At minimum, the agreement must comply with the following 
requirements for the type of HOME assistance:
    (i) Using set-aside funds under Sec.  92.300 for affordable 
housing. The written agreement must contain the requirements described 
in paragraph (c)(3) of this section and the following additional 
requirements:
    (A) Role of community housing development organization. The 
agreement must state whether the community housing development 
organization will own, develop, or sponsor rental housing, as described 
in Sec.  92.300(a)(2)-(5) and require the community housing development 
organization to comply with the applicable requirements in Sec.  
92.300(a), based on its role.
    (B) Developer of homeownership housing. If the community 
development organization is a ``developer'' of homeownership housing, 
as defined in Sec.  92.300(a)(6), the agreement must specify whether 
the organization may retain proceeds from the sale of the housing and 
whether the proceeds are to be used for HOME-eligible or other housing 
activities to benefit low-income families.
    (C) Sharing of developer responsibilities. If the community housing 
development organization will share developer responsibilities with 
another entity pursuant to Sec.  92.300(a)(3) or (6), the participating 
jurisdiction must enter into a written agreement only with the 
community housing development organization. The written agreement must 
require the community housing development organization to enter into a 
separate agreement with the co-developer. At minimum, the agreement 
between the community housing development organization and its co-
developer must contain the following:
    (1) The responsibilities of the community housing development 
organization and co-developer with descriptions of the responsibilities 
in sufficient detail to demonstrate compliance with Sec.  92.300(a)(3) 
or (a)(6), as applicable;
    (2) A description of the amount of developer fee and other 
compensation, if any, to be paid to the co-developer;
    (3) A description of any ownership interest in the community 
housing development organization and if applicable, any membership or 
partnership interest in the owner held by the co-developer; and
    (4) A provision that the agreement's terms and conditions are 
subject to review by the participating jurisdiction and if such terms 
and conditions affect a project's compliance with HOME requirements, 
the terms and conditions are subject to approval by the participating 
jurisdiction.
    (ii) Receiving assistance for operating expenses. The agreement 
must describe the use of HOME funds for operating expenses (e.g., 
salaries, wages, and other employee compensation and benefits); 
employee education, training, and travel; rent; utilities; 
communication costs; taxes; insurance; equipment; and materials and 
supplies. If the community housing development organization is not also 
receiving funds for a housing project to be developed, sponsored, or 
owned by the community housing development organization, the agreement 
must provide that the community housing development organization is 
expected to receive funds for a project within 24 months of the date of 
receiving the funds for operating expenses, and must specify the terms 
and conditions upon which this expectation is based and the 
consequences of failure to receive funding for a project. If the 
community housing development organization is also receiving funds for 
a project, there must be a separate written agreement that complies 
with this section for the use of HOME funds for the project and the 
agreement must contain the applicable requirements in paragraph 
(c)(6)(i) of this section.
    (iii) Receiving assistance for project-specific technical 
assistance and site control loans or project-specific seed money loans. 
The agreement must identify the specific site or sites and describe the 
amount and use of the HOME funds (in accordance with Sec.  92.301), 
including a budget for work, a period of performance, and a schedule 
for completion. The agreement must also set forth the basis upon which 
the participating jurisdiction may waive repayment of the loans, 
consistent with Sec.  92.301, if applicable.
    (7) Technical assistance provider to develop the capacity of 
community housing development organizations in the jurisdiction. The 
agreement must identify the specific nonprofit organization(s) to 
receive capacity building assistance. The agreement must describe the 
amount and use (scope of work) of the HOME funds, including a budget, a 
period of performance, and a schedule for completion.
0
40. Amend Sec.  92.505 by revising the first sentence to read as 
follows:


Sec.  92.505  Applicability of uniform administrative requirements.

    The requirements of 2 CFR part 200 apply to participating 
jurisdictions, State recipients, and subrecipients receiving HOME 
funds, except for the following provisions: Sec. Sec.  200.306, 
200.307, 200.308 (not applicable to participating jurisdictions), 
200.311 (except as provided in Sec.  92.257), 200.312, 200.328, 
200.330, 200.334, 200.335, and 200.344. * * *
0
41. Revise Sec.  92.507 to read as follows:


Sec.  92.507  Closeout.

    This section specifies the procedure and actions that must be 
completed by a participating jurisdiction and HUD to closeout a grant.
    (a) Closeout process.
    (1) HUD will close out a grant when it determines that the 
participating jurisdiction has completed all required activities and 
closeout actions for the grant. If the participating jurisdiction fails 
to complete the requirements in accordance with this section, HUD may 
close out the Federal award with the information available. HUD may 
closeout individual grants or multiple grants simultaneously.
    (2) The participating jurisdiction must complete requirements in 
paragraph (b) of this section to closeout a grant.
    (3) Before the end of the budget period of the grant, the 
participating jurisdiction shall draw down funds for all financial 
obligations incurred under the grant from the U.S. Treasury account by 
electronic funds transfer.
    (i) At closeout, the participating jurisdiction must promptly 
refund any balances of unobligated cash paid in advance. All such 
refunds must be completed prior to submission of the information and 
reports required in paragraph (b) of this section.

[[Page 46679]]

    (ii) At the end of the budget period, all remaining balance of 
funds in the U.S. Treasury account shall be canceled and thereafter 
shall not be available for obligation or expenditure for any purpose, 
as required by 31 U.S.C. 1552(a). Any unused grant funds disbursed from 
the U.S. Treasury account which are in the possession of the 
participating jurisdiction shall be refunded to HUD or recaptured by 
the U.S. Treasury.
    (4) HUD will initiate closeout actions in the computerized 
disbursement and information system when the participating jurisdiction 
has met the requirements established in paragraph (b) of this section.
    (i) If the participating jurisdiction does not submit and enter all 
required data, information, and reports or complete the actions 
described in paragraph (b) of this section, HUD will proceed to close 
out the grant with the information available within one year of the 
period of performance end date.
    (ii) HUD may report the participating jurisdiction's material 
failure to comply with the terms and conditions of the award or 
requirements in this section to the OMB-designated integrity and 
performance system (currently FAPIIS). HUD may also pursue other 
enforcement actions in 2 CFR 200.339.
    (5) A participating jurisdiction may request, and HUD may provide 
an extension of the period of performance or closeout deadlines 
provided good cause is demonstrated.
    (b) Actions required for closeout. A participating jurisdiction 
must complete the following actions for closeout of the grant:
    (1) Submit a complete and final Federal Financial Report for the 
grant to HUD within 120 days of the end date of the period of 
performance, as indicated in the grant agreement;
    (2) Complete all activities for which funds were expended;
    (3) Enter all data for activities in the computerized disbursement 
and information system established by HUD, within one year from the end 
of the period of performance as required by the grant agreement;
    (4) Demonstrate that all HOME-assisted units are occupied by 
eligible occupants by entering accurate beneficiary data in the 
computerized disbursement and information system established by HUD, 
within one year from the end of the period of performance, as required 
by the grant agreement;
    (5) The participating jurisdiction must comply with the 
requirements in 2 CFR 200.313(e) for the disposition of any equipment 
acquired under one or more HOME grants, that is no longer needed for 
the HOME program, or for other activities previously supported by a 
Federal agency;
    (6) Resolve and close all HOME monitoring findings for the grant 
(if applicable);
    (7) Resolve and close all OIG audit findings for the grant (if 
applicable);
    (8) Resolve and close all Single Audit findings for the grant (if 
applicable);
    (9) Carry out all other responsibilities under the grant agreement 
and applicable laws and regulations satisfactorily; and
    (10) The participating jurisdiction must complete a closeout 
certification prepared by HUD. The certification shall identify the 
grant being closed out and include provisions with respect to the 
following:
    (i) Identification of any unused grant funds that were canceled by 
HUD;
    (ii) Compliance with the recordkeeping requirements in Sec.  
92.508, including maintaining program, project, financial, program 
administration, community housing development organization records, 
records concerning other Federal requirements, and such other records 
as necessary to carry out responsibilities for the grant by the 
participating jurisdiction, its State recipients, and subrecipients;
    (iii) Monitoring and enforcement of the requirements for all HOME-
assisted units set forth in 24 CFR part 92 for the period specified in 
the HOME written agreement with the property owner;
    (iv) Compliance with use of program income, recaptured funds, and 
repayments in accordance with Sec.  92.503. If the jurisdiction is not 
a participating jurisdiction (as a metropolitan city, urban county, or 
consortium member) when it receives funds, the funds are not subject to 
the requirements of 24 CFR part 92;
    (v) All actions required in 2 CFR 200.344 applicable to the grant 
have been taken by the participating jurisdiction;
    (vi) All actions required in 2 CFR 200.344 applicable to the 
participating jurisdiction's subrecipients have been taken;
    (vii) Other provisions appropriate to any special circumstances of 
the grant closeout, in modification of or in addition to the 
obligations in paragraphs (c)(1) and (2) of this section;
    (viii) Acknowledge future monitoring by HUD and that findings of 
noncompliance may be taken into account by HUD as unsatisfactory 
performance of the participating jurisdiction and in any risk-based 
assessment of a future grant award under this part; and
    (ix) Unless otherwise provided in a closeout certification, the 
Consolidated Plan will remain in effect after closeout until the 
expiration of the program year covered by the most recent Consolidated 
Plan.
    (c) Post closeout adjustments and continuing responsibilities. The 
closeout of a grant does not affect any of the obligations required 
under this part and under 2 CFR 200.345, including:
    (1) The right of HUD to disallow costs and recover funds on the 
basis of a later audit or other review. HUD must make any cost 
disallowance determination and notify the participating jurisdiction 
within the record retention period;
    (2) Compliance with the requirements in Sec.  92.508;
    (3) Compliance with the requirements in Sec.  92.509;
    (4) Records retention as required in 2 CFR 200.345, as applicable;
    (5) Monitoring and enforcement of the requirements for all HOME-
assisted units set forth in 24 CFR part 92 for the period of 
affordability specified in the HOME written agreement with the property 
owner;
    (6) Compliance with use of program income, recaptured funds, and 
repayments in accordance with Sec.  92.503. If the jurisdiction is not 
a participating jurisdiction (as a metropolitan city, urban county, or 
consortium member) when it receives funds, the funds are not subject to 
the requirements of 24 CFR part 92;
    (7) Compliance with the requirement in 2 CFR 200.345(a)(2) that the 
participating jurisdiction return any funds due as a result of a later 
refund, corrections, or other transactions including final indirect 
cost rate adjustments; and
    (8) Compliance with the audit requirements at 2 CFR part 200, 
subpart F (2 CFR 200.345(a)(4)).
0
42. In Sec.  92.508:
0
a. Add a sentence to the end of paragraph (a)(2)(ix);
0
b. Revise paragraph (a)(3)(iii);
0
c. Amend paragraph (a)(3)(iv) by removing the citation ``Sec.  
92.504(d)'' and adding, in its place, the citation ``Sec.  92.251(f)'';
0
d. Revise paragraph (a)(3)(vi);
0
e. Amend paragraph (a)(3)(ix) by removing the words ``the tenant'' and 
adding, in their place, the words ``the applicable tenant''; and
0
f. Amend paragraph (a)(5)(iv) by removing the citation to ``2 CFR 
200.302'' and adding, in its place, a citation to ``2 CFR 200.302 and 2 
CFR 200.303''.
    The revisions and additions read as follows:

[[Page 46680]]

Sec.  92.508  Recordkeeping.

    (a) * * *
    (2) * * *
    (ix) * * * If the participating jurisdiction will apply excess 
matching contribution to a future fiscal year's liability, records 
demonstrating compliance with the matching requirements of Sec.  92.218 
through Sec.  92.221 for the excess amount applied, as described in 
Sec.  92.221(b)(1), must be provided at the time of application, and 
maintained for five years from the date of application.
* * * * *
    (3) * * *
    (iii) Records demonstrating that each rental housing or 
homeownership project meets the minimum per-unit subsidy amount of 
Sec.  92.205(c), the maximum per-unit subsidy amount in accordance with 
the requirement in Sec.  92.250(a), the subsidy layering and 
underwriting evaluation adopted in accordance with Sec.  92.250(b), 
and, if applicable, compliance with a green building standard 
established by HUD in accordance with the requirements in Sec.  
92.250(c).
* * * * *
    (vi) Records demonstrating that each tenant-based rental assistance 
project meets the written tenant selection policies and criteria of 
Sec.  92.209(c), including any targeting requirements, the rent 
reasonableness requirements of Sec.  92.209(f), the maximum subsidy 
provisions of Sec.  92.209(h), housing standards of Sec.  92.209(i) 
(including property inspection reports), security deposit requirements 
of Sec.  92.209(j), and calculation of the HOME subsidy.
* * * * *
0
43.Amend Sec.  92.551 by adding paragraph (c)(3) to read as follows:


Sec.  92.551  Corrective and remedial actions.

* * * * *
    (c) * * *
    (3) A participating jurisdiction may request HUD reduce grant 
payments by an amount equal to the amount of expenditures that did not 
comply with the requirements of this part. The amount of a reduction 
may be for the entire grant amount.
0
44. Amend Sec.  92.552 by removing the period at the end of paragraph 
(a)(2)(iv) and adding, in its place, a semicolon, and adding paragraphs 
(a)(2)(v) through (vii) to read as follows:


Sec.  92.552  Notice and opportunity for hearing; sanctions.

    (a) * * *
    (2) * * *
    (v) Reduce grant amounts paid to the participating jurisdiction by 
an amount equal to the amount of any expenditures that did not comply 
with the requirements of this part. The amount of a reduction may be 
for the entire grant amount;
    (vi) Revoke a jurisdiction's designation as a participating 
jurisdiction; and
    (vii) Terminate the assistance in whole or in part in accordance 
with 2 CFR 200.340.
* * * * *

Subpart M [Removed]

0
45. Remove subpart M (Sec.  92.600 through Sec.  92.618).

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

0
46. The authority citation for part 570 continues to read as follows:

    Authority:  12 U.S.C. 1701x, 1701x-1; 42 U.S.C. 3535(d) and 
5301-5320.

0
47. Amend Sec.  570.200 by revising paragraph (h) introductory text to 
read as follows:


Sec.  570.200  General policies.

* * * * *
    (h) Reimbursement for pre-award costs. The effective date of the 
grant agreement is the date of HUD execution of the grant agreement. 
For a Section 108 loan guarantee, the effective date of the grant 
agreement is the date of HUD execution of the grant agreement amendment 
for the particular loan guarantee commitment.
* * * * *

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

0
48. The authority citation for part 982 continues to read as follows:

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

0
49. Amend Sec.  982.507 by revising paragraphs (c)(2) and (3) to read 
as follows:


Sec.  982.507  Rent to owner: Reasonable rent.

* * * * *
    (c) * * *
    (2) LIHTC. If the rent requested by the owner exceeds the LIHTC 
rents for non-voucher families, the PHA must determine the rent to 
owner is a reasonable rent in accordance with paragraph (b) of this 
section and the rent shall not exceed the lesser of the:
    (i) Reasonable rent; and
    (ii) The payment standard established by the PHA for the unit size 
involved.
    (3) HOME Program. If the rent requested by the owner exceeds the 
HOME rents for non-voucher families, the PHA must determine the rent to 
owner is a reasonable rent in accordance with paragraph (b) of this 
section and the rent shall not exceed the lesser of the:
    (i) Reasonable rent; and
    (ii) The payment standard established by the PHA for the unit size 
involved.
* * * * *

Adrianne Todman,
Acting Secretary.
[FR Doc. 2024-10975 Filed 5-28-24; 8:45 am]
BILLING CODE 4210-67-P

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