[Federal Register Volume 75, Number 209 (Friday, October 29, 2010)]
[Proposed Rules]
[Pages 66978-67009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27069]
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Part III
Department of Housing and Urban Development
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24 CFR Parts 91 and 92
Housing Trust Fund; Proposed Rule
Federal Register / Vol. 75 , No. 209 / Friday, October 29, 2010 /
Proposed Rules
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 91 and 92
[Docket No. FR-5246-P-02]
RIN 2506-AC30
Housing Trust Fund
AGENCY: Office of the Assistant Secretary for Community Planning and
Development, HUD.
ACTION: Proposed rule.
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SUMMARY: The Housing and Economic Recovery Act of 2008 establishes a
Housing Trust Fund (HTF) to be administered by HUD. The purpose of the
HTF is to provide grants to State governments to increase and preserve
the supply of rental housing for extremely low- and very low-income
families, including homeless families, and to increase homeownership
for extremely low- and very low-income families. This proposed rule
submits, for public comment, the regulations that will govern the HTF.
DATES: Comment due date: December 28, 2010.
ADDRESSES: Interested persons are invited to submit comments regarding
this rule to the Regulations Division, Office of General Counsel,
Department of Housing and Urban Development, 451 7th Street, SW., Room
10276, Washington, DC 20410-0500. Communications must refer to the
above docket number and title. There are two methods for submitting
public comments. All submissions must refer to the above docket number
and title.
Submission of Comments by Mail. Comments may be submitted
by mail to the Regulations Division, Office of General Counsel,
Department of Housing and Urban Development, 451 7th Street, SW., Room
10276, Washington, DC 20410-0001.
Electronic Submission of Comments. Interested persons may
submit comments electronically through the Federal eRulemaking Portal
at http://www.regulations.gov. HUD strongly encourages commenters to
submit comments electronically. Electronic submission of comments
allows the commenter maximum time to prepare and submit a comment,
ensures timely receipt by HUD, and enables HUD to make them immediately
available to the public. Comments submitted electronically through the
http://www.regulations.gov Web site can be viewed by other commenters
and interested members of the public. Commenters should follow the
instructions provided on that site to submit comments electronically.
Note: To receive consideration as public comments, comments must
be submitted through one of the two methods specified above. Again,
all submissions must refer to the docket number and title of the
rule.
No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
Public Inspection of Public Comments. All properly submitted
comments and communications submitted to HUD will be available for
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the
above address. Due to security measures at the HUD Headquarters
building, an advance appointment to review the public comments must be
scheduled by calling the Regulations Division at 202-708-3055 (this is
not a toll-free number). Individuals with speech or hearing impairments
may access this number through TTY by calling the Federal Information
Relay Service at 800-877-8339. Copies of all comments submitted are
available for inspection and downloading at http://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Marcia Sigal, Office of Community
Planning and Development, Department of Housing and Urban Development,
451 7th Street, SW., Room 7162, Washington, DC 20410; telephone number
202-402-3002 (this is not a toll-free number). Persons with hearing or
speech impairments may access this number through TTY by calling the
toll-free Federal Information Relay Service at 800-877-8389.
SUPPLEMENTARY INFORMATION:
I. Background
The Housing and Economic Recovery Act of 2008 (Pub. L. 110-289,
approved July 30, 2008) (HERA) was major housing legislation enacted to
reform and improve the regulation of Fannie Mae and Freddie Mac, the
government-sponsored enterprises (GSEs), strengthen neighborhoods
hardest hit by the foreclosure crisis, enhance mortgage protection and
disclosures, and maintain the availability of affordable home loans.
The reform of the GSEs is provided in the Federal Housing Finance
Regulatory Reform Act of 2008, which is found in Division A, Title I of
HERA. Section 1131 of the GSE-reform portion of HERA amended the
Federal Housing Enterprises Financial Safety and Soundness Act of 1992
(12 U.S.C. 4501 et seq.) (FHEFSSA) to add a new section 1337 entitled
``Affordable Housing Allocations'' and a new section 1338 entitled
``Housing Trust Fund.''
Section 1337 of FHEFSSA provides for the HTF to be funded with
amounts allocated by Fannie Mae and Freddie Mac. Proceeds equal to 4.2
basis points (.042%) of the GSEs' new mortgage purchases were to be
partially diverted to fund the HTF. However, because the GSEs
experienced significant declines in their respective capital reserves
in 2008, under the authority granted to the Federal Housing Finance
Agency (FHFA), the GSE's oversight agency, by Section 1367 of FHEFSSA,
Fannie Mae and Freddie Mac were placed in conservatorship in September
2008. Under Section 1337 of FHEFSSA, the Director of the FHFA has the
authority to suspend Fannie Mae's and Freddie Mac's contributions to
the HTF if such contributions were to have an adverse impact on the
financial stability of the GSEs. Shortly after being placed in
conservatorship, the GSEs were instructed by the FHFA to suspend such
contributions. However, Section 1338 of FHEFSSA provides that the HTF
may be funded with amounts appropriated, transferred, or credited to
the HTF under other provisions of law. Accordingly, HUD is proceeding
with regulatory implementation of the HTF in anticipation of future
funding through sources other than GSE proceeds.
Congress authorized the HTF with the stated purpose of: (1)
Increasing and preserving the supply of rental housing for extremely
low-income (ELI) families with incomes between 0 and 30 percent of area
median income and very low-income (VLI) families with incomes between
30 and 50 percent of area median income, including homeless families,
and (2) increasing homeownership for ELI and VLI families. HUD's
periodic reports to Congress on worst-case needs for affordable rental
housing document that shortages of affordable rental housing for ELI
and VLI families have grown increasingly more severe. A household
defined as experiencing worst-case housing needs means that the
household has an income at or below 50 percent of the area median
income, receives no housing assistance, and has a severe rent burden
(paying more than half of its income for rent) and/or lives in severely
inadequate conditions (e.g., incomplete plumbing).
As of 2007, the combined number of ELI and VLI renters with worst-
case housing needs was 5.9 million, or 37 percent of all ELI and VLI
renters (15.9 million). Furthermore, 51 percent of ELI and VLI renters
who lack housing assistance have worst-case housing needs. When the
2007 data are broken down further, worst-case needs
[[Page 66979]]
occurred to 47 percent of all ELI renters and 73 percent of ELI renters
lacking housing assistance. By comparison, 24 percent of all VLI
renters and 28 percent of VLI renters lacking housing assistance have
worst-case housing needs. ELI renters are particularly burdened with
severe housing problems.
There is a shortage of low-cost rental units, as builders and
housing providers are unable to construct, finance, and operate a
sufficient supply of rental housing affordable to ELI and VLI
households. The result is that in 2007, for every 100 ELI renters
nationwide, only 44 rental units were both affordable and available for
rent or currently occupied by households in this income range. HUD
notes that more than half of the 3.8 million ELI renters who occupied
affordable units in 2007 were able to do so only because they reported
receiving government rental assistance, such as from the public
housing, project-based Section 8 or Section 202/811 programs, and the
housing choice voucher program. Other units that would have been
affordable may have been occupied by higher-income households. For
every 100 VLI and ELI renters, on average, there were only 74
affordable units available. The HTF will provide funds to produce
additional units affordable to ELI and VLI households with the greatest
need, thus increasing the supply and reducing the most critical
component of the existing shortage.
Housing Trust Fund--Formula Allocation
Section 1338 of FHEFSSA directs HUD to establish, through
regulation, the formula for distribution of amounts made available for
the HTF. The statute specifies that only certain factors are to be part
of the formula, and assigns priority to certain factors. HUD's proposed
formula for the allocation of HTF funds was submitted for public
comment in a proposed rule published on December 4, 2009 (74 FR 63938).
The allocation formula will be renumbered and published with the final
program rule in Sec. Sec. 92.710-92.714.
Housing Trust Fund--Administration of the Fund
In addition to the statutory direction to establish by regulation a
formula for the allocation of HTF funds, section 1338 of FHEFSSA
directs HUD to establish and manage the HTF, the purpose of which is to
provide grants to States for use to: (1) Increase and preserve the
supply of rental housing for ELI and VLI families, including homeless
families; and (2) increase homeownership for ELI and VLI families.
Section 1338 of FHEFSSA also directs HUD to establish regulations to
administer the HTF, and this rule proposes the regulations that will
govern the HTF.
II. This Proposed Rule
New 24 CFR Part 92 Subpart N
HUD proposes to codify the HTF regulations in a new subpart N of 24
CFR part 92. Part 92 contains the regulations for HUD's HOME Investment
Partnerships program (HOME program). Established by the National
Affordable Housing Act of 1992, the HOME program is the largest Federal
block grant program that produces affordable housing for VLI
households. The HOME program is similar in most aspects to the proposed
HTF. Each year, the HOME program allocates approximately $2 billion to
States and more than 600 localities nationwide. Since it inception in
1992, the HOME program has produced approximately one million units of
affordable rental and homeownership units. Both programs provide
funding through a formula allocation for rental housing production and
homeownership. The HOME program provides formula grants that
communities use, often in partnership with local nonprofit groups, to
fund a wide range of activities that build, buy, and/or rehabilitate
affordable housing units for rent or homeownership. The HTF will
operate in substantially the same manner, with formula grants to States
used to develop affordable housing units for rent or homeownership. In
addition, the grant activities in both programs require the same
grantee administration and HUD oversight functions.
While the HTF provides new resources targeted to producing
affordable housing primarily for ELI households, an entirely new or
different set of program regulations is not necessary in order to
implement the statutory requirements of the HTF. Many of the program
requirements applicable to the HOME program are applicable to the HTF.
Further, each State is a participating jurisdiction in the HOME
program, and all States and their designated housing entities will be
the HTF grantees. Accordingly, it is HUD's position that codifying the
HTF regulations in part 92 is a logical step that will enable HUD to:
(1) Provide a coordinated ``menu'' of production programs that State
and local governments can use to address the affordable housing needs
of low-, very low- and extremely low-income households, including those
with special needs, in their communities, and (2) simplify and
streamline program requirements for grantees, and avoid making grantees
create new or separate structures to administer HTF funds.
Additionally, HUD believes that many grantees will use HTF funds in
combination with HOME program funds to develop mixed-income housing,
and many of the applicable requirements are the same for both programs
(e.g., administrative requirements; monitoring, site and neighborhood
standards; and affirmative marketing). This approach is expected to
expedite the expenditure of HTF funds and deliver more affordable
housing sooner to households and communities.
HUD is specifically soliciting input from HTF grantees and
interested parties on HUD's proposed coordination of HOME program and
HTF regulations, as well as on additional or alternative ways to better
coordinate and use HTF funds with funding from other Federal, State,
local programs, or private sources typically used to produce mixed-
income affordable housing developments.
The Department is embarking on a number of initiatives to
incorporate and promote energy efficiency, transit-oriented
development, and other sustainability features in the development of
units and projects assisted with HUD funds. These efforts will help
reduce the impact of the property on the environment and promote a
healthier environment for building occupants, as well as reduce the
costs of utilities to help make these units affordable. In addition,
facilitating the inclusion of affordable housing for ELI and VLI
households in transit-oriented development will help ensure that
affordable housing is located in areas that are within walking distance
of transit facilities and more easily accessible to essential area
destinations such as jobs, and educational, retail, and health
services. The HTF implements the Department's commitment to further
sustainable affordable housing available for ELI households, by
requiring energy and water-efficiency features in all HTF-assisted
units. In addition, the proposed rule includes specific funding
commitment definitions that address the need to commit HTF funds early
in the development process of a Transit-Oriented Development (TOD)
project.
HUD's efforts to promote energy-efficient homes directly reflect
the Department's energy goal contained in its Fiscal Year (FY) 2010-15
Strategic Plan to ``promote energy-efficient buildings and location-
efficient communities that are healthy, affordable, and diverse.'' The
proposed
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energy and water efficiency requirements for the HTF are similar to
those of several HUD energy-efficiency and green initiatives, such as
the ``Green'' Community Housing Development Organization Notice Of
Funding Availability (HOME Competitive Reallocation of CHDO Funds to
Provide for Energy Efficient and Environmentally Friendly Housing for
Low-Income Families), the Self-Help Homeownership Opportunity Program
(SHOP) NOFA, and the Neighborhood Stabilization Program (NSP)-2 NOFA.
Fostering the development of sustainable, transit-oriented, mixed-
use communities with HTF funds is consistent with the Livability
Principles established by the Partnership for Sustainable Communities,
an interagency collaboration between HUD, the Department of
Transportation (DOT), and the Environmental Protection Agency (EPA).
This partnership aims to coordinate Federal housing, transportation,
and other infrastructure investments to provide communities with the
resources they need to build more livable and sustainable communities,
promote equitable development, and improve access to affordable
housing. Each of the three agencies is responsible for incorporating
the Livability Principles into its policies and programs, to the
maximum extent feasible.
Energy-efficiency and transit-oriented development definitions and
property standards for the HTF can be found in Sections 92.702 and
92.741-92.745, respectively. The following sections highlight key
provisions of the HTF regulations established in accordance with
section 1338 of FHEFSSA.
General Provisions
Sections 92.701-92.703 of new subpart N sets forth the general
provisions applicable to the HTF.
Section 92.701 provides an overview of the statutory basis for the
HTF, and identifies which subparts of part 92 are applicable to the
HTF. To the extent that other sections or subparts of part 92 are
applicable to the HTF, Sec. 92.701 provides that references to
``HOME'' mean ``HTF'' and that references to ``participating
jurisdictions'' mean ``HTF grantees.''
Definitions
Section 92.702 incorporates terms defined in the HOME program
regulations (24 CFR 92.2) and defines terms that are specifically
applicable to the HTF. Key definitions applicable to the HTF include
the following:
Commitment. The definition of ``commitment'' implements the
statutory requirement that HTF funds must be used or committed within 2
years of the formula allocation (grant award). Grantees must commit
funds to a specific project pursuant to legally binding agreements that
meet the requirements of written agreements in Sec. 92.774. To
facilitate TOD projects, the definition of ``commitment'' permits a
unit of general local government to acquire the land for a TOD project
in advance of having specific project plans. The definition of transit-
oriented commitment would allow the acquisition of property without the
requirement of having a specific project. The unit of general local
government has 36 months from the date of acquisition of the property
for a TOD project to commit additional funds to a specific project on
the property. To discourage the use of this provision for acquisition
of property for any purpose other than the development of HTF-assisted
units as part of transit-oriented development, the local government
where the development is to take place is required to hold title to the
property. If no commitment to a specific HTF-assisted project occurs
within 36 months from date of the acquisition of the property, the
amount of HTF funds used to pay for the property, or the current value
of the property, whichever is greater, must be repaid to the grantee's
HTF account. The amount repaid will be prorated in proportion to the
amount of HTF funds to total funds used to purchase the land.
Energy Efficiency. Several definitions are included in this rule
that will help facilitate the development of energy-efficient
residential units, including definitions of ENERGY STAR-Qualified New
Homes and WaterSense-labeled products.
Grantee. The statute allows a State or State-designated entity to
receive the HTF formula allocations. Each State may decide which agency
within the State will be the HTF grantee. For example, in many States,
there are multiple State agencies, as well as a State housing finance
agency, that administer housing programs.
Recipient. An HTF recipient means an entity that receives HTF funds
solely as a developer or owner of HTF-assisted housing. Section
1338(c)(9) of FHEFSSA requires an eligible recipient of a grant from a
State's HTF formula allocation to have demonstrated experience and
capacity to conduct an eligible activity, as evidenced by its ability
to: (i) Own, construct, rehabilitate, manage, or operate an affordable
multifamily rental housing development; (ii) design, construct,
rehabilitate, or market affordable housing for homeownership; or (iii)
provide forms of assistance, such as down payments, closing costs, or
interest-rate buy-downs for purchasers.
Section 1338(c)(9) of FHEFSSA also requires an eligible recipient
to demonstrate the ability and financial capacity to undertake, comply,
and manage the eligible activity; demonstrate its familiarity with the
requirements of any other Federal, State, or local housing program that
will be used in conjunction with such grant amounts to ensure
compliance with all applicable requirements and regulations of such
programs; and make such assurances to the grantee that it will comply
with the HTF requirements. These conditions of eligibility imposed on
recipients are incorporated in the definition of ``recipient'' found in
Sec. 92.702.
State. The term ``State'' means any State of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth
of the Northern Mariana Islands, Guam, the Virgin Islands, and American
Samoa. (See 1338 (a)(1) of FHEFSSA.)
State-Designated Entity. The statute permits a State to use a
``State-designated entity'' to receive its formula allocation.
Permissible designees for the HTF State-designated entity are: A State
housing finance agency, a Tribally designated housing entity (as such
term is defined in section 4 of the Native American Housing Assistance
and Self-Determination Act of 1997 (25 U.S.C. 4103)), or any other
qualified instrumentality of the State. (See 1338(c)(2) of FHEFSSA.)
Subgrantee. An HTF grantee may choose to distribute HTF funds
through one or more subgrantees. A subgrantee may be a State agency or
a unit of general local government. All local governments that are HTF
subgrantees must have an approved consolidated plan under 24 CFR part
91.
Allocation Formula
Reallocations
Section 92.714 describes the conditions under which HUD will
reallocate HTF funds. Consistent with the statute, funds will be
reallocated by formula in the following fiscal year. (See section
1338(c)(10) and (d) of FHEFSSA.)
Participation and Submission Requirements; Distribution of Assistance
Section 92.720 requires the State to notify HUD of its intent to
participate in the HTF program and to have a consolidated plan that
contains its HTF allocation plan required by FHEFSSA. (See section
1338(c)(8) of FHEFSSA.)
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Allocation Plan
Section 1338(c)(5)(A) of FHEFSSA provides that for a grantee to
receive an HTF grant, the grantee must submit an HTF allocation plan,
which must: (1) Describe the distribution of the grant; (2) be based on
priority housing needs, as determined by the grantee in accordance with
the HTF regulations; (3) comply with the statutory requirements
regarding activities eligible for HTF funding; and (4) include
performance goals that comply with HUD's HTF regulations. HUD has
chosen to implement the requirement for an HTF allocation plan by
amending its regulations in 24 CFR part 91 to include these
requirements in the consolidated plans of grantees and, where
applicable, subgrantees. The decision to include the HTF allocation
plan in the consolidated plan is consistent with the statutory
requirement in section 105(a) of the Cranston-Gonzalez National
Affordable Housing Act (12 U.S.C. 12705) that HUD may only provide
assistance directly to a jurisdiction if the jurisdiction submits a
comprehensive housing affordability strategy (the basic framework of
the consolidated plan) to HUD and the strategy is approved by HUD.
Sections 91.220 and 91.320 of the consolidated plan regulation are
amended to reflect the HTF allocation plan requirements.
In addition, section 1338(c)(5)(B) of FHEFSSA directs each State,
in establishing its HTF allocation plan, to: (1) Notify the public of
the establishment of the plan; (2) provide an opportunity for public
comments regarding the plan, (3) consider any public comments received
on the plan, and (4) make the completed plan available to the public.
Section 1338(c)(8)(B) of FHEFSSA requires grantees to comply with the
requirements of laws related to public participation, including laws
related to consolidated plans. Rather than establish new citizen
participation requirements, Sec. 92.720 directs States to include the
HTF allocation plan in the consolidated plan and follow the citizen
participation requirements found in the consolidated plan regulations
in 24 CFR part 91.
Section 1338(c)(5)(C) of FHEFSSA also provides that a State's
allocation plan must disclose the requirements that the State will
impose on eligible recipients that apply for grants under the State's
formula allocation. Section 1338(c)(5)(C) provides that such
requirements must include: (1) A description of the eligible activities
to be conducted using such assistance; and (2) a certification from the
eligible recipient that any housing units assisted will comply with HTF
requirements under this section. The statutory requirements are
implemented in Sec. Sec. 91.220 and 91.320.
In the case of HTF-assisted rental housing projects, the plan must
provide priority to projects that have Federal, State, or local
project-based rental assistance so that rents are affordable to ELI
families, and take into consideration the duration of the HTF-assisted
units' affordability period. (See 1338 (g)(2)(D) of FHEFSSA.) The HTF
allocation plan must consider the merits of the application in meeting
the priority housing needs of the State. The rule provides flexibility
to allow each grantee to include incentives and priorities in its HTF
allocation plan that are appropriate to the communities where housing
developed with HTF funds will be located. For example, incentives to
promote green building, the use of renewable building materials, or
sustainable development, as defined by the grantee, may be included in
its HTF allocation plan.
HUD specifically requests comments on how it may provide incentives
to encourage the use of HTF funds to develop housing affordable to ELI
households that is also accessible to transit and employment centers.
HUD is also seeking comments on what program structure or features will
encourage or assist States in allocating HTF funding in accordance with
metropolitan and regional land use and transportation plans. Similarly,
HUD is interested in hearing about how it can provide incentives to HTF
grantees and recipients to incorporate ``green building'' and
``sustainability'' features in the development of HTF-assisted
projects, such as the use of renewable building materials or other
techniques that reduce the impact of the property or site on the
environment and promote a healthier environment for building occupants.
In addition, HUD specifically requests comments on how it could include
standards or minimum requirements in the HTF regulations for specific
``green building'' or sustainable development features.
Distribution of Assistance: HTF Grantees, Subgrantees, and Recipients
Section 92.725 describes the way HTF funds will flow to the
communities and recipients, as well as the participation and submission
requirements for grantees receiving an HTF allocation. For each year
that funds are made available for the HTF, a formula grant will be
provided to each State. The State or State-designated entity is
responsible for distributing HTF funds throughout the State according
to its assessment of the priority housing needs, as identified in the
State's approved consolidated plan, and in accordance with any
priorities that may be established by HUD in allocating grants to the
States in accordance with the formula. HUD will issue notices in the
future as necessary to communicate policy priorities for the HTF.
FHEFSSA allows a State to choose to be the HTF grantee (to receive
and administer its grant) or to choose a qualified State-designated
entity to be the HTF grantee. In addition, the HTF grantee may choose
to directly fund projects (in accordance with the grantee's HTF
allocation plan in its consolidated plan), or a grantee may choose one
or more subgrantees (to administer the HTF funds and fund projects). A
subgrantee may be a State agency or a unit of general local government
that has submitted a consolidated plan under 24 CFR part 91. The
subgrantee must include an HTF allocation plan in its consolidated plan
(see 24 CFR 91.220(l)(4)) and must select projects by eligible
recipients in accordance with its HTF allocation plan.
Eligible recipients of HTF funds must meet statutorily prescribed
criteria, as promulgated through this rulemaking. An HTF recipient
means an organization, agency, or other entity (including a for-profit
entity or a nonprofit entity) that receives HTF assistance from a
grantee to be an owner or developer of an HTF-assisted project. In
order to qualify as an eligible recipient, the entity must demonstrate
its ability and financial capacity to manage the eligible activity in
compliance with all applicable HTF requirements. In addition, the
entity must demonstrate familiarity with the requirements of other
Federal, State, or local housing programs that may be used in
conjunction with HTF funds to ensure compliance with all applicable
requirements and regulations of such programs. An eligible HTF
recipient must have demonstrated experience in housing construction or
rehabilitation of rental housing or housing for homeownership; if it is
to be the owner, it must demonstrate experience in the management and
operation of affordable multifamily rental housing.
Income Targeting
Based on tabulations of American Housing Survey data, HUD estimates
that during 2007, there were about 9.2 million ELI renter households
nationwide, but only about 4.2 million units with rents affordable and
available to this income group. As a result, 64.5
[[Page 66982]]
percent of ELI renters were severely rent-burdened (paid more than 50
percent of their income for rent) or lived in severely inadequate
housing. HUD notes that more than half (51 percent) of the 3.8 million
ELI renters who occupied affordable units in 2007 were able to do so
only because they reported receiving government rental assistance, such
as from the public housing, project-based Section 8 or Section 202/811
program, and the housing choice voucher program.
By contrast, of the 6.7 million renters with incomes between 30 and
50 percent of area median income (VLI renters), only 23.6 percent had
severe rent burdens in 2007. Furthermore, there were about 7.8 million
units with rents affordable and available to VLI renters, and about one
million of these units were assisted.
FHEFSSA requires that not less than 80 percent of the HTF grant
shall be used to produce rental housing \1\ and, of this amount,
section 1338(c)(7)(A) of FHEFSSA requires that not less than 75 percent
shall be used for the benefit only of ELI families or families with
incomes at or below the poverty line (as such term is defined in
section 673 of the Omnibus Budget Reconciliation Act of 1981 (42 U.S.C.
9902), including any revision required by such section), whichever is
the greater, applicable to a family of the size involved, and not more
than 25 percent be used for the benefit only of VLI families.
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\1\ The establishment of a minimum of 80 percent of HTF funds to
be used for rental housing is derived by reading two provisions of
the statute. Section 1338(c)(10) provides that of the aggregate
amount allocated to a State or State-designated entity under section
1338, not more than 10 percent shall be used for activities under
section 1338(c)(7)(B), which are the homeownership activities.
Therefore, under section 1338, not more than 10 percent of funds can
be used for homeownership, leaving 90 percent available for the
production, preservation, and rehabilitation of rental housing.
Section 1338(c)(10)(D)(iii) limits the amount that a State or State-
designated entity may use for administrative costs for carrying out
the HTF program, to a maximum of 10 percent. Therefore, the minimum
amount available for activities under section 1338(c)(7)(A) (rental
housing production) is 80 percent.
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Under the rulemaking authority of section 1338(g) of FHEFFSA, which
provides that ``The Secretary shall issue regulations to carry out this
section [section 1338],'' the Secretary has the discretion to elaborate
upon, clarify, define and, in some instances, add to the statutory
program requirements and criteria. With respect to the allocation of
funds for ELI families or families with incomes below the poverty line,
the Secretary has the discretion to direct grantees, in any given year,
to use more than 75 percent of the HTF funds for the benefit only of
ELI families or families with incomes at or below the poverty line,
whichever is greater. For the first year in which HTF funds are made
available, the rule provides that of the amount made available for
rental and homeownership housing, grantees are to expend 100 percent of
HTF funds to provide rental and homeownership housing for ELI
households. The Secretary shall publish subsequent income targeting
requirements when HUD's allocation amounts to States are published.
Sections 92.736 and 92.737 set forth the income targeting requirements,
as required by section 1338(c)(7) of FHEFSSA, for HTF-assisted rental
units and homeownership units, respectively.
HUD recognizes that subsidizing the development and operations of
rental units targeted to ELI households can be extremely challenging.
The resources available to develop rental units targeted to ELI
households are scarce, and the financing mechanisms that are often
required to develop financially viable and sustainable projects with
units targeted to ELI households are complex and dependent on multiple
sources of both public and private funding. In implementing the HTF,
HUD's goal is to provide resources and a program structure that will
help States and local governments, as well as private and nonprofit
developers to develop energy-efficient rental housing that is
affordable to ELI households. Toward that end, Section 8 project-based
vouchers may be made available through appropriations. If Section 8
project-based vouchers are made available, HTF grantees will allocate
the vouchers concurrently with HTF funding to specific projects. These
Section 8 project-based vouchers will be administered in accordance
with the rules applicable to that program. The vouchers will help pay
for the operating costs of units constructed with HTF funds. However,
an HTF-assisted unit that has a Section 8 project-based voucher
attached to it may not also receive HTF operating cost assistance.
HUD is interested in hearing from developers of affordable rental
housing for ELI families about the ways to reduce the cost of
subsidizing this housing. What specific measures can the Department
undertake to help reduce the cost of producing rental units targeted to
ELI families? Similarly, what approaches will help to reduce operating
costs and reduce the need for ongoing operating subsidies? For example,
to what extent do energy-efficiency measures reduce the costs of
operations of these units--for both the tenants and project owners? To
what extent do tax abatements significantly reduce operating costs? If
HTF funds are used to pay for the entire development cost of these
rental units, would the absence of debt significantly impact the
financial viability of HTF-assisted units?
If grantees choose to undertake homeownership activities for ELI
households, HUD expects that grantees will ensure that the underwriting
for these units and homebuyer counseling address the precarious
financial conditions that ELI households usually experience. Shared
equity models and other types of homeownership program designs, such as
lease purchase models, may be more appropriate for HTF-assisted
homeownership activities. The Department is seeking comments from the
public about appropriate and effective approaches for homeownership
programs for ELI households. What specific measures can the Department
undertake to help reduce the cost of homeownership targeted to ELI
families? Similarly, what approaches will help to reduce operating
costs for ELI homeowners? For example, to what extent do energy-
efficiency measures reduce the costs of operations of these units?
Eligible and Prohibited Activities
Sections 92.730-92.735 reflect the statutory requirements that
govern eligible and prohibited activities, eligible project costs, and
planning and administrative costs. Allowable and prohibited fees are
also addressed in these sections.
Eligible Activities
Section 92.730 describes the HTF-eligible activities. Section
1338(c)(7) of FHEFSSA provides that HTF funds may be used for
assistance for the production, preservation, rehabilitation, and
operating costs of rental housing. The Department views the HTF as
primarily a production program meant to add units to the supply of
affordable housing for ELI and VLI households. While the statute allows
HTF funds to be used for operating costs, it does not provide a limit.
In order to achieve the goal of using HTF funds primarily for the
production of new affordable units, the Department proposes to limit
the amount of HTF funds that may be used for operating cost assistance
to 20 percent of each annual grant. In establishing this limit, the
Department assumes that HTF funds will be combined with other sources
to produce and preserve affordable units, mostly in mixed-income
projects. The Department also considered various analyses with
different scenarios, including different operating cost assistance caps
and
[[Page 66983]]
different local development practices. HUD anticipates that project-
based vouchers will be made available to subsidize operating costs in
HTF-assisted units. However, if vouchers or other forms of project-
based assistance are not available for the HTF-assisted unit, it may be
necessary to use HTF funds for operating cost assistance. This limit
would make sufficient funds available to pay for operating cost
assistance if needed, while ensuring that additional affordable units
continue to be produced with HTF funds. The 20 percent limit applies to
each annual grant. Therefore, grantees will have discretion in how they
allocate funds to each project's development and operating costs.
Grantees may apply the 20 percent limit to all projects or adjust it
accordingly, as long as no more than 20 percent of each annual grant is
used for operating cost assistance.
Analyses of the use of HTF funds for both development and operating
subsidy show that the use of HTF funds for operating cost assistance
could very quickly consume each State's formula allocation and would
deter the use of HTF funds for production of additional units, as well
as preservation and rehabilitation of units, targeted to ELI
households--the primary purpose of the HTF. If Section 8 Project-Based
Vouchers are made available to HTF projects for HTF-assisted units,
limiting the amount of HTF funds available for operating cost
assistance will not hinder implementation of the HTF.
Nonetheless, HUD is seeking comments regarding how imposing this or
any restriction on the use of HTF funds for operating cost assistance
might enhance or hinder the ability of a grantee to maximize the number
of units affordable to ELI families produced, by new construction or
acquisition, with HTF funds.
Section 1338(c)(7)(B) provides that the production, preservation,
and rehabilitation of housing for homeownership, including forms of
down payment assistance, closing cost assistance, and assistance for
interest rate buy-downs, are eligible activities. HTF funds may be used
only for units that will be the principal residence of eligible
families who are first-time homebuyers.
Section 1338(c)(10)(A) of FHEFSSA provides that not more than 10
percent of the annual grant may be used for homeownership activities.
If a grantee chooses to implement a homeownership program with HTF
funds, the regulations require the grantee to perform due diligence and
underwriting analysis such that the affordability of the homeownership
units is sustainable for ELI households. In light of the distressed
housing market conditions in many jurisdictions, program techniques
such as shared equity, lease-purchase, and first options to re-purchase
HTF-assisted homeownership units in default might be practical features
to include in HTF homeownership programs.
Forms of Assistance
Section 92.730(b) provides that HTF funds may be invested as equity
investments, interest-bearing loans or advances, non-interest-bearing
loans or advances, interest subsidies, deferred payment loans, grants,
or other forms of assistance that HUD may determine to be consistent
with the goals and objectives of the HTF.
Section 92.730(c) requires that only the actual cost of development
and operation of HTF units can be charged to the program, and describes
the methods for allocating costs and determining HTF units in multiunit
projects. An HTF-assisted unit that has a Section 8 project-based
voucher attached to it may not also receive HTF operating cost
assistance.
Terminated Project
Section 92.730(d) provides that an HTF-assisted project that is
terminated before completion, either voluntarily or otherwise,
constitutes an ineligible activity, and any HTF funds invested in the
project must be repaid to the grantee's HTF account.
Prohibited Activities
Prohibited activities are set forth in Sec. 92.735. Section
1338(c)(10)(D) of FHEFSSA provides that HTF funds may not be used for:
Political activities; advocacy; lobbying, whether directly or through
other parties; counseling services; travel expenses; and preparing or
providing advice on tax returns. The prohibited use of funds for
political activities includes influencing the selection, nomination,
election, or appointment of one or more candidates to any Federal,
State, or local office as codified in section 501 of the Internal
Revenue Code of 1986 (26 U.S.C. 501). This statutory section further
provides that, subject to the exception in section 1338(c)(10)(D)(iii),
HTF funds may not be used for administrative, outreach, or other costs
of the grantee, or any other recipient of such grant amounts. The
statutory exception to this prohibition is that a grantee may use up to
10 percent of the State's HTF grant for administrative costs of
carrying out its program(s) using the HTF, including homeownership
counseling.
Eligible Project Costs
Section 92.731 sets forth the eligible project costs, which include
development hard costs, refinancing costs in conjunction with
rehabilitation, acquisition of standard projects, development related
soft costs, architectural and engineering fees, project audit costs,
staff overhead related to the development of the units, settlement
costs, impact fees, the cost to address and meet environmental and
historic preservation property standards, operating costs, relocation
costs, repayment of construction or other loans, and certain types of
costs for construction undertaken before HTF funds were committed to
the project.
Operating cost assistance, as defined in Sec. 92.731(e), may
include the cost of utilities, insurance, taxes, and scheduled payments
to a replacement reserve. The eligible amount of HTF funds per unit for
operating costs is determined based on the deficit remaining after the
monthly rent payment for the HTF-assisted unit is applied to the HTF-
assisted unit's share of monthly operating costs. The written agreement
between the grantee and the recipient must set forth the maximum amount
of the operating assistance to be provided to the HTF-assisted rental
project. The grantee may provide operating cost assistance necessary
for the project for up to 2 years from one HTF grant. However, the
written agreement may provide for renewal of operating cost assistance
during the period of affordability of the project, subject to funding
availability.
Administration and Planning Costs
As noted earlier, the administrative costs allowed in the HTF
program cannot exceed 10 percent of the annual grant. Similar to the
HOME program requirements at Sec. 92.207, eligible administrative and
planning costs are found in Sec. 92.732.
HTF and Public Housing
Section 1338(c)(7)(A) of FHEFSSA provides that HTF assistance may
be used for the production, preservation, and rehabilitation of
housing, including housing identified in section 1335(a)(1)(B) of
FHEFSSA (12 U.S.C. 4565(a)(1)(B)). (Note: The statute incorrectly
references section 1335(a)(2)(B)). The programs identified in that
section include housing projects subsidized under the project-based and
tenant-based rental assistance programs under section 8 of the United
States Housing Act of 1937 (1937 Act); the program under section 236 of
the National Housing Act; the below-market
[[Page 66984]]
interest rate mortgage program under section 221(d)(4) of the National
Housing Act (note: Section 1335(a)(1)(B) of FHEFSSA incorrectly
references the below-market interest rate mortgage program; the correct
statutory reference is section 221(d)(3)/(d)(5) of the National Housing
Act.); the supportive housing for the elderly program under section 202
of the Housing Act of 1959; the supportive housing program for persons
with disabilities under section 811 of the Cranston-Gonzalez National
Affordable Housing Act; the permanent supportive housing projects
subsidized under programs under Title IV of the McKinney-Vento Homeless
Assistance Act (42 U.S.C. 11361 et seq.); the rural rental housing
program under section 515 of the Housing Act of 1949; the low-income
housing tax credit under section 42 of the Internal Revenue Code of
1986, as amended; and comparable State and local affordable housing
programs. Although this list is not necessarily exhaustive, it is HUD's
determination that the HTF funds are not eligible to be used in
existing public housing units. Moreover, the 1937 Act provides annual
formula funding for public housing. Accordingly, Sec. 92.734 prohibits
the use of HTF funds for public housing.
Prohibited Activities and Fees
The section on prohibited activities and fees mirrors the HOME
program regulation at Sec. 92.214, except that the HTF section is
expanded to expressly cover political activities, advocacy, and
lobbying, which are ineligible under FHEFSSA.
Program Requirements
Site and Neighborhood Standards
Section 92.726 applies the site and neighborhood standards for the
HOME program, at Sec. 92.202, to the HTF. If Section 8 project-based
vouchers are made available, the Section 8 requirements related to site
and neighborhood standards will apply to an HTF-assisted unit that has
a Section 8 project-based voucher attached to it.
Income Determinations
Section 92.727 defines ``annual income'' and describes the process
for determining the annual income of tenants and homebuyers for
eligibility in HTF-assisted housing. Income from all family members
must be included when determining income eligibility. As in the HOME
program, grantees may use the definition of annual income in 24 CFR
5.609 (Section 8 program definitions) or the Internal Revenue Service
(IRS) definition of annual income from IRS Form 1040. Section 92.727(e)
provides that a State must follow HUD's regulations in 24 CFR 5.617
when making income determinations for persons with disabilities who are
tenants in HTF-assisted rental housing. For homebuyers, the grantee
must determine annual income by examining source documentation for the
entire household, or obtain written statements verifying incomes from
the household or administrators of government programs from which the
household receives assistance.
Project Requirements
Sections 92.740-92.750 establish requirements applicable to HTF-
assisted housing projects.
Maximum Per-Unit Subsidy
Section 92.740(a) establishes maximum per-unit subsidy,
underwriting, and subsidy layering requirements. The grantee must
establish maximum limitations on the amount of HTF funds the grantee
may invest on a per-unit basis.
Underwriting and Subsidy Layering
Section 92.740(b) requires the grantee to perform subsidy layering
analysis before committing HTF funds to a project. The grantee must
determine that costs are reasonable, examine the sources and uses of
funds, and ensure that the amounts available and their use are
necessary to provide quality affordable rental or homeownership housing
for ELI households for the affordability period (30 years).
Furthermore, developers or owners of HTF-assisted projects may not
receive undue returns on their investments.
Property Standards
As described below, the HTF requires energy and water efficiency
features in all HTF-assisted units. Each grantee can include incentives
and priorities in its HTF allocation plan to further promote
sustainable development that is appropriate to the communities where
housing developed with HTF funds will be located.
Applicable property standards are established at Sec. Sec. 92.741
through 92.745. This rule requires, at minimum, that all HTF-assisted
units that are newly constructed or undergoing gut rehabilitation must
be certified that they meet the guidelines for ENERGY STAR-Qualified
New Homes (for residential buildings up to 3 stories) or exceed, by 20
percent, the energy efficiency requirements of the American Society of
Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE)
Standard 90.1-2007, Appendix G: Performance Rating Method (for
residential buildings over 3 stories), as defined in Sec. 92.741. A
Home Energy Rater (HER) must inspect the units to certify that the
units meet the ENERGY STAR guidelines. HUD is aware that Home Energy
Raters may not be available in all places; therefore, the requirement
for ENERGY STAR certification will become effective 6 months from the
effective date of this rule. ENERGY STAR-labeled products must be
installed when older obsolete products are replaced as part of the
rehabilitation work for HTF-assisted units, as applicable in Sec.
92.742. All water-usage products installed in HTF-assisted units must
also be certified to meet the WaterSense requirements, in accordance
with Sec. 92.741 and Sec. 92.742.
The specific property standards addressed by Sec. Sec. 92.741
through 92.745 are as follows: Sec. 92.741 contains the property
standards for new construction and gut rehabilitation, Sec. 92.742
establishes the standards for housing undergoing other rehabilitation,
Sec. 92.743 contains the property standards for existing housing that
is acquired with HTF funds, Sec. 92.744 establishes property standards
for manufactured housing, and Sec. 92.745 establishes ongoing property
standards for rental housing during the period of affordability.
HUD requests comments from interested parties on how additional
minimum property standards may be imposed to increase the efficiency
and reduce the operating costs of HTF-assisted units.
Qualification as Affordable Housing
Sections 92.746 and 92.748 establish an affordability period of not
less than 30 years for rental housing and homeownership units assisted
with HTF funds. As stated earlier, the Department expects that HTF
funds will be combined with the other sources of private funding and
financing typically used for the development of affordable housing,
such as Low-Income Housing Tax Credits (LIHTCs). The affordability
period for HTF-assisted units is designed to work in conjunction with
the 30-year affordability period for LIHTC projects. Grantees may also
establish longer affordability periods in their HTF allocation plans.
Section 92.746(b) establishes the maximum rent (including
utilities) for HTF-assisted units at 30 percent of the annual income of
a family whose income equals 30 percent of the area median income, or
30 percent of the poverty line, whichever is greater. It is necessary
to establish fixed rents for underwriting purposes and required subsidy
layering analyses. HUD
[[Page 66985]]
recognizes that some ELI tenants living in HTF-assisted units may be
rent-burdened if required to pay HTF rents. As stated earlier in this
preamble, Section 8 Project-Based Vouchers may be made available to
HTF-assisted units; these vouchers alleviate cost burdens for ELI
tenants. When project-based assistance from other HUD programs is
provided to HTF units, the rents are based on the rent requirements of
that program.
Section 92.746(e) requires that HTF project owners verify the
initial and continued eligibility of tenants living in HTF-assisted
rental units and establishes the methods by which HTF project owners
must verify tenant income. Furthermore, this section specifies that
when Section 8 Project-Based Vouchers or any other Federal rental
assistance programs are used in conjunction with an HTF-assisted rental
unit, the income verification rules and procedures of those programs
will apply instead of the requirements set forth in this subsection.
Section 92.747 establishes tenant protection, lease, and selection
requirements, and incorporates the requirements of section 1338(c)(8)
of FHEFSSA.
Section 92.748(d) establishes the HTF requirements for homebuyers.
HTF assistance to homebuyers may be provided only to first-time
homebuyers and must be for the principal residence of the homebuyer.
Before purchasing the housing, in accordance with section
1338(c)(7)(B)(iv) of FHEFSSA, the homebuyer must have completed
homeownership counseling from an organization that meets the
requirements of section 1132 of the Federal Housing Regulatory Reform
Act of 2008.
Section 92.748(f) establishes the resale requirements, as required
by section 1338(c)(7)(B)(iii), for homeownership units assisted by the
HTF. Upon resale, each HTF-assisted homeownership unit must be sold to
an income-eligible family. Each grantee that has an HTF homeownership
program must include resale restriction policies in its HTF allocation
plan. HTF grantees may adopt their HOME program resale restriction
policies, modified for income-eligible households. The grantee may also
include purchase options and right of first refusal to purchase the
HTF-assisted units upon foreclosure, in order to preserve
affordability.
Section 92.749 defines the modest housing requirements in section
1338(c)(7)(B)(ii) of FHEFSSA for HTF-assisted homeownership units. For
newly constructed housing, the value of the housing may not exceed 95
percent of the median purchase price for single-family housing in the
area. HUD intends to provide these purchase limits for each area or the
grantee can determine 95 percent of the area median purchase price in
accordance with the methodology set forth in Sec. 92.749(e).
In the event of foreclosure of HTF-assisted rental or homeownership
units, or transfer of deed in lieu of foreclosure, the affordability
period required by Sec. Sec. 92.746 and 92.748 is terminated. In order
to preserve the affordability of the housing, the grantee may include
purchase options in the HTF written agreement, such as ``right of first
refusal'' to purchase the HTF-assisted units in default. The
termination of the affordability restrictions on the project does not
terminate the grantee's repayment obligation under Sec. 92.773.
Faith-Based Organizations
Section 92.750 provides for the eligibility of faith-based
organizations to apply for and use HTF funds under the same
requirements as other recipients.
Other Federal Requirements
Sections 92.760-92.764 set forth the other Federal requirements
that are applicable to the use of HTF funds, including
nondiscrimination requirements. For example, the rule requires the
grantee to establish affirmative marketing requirements, as required in
the HOME program, and grantees must comply with Federal lead-based
paint and relocation requirements. These sections also include the
funding accountability and transparency requirements of the Federal
Funding Accountability and Transparency Act of 2006 (31 U.S.C. 6101
note), which must be met in accordance with section 1338(i) of FHEFSSA.
Program Administration
Sections 92.770-92.779 establish the conditions and requirements by
which States are to administer their HTF funds. Section 92.770
describes two HTF accounts that make up the HTF: The HTF Treasury
account, which is for HTF funds allocated or reallocated to a grantee
under the HTF formula, and the HTF local account, which is for deposits
of HTF funds disbursed from the HTF Treasury account, any program
income, and any repayments required to be made. Section 92.771 provides
that allocation and reallocation of HTF funds will be made available
pursuant to an HTF grant agreement.
Section 92.772 establishes the requirements applicable to program
disbursement and the establishment of the information system consistent
with section 1338(e) of FHEFSSA. This statutory section provides that
(1) HUD must require each grantee to develop and maintain a system to
ensure that each recipient of assistance use HTF funds in accordance
with the statute, the regulations, and any requirements or conditions
under which HTF funds were provided; and (2) establish minimum
requirements for agreements between the grantee and recipients. This
statutory section further provides that the minimum requirements must
include: (1) Appropriate periodic financial and project reporting,
record retention, and audit requirements for the duration of the
assistance to the recipient, to ensure compliance with the limitations
and requirements of the statute and regulations; and (2) any other
requirements that the Secretary determines are necessary to ensure
appropriate administration and compliance. These statutory requirements
are reflected in Sec. Sec. 92.776-92.779.
Specifically, Sec. 92.774(b) requires that before disbursing any
HTF funds to any entity, the grantee must enter into a written
agreement with that entity. The written agreement must ensure
compliance with the requirements of this subpart. Requirements for the
HTF written agreement and required provisions are specified in Sec.
92.774(c). Where HOME program funds are used together with HTF funds, a
single written agreement meeting the requirements of both Sec. 92.504
and this subpart may be used to enforce requirements for both programs.
Section 1338(g)(2) of FHEFSSA requires that HUD ensure that the use
of HTF grants by States or State-designated entities is audited not
less than annually to ensure compliance with statutory and HUD's
regulatory requirements. Section 1338(g)(2) also authorizes HUD to
audit, provide for an audit, or otherwise verify a grantee's activities
to ensure compliance with all HTF requirements. Section 1338(g)(2)
further provides that any financial statement submitted by a grantee or
recipient to HUD shall be reviewed by an independent certified public
accountant in accordance with Statements on Standards for Accounting
and Review Services, issued by the American Institute of Certified
Public Accountants. These requirements are reflected in Sec. 92.776.
Performance Review and Sanctions Review of Subgrantees and Recipients
Grantees will report on their progress and performance in meeting
the requirements of the HTF in HUD's Integrated Disbursement &
Information
[[Page 66986]]
System (IDIS) and the consolidated plan. For example, grantees will
report on the incomes of HTF beneficiaries in IDIS, and will also
demonstrate compliance with the deadlines for the commitment and
expenditure of funds by data entered into IDIS. As stated earlier, this
proposed rule would add the annual HTF allocation plan as a subsection
to the strategic plan and annual action plan. Performance benchmarks
will be established in the HTF allocation plan in conjunction with the
strategic and annual plans, and subsequent reporting on performance
will be reported to the public and HUD through the submissions and
reports associated with those plans.
Section 1338(e)(2)(B) of FHEFSSA is directed to the misuse of funds
and provides that if HUD determines, after reasonable notice and
opportunity for hearing, that a grantee has failed to comply
substantially with any provision of the HTF statutory requirements or
HUD's regulatory requirements, and until HUD is satisfied that there is
no longer any such failure to comply, HUD shall: (1) Reduce the amount
of assistance to the grantee by an amount equal to the amount of grant
amounts that were not used; (2) require the grantee to repay HUD any
amount of the grant that was not used; (3) limit the availability of
assistance to the grantee to activities or recipients not affected by
such failure to comply; or (4) terminate any assistance under this
section to the grantee. These statutory requirements are reflected in
Sec. 92.782.
Section 1338(e)(1)(B) provides that if any recipient of assistance
of HTF funds is determined to have used any such amounts in a manner
that is materially in violation of the HTF statutory requirements,
HUD's HTF regulatory requirements, or any requirements or conditions
under which such amounts were provided, the grantee shall require,
within 12 months after the determination of the misuse, that the
recipient must reimburse the grantee for the misused amounts and return
to the grantee any such amounts that remain unused or uncommitted for
use. Section 1338(e)(1)(B) provides that if a grantee makes this
determination, the grantee must first provide notification of the
determination to HUD for review and concurrence. This statutory section
authorizes HUD to reverse the determination if it disagrees. These
statutory requirements are reflected in Sec. 92.783.
Consolidated Plan Revisions
As noted earlier in this preamble, this rule also makes conforming
changes to the consolidated plan regulations at 24 Part 91 to require
information related to the HTF to be included in strategic and 5-year
State or local government strategic and annual action plans.
III. Findings and Certifications
Executive Order 12866, Regulatory Planning and Review
The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866 (entitled, ``Regulatory Planning and Review'').
This proposed rule was determined to be a ``significant regulatory
action,'' as defined in section 3(f) of the Order but not economically
significant, as provided in section 3(f)(1) of the Order. The reasons
for the determination are as follows:
As discussed above in this preamble, HERA charged HUD to establish
through regulation, the formula for the distribution of HTF grants to
States, and to follow that rule with one that implements the
programmatic requirements for the HTF. Consistent with that statutory
direction, on December 4, 2009 (74 FR 63938), HUD published a proposed
rule submitting for public comment the proposed formula for allocating
HTF funds. As the first rule to be issued in the rulemaking process for
the HTF, the formula allocation constituted, on behalf of the entire
HTF rulemaking, an economically significant regulatory action under
Executive Order 12866. The preamble to the December 2009 rule
summarized the economic impacts of the HTF program, as proposed to be
implemented through the formula issued for public comment on December
4, 2009. (For a discussion of the economic impact, please see 74 FR
63940-63941.) HUD's full economic analysis for the allocation rule is
available for inspection on HUD's Web site at http://www.huduser.org/portal/publications/pubasst/riaforhtf.html.
This proposed rule follows the December 4, 2009, allocation formula
rule by submitting for public comment the program requirements that
will govern the HTF. The economic impacts of the rulemakings
implementing the HTF are largely limited to the procedures governing
the allocation and distribution of grant funds set forth in the
December 4, 2009, proposed rule. This proposed rule does not revise the
HTF allocation formula or otherwise affect the allocation of HTF funds.
To the extent that this proposed rule has an economic impact, it
derives from the December 2009 allocation formula proposed rule. That
economic assessment may be revised to account for any new impacts
resulting from changes made at the final rule stage.
The docket file is available for public inspection between the
hours of 8 a.m. and 5 p.m. weekdays in the Regulations Division, Office
of General Counsel, Department of Housing and Urban Development, 451
7th Street, SW., Room 10276, Washington, DC 20410-0500. Due to security
measures at the HUD Headquarters building, please schedule an
appointment to review the docket file by calling the Regulations
Division at 202-708-3055 (this is not a toll-free number). Persons with
hearing or speech impairments may access the above telephone number via
TTY by calling the toll-free Federal Information Relay Service at 800-
877-8339.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally
requires an agency to conduct a regulatory flexibility analysis of any
rule subject to notice and comment rulemaking requirements, unless the
agency certifies that the rule will not have a significant economic
impact on a substantial number of small entities.
Under the HTF program, HUD makes grants to the relatively large
entities of States or their designated housing entities for the
purposes of preserving and increasing the supply of rental housing and
increasing homeownership for eligible families. Therefore, the primary
focus on the rule is on these large entities. The States and State-
designated housing entities may, in turn, make funding available to
recipients, which may include smaller entities (such as nonprofit or
for-profit organizations), but the funding made available to recipients
is provided under application procedures and requirements established
by the States or State-designated housing entities, not HUD; however,
the grantees must ensure their recipients' adherence to the statutory
requirements and regulatory requirements promulgated by HUD.
Additionally, the regulatory text largely reflects statutory
requirements of FHEFFSA. Where HUD has exercised the discretion to
elaborate on the statutory requirements, HUD has strived to closely
model these procedures on existing development programs, which are
familiar to entities likely to be participants under the new HTF
program. For example, as noted earlier in this preamble, the HTF
program adopts several definitions used under the HOME program. The
organization of the HTF regulations is modeled after those for the HOME
program, and HUD has elected to adopt many existing HOME program
requirements. Given that HTF funding is statutorily provided for the
benefit of the States and is to be
[[Page 66987]]
allocated to the States, HUD has determined that the rule will not have
a significant economic impact on a substantial number of small
entities.
Notwithstanding HUD's determination that this rule will not have a
significant effect on a substantial number of small entities, HUD
specifically invites comments regarding any less burdensome
alternatives to this rule that will meet HUD's objectives as described
in this preamble.
Environmental Impact
A Finding of No Significant Impact (FONSI) with respect to the
environment has been made in accordance with HUD regulations at 24 CFR
part 50, which implement section 102(2)(C) of the National
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The Finding of
No Significant Impact is available for public inspection between the
hours of 8 a.m. and 5 p.m. weekdays in the Regulations Division, Office
of General Counsel, Department of Housing and Urban Development, 451
Seventh Street, SW., Room 10276, Washington, DC 20410. Due to security
measures at the HUD Headquarters building, please schedule an
appointment to review the FONSI by calling the Regulations Division at
202-708-3055 (this is not a toll-free number). Individuals with speech
or hearing impairments may access this number via TTY by calling the
Federal Information Relay Service at 800-877-8339.
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits, to the
extent practicable and permitted by law, an agency from promulgating a
regulation that has federalism implications and either imposes
substantial direct compliance costs on State and local governments and
is not required by statute, or preempts State law, unless the relevant
requirements of Section 6 of the Executive Order are met. This rule
does not have federalism implications, and does not impose substantial
direct compliance costs on State and local governments or preempt State
law within the meaning of the Executive Order.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (2
U.S.C. 1531-1538) establishes requirements for Federal agencies to
assess the effects of their regulatory actions on State, local, and
Tribal governments and the private sector. This rule does not impose
any Federal mandate on any State, local, or Tribal government or the
private sector within the meaning of UMRA.
Paperwork Reduction Act
The information collection requirements contained in this rule have
been submitted to the Office of Management and Budget (OMB) under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In accordance
with the Paperwork Reduction Act, an agency may not conduct or sponsor,
and a person is not required to respond to, a collection of
information, unless the collection displays a currently valid OMB
control number.
The burden of the information collections in this rule is estimated
as follows:
Reporting and Recordkeeping Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
Recordkeeping Reporting Number of
Reg. section Paperwork requirement hours hours jurisdictions Total hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 91.215.................................. Strategic Planning--Draft Housing 10 .............. 62 620
Section of Localities Plan.
Sec. 91.220.................................. Allocation Planning--Draft the 30 .............. 62 1,860
localities allocation plan.
Sec. 92.725.................................. Distribution of Assistance............. 2 .............. 56 112
Sec. 92.726.................................. Site and Neighborhood Standards........ 2 .............. 56 112
Sec. 92.727.................................. Income Determinations.................. 1 .............. 4,573 4,573
Sec. 92.730, Sec. 92.731, Sec. 92.736, Documentation required by HUD to be 5 .............. 415 2,075
Sec. 92.737, Sec. 92.740, Sec. 92.746, included in project file to determine
and Sec. 92.748. project eligibility (i.e., eligible
activities and costs, income
targeting, subsidy limits,
qualification as affordable housing).
Sec. 92.741, Sec. 92.742, Sec. 92.743, Property Standards (new construction, 1 .............. 415 415
Sec. 92.744, and Sec. 92.745. rehabilitation, acquisition,
manufactured housing, rental housing).
Sec. 92.747.................................. Tenant Protections and Selection 1 .............. 4,573 4,573
(including lease requirement).
Sec. 92.748.................................. Qualification as Affordable Housing: 1 .............. 58 58
Homeownership.
Sec. 92.720.................................. Public Participation................... 4 .............. 56 224
Sec. 92.760.................................. Other Federal Requirements and 5 .............. 415 2,075
Nondiscrimination (including minority
and women business enterprise and
minority outreach efforts).
Sec. 92.760.................................. Affirmative Marketing.................. 10 .............. 415 4,150
Sec. 92.762.................................. Displacement, Relocation, and 5 .............. 457 2,285
Acquisition (including tenant
assistance policy).
Sec. 92.761.................................. Lead-based paint....................... 1 .............. 208 208
Sec. 92.778.................................. Debarment and Suspension............... 1 .............. 25 25
Sec. 92.771.................................. HTF Grant Agreement (HUD 40101)........ 1 .............. 56 56
Sec. 92.774.................................. Grantee Written Agreements............. 10 .............. 415 4,150
Sec. 92.725.................................. Distribution of Assistance--State .............. 2 52 78
Designation of Local Recipients.
Sec. 92.731.................................. Eligible Project Costs--Refinancing.... .............. 1 25 25
Sec. 92.772.................................. Program Disbursement and Information .............. 1 415 415
System (IDIS).
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[[Page 66988]]
Total Annual Respondents and Burden Hours........................................... 90 4 12,809 28,089
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Estimated Burden Hours
In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments
from members of the public and affected agencies concerning this
collection of information to:
(1) Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;
(2) Evaluate the accuracy of the agency's estimate of the burden of
the proposed collection of information;
(3) Enhance the quality, utility, and clarity of the information to
be collected; and
(4) Minimize the burden of the collection of information on those
who are to respond, including through the use of appropriate automated
collection techniques or other forms of information technology, e.g.,
permitting electronic submission of responses.
Interested persons are invited to submit comments regarding the
information collection requirements in this rule. Comments must refer
to the proposal by name and docket number (FR-5246) and must be sent
to:
HUD Desk Officer, Office of Management and Budget, New Executive Office
Building, Washington, DC 20503, Fax: 202-395-6947, and
Reports Liaison Officer, Office of Community Planning and Development,
Department of Housing and Urban Development, 451 Seventh Street, SW.,
Room 7233, Washington, DC 20410.
List of Subjects
24 CFR Part 91
Aged, Grant programs-housing and community development, Homeless,
Individuals with disabilities, Low- and moderate-income housing,
Reporting and recordkeeping requirements.
24 CFR Part 92
Administrative practice and procedure, Grant programs-housing and
community development, Low- and moderate-income housing, Manufactured
homes, Rent subsidies, Reporting and recordkeeping requirements.
For the reasons stated in the preamble, HUD proposes to amend 24
CFR part 91 and amend 24 CFR part 92 as follows:
PART 91--CONSOLIDATED SUBMISSIONS FOR COMMUNITY PLANNING AND
DEVELOPMENT PROGRAMS
1. The authority citation for part 91 continues to read as follows:
Authority: 42 U.S.C. 3535(d), 3601-3619, 5301-5315, 11331-
11388, 12701-12711, 12741-12756, 12901-12912, and 12 U.S.C. 1301 et
seq.
2. In Sec. 91.2, remove the word ``and'' at the end of paragraph
(a)(3), remove the period at the end of paragraph (a)(4) and add ``;
and'' in its place, and add paragraph (a)(5) to read as follows:
Sec. 91.2 Applicability.
(a) * * *
(5) The Housing Trust Fund (HTF) program (see 24 CFR part 92).
* * * * *
3. Revise the first sentence of Sec. 91.10(a) to read as follows:
Sec. 91.10 Consolidated program year.
(a) Each of the following programs shall be administered by a
jurisdiction on a single consolidated program year, established by the
jurisdiction: CDBG, ESG, HOME, HOPWA, and HTF. * * *
* * * * *
4. Revise Sec. 91.215(b)(2) to read as follows:
Sec. 91.215 Strategic plan.
* * * * *
(b) * * *
(2) The affordable housing section shall include specific
objectives that describe proposed accomplishments the jurisdiction
hopes to achieve and must specify the number of extremely low-income,
low-income, and moderate-income families to whom the jurisdiction will
provide affordable housing as defined in 24 CFR 92.252 for rental
housing, 24 CFR 92.254 for homeownership, and 24 CFR 92.746 and 24 CFR
92.748 (if the jurisdiction receives HTF funds from the State) over a
specific time period.
* * * * *
5. Add Sec. 91.220(l)(4) to read as follows:
Sec. 91.220 Action plan.
* * * * *
(l) * * *
(4) Housing Trust Fund. If the jurisdiction receives HTF funds from
the State, under 92.725, the action plan must include the HTF
allocation plan (consistent with the State's HTF requirements) that
describes the distribution of the HTF funds, and establishes the
application requirements and the criteria for selection of applications
submitted by eligible recipients that meet the jurisdiction's priority
housing needs. The plan must include the following:
(i) The plan must identify priority factors for funding that shall
include the following: geographic diversity (as defined by the grantee
in the consolidated plan); the applicant's ability to obligate HTF
funds and undertake eligible activities in a timely manner; in the case
of rental housing projects, the extent to which rents for units in the
project are affordable to ELI families; in the case of rental housing
projects, the duration of the units' affordability period; the merits
of the application in meeting the priority housing needs of the
jurisdiction (such as housing that is accessible to transit or
employment centers, housing that includes green building and
sustainable development features, and housing that serves special needs
populations); and the extent to which the application makes use of non-
Federal funding sources.
(ii) The plan must include the requirement that the application
contain a description of the eligible activities to be conducted with
the HTF funds (as provided in 24 CFR 92.730) and contain a
certification by each eligible recipient that housing units assisted
with the HTF will comply with HTF requirements. The plan must also
describe eligibility requirements for recipients (as defined in 24 CFR
92.702).
(iii) The plan must provide for performance goals, consistent with
the jurisdiction's goals established under 24 CFR 91.215(b)(2).
(iv) The plan must provide the jurisdiction's rehabilitation
standards, as required by 24 CFR 92.742.
(v) The plan must describe the conditions under which the grantee
will refinance existing debt.
[[Page 66989]]
6. Revise Sec. 91.315(b)(2) to read as follows:
Sec. 91.315 Strategic plan.
* * * * *
(b) * * *
(2) The affordable housing section shall include specific
objectives that describe proposed accomplishments the State hopes to
achieve and must specify the number of extremely low-income, low-
income, and moderate-income families to which the State will provide
affordable housing, as defined in 24 CFR 92.252 for rental housing, 24
CFR 92.254 for homeownership, 24 CFR 92.746 for rental housing, and 24
CFR 92.748 for homeownership (if the jurisdiction receives HTF from the
State) over a specific time period.
* * * * *
7. Add Sec. 91.320(k)(5) to read as follows:
Sec. 91.320 Action plan.
* * * * *
(k) * * *
(5) Housing Trust Fund. The action plan must include the HTF
allocation plan that describes the distribution of the HTF funds, and
establishes the application requirements and the criteria for selection
of applications submitted by eligible recipients that meet the State's
priority housing needs. The plan must also establish the State's
maximum per-unit subsidy limit for housing assisted with HTF funds. If
the HTF funds will be used for first-time homebuyers, the plan must
include resale restrictions in accordance with 24 CFR 92.748. The plan
must reflect the State's decision to distribute HTF funds through
grants to subgrantees and/or to select applications submitted by
eligible recipients. If the State is selecting applications submitted
by eligible recipients, the plan must include the following:
(i) The plan must provide priority for funding based on geographic
diversity (as defined by the grantee in the consolidated plan); the
applicant's ability to obligate HTF funds and undertake eligible
activities in a timely manner; in the case of rental housing projects,
the extent to which the project has Federal, State, or local project-
based rental assistance so that rents are affordable to ELI families;
in the case of rental housing projects, the duration of the units'
affordability period; the merits of the application in meeting the
priority housing needs of the State (such as housing that is accessible
to transit or employment centers, housing that includes green building
and sustainable development features, or housing that serves special
needs populations); and the extent to which the application makes use
of non-Federal funding sources.
(ii) The plan must include the requirement that the application
contain a description of the eligible activities to be conducted with
the HTF funds (as provided in 24 CFR 92.730) and contain a
certification by each eligible recipient that housing units assisted
with the HTF will comply with HTF requirements. The plan must also
describe eligibility requirements for recipients (as defined in 24 CFR
92.702).
(iii) The plan must provide for performance goals and benchmarks
against which the State will measure its progress, consistent with the
State's goals established under 24 CFR 91.315(b)(2).
(iv) The plan must include the State's rehabilitation standards, as
required by 24 CFR 92.742.
(v) The plan must include the refinancing guidelines as required by
24 CFR 92.731(b).
(vi) The plan must describe the conditions under which the grantee
will refinance existing debt.
PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM
8. The authority for 24 CFR part 92 continues to read as follows:
Authority: 42 U.S.C. 3535(d), 12701-12839, and 12 U.S.C. 1301 et
seq.
9. In Sec. 92.2, revise the definition of ``First-time homebuyer''
to read as follows:
Sec. 92.2 Definitions.
* * * * *
First-time homebuyer means an individual and his or her spouse who
have not owned a home during the 3-year period prior to purchase of a
home with assistance under this part. The term first-time homebuyer
also includes an individual who is a displaced homemaker or single
parent, as those terms are defined in this section.
* * * * *
10. Add new subpart N to read as follows:
Subpart N--Housing Trust Fund
General
Sec.
92.701 Overview.
92.702 Definitions.
92.703 Waivers.
Allocation Formula; Reallocations
92.710-92.713 [Reserved]
92.714 Reallocations by formula.
Participation and Submission Requirements; Distribution of Assistance
92.720 Participation and submission requirements.
92.725 Distribution of assistance.
Program Requirements
92.726 Site and neighborhood standards.
92.727 Income determinations.
Eligible and Prohibited Activities
92.730 Eligible activities: general.
92.731 Eligible project costs.
92.732 Eligible administrative and planning costs.
92.734 HTF funds and public housing.
92.735 Prohibited activities and fees.
Income Targeting
92.736 Income targeting: rental units.
92.737 Income targeting: homeownership.
Project Requirements
92.740 Maximum per-unit subsidy amount, underwriting, and subsidy
layering.
92.741 Property standards: new construction projects and gut
rehabilitation projects.
92.742 Property standards: rehabilitation projects.
92.743 Property standards: acquisition of standard housing.
92.744 Property standards: manufactured housing.
92.745 Ongoing property standards: rental housing.
92.746 Qualification as affordable housing: rental housing.
92.747 Tenant protections and selection.
92.748 Qualification as affordable housing: homeownership.
92.749 Qualification as affordable housing: modest housing
requirements for homeownership.
92.750 Faith-based organizations.
Other Federal Requirements
92.760 Other Federal requirements and nondiscrimination; affirmative
marketing.
92.761 Lead-based paint.
92.762 Displacement, relocation, and acquisition.
92.763 Conflict of interest.
92.764 Funding accountability and transparency.
Program Administration
92.770 Housing Trust Fund (HTF) accounts.
92.771 HTF Grant Agreement.
92.772 Program disbursement and information system.
92.773 Program income and repayments.
92.774 Grantee responsibilities; written agreements; onsite
inspections; financial oversight.
92.775 Applicability of uniform administrative requirements.
92.776 Audit.
92.777 Closeout.
92.778 Recordkeeping.
92.779 Performance reports.
Performance Review and Sanctions
92.780 Accountability of recipients.
92.781 Performance reviews.
92.782 Corrective and remedial actions.
92.783 Notice and opportunity for hearing; sanctions.
[[Page 66990]]
Subpart N--Housing Trust Fund
General
Sec. 92.701 Overview.
(a) This subpart implements the Housing Trust Fund (HTF) program
established under section 1338 of the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992 (FHEFSSA), as amended by the
Federal Housing Finance Regulatory Reform Act of 2008 (12 U.S.C. 4568).
In general, under the HTF program, HUD allocates funds by formula to
eligible States to increase and preserve the supply of decent, safe,
sanitary, and affordable housing, with primary attention to rental
housing for ELI and VLI households, including homeless families.
(b) Section 1337 of FHEFSSA requires a percentage of the unpaid
principal balance of total new business for the Federal Home Loan
Mortgage Corporation (Freddie Mac) and the Federal National Mortgage
Association (Fannie Mae) (collectively, the government-sponsored
enterprises or GSEs) to be set-aside and allocated as a dedicated
source of annual funding for the HTF, unless allocations are suspended
by the Director of the Federal Housing Finance Agency, the agency that
regulates the GSEs. These funds will be deposited into an HTF account
established in the Treasury of the United States by the Secretary of
the Treasury to carry out the HTF program. FHEFSSA also provides that
the HTF may be funded with amounts appropriated, transferred, or
credited to the HTF under other provisions of law.
(c) Other subparts of part 92 are not applicable to the HTF
program, except as expressly provided in this subpart N. To the extent
that sections of other subparts of this part are made applicable,
references to HOME shall mean HTF and references to participating
jurisdictions shall mean grantees.
Sec. 92.702 Definitions.
(a) The definitions in 24 CFR 92.2 apply to this subpart, except as
modified in paragraph (b) of this section.
(b) As used in this subpart:
Commitment means:
(1) The grantee has executed a legally binding written agreement
(that includes the date of the signature of each person signing the
agreement) with an eligible recipient for a project that meets the
definition of ``commit to a specific local project'' of paragraph (2)
of this definition or with a unit of general local government for a
project that meets the definition of ``commit to a transit-oriented
development'' of paragraph (3) of this definition.
(2) Commit to a specific project, which means:
(i) If the project consists of rehabilitation or new construction
(with or without acquisition), the grantee and recipient have executed
a written legally binding agreement under which HTF assistance will be
provided to the recipient for an identifiable project for which
construction can reasonably be expected to start within 12 months of
the agreement date.
(ii) If the project consists of acquisition of standard housing and
the grantee is providing HTF funds to a recipient to acquire rental
housing, or to a first-time homebuyer family to acquire single-family
housing for homeownership, the grantee and recipient or the family have
executed a written agreement under which HTF assistance will be
provided for the purchase of the single-family housing or rental
housing and the property title will be transferred to the family or
recipient within 6 months of the agreement date.
(iii) If the project includes operating cost assistance, the
grantee and the recipient must have executed a legally binding written
agreement under which HTF assistance will be provided to the recipient
for operating cost assistance for the identified HTF project. The
legally binding agreement must include the amount of HTF funds
necessary for operating cost assistance for a period of not more than 2
years, which may be renewed during the period of affordability.
(3) Commit to a transit-oriented development means a unit of
general local government and the property owner have executed a legally
binding written contract for sale of an identifiable property for use
for HTF-assisted units within a transit-oriented development and that
the property title will be transferred to the unit of general local
government within 6 months of the date of the contract. Within 36
months of the date of the transfer of title, the local government must
commit an additional amount of HTF funds or other resources, as
necessary, to a specific local project (that meets the definition in
paragraph (2) of this definition) for this property.
Energy-Efficient Improvements mean activities undertaken to
minimize energy waste in existing housing through rehabilitation work,
including home weatherization and other improvements such as installing
additional insulation, sealing or reducing air leakage, upgrading to
energy-efficient lighting, installing programmable thermostats, and
converting to high-efficiency HVAC equipment and appliances. Energy-
efficient improvements can increase comfort levels, and improve health
in homes, reduce operating costs, improve building performance, lower
maintenance costs, and reduce energy-related pollution of the
environment.
ENERGY STAR is a joint program of the Environmental Protection
Agency (EPA) and the Department of Energy to save money and protect the
environment through endorsement of energy-efficient products and
practices.
ENERGY STAR-Qualified New Homes means homes that earn the ENERGY
STAR label. To earn the ENERGY STAR label, a home must meet strict
guidelines for energy efficiency set by the U.S. Environmental
Protection Agency (EPA) and be independently verified by a third-party
Home Energy Rater. Any home three stories or less can earn the ENERGY
STAR label if it has been verified to meet EPA's guidelines, including:
single-family, attached, and low-rise multifamily homes; manufactured
homes; systems-built homes (e.g., SIP, ICF, or modular construction);
log homes; concrete homes; and existing retrofitted homes. ENERGY STAR
qualified homes can include a variety of energy-efficient features that
contribute to improved home quality and homeowner comfort, lower energy
demand, and reduced air pollution, including effective insulation,
high-performance windows, tight construction and ducts, efficient
heating and cooling equipment, and efficient ENERGY STAR qualified
products.
ENERGY STAR-Qualified Products and Appliances means that the
energy-efficient products and appliances have earned the ENERGY STAR
label by meeting guidelines for energy efficiency set by the EPA, and
will help deliver energy savings and environmental benefits. Products
that can earn the ENERGY STAR label include lighting, windows, heating
and cooling equipment, and appliances such as refrigerators,
dishwashers, and washing machines.
Extremely Low-Income (ELI) Families means low-income families whose
annual incomes do not exceed 30 percent of the median family income of
a geographic area, as determined by HUD with adjustments for smaller
and larger families, except that HUD may establish income ceilings
higher or lower than 30 percent of the median for the area on the basis
of HUD findings that such variations are necessary because of
prevailing levels of construction costs or fair market rents,
[[Page 66991]]
or unusually high or low family incomes.
FHEFSSA means the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992, as amended (12 U.S.C. 1301 et seq.).
Grantee means the State or the State-designated entity that
receives the HTF funds from HUD.
Gut Rehabilitation means the total removal and replacement of all
interior (nonstructural) systems, equipment, components, or features of
the existing structure, and may include structural and nonstructural
modifications of the exterior of the structure.
Home Energy Rater (HER) means an independent third-party rater who
verifies that a home meets ENERGY STAR guidelines. Home Energy Raters
are trained and certified through the Residential Energy Services
Network (RESNET) to evaluate construction techniques, recommend
improvements, take key measurements, and perform inspections and
testing procedures during and after construction to verify a home's
energy-efficient performance and conduct Home Energy Rating System
(HERS) ratings.
Home Energy Rating means an analysis of a home's projected energy
efficiency in comparison to a ``reference home'' based on the
International Energy Conservation Code. A home energy rating involves
both an analysis of a home's construction plans, as well as onsite
inspections and testing by a certified Home Energy Rater.
HTF Allocation Plan means the annual submission to HUD required by
FHEFSSA that describes how the grantee will distribute its HTF funds,
including how it will use the funds to address its priority housing
needs, what activities may be undertaken with those funds, and how
recipients and projects will be selected to receive those funds. See 24
CFR 91.220(l)(4) and 91.320(k)(5).
HTF Funds means funds made available under this part through
formula allocations and reallocations, plus program income.
Income-eligible means a family, homeowner, or household (as
appropriate given the context of the specific regulatory provision)
that is very low-income, extremely low-income, or both, depending on
the income-targeting requirements established by the Secretary for the
fiscal year.
Observed Deficiency (OD) means any deficiency identified during an
onsite inspection of each inspected item for each inspected area. The
grantee can establish its own standards for an observed deficiency for
each inspected item, except that at a minimum, the grantee's standards
shall identify each deficiency (regardless of the level of severity)
for each inspected item and inspected area included in the latest
Uniform Physical Condition Standards (UPCS) Dictionary of Definitions
established by HUD pursuant to 24 CFR 5.703 and 24 CFR 5.705, or such
other requirements that the Secretary of HUD may establish.
Poverty Line is defined in section 673 of the Omnibus Budget
Reconciliation Act of 1981 (42 U.S.C. 9902).
Program Income means gross income received by the grantee that is
directly generated from the use of HTF funds. When program income is
generated by housing that is only partially assisted with HTF funds,
the income shall be prorated to reflect the percentage of HTF funds
used. Program income includes, but is not limited to, the following:
(1) Proceeds from the disposition by sale or long-term lease of
real property acquired, rehabilitated, or constructed with HTF funds;
(2) Gross income from the use or rental of real property owned by
the grantee that was acquired, rehabilitated, or constructed with HTF
funds, minus costs that were incidental to generation of the income;
therefore, program income excludes gross income from the use, rental,
or sale of real property received by the recipient, unless the funds
are paid by the recipient to the grantee);
(3) Payments of principal and interest on loans made using HTF
funds;
(4) Proceeds from the sale of loans made with HTF funds;
(5) Proceeds from the sale of obligations secured by loans made
with HTF funds;
(6) Interest earned on program income pending its disposition; and
(7) Any other interest or return on the investment of HTF funds, as
permitted under Sec. 92.730(b).
Project Completion means that all necessary title transfer
requirements and construction work have been performed, the project
complies with the requirements of this subpart (including the property
standards under Sec. Sec. 92.741 through 92.745 of this subpart), the
final drawdown has been disbursed for the project, and the project
completion information has been entered in the disbursement and
information system established by HUD.
Recipient means an organization, agency, or other entity (including
a for-profit entity or a nonprofit entity) that receives HTF assistance
from a grantee as an owner or developer to carry out an HTF-assisted
project. A recipient must:
(1) Make acceptable assurances to the grantee that it will comply
with the requirements of the HTF program during the entire period that
begins upon selection of the recipient to receive HTF funds, and ending
upon the conclusion of all HTF-funded activities;
(2) Demonstrate the ability and financial capacity to undertake,
comply, and manage the eligible activity;
(3) Demonstrate its familiarity with the requirements of other
Federal, State, or local housing programs that may be used in
conjunction with HTF funds to ensure compliance with all applicable
requirements and regulations of such programs; and
(4) Have demonstrated experience and capacity to conduct an
eligible HTF activity as evidenced by its ability to:
(i) Own, construct, or rehabilitate, and manage and operate an
affordable multifamily rental housing development; or
(ii) Design, construct, or rehabilitate, and market affordable
housing for homeownership.
(iii) Provide forms of assistance, such as down payments, closing
costs, or interest rate buydowns for purchasers.
State means any State of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the
Northern Mariana Islands, Guam, the Virgin Islands, and American Samoa.
State-Designated Entity means a State housing finance agency,
Tribally designated housing entity, or any other qualified
instrumentality of the State that is designated by the State to be the
grantee.
Subgrantee means a unit of general local government or State public
agency selected by the grantee to administer all or a portion of its
HTF program. A local government subgrantee must have an approved
consolidated plan submitted in accordance with 24 CFR part 91. The
selection of a subgrantee by a grantee is not subject to the
procurement procedures and requirements.
Transit-Oriented Development (TOD) refers to a compact, mixed-use,
mixed-income development that is within walking distance (no more than
\1/2\ mile) of a proposed or existing transit facility, that is easily
accessible to essential neighborhood destinations including jobs,
education, retail, and health services.
Tribally Designated Housing Entity has the meaning given the term
in section 4 of the Native American Housing Assistance and Self-
Determination Act of 1997 (25 U.S.C. 4103).
Uniform Physical Condition Standards (UPCS) means uniform
[[Page 66992]]
national standards established by HUD pursuant to 24 CFR part 5.703
that ensure that assisted housing is decent, safe, sanitary, and in
good repair. Standards are established for inspected items for each of
the following areas, which must be inspected: site, building exterior,
building systems, dwelling units, and common areas.
Very Low-Income (VLI) Families means low-income families whose
annual incomes are in excess of 30 percent but not greater than 50
percent of the median family income of a geographic area, as determined
by HUD with adjustments for smaller and larger families, except that
HUD may establish income ceilings higher or lower than 50 percent of
the median for the area on the basis of HUD findings that such
variations are necessary because of prevailing levels of construction
costs or fair market rents, or unusually high or low family incomes.
``Very low-income family'' includes any family that resides in a rural
area that does not exceed the poverty line applicable to the family
size involved.
WaterSense is a partnership program sponsored by the EPA that seeks
to protect the future of our Nation's water supply by promoting water
efficiency and enhancing the market for water-efficient products,
programs, and practices. WaterSense-labeled products must be
independently tested and certified by an EPA-licensed certifying body
to meet the criteria in EPA's specifications for water efficiency and
performance.
Sec. 92.703 Waivers.
The Secretary may, upon a determination of good cause and subject
to statutory limitations, waive any provision of this subpart and
delegate this authority in accordance with section 106 of the
Department of Housing and Urban Development Reform Act of 1989 (42
U.S.C. 3535(q)).
Allocation Formula; Reallocations
Sec. Sec. 92.710-92.713 [Reserved]
Sec. 92.714 Reallocations by formula.
(a) HUD will reallocate under this section:
(1) Any HTF funds available for reallocation because HUD reduced or
recaptured funds from an HTF grantee under Sec. 92.770 for failure to
commit or expend the funds within the time specified, or under Sec.
92.783 for failure to comply substantially with any provision of this
subpart;
(2) Any HTF funds reduced for failure by the grantee to obtain
funds required to be reimbursed or returned under Sec. 92.780; and
(3) Any HTF funds remitted to HUD under Sec. 92.773(b)(4) when a
grantee ceases to be an HTF grantee for any reason.
(b) Any reallocation of funds must be made only among all
participating States, except those States from which the funds were
recaptured or reduced.
(c) Any amounts that become available for reallocation shall be
added to amounts for formula allocation in the succeeding fiscal year.
Participation and Submission Requirements; Distribution of Assistance
Sec. 92.720 Participation and submission requirements.
(a) Notification of intent to participate. Not later than 30 days
after receiving notice of its formula allocation amount, a State must
notify HUD in writing of its intention to become an HTF grantee for the
first year of HTF funding.
(b) Submission requirement. In order to receive its HTF grant, the
grantee must submit a consolidated plan in accordance with 24 CFR part
91.
Sec. 92.725 Distribution of assistance.
(a) A State may choose to be the HTF grantee to receive and
administer its grant or it may choose a qualified State-designated
entity to be the HTF grantee.
(b) Each grantee is responsible for distributing HTF funds
throughout the State according to the State's assessment of the
priority housing needs within the State, as identified in the State's
approved consolidated plan, and as may be directed by HUD at the time
of allocation of HTF funds for the fiscal year.
(c) An HTF grantee may choose to directly fund projects by eligible
recipients in accordance with the grantee's HTF allocation plan or to
fund projects by eligible recipients through one or more subgrantees.
The HTF subgrantee must have a consolidated plan under 24 CFR part 91,
must include an HTF allocation plan in its consolidated plan (see 24
CFR 91.220(l)(4)), and must select projects by eligible recipients in
accordance with its HTF plan. The grantee or subgrantee must determine
that the applicant is an eligible recipient that meets the definition
of ``recipient'' in Sec. 92.702 before awarding HTF assistance.
(d) If the HTF grantee subgrants HTF funds to subgrantees, the
grantee must ensure that its subgrantees comply with the requirements
of this subpart and carry out the responsibilities of the grantee. The
grantee must annually review the performance of subgrantees in
accordance with 24 CFR 92.774(a).
Program Requirements
Sec. 92.726 Site and neighborhood standards.
The site and neighborhood standards contained in Sec. 92.202 apply
to the HTF.
Sec. 92.727 Income determinations.
(a) General. The HTF program has income-targeting requirements for
HTF-assisted projects. Therefore, the grantee must determine that each
family occupying an HTF-assisted unit is income-eligible, by
determining the family's annual income.
(b) Definition of ``annual income.'' (1) When determining whether a
family is income-eligible, the grantee must use one of the following
two definitions of ``annual income'':
(i) ``Annual income'' as defined at 24 CFR 5.609; or
(ii) ``Adjusted gross income'' as defined for purposes of reporting
under the Internal Revenue Service (IRS) Form 1040 series for
individual Federal annual income tax purposes, except that government
cost-of-living allowances that are not included in income (e.g., for a
Federal civilian employee or a Federal court employee who is stationed
in Alaska, Hawaii, or outside the United States) must be added to
adjusted gross income.
(2) To calculate adjusted income, the grantee must apply exclusions
from income established at 24 CFR 5.611.
(3) The grantee may use only one definition for each HTF-assisted
program (e.g., down payment assistance program) that it administers.
(c) Determining annual income. (1) Tenants in HTF-assisted housing.
For families who are tenants in HTF-assisted housing, the grantee must
initially determine annual income using the method in paragraph (d)(1)
of this section. For subsequent income determinations during the period
of affordability, the grantee may use any one of the methods described
in paragraph (d) of this section, in accordance with Sec. 92.746(e).
(2) HTF-assisted homebuyers. For families who are HTF-assisted
homebuyers, the grantee must determine annual income using the method
described in paragraph (d)(1) of this section.
(d) Methods for determining annual income. A grantee must use one
of the following methods to determine annual income, as described in
paragraph (c) of this section:
(1) Examine the source documents evidencing annual income (e.g.,
wage statement, interest statement, unemployment compensation
statement) for the family.
(2) Obtain from the family a written statement of the amount of the
family's
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annual income and family size, along with a certification that the
information is complete and accurate. The certification must state that
the family will provide source documents upon request.
(3) Obtain a written statement from the administrator of a
government program under which the family receives benefits and that
examines the annual income of the family each year. The statement must
indicate the tenant's family size and state the amount of the family's
annual income; or alternatively, the statement must indicate the
current dollar limit for VLI or ELI families for the family size of the
tenant and state that the tenant's annual income does not exceed this
limit.
(e) Calculation of annual income. (1) The grantee must calculate
the annual income of the family by projecting the prevailing rate of
income of the family at the time the grantee determines that the family
is income-eligible. Annual income shall include income from all family
members and must include the annual income of all families in the unit.
Income or asset enhancement derived from the HTF-assisted project shall
not be considered in calculating annual income.
(2) The grantee is not required to re-examine the family's income
at the time the HTF assistance is provided, unless more than 6 months
has elapsed since the grantee determined that the family qualified as
income-eligible.
(3) The grantee must follow the requirements in 24 CFR 5.617 when
making subsequent income determinations of persons with disabilities
who are tenants in HTF-assisted rental housing.
Eligible and Prohibited Activities
Sec. 92.730 Eligible activities: General.
(a)(1) HTF funds may be used for the production, preservation, and
rehabilitation of affordable rental housing and affordable housing for
first-time homebuyers through the acquisition (including assistance to
homebuyers), new construction, reconstruction, or rehabilitation of
nonluxury housing with suitable amenities, including real property
acquisition, site improvements, conversion, demolition, and other
expenses, including financing costs, relocation expenses of any
displaced persons, families, businesses, or organizations; for
operating costs of HTF-assisted rental housing; and for reasonable
administrative and planning costs. Not more than 20 percent of the
annual grant may be used for operating cost assistance. Operating cost
assistance may be provided only to rental housing acquired,
rehabilitated, preserved, or newly constructed with HTF funds. Not more
than 10 percent of the annual grant shall be used for housing for
homeownership. HTF-assisted housing must be permanent or transitional
housing. The specific eligible costs for these activities are found in
Sec. Sec. 92.731 and 92.732. The activities and costs are eligible
only if the housing meets the property standards in Sec. Sec. 92.741
through 92.744, as applicable, upon project completion.
(2) Acquisition of vacant land or demolition must be undertaken
only with respect to a particular housing project intended to provide
affordable housing within the time frames established in the definition
of ``commitment'' in Sec. 92.702(b).
(3) A unit of general local government may purchase improved or
unimproved land for use for HTF-assisted units to be part of a transit-
oriented development within the time frame established in the
``commitment'' definition of ``commit to a transit oriented
development'' in Sec. 92.702. The unit of general local government
must own the improved or unimproved property until the project meets
the requirement for ``commit to a specific local project'' in Sec.
92.702. If the unit of general local government does not have a
commitment for a specific HTF-assisted project within 36 months from
the date of the contract to acquire the property, the cost to purchase
or the current value of the property, whichever is greater, must be
repaid to the grantee's HTF account from which the funds were drawn
(i.e., local or Treasury account). The amount repaid must be prorated
in proportion to the amount of HTF funds to total funds used to
purchase the land.
(4) HTF funds may be used to purchase and/or rehabilitate a
manufactured housing unit, or purchase the land upon which a
manufactured housing unit is located. The manufactured housing unit
must, at the time of project completion, be connected to permanent
utility hook-ups and be located on land that is owned by the
manufactured housing unit owner or land for which the manufactured
housing owner has a lease for a period at least equal to the applicable
period of affordability.
(b) Forms of assistance. A grantee may invest HTF funds as equity
investments, interest-bearing loans or advances, non-interest-bearing
loans or advances, interest subsidies consistent with the purposes of
this subpart, deferred payment loans, grants, or other forms of
assistance that HUD determines to be consistent with the purposes of
this part. Each grantee has the right to establish the terms of
assistance, subject to the requirements of this part.
(c) Multi-unit projects. (1) HTF funds may be used to assist in the
development of one or more housing units in a multi-unit project. Only
the actual HTF eligible development costs of the assisted units may be
charged to the HTF program. If the assisted and non-assisted units are
not comparable, the actual costs may be determined based on a method of
cost allocation. If the assisted and non-assisted units are comparable
in terms of size, features, and number of bedrooms, the actual cost of
the HTF-assisted units can be determined by prorating the total HTF-
eligible development costs of the project so that the proportion of the
total development costs charged to the HTF program does not exceed the
proportion of the HTF-assisted units in the project.
(2) After project completion, the number of HTF-assisted units
designated as part of the development process may not be reduced,
except that in a project consisting of all HTF-assisted units, one unit
may be converted to an onsite manager's unit if the grantee determines
the conversion is reasonable and that, based on one fewer HTF-assisted
unit, the costs charged to the HTF program do not exceed the actual
costs of the HTF-assisted units and do not exceed the subsidy limit
established pursuant to Sec. 92.740(a).
(d) Terminated projects. An HTF-assisted project that is terminated
before completion, either voluntarily or otherwise, constitutes an
ineligible activity and the grantee must repay any HTF funds invested
in the project to the HTF account from which the funds were drawn
(i.e., local or Treasury account), in accordance with Sec. 92.773(b).
A project that does not meet the requirements for affordable housing
must be terminated and the HTF funds must be repaid to the grantee's
HTF account.
Sec. 92.731 Eligible project costs.
HTF funds may be used to pay the following eligible costs:
(a) Development hard costs. The actual cost of constructing or
rehabilitating housing. These costs include the following:
(1) For new construction projects, costs to meet the new
construction standards in Sec. 92.741;
(2) For rehabilitation projects, costs to meet the property
standards for rehabilitation projects in Sec. 92.742;
(3) For both new construction and rehabilitation projects, costs:
(i) To demolish existing structures;
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(ii) To make utility connections including offsite connections from
the property line to the adjacent street; and
(iii) To make improvements to the project site that is in keeping
with improvements of surrounding, standard projects. Site improvements
may include onsite roads and sewer and water lines necessary to the
development of the project. The project site is the property, owned by
the project owner, upon which the project is located.
(4) For both new construction and rehabilitation of multifamily
rental housing projects, costs to construct or rehabilitate laundry and
community facilities that are located within the same building as the
housing and that are for the use of the project residents and their
guests.
(5) Costs to make utility connections or to make improvements to
the project site, in accordance with the paragraphs (a)(3)(ii) and
(iii) of this section, are also eligible, in connection with
acquisition of standard housing.
(b) Refinancing costs. (1) The cost to refinance existing debt
secured by rental housing units that are being rehabilitated with HTF
funds, but only if the refinancing is necessary to reduce the overall
housing costs and to make the housing more affordable and proportional
to the number of HTF-assisted units in the rental project. The
proportional rehabilitation cost must be greater than the proportional
amount of debt that is refinanced.
(2) The grantee must establish refinancing guidelines and state
them in its consolidated plan described in 24 CFR part 91. The
guidelines shall describe the conditions under which the grantee will
refinance existing debt. At minimum, the guidelines must demonstrate
that rehabilitation is the primary eligible activity and ensure that
this requirement is met by establishing a minimum level of
rehabilitation per unit or a required ratio between rehabilitation and
refinancing.
(c) Acquisition costs. Costs of acquiring improved or unimproved
real property, including acquisition by homebuyers.
(d) Related soft costs. Other reasonable and necessary costs
incurred by the owner or grantee and associated with the financing or
development (or both) of new construction, rehabilitation, or
acquisition of housing assisted with HTF funds. These costs include,
but are not limited to:
(1) Architectural, engineering, or related professional services
required to prepare plans, drawings, specifications, or work write-ups.
(2) Costs to process and settle the financing for a project, such
as private lender origination fees, credit reports, fees for title
evidence, fees for recordation and filing of legal documents, building
permits, attorney's fees, private appraisal fees, fees for an
independent cost estimate, and builder's or developer's fees.
(3) Costs of a project audit and certification of costs performed
by a certified public accountant that the grantee may require with
respect to the development of the project.
(4) Costs to provide information services such as affirmative
marketing and fair housing information to prospective homeowners and
tenants, as required by Sec. 92.760.
(5) For new construction and rehabilitation of rental housing, the
cost of funding an initial operating deficit reserve, which is a
reserve to meet any shortfall in project income during the period of
project rent-up (not to exceed the amount necessary for a period of 18
months). Any HTF funds that are placed in an operating deficit reserve
that remain unexpended after the project rent-up may be retained for
project reserves if permitted by the participating jurisdiction.
(6) Staff and overhead costs of the grantee directly related to
carrying out the project, such as work specifications preparation, loan
processing, and inspections. For multi-unit projects, such costs must
be allocated among HTF-assisted units in a reasonable manner and
documented. These costs cannot be charged to or paid by the assisted
families.
(7) For both new construction and rehabilitation, costs for the
payment of impact fees that are charged for all projects within a
jurisdiction.
(8) Costs to address and meet environmental and historic
preservation property standards on the project, including any necessary
studies, research, or mitigation in accordance with Sec. Sec.
92.741(f) and 92.742(c).
(e) Operating cost assistance; and operating cost assistance
reserves. For HTF-assisted units for which project-based assistance is
not available, when necessary and subject to the limitations in Sec.
92.730(a), HTF funds may be used to pay for operating costs and
operating cost assistance reserves, as follows:
(1) Operating costs for insurance, utilities, real property taxes,
and maintenance and scheduled payments to a reserve for replacement of
major systems (provided that the payments must be based on the useful
life of each major system and expected replacement cost) of an HTF-
assisted unit. The eligible amount of HTF funds per unit for operating
cost assistance is determined based on the deficit remaining after the
monthly rent payment for the HTF-assisted unit is applied to the HTF-
assisted unit's share of monthly operating costs. The grantee may agree
to provide operating cost assistance during the entire period of
affordability, subject to the availability of funds. The maximum amount
of the operating assistance to be provided to an HTF-assisted rental
project must be specified in a written agreement between the grantee
and the recipient. The grantee may provide for the amount of expected
operating cost assistance necessary for the project in the written
agreement, for a period of not more than two years, which may be
renewed during the period of affordability, subject to the availability
of funds. The amount of HTF funds for operating cost assistance that a
grantee may provide to a project from any fiscal year HTF grant may not
exceed the eligible amount for operating cost assistance for the HTF-
assisted units in a project for a period of not greater than two years.
(2) Operating Cost Assistance Reserves may be established by the
grantee for HTF-assisted projects where such reserves are deemed
necessary by the grantee to ensure a project's financial feasibility.
The allowable amount of an operating cost reserve shall not exceed, for
a period of more than 5 years, the amount determined to be necessary to
provide operating cost assistance for HTF-assisted units, as determined
by the grantee, based on an analysis of potential deficits remaining
after the expected rent payments for the HTF-assisted unit are applied
to the HTF-assisted unit's expected share of operating costs.
(f) Relocation costs. The cost of relocation payments and other
relocation assistance to persons displaced by the project are eligible
costs.
(1) Relocation payments include replacement housing payments,
payments for moving expenses, and payments for reasonable out-of-pocket
costs incurred in the temporary relocation of persons.
(2) Other relocation assistance means staff and overhead costs
directly related to providing advisory and other relocation services to
persons displaced by the project, including timely written notices to
occupants, referrals to comparable and suitable replacement property,
property inspections, counseling, and other assistance necessary to
minimize hardship.
(g) Costs relating to payment of loans. If the HTF funds are not
used to directly pay a cost specified in this section, but
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are used to pay off a construction loan, bridge financing loan, or
guaranteed loan, the payment of principal and interest for such loan is
an eligible cost only if:
(1) The loan was used for eligible costs specified in this section,
(2) The HTF assistance is part of the original financing for the
project, and
(3) The project meets the requirements of this subpart.
(h) Construction undertaken before the HTF funds are committed to
the project. HTF funds cannot be used for development hard costs, as
provided in paragraph (a) of this section, including acquisition of
construction undertaken before the HTF funds are committed to the
project. However, the written agreement committing the HTF funds to the
project may authorize HTF funds to be used for architectural and
engineering costs and other related soft costs, as provided in
paragraphs (d)(1) and (2) of this section, that were incurred before
HTF funds were committed to the project.
Sec. 92.732 Eligible administrative and planning costs.
(a) General. A grantee may expend, for payment of reasonable
administrative and planning costs of the HTF program, an amount of HTF
funds that is not more than 10 percent of the fiscal year HTF grant. A
grantee may also expend, for payment of reasonable administrative and
planning costs of the HTF program, a sum up to 10 percent of the
program income deposited into its local account or received and
reported by its subgrantees during the program year. A grantee may
expend such funds directly or may authorize its subgrantees, if any, to
expend all or a portion of such funds, provided that total expenditures
for planning and administrative costs do not exceed the maximum
allowable amount. For purposes of this section, ``reasonable
administrative and planning costs'' are the costs described in
paragraphs (b) through (h) of this section.
(b) General management, oversight, and coordination. Reasonable
costs of overall program management, coordination, monitoring, and
evaluation. Such costs include, but are not limited to, necessary
expenditures for the following:
(1) Salaries, wages, and related costs of the grantee's staff. In
charging costs to this category, the grantee may either include the
entire salary, wages, and related costs (allocable to the program) of
each person whose primary responsibilities with regard to the program
involve program administration assignments or the prorated share of the
salary, wages, and related costs of each person whose job includes any
program administration assignments. The grantee may use only one of
these methods. Program administration includes the following types of
assignments:
(i) Developing systems and schedules for ensuring compliance with
program requirements;
(ii) Developing interagency agreements and agreements with entities
receiving HTF funds;
(iii) Monitoring HTF-assisted housing for progress and compliance
with program requirements;
(iv) Preparing reports and other documents related to the program
for submission to HUD;
(v) Coordinating the resolution of audit and monitoring findings;
(vi) Evaluating program results against stated objectives; and
(vii) Managing or supervising persons whose primary
responsibilities with regard to the program include such assignments as
those described in paragraphs (b)(1)(i) through (b)(1)(vi) of this
section.
(2) Travel costs incurred for official business in carrying out the
program.
(3) Administrative services performed under third party contracts
or agreements, including such services as general legal services,
accounting services, and audit services.
(4) Other costs for goods and services required for administration
of the program, including such goods and services as rental or purchase
of equipment, insurance, utilities, office supplies, and rental and
maintenance (but not purchase) of office space.
(c) Staff and overhead. (1) Staff and overhead costs of the grantee
directly related to carrying out the project, such as work
specifications preparation; loan processing; inspections; lead-based
paint inspections (visual assessments, inspections, and risk
assessments); housing counseling; and other services related to
assisting potential owners, tenants, and homebuyers; and staff and
overhead costs directly related to providing advisory and other
relocation services to persons displaced by the project, including
timely written notices to occupants, referrals to comparable and
suitable replacement property, property inspections, counseling, and
other assistance necessary to minimize hardship.
(2) These costs, except housing counseling, may be charged as
administrative costs or as project costs under Sec. Sec. 92.731(d)(5)
and 92.731(f)(2), at the discretion of the grantee; however, these
costs cannot be charged to or paid by the assisted families.
(d) Public information. The provision of information and other
resources to residents and citizen organizations participating in the
planning, implementation, or assessment of projects being assisted with
HTF funds.
(e) Fair housing. Activities to affirmatively further fair housing,
in accordance with the grantee's certification under 24 CFR part 91.
(f) Indirect costs. Indirect costs may be charged to the HTF
program under a cost allocation plan prepared in accordance with OMB
Circulars A-87 or A-122, as applicable.
(g) Preparation of the consolidated plan. Preparation of the
consolidated plan required under 24 CFR part 91. Preparation includes
the costs of public hearings, consultations, and publication.
(h) Other Federal requirements. Costs of complying with the Federal
requirements in Sec. Sec. 92.760 through 92.764 of this subpart.
Sec. 92.734 HTF funds and public housing.
(a) HTF funds may not be used for public housing, including public
housing that is developed under section 24 of the 1937 Act (HOPE VI).
(b) HTF-assisted housing may not receive operating assistance under
section 9 of the 1937 Act during the HTF period of affordability.
(c) Consistent with Sec. 92.730(c), HTF funds may be used for
affordable housing in a project that also contains public housing
units, provided that the HTF funds are not used for the public housing
units and HTF funds are used only for eligible costs, in accordance
with this subpart.
Sec. 92.735 Prohibited activities and fees.
(a) HTF funds may not be used to:
(1) Provide assistance (other than assistance to a homebuyer to
acquire housing previously assisted with HTF funds) to a project
previously assisted with HTF funds during the period of affordability
established by the grantee in the written agreement under Sec. 92.774.
However, additional HTF funds may be committed to a project up to one
year after project completion, but the amount of HTF funds in the
project may not exceed the maximum per-unit subsidy amount established
pursuant to Sec. 92.740.
(2) Pay for the acquisition of property owned by the grantee,
except for property acquired by the grantee with HTF funds or property
acquired in anticipation of carrying out an HTF project.
(3) Pay delinquent taxes, fees, or charges on properties to be
assisted with HTF funds.
[[Page 66996]]
(4) Pay for political activities, advocacy, lobbying (whether
directly or through other parties), counseling services (except for
housing counseling), travel expenses (other than those eligible under
Sec. 92.732(b)), or preparing or providing advice on tax returns. The
prohibited use of funds for political activities includes influencing
the selection, nomination, election, or appointment of one or more
candidates to any Federal, State, or local office as codified in
section 501 of the Internal Revenue Code of 1986 (26 U.S.C. 501).
(5) Pay for administrative, outreach, or other costs to manage and
operate the grantee of HTF funds, except those administrative costs
necessary to carry out the HTF program, including housing counseling.
(6) Pay for any cost that is not eligible under Sec. 92.731 and
Sec. 92.732.
(b)(1) The grantee may not charge (and must prohibit subgrantees
and recipients from charging) servicing, origination, or other fees for
the costs of administering the HTF program (except as allowed in Sec.
92.731(d)(2)). However, the grantee may charge owners of rental
projects reasonable annual fees for monitoring compliance during the
period of affordability and may charge nominal application fees
(although these fees are not an eligible HTF cost) to eligible
recipients, to discourage frivolous applications.
(2) The amount of application fees must be appropriate to the type
of application and may not create an undue impediment to an ELI family
to be able to participate in the grantee's program. All fees are
applicable credits under OMB Circular A-87.
(3) In addition, the grantee must prohibit project owners from
charging origination fees, parking fees that exceed usual and customary
charges, laundry room access fees, and other fees; however, rental
project owners may charge reasonable application fees to prospective
tenants.
Income Targeting
Sec. 92.736 Income targeting: Rental units.
Unless otherwise directed by HUD at the time of allocation of HTF
funds for a fiscal year, in each fiscal year, not less than 75 percent
of HTF grant amounts provided to rental projects under each grant must
be used for the benefit of ELI families or families with incomes at or
below the poverty line, whichever is greater. For the first year of HTF
funding, States must use 100 percent of HTF rental housing funding for
the benefit of ELI families or families with incomes at or below the
poverty line, whichever is greater. For subsequent funding years, HUD
will advise the percentage of funds to be used for the benefit of ELI
families or families with incomes at or below the poverty line, if such
percentage is to be greater than 75 percent.
Sec. 92.737 Income targeting: Homeownership.
Unless otherwise directed by HUD at the time of allocation of HTF
funds for a fiscal year, in each fiscal year, not less than 75 percent
of HTF grant amounts provided to homeownership projects under each
grant must be used for the benefit of ELI families or families with
incomes at or below the poverty line, whichever is greater. For the
first year of HTF funding, each assisted homeownership unit must be for
purchase only by ELI families, or families with incomes at or below the
poverty line, whichever is greater, who qualify as first-time
homebuyers. For subsequent funding years, HUD will advise the
percentage of funds to be used for the benefit of ELI families or
families with incomes at or below the poverty line, if such percentage
is to be greater than 75 percent.
Project Requirements
Sec. 92.740 Maximum per-unit subsidy amount, underwriting, and
subsidy layering.
(a) Maximum per-unit development subsidy amount. The grantee must
establish maximum limitations on the total amount of HTF funds that the
grantee may invest per-unit for development, with adjustments for the
number of bedrooms and the geographic location of the project. The
grantee must include these limits in its consolidated plan and update
these limits annually.
(b) Underwriting and subsidy layering. Before committing funds to a
project, the grantee must evaluate the project in accordance with
guidelines that it has adopted for this purpose and make a
determination that it will not invest any more HTF funds, alone or in
combination with other governmental assistance, than is necessary to
provide quality affordable housing that is financially viable for a
reasonable period (at a minimum, the period of affordability in Sec.
92.746 or Sec. 92.748) and will not provide undue return on the
owner's or developer's investment or undue profit. This analysis must
include any operating cost assistance or project-based rental
assistance that will be provided to the project. In addition, the
grantee must examine the sources and uses of funds for the project, and
determine that the costs are reasonable.
Sec. 92.741 Property standards: New construction projects and gut
rehabilitation projects.
(a) State and local codes, ordinances, and zoning requirements. (1)
Housing that is constructed or has undergone gut rehabilitation with
HTF funds must meet all applicable State and local codes, ordinances,
and zoning requirements. HTF-assisted new construction and gut
rehabilitation projects must meet the International Residential Code or
International Building Code (as applicable to the type of housing) of
the International Code Council, or State or local residential and
building codes for new construction or gut rehabilitation. The housing
must meet the applicable requirements upon project completion.
(2) All new construction and gut rehabilitation housing must also
meet the requirements described in paragraphs (b) through (f) of this
section:
(b) Lead-based paint. The housing must meet the lead-based paint
requirements at 24 CFR part 35.
(c) Accessibility. (1) The housing must meet the accessibility
requirements at 24 CFR part 8, which implements section 504 of the
Rehabilitation Act of 1973 (29 U.S.C. 794).
(2) Covered multifamily dwellings, as defined at 24 CFR 100.201,
must also meet the design and construction requirements at 24 CFR
100.205, which implements the Fair Housing Act (42 U.S.C. 3601-3619).
(3) Construction may include improvements that permit use by
persons with disabilities, but are not required by regulation or
statute.
(d) Energy and water efficiency. Upon completion, the housing must
meet energy and water efficiency standards, as set forth in paragraphs
(d)(1), (2), and (3) of this section.
(1) All residential buildings up to three stories must meet the
guidelines for ENERGY STAR-Qualified New Homes, as certified by a
qualified Home Energy Rater. The requirement for ENERGY STAR
certification by a qualified Home Energy Rater shall apply to all
projects to which funds are committed after 6 months from the effective
date of this rule.
(2) All mid- or high-rise multifamily housing over three stories
must exceed, by 20 percent, the minimum energy efficiency requirements
defined by the American Society of Heating, Refrigerating, and Air-
Conditioning Engineers (ASHRAE) Standard 90.1-2007, Appendix G:
Performance Rating Method. When the ASHRAE standard is updated, the
updated standard, plus 20 percent, must be applied to all projects
[[Page 66997]]
with HTF funds committed after the date that the updated standard is
published. At such time as an ENERGY STAR standard is established for
all housing taller than three stories, the ENERGY STAR guidelines and
certification requirements shall apply.
(3) All water-usage products installed in HTF-assisted units must
be certified ``WaterSense''-labeled products, including toilets,
showers, and faucets.
(e) Disaster mitigation. Where relevant, the housing must be
constructed or rehabilitated to mitigate the impact of potential
disasters (e.g., earthquakes, hurricanes, flooding, and wildfires), in
accordance with State and local codes, ordinances, and requirements, or
such other requirements as the Secretary of HUD may establish.
(f) Environmental review requirements. (1) Historic preservation.
(i) The project activities (including demolition) must not be performed
on properties that are either listed in or determined eligible for
listing in the National Register of Historic Places, or identified as
historic by the State, territory, Tribe, or municipality (i.e., listed
in a State or local inventory of historic places, or designated as a
State or local landmark or historic district by appropriate law or
ordinance), unless the project activities comply with at least one of
the following conditions:
(A) The project activities must meet the Secretary of the
Interior's Standards for Rehabilitation, as verified by someone that
meets the Secretary of the Interior's Professional Qualification
Standards;
(B) The project activities must comply with the State (or
territory) historic preservation law and requirements (applies to
projects that are defined as State-assisted); or
(C) Project activities must comply with local historic preservation
ordinances and permit conditions (applies to projects affecting locally
designated historic landmarks or districts).
(ii) Archaeological resources. If archaeological resources or human
remains are discovered on the project site during construction, the
recipient must comply with applicable State (or territory) law and/or
local ordinance (e.g., State unmarked burial law).
(2) Farmland. Project activities must not result in the conversion
of unique, prime, or statewide or locally significant agricultural
properties to urban uses.
(3) Airport zones. Projects are not permitted within the runway
protection zones of civilian airports, or the clear zones or accident
potential zones of military airfields.
(4) Coastal Barrier Resource System. No projects may be assisted in
Coastal Barrier Resource System (CBRS) units. CBRS units are mapped and
available from the U.S. Fish and Wildlife Service.
(5) Coastal zone management. Development must be consistent with
the appropriate State coastal zone management plan. Plans are available
from the local coastal zone management agency.
(6) Floodplains. Except as modified below, definitions for terms
used below can be found at 24 CFR part 55.
(i) Construction and other activities in the 100-year floodplain
are to be avoided when practicable. If there are no practicable
alternatives to new construction or substantial improvement in the 100-
year floodplain, the structure must be elevated at least to the base
flood elevation (BFE) or floodproofed to one foot above the BFE.
Elevated and floodproofed buildings must adhere to National Flood
Insurance Program standards. The primary sources of floodplain data are
Federal Emergency Management Agency (FEMA) Flood Insurance Rate Maps
(FIRMs). In certain situations, including but not limited to, post-
disaster development or redevelopment, interim FEMA information will be
the source of these designations. If FEMA information is unavailable,
other Federal, State, or local data may be used.
(ii) No Housing Trust Fund financial assistance may be approved
with respect to:
(A) Any action, other than a functionally dependent use, located in
a floodway;
(B) Any critical action located in a coastal high hazard area, 100-
or 500-year floodplain; or
(C) Any non-critical action located in a coastal high hazard area,
unless the action is designed for location in a coastal high hazard
area consistent with the FEMA National Flood Insurance Program
requirements for V-Zones.
(7) Wetlands. (i) No draining, dredging, channelizing, filling,
diking, impounding, or related grading activities are to be performed
in wetlands. No activities, structures, or facilities funded under this
program are to adversely impact a wetland.
(ii) A wetland means those areas that are inundated by surface or
ground water with a frequency sufficient to support, and under normal
circumstances, does or would support a prevalence of vegetative or
aquatic life that requires saturated or seasonally saturated soil
conditions for growth and reproduction. Wetlands generally include
swamps, marshes, bogs, and similar areas such as sloughs, potholes, wet
meadows, river overflows, mud flats, and natural ponds. This definition
includes those wetlands areas separated from their natural supply of
water as a result of activities, such as the construction of structural
flood protection methods or solid-fill road beds, or mineral extraction
and navigation improvements. This definition is independent of the
definition of jurisdictional wetland used by the U.S. Army Corps of
Engineers under section 404 of the Clean Water Act (33 U.S.C. 1251 et
seq.).
(8) Explosives and hazards. Projects must be in compliance with the
standards for acceptable separation distance, as set forth at 24 CFR
part 51, Subpart C.
(9) Contamination. It is HUD policy that all properties to be used
in the HTF program be free of hazardous materials, contamination, toxic
chemicals and gases, and radioactive substances, where a hazard could
affect the health and safety of occupants or conflict with the intended
utilization of the property.
(i) All proposed multifamily (more than 4 housing units)
development of HUD-assisted HTF project activities requires a Phase I
Environmental Site Assessment (ESA-ASTM-E 1527-05). If the Phase I ESA
identifies recognized environmental concerns (RECs), a Phase II (ESA-
ASTM-E 1903-97) will be required. Single-family properties (up to 4
units) do not require a Phase I ESA.
(ii) HTF projects must avoid sites located within 0.25 miles of a
Superfund or CERCLIS (Comprehensive Environmental Response,
Compensation, and Liability Information System) site or other
contaminated site reported to Federal, State, or local authorities
without a statement in writing from the U.S. Environmental Protection
Agency (EPA) or the appropriate State agency that there is no hazard
that could affect the health and safety of the occupants or conflict
with the intended utilization of the property.
(10) Noise. (i) Internal noise levels: All activities will be
developed to ensure an interior noise level of 45 decibels (dB).
(ii) External noise levels:
(A) Project sites exposed to less than or equal to 65 dB of
environmental noise are acceptable.
(B) Sites between 65 dB and less than 75 dB are acceptable with
mitigation (e.g., noise walls, careful site planning) that results in
an interior standard of 45 dB.
(C) Locations with environmental noise levels of 75 dB or greater
may not have noise sensitive outdoor uses (e.g., picnic areas, totlots,
balconies, or
[[Page 66998]]
patios) and require sound attenuation in the building shell to achieve
the 45 dB interior standard.
(11) Endangered species. Recipients must avoid all actions which
could jeopardize the continued existence of any endangered or
threatened species, as designated by U.S. Fish and Wildlife Service or
National Marine Fisheries Service, or would result in the destruction
or adversely modify the designated critical habitat of such species.
(12) Wild and scenic rivers. Recipients must avoid activities that
are inconsistent with conservation easements, land-use protections, and
restrictions adjacent to wild and scenic rivers, as designated/listed
by the Departments of Agriculture or Interior. Maps for the National
Wild and Scenic Rivers System are available at the governing
departments.
(13) Safe drinking water. Projects with a potable water system must
use only lead-free pipes, solder, and flux.
(14) Sole-source aquifers. Project activities should avoid sites
and activities that have the potential to contaminate sole source
aquifer areas (SSAs). The EPA defines a sole or principal source
aquifer as an aquifer that supplies at least 50 percent of the drinking
water consumed in the area overlying the aquifer. If the project
overlies an SSA, the EPA must review the project. The EPA review is
designed to reduce the risk of ground water contamination, that could
pose a health hazard to those who use it.
(g) Written standards for methods and materials, plans,
specifications, work write-ups, and cost estimates. (1) The grantee
must establish written standards for methods and materials to be used
for new construction and gut rehabilitation.
(2) The grantee must ensure that plans and specifications for new
construction or work write-ups for gut rehabilitation that describe the
work to be undertaken are in compliance with State and local codes,
ordinances, requirements, and the grantee's standards for methods and
materials.
(3) The grantee must review and approve a written cost estimate
based upon a finding of cost reasonableness.
(h) Property inspections. The grantee must establish written
procedures for initial, progress, and final inspections during
construction including:
(1) Detailed inspection checklists;
(2) Description of how and by whom inspections will be carried out;
and
(3) Procedures for training and certifying qualified inspectors.
(i) Frequency of inspections.
(1) For gut rehabilitation, the grantee must conduct an initial
property inspection to identify the deficiencies that must be
addressed.
(2) The grantee must conduct progress and final inspections to
ensure that work is done in accordance with approved standards for
methods and materials, plans, specifications, and work write-ups, as
applicable to the work.
(3) In accordance with Sec. 92.774(d), the grantee must comply
with ongoing responsibilities for onsite inspections during the
affordability period.
(j) Payment schedule. The grantee must have procedures to ensure
that progress payments are consistent with the amount of work performed
and that final payment does not occur until project completion.
Sec. 92.742 Property standards: Rehabilitation projects.
Housing that has undergone gut rehabilitation with HTF funds must
meet the requirements of Sec. 92.741. All other rehabilitation must
meet the requirements of this part.
(a) State and local codes, ordinances, and zoning requirements.
Housing that is rehabilitated with HTF funds must meet all applicable
State and local codes, ordinances, and requirements. The housing must
meet the applicable requirements upon project completion.
(b) Written standards for methods and materials. The grantee must
establish written standards for methods and materials to be used for
rehabilitation work and describe these standards in its consolidated
plan, whether or not there are applicable State or local rehabilitation
codes. The housing must meet the grantee's standards upon project
completion. The grantee's description of its standards must be in
sufficient detail to establish the basis for a uniform inspection of
the property. At a minimum, the grantee's standards must cover all
items included in HUD's most recent Uniform Physical Condition
Standards (UPCS) Comprehensive Listing of Inspectable Areas, or such
other requirements as the Secretary of HUD may establish. The grantee's
rehabilitation standards must address each of the following:
(1) Health and safety. The housing must be free of all health and
safety defects. The grantee's standards must identify life-threatening
deficiencies that must be addressed.
(2) Habitability and functionality. The housing must meet minimum
standards of habitability and functionality for each of the following
areas: site, building exterior, building systems, dwelling units, and
common areas. All inspected items with an observed deficiency (OD) must
be corrected.
(3) Major systems. Upon project completion, each of the following
major systems must have a useful life for a minimum of 15 years. The
grantee may specify a longer period.
(i) Structural support;
(ii) Roofing;
(iii) Cladding and weatherproofing (e.g., windows, doors, siding,
gutters);
(iv) Plumbing;
(v) Electrical; and
(vi) Heating, ventilation, and air conditioning.
(4) Lead-based paint. The housing must meet the lead-based paint
requirements at 24 CFR part 35.
(5) Accessibility. (i) The housing must meet the accessibility
requirements at 24 CFR part 8, which implements section 504 of the
Rehabilitation Act of 1973 (29 U.S.C. 794).
(ii) If the rehabilitation includes an addition, covered
multifamily dwellings, as defined at 24 CFR 100.201, must also meet the
design and construction requirements at 24 CFR 100.205, which
implements the Fair Housing Act (42 U.S.C. 3601-3619).
(iii) Rehabilitation may include improvements that are not required
by regulation or statute that permit use by persons with disabilities.
(6) Energy and water efficiency. ENERGY STAR-labeled and
WaterSense-labeled products must be installed when older obsolete
products (such as windows, doors, lighting, fans, water heaters,
furnaces, boilers, air conditioning units, refrigerators, clothes
washers, dryers, dishwashers, toilets, showers, and faucets) are
replaced as part of the approved rehabilitation work, and such products
are appropriate for achieving energy efficiency for the climate area in
which the housing is located.
(7) Disaster mitigation. Where relevant, the housing must be
improved to mitigate the impact of potential disasters (e.g.,
earthquakes, hurricanes, flooding, wildfires) in accordance with State
and local codes, ordinances, and requirements, or such other
requirements as the Secretary of HUD may establish.
(8) Other improvements. Discretionary housing improvements beyond
those described in paragraphs (b)(1) through (7) of this section may
include modest amenities and aesthetic features that are in keeping
with housing of similar type in the community and must avoid luxury
improvements, as defined by the grantee.
(c) Environmental requirements. (1) Historic preservation. (i) The
project activities (including demolition) must not be performed on
properties that are either listed in or determined eligible
[[Page 66999]]
for listing in the National Register of Historic Places, or identified
as historic by the State, territory, Tribe, or municipality (i.e.,
listed in a State or local inventory of historic places, or designated
as a State or local landmark or historic district by appropriate law or
ordinance), unless the project activities comply with at least one of
the following conditions:
(A) The project activities must meet the Secretary of the
Interior's Standards for Rehabilitation, either as certified through
the Federal and/or State historic rehabilitation tax credit programs or
as verified by someone that meets the Secretary of the Interior's
Professional Qualification Standards;
(B) The project activities must comply with the State (or
territory) historic preservation law and requirements (applies to
projects that are defined as State-assisted); or
(C) Project activities must comply with local historic preservation
ordinances and permit conditions (applies to projects affecting locally
designated historic landmarks or districts).
(ii) Archaeological resources. If archaeological resources or human
remains are discovered on the project site during construction or
rehabilitation, the recipient must comply with applicable State (or
territory) law and/or local ordinance (e.g., State unmarked burial
law).
(2) Farmland. Project activities must not result in the conversion
of unique, prime, or locally significant agricultural properties to
urban uses.
(3) Airport zones. Projects are not permitted within the runway
protection zones of civilian airports, or the clear zones or accident
potential zones of military airfields.
(4) Coastal Barrier Resource System. No projects may be assisted in
Coastal Barrier Resource System (CBRS) units. CBRS units are mapped and
available from the U.S. Fish and Wildlife Service.
(5) Coastal zone management. Development must be consistent with
the appropriate State coastal zone management plan. Plans are available
from the local coastal zone management agency.
(6) Floodplains. Except as modified below, definitions for terms
used below can be found at 24 CFR part 55.
(i) Construction and other activities in the 100-year floodplain
are to be avoided when practicable. If there are no practicable
alternatives to new construction or substantial improvement in the 100-
year floodplain, the structure must be elevated at least to the base
flood elevation (BFE) or floodproofed to one foot above the BFE.
Elevated and floodproofed buildings must adhere to National Flood
Insurance Program standards. The primary sources of floodplain data are
Federal Emergency Management Agency (FEMA) Flood Insurance Rate Maps
(FIRMS). In certain situations, including, but not limited to, post-
disaster development or redevelopment, interim FEMA information will be
the source of these designations. If FEMA information is unavailable,
other Federal, State, or local data may be used.
(ii) No HTF financial assistance may be approved with respect to:
(A) Any action, other than functionally dependent uses, located in
a floodway;
(B) Any critical action located in a coastal high hazard area, 100-
or 500-year floodplain; or
(C) Any non-critical action located in a coastal high hazard area,
unless the action is designed for location in a coastal high hazard
area consistent with the FEMA National Flood Insurance Program
requirements for V-Zones.
(7) Wetlands. No rehabilitation of existing properties that expands
the footprint into a wetland is allowed. A wetland means those areas
that are inundated by surface or ground water with a frequency
sufficient to support, and under normal circumstances, does or would
support a prevalence of vegetative or aquatic life that requires
saturated or seasonally saturated soil conditions for growth and
reproduction. Wetlands generally include swamps, marshes, bogs, and
similar areas such as sloughs, potholes, wet meadows, river overflows,
mud flats, and natural ponds. This definition includes those wetlands
areas separated from their natural supply of water as a result of
activities such as the construction of structural flood protection
methods or solid-fill road beds and activities such as mineral
extraction and navigation improvements. This definition is independent
of the definition of jurisdictional wetland used by the U.S. Army Corps
of Engineers under section 404 of the Clean Water Act (33 U.S.C. 1251
et seq.).
(8) Explosives and hazards. If the rehabilitation of the building
increases the number of dwelling units, then the project must be in
compliance with the standards for acceptable separation distance as set
forth at 24 CFR part 51, subpart C.
(9) Contamination. It is HUD policy that all properties to be used
in the HTF be free of hazardous materials, contamination, toxic
chemicals and gases, and radioactive substances, where a hazard could
affect the health and safety of occupants or conflict with the intended
utilization of the property:
(i) All proposed multifamily (more than four housing units)
development of HUD-assisted HTF project activities requires a phase I
Environmental Site Assessment (ESA-ASTM-E 1527-05). If the Phase I ESA
identifies recognized environmental concerns (RECs), a Phase II (ESA-
ASTM-E 1903-97) will be required. Single-family properties (up to four
units) do not require a Phase I ESA.
(ii) Must avoid sites located within 0.25 miles of a Superfund or
CERCLIS (Comprehensive Environmental Response, Compensation, and
Liability Information System) site or other contaminated site reported
to Federal, State, or local authorities without a statement in writing
from the EPA or the appropriate State agency that there is no hazard
that could affect the health and safety of the occupants or conflict
with the intended utilization of the property.
(10) Noise. (i) Internal noise levels: All activities will be
developed to ensure an interior noise level of 45 decibels (dB).
(ii) External noise levels:
(A) Project sites exposed to less than or equal to 65 dB of
environmental noise are acceptable.
(B) Sites between 65 dB and less than 75 dB may be acceptable with
mitigation (e.g., noise walls, careful site planning) that results in
an interior standard of 45 dB.
(C) Locations with environmental noise levels of 75 dB or greater
may not have noise sensitive outdoor uses (e.g., picnic areas, totlots,
balconies, or patios) and require sound attenuation in the building
shell to achieve the interior standard.
(11) Endangered species. (i) Recipients must avoid all actions that
could jeopardize the continued existence of any species designated by
the U.S. Fish and Wildlife Service or National Marine Fisheries as
endangered or threatened.
(ii) Recipients must avoid all actions that adversely modify the
critical habitat of such species.
(12) Wild and scenic rivers. Recipients must avoid activities that
are inconsistent with conservation easements, land-use protections, and
restrictions adjacent to wild and scenic rivers, as designated/listed
by the Departments of Agriculture and Interior. Maps for the National
Wild and Scenic Rivers System are available at the governing
departments.
(13) Safe drinking water. Projects with a potable water system must
use only lead-free pipes, solder, and flux.
(14) Sole-source aquifers. Project activities should avoid sites
and
[[Page 67000]]
activities that have the potential to contaminate sole source aquifer
areas (SSAs). The EPA defines a sole or principal source aquifer as an
aquifer that supplies at least 50 percent of the drinking water
consumed in the area overlying the aquifer. If the project overlies an
SSA, the EPA must review the project. The EPA review is designed to
reduce the risk of ground water contamination, which could pose a
health hazard to those who use it.
(d) Work write-ups and cost estimates. (1) The grantee must ensure
that a work write-up that describes the work to be undertaken is in
compliance with State and local codes, ordinances, requirements, and
the grantee's standards for methods and materials.
(2) The grantee must review and approve a written cost estimate
based upon a finding of cost reasonableness.
(e) Property inspections. The grantee must establish written
inspection procedures for initial, progress, and final inspections
during construction (see Sec. 92.774(d) for the grantee's ongoing
responsibilities for onsite inspections during the affordability
period) including:
(1) Detailed inspection checklists;
(2) Description of how and by whom inspections will be carried out;
and
(3) Procedures for training and certifying qualified inspectors.
(f) Frequency of inspections. (1) The grantee must conduct an
initial property inspection to identify the deficiencies that must be
addressed.
(2) The grantee must conduct progress and final inspections to
ensure that work is done in accordance with approved standards for
methods and materials, and work write-ups.
(3) In accordance with Sec. 92.774(d), the grantee must comply
with ongoing responsibilities for onsite inspections during the
affordability period.
(g) Payment schedule. The grantee must have procedures to ensure
that progress payments are consistent with the amount of work performed
and that final payment does not occur until all punch list items are
completed.
Sec. 92.743 Property standards: Acquisition of standard housing.
(a) Existing housing that is acquired with HTF assistance, and has
been newly constructed or gut-rehabilitated less than 12 months before
the commitment of HTF funds, must meet the property standards at Sec.
92.741 for new construction and gut rehabilitation projects. The
grantee must document this compliance based upon a review of approved
building plans and Certificates of Occupancy, and a current inspection
that is conducted no earlier than 30 days prior to the commitment of
HTF assistance.
(b) All other existing housing that is acquired with HTF assistance
must meet the property standards requirements of Sec. 92.742. The
grantee must document this compliance based upon a current inspection
that is conducted no earlier than 30 days prior to the commitment of
HTF assistance, in accordance with the inspection procedures that the
grantee established pursuant to Sec. 92.742.
(c) If the property does not meet these standards, with the
exception of noise standards at Sec. 92.741(f)(10) or Sec.
92.742(c)(10), the property must be rehabilitated to meet the standards
of Sec. 92.741 or Sec. 92.742, as applicable.
Sec. 92.744 Property standards: Manufactured housing.
(a) Compliance With manufactured home construction and safety
standards. Construction of all manufactured housing must meet the
Manufactured Home Construction and Safety Standards codified at 24 CFR
part 3280. These standards pre-empt State and local codes covering the
same aspects of performance for such housing.
(b) Installation and standards for new construction and gut
rehabilitation of manufactured housing projects. (1) If the grantee
provides HTF assistance to install a manufactured housing unit, the
installation must comply with applicable State and local laws or codes.
In the absence of such laws or codes, the installation must comply with
the manufacturer's written instructions for installation. Manufactured
housing constructed or rehabilitated using HTF funds must be on a
permanent foundation. The grantee must document this compliance in
accordance with the inspection procedures that the grantee has
established pursuant to Sec. 92.742.
(2) Manufactured housing that is newly constructed or has undergone
gut rehabilitation using HTF funds must meet the energy and water
efficiency standards in Sec. 92.741. An ENERGY STAR-qualified
manufactured home is a home that has been designed, produced, and
installed in accordance with ENERGY STAR's guidelines by an ENERGY
STAR-certified plant. A plant must be certified by a Quality Assurance
Provider (QAP), which is an EPA-designated organization that meets
certain qualifications, to produce ENERGY STAR-qualified manufactured
homes on an ongoing basis. Once certified, a plant must follow ENERGY
STAR guidelines for producing and installing homes to maintain its
plant certification. To comply with the requirement in Sec. 92.741 to
meet the guidelines for ENERGY STAR-Qualified New Homes, a QAP may
provide quality assurance oversight for the ENERGY STAR verification
process of energy-efficient manufactured homes that cannot be certified
by a qualified Home Energy Rater.
(c) Manufactured housing rehabilitation. Manufactured housing that
is rehabilitated (other than gut rehabilitation) using HTF funds must
meet the property standards requirements of Sec. 92.742, as
applicable. The grantee must document this compliance in accordance
with the inspection procedures that the grantee has established
pursuant to Sec. 92.742, as applicable.
(d) Environmental requirements. Manufactured housing is subject to
the environmental standards in Sec. 92.741(f) for new construction and
gut rehabilitation or Sec. 92.742(c) for rehabilitation, as
applicable. If an existing property does not meet these standards, the
property must be rehabilitated to meet the standards in Sec. 92.741 or
Sec. 92.742, as applicable, with the exception of noise standards at
Sec. 92.741(f)(10) or Sec. 92.742(c)(10).
Sec. 92.745 Ongoing property standards: Rental housing.
(a) Property standards. The grantee must establish property
standards for rental housing (including manufactured housing) that
apply throughout the affordability period, and describe these standards
in its Consolidated Plan. The standards must ensure that owners
maintain the housing as decent, safe, and sanitary housing in good
repair. The grantee's description of its property standards must be in
sufficient detail to establish the basis for a uniform inspection of
the property. At a minimum, the grantee's standards must include all
inspectable items included in HUD's most recent Uniform Physical
Condition Standards (UPCS) Comprehensive Listing of Inspectable Areas,
or such other requirements as the Secretary of HUD may establish. The
grantee's ongoing property standards must address each of the
following:
(1) Compliance with State and local codes, ordinances, and
requirements. The housing must meet all applicable State and local
codes, ordinances, and requirements.
(2) Health and safety. The housing must be free of all health and
safety defects. The standards must identify life-threatening
deficiencies that the owners must immediately correct and the grantee's
time frame for addressing these deficiencies.
(3) Habitability and functionality. The housing must meet minimum
standards
[[Page 67001]]
of habitability and functionality for each of the following areas:
site, building exterior, building systems, dwelling units, and common
areas. All inspected items with an observed deficiency (OD) must be
corrected within a reasonable time frame established by the grantee.
(4) Lead-based paint. The housing must meet the lead-based paint
requirements at 24 CFR part 35.
(b) Inspection procedures. The grantee must have written inspection
procedures for ongoing property inspections, in accordance with Sec.
92.774(d). These procedures must include:
(1) Detailed inspection checklists;
(2) Description of how frequently the property inspections will be
undertaken;
(3) Description of how and by whom inspections will be carried out;
and
(4) Procedures for training and certifying qualified inspectors.
(c) Corrective and remedial actions. The grantee must have
procedures for ensuring that timely corrective and remedial actions are
taken by the project owner to address identified deficiencies.
Sec. 92.746 Qualification as affordable housing: Rental housing.
(a) General. Not less than 75 percent of the HTF grant amounts a
grantee provides to rental projects under each grant must be used for
the benefit only of ELI families or families at or below the poverty
line, whichever is greater, except that in any given fiscal year, the
Secretary may establish a higher minimum percentage. The HTF-assisted
units in a rental housing project must be occupied only by households
that qualify as ELI and must meet the requirements of this section to
qualify as affordable housing. The affordability requirements also
apply to the HTF-assisted rental units in single-family housing
purchased by a first-time homebuyer with HTF funds, in accordance with
24 CFR 92.748(g).
(b) Rent limitations. (1) The HTF rent plus utilities shall not
exceed the greater of 30 percent of the Federal poverty line or 30
percent of the income of a family whose annual income equals 30 percent
of the median income for the area, as determined by HUD, with
adjustments for the number of bedrooms in the unit. HUD will publish
the HTF rent limits on an annual basis.
(2) If the unit receives Federal or State project-based rental
subsidy, the maximum rent is the rent allowable under the Federal or
State project-based rental subsidy program.
(c) Initial rent schedule and utility allowance. (1) The grantee
must establish maximum monthly allowances for utilities and services
(excluding telephone, television, and Internet service).
(2) The grantee must annually review and approve rents proposed by
the owner for HTF units. For all units for which the tenant is paying
utilities, the grantee must ensure that the rents do not exceed the
maximum rent minus the monthly allowances for utilities.
(d) Periods of affordability. (1) HTF-assisted units must meet the
affordability requirements for not less than 30 years, beginning after
project completion. The grantee may impose longer periods.
(2) The affordability requirements apply without regard to the term
of any loan or mortgage, repayment of the HTF investment, or the
transfer of ownership. They must be imposed by deed restrictions,
covenants running with the land, use restrictions, or other mechanisms
approved by HUD under which the grantee and beneficiaries may require
specific performance, except that the affordability restrictions may
terminate upon foreclosure or transfer in lieu of foreclosure. The
affordability requirements must be recorded in accordance with State
recordation laws.
(3) The grantee may use purchase options, rights of first refusal,
or other preemptive rights to purchase the housing before foreclosure
or deed in lieu of foreclosure in order to preserve affordability.
(4) The affordability restrictions shall be revived according to
the original terms if, during the original affordability period, the
owner of record before the foreclosure, or deed in lieu of foreclosure,
or any entity that includes the former owner or those with whom the
former owner has or had family or business ties, obtains an ownership
interest in the project or property.
(5) The termination of the restrictions on the project does not
terminate the grantee's repayment obligation under Sec. 92.773.
(e) Tenant income. (1) The income of each tenant must be determined
initially in accordance with Sec. 92.727(d)(1). In addition, in each
year during the period of affordability, the project owner must re-
examine each tenant's annual income in accordance with one of the
options in Sec. 92.727(c) selected by the grantee.
(2) An owner who re-examines a tenant's annual income through a
statement and certification in accordance with Sec. 92.727(d)(2), must
examine the source documentation of the income of each tenant every 6th
year of the affordability period, except that, for units that receive
Federal project-based assistance, the owner must re-examine the
tenant's annual income in accordance with the project-based assistance
rules. Otherwise, an owner who accepts the tenant's statement and
certification in accordance with Sec. 92.727(d)(2) is not required to
examine the income of tenants, unless there is evidence that the
tenant's written statement failed to completely and accurately state
information about the family's size or income.
(f) Over-income tenants. HTF-assisted units continue to qualify as
affordable housing despite a temporary noncompliance caused by
increases in the incomes of existing tenants if actions satisfactory to
HUD are being taken to ensure that all vacancies are filled in
accordance with this section until the noncompliance is corrected.
(g) Fixed and floating HTF units. In a project containing HTF-
assisted and other units, the grantee may designate fixed or floating
HTF units. This designation must be made at the time of project
commitment in the written agreement between the grantee and the
recipient, and the HTF units must be identified not later than the time
of project completion. Fixed units must remain the same throughout the
period of affordability. Floating units must be changed to maintain
conformity with the requirements of this section during the period of
affordability so that the total number of housing units meeting the
requirements of this section remains the same, and each substituted
unit must be comparable in terms of size, features, and number of
bedrooms to the originally designated HTF-assisted unit.
(h) Tenant selection. The tenants must be selected in accordance
with Sec. 92.747(d) and must enter into a written lease that complies
with Sec. 92.747.
(i) Nondiscrimination against rental assistance subsidy holders.
The owner cannot refuse to lease HTF-assisted units to a voucher holder
under 24 CFR part 982, the Housing Choice Voucher Program, or to the
holder of a comparable document evidencing participation in a HOME
tenant-based rental assistance program because of the status of the
prospective tenant as a holder of such voucher or comparable HOME
tenant-based assistance document.
(j) Onsite inspections and financial oversight. See Sec. 92.774(d)
for the grantee's ongoing responsibilities for onsite inspections and
financial oversight.
Sec. 92.747 Tenant protections and selection.
(a) Lease. There must be a written lease between the tenant and the
owner of rental housing assisted with HTF funds that is for a period of
not less than
[[Page 67002]]
one year, unless a shorter period is specified by mutual agreement
between the tenant and the owner. Renewal of the tenancy also requires
a written lease. The lease must comply with this subpart and with State
law. The lease period for transitional housing must equal the tenancy
period established by the grantee or the owner in accordance with the
definition of ``transitional housing.''
(b) Prohibited lease terms. The lease may not contain any of the
following provisions:
(1) Agreement to be sued. Agreement by the tenant to be sued, to
admit guilt, or to a judgment in favor of the owner in a lawsuit
brought in connection with the lease.
(2) Treatment of property. Agreement by the tenant that the owner
may take, hold, or sell personal property of household members without
notice to the tenant and a court decision on the rights of the parties.
This prohibition, however, does not apply to an agreement by the tenant
concerning disposition of personal property remaining in the housing
unit after the tenant has moved out of the unit. The owner may dispose
of this personal property in accordance with State law.
(3) Excusing owner from responsibility. Agreement by the tenant not
to hold the owner or the owner's agents legally responsible for any
action or failure to act, whether intentional or negligent.
(4) Waiver of notice. Agreement of the tenant that the owner may
institute a lawsuit without notice to the tenant.
(5) Waiver of legal proceedings. Agreement by the tenant that the
owner may evict the tenant or household members without instituting a
civil court proceeding in which the tenant has the opportunity to
present a defense, or before a court decision on the rights of the
parties.
(6) Waiver of a jury trial. Agreement by the tenant to waive any
right to a trial by jury.
(7) Waiver of right to appeal court decision. Agreement by the
tenant to waive the tenant's right to appeal, or to otherwise
challenge, in court, a court decision in connection with the lease.
(8) Tenant chargeable with cost of legal actions regardless of
outcome. Agreement by the tenant to pay attorney's fees or other legal
costs even if the tenant wins in a court proceeding by the owner
against the tenant. The tenant, however, may be obligated to pay costs
if the tenant loses.
(9) Mandatory supportive services. Agreement by the tenant (other
than a tenant in transitional housing) to accept supportive services
that are offered.
(c) Termination of tenancy. (1) An owner may not terminate the
tenancy or refuse to renew the lease of a tenant of rental housing
assisted with HTF funds except for serious or repeated violation of the
terms and conditions of the lease; violation of applicable Federal,
State, or local law; completion of the tenancy period for transitional
housing or failure to follow a transitional housing services plan; or
other good cause. Good cause does not include an increase in the
tenant's income.
(2) To terminate or refuse to renew tenancy, the owner must serve
written notice upon the tenant specifying the grounds for the action
and providing a specific period for vacating that is consistent with
State or local law.
(d) Tenant selection. An owner of rental housing assisted with HTF
funds must comply with the affirmative marketing requirements
established by the grantee pursuant to Sec. 92.760. The owner must
adopt and follow written tenant selection policies and criteria that:
(1) Limit the housing to income-eligible families.
(2) Are reasonably related to the applicants' ability to perform
the obligations of the lease (i.e., pay the rent, not damage the
housing, not interfere with the rights of and quiet enjoyment by other
tenants).
(3)(i) Limit eligibility or give a preference to a particular
segment of the population if permitted in its written agreement with
the grantee (and only if the limitation or preference is described in
the grantee's consolidated plan).
(ii) Any limitation or preference cannot violate nondiscrimination
requirements of Sec. 92.760. The use of HTF funds for a project that
limits eligibility to persons with disabilities or persons with a
particular type of disability does not violate nondiscrimination
requirements if the housing also receives funding from a Federal
program that limits eligibility to a particular segment of the
population (e.g., the Housing Opportunity for Persons with AIDS program
under 24 CFR part 574, the Shelter Plus Care program under 24 CFR part
582, the Supportive Housing program under 24 CFR part 583, and
supportive housing programs for the elderly or persons with
disabilities under 24 CFR part 891).
(iii) When a project is limited to persons with disabilities or
with a particular type of disability as set forth in paragraph
(d)(3)(ii) of this section, the owner may advertise the project as
being open only to those who are eligible under the relevant statute
and admit only those persons who meet the statutory requirements.
(iv) In the absence of a statute that limits occupancy to persons
with disabilities or to persons with a particular type of disability, a
project may propose to provide a preference to such persons, if
necessary to provide housing, aid, benefits, or services equally as
effective as those provided to others, so long as the project is in the
most integrated setting appropriate to meet their needs and otherwise
complies with 24 CFR 8.4.
(4) Do not reject an applicant with a voucher under the Section 8
Housing Choice Voucher Program (24 CFR part 982) or an applicant with
HOME tenant-based rental assistance (24 CFR 92.209) because of the
status of the prospective tenant as a recipient of tenant-based rental
assistance.
(5) Provide for the selection of tenants from a written waiting
list in the chronological order of their application, insofar as is
practicable.
(6) Give prompt written notification to any rejected applicant of
the grounds for any rejection.
Sec. 92.748 Qualification as affordable housing: Homeownership.
(a) Homeownership activities. Housing that is for purchase by a
first-time homebuyer must meet the affordability requirements of this
section.
(b) Single-family housing. The housing must be single-family
housing, as defined at Sec. 92.2.
(c) Modest housing. The housing must be modest housing, in
accordance with Sec. 92.749.
(d) First-time homebuyer and income requirements. The housing must
be acquired by a first-time homebuyer whose family qualifies as an
income-eligible family and the housing must be the principal residence
of the family throughout the period described in paragraph (e) of this
section. In determining the income eligibility of the family, the
grantee must include the income of all persons living in the housing.
Before purchasing the housing, the family must have completed a program
of independent financial education and homeownership counseling from an
eligible organization that meets the requirements of section 1132 of
the Federal Housing Finance Regulatory Reform Act of 2008 (12 U.S.C.
1701x note).
(e) Period of affordability. (1) The HTF-assisted housing must meet
the affordability requirements for not less than 30 years.
(f) Resale during period of affordability. (1) To ensure continuing
affordability, the grantee may apply its HOME program resale
restrictions to the
[[Page 67003]]
HTF-assisted units or the grantee may develop and adopt resale
restrictions for the HTF program. The HTF resale provisions must be
included in the State's consolidated plan. If a grantee uses resale
provisions established for the HOME program, it must amend those
provisions to accommodate subsequent purchasers who are income-eligible
families.
(2) The resale requirements must ensure, if the housing does not
continue to be the principal residence of the family for the duration
of the period of affordability, that:
(i) The housing is made available for subsequent purchase only to a
first-time homebuyer whose family qualifies as an income-eligible
family and will use the property as its principal residence; and
(ii) The price at resale provides the original HTF-assisted owner a
fair return on investment (including the homeowner's investment and any
capital improvement), and ensures that the housing will remain
affordable to a reasonable range of income-eligible homebuyers. The
grantee must specifically define ``fair return on investment'' and
``affordability to a reasonable range of income-eligible homebuyers.''
(3)(i) The mechanism to impose the resale provisions must be deed
restrictions, covenants running with the land, use restrictions, or
other mechanisms approved by HUD under which the grantee and
beneficiaries may require specific performance.
(ii) The affordability restrictions may terminate upon foreclosure,
transfer in lieu of foreclosure, or assignment of a mortgage insured by
the Federal Housing Administration to HUD.
(iii) The grantee may use purchase options, rights of first
refusal, or other preemptive rights to purchase the housing before
foreclosure to preserve affordability. The affordability restrictions
shall be revived according to the original terms if, during the
original affordability period, the owner of record before the
termination event obtains an ownership interest in the housing.
(g) Special considerations for single-family properties with more
than one unit. (1) If the HTF funds are used only to assist an income-
eligible homebuyer in acquiring one unit in a single-family property
containing more than one unit and the assisted unit will be the
principal residence of the homebuyer, the affordability requirements of
this section apply only to the assisted unit.
(2) If HTF funds are also used to assist the income-eligible
homebuyer in acquiring one or more of the rental units in the single-
family property, the affordability requirements of Sec. 92.746 apply
to assisted rental units, except that the grantee must impose resale
restrictions on all assisted units (owner-occupied and rental units) in
the single-family housing. The affordability requirements on all
assisted units continue for the period of affordability. If HTF funds
are used to assist only the rental units in such a property, then the
requirements of Sec. 92.746 would apply and the owner-occupied unit
would not be subject to the income targeting or affordability
provisions of this section.
(h) Lease-purchase. (1) HTF funds may be used to assist homebuyers
through lease-purchase programs for existing housing and for housing to
be constructed. The housing must be purchased by an eligible homebuyer
within 36 months of signing the lease-purchase agreement. The homebuyer
must qualify as an income-eligible family at the time the lease-
purchase agreement is signed.
(2) If HTF funds are used to acquire housing that will be resold to
a homebuyer through a lease-purchase program, the HTF affordability
requirements for rental housing in Sec. 92.746 shall apply if the
housing is not transferred to an eligible homebuyer within 42 months
after project completion.
(i) Contract to purchase. If HTF funds are used to assist a
homebuyer who has entered into a contract to purchase housing to be
constructed, the homebuyer must qualify as an income-eligible family at
the time the contract is signed.
(j) Preserving affordability. (1) To preserve the affordability of
housing that was previously assisted with HTF funds and subject to the
requirements of this section, a grantee may use additional HTF funds to
acquire the housing through a purchase option, right of first refusal,
or other preemptive right before foreclosure, or to acquire the housing
at the foreclosure sale, undertake any necessary rehabilitation, and
provide assistance to another first-time homebuyer. The housing must be
sold to a new eligible homebuyer in accordance with the requirements of
this section. Additional HTF funds may not be used if the mortgage in
default was funded with HTF funds.
(2) The total amount of original and additional HTF assistance may
not exceed the maximum per-unit subsidy amount established pursuant to
Sec. 92.740. As an alternative to charging the cost to the HTF program
under Sec. 92.731, the grantee may charge the cost to the HTF program
under Sec. 92.732 as a reasonable administrative cost of its HTF
program, so that the additional HTF funds for the housing are not
subject to the maximum per-unit subsidy amount.
(k) Agreements with lending institutions. (1) The grantee may
provide homeownership assistance through written agreements with for-
profit or nonprofit lending institutions that are providing the first
mortgage loan to a family. The grantee must independently verify that
the family is income-eligible and meets the definition of ``first-time
homebuyer,'' and must inspect the housing for compliance with the
applicable property standards.
(2) No fees may be charged to the family for the HTF homeownership
assistance (e.g., origination fees or points, processing fees,
inspection fees), although reasonable administrative costs can be
charged to the HTF program as project costs (e.g., nominal application
fees, credit report fees, and appraisal fees). The grantee must
determine that the fees and other amounts charged to the family by the
lender for the first mortgage financing are reasonable. If the grantee
requires lenders to pay a fee to participate in the HTF program, the
fee is program income to the HTF program.
(l) Written policies. The grantee must have and follow written
policies for:
(1) Underwriting standards for homeownership assistance that
examine the family's housing debt, overall debt, income, and ability to
maintain the housing;
(2) Anti-predatory lending; and
(3) Refinancing loans to which HTF loans are subordinated to ensure
that the terms of the new loan are reasonable.
Sec. 92.749 Qualification as affordable housing: Modest housing
requirements for homeownership.
(a) General. Housing that is for acquisition by a family pursuant
to Sec. 92.748 must be modest housing in accordance with this section.
(b) New construction. In the case of acquisition of newly
constructed housing or standard housing, the housing must have an
appraised value that does not exceed 95 percent of the median purchase
price for the type of single-family housing for the area, as described
in paragraphs (d) and (e) of this section.
(c) Rehabilitation. In the case of acquisition with rehabilitation,
the housing must have an estimated value after rehabilitation that does
not exceed 95 percent of the median purchase price for the area, as
described in paragraphs (d) and (e) of this section.
(d) Options for determining purchase price limits. If a grantee
intends to use
[[Page 67004]]
HTF funds for homebuyer assistance, the grantee must either:
(1) Use the limits issued by HUD for the HTF program (i.e., 95
percent of the median purchase price for the area); or
(2) Determine 95 percent of the area median purchase price for
single-family housing in the jurisdiction, in accordance with paragraph
(e) of this section.
(e) Determining 95 percent of area median purchase price. A grantee
that elects to determine the purchase price limit under paragraph
(d)(2) of this section must use the following methodology:
(1) The grantee must establish the price for different types of
single-family housing for different areas within its jurisdiction. The
95 percent of area median purchase price must be established in
accordance with a market analysis that ensures that a sufficient number
of recent housing sales are included in the survey.
(2) Sales must cover the requisite number of months based on
volume:
(i) For 500 or more sales per month, a one-month reporting period;
(ii) For 250 through 499 sales per month, a 2-month reporting
period; and
(iii) For less than 250 sales per month, at least a 3-month
reporting period.
(3) The data must be listed in ascending order of sales price. The
address of the listed properties must include the location within the
jurisdiction. Lot, square, and subdivision data may be substituted for
the street address. The housing sales data must reflect all, or nearly
all, of the one-family house sales in the entire jurisdiction.
(4) To determine the median, the grantee must:
(i) Use the middle sale on the list if an odd number of sales; or
(ii) Use the higher of the middle numbers if an even number of
sales.
(5) After identifying the median sales price, the amount must be
multiplied by 0.95 to determine the 95 percent of the area median
purchase price. This information must be updated annually and submitted
to the relevant HUD Field Office for review.
Sec. 92.750 Faith-based organizations.
Faith-based organizations are eligible to participate in the HTF,
as provided in 24 CFR 92.257.
Other Federal Requirements
Sec. 92.760 Other Federal requirements and nondiscrimination;
affirmative marketing.
(a) The Federal requirements set forth in 24 CFR part 5, subpart A,
are applicable to the HTF program.
(b) The affirmative marketing requirements contained in 24 CFR
92.351(a) apply to the HTF program.
Sec. 92.761 Lead-based paint.
Housing assisted with HTF funds is subject to the regulations at 24
CFR part 35, subparts A, B, J, K, and R.
Sec. 92.762 Displacement, relocation, and acquisition.
The displacement, relocation, and acquisition requirements of 24
CFR 92.353 apply to the HTF program.
Sec. 92.763 Conflict of interest.
The conflict-of-interest requirements contained in Sec. 92.356
apply to the HTF program.
Sec. 92.764 Funding accountability and transparency.
The HTF grant to the grantee and all assistance provided to
subgrantees and recipients shall be considered a Federal award for
purposes of the Federal Funding Accountability and Transparency Act of
2006 (31 U.S.C. 6101 note).
Program Administration
Sec. 92.770 Housing Trust Fund (HTF) accounts.
(a) General. The HTF consists of the accounts described in this
section solely for use in accordance with the provisions of this
subpart. HUD will establish an HTF United States Treasury account (HTF
Treasury account) for each grantee. Each grantee may use either a
separate HTF local account or a subsidiary account within its general
fund (or other appropriate fund) as the HTF local account.
(b) HTF Treasury account. The HTF Treasury account includes the
annual grant and funds reallocated to the State by formula.
(c) HTF local account. (1) The HTF local account includes deposits
of HTF funds disbursed from the HTF Treasury account, any program
income, and any repayments as required by Sec. 92.773.
(2) The HTF local account must be interest-bearing.
(d) Reductions. (1) HUD will reduce or recapture funds in the HTF
account by the amount of:
(i) Any funds in the HTF Treasury account that are not committed
within 24 months after the last day of the month in which HUD notifies
the State of HUD's execution of the HTF Grant Agreement;
(ii) Any funds in the HTF local account that are not expended
within 5 years after the last day of the month in which HUD notifies
the State of HUD's execution of the HTF Grant Agreement;
(iii) Any amounts pursuant to Sec. 92.783; and
(iv) Amounts that the grantee fails to obtain and that were
required to be reimbursed or returned under Sec. 92.780.
(2) For purposes of determining the amount by which the HTF account
will be reduced or recaptured under paragraphs (d)(1)(i) and (ii) of
this section, HUD will consider the sum of commitments or expenditures,
as applicable, from the fiscal year grant being examined, as well as
from previous and subsequent grants. The sum must be greater than the
amount of the fiscal year grant being examined and all previous grants.
Sec. 92.771 HTF Grant Agreement.
Allocated and reallocated funds will be made available pursuant to
an HTF Grant Agreement.
Sec. 92.772 Program disbursement and information system.
(a) General. The HTF Treasury account is managed through a
computerized disbursement and information system established by HUD.
The system disburses HTF funds that are allocated or reallocated, and
collects and reports information on the use of funds in the HTF
Treasury account. The grantee must report on the receipt and use of all
program income in HUD's computerized disbursement and information
system. The grantee must develop and maintain a system to ensure that
each recipient and subgrantee uses HTF funds in accordance with the
requirements of this subpart and that any requirements or conditions
under which the HTF funds were provided.
(b) Project set-up. (1) After the grantee executes the HTF Grant
Agreement, submits the applicable banking and security documents, and
commits funds to a specific local project, the grantee shall identify
(set up) specific activities (i.e., projects) in the disbursement and
information system. Investments that require the set-up of projects in
the system are the acquisition, new construction, or rehabilitation of
housing, and operating cost assistance. The grantee is required to
enter complete project set-up information at the time of project set-
up.
(2) If the project set-up information is not completed within 20
days of the initial project set-up, the project may be canceled by the
system. In addition, a project that has been committed in the system
for 12 months without an initial disbursement of funds may be canceled
by the system.
(c) Disbursement of HTF Funds. (1) After complete project set-up
[[Page 67005]]
information is entered into the disbursement and information system,
HTF funds for the project may be drawn down from the HTF Treasury
account by the grantee by electronic funds transfer. The funds will be
deposited in the HTF local account of the grantee within 72 hours of
the disbursement request. Any drawdown of funds in the HTF Treasury
account is conditioned upon the provision of satisfactory information
by the grantee about the project and compliance with other procedures,
as specified by HUD.
(2) Funds drawn from the HTF Treasury account are subject to the
Intergovernmental Cooperation Act (31 U.S.C. 6501 et seq.) and
regulations at 31 CFR part 205.
(3) Funds in the HTF local account must be disbursed before
requests are made for funds in the HTF Treasury account.
(4) The grantee will be paid on an advance basis, provided it
complies with the requirements of this subpart.
(d) Project completion. (1) Complete project completion information
must be entered into the disbursement and information system, or
otherwise provided, within 120 days of the final project drawdown. If
satisfactory project completion information is not provided, HUD may
suspend further project set-ups or take other corrective actions.
(2) Additional HTF funds for development-related costs may be
committed to a project up to one year after project completion, but the
amount of HTF funds in the project may not exceed the maximum per-unit
development subsidy amount established pursuant to Sec. 92.740.
(e) Access by other participants. Access to the disbursement and
information system by other entities participating in the HTF program
will be governed by procedures established by HUD.
Sec. 92.773 Program income and repayments.
(a) Program income. Program income must be treated as HTF funds and
must be used in accordance with the requirements of this subpart.
Program income must be deposited in the grantee's HTF local account
unless the grantee permits a subgrantee to retain the program income
for additional HTF projects pursuant to the written agreement required
by Sec. 92.774. The grantee must report the program income received as
well as the use of the program income in the disbursement and
information system that HUD designates for the HTF.
(b) Repayments. (1) Any HTF funds invested in housing that does not
meet the affordability requirements for the period specified in Sec.
92.746 or Sec. 92.748, as applicable, must be repaid by the grantee in
accordance with paragraph (b)(3) of this section.
(2) Any HTF funds invested in a project that is terminated before
completion, either voluntarily or otherwise, must be repaid by the
grantee, in accordance with paragraph (b)(3) of this section.
(3) HUD will instruct the grantee to either repay the funds to the
HTF Treasury account or the local account. Generally, if the HTF funds
were disbursed from the grantee's HTF Treasury account, they must be
repaid to the HTF Treasury account. If the HTF funds were disbursed
from the grantee's HTF local account, they must be repaid to the local
account.
(4) If the grantee is no longer a grantee in the HTF program when
the repayment is made, the funds must be remitted to HUD and
reallocated in accordance with Sec. 92.714 of this subpart.
Sec. 92.774 Grantee responsibilities; written agreements; onsite
inspections; financial oversight.
(a) Responsibilities. The grantee is responsible for managing the
day-to-day operations of its HTF program, ensuring that HTF funds are
used in accordance with all program requirements and written
agreements, and taking appropriate action when performance problems
arise. The use of subgrantees or contractors does not relieve the
grantee of this responsibility, and procurement contracts shall be
governed by 24 CFR 85.36 and 84.44. The performance of subgrantees and
contractors of the grantee must be reviewed at least annually. The
grantee must have and follow written policies, procedures, and systems,
including a system for assessing risk of activities and projects, and a
system for monitoring entities consistent with this section, to ensure
that the requirements of this subpart are met.
(b) Executing a written agreement. Before disbursing any HTF funds
to any entity, the grantee must enter into a written agreement with
that entity. The written agreement must ensure compliance with the
requirements of this subpart. Where HOME program funds are used
together with HTF funds, a single written agreement meeting the
requirements of both Sec. 92.504 and this subpart may be used to
enforce requirements for both programs.
(c) Provisions in written agreements. The contents of the agreement
may vary depending upon the role the entity is asked to assume or the
type of project undertaken. This section details basic requirements by
role and the minimum provisions that must be included in a written
agreement.
(1) Subgrantee. The agreement must require the subgrantee to comply
with the requirements applicable to the grantee under this subpart. The
agreement between the grantee and the subgrantee must include:
(i) Use of the HTF funds. The HTF subgrantee must have a
consolidated plan under 24 CFR part 91, and the written agreement must
require that an HTF allocation plan be part of the subgrantee's
consolidated plan (see 24 CFR 91.220(l)(4)). The written agreement must
require that the selection of projects by eligible recipients will be
in accordance with the HTF allocation plan. The agreement must describe
the tasks to be performed, a schedule for completing the tasks
(including a schedule for committing funds to projects), a budget, and
the period of the agreement. These items must be in sufficient detail
to provide a sound basis for the grantee to effectively monitor
performance under the agreement.
(ii) Deadlines. The agreement must state the time requirements for
the commitment and expenditure of HTF funds and specify that remaining
funds will be reduced or recaptured by HUD, as provided in Sec.
92.770.
(iii) Audit. The agreement must state that an audit of the
subgrantee must be conducted at least annually, in accordance with
Sec. 92.776.
(iv) Program income. The agreement must state if program income is
to be remitted to the grantee or to be retained by the subgrantee for
additional eligible activities.
(v) Uniform administrative requirements. The agreement must require
the subgrantee to comply with applicable uniform administrative
requirements, as described in Sec. 92.775.
(vi) Other program requirements. The agreement must require the
subgrantee to carry out each project in compliance with all Federal
laws and regulations described in Sec. Sec. 92.760-92.764 of this
subpart.
(vii) Affirmative marketing. The agreement must specify the
subgrantee's affirmative marketing responsibilities, in accordance with
Sec. 92.760.
(viii) Requests for disbursement of funds. The agreement must
specify that the subgrantee may not request disbursement of funds under
the agreement until the funds are needed for payment of eligible costs.
The amount of each request must be limited to the amount needed.
Program income must be disbursed before the subgrantee requests funds
from the grantee.
[[Page 67006]]
(ix) Reversion of assets. The agreement must specify that upon
expiration of the agreement, the subgrantee must transfer to the
grantee any HTF funds on hand at the time of expiration and any
accounts receivable attributable to the use of HTF funds.
(x) Records and reports. The agreement must specify the particular
records that must be maintained and the information or reports that
must be submitted in order to assist the grantee in meeting its
recordkeeping and reporting requirements.
(xi) Enforcement of the agreement. The agreement must specify
remedies for breach of the provisions of the agreement. The agreement
must specify that, in accordance with 24 CFR 84.62 or 85.43, suspension
or termination may occur if the subgrantee materially fails to comply
with any term of the agreement. The grantee may permit the agreement to
be terminated for convenience, in accordance with 24 CFR 84.61 or
85.44.
(xii) Written agreement. The agreement must require that before the
subgrantee provides HTF funds to eligible recipients, first-time
homebuyers, or contractors, the subgrantee must have a written
agreement that meets the requirements of this section.
(xiii) Duration of the agreement. The agreement must specify the
duration of the agreement.
(xiv) Fees. The agreement must prohibit the subgrantee from
charging servicing, origination, or other fees for the costs of
administering the HTF program.
(2) Eligible recipient. The agreement between the grantee and the
eligible recipient selected for funding must include:
(i) Use of the HTF funds. The agreement must describe the use of
the HTF funds for the project, including the tasks to be performed, a
schedule for completing the tasks and project (including the
expenditure deadline), and a project budget. These items must be in
sufficient detail to provide a sound basis for the grantee to
effectively monitor performance under the agreement. If the grantee is
providing operating cost assistance, the written agreement must include
the provisions required by Sec. 92.731(c).
(ii) Deadlines. The agreement must state the time requirements for
the commitment and expenditure of HTF funds and specify that remaining
funds will be reduced or recaptured by HUD, as provided in Sec.
92.770.
(iii) Audit. The agreement must specify that the recipient will
submit to the grantee a cost certification performed by a certified
public accountant for each project assisted with HTF funds. The
agreement must specify that the recipient will submit to the grantee an
annual audit performed on each project assisted with HTF funds,
beginning the first year following the cost certification and with the
final annual audit occurring the last year of the affordability period.
(iv) Affordability. The agreement must specify the affordability
period, require housing assisted with HTF funds to meet the
affordability requirements of Sec. 92.746 or Sec. 92.748, as
applicable, and must require repayment of the funds if the housing does
not meet the affordability requirements for the specified time period.
If the recipient is undertaking a rental project, the agreement must
establish the initial rents and the procedures for rent increases, the
number of HTF units, the size of the HTF units, the designation of the
HTF units as fixed or floating, and the requirement to provide the
address (e.g., street address and apartment number) of each HTF unit no
later than the time of project completion. If the recipient is
undertaking homeownership projects for sale to first-time homebuyers,
in accordance with Sec. 92.748, the agreement must establish the
resale requirements that must be imposed on the housing, the sales
price or the basis upon which the sales price will be determined, and
the disposition of the sales proceeds.
(v) Project requirements. The agreement must require the housing to
meet the property standards in Sec. Sec. 92.741-92.745 of this
subpart, as applicable, and in accordance with the type of project
assisted upon project completion. The agreement must also require
owners of rental housing assisted with HTF funds to maintain the
housing in compliance with Sec. 92.745 of this part for the duration
of the affordability period, and to comply with the requirements of
Sec. 92.747. The agreement may permit the recipient to limit
eligibility or give a preference to a particular segment of the
population, only if the grantee has described any such limited
eligibility or preference in its consolidated plan; provided, however,
that any limitation or preference cannot violate nondiscrimination
requirements in Sec. 92.760.
(vi) Other program requirements. The agreement must require the
eligible recipient to carry out each project in compliance with all
Federal laws and regulations described in Sec. Sec. 92.760-92.764 of
this subpart.
(vii) Affirmative marketing. The agreement must specify the
recipient's affirmative marketing responsibilities, as enumerated by
the grantee in accordance with Sec. 92.760.
(viii) Requests for disbursement of funds. The agreement must
specify that the recipient may not request disbursement of funds under
the agreement until the funds are needed for payment of eligible costs.
The amount of each request must be limited to the amount needed.
(ix) Records and reports. The agreement must specify the particular
records that must be maintained and the information or reports that
must be submitted in order to assist the grantee in meeting its
recordkeeping and reporting requirements. The owner of rental housing
must annually provide the grantee with information on rents and
occupancy of HTF-assisted units to demonstrate compliance with Sec.
92.746. If the rental housing project has floating HTF units, the owner
must provide the grantee with information regarding unit substitution
and filling vacancies so that the project remains in compliance with
HTF rental occupancy requirements. The agreement must specify the
reporting requirements (including copies of financial statements) to
enable the grantee to determine the financial condition (and continued
financial viability) of the rental project.
(x) Enforcement of the agreement. The agreement must provide for a
means of enforcement of the affordable housing requirements by the
grantee and the intended beneficiaries. This means of enforcement and
the affordability requirements in Sec. 92.746 must be imposed by deed
restrictions, covenants running with the land, use restrictions, or
other mechanisms approved by HUD under which the grantee and
beneficiaries may require specific performance. In addition, the
agreement must specify remedies for breach of the provisions of the
agreement.
(xi) Duration of the agreement. The agreement must specify the
duration of the agreement. If the housing assisted under this agreement
is rental housing, the agreement must be in effect through the
affordability period required by the grantee under Sec. 92.746. If the
housing assisted under this agreement is homeownership housing, the
agreement must be in effect at least until completion of the project
and ownership by the first-time homebuyer.
(xii) Fees. The agreement must prohibit project owners from
charging origination fees, parking fees, laundry room access fees, and
other fees; however, rental project owners may charge reasonable
application fees to prospective tenants.
[[Page 67007]]
(3) First-time homebuyer. When a grantee provides assistance to a
homebuyer, the written agreement must include as a minimum:
(i) Use of the HTF funds. The agreement must conform to the
requirements in Sec. 92.748, including the limitations on the value of
the property, principal residence requirement, lease-purchase terms, if
applicable, and the resale provisions. The agreement must specify the
amount of HTF funds, the form of assistance (e.g., grant, amortizing
loan, deferred payment loan), the use of the funds (e.g., downpayment,
closing costs), and the time by which the housing must be acquired.
(ii) Resale restrictions. The agreement must specify the resale
restrictions established under Sec. 92.748 for the specified time
period.
(iii) Enforcement of the agreement. The agreement must provide for
a means of enforcement of the affordable housing requirements by the
grantee. This means of enforcement and the affordability requirements
in Sec. 92.748 must be imposed by deed restrictions, covenants running
with the land, use restrictions, or other mechanisms approved by HUD
under which the grantee and beneficiaries may require specific
performance. In addition, the agreement must specify remedies for
breach of the provisions of the agreement.
(d) Onsite inspections. (1) Project completion. The grantee must
perform an onsite inspection of each HTF-assisted project at project
completion to determine that the housing meets the property standards
of Sec. Sec. 92.741 through 92.744. The inspections must be in
accordance with the inspection procedures that the grantee establishes
to meet the inspection requirements of Sec. Sec. 92.741 through
92.744.
(2) Period of affordability. (i) During the period of
affordability, the grantee must perform onsite inspections of HTF-
assisted rental housing buildings to determine compliance with the
ongoing property standards of Sec. 92.745 and to verify the
information submitted by the owners in accordance with the requirements
of Sec. 92.746. The inspections must be in accordance with the
inspection procedures that the grantee establishes to meet the
inspection requirements of Sec. 92.745.
(ii) The onsite inspections must occur 12 months after project
completion and at least once every 3 years thereafter during the period
of affordability.
(iii) If there are observed deficiencies for any of the inspectable
items established by the grantee, in accordance with the inspection
requirements of Sec. 92.745, a follow-up onsite inspection must occur
within 12 months, or within a reasonable time frame established by the
grantee depending on the severity of the deficiency, to verify that all
observed deficiencies have been corrected. Life-threatening health and
safety deficiencies must be corrected immediately, in accordance with
Sec. 92.745(a)(2).
(iv) The property owner must annually certify to the grantee that
each building in the project is suitable for occupancy, taking into
account State and local health, safety, and other applicable codes,
ordinances, and requirements, and the ongoing property standards
established by the grantee to meet the requirements of Sec. 92.745.
(v) Inspections must be based on a sufficient sample of units. The
grantee must select the sample. For projects with one to four HTF-
assisted units, the inspectable items (site, building exterior,
building systems, and common areas) for each building with HTF-assisted
units and 100 percent of the HTF-assisted dwelling units must be
inspected. For projects with more than four HTF-assisted units, the
inspectable items (site, building exterior, building systems, and
common areas) for each building with HTF-assisted units and at least 20
percent of the HTF-assisted dwelling units in each building, but not
less than four HTF-assisted units in each project and one HTF-assisted
unit in each building, must be inspected.
(e) Financial oversight. During the period of affordability, the
grantee must examine regularly (at least annually) the financial
condition of HTF-assisted rental housing to determine the continued
financial viability of the housing and must take actions to correct
problems.
Sec. 92.775 Applicability of uniform administrative requirements.
The uniform administrative requirements contained in Sec. 92.505
apply to the HTF.
Sec. 92.776 Audit.
(a) Audits of the grantee and subgrantees must be conducted in
accordance with 24 CFR 84.26 and 85.26. The use of HTF grant funds by
the grantee must be audited not less than annually to ensure compliance
with this subpart. Any financial statement submitted by the grantee to
HUD must be reviewed by an independent certified public accountant, in
accordance with Statements on Standards for Accounting and Review
Services, which is issued by the American Institute of Certified Public
Accountants.
(b) The agreement must specify that the recipient will submit to
the grantee a cost certification performed by a certified public
accountant for each project assisted with HTF funds. The agreement must
specify that the recipient will submit to the grantee an annual audit
performed on each project assisted with HTF funds, beginning the first
year following the cost certification and with the final annual audit
occurring the last year of the affordability period.
Sec. 92.777 Closeout.
HTF funds will be closed out in accordance with procedures
established by HUD.
Sec. 92.778 Recordkeeping.
(a) General. Each grantee must establish and maintain sufficient
records to enable HUD to determine whether the grantee has met the
requirements of this subpart. At a minimum, the following records are
needed:
(1) Program records. (i) The forms of HTF assistance used in the
program.
(ii) The subsidy layering guidelines adopted in accordance with
Sec. 92.740.
(iii) If HTF funds are used for housing for first-time homebuyers,
the procedures used for establishing 95 percent of the median purchase
price for the area in accordance with Sec. 92.749, as set forth in the
Consolidated Plan.
(iv) If HTF funds are used for acquisition of housing for
homeownership, the resale guidelines established in accordance with
Sec. 92.748, as set forth in the Consolidated Plan.
(v) Records documenting compliance with the 24-month commitment
deadline of Sec. 92.770(d)(i).
(vi) Records documenting compliance with the 10 percent limitation
on administrative and planning costs in, accordance with Sec. 92.732.
(2) Project records. (i) A full description of each project
assisted with HTF funds, including the location (address of each unit),
form of HTF assistance, and the units assisted with HTF funds.
(ii) The source and application of funds for each project,
including supporting documentation, in accordance with 24 CFR 85.20,
and records to document the eligibility and allowability of the project
costs, including the documentation of the actual HTF-eligible
development costs of each HTF-assisted unit (through allocation of
costs, if permissible under Sec. 92.730(c)) in situations where HTF
funds are used to assist less than all of the units in a multi-unit
project.
[[Page 67008]]
(iii) Records demonstrating that each rental housing or
homeownership project meets the maximum per-unit subsidy amount
established pursuant to Sec. 92.740(a), and the subsidy layering and
underwriting evaluation in accordance with Sec. 92.740(b).
(iv) Records (e.g., inspection reports) demonstrating that each
project meets the property standards of Sec. Sec. 92.740-92.745 of
this part at project completion. In addition, during the period of
affordability, records for rental projects demonstrating compliance
with the property standards, and financial reviews and actions pursuant
to Sec. 92.774(a).
(v) Records demonstrating that each family is income-eligible.
(vi) Records demonstrating that each rental housing project meets
the affordability and income targeting requirements of Sec. 92.746 for
the required period. Records must be kept for each family assisted.
(vii) Records demonstrating that each lease for an assisted rental
housing unit complies with the tenant and participant protections of
Sec. 92.747. Records must be kept for each family assisted.
(viii) Records demonstrating that the purchase price or estimated
value after rehabilitation for each housing unit for a first-time
homebuyer does not exceed 95 percent of the median purchase price for
the area, in accordance with Sec. 92.749. The records must demonstrate
how the estimated value was determined.
(ix) Records demonstrating that each housing unit for a first-time
homebuyer meets the affordability requirements of Sec. 92.748 for the
required period.
(x) Records demonstrating that a site and neighborhood standards
review was conducted for each project that included new construction of
rental housing assisted under this subpart, to determine that the site
meets the requirements of Sec. 92.726.
(xi) Records (written agreements) demonstrating compliance with the
written agreements requirements in Sec. 92.774.
(3) Financial records. (i) Records identifying the source and
application of funds for each fiscal year, including the annual grant
and any reallocation (identified by Federal fiscal year).
(ii) Records concerning the HTF Treasury account and local account
required to be established and maintained by Sec. 92.770, including
deposits, disbursements, balances, supporting documentation, and any
other information required by the program disbursement and information
system established by HUD.
(iii) Records identifying the source and application of program
income and repayments.
(iv) Records demonstrating adequate budget control, in accordance
with 24 CFR 85.20, including evidence of periodic account
reconciliations.
(4) Program administration records. (i) Written policies,
procedures, and systems, including a system for assessing risk of
activities and projects, and a system for monitoring entities
consistent with this section, to ensure that the requirements of this
subpart are met.
(ii) Records demonstrating compliance with the applicable uniform
administrative requirements required by Sec. 92.775.
(iii) Records documenting required inspections, monitoring reviews
and audits, and the resolution of any findings or concerns.
(5) Records concerning other Federal requirements. (i) Equal
opportunity and fair housing records, as required under 24 CFR part
121.
(A) Data on the extent to which each racial and ethnic group and
single-headed households (by gender of household head) have applied
for, participated in, or benefited from, any program or activity funded
in whole or in part with HTF funds.
(B) Documentation of actions undertaken to meet the requirements of
24 CFR part 135, which implements section 3 of the Housing Development
Act of 1968, as amended (12 U.S.C. 1701u).
(ii) Records demonstrating compliance with the affirmative
marketing procedures and requirements of Sec. 92.760.
(iii) Records demonstrating compliance with the lead-based paint
requirements of 24 part 35, subparts A, B, J, K, M, and R.
(iv) Records demonstrating compliance with requirements of Sec.
92.762 regarding displacement, relocation, and real property
acquisition.
(v) Records supporting exceptions to the conflict-of-interest
prohibition pursuant to Sec. 92.763.
(vi) Debarment and suspension certifications required by 24 CFR
parts 24 and 91.
(vii) Records demonstrating compliance with Sec. 92.764.
(viii) Records demonstrating compliance with Sec. 85.36(e)
regarding the grantee's activities related to minority business
enterprise (MBE) and women's business enterprise (WBE).
(b) Period of record retention. All records pertaining to each
fiscal year of HTF funds must be retained in a secure location for the
most recent 5-year period, except as provided below.
(1) For rental housing projects, records may be retained for 5
years after the project completion date, except that records of
individual tenant income verifications, project rents, and project
inspections must be retained for the most recent 5-year period, until 5
years after the affordability period terminates.
(2) For homeownership housing projects, records may be retained for
5 years after the project completion date, except for documents
imposing resale restrictions that must be retained for 5 years after
the affordability period terminates.
(3) Written agreements must be retained for 5 years after the
agreement terminates.
(4) Records covering displacements and acquisitions must be
retained for 5 years after the date by which all persons displaced from
the property and all persons whose property is acquired for the project
have received the final payment to which they are entitled, in
accordance with Sec. 92.762.
(5) If any litigation, claim, negotiation, audit, monitoring,
inspection, or other action has been started before the expiration of
the required record retention period, records must be retained until
completion of the action and resolution of all issues that arise from
it, or until the end of the required period, whichever is later.
(c) Access to records. (1) The grantee must provide citizens,
public agencies, and other interested parties with reasonable access to
records, consistent with applicable State and local laws regarding
privacy and obligations of confidentiality.
(2) HUD and the Comptroller General of the United States, and any
of their representatives, have the right of access to any pertinent
books, documents, papers, or other records of the grantee, subgrantees,
and recipients, in order to make audits, examinations, excerpts, and
transcripts.
Sec. 92.779 Performance reports.
Each grantee must develop and maintain a system to track the use of
its HTF funds, and submit annual performance and management reports on
its HTF program in such format and at such time as HUD may prescribe.
These reports must describe the program's accomplishments, and the
extent to which the grantee complied with its approved allocation plan
and the requirements of this subpart. HUD will make the performance and
management reports publicly available.
[[Page 67009]]
Performance Reviews and Sanctions
Sec. 92.780 Accountability of recipients.
The grantee shall review each recipient to determine compliance
with the requirements of this subpart and the terms of the written
agreement in accordance with the grantee's policies, procedures, and
systems established pursuant to Sec. 92.774(a).
(a) Misuse of funds. (1) Reimbursement requirement. If a recipient
of HTF assistance is determined to have used HTF funds in a manner that
is materially in violation of the requirements of this subpart or any
requirements or conditions under which the funds were provided, the
grantee must require that, within 12 months after the determination of
such misuse, the recipient reimburse the grantee for such misused
amounts and return to the grantee any such amounts that remain unused
or uncommitted for use. The reimbursement is in addition to any other
remedies that may be available under law.
(2) Determination. The grantee or HUD may make the determination,
provided that:
(i) The grantee provides notification and opportunity for
discretionary review to HUD; and
(ii) HUD does not subsequently reverse the determination.
(b) Reduction for failure to obtain return of misused funds. (1)
If, in any year, a grantee fails to obtain reimbursement or return of
the full amount required to be reimbursed or returned to the grantee
during the year, the amount of the grant for the grantee for the
succeeding year will be reduced by the amount by which the amounts
required to be reimbursed or returned exceed the amount actually
reimbursed or returned.
(2) In any case in which a failure to obtain reimbursement or
return occurs during a year immediately preceding a year in which HTF
grants will not be made, the grantee shall pay to HUD, for reallocation
among the other grantees, an amount equal to the amount of the
reduction for the entity that would otherwise apply.
Sec. 92.781 Performance reviews.
(a) General. HUD will review the performance of each grantee in
carrying out its responsibilities under this subpart whenever
determined necessary by HUD, but at least annually. In conducting
performance reviews, HUD will rely primarily on information obtained
from the grantee's records and reports, findings from onsite
monitoring, audit reports, and information generated from the
disbursement and information system established by HUD. Where
applicable, HUD may also consider relevant information pertaining to a
grantee's performance gained from other sources, including citizen
comments, complaint determinations, and litigation. Reviews to
determine compliance with specific requirements of this subpart will be
conducted as necessary, with or without prior notice to the grantee.
Onsite comprehensive performance reviews under the standards in
paragraph (b) of this section will be conducted after prior notice to
the grantee.
(b) Standards for comprehensive performance review. A grantee's
performance will be comprehensively reviewed periodically, as
prescribed by HUD, to determine whether the grantee has committed and
expended the HTF funds as required by Sec. 92.770; has met the
requirements of this subpart, particularly eligible activities, income
targeting, affordability, and property standards; has awarded the funds
in accordance with its HTF plan and requirements of this subpart; has
reviewed its subgrantees and recipients to determine whether they have
satisfied the requirements of this subpart and the terms of their
written agreements; and has met its performance measures in its
consolidated plan.
Sec. 92.782 Corrective and remedial actions.
The corrective and remedial actions contained in Sec. 92.551 apply
to the HTF, except paragraph (c)(1)(viii).
Sec. 92.783 Notice and opportunity for hearing; sanctions.
(a) If HUD finds after reasonable notice and opportunity for
hearing that a grantee has substantially failed to comply with any
provision of this subpart, and until HUD is satisfied that there is no
longer any such failure to comply:
(1) HUD shall reduce the funds in the grantee's HTF account by the
amount of any expenditures that were not in accordance with the
requirements of this subpart or require the grantee to repay to HUD any
amount of the HTF grant that was not used in accordance with the
requirements of this subpart; and
(2) HUD may do one or more of the following:
(i) Prevent withdrawals from the grantee's HTF account for
activities affected by the failure to comply;
(ii) Restrict the grantee's activities under this subpart to
activities or recipients not affected by the failure to comply;
(iii) Remove the State from participation in allocations or
reallocations of funds made available under Sec. Sec. 92.710 through
92.714 of this part; or
(iv) Terminate any HTF assistance to the grantee. HUD may, on due
notice, suspend payments at any time after the issuance of a notice of
opportunity for hearing pursuant to paragraph (b)(1) of this section,
pending such hearing and a final decision, to the extent that HUD
determines such action to be necessary to preclude the further
expenditure of funds for activities affected by the failure to comply.
(b) Proceedings. When HUD proposes to take action pursuant to this
section, the respondent in the proceedings will be the grantee.
Proceedings will be conducted in accordance with 24 CFR part 26.
Dated: September 28, 2010.
Shaun Donovan,
Secretary.
[FR Doc. 2010-27069 Filed 10-28-10; 8:45 am]
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