[Federal Register Volume 76, Number 25 (Monday, February 7, 2011)]
[Proposed Rules]
[Pages 6654-6682]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-2303]
[[Page 6653]]
Vol. 76
Monday,
No. 25
February 7, 2011
Part II
Department of Housing and Urban Development
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24 CFR Parts 903, 905, 941 et al.
Public Housing Capital Fund Program; Proposed Rule
Federal Register / Vol. 76, No. 25 / Monday, February 7, 2011 /
Proposed Rules
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 903, 905, 941, 968, 969
[Docket No. FR-5236-P-01]
RIN-2577-AC50
Public Housing Capital Fund Program
AGENCY: Office of the Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Proposed rule.
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SUMMARY: This proposed rule combines and streamlines the former legacy
public housing modernization programs, including the Comprehensive
Grant Program (CGP), the Comprehensive Improvement Assistance Program
(CIAP), and the Public Housing Development Program (which encompasses
mixed-finance development), into the Capital Fund Program (CFP). This
rule proposes a change to the Public Housing Agency Annual Plan
regulation to incorporate the definition of qualified public housing
agencies (PHAs), which was mandated by the Housing and Economic
Recovery Act (HERA) of 2008, and to decouple or separate the CFP
informational requirements from the PHA Annual Plan requirements. Also
proposed is the ability for PHAs to request a total development cost
(TDC) exception for integrated utility management, capital planning,
and other capital and management activities that maximize energy
conservation and efficiency, including green construction and
retrofits, which include windows; heating system replacements; wall
insulation; site-based generation; advanced energy savings
technologies, including renewable energy generation; and other such
retrofits.
The structure of the proposed Public Housing Capital Fund Program
regulation is described in section IV of the SUPPLEMENTARY INFORMATION.
Several regulations would be eliminated with the implementation of this
rule, along with the issuance of new and/or revised CFP forms,
including the CFP Annual Statement/Performance and Evaluation Report
(form HUD-50075.1), CFP 5-Year Action Plan (form HUD-50075.2), and the
CFP Annual Contributions Contract (ACC) Amendment, as well as a new
guidebook.
DATES: Comments Due Date: April 8, 2011.
ADDRESSES: Interested persons are invited to submit comments regarding
this proposed rule to the Regulations Division, Office of General
Counsel, Department of Housing and Urban Development, 451 7th Street,
SW., Room 10276, Washington, DC 20410-0500. Communications must refer
to the above docket number and title. There are two methods for
submitting public comments. All submissions must refer to the above
docket number and title.
1. Submission of Comments by Mail. Comments may be submitted by
mail to the Regulations Division, Office of General Counsel, Department
of Housing and Urban Development, 451 7th Street, SW., Room 10276,
Washington, DC 20410-0500.
2. Electronic Submission of Comments. Interested persons may submit
comments electronically through the Federal eRulemaking Portal at
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 202-402-3055 (this is
not a toll-free number). Individuals with speech or hearing impairments
may access this number via TTY by calling the Federal Information Relay
Service, toll free, at 800-877-8339. Copies of all comments submitted
are available for inspection and downloading at http://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Jeffrey Riddel, Director, Office of
Capital Improvements, Office of Public and Indian Housing, Department
of Housing and Urban Development, 451 7th Street, SW., Washington, DC
20410-8000; telephone number 202-708-1640 (this is not a toll-free
number). Hearing- or speech-impaired individuals may access this number
through TTY by calling the toll-free Federal Information Relay Service
at 800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
Section 9(d) of the U.S. Housing Act of 1937 (1937 Act) (42 U.S.C.
1437g(d)) provides for a ``Capital Fund'' for the purpose of making
assistance available to PHAs to carry out capital and management
improvement activities. Section 9(d)(2) of the 1937 Act (42 U.S.C.
1437g(d)(2)) requires HUD to develop a formula for determining the
amount of assistance provided to PHAs from the Capital Fund for a
federal fiscal year (FFY). The formula ``shall include'' a mechanism to
reward PHA performance. As required by statute, the Capital Fund
formula (CF formula) was developed through negotiated rulemaking and
promulgated through a final rule, published on March 16, 2000 (65 FR
14422), with certain minor amendments to remove some incorrect,
unnecessary dates adopted by final rule published on May 2, 2000 (65 FR
25446).
Section 9(g) of the 1937 Act (42 U.S.C. 1437g(g)) provides for a
certain amount of flexibility in the use of Capital Fund amounts. For
PHAs other than small PHAs (that is, those with fewer than 250 units of
public housing), a PHA may use up to 20 percent of its Capital Fund for
activities that are eligible activities for the Operating Fund under
section 9(e) of the 1937 Act (42 U.S.C. 1437g(e)). Small PHAs that meet
certain statutory criteria related to operating and maintaining their
public housing in safe, clean, and healthy condition may use 100
percent of their Capital Fund amounts for any statutorily eligible use
under the Operating Fund.
Section 9(g)(3) of the 1937 Act (42 U.S.C. 1437g(g)(3)) imposes
limitations on the use of the Capital Fund or Operating Fund for new
construction. Generally, the CF formula shall not provide PHAs funding
for the purpose of constructing public housing units (which includes
acquisition), if the construction would result in a net increase from
the number of housing units owned, operated, or assisted by the PHA on
October 1, 1999. PHAs may use their CF formula amounts to construct
units in excess of the ``net increase'' limitation, if the units are
available and affordable to low-income families (42 U.S.C.
1437g(g)(3)(B)). The 1937 Act provides two exceptions to the ``net
increase'' limitation on the CF
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formula. One is where the funding for additional units is for a mixed-
finance project (42 U.S.C. 1437g(g)(3)(C)(i)). The second exception is
where the cost of the useful life of the project is less than the
estimated cost of providing tenant-based assistance under the Housing
Choice Voucher program (42 U.S.C. 1437g(g)(3)(C)(ii)).
Section 9(j) of the 1937 Act (42 U.S.C. 1437g(j)) provides for
penalties for slow obligation and expenditure of Capital Funds.
Generally, a PHA is required to obligate funds received under section 9
of the 1937 Act within 24 months of the date on which the funds become
available or within 24 months of the date on which the PHA accumulates
enough funds to undertake modernization, substantial rehabilitation, or
construction of units (42 U.S.C. 1437g(j)(1)). Under section 9(j)(2)(B)
of the 1937 Act (42 U.S.C. 1437g(j)(2)(B)), a PHA ``shall disregard''
this requirement with respect to unobligated amounts the total of which
do not exceed 10 percent of the original allocation of Capital Funds to
the PHA. Additionally, PHAs must expend their Capital Fund assistance
within 4 years after the date on which the funds became available for
obligation (42 U.S.C. 1437g(j)(5)). HUD may extend the time periods for
obligation of Capital Funds for specific reasons listed in the statute
and established by HUD by notice published in the Federal Register (42
U.S.C. 1437g(j)(2), 42 U.S.C. 1437g(j)(5)(A)). The statute lists
potential sanctions for failure to comply with the obligation and
expenditure deadlines, including withholding of funds, penalties
applied to future grants, reallocation of funds to high-performing
PHAs, and recapture (42 U.S.C. 1437g(j)(3), 42 U.S.C. 1437g(j)(6)).
Regulations implementing the obligation and expenditure requirements
were published on August 1, 2003 (68 FR 45731). These regulations are
currently codified at 24 CFR 905.120, and would be moved to Sec.
905.306 by this proposed rulemaking.
Former section 9(k) of the 1937 Act (42 U.S.C. 1437g(k)) provided
for a fund reserve for emergency, natural disasters, and litigation
needs, and for a set-aside for Operation Safe Home. Section 2804 of
Title VII (Small Public Housing Authorities Paperwork Reduction Act) of
Division B of the HERA (Pub. L. 110-289, approved July 30, 2008)
removed section 9(k) of the 1937 Act.
Section 2702 of the Small Public Housing Authorities Paperwork
Reduction Act amends section 5A of the 1937 Act (42 U.S.C. 1437c-1), to
provide that certain PHAs, called ``qualified public housing
agencies,'' are not required to file the PHA Annual Plan called for in
section 5A(b)(1) of the 1937 Act (42 U.S.C. 1437c-1(b)(1)). Qualified
PHAs under section 2702 are those that administer 550 or fewer units--
considered as the sum of all the public housing units and vouchers
under section 8(o) of the 1937 Act (42 U.S.C. 1437f(o)) administered by
a PHA--and are not designated as a troubled PHA under section 6(j)(2),
and do not have a failing score under the Section 8 Management
Assessment Program (SEMAP) during the prior 12 months.
Such PHAs must still submit a PHA 5-Year Plan, file the civil
rights certification under 42 U.S.C. 1437c-1(d)(16), and consult with,
and consider the recommendations of, the resident advisory board at the
annual hearing required of such agencies regarding any changes to the
goals, objectives, and policies of that PHA. The CFP (and previous CIAP
and CGP) have always had separate informational requirements, but some
of these were combined with the PHA Annual and 5-Year Plan. However,
with the changes made to the PHA Annual Plan and the need to have grant
reporting in compliance with CFP and other federal reporting
requirements, the CFP informational requirements will be decoupled or
separated from the PHA Annual Plan submissions.
II. Overview of the Capital Fund Program
This rule proposes to revise the regulations governing the use of
assistance made available under the Capital Fund in 24 CFR part 905.
Assistance under the Capital Fund is a primary, regular source of
funding made available by HUD to a PHA for modernization and
development of public housing and other capital activities. This rule
also proposes to replace and remove several other regulations that
currently govern a PHA's use of HUD assistance, specifically: 24 CFR
part 941, entitled ``Public Housing Development''; 24 CFR part 968,
entitled ``Public Housing Modernization''; and 24 CFR part 969,
entitled ``PHA-Owned Projects--Continued Operation as Low-Income
Housing After Completion of Debt Service.'' In the case of part 969,
which provides for the continued operation of housing as public housing
for the 10-year period after the last receipt of operating subsidy,
sections 9(e)(3) and 9(m) of the 1937 Act, along with the Annual
Contributions Contract (ACC), as amended and approved by HUD, serve the
same purpose, making the separate regulations in 24 CFR part 969 no
longer necessary.
Although HUD established the CF formula in 2000, HUD continued to
rely on CFP requirements found in the regulations in these other parts
of 24 CFR, to the extent that these requirements were not superseded by
statutory requirements.
III. Overview of the Changes to the PHA Annual Plan
This regulation modifies 24 CFR 903.3(a) to incorporate the
definition of a qualified PHA provided in section 2702 of HERA. HERA
exempts qualified PHAs from the requirement of section 5(A) of the 1937
Act to submit a PHA Annual Plan.
IV. This Proposed Rule
To meet the objective of revising and consolidating the
requirements governing the use of Capital Funds, as discussed in
Section II of this preamble, this proposed rule would revise 24 CFR
part 905 to establish new subparts A through H.
A. Subpart A
Subpart A of this proposed part 905 would provide a general
introduction and definitions. Section 905.100(a) and (b) would state
the purpose of the part 905 regulations and provide a general
description of the CFP. Section 905.100(c) would establish employment,
contracting, and close-out requirements. Section 905.102 would address
the applicability of the part 905 regulations. Section 905.104 would
require that all HUD approvals be in writing from officials designated
to grant such approvals. Section 905.106 would state that noncompliance
with this part or any other applicable requirements may subject a PHA
and its partners to sanctions provided elsewhere in part 905. Section
905.108 would provide a number of program-specific definitions.
The following are definitions relating to the Capital Fund Program
and proposed to be included in the definition section of the part 905
regulations: ``Additional Project Costs,'' ``Accessible,'' ``Capital
Fund,'' ``Capital Fund Annual Contributions Contract Amendment (CF ACC
Amendment),'' ``Capital Fund Program Fee,'' ``Community Renewal
Costs,'' ``Cooperation Agreement,'' ``Date of Full Availability
(DOFA),'' ``Emergency Work,'' ``Expenditure,'' ``Federal Fiscal Year
(FFY),'' ``Force Account Labor,'' ``Fungibility,'' ``Housing
Construction Cost (HCC),'' ``Line of Credit Control system (LOCCS),''
``Mixed Finance Modernization,'' ``Natural Disaster,'' ``Obligation,''
``Open Grant,'' ``Operating
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Fund,'' ``PIH Information Center (PIC),'' ``Public Housing Agency
(PHA),'' ``Public Housing Project,'' ``Public Housing Assessment System
(PHAS),'' ``Public Housing Development,'' ``Public Housing
Requirements,'' ``Reasonable Cost,'' ``Reconfiguration,'' and ``Uniform
Federal Accessibility Standards (UFAS).'' Other definitions
specifically related to public housing development are proposed to be
placed in subpart F, which will address development activities.
``Capital Fund Program Fee'' is defined as the amount up to 10
percent of the annual Capital Fund grant under this regulation that may
be set aside for administrative costs for an asset management PHA.
These costs are associated with the Central Office Cost Center's (COCC)
oversight and management of the CFP. These costs include duties related
to general capital planning, preparing of the Annual Plan, processing
of LOCCS, preparing reports, drawing of funds, budgeting, accounting,
and procuring of construction and other miscellaneous contracts.
PHAs that have not converted to asset management may expend up to
10 percent of the Capital Fund grant on their administrative costs.
Administrative costs exclude any costs related to lead-based paint or
asbestos testing, in-house architectural or engineering work, or
special administrative costs required under state or local law, unless
approved by HUD.
``Reasonable cost'' is defined in the regulation as ``An amount to
rehabilitate or modernize an existing structure that is not greater
than 90 percent of the TDC for a new development of the same structure
type, number and size of units in the same market area.'' Section
905.314(g), modernization cost limits, states that a PHA is prohibited
from modernizing an existing public housing development that cannot be
modernized for 90 percent of TDC. The Office of Public Housing uses
other cost limitation standards for voluntary conversion and for
Section 18 demolition. For mandatory conversion (24 CFR part 972
subpart B), which relates to developments of 250 or more dwelling units
with a significant (15 percent) vacancy rate over 3 years, the cost
standard is whether it is more expensive to operate the development as
public housing than to provide tenant based assistance. For 24 CFR part
970, the description of major problems indicative of obsolescence
includes a cost standard of 62 percent of TDC for elevator structure
and 57.14 percent of TDC for all other types of structures. HUD is
requesting that the public consider these varying cost limitations and
provide the Department with comments on whether the standard of 90
percent of TDC, which is incorporated in this proposed rulemaking, is
the best cost limitation to use for the modernization of existing
public housing.
B. Subpart B
Subpart B would describe Capital Fund eligible activities and
ineligible activities. Section 905.200 lists the eligible costs, which
include, but are not limited to, development, financing, and
modernization of public housing projects; capital planning; preparation
of the annual statement; vacancy reduction; making units and common
areas accessible; nonroutine maintenance; resident self sufficiency,
security and safety; relocation and mobility counseling; costs for
approved homeownership programs; conduct of an energy audit when there
are not sufficient operating funds and the energy audit is part of a
new modernization program for energy efficiency, including the use of
Energy Star items; certain administrative costs; monitoring of LOCCS;
the preparation of reports; the new Capital Fund program fee that can
be attributed to the Central Office Cost Center; and emergency
activities.
This proposed rule would incorporate energy standards at Sec. Sec.
905.200(b)(6)(ii), 905.200(b)(14), 905.312(b)(1), 905.312(c)(3),
905.312(d), 905.314(c), and 905.316(e). The standards include those in
42 U.S.C. 12709 as amended by section 153 of the Energy Policy Act of
2005, Public Law 109-58 (these standards include the 2006 International
Energy Conservation Code and ASHRAE 90.1-2004), and the Energy Star
requirement for appliances in section 152 of the Energy Policy Act of
2005. In addition, Sec. 905.200(b)(14) of this proposed rule
incorporates energy efficiency standards from 42 U.S.C. 1437g(d)(1)(K),
as added by section 151 of the Energy Policy Act of 2005, which makes
it an eligible use of the capital fund to increase energy efficiency by
such means as the Secretary of HUD determines are appropriate. Public
comment is sought as to how energy efficiency should be measured, as
well as what specific uses of the Capital Fund would increase energy
efficiency.
Since HERA removed the authorization of the emergency set-aside
under section 9(k) of the 1937 Act (42 U.S.C. 1437g(k)), this proposed
rule would remove the regulatory provisions related to section 9(k).
Proposed Sec. 905.202 would list the activities and costs that
would be ineligible under the CFP. These include, but are not limited
to, costs not included in the PHA's CFP 5-Year Action Plan; luxury
items such as amenities beyond what is customary in the community;
costs that would be eligible but for the fact that they are in excess
of the amount directly attributable to the public housing units, when
the physical or management improvement will benefit programs other than
public housing; direct provision of social services; costs that are
funded by another source, so there would be duplicate funding; and any
other costs that HUD may determine on a case-by-case basis.
Proposed Sec. 905.204 would include regulations on funding for
emergencies and natural disasters. Under this section, HUD will look to
ensure, in both situations, that a PHA uses other legally available
funds, including unobligated Capital Funds, before using funds from the
set-aside for disasters and emergencies. Disasters and emergencies are,
however, by nature unexpected and unpredictable, so it is also
necessary for HUD to exercise case-by-case discretion to ensure that
disaster needs and other housing needs of the PHA's residents are and
will continue to be met. It should be noted that both HUD's 2009 (Title
II, Pub. L. 111-8) and 2010 (Division A, Title II, Pub. L. 111-117)
Appropriations Acts made a limited amount of Capital Funds available
for emergencies and natural disasters, and specifically excluded
Capital Funds from being used for Presidentially declared disasters
under the Stafford Act (42 U.S.C. 5121 et seq.). See also PIH Notice
2010-14, available at http://www.hud.gov/offices/pih/publications/notices/10/pih2010-14.pdf.
Former Sec. 905.10(b), Emergency Reserve and Use of Amounts, would
be removed from the proposed rule. The Capital Fund formula, which was
previously found in Sec. 905.10, is in Sec. 905.400 of this proposed
rulemaking. However, this proposed rule retains the procedures for
awarding emergency and natural disaster grants, if provision is made
for a set-aside for emergencies and natural disasters in an annual
Appropriations Act.
C. Subpart C
Subpart C of this proposed rule would include the CFP requirements
found in 24 CFR part 968 (public housing modernization) and 24 CFR
905.120 (penalties for slow expenditure or obligation of Capital
Funds), as those sections are codified as of the date of this proposed
rule. This rule would
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establish CFP submission requirements for both qualified and
nonqualified PHAs, as defined in Title VII of HERA section 2702.
Submission requirements include, but are not limited to, the Physical
Needs Assessment (PNA), the budget, and various certifications.
The new requirement for project-based PNAs for all properties in
the PHA's inventory is intended to support effective property-based
planning and the transition to asset management. Completion of the PNA
will provide PHAs with critical information on the physical condition
of each project in its inventory and assist the PHAs to identify and
prioritize work items in the Annual Statement and the 5-Year Action
Plan. The proposed rule would require that the PNA be completed by the
PHA and be submitted to the Field Office at a time required by HUD.
The proposed rule would require that the other CFP submission
requirements, including the budget and the certifications, be submitted
in a format prescribed by HUD at the time that the PHA submits its
signed CFP ACC Amendment for its CFP grant(s). Except in the case of
emergency work, the PHA shall not spend Capital Funds on any work that
is not included in an approved CFP 5-Year Action Plan and any approved
amendments. Proposed Sec. 905.300(b)(5) describes HUD review of the
CFP submissions for compliance with the public housing program
requirements. The PHA's budget must be approved by the PHA's Board of
Commissioners, but does not require HUD approval. The CFP 5-Year Action
Plan, which is a component of the 5-Year Plan required under part 903,
continues to be required for all PHAs, both qualified and nonqualified.
Proposed Sec. 905.300(b)(8) would address performance and
evaluation reports. Proposed Sec. 905.300(b)(4) would govern other
formal requirements for qualified and nonqualified PHAs, such as the
requirement that the PHA consult with the Resident Advisory Board(s)
and conduct annual public hearings.
Proposed Sec. 905.302 would require PHAs to submit the CF ACC
Amendment by a specified date. Late submittal does not affect a PHA's
requirement to obligate and expend its Capital Fund by the dates
established by HUD. If HUD does not receive the signed and dated CF ACC
Amendment by the submission deadline, the PHA will receive the Capital
Fund grant for that year; however, the PHA will have less than 24
months to obligate 90 percent of the Capital Fund grant and less than
48 months to expend those funds, because the PHA's obligation start
date and disbursement end date for these grants will remain as
previously established by HUD.
Proposed Sec. 905.304 requires public housing developed or
modernized with Capital Funds to be operated in accordance with the CF
ACC Amendment. Under proposed Sec. 905.304(a)(1), projects developed
with Capital Funds must have a covenant requiring them to be operated
as public housing for a 40-year period beginning on the date on which
the project becomes available for occupancy, as required by section
9(d)(3)(A) of the 1937 Act (42 U.S.C. 1437g(d)(3)(A)). Under proposed
Sec. 905.304(a)(2), projects modernized with Capital Funds will have
an additional use restriction for a 20-year period that begins on the
latest date that modernization is completed, as required by section
9(d)(3)(B) of the 1937 Act (42 U.S.C. 1437g(d)(3)(B)). Under proposed
Sec. 905.304(a)(3), projects developed that receive Operating Fund
assistance shall generally have a covenant to operate under
requirements applicable to public housing for a 10-year period
beginning upon the conclusion of the fiscal year for which such amounts
were provided. In accordance with the ACC, existing Declarations of
Trust, and section 30 of the 1937 Act (42 U.S.C.1437z-2), proposed
Sec. 905.304(b) imposes a HUD approval requirement on any potential
liens or security interests in public housing assets.
The requirements for obligation and expenditure of Capital Funds
would be in proposed Sec. 905.306. These requirements include the
statutory time limits on expenditure found in section 9(j) of the 1937
Act (42 U.S.C. 1437g(j)), as well as penalties for failure to obligate
Capital Funds in a timely manner. This section also provides
information on the criteria for requesting an extension to the
obligation deadline.
Section 905.308 would list federal requirements applicable to all
Capital Fund modernization, development, and financing activities,
including, but not limited to, relocation of residents, wage rates,
environmental requirements, section 504 compliance, and lead-based
paint poisoning prevention.
Proposed Sec. 905.310 would require that the PHA initiate a fund
requisition from HUD only when the funds are due and payable, unless
HUD authorizes another method of payment of such advances, which
includes working capital advances, or reimbursement as authorized by 24
CFR 85.21.
Proposed Sec. 905.312 would incorporate the design and
construction requirements, which are currently found in 24 CFR 941.203.
The standards in proposed Sec. 905.312(a) are similar to those in
currently codified 24 CFR 941.203(a), with the primary difference being
that the proposed Sec. 905.312 would require structures ``to be
consistent with'' the neighborhoods they occupy, rather than requiring
them to ``improve or harmonize with'' the neighborhoods.
Additionally, proposed Sec. 905.312, like currently codified Sec.
941.203(b), would require that all development comply with a national
building code in addition to the applicable state and local laws,
codes, ordinances, and regulations. The proposed rule also specifically
addresses accessibility requirements among the federal requirements
with which compliance is required at proposed Sec. 905.312(b)(4). The
proposed rule would apply design and construction standards to
modernization, as well as to development, in proposed Sec. 905.312(c).
In Sec. 905.312(c)(3), HUD refers to including cost-effective
energy conservation measures as identified in the PHA's most recent
updated energy audit in the design, rehabilitation and construction of
public housing development. The Department is seeking public comment,
particularly from PHAs, on what cost-effectiveness test(s) should be
used when deciding whether an energy conservation measure identified in
the energy audit should be implemented or not. Issues for public
comment include but are not limited to the following:
(1) The measurement basis for cost effectiveness; i.e., whether to
use the total cost of the energy improvement versus the incremental
cost of the energy improvement;
(2) Are opportunity costs figured into this calculation (e.g., the
incremental cost of the energy improvement versus the cost of various
alternative uses of the money);
(3) Do such calculations include any expected increase in energy
costs; and
(4) The period of time over which the cost of the improvement would
be realized, such as the manufacturer's estimated useful life versus
actual time in service.
Your comments will assist HUD to develop important guidance to PHAs
that will assist them in determining the most cost-effective energy
conservation measures to fund from among the many identified in the
PHAs' respective energy audits.
Proposed Sec. 905.314 establishes cost limits for public housing
projects, including details about how the TDC and housing construction
cost (HCC) limits are calculated. Modernization costs are limited to 90
percent of the TDC; if modernization costs exceed that
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limit, the project will not be modernized. Also proposed in Sec.
905.314(c)(1) is the ability for PHAs to request a TDC exception for
integrated utility management, capital planning, and other capital and
management activities that maximize energy conservation and efficiency,
including green construction and retrofits, which include windows;
heating system replacements; wall insulation; site-based generation;
advanced energy savings technologies, including renewable energy
generation; and other such retrofits. HUD has the statutory authority
to grant such a TDC exception pursuant to 42 U.S.C. 1437d(b).
For TDC exceptions for integrated utility management, capital
planning, and other capital and management activities that maximize
energy conservation and efficiency identified in Sec. 905.314(c)(1),
the Department will require that the requesting PHA submit a detailed
list of the planned energy conservation improvements, an explanation
and justification for the proposed energy conservation improvements,
and the estimated costs for HUD review. In addition, PHAs requesting an
exception of the TDC will be required to submit to HUD an independent
cost certification from a third party such as a licensed accredited
architect. These materials will be reviewed by HUD and approved on a
case-by-case basis. The Department is seeking public comment on what
cost effectiveness test(s) HUD should apply when reviewing TDC requests
for this exception.
Proposed Sec. 905.314(h) sets administrative cost limits for
modernization at 10 percent of the annual Capital Fund grant, excluding
costs related to lead-based paint or asbestos testing, in-house
architectural or engineering work, or other special administrative
costs, unless approved by HUD. Proposed Sec. 905.314(h) sets the
administrative cost limits for development work with Capital Fund and
RHF grants at 3 percent of the total project budget or, with HUD's
approval, up to 6 percent of the total project budget. For a PHA that
is under asset management, this administrative cost limit of 10 percent
includes the Capital Fund Program fee. This limitation reflects the
priority HUD places on use of the Capital Fund for development and
modernization.
Proposed Sec. 905.314(j) proposes to reduce the threshold for
management improvements from 20 percent to 10 percent over a 3-year
period. Under the current CFP a large housing authority (a PHA with 250
or more units in management) could use as much as 50 percent of a
Capital Fund (CF) formula grant (i.e., 20 percent for management
improvements, 10 percent for administrative costs, and up to 20 percent
for operations) for costs not associated with physical improvements of
the development. The Department will not be able to fund the estimated
modernization needs (as determined in the Capital Needs of the Public
Housing Stock in 1998: Formula Capital Study) if such a high percentage
of the Capital Fund appropriation is used for purposes other than
modernization or development of public housing units. When CGP was
established more than 20 years ago, the Department established a
threshold to allow for 20 percent of the Capital Fund grant to be used
to fund resident activities and other administrative expenses needed to
support the physical improvements funded by the modernization program.
Since the initiation of the CIAP and CGP, other programs such as the
Resident Opportunities and Supportive Services (ROSS) program and
Community and Supportive Services, a component of the HOPE VI program,
have been established to fund services that enable residents to become
self sufficient and/or improve their quality of life. In addition to
these programs, section 9(g) of the 1937 Act (42 U.S.C. 1437g(g))
allows large PHAs to use up to 20 percent of a Capital Fund grant for
operating costs, while small PHAs have complete flexibility to use
their entire Capital Fund grant for operating costs (Sec. 905.314(l)
of this proposed rule). With this flexibility to use Capital Fund for
operations, it is no longer necessary to have such a high threshold for
funding management improvements.
Proposed Sec. 905.314(k) covers resident management corporation
(RMC) activities. RMCs are authorized under section 20 of the 1937 Act
(42 U.S.C. 1437r). Under section 20(c) of the 1937 Act (42 U.S.C.
1437r(c)), a PHA may provide a portion of its Capital Funds to an RMC
for the purpose of performing eligible activities (under certain
conditions, RMCs can be directly funded without going through the PHA
(see 42 U.S.C. 1437r(e)). The proposed rule would provide that the PHA
will not retain any of the Capital Funds unless the PHA contractually
agrees to do so with the RMC.
Proposed Sec. 905.314(j) provides for the HUD-approved use of
force account labor. High-performing PHAs would not require HUD
approval for this purpose.
Proposed Sec. 905.316 of the proposed rule establishes contracting
requirements. This section generally requires compliance with 24 CFR
85.36. Proposed Sec. 905.316(d) requires that, notwithstanding the
bonding requirements of 24 CFR 85.36(h), for each contract over
$100,000, the contractor shall provide a bid guarantee equivalent to 5
percent of the bid price plus one of five acceptable forms of bond
listed.
Section 905.318 of the proposed rule would require the PHA to
obtain a title insurance policy before taking title to any and all
sites and properties acquired with Capital Funds. Section 905.318 also
would require recordation of the deed as prescribed by HUD.
Proposed Sec. 905.320 would impose contract administration duties
on the PHA for work performed using Capital Funds. The PHA must inspect
the work and determine when it is acceptable, and shall pay a
contractor only for work that the PHA has inspected and accepted.
Proposed Sec. 905.322 would require that the fiscal closeout of a
Capital Fund project requires the submission of a cost certificate; and
an audit, if applicable. Proposed Sec. 905.322 also would require the
submission of a performance and evaluation (P&E) report that describes
the progress on open Capital Fund grants, which is currently required
by 24 CFR 968.330. If the PHA does not submit the cost certificate and
P&E report in a timely manner as specified in the regulation, HUD may,
after notifying the PHA, impose restrictions on the PHA's Capital Fund
grants. Proposed Sec. 905.322(c) would provide that the cost
certificate is also subject to audit. For PHAs that are exempt from
audit, HUD would review and approve the cost certificate based on
available information regarding the Capital Fund grant. Proposed Sec.
905.322(e) would provide that all Capital Funds in excess of the actual
cost incurred for the grant are subject to recapture.
Proposed Sec. 905.324 would require certain data reporting by
PHAs.
Proposed Sec. 905.326 would require PHAs to keep full and complete
records of each Capital Fund grant.
D. Subpart D
Subpart D would incorporate, in proposed Sec. 905.400, the
regulations that establish the CF formula, currently codified in Sec.
905.10, with the exception of reference to the emergency reserve fund,
which was removed by HERA, as discussed above.
The CF formula was initially established by final rule published on
March 16, 2000 (65 FR 14422), and that formula is not proposed to be
changed by this rule. Terminology would be updated to reflect the
change to asset management and project-level accounting. In April 2008,
PIC was
[[Page 6659]]
realigned to reflect the reorganization of developments into projects.
In order to avoid resulting changes in DOFA dates that otherwise could
have affected certain PHAs, Sec. 905.400 (d)(6) of this rule proposes
to freeze the determination of modernization need as of FFY 2008 and
then make adjustments based on changes in inventory. The end result is
that there is no substantive change to the formula or the resulting
allocation of Capital Funds, and hence the formula, which was
originally established through a statutory negotiated rulemaking
process, is presented here for the sake of completeness only and not
for public comment. However, HUD will accept comment on the
aforementioned technical changes reflecting asset management.
Since the Study of the Modernization Needs of the Public and Indian
Housing Stock, prepared by Abt Associates Inc., in 1988, the Department
has demolished more than 100,000 units of severely distressed public
housing and funded a significant amount of modernization in public
housing. Subsequently, the Department has already funded 10 years of
replacement housing grants for the severely distressed public housing
that was removed from the public housing inventory. Section 905.400(j)
proposes a transition from a 10-year-long RHF program to a 5-year RHF
program for PHAs that remove units from the inventory based on
demolition or disposition. The transition to a 5-year RHF program would
be effective in FFY 2011 for PHAs that removed units from the inventory
in FFY 2010. In FFY 2011, any PHA that began receiving RHF in FFY 2010
based on demolition or disposition that occurred in FFY 2009 and
earlier will receive the remainder of its first increment and be
eligible for a second increment. Subsequently, PHAs that are already
receiving RHF funding in FFY 2011 will not be negatively impacted by
the transition because they will receive the total 10 years of RHF
funding and will be eligible to receive RHF funding for units removed
from inventory for the sale of homeownership as described in Sec.
905.400(j)(1). Also, beginning in FFY 2011, PHAs will be eligible to
receive RHF funding for units removed from inventory for the sale of
homeownership as described in Sec. 905.400(j)(1) and be allowed to use
RHF grants to fund development of either public housing rental or
homeownership units. The Department is soliciting comments from PHAs
and the PHA interest groups on this proposal to change the RHF funding.
Proposed Sec. 905.400(k) provides for a performance award factor
similar to currently codified Sec. 905.10(j). The provisions of
currently codified Sec. 905.10(k) on eligible costs would be moved to
proposed Sec. 905.200.
E. Subpart E
Subpart E would address the use of Capital Funds for financing.
This subpart is reserved for the regulation entitled ``Use of Public
Housing Capital and Operating Funds for Financing Activities'' that is
the subject of a separate rulemaking. (See final rule published on
October 21, 2010, at 75 FR 65198.)
F. Subpart F
Subpart F would contain the development requirements, including
those related to mixed-finance projects. These requirements would be
moved to subpart F from 24 CFR part 941. Program requirements including
the limitation on costs and site and neighborhood standards are
described in Sec. 905.602. The Department has not made any substantive
changes to the site and neighborhood standards found at Sec. 941.202.
Definitions specifically related to public housing development are
found in Sec. 905.604(b). This subpart also proposes certain
deviations from applicable requirements as HUD is permitted to do by
regulation in the case of mixed-finance projects under section 35(h) of
the 1937 Act, 42 U.S.C. 1437z-7(h). Section 905.604(l), which pertains
to closing materials and other documents, and Sec. 905.604(m), which
addresses subsidy layering, are reserved to address the revised
regulations that are the subject of the rulemaking entitled
``Streamlining of Mixed Finance Applications,'' which was published as
a proposed rule in the Federal Register on December 27, 2006.
Development, with regards to homeownership, will be addressed by a
separate rulemaking.
G. Subpart G
Subpart G would state that the PHA may not pledge, mortgage, or
enter into a transaction that uses public housing assets without
written HUD approval.
H. Subpart H
Subpart H would address PHA compliance with Capital Fund
requirements, and HUD review and sanction for noncompliance with HUD
contracts and regulations.
V. Findings and Certifications
Paperwork Reduction Act
The information collection requirements contained in this rule have
been approved by the Office of Management and Budget (OMB) under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and given OMB
control numbers 2577-0157 and 2577-0226. 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.
Regulatory Planning and Review
OMB reviewed this rule under Executive Order 12866 (entitled
``Regulatory Planning and Review''). This rule was determined to be a
``significant regulatory action'' as defined in section 3(f) of the
Order (although not an economically significant regulatory action under
the Order).
The rule would not have any direct financial impact on the level of
funding for the CFP, but has the potential to create some financial
transfers among program participants. However, the total amount of
transfer is estimated to be less than $100 million annually.
The rule would gradually phase down the dollar threshold for
management improvements, from up to 20 percent to up to 10 percent of a
PHA's CF formula grant over a period of 3 fiscal years. On average,
PHAs use approximately 8 percent of their Capital Fund grants on
management improvements, with many PHAs using considerably less and
large PHAs of more than 250 units using 9 percent. In 2008, $2.38
billion in formula funds were distributed to PHAs. If all PHAs were
using the full 20 percent permitted under the current rule, a 10
percent reduction in the management improvement threshold would
indicate that about $238 million would be reprogrammed for other
eligible activities and would constitute a transfer from one group of
stakeholders that traditionally received management improvement funds,
to other CFP eligible activities and stakeholders, without any impact
on funding. However, given that the actual rate of usage is below 10
percent, this program requirement would not result in any transfers.
The rule would also phase down the allocation of funds for the RHF
from a 10-year RHF to a 5-year RHF. In 2008, a total of 294 PHAs
received RHF funds. That year, 251 PHAs funded under the CF formula
received $97,936,944 RHF first increment funding, and 123 PHAs received
$112,825,095 RHF second increment funding. Five years after the
implementation of the RHF phase-down, the $113 million second increment
funding would be eliminated and redistributed by formula to all 3,138
eligible PHAs, creating a transfer, but
[[Page 6660]]
one only among PHAs. However, HUD has already funded more than 10 years
of RHF to assist PHAs that demolished over 100,000 units of severely
distressed public housing; thus, the need for RHF has significantly
decreased. The phase-down also grandfathers all PHAs that are receiving
first- or second-increment RHF as of Fiscal Year (FY) 2010, minimizing
the impact.
This rule, if implemented as proposed, would also have significant
benefits. This rule updates and consolidates the CFP regulations and
related regulations having to do with the use of Capital Funds for
development and modernization, as well as regulations for continuing
operation of low-income housing after completion of debt service. In
addition, the rule proposes to codify recent statutory requirements
enacted in HERA. The benefits of the rule such as regulatory
consolidation, program clarification, removal of obsolete references,
and enhanced efficiencies make the rule necessary. Although HUD
established the CF formula in 2000, HUD has continued to rely on CFP
requirements to the extent that these requirements were not superseded
by statutory requirements.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) (UMRA) establishes requirements for federal agencies to
assess the effects of their regulatory actions on state, local, and
tribal governments and the private sector. This rule does not impose
any federal mandate on any state, local, or tribal government or the
private sector within the meaning of UMRA.
Environmental Impact
A Finding of No Significant Impact 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 7th Street,
SW., Room 10276, Washington, DC 20410-0500. Due to security measures at
the HUD Headquarters building, an advance appointment to review the
docket file must be scheduled by calling the Regulations Division at
202-708-3055 (this is not a toll-free number). Hearing- or speech-
impaired individuals may access this number through TTY by calling the
toll-free Federal Information Relay Service at 800-877-8339.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.)
generally requires an agency to conduct a regulatory flexibility
analysis of any rule subject to notice and comment rulemaking
requirements, unless the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities.
This rule reflects the transition from PHA-wide accounting to an asset
management model, and therefore changes some of the language regarding
the CF formula to reflect the new accounting model. The only
significant change in the CF formula calculation is a proposal to limit
the number of years a PHA is eligible to receive RHF grants to replace
units removed from the inventory by demolition, disposition, or
homeownership, from 10 years to 5 years. The CF formula amount that is
freed up because of fewer RHF grants will cause an increase in the
amount of Capital Funds available to the remainder of the PHAs, which
includes a large number of small PHAs. Since most small PHAs do not
demolish or dispose of a significant number of public housing units,
reducing RHF eligibility to 5 years should benefit small PHAs.
Therefore, the undersigned certifies that this rule will not have a
significant economic impact on a substantial number of small entities,
and an initial regulatory flexibility analysis is not required.
Notwithstanding the determination that this rule would not have a
significant impact on a substantial number of small entities, HUD
specifically invites any comments regarding any less burdensome
alternatives to this rule that will meet HUD's objectives as described
in this preamble.
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.
Catalog of Federal Domestic Assistance Number
The Catalog of Federal Domestic Assistance numbers for 24 CFR parts
905, 941, 968, and 969 are 14.850, 14.872, 14.882, 14.883.
List of Subjects
24 CFR Part 903
Administrative practice and procedure, Public housing, Reporting
and recordkeeping requirements.
24 CFR Part 905
Grant programs--housing and community development, Public housing,
Reporting and recordkeeping requirements.
24 CFR Part 941
Grant programs--housing and community development, Loan programs--
housing and community development, Public housing.
24 CFR Part 968
Grant programs--housing and community development, Loan programs--
housing and community development, Public housing, Reporting and
recordkeeping requirements.
24 CFR Part 969
Grant programs--housing and community development, Low and moderate
income housing, Public housing.
Accordingly, for the reasons stated in the preamble, under the
authority of 42 U.S.C. 3535(d), HUD proposes to amend 24 CFR chapter IX
as follows:
PART 903--PUBLIC HOUSING AGENCY PLANS
1. The authority citation for part 903 is revised to read as
follows:
Authority: 42 U.S.C. 1437c; 42 U.S.C. 1437c-1; Pub. L. 110-289;
42 U.S.C. 3535d.
2. Revise Sec. 903.3 to read as follows:
Sec. 903.3 What is the purpose of this subpart?
(a) This subpart specifies the requirements for PHA plans, required
by section 5A of the United States Housing Act of 1937 (42 U.S.C.
1437c-1) (the Act), as amended.
(b) Title VII of the Housing and Economic Reform Act, Public Law
110-289, section 2702, amends 42 U.S.C. 1437c-1(b) to provide qualified
public housing agencies (PHAs) an exemption from the requirement of
section 5A of the Act to submit an annual PHA Plan. The term
``qualified public housing
[[Page 6661]]
agency'' has the meaning stated in section 2702(a)(3)(C) of Pub. L.
110-289. HUD will make available a list of the qualified PHAs on a
quarterly basis.
3. Revise part 905 to read as follows:
PART 905--THE PUBLIC HOUSING CAPITAL FUND PROGRAM
Subpart A--General
Sec.
905.100 Purpose, general description, and other requirements.
905.102 Applicability.
905.104 HUD approvals.
905.106 Compliance.
905.108 Definitions.
Subpart B--Eligible Activities
905.200 Eligible activities.
905.202 Ineligible activities and costs.
905.204 Emergencies and natural disasters.
Subpart C--General Program Requirements
905.300 Capital fund submission requirements.
905.302 Timely submission of the CF ACC amendment by the PHA.
905.304 CF ACC term and covenant to operate.
905.306 Obligations and expenditure of Capital Fund grants.
905.308 Federal requirements applicable to all capital fund
activities.
905.310 Disbursements from HUD.
905.312 Design and construction.
905.314 Cost and other limitations.
905.316 Procurement and contract requirements.
905.318 Title and deed.
905.320 Contract administration and acceptance of work.
905.322 Fiscal closeout.
905.324 Data reporting requirements.
905.326 Records.
Subpart D--Capital Fund Formula
905.400 Capital Fund formula (CF formula).
Subpart E--Use of Capital Funds for Financing [Reserved]
Subpart F--Development Requirements
905.600 General.
905.602 Program requirements.
905.604 Mixed-finance development.
905.606 Development proposal.
905.608 Site or property acquisition proposal.
905.610 Technical processing.
905.612 Disbursement of capital funds--predevelopment costs.
Subpart G--Other Security Interests
905.700 Other security interests.
Subpart H--Compliance, HUD Review, Penalties, and Sanctions
905.800 Compliance.
905.802 HUD review of PHA performance.
905.804 Sanctions.
Authority: 42 U.S.C. 1437g and 3535(d); Pub. L. 110-289.
Subpart A--General
Sec. 905.100 Purpose, general description, and other requirements.
(a) Purpose. The Public Housing Capital Fund Program (Capital Fund
Program or CFP) provides financial assistance to public housing
agencies (PHAs) and resident management corporations (RMC) (pursuant to
24 CFR 964.225) to make improvements to existing public housing. The
CFP also provides financial assistance to develop public housing,
including mixed-finance developments that contain public housing units.
(b) General description. Congress appropriates amounts for the
Capital Fund in HUD's annual appropriations. In order to receive a
Capital Fund grant, the PHA must:
(1) Validate project-level information in HUD's data systems, as
prescribed by HUD;
(2) Have an approved CFP 5-Year Action Plan;
(3) Enter into a Capital Fund Annual Contributions Contract (CF
ACC) Amendment to the PHA's Annual Contributions Contract (as defined
in 24 CFR 5.403) with HUD; and
(4) Provide a written certification and counsel's opinion that all
property receiving Capital Fund assistance is under a currently
effective Declaration of Trust and is in compliance with the CF ACC and
the Act.
(c) Informational requirements. Section 905.300 of this part
describes the information to be submitted to HUD for the CFP. HUD uses
the Capital Fund formula set forth in Sec. 905.400 of this part, along
with data provided by the PHA and other information, including, but not
limited to, the High Performance information from the Real Estate
Assessment Center (REAC) and location cost indices, to determine each
PHA's annual grant amount. HUD notifies each PHA of the amount of the
grant and provides a CF ACC Amendment that must be signed by the PHA
and executed by HUD in order for the PHA to access the grant. After HUD
executes the CF ACC Amendment, the PHA may draw down funds for eligible
costs that have been described in its CFP Annual Statement/Performance
and Evaluation Report or CFP 5-Year Action Plan.
(d) Eligible activities. Eligible Capital Fund costs and activities
as further described in subpart B of this part include, but are not
limited to, making physical improvements to the public housing stock
and developing public housing units to be added to the existing
inventory. With HUD approval, a PHA may also leverage its public
housing inventory by borrowing additional capital on the private market
and pledging a portion of its annual Capital Funds for debt service in
accordance with Sec. 905.500.
(e) Obligation and expenditure requirements. A PHA must obligate
and expend its Capital Funds in accordance with Sec. 905.306. The PHA
will directly employ labor, either temporarily or permanently, to
perform work (force account) or contract for the required work in
accordance with 24 CFR part 85. Upon completion of the work, the PHA
must submit an Actual Modernization Cost Certificate (AMCC) or Actual
Development Cost Certificate (ADCC) and a final Performance and
Evaluation Report (in accordance with Sec. 905.322) to HUD to close
out each Capital Fund grant.
(f) Financing and development. Section 905.500 of this part
regulates financing activities using Capital Funds and Operating Funds.
Section 905.600 of this part contains the development requirements,
including those related to mixed-finance development formerly found in
24 CFR part 941. Section 905.700 of this part describes the criteria
for the use of Capital Funds for other security interest. Section
905.800 of this part addresses PHA compliance with Capital Fund
requirements and HUD capability for review and sanction for
noncompliance.
Sec. 905.102 Applicability.
All PHAs that have public housing units under an Annual
Contributions Contract as described in 24 CFR 5.403 are eligible to
receive Capital Funds.
Sec. 905.104 HUD approvals.
All HUD approvals required in this part must be in writing and from
an official designated to grant such approval.
Sec. 905.106 Compliance.
PHAs or owner/management entities or their partners are required to
comply with all applicable provisions of this part. Execution of the CF
ACC Amendment, submissions required by this part, and disbursement of
Capital Fund grants from HUD are individually and collectively deemed
to be the PHA's certification that it is in compliance with the
provisions of this part and all other Public Housing Program
Requirements. Noncompliance with any provision of this part or other
applicable requirements may subject the PHA and/or its partners to
sanctions contained in Sec. 905.804.
Sec. 905.108 Definitions.
The following definitions apply to this part:
[[Page 6662]]
1937 Act. The term ``1937 Act'' is defined in 24 CFR 5.100.
Accessible. As defined in 24 CFR 8.3.
Additional Project Costs. The sum of the following HUD-approved
costs related to the development of a public housing project:
(1) Costs for the demolition or remediation of environmental
hazards associated with public housing units that will not be rebuilt
on the original site; and
(2) Extraordinary site costs that have been verified by an
independent state registered, licensed engineer (e.g., removal of
underground utility systems; replacement of off-site underground
utility systems; extensive rock and/or soil removal and replacement;
and amelioration of unusual site conditions such as unusual slopes,
terraces, water catchments, lakes, etc.). These costs are not subject
to the Total Development Cost (TDC) limit, but are included in the
maximum project cost as stated in Sec. 905.314(b).
Capital Fund (CF). The fund established under 42 U.S.C. 1437g(d).
Capital Fund Annual Contributions Contract Amendment (CF ACC). A
contract under the 1937 Act between HUD and the PHA containing the
terms and conditions under which the Department assists the PHA in
providing decent, safe, and sanitary housing for low-income families.
The CF ACC must be in a form prescribed by HUD, under which HUD agrees
to provide assistance in the development, modernization, and/or
operation of a low-income housing project under the 1937 Act and the
PHA agrees to modernize and operate the project in compliance with all
Public Housing Requirements.
Capital Fund Program Fee. The Capital Fund Program Fee covers costs
associated with the Central Office Cost Center's (COCC) oversight and
management of the Capital Fund Program. These costs include duties
related to general capital planning, preparing of the Annual Plan,
processing of the Line of Credit Control System (LOCCS), preparation of
reports, drawing of funds, budgeting, accounting, and procurement of
construction and other miscellaneous contracts. The Capital Fund
Program Fee is the administrative cost for managing Capital Fund grants
for PHAs subject to asset management, which is subject to the
regulatory limitation of 10 percent of the annual capital fund grant.
Community Renewal Costs. Public housing capital assistance may be
used to pay for Community Renewal Costs in an amount equivalent to the
difference between the Housing Construction Costs (HCCs) paid for with
public housing capital assistance and the TDC limit.
Cooperation Agreement. An agreement, in a form prescribed by HUD,
between a PHA and the applicable local governing body or bodies that
assures exemption from real and personal property taxes, provides for
local support and services for the development and operation of public
housing, and provides for PHA payments in lieu of taxes (PILOT).
Date of Full Availability (DOFA). The last day of the month in
which substantially all (95 percent or more) of the units in a public
housing project are available for occupancy.
Emergency Work. Capital Fund related physical work items that if
not done pose an immediate threat to the health or safety of residents,
and which must be completed within one year of funding. Management
Improvements are not eligible as emergency work and therefore must be
covered by the CFP 5-Year Action Plan before the PHA may carry them
out.
Expenditure. Capital Funds disbursed to the PHA to pay for
obligations incurred in connection with work included in a HUD approved
CFP 5-Year Action Plan. Total funds expended means cash actually
disbursed and does not include retainage.
Federal Fiscal Year (FFY). The Federal Fiscal Year begins each year
on October 1 and ends on September 30 of the following year.
Force Account Labor. Labor employed directly by the PHA on either a
permanent or a temporary basis.
Fungibility. As it relates to the Capital Fund Program, fungibility
allows the PHA to substitute work items between any of the years within
the latest approved CFP 5-Year Action Plan, without prior HUD approval.
Housing Construction Cost (HCC). The sum of the following HUD-
approved costs related to the development of a public housing project:
Dwelling unit hard costs (including construction and equipment),
builder's overhead and profit, the cost of extending utilities from the
street to the public housing project, finish landscaping, and the
payment of Davis-Bacon wage rates.
Line of Credit Control System (LOCCS). LOCCS-Web is an intranet
version of LOCCS for HUD personnel. eLOCCS is the Internet link to
LOCCS data for HUD business partners.
Mixed-Finance Modernization. Use of the mixed-finance method of
development to modernize public housing projects.
Natural Disaster. An extraordinary event, affecting only one or few
PHAs, but excluding Presidentially declared emergencies and major
disasters under the Robert T. Stafford Disaster Relief and Emergency
Assistance Act, 42 U.S.C. 5121 et seq.
Obligation. A binding agreement for work or financing that will
result in outlays, immediately or in the future. All obligations must
be incorporated within the HUD-approved CFP 5-Year Action Plan. This
includes funds obligated by the PHA for work to be performed by
contract labor (i.e., contract award), or by force account labor (i.e.,
work actually started by PHA employees). Capital Funds identified in
the PHA's CFP 5-Year Action Plan to be transferred to operations are
obligated by PHAs once the funds have been budgeted and drawn down by
the PHA. Once these funds are drawn down they are subject to the
requirements of 24 CFR part 990.
Open Grant. Any grant for which a cost certificate has not been
submitted and has not reached fiscal closeout as described in Sec.
905.322.
Operating Fund. Assistance provided under 24 CFR part 990 pursuant
to section 9(e) of the 1937 Act (42 U.S.C. 1437g(e)) for the purpose of
operation and management of public housing.
PIH Information Center (PIC). PIH's current system for recording
data concerning: The public housing inventory, the characteristics of
public housing and Housing Choice Voucher assisted families, the
characteristics of PHAs, and performance measurement of housing
authorities receiving Housing Choice Voucher funding.
Public Housing Agency (PHA). Any State, county, municipality, or
other governmental entity or public body or agency or instrumentality
of these entities that is authorized to engage or assist in the
development or operation of public housing under this part.
Public Housing Assessment System (PHAS). The assessment system
under 24 CFR part 902 for measuring the properties and PHA management
performance in essential housing operations, including rewards for
strong performers and consequences for poor performers.
Public Housing Development. Any or all undertakings necessary for
planning, land acquisition, demolition, construction, or equipment in
connection with a public housing project.
Public Housing Project. The term ``public housing'' means low-
income housing, and all necessary appurtenances thereto, assisted under
the 1937 Act, other than Section 8. The term ``public housing''
includes dwelling units in a mixed-finance project that are assisted by
a public housing agency
[[Page 6663]]
with Capital Fund or Operating Fund assistance. When used in reference
to public housing, the term ``project'' means housing developed,
acquired, or assisted by a public housing agency under the 1937 Act,
and the improvement of any such housing.
Public Housing Requirements. All requirements applicable to public
housing including, but not limited to, the 1937 Act; HUD regulations;
the CF ACC, including amendments; HUD notices; and all applicable
federal statutes, executive orders, and regulatory requirements, as
these requirements may be amended from time to time.
Reasonable cost. An amount to rehabilitate or modernize an existing
structure that is not greater than 90 percent of the TDC for a new
development of the same structure type, number, and size of units in
the same market area. Reasonable costs are also determined with
consideration of HUD regulations including 24 CFR part 85 and OMB
Circular A-87.
Reconfiguration. The altering of the interior space of buildings
(e.g., moving or removing interior walls to change the design, sizes,
or number of units) without demolition, as defined in 24 CFR 970.5.
Uniform Federal Accessibility Standards (UFAS). As defined in 24
CFR 8.32.
Subpart B--Eligible Activities
Sec. 905.200 Eligible activities.
(a) General. Eligible activities include only items specified in an
approved CFP 5-Year Action Plan as identified in Sec. 905.300, or
approved by HUD for emergency and natural disaster assistance.
(b) Eligible activities. Eligible activities include the
development, financing, and modernization of public housing projects,
including the redesign, reconstruction, and reconfiguration of public
housing sites and buildings (including accessible design and
construction of accessibility improvements) and the development of
mixed-finance projects, including the following:
(1) Modernization. Modernization means the activities identified in
Sec. 905.200(a), except those activities associated with the
development of public housing;
(2) Development. Development refers to activities and related costs
to add units to a PHA's public housing inventory under Sec. 905.600,
including: Construction and acquisition with or without rehabilitation;
any and all undertakings necessary for planning, design, financing,
land acquisition, demolition, construction, or equipment, including
development of public housing units, and buildings, facilities, and/or
related appurtenances (i.e., nondwelling facilities/spaces).
Development of mixed-finance projects include the provision of public
housing through a regulatory and operating agreement, master contract,
individual lease, condominium or cooperative agreement, or equity
interest.
(3) Financing. Debt and financing costs (e.g., origination fees,
interest) incurred by PHAs for development or modernization of PHA
projects that involves the use of Capital Funds, including, but not
limited to:
(i) Mixed Finance as described in Sec. 905.604;
(ii) The Capital Fund Financing Program (CFFP) as described in
Sec. 905.500; and
(iii) Any other use authorized by the Secretary under section 30 of
the 1937 Act (42 U.S.C. 1437).
(4) Vacancy reduction. Physical improvements to reduce the number
of units that are vacant. Not included are costs for routine vacant
unit turnaround such as painting, cleaning, and minor repairs. Vacancy
reduction activities must be remedies to a defined vacancy problem
detailed in a vacancy reduction program included in the PHA's CFP 5-
Year Action Plan.
(5) Nonroutine maintenance. Work items that ordinarily would be
performed on a regular basis in the course of maintenance of property,
but have become substantial in scope because they have been postponed
and involve expenditures that would otherwise materially distort the
level trend of maintenance expenses. These activities also include the
replacement of obsolete utility systems and dwelling equipment.
(6) Planned code compliance. Building code compliance includes
design and physical improvement costs associated with:
(i) Correcting violations of local code or the Uniform Physical
Condition Standards (UPCS) under the Public Housing Assessment System
(PHAS), and
(ii) A national building code, such as those developed by the
International Code Council or the National Fire Protection Association;
and the 2006 International Energy Conservation Code (IECC), or ASHRAE
90.1-2004 for multifamily high-rises (four stories or higher), or a
successor energy code or standard that has been adopted by HUD pursuant
to 42 U.S.C. 12709 or other relevant authority.
(7) Management improvements. Activities that are project-specific
or PHA-wide noncapital improvements needed to upgrade the operation of
the PHA's projects, including upgrading operations to maximize energy
conservation to sustain physical improvements at those projects, or
correct management deficiencies. Such activities include, but are not
limited to, the following costs:
(i) Training for PHA personnel in operations and procedures;
(ii) Improvement of resident programs and services, including
resident and project security, and resident selection and eviction;
(iii) Activities that assure or foster equal opportunity; and
(iv) Resident management costs not covered by the Operating Fund
include, but are not limited to:
(A) The cost of technical assistance to a resident council or RMC
to assess feasibility of carrying out management functions for a
specific development or developments;
(B) The cost to train residents in skills directly related to the
operation and management of the development(s) for potential employment
by the RMC;
(C) The cost to train RMC board members in community organization,
board development, and leadership; and the cost of the formation of an
RMC; and
(D) When carrying out management improvement activities, the PHA
shall give priority to correcting deficiencies under PHAS before
expending Capital Funds on other management improvements, except for
activities necessary to address emergency work or statutory or court-
ordered deadlines.
(8) Resident self-sufficiency.
(i) Economic Self-Sufficiency Costs. These include costs for
resident job training and resident business development activities to
enable residents and their businesses to carry out Capital Fund-
assisted activities. HUD encourages PHAs, to the greatest extent
feasible, to hire residents as trainees, apprentices, or employees to
carry out activities under this part, and to contract with resident-
owned businesses as required by Section 3 of the Housing and Community
Development Act of 1968, 12 U.S.C. 1701u.
(ii) Resident Participation Costs. These are costs that promote
more effective resident participation in the operation of the PHA in
its Capital Fund activities to the extent not covered by $25 per unit,
per month, from the Operating Fund. They include costs for staff
support, outreach, training, meeting and office space, childcare,
[[Page 6664]]
transportation, and access to computers that are modest and reasonable.
(iii) Economic Self-Sufficiency. Capital expenditures to facilitate
programs to improve the empowerment and economic self-sufficiency of
public housing residents.
(9) Demolition and reconfiguration.
(i) The costs to demolish dwelling units or nondwelling facilities
approved by HUD, where required, and other related costs for activities
such as relocation, clearing, and grading the site after demolition,
and subsequent site improvements to benefit the remaining portion of
the existing public housing property, as applicable.
(ii) The costs to develop dwelling units or nondwelling facilities
approved by HUD, where required, and other related costs for activities
such as relocation, clearing, and grading the site prior to
development.
(iii) The costs to reconfigure existing dwelling units to units
with different bedroom sizes or to a nondwelling use.
(10) Resident relocation and mobility counseling. Relocation and
other assistance (e.g., reasonable out-of-pocket expenses incurred in
connection with temporary relocation, including the cost of moving to
and from temporary housing and any increase in monthly rent/utility
costs) for permanent or temporary relocation, as a direct result of
modernization, development, rehabilitation, demolition,
reconfiguration, or acquisition.
(11) Security and safety. Capital expenditures to improve the
security and safety of residents.
(12) Homeownership. Activities associated with approved
homeownership, such as:
(i) The cost of a study to assess the feasibility of converting
rental to homeownership units and the preparation of an application for
the conversion to homeownership or sale of units;
(ii) Construction or acquisition of units;
(iii) Downpayment assistance;
(iv) Closing cost assistance;
(v) Subordinate mortgage loans;
(vi) Construction or permanent financing such as write downs for
new construction, or acquisition with or without rehabilitation; and
(vii) Other activities in support of the above primary
homeownership activities, including but not limited to:
(A) Demolition to make way for new construction;
(B) Abatement of environmentally hazardous materials;
(C) Relocation assistance and mobility counseling;
(D) Homeownership counseling;
(E) Site improvements; or
(F) Administrative and marketing costs;
(13) Capital Fund related legal costs (e.g., legal costs related to
preparing property descriptions for the Declaration on Trust, zoning,
permitting, environmental review, procurement, and contracting).
(14) Energy efficiency. Allowed costs include:
(i) Energy audit or updated energy audit to the extent operating
funds are not available and the energy audit is included within a
modernization program.
(ii) Integrated utility management and capital planning to maximize
energy conservation and efficiency measures.
(iii) Energy conservation measures identified in a PHA's most
recently updated energy audit.
(iv) Improvement of energy and water-use efficiency by installing
fixtures and fittings that conform to the American Society of
Mechanical Engineers/American National Standards Institute standards
A112.19.2-1998 and A112.18.1-2000, or any revision thereto, applicable
at the time of installation, and by increasing energy efficiency and
water conservation by such other means as the Secretary determines are
appropriate.
(v) The installation and the use of Energy Star appliances whenever
energy systems, devices, and appliances are replaced, unless it is not
cost-effective to do so, in accordance with Section 152 of the Energy
Policy Act of 2005, 42 U.S.C. 15841.
(vi) Utility and energy management system automation, and metering
activities, including changing mastermeter systems if installed as a
part of a modernization activity to upgrade utility systems, e.g.
electric, water, or gas systems of the PHA consistent with the
requirements of 24 CFR part 965.
(15) Administrative costs. Any administrative costs, including
salaries and employee benefit contributions, other than the Capital
Fund Program Fee, must be related to a specific public housing
development or modernization project and detailed in the CFP 5-Year
Action Plan.
(16) Audit. Costs of the annual audit attributable to the portion
of the audit covering the CFP in accordance with Sec. 905.322(c).
(17) Capital Fund Program Fee. This fee covers costs associated
with oversight and management of the CFP attributable to the HUD-
accepted COCC as described in 24 CFR part 990 subpart H. These costs
include duties related to capital planning, preparing the CFP Annual
Statement/Performance and Evaluation Report, preparing the CFP 5-Year
Action Plan, monitoring of LOCCS, preparing reports, drawing of funds,
budgeting, accounting, and procuring of construction and other
miscellaneous contracts. This fee is not intended to cover costs
associated with construction supervisory and inspection functions that
are considered a front-line cost of the project.
(18) Emergency activities. Capital Fund related activities
identified as emergency work, as defined in Sec. 905.108, whether or
not the need is indicated in the CFP 5-Year Action Plan.
Sec. 905.202 Ineligible activities and costs.
The following are ineligible activities and costs for the Capital
Fund Program:
(a) Costs not associated with a public housing project or
development, as defined in Sec. 905.604(b)(1);
(b) Activities and costs not included in the PHA's CFP 5-Year
Action Plan;
(c) Improvements or purchases that are not modest in design and
cost because they include amenities, materials, and design in excess of
what is customary for the locality;
(d) Any costs not authorized as outlined in OMB Circular A-87,
codified at 2 CFR part 225, including, but not limited to, indirect
administrative costs and indemnification;
(e) Public housing operating assistance, except as provided in
Sec. 905.314(l);
(f) Direct provision of social services through either force
account or contract labor;
(g) Eligible costs that are in excess of the amount directly
attributable to the public housing units when the physical or
management improvements, including salaries and employee benefits and
contributions, will benefit programs other than public housing, such as
Section 8 housing choice voucher or local revitalization programs;
(h) Eligible cost that is funded by another source and would result
in duplicate funding; and
(i) Any other activities and costs that HUD may determine on a
case-by-case basis.
Sec. 905.204 Emergencies and natural disasters.
(a) General. PHAs are required by the CF ACC to carry various types
of insurance to protect it from loss. In most cases, insurance coverage
will be the primary source of funding to pay repair or replacement
costs associated with emergencies and natural disasters. Where the
Department's Annual
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Appropriations Act requires a set aside from the Capital Fund
appropriation for emergencies and natural disasters, the procedures in
this section apply.
(b) Estimate required. An independent estimate of damage and repair
cost is required as a part of the final natural disaster application.
For natural disasters, the assessment must identify damage specifically
caused by the natural disaster from other repairs. The set aside can be
used only to pay costs to repair or replace a public housing project
damaged as a result of the natural disaster, not for nonroutine
maintenance or other improvements.
(c) Emergencies and natural disasters. An emergency is an
unforeseen or unpreventable event or occurrence that poses an immediate
threat to the health and safety of the residents that must be corrected
within one year of funding. A natural disaster for purposes of the
Capital Fund reserve is a non-Presidentially declared disaster. In the
event an emergency or natural disaster arises, HUD may require a PHA to
use any other source that may legally be available, including
unobligated Capital Funds, prior to providing emergency or natural
disaster funds from the set aside. The Department will review, on a
case-by-case basis, requests for emergency and natural disaster funding
from PHAs that have unobligated Capital Funds.
(d) Procedure to request emergency or natural disaster funds. To
obtain emergency or natural disaster funds, a PHA shall submit a
written request in the form and manner prescribed by HUD. In instances
where the PHA requires immediate relief to preserve the property and
safety of the residents, the PHA may submit a preliminary request
outlined in Sec. 905.204(f). Subsequently, the PHA is required to
complete and submit the remaining information outlined in Sec.
905.204(g), at a time prescribed by HUD.
(e) Procedure to request preliminary natural disaster grant for
immediate preservation. A PHA may request a preliminary grant only for
costs necessary for immediate preservation of the property and
protection of the residents. The application should include the
reasonable identification of damage and preservation costs as
determined by the PHA. An independent assessment will be required when
the PHA submits the final request or when the PHA reconciles the
preliminary application grant with the actual amounts received from the
Federal Emergency Management Agency (FEMA), insurance carriers, and
other natural disaster relief sources. Regardless of whether further
funding from the set aside is requested, at a time specified by HUD,
the PHA will be expected to provide a reconciliation of all funds
received, to ensure that the PHA does not receive duplicate funding.
(f) Procedure for final request of emergency or natural disaster
funds. In the request the PHA shall:
(1) Identify the public housing project(s) with the emergency or
natural disaster condition(s).
(2) Identify and provide the date of the:
(i) Conditions that present an unforeseen or unpreventable threat
to the health, life, or safety of residents in the case of emergencies;
or
(ii) Natural disaster (e.g., hurricane, tornado, etc.).
(3) Describe the activities that will be undertaken to correct the
emergency or the conditions caused by the natural disaster and the
estimated cost.
(4) Provide an independent assessment of the extent of and the cost
to correct the condition. The assessment must be specific as to the
damage and costs associated with the emergency or natural disaster.
(5) Provide a copy of a currently effective Declaration of Trust
covering the property and an opinion of counsel that there are no
preexisting liens or other encumbrances on the property.
(6) Demonstrate that without the requested funds from the set aside
the PHA does not have adequate funds available to correct the emergency
condition(s).
(7) Identify all other sources of available funds (e.g., insurance
proceeds, FEMA).
(8) Any other material required by HUD.
(g) HUD Action. HUD shall review all requests for emergency or
natural disaster funds. If HUD determines that a PHA's request meets
the requirements of this section, HUD shall approve the request subject
to the availability of funds in the set aside, in the order in which
requests are received and are determined approvable.
(h) Submission of the CF ACC. Upon being provided with a CF ACC
Amendment from HUD, the PHA must sign and date the CF ACC Amendment and
return it to HUD by the date established by HUD. HUD will execute the
signed and dated CF ACC Amendment submitted by the PHA.
Subpart C--General Program Requirements
Sec. 905.300 Capital fund submission requirements.
(a) General. Unless otherwise stated, the requirements in this
section apply to both qualified Public Housing Agencies (as described
in Sec. 903.3) and non-qualified Public Housing Agencies. Each PHA
must complete a comprehensive physical needs assessment (PNA) to be
submitted at a time and in a format prescribed by HUD. The PHA shall
use the PNA to identify and prioritize work to be performed with
Capital Funds at each project.
(b) Capital Fund program submission requirements. At the time that
the PHA submits the ACC Amendment(s) for its Capital Fund Grants(s) to
HUD, the PHA must also submit the following items:
(1) Budget. The Capital Fund Budget, including attachments, shall
be prepared by a PHA using the form(s) prescribed by HUD. The PHA's
budget must be approved by the PHA's Board of Commissioners; it does
not require HUD approval. Work items listed in the budget must include,
but are not limited to the following:
(i) Where a PHA has an approved Capital Fund Financing Program
(CFFP) loan, debt service payments for the grants from which the
payments are scheduled;
(ii) Where a PHA has an approved CFFP loan, the PHA shall also
include all work and costs, including debt service payments, in the CFP
5-Year Action Plan. Work associated with the use of financing proceeds
will be reported separately in the CFP Annual Statement/Performance and
Evaluation Report; or
(iii) Work affecting health and safety and compliance with
regulatory requirements such as section 504 of the Rehabilitation Act
of 1973 and HUD's implementing regulations at 24 CFR part 8, and the
lead-based paint poisoning prevention standards at 24 CFR part 35,
before major systems (e.g., heating, roof, etc.) and other costs of
lower priority.
(2) Certifications required for receipt of Capital Fund grants. The
PHA is also required to submit various certifications to HUD, in a form
prescribed by HUD, including, but not limited to:
(i) Certification of PIC Data;
(ii) Standard Form--Disclosure of Lobbying Activities;
(iii) Standard Form--Drug Free Workplace;
(iv) Civil Rights Compliance in a form prescribed by HUD; and
(v) Compliance with Public Hearing Requirements.
(3) Public hearing and Resident Advisory Board requirements. A PHA
must annually conduct a public hearing and consult with the Resident
Advisory Board of the PHA to discuss either the PHA Annual Plan, or any
changes to the goals, objectives, and policies of the
[[Page 6666]]
qualified PHA, in order to solicit public comment.
(4) Qualified and non-qualified PHAs. (i) Qualified PHAs, as
described in 24 CFR 903.3, are required to comply with the requirements
in the Housing and Economic Recovery Act (HERA), Public Law 110-289
(approved July 30, 2008), section 2702.
(ii) Non-Qualified PHAs are required to comply with the
requirements of 24 CFR part 903.
(5) HUD review for compliance. The CFP submission requirements must
meet the requirements of this part as well as the Public Housing
Program Requirements as defined in Sec. 905.108. PHAs are required to
revise or correct information that is not in compliance, and HUD has
the authority to impose administrative sanctions until the appropriate
revisions are made. HUD will review the CFP submission requirements to
determine whether:
(i) All of the information that is required to be submitted is
included;
(ii) The information is consistent with the needs identified in the
PNA and data available to HUD; and
(iii) There are any issues of compliance with applicable laws,
regulations, or contract requirements that have not been addressed with
the proposed use of the Capital Fund.
(6) Time frame for submission of requirements. The requirements
identified in Sec. 905.300(b) must be submitted to HUD in a format
prescribed by HUD at the time that the PHA submits its signed CF ACC
Amendment.
(7) CFP 5-Year Action Plan covering large capital items for all
PHAs.
(i) Content. The CFP 5-Year Action Plan must describe the capital
improvements necessary to ensure long-term physical and social
viability of the PHA's public housing developments, including the
capital improvements to be undertaken with the 5-year period, their
estimated costs, and any other information required for participation
in the CFP as prescribed by HUD. Except in the case of emergency work,
the PHA shall not spend Capital Funds on any work that is not included
in an approved CFP 5-Year Action Plan and its amendments.
(ii) Submission. The PHA must submit a CFP 5-Year Action Plan at
least once every 5 years. The PHA may choose to update its CFP 5-Year
Action Plan every year. The PHA shall indicate whether its CFP 5-Year
Action Plan is fixed or rolling.
(iii) PHAs making amendments to the CFP 5-Year Action Plan must
follow the requirements in 24 CFR 903.21.
(iv) HUD Review and Approval. PHA submission and HUD Approval
requirements for the CFP 5-Year Action Plan must be made pursuant to 24
CFR part 903. In any given year that a PHA does not have an approved
CFP 5-Year Action Plan, the Capital Fund grant(s) for these PHAs will
be reserved and obligated; however, the PHA will not have access to
those funds until its CFP 5-Year Action Plan is approved by HUD.
(8) Performance and Evaluation Report.
(i) All PHAs must prepare a CFP Annual Statement/Performance and
Evaluation Report at a time and in a format prescribed by HUD. These
reports shall be retained on file for all grants for which a final
Actual Modernization Cost Certificate (AMCC) or an Actual Development
Cost Certificate (ADCC) has not been submitted. A final Performance and
Evaluation Report must be submitted in accordance with 24 CFR 905.322,
at the time the PHA submits its AMCC or ADCC.
(ii) PHAs that are designated as Troubled under PHAS or the Section
8 Management Assessment Program (SEMAP), and/or were identified as
noncompliant with section 9(j) obligation and expenditure requirements
during the fiscal year, shall submit their CFP Annual Statement/
Performance and Evaluation Reports to HUD for review and approval.
(iii) All other PHAs that are not designated as Troubled under
PHAS, and were in compliance with section 9(j) obligation and
expenditure requirements during the fiscal year, shall prepare a CFP
Annual Statement/Performance and Evaluation report for all open grants
and shall retain the report(s) on file at PHA to be available to HUD
upon request.
Sec. 905.302 Timely submission of the CF ACC amendment by the PHA.
Upon being provided with a CF ACC Amendment from HUD, the PHA must
sign and date the CF ACC Amendment and return it to HUD by the date
established. HUD will execute the signed and dated CF ACC Amendment
submitted by the PHA. If HUD does not receive the signed and dated
Amendment by the submission deadline, the PHA will receive the Capital
Fund grant for that year; however, it will have less than 24 months to
obligate 90 percent of the Capital Fund grant and less than 48 months
to expend these funds because the PHA's obligation start date and
disbursement end date for these grants will remain as previously
established by HUD.
Sec. 905.304 CF ACC term and covenant to operate.
(a) Period of obligation to operate as public housing. The PHA
shall operate all public housing projects in accordance with the CF
ACC, as amended, and applicable HUD regulations for the statutorily
prescribed period. These periods shall be evidenced by a recorded
Declaration of Trust on all public housing property. If the PHA uses
Capital Funds to develop public housing or to modernize existing public
housing, the CF ACC term and the covenant to operate those projects are
as follows:
(1) Development activities. Each public housing project developed
using Capital Funds shall establish a restricted use covenant to
operate under the terms and conditions applicable to public housing for
a 40-year period that begins on the date on which the project becomes
available for occupancy, as determined by HUD.
(2) Modernization activities. For PHAs that receive Capital Fund
assistance, the execution of each new CF ACC Amendment establishes an
additional 20-year period that begins on the latest date on which
modernization is completed, except that the additional 20-year period
does not apply to a project that receives Capital Fund assistance only
for management improvements.
(3) Operating fund. Any public housing project developed that
receives Operating Fund assistance shall have a covenant to operate
under requirements applicable to public housing for a 10-year period
beginning upon the conclusion of the fiscal year for which such amounts
were provided, except for such shorter period as permitted by HUD by an
exception.
(b) Mortgage or security interests. The PHA shall not allow any
mortgages or security interests in public housing assets, including
under section 30 of the 1937 Act, without prior written approval from
HUD.
(c) Applicability of latest expiration date. All public housing
subject to this part or required by law shall be maintained and
operated as public housing as prescribed until the latest expiration
date provided in section 9(d)(3) of the 1937 Act (42 U.S.C.
1437g(d)(3)) or any other provision of law or regulation mandating the
operation of the housing as public housing, or under terms and
conditions applicable to public housing, for a specified period of
time.
[[Page 6667]]
Sec. 905.306 Obligation and expenditure of Capital Fund grants.
(a) Obligation. A PHA shall obligate each Capital Fund grant,
including formula grants, Replacement Housing Factor (RHF) grants, and
natural disaster grants, no later than 24 months, and emergency grants
no later than 12 months after the date on which the funds become
available to the PHA for obligation, except as provided in paragraphs
(c) and (d) of this section. However, a PHA with unobligated funds from
a grant shall disregard this requirement for up to not more than 10
percent of the originally allocated funds from that grant. The funds
become available to the PHA when HUD executes the CF ACC Amendment.
With HUD approval, the PHA can accumulate RHF grants for up to 5 years
or until it has adequate funds to undertake replacement housing. The
PHA shall obligate 90 percent of the RHF grant within 24 months from
the date that the PHA accumulates adequate funds, except as provided in
paragraph (c) of this section.
(b) Items and costs. For funds to be considered obligated, all
items and costs must meet the criteria for an obligation in Sec.
905.108.
(c) Extension to obligation requirement. The PHA may request an
extension of the obligation deadline, and HUD may grant an extension
for a period of up to 12 months, based on:
(1) The size of the PHA;
(2) The complexity of the CFP of the PHA;
(3) Any limitation on the ability of the PHA to obligate the
amounts allocated for the PHA from the Capital Fund in a timely manner
as a result of state or local law; or
(4) Any other factors that HUD determines to be relevant.
(d) HUD extension for other reasons. HUD may extend the obligation
deadline for a PHA for such a period as HUD determines to be necessary,
if HUD determines that the failure of the PHA to obligate assistance in
a timely manner is attributable to:
(1) Litigation;
(2) Delay in obtaining approvals from the Federal Government or a
state or local government that is not the fault of the PHA;
(3) Compliance with environmental assessment and abatement
requirements;
(4) Relocating residents;
(5) An event beyond the control of the PHA; or
(6) Any other reason established by HUD by Notice in the Federal
Register.
(e) Failure to obligate. (1) For any month during the fiscal year,
HUD shall withhold all new Capital Fund grants, including RHF grants,
from any PHA that has unobligated funds in violation of Sec.
905.306(a). The penalty will be imposed once the violations of Sec.
905.306(a) are known. The PHA may cure the noncompliance by:
(i) Requesting in writing that HUD recapture the unobligated
balance of the grant; or
(ii) Continuing to obligate funds for the grant in noncompliance
until the noncompliance is cured.
(2) After the PHA has cured the noncompliance, HUD will release the
withheld Capital Fund grant(s) minus a penalty of 1/12th of the grant
for each month of noncompliance.
(f) Expenditure. The PHA shall expend all grant funds within 48
months after the date on which funds become available, as described in
Sec. 905.306(a). The deadline to expend funds may be extended only by
the period of time of a HUD-approved extension of the obligation
deadline. No other extensions of the expenditure deadline will be
granted. All funds not expended will be recaptured.
Sec. 905.308 Federal requirements applicable to all capital fund
activities.
(a) The PHA shall comply with the requirements of 24 CFR part 5
(General HUD Program Requirements; Waivers), 24 CFR part 85
(Administrative Requirements for Grants and Cooperative Agreements to
State, Local and Federally Recognized Indian Tribal Governments), and
this part.
(b) The PHA shall also comply with the following program
requirements.
(1) Nondiscrimination and equal opportunity. The PHA shall comply
with all applicable nondiscrimination and equal opportunity
requirements, including, but not limited to, the Department's generally
applicable nondiscrimination and equal opportunity requirements at 24
CFR 5.105(a) and the Architectural Barriers Act of 1968, 42 U.S.C. 4151
et seq., and its implementing regulations at 24 CFR parts 40 and 41.
The PHA shall affirmatively further fair housing in its use of funds
under this part, which includes but is not limited to addressing
modernization and development in the completion of requirements at 24
CFR 903.7(o).
(2) Environmental requirements. All activities under this part are
subject to an environmental review by a responsible entity under HUD's
environmental regulations at 24 CFR part 58 and must comply with the
requirements of the National Environmental Policy Act of 1969 (NEPA)
(42 U.S.C. 4321 et seq.) and the related laws and authorities listed at
24 CFR 58.5. HUD may make a finding in accordance with 24 CFR 58.11 and
may perform the environmental review itself under the provisions of 24
CFR part 50. In those cases where HUD performs the environmental review
under 24 CFR part 50, it will do so before approving a proposed
project, and will comply with the requirements of NEPA and the related
requirements at 24 CFR 50.4.
(3) Wage rates. (i) Davis-Bacon wage rates. For all work or
contracts exceeding $2,000 in connection with development activities or
modernization activities (except for nonroutine maintenance work, as
defined in Sec. 905.200(b)(5) of this part), all laborers and
mechanics employed on the construction, alteration, or repair shall be
paid not less than the wages prevailing in the locality, as determined
by the Secretary of Labor pursuant to the Davis-Bacon Act (40 U.S.C.
3142).
(ii) HUD-determined wage rates. For all operations work and
contracts, including routine and nonroutine maintenance work (as
defined in Sec. 905.200(b)(5) of this part), all laborers and
mechanics employed shall be paid not less than the wages prevailing in
the locality, as determined or adopted by HUD pursuant to section 12(a)
of the 1937 Act, 42 U.S.C. 1437j(a).
(iii) State wage rates. Preemption of state prevailing wage rates
as provided at 24 CFR 965.101.
(iv) Volunteers. The prevailing wage requirements of this section
do not apply to volunteers performing development, modernization, or
nonroutine maintenance work under the conditions set out in 24 CFR part
70.
(4) Technical wage rates. All architects, technical engineers,
draftsmen, and technicians (other than volunteers under the conditions
set out in 24 CFR part 70) employed in a development or modernization
project shall be paid not less than the wages prevailing in the
locality, as determined or adopted (subsequent to a determination under
applicable state or local law) by HUD.
(5) Lead-based paint poisoning prevention. The PHA shall comply
with the Lead-Based Paint Poisoning Prevention Act (LPPPA) (42 U.S.C.
4821 et seq.), the Residential Lead-Based Paint Hazard Reduction Act
(42 U.S.C. 4851 et seq.), and the Lead Safe Housing Rule and the Lead
Disclosure Rule at 24 CFR part 35.
(6) Fire safety. A PHA shall comply with the requirements of
section 31 of the Federal Fire Prevention and Control Act of 1974 (15
U.S.C. 2227).
(7) Flood insurance and floodplain requirements. The PHA will not
engage
[[Page 6668]]
in the acquisition, construction, or improvement of a public housing
project located in an area that has been identified by the Federal
Emergency Management Agency (FEMA) as having special flood hazards,
unless:
(i) The requirements of 24 CFR part 55, Floodplain Management, have
been met, including a determination by a responsible entity under 24
CFR part 58 or by HUD under 24 CFR part 50 that there is no practicable
alternative to locating in an area of special flood hazards; and the
minimization of unavoidable adverse impacts.
(ii) Flood insurance on the building is obtained in compliance with
the Flood Disaster Protection Act of 1973 (42 U.S.C. 4001 et seq.); and
(iii) The community in which the area is situated is participating
in the National Flood Insurance Program in accordance with 44 CFR parts
59 through 79, or less than one year has passed since FEMA notification
regarding flood hazards.
(8) Coastal barriers. In accordance with the Coastal Barriers
Resources Act (16 U.S.C. 3501 et seq.), no financial assistance under
this part may be made available within the Coastal Barrier Resources
System.
(9) Displacement, relocation, and real property acquisition. All
acquisition or rehabilitation activities carried out under the Capital
Fund, including acquisition of any property for development, shall
comply with the Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4601-4655) and with
implementing regulations at 49 CFR part 24. Demolition or disposition
under section 9(d)(4) is covered by the section 18 relocation
provisions at 24 CFR 970.21.
(10) Procurement and contract requirement. PHAs and their
contractors shall comply with Section 3 of the Housing and Community
Development Act of 1968 (12 U.S.C. 1701u) and HUD's implementing rules
at 24 CFR part 135.
Sec. 905.310 Disbursements from HUD.
(a) The PHA shall initiate a fund requisition from HUD only when
funds are due and payable, unless HUD approves another payment schedule
as authorized by 24 CFR 85.21.
(b) The PHA shall maintain detailed disbursement records to
document eligible expenditure (e.g., contracts or other applicable
documents), in a form and manner prescribed by HUD.
Sec. 905.312 Design and construction.
The PHA shall meet the following design and construction standards,
as applicable, for all development and modernization.
(a) Physical structures shall be designed, constructed, and
equipped to be consistent with the neighborhoods they occupy; meet
contemporary standards of modest design, comfort, and livability;
promote security; maximize energy conservation; and be attractive and
marketable to the people they are intended to serve.
(b) All development projects shall be designed and constructed in
compliance with:
(1) A national building code, such as those developed by the
International Code Council or the National Fire Protection Association;
and the 2006 International Energy Conservation Code (IECC), or ASHRAE
90.1-2004 for multifamily high-rises (four stories or higher), or a
successor energy code or standard that has been adopted by HUD pursuant
to 42 U.S.C. 12709 or other relevant authority;
(2) Applicable state and local laws, codes, ordinances, and
regulations;
(3) Other federal requirements, including fire protection and
safety standards implemented under section 31 of the Fire
Administration Authorization Act of 1992, 15 U.S.C. 2227 and HUD
minimum property standards (e.g., 24 CFR part 200, subpart S);
(4) Accessibility Requirements as required by Section 504 of the
Rehabilitation Act (29 U.S.C. 794) and implementing regulations at 24
CFR part 8; Title II of the Americans with Disabilities Act (42 U.S.C.
12101 et seq.) and implementing regulations at 28 CFR part 35; and, if
applicable, the Fair Housing Act (42 U.S.C. 3601-3619) and implementing
regulations at 24 CFR part 100; and
(5) High-rise elevator structure specifications. A high-rise
elevator structure shall not be provided for families with children
regardless of density, unless the PHA demonstrates and HUD determines
that there is no practical alternative, where project-based Section 8
assistance under 42 U.S.C. 1437f(o)(13) is provided through a Housing
Assistance Payment (HAP) contract, in which case the assistance may be
provided to a high-rise elevator building, including one occupied by
families with children, without review and approval of the contract by
the Secretary.
(c) All modernization projects shall be designed and constructed in
compliance with:
(1) The modernization standards as prescribed by HUD;
(2) Accessibility requirements as required by Section 504 of the
Rehabilitation Act (29 U.S.C. 794) and implementing regulations at 24
CFR part 8; Title II of the Americans with Disabilities Act (42 U.S.C.
12101 et seq.) and implementing regulations at 28 CFR part 35; and, if
applicable, the Fair Housing Act (42 U.S.C. 3601-3619) and implementing
regulations at 24 CFR part 100; and
(3) Cost-effective energy conservation measures, identified in the
PHA's most recently updated energy audit, conducted pursuant to 24 CFR
part 965, subpart C.
(d) PHAs shall use appliances that are Energy Star products or
Federal Energy Management Program-designed products, unless the PHA
determines that the purchase of these appliances is not cost-effective.
Sec. 905.314 Cost and other limitations.
(a) Eligible administrative costs. Where the physical or management
improvement costs will benefit programs other than Public Housing, such
as the Housing Choice Voucher program or local revitalization programs,
eligible administrative costs are limited to the amount directly
attributable to the public housing program.
(b) Maximum project cost. The maximum project cost represents the
total amount of public housing capital assistance used in connection
with the development of a public housing project, and includes:
(1) Project costs that are subject to the TDC limit (i.e., HCC and
Community Renewal Costs); and
(2) Project costs that are not subject to the TDC limit (i.e.,
Additional Project Costs). The total project cost to be funded with
public housing capital assistance, as set forth in the proposal and as
approved by HUD, becomes the maximum project cost stated in the CF ACC
Amendment. Upon completion of the project, the actual project cost is
determined based upon the amount of public housing capital assistance
expended for the project, and this becomes the maximum project cost for
purposes of the CF ACC Amendment.
(c) TDC limit. (1) The Capital Fund may not be used to pay for
Housing Construction Cost (HCC) and Community Renewal Costs in excess
of the TDC limit, as determined under paragraph (b)(2) of this section.
However, HOPE VI grantees will be eligible to request a TDC exception
for public housing and HOPE VI funds awarded in FFY 1996 and prior
years. However, PHAs may also request a TDC exception for integrated
utility management, capital planning, and other capital and management
activities
[[Page 6669]]
that maximize energy conservation and efficiency, including green
construction and retrofits, which include windows; heating system
replacements; wall insulation; site-based generation; advanced energy
savings technologies, including renewable energy generation; and other
such retrofits. HUD will apply a cost-effectiveness test to ensure that
up-front expenditures due to the exception would be justified by future
cost savings when deciding whether to grant a TDC waiver under this
section.
(2) Determination of TDC limit. HUD will determine the TDC for a
public housing project as follows:
(i) Step 1: Unit construction cost guideline. HUD will first
determine the applicable ``construction cost guideline,'' averaging the
current construction costs as listed in two nationally recognized
residential construction cost indices for publicly bid construction of
a good and sound quality for specific bedroom sizes and structure
types. The two indices HUD will use for this purpose are the R.S. Means
cost index for construction of ``average'' quality and the Marshall &
Swift cost index for construction of ``good'' quality. HUD has the
discretion to change the cost indices to other such indices that
reflect comparable housing construction quality through a notice
published in the Federal Register.
(ii) Step 2: Bedroom size and structure types. The construction
cost guideline is then multiplied by the number of units for each
bedroom size and structure type.
(iii) Step 3: Elevator and non-elevator type structures. HUD will
then multiply the resulting amounts from step 2 by 1.6 for elevator
type structures and by 1.75 for non-elevator type structures.
(iv) Step 4: TDC limit. The TDC limit for a project is calculated
by adding the resulting amounts from step 3 for all the public housing
units in the project.
(3) Costs not subject to the TDC limit. Additional Project Costs
are not subject to the TDC limit, which is described in paragraph (c)
of this section.
(4) Funds not subject to the TDC limit. A PHA may use funding
sources not subject to the TDC limit (e.g., Community Development Block
Grant (CDBG) funds, low-income tax credits, private donations, private
financing, etc.) to cover project costs that exceed the TDC limit or
the HCC limit described in paragraph (c) of this section. Such funds,
however, may not be used for items that would result in substantially
increased operating, maintenance, or replacement costs, and must meet
the requirements of section 102 of the Department of Housing and Urban
Development Reform Act of 1989 (Pub. L. 101-235, approved December 15,
1989) (42 U.S.C. 3545). These funds must be included in the project
development cost budget.
(d) Housing Construction Costs (HCC).
(1) General. A PHA may not use Capital Funds to pay for HCC in
excess of the amount determined under paragraph (c)(2) of this section.
(2) Determination of HCC limit. HUD will determine the HCC limit as
listed in at least two nationally recognized residential construction
cost indices for publicly bid construction of a good and sound quality
for specific bedroom sizes and structure types. The two indices HUD
will use for this purpose are the R.S. Means cost index for
construction of ``average'' quality and the Marshal & Swift cost index
for construction of ``good'' quality. HUD has the discretion to change
the cost indices to other such indices that reflect comparable housing
construction quality through a notice published in the Federal
Register. The resulting construction cost guideline is then multiplied
by the number of public housing units in the project based upon bedroom
size and structure type. The HCC limit for a project is calculated by
adding the resulting amounts for all public housing units in the
project.
(3) The HCC limit is not applicable to the acquisition of existing
housing, whether or not such housing will be rehabilitated. The TDC
limit is applicable to such acquisition.
(e) Community Renewal Costs. Capital Funds may be used to pay for
Community Renewal Costs in an amount equivalent to the difference
between the HCC paid for with public housing capital assistance and the
TDC limit.
(f) Rehabilitation of existing public housing projects. The HCC
limit is not applicable to the rehabilitation of existing Public
Housing Projects. The TDC limit for modernization of existing public
housing is 90 percent of the TDC limit as determined under Sec.
905.314(c). This limitation does not apply to the rehabilitation of any
property acquired pursuant to Sec. 905.600.
(g) Modernization cost limits. If the modernization costs are more
than 90 percent of the TDC, then the project shall not be modernized.
Capital Funds shall not be expended to modernize an existing public
housing development that fails to meet the HUD definition of reasonable
cost found in Sec. 905.108, except for:
(1) Emergency work;
(2) Essential maintenance necessary to keep a public housing
project habitable until the demolition or disposition application is
approved; or
(3) The costs of maintaining the safety and security of a site that
is undergoing demolition.
(h) Administrative cost limits and Capital Fund Program Fee.
(1) Administrative cost limits (for non-asset management PHAs).
(i) Modernization. The PHA shall not budget or expend more than 10
percent of its annual Capital Fund grant on administrative costs, in
accordance with its CFP 5-Year Action Plan. The 10 percent limit
excludes any costs related to lead-based paint or asbestos testing, in-
house Architectural and Engineering work, or other special
administrative costs required by state or local law.
(ii) Development. For development work with Capital Fund and RHF
grants, the administrative cost limit is 3 percent of the total project
budget, or, with HUD's approval, up to 6 percent of the total project
budget.
(2) Capital Fund Program Fee (for asset management PHAs). For a PHA
that is under asset management, the Capital Fund Program Fee and
administrative costs limits are the same. For the Capital Fund Program
Fee, a PHA may charge a management fee of up to 10 percent of the
annual CFP formula grant(s) amount, excluding emergency and disaster
grants and also excluding any costs related to lead-based paint or
asbestos testing, in-house Architectural and Engineering work, or other
special administrative costs required by state or local law. The
Capital Fund Program Fee for development work funded with Capital Fund
and RHF grants is 3 percent of the total project budget, or, with HUD
approval, up to 6 percent of the total project budget.
(i) Management improvement cost limits. A PHA shall not budget nor
use more than 20 percent of its annual Capital Fund grant for
management improvement costs identified in its CFP 5-Year Action Plan
through FY 2010. In FFY 2011, a PHA shall not budget nor use more than
16 percent for management improvements for grants awarded in that
fiscal year; for FFY 2012, a PHA shall not budget nor use more than 13
percent for grants awarded in that year; and for FFY 2013 and
thereafter, a PHA shall not budget nor use more than 10 percent for
grants awarded. Management improvements are an eligible expense for
PHAs participating in Asset Management.
(j) Types of labor. A PHA may use force account labor for
development and modernization activities if included in a HUD-approved
CFP 5-Year Action Plan. HUD approval to use force account labor is not
required when the PHA is
[[Page 6670]]
designated as a High Performer under PHAS.
(k) RMC activities. When the entire development, financing, or
modernization activity, including the planning and architectural
design, is administered by an RMC, the PHA shall not retain any portion
of the Capital Funds for any administrative or other reason unless the
PHA and the RMC provide otherwise by contract.
(l) Capital Funds for operating costs. A PHA may use Capital Funds
for operating costs only if it is included in the HUD-approved CFP 5-
Year Action Plan and limited as described in paragraphs (l)(1) and (2)
of this section. Capital Funds identified in the CFP 5-Year Action Plan
to be transferred to operations are obligated once the funds have been
budgeted and drawn down by the PHA. Once such transfer of funds occurs,
the PHA must follow the requirements of 24 CFR part 990 with respect to
those funds.
(1) Large PHAs. A PHA with 250 or more units may use no more than
20 percent of its annual Capital Fund grant for activities that are
eligible under the Operating Fund at 24 CFR part 990.
(2) Small PHAs. A PHA with less than 250 units, that is not
designated as troubled under PHAS, may use up to 100 percent of its
annual Capital Fund grant for activities that are eligible under the
Operating Fund at 24 CFR part 990, except that the PHA must have
determined that there are no debt service payments, significant Capital
Fund needs, or emergency needs that must be met prior to transferring
100 percent of its funds to operating expenses.
Sec. 905.316 Procurement and contract requirements.
(a) General. PHAs shall comply with 24 CFR 85.36, and HUD
implementing instructions, for all capital activities including
modernization and development except as provided in paragraph (c) in
this section.
(b) Contracts. The PHA shall use all contract forms prescribed by
HUD. If a form is not prescribed, the PHA may use any Office of
Management and Budget (OMB) approved form that contains all applicable
federal requirements and contract clauses.
(c) Mixed-finance development projects. Mixed-finance development
partners may be selected in accordance with the 24 CFR 905.604.
Contracts and other agreements with mixed-finance development partners
must specify that they comply with the requirements of Sec. Sec.
905.602 and 905.604.
(d) Assurances of completion. Notwithstanding 24 CFR 85.36(h), for
each construction contract over $100,000, the contractor shall furnish
the PHA with the following:
(1) A bid guarantee from each bidder equivalent to 5 percent of the
bid price; and
(2) One of the following:
(i) A performance bond and payment bond for 100 percent of the
contract price;
(ii) A performance bond and a payment bond, each for 50 percent or
more of the contract price;
(iii) A 20 percent cash escrow;
(iv) A 25 percent irrevocable letter of credit with terms
acceptable to HUD, or
(v) Any other payment method acceptable to HUD.
(e) Procurement of recovered materials. PHAs that are state
agencies and agencies of a political subdivision of a state that are
using assistance under this part for procurement, and any person
contracting with such PHAs with respect to work performed under an
assisted contract, must comply with the requirements of section 6002 of
the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act. In accordance with section 6002, these agencies and
persons must procure items designated in guidelines of the
Environmental Protection Agency (EPA) at 40 CFR part 247 that contain
the highest percentage of recovered material practicable, consistent
with maintaining a satisfactory level of competition, where the
purchase price of the item exceeds $10,000 or the value of the quantity
acquired in preceding fiscal year exceeded $10,000; must procure solid
waste management services in a manner that maximizes energy and
resource recovery; and must have established an affirmative procurement
program for procurement of recovered materials identified in the EPA
guidelines.
Sec. 905.318 Title and deed.
The PHA shall obtain a title insurance policy that guarantees the
title is good and marketable before taking title to any and all sites
and properties acquired with Capital Funds. The PHA shall record within
90 days the deed and Declaration of Trust in the form and in the manner
prescribed by HUD. The PHA shall at all times maintain a recorded
Declaration of Trust in the form and manner prescribed by HUD on all
public housing projects covering the term required by this part.
Sec. 905.320 Contract administration and acceptance of work.
(a) Contract administration. The PHA is responsible, in accordance
with 24 CFR 85.36, for all contractual and administrative issues
arising out of their procurements. The PHA shall maintain full and
complete records on the history of each procurement transaction.
(b) Inspection and acceptance. The PHA or owner, in the case of
mixed finance, shall carry out inspections of work in progress and
goods delivered, as necessary, to ensure compliance with existing
contracts. If, upon inspection, the PHA determines that the work and/or
goods are complete, satisfactory and, as applicable, otherwise
undamaged, except for any work that is appropriate for delayed
completion, the PHA shall accept the work. The PHA shall determine any
hold-back for items of delayed completion and the amount due and
payable for the work that has been accepted, including any conditions
precedent to payment that are stated in the construction contract or
contract of sale. The contractor shall be paid for items only after the
PHA inspects and accepts that work.
(c) Guarantees and warranties. The PHA or owner, in the case of
mixed finance, shall specify the guaranty period and amounts to be
withheld, as applicable, and shall provide that all contractor,
manufacturer, and supplier warranties required by the construction and
modernization documents shall be assigned to the PHA. The PHA shall
inspect each dwelling unit and the overall project approximately 3
months after the beginning of the project guaranty period, 3 months
before its expiration, and at other times as may be necessary to
exercise its rights before expiration of any warranties. The PHA shall
require repair or replacement of all defective items prior to the
expiration of the guaranty or warranty periods.
(d) Notification of completion. The PHA shall require that all
contractors and developers notify the PHA in writing when the contract
work, including any approved off-site work, will be completed and ready
for inspection.
Sec. 905.322 Fiscal closeout.
(a) General. Each Capital Fund grant and/or development project is
subject to fiscal closeout. Fiscal closeout includes the submission of
a cost certificate; an audit, if applicable; a final Performance and
Evaluation Report; and HUD approval of the cost certificate.
(b) Submission of cost certificate. (1) When an approved
development or modernization activity is completed or when HUD
terminates the activity, the PHA must submit to HUD the:
(i) Actual Development Cost Certificate (ADCC) within 12 months.
For purposes of the CF ACC, costs incurred between the completion of
the
[[Page 6671]]
development and DOFA becomes the actual development cost; and
(ii) Actual Modernization Cost Certificate (AMCC) for each grant,
no later than 12 months after the expenditure deadline but no earlier
than the obligation end date. A PHA with under 250 units with an
approved CFP 5-Year Action Plan for use of 100 percent of the Capital
Fund Grant in Operations may submit the cost certificate any time after
the funds have been budgeted to operations and withdrawn, as described
in Sec. 905.314(l).
(2) If the PHA does not submit the cost certificate and the final
CFP Annual Statement/Performance and Evaluation Report within the
period prescribed in this section, HUD may impose restrictions on open
Capital Fund grants, e.g., establish review thresholds, set the grant
to ``auto review'' (HUD automatically reviews it on a periodic basis),
or suspend grants, until the cost certificate for the affected grant is
submitted. These restrictions may be imposed by HUD after notification
of the PHA.
(c) Audit. The cost certificate is a financial statement subject to
audit pursuant to 24 CFR 85.26. After submission of the cost
certificate to HUD, the PHA shall provide the cost certificate to its
independent public auditor (IPA) as part of its annual audit. After
audit, the PHA will notify HUD of the grants included in the audit, any
exceptions noted by the PHA auditor, and the schedule to complete
corrective actions recommended by the auditor.
(d) Review and approval. For PHAs exempt from the audit
requirements, HUD will review and approve the cost certificate based on
available information regarding the Capital Fund grant. For PHAs
subject to an audit, HUD will review the information from the annual
audit provided by the PHA and approve the certificate after all
exceptions, if any, have been resolved.
(e) Recapture. All Capital Funds in excess of the actual cost
incurred for the grant are subject to recapture. Any funds awarded to
the PHA that are returned or any funds taken back from the PHA in a
fiscal year after the grant was awarded are subject to recapture.
Sec. 905.324 Data reporting requirements.
The PHA shall provide, at minimum, the following data reports, at a
time and in a form prescribed by HUD:
(a) The Performance and Evaluation Report as described in Sec.
905.300(b)(8);
(b) Updates on the PHA's building and unit data as required by HUD;
(c) Reports of obligation and expenditure; and
(d) Any other information required for participation in the Capital
Fund Program.
Sec. 905.326 Records.
(a) The PHA will maintain full and complete records of the history
of each Capital Fund grant, including, but not limited to, CFP 5-Year
Action Plans, procurement, contracts, obligations, and expenditures.
(b) The PHA shall retain all documents related to the activities
for which the Capital Fund grant was received for 5 years after HUD
approves either the actual development or modernization cost
certificate, unless a longer period is required by applicable law.
(c) HUD and its duly authorized representatives shall have full and
free access to all PHA offices, facilities, books, documents, and
records, including the right to audit and make copies.
Subpart D--Capital Fund Formula
Sec. 905.400 Capital Fund formula (CF formula).
(a) General. This section describes the formula for allocating
Capital Funds to PHAs.
(b) Formula allocation based on relative needs. HUD shall allocate
Capital Funds to the PHAs in accordance with the CF formula. The CF
formula measures the existing modernization needs and accrual needs of
PHAs.
(c) Allocation for existing modernization needs under the CF
formula. HUD shall allocate one-half of the available Capital Fund
amount based on the relative existing modernization needs of PHAs,
determined in accordance with paragraph (d) of this section.
(d) PHAs with 250 or more units in FFY 1999, except the New York
City and Chicago Housing Authorities. The estimates of the existing
modernization needs for these PHAs shall be based on the following:
(1) Objective measurable data concerning the following PHA,
community, and project characteristics applied to each project:
(i) The average number of bedrooms in the units in a project
(Equation co-efficient: 4604.7);
(ii) The total number of units in a project (Equation co-efficient:
10.17);
(iii) The proportion of units in a project in buildings completed
in 1978 or earlier. In the case of acquired projects, HUD will use the
DOFA unless the PHA provides HUD with the actual date of construction
completion. When the PHA provides the actual date of construction
completion, HUD will use that date (or, for scattered sites, the
average dates of construction of all the buildings), subject to a 50-
year cap. (Equation co-efficient: 4965.4);
(iv) The cost index of rehabilitating property in the area
(Equation co-efficient: -10608);
(v) The extent to which the units of a project were in a
nonmetropolitan area as defined by the United States Bureau of the
Census (Census Bureau) during FFY 1996 (Equation co-efficient: 2703.9);
(vi) The PHA is located in the Southern census region, as defined
by the Census Bureau (Equation co-efficient: -269.4);
(vii) The PHA is located in the Western census region, as defined
by the Census Bureau (Equation co-efficient: -1709.5);
(viii) The PHA is located in the Midwest census region as defined
by the Census Bureau (Equation co-efficient: 246.2); and
(2) An equation constant of 13851.
(i) Newly constructed units. Units with a DOFA date of October 1,
1991, or after, shall be considered to have a zero existing
modernization need.
(ii) Acquired projects. Projects acquired by a PHA with a DOFA date
of October 1, 1991, or after, shall be considered to have a zero
existing modernization need.
(3) For New York City and Chicago Housing Authorities, based on a
large sample of direct inspections. Prior to the cost calibration in
paragraph (d)(5) of this section, the number used for the existing
modernization need of family projects shall be $16,680 in New York and
$24,286 in Chicago, and the number for elderly projects shall be
$14,622 in New York and $16,912 in Chicago.
(i) Newly constructed units. Units with a DOFA date of October 1,
1991, or after, shall be considered to have a zero existing
modernization need.
(ii) Acquired projects. Projects acquired by a PHA with a DOFA date
of October 1, 1991, or after, shall be considered to have a zero
existing modernization need.
(4) PHAs with fewer than 250 units in FFY 1999. The estimates of
the existing modernization need shall be based on the following:
(i) Objective measurable data concerning the PHA, community, and
project characteristics applied to each project:
(A) The average number of bedrooms in the units in a project.
(Equation coefficient: 1427.1);
(B) The total number of units in a project. (Equation coefficient:
24.3);
[[Page 6672]]
(C) The proportion of units in a project in buildings completed in
1978 or earlier. In the case of acquired projects, HUD shall use the
DOFA date unless the PHA provides HUD with the actual date of
construction completion, in which case HUD shall use the actual date of
construction completion (or, for scattered sites, the average dates of
construction of all the buildings), subject to a 50-year cap. (Equation
coefficient: -1389.7);
(D) The cost index of rehabilitating property in the area, as of
FFY 1999. (Equation coefficient: -20163);
(E) The extent to which the units of a project were in a
nonmetropolitan area as defined by the Census Bureau during FFY 1996.
(Equation coefficient: 6157.7);
(F) The PHA is located in the Southern census region, as defined by
the Census Bureau. (Equation coefficient: 4379.2);
(G) The PHA is located in the Western census region, as defined by
the Census Bureau. (Equation coefficient: 3747.7);
(H) The PHA is located in the Midwest census region as defined by
the Census Bureau. (Equation coefficient: -2073.5); and
(ii) An equation constant of 24762.
(A) Newly constructed units. Units with a DOFA date of October 1,
1991, or after, shall be considered to have a zero existing
modernization need.
(B) Acquired projects. Projects acquired by a PHA with a DOFA date
of October 1, 1991, or after, shall be considered by HUD to have a zero
existing modernization need.
(5) Calibration of existing modernization need for cost index of
rehabilitating property in the area. The estimated existing
modernization need determined under paragraphs (d)(1), (d)(2), or
(d)(3) of this section shall be adjusted by the values of the cost
index of rehabilitating property in the area.
(6) Freezing of the determination of existing modernization need.
FFY 2008 is the last fiscal year that HUD will calculate the existing
modernization need. The existing modernization need will be frozen for
all developments at the calculation as of FFY 2008 and will be adjusted
for changes in the inventory and paragraph (d)(4) of this section.
(e) Allocation for accrual needs under the CF formula. HUD shall
allocate the other half of the remaining Capital Fund amount based on
the relative accrual needs of PHAs, determined in accordance with this
paragraph of this section.
(1) PHAs with 250 or more units, except the New York City and
Chicago Housing Authorities. The estimates of the accrual need shall be
based on the following:
(i) Objective measurable data concerning the following PHA,
community, and project characteristics applied to each project:
(A) The average number of bedrooms in the units in a project.
(Equation coefficient: 324.0);
(B) The extent to which the buildings in a project average fewer
than 5 units. (Equation coefficient: 93.3);
(C) The age of a project, as determined by the DOFA date. In the
case of acquired projects, HUD shall use the DOFA date unless the PHA
provides HUD with the actual date of construction completion, in which
case HUD shall use the actual date of construction (or, for scattered
sites, the average dates of construction of all the buildings), subject
to a 50-year cap. (Equation coefficient: -7.8);
(D) Whether the development is a family project. (Equation
coefficient: 184.5);
(E) The cost index of rehabilitating property in the area.
(Equation coefficient: -252.8);
(F) The extent to which the units of a project were in a
nonmetropolitan area as defined by the Census Bureau during FFY 1996.
(Equation coefficient: -121.3);
(G) PHA size of 6,600 or more units in FFY 1999. (Equation
coefficient: -150.7);
(H) The PHA is located in the Southern census region, as defined by
the Census Bureau. (Equation coefficient: 28.4);
(I) The PHA is located in the Western census region, as defined by
the Census Bureau. (Equation coefficient: -116.9);
(J) The PHA is located in the Midwest census region as defined by
the Census Bureau. (Equation coefficient: 60.7); and
(ii) An equation constant of 1371.9.
(2) For the New York City and Chicago Housing Authorities, based on
a large sample of direct inspections. Prior to the cost calibration in
paragraph (e)(4) of this section the number used for the accrual need
of family developments is $1,395 in New York, and $1,251 in Chicago,
and the number for elderly developments is $734 in New York and $864 in
Chicago.
(3) PHAs with fewer than 250 units. The estimates of the accrual
need shall be based on the following:
(i) Objective measurable data concerning the following PHA,
community, and project characteristics applied to each project:
(A) The average number of bedrooms in the units in a project.
(Equation coefficient: 325.5);
(B) The extent to which the buildings in a project average fewer
than 5 units. (Equation coefficient: 179.8);
(C) The age of a project, as determined by the DOFA date. In the
case of acquired projects, HUD shall use the DOFA date unless the PHA
provides HUD with the actual date of construction completion. When
provided with the actual date of construction completion, HUD shall use
this date (or, for scattered sites, the average dates of construction
of all the buildings), subject to a 50-year cap. (Equation coefficient:
-9.0);
(D) Whether the project is a family development. (Equation
coefficient: 59.3);
(E) The cost index of rehabilitating property in the area.
(Equation coefficient: -1570.5);
(F) The extent to which the units of a project were in a
nonmetropolitan area as defined by the Census Bureau during FFY 1996.
(Equation coefficient: -122.9);
(G) The PHA is located in the Southern census region, as defined by
the Census Bureau. (Equation coefficient: -564.0);
(H) The PHA is located in the Western census region, as defined by
the Census Bureau. (Equation coefficient: -29.6);
(I) The PHA is located in the Midwest census region as defined by
the Census Bureau. (Equation coefficient: -418.3); and
(ii) An equation constant of 3193.6.
(4) Calibration of accrual need for the cost index of
rehabilitating property in the area. The estimated accrual need
determined under either paragraph (e)(2) or (e)(3) of this section
shall be adjusted by the values of the cost index of rehabilitation.
(f) Calculation of number of units.
(1) General. For purposes of determining the number of a PHA's
public housing units and the relative modernization needs of PHAs:
(i) HUD shall count as one unit:
(A) Each public housing and section 23 bond-financed CF unit,
except that each existing unit under the Turnkey III program shall
count as one-fourth of a unit. Units receiving operating subsidy only
shall not be counted.
(B) Each existing unit under the Mutual Help program.
(ii) HUD shall add to the overall unit count any units that the PHA
adds to its inventory when the units are under CF ACC amendment and
have reached DOFA by the date that HUD establishes for the FFY in which
the CF formula is being run (hereafter called the ``reporting date'').
New CF units and reaching DOFA after the reporting date
[[Page 6673]]
shall be counted for CF formula purposes in the following FFY.
(2) Replacement units. Replacement units newly constructed on or
after October 1, 1998, that replace units in a project funded in FFY
1999 by the Comprehensive Grant formula system or the Comprehensive
Improvement Assistance Program (CIAP) formula system shall be given a
new CF ACC number as a separate project and shall be treated as a newly
constructed development as outlined in Sec. 905.600.
(3) Reconfiguration of units. Reconfiguration of units may cause
the need to be calculated by the new configuration based on the formula
characteristics in the building and unit's module of PIC (refer to the
formula sections here). The unit counts will be determined by the CF
units existing after the reconfiguration.
(4) Reduction of units. For a project losing units as a result of
demolition and disposition, the number of units on which the CF formula
is based shall be the number of units reported as eligible for Capital
Funds as of the reporting date. Units are eligible for funding until
they are removed due to demolition and disposition in accordance with a
schedule approved by HUD.
(g) Computation of formula shares under the CF formula. (1) Total
estimated existing modernization need. The total estimated existing
modernization need of a PHA under the CF formula is the result of
multiplying for each project the PHA's total number of formula units by
its estimated existing modernization need per unit, as determined by
paragraph (d) of this section, and calculating the sum of these
estimated project needs.
(2) Total accrual need. The total accrual need of a PHA under the
CF formula is the result of multiplying for each project the PHA's
total number of formula units by its estimated accrual need per unit,
as determined by paragraph (e) of this section, and calculating the sum
of these estimated accrual needs.
(3) PHA's formula share of existing modernization need. A PHA's
formula share of existing modernization need under the CF formula is
the PHA's total estimated existing modernization need divided by the
total existing modernization need of all PHAs.
(4) PHA's formula share of accrual need. A PHA's formula share of
accrual need under the CF formula is the PHA's total estimated accrual
need divided by the total existing accrual need of all PHAs.
(5) PHA's formula share of capital need. A PHA's formula share of
capital need under the CF formula is the average of the PHA's share of
existing modernization need and its share of accrual need (by which
method each share is weighted 50 percent).
(h) CF formula capping. (1) For units that are eligible for funding
under the CF formula (including replacement housing units discussed
below), a PHA's CF formula share shall be its share of capital need, as
determined under the CF formula, subject to the condition that no PHA's
CF formula share for units funded under CF formula can be less than 94
percent of its formula share had the FFY 1999 formula system been
applied to these CF formula eligible units. The FFY 1999 formula system
is based upon the FFY 1999 Comprehensive Grant formula system for PHAs
with 250 or more units in FFY 1999 and upon the FFY 1999 Comprehensive
Improvement Assistance Program (CIAP) formula system for PHAs with
fewer than 250 units in FFY 1999.
(2) For a Moving to Work (MTW) PHA whose MTW agreement provides
that its CF formula share is to be calculated in accordance with the
previously existing formula, the PHA's CF formula share, during the
term of the MTW agreement, may be approximately the formula share that
the PHA would have received had the FFY 1999 formula funding system
been applied to the CF formula eligible units.
(i) RHF to reflect formula need for developments with demolition,
or disposition occurring on or after October 1, 1998.
(1) RHF generally. PHAs that have a reduction in the number of
units attributable to demolition or disposition of units during the
period (reflected in data maintained by HUD) that lowers the formula
unit count for the CFF calculation qualify for application of a
replacement housing factor, subject to satisfaction of criteria stated
in paragraph (i)(5) of this section
(2) When applied. The RHF will be added, where applicable:
(i) For the first 5 years after the reduction of units described in
paragraph (i)(1) of this section; and
(ii) For an additional 5 years if the planning, leveraging,
obligation, and expenditure requirements are met. As a prior condition
of a PHA's receipt of additional funds for replacement housing provided
for the second 5-year period or any portion thereof, a PHA must obtain
a firm commitment of substantial additional funds other than public
housing funds for replacement housing, as determined by HUD.
(3) Computation of RHF. The RHF consists of the difference between
the CFF share without the CFF share reduction of units attributable to
demolition or disposition, and the CFF share that resulted after the
reduction of units attributable to demolition or disposition.
(4) Replacement housing funding in FFY 1998 and 1999. Units that
received replacement housing funding in FFY 1998 will be treated as if
they had received 2 years of replacement housing funding by FFY 2000.
Units that received replacement housing funding in FFY 1999 will be
treated as if they had received one year of replacement housing funding
as of FFY 2000.
(5) PHA Eligibility for the RHF. A PHA is eligible for this factor
only if the PHA satisfies the following criteria:
(i) The PHA requests the application of the replacement housing
factor;
(ii) The PHA will use the funding in question only for replacement
housing;
(iii) The PHA will use the restored funding that results from the
use of the replacement factor to provide replacement housing in
accordance with the PHA's 5-Year Plan, as approved by HUD under part
903 of this chapter;
(iv) The PHA has not received funding for public housing units that
will replace the lost units under Public Housing Development, and Major
Reconstruction of Obsolete Public Housing, HOPE VI, or programs that
otherwise provide for replacement with public housing units;
(v) The PHA, if designated troubled by HUD, and not already under
the direction of HUD or an appointed receiver, in accordance with part
902 of this chapter, uses an Alternative Management Entity as defined
in part 902 of this chapter, for development of replacement housing and
complies with any applicable provisions of its Memorandum of Agreement
executed with HUD under that part; and
(vi) The PHA undertakes any development of replacement housing in
accordance with applicable HUD requirements and regulations.
(6) Failure to provide replacement housing in a timely fashion.
(i) A PHA will be subject to the actions described in paragraph
(i)(7)(ii) of this section if the PHA does not:
(A) Use the restored funding that results from the use of the RHF
to provide replacement housing in a timely fashion as provided in
paragraph (i)(7)(i) of this section and in accordance with applicable
HUD requirements and regulations, and
(B) Make reasonable progress on such use of the funding, in
accordance with applicable HUD requirements and regulations.
(ii) If a PHA fails to act as described in paragraph (i)(6)(i) of
this section,
[[Page 6674]]
HUD will require appropriate corrective action under these regulations,
may recapture and reallocate the funds, or may take other appropriate
action.
(7) Requirement to obligate and expend RHF funds within specified
period.
(i) In addition to the requirements otherwise applicable to
obligation and expenditure of funds, PHAs are required to obligate
assistance received as a result of the RHF within:
(A) 24 months from the date that funds become available to the PHA;
or
(B) With specific HUD approval, 24 months from the date that the
PHA accumulates adequate funds to undertake replacement housing.
(ii) To the extent the PHA has not obligated any funds provided as
a result of the RHF within the time frames required by this paragraph,
or has not expended such funds within a reasonable time, HUD shall
reduce the amount of funds to be provided to the PHA as a result of the
application of the second 5 years of the replacement housing factor.
(j) RHF to reflect formula need for developments with demolition,
disposition, or sale for homeownership occurring on or after October 1,
2009.
(1) RHF generally. In FFY 2011 and thereafter, PHAs that have a
reduction in the number of units occurring in FFY 2010 and attributable
to demolition, disposition, or sale of homeownership under section 32
of the U.S. Housing Act of 1937, 42 U.S.C. 1437z-4 (section 32), or
former section 5(h) of the U.S. Housing Act of 1937 (42 U.S.C. 1437c(h)
(1994) (former section 5(h)), HOPE I, or as otherwise approved by HUD,
but excluding homeownership under Turnkey III, are automatically
eligible to receive RHF grants for a 5-year period, subject to the
criteria stated in paragraph (j)(4) of this section. The funding
reductions attributable to homeownership apply in instances where the
units proposed for homeownership under section 32, former section 5(h),
HOPE I, or as otherwise approved by HUD have been in the public housing
inventory for a minimum of 5 years.
(2) When applied. The RHF will be added, where applicable, for 5
years after the reduction of units described in paragraph (j)(1) of
this section.
(3) Computation of RHF. The RHF consists of the difference between
the CFF share without the CFF share reduction of units attributable to
demolition, disposition, or sale for homeownership under section 32,
former section 5(h), HOPE I or as otherwise approved by HUD and the CFF
share that resulted after the reduction of units attributable to
demolition, disposition, or sale for homeownership under section 32,
former section 5(h), HOPE I, or as otherwise approved by HUD.
(4) PHA eligibility for the RHF. A PHA is eligible for this factor
only if the PHA satisfies the following criteria:
(i) The PHA will automatically receive the RHF for reduction of
units in accordance with (j)(1), unless the PHA rejects the RHF funding
for that fiscal year in writing;
(ii) The PHA will use the funding in question for replacement
housing, i.e., development of public housing rental and/or
homeownership units;
(iii) The PHA will use the restored funding that results from the
use of the replacement factor to provide replacement housing in
accordance with the PHA's CFP 5-Year Action Plan.
(iv) The PHA has not received funding for public housing units that
will replace the lost units under Public Housing Development, and Major
Reconstruction of Obsolete Public Housing, HOPE VI, or programs that
otherwise provide for replacement with public housing units;
(v) The PHA, if designated troubled by HUD, and not already under
the direction of HUD or an appointed receiver, in accordance with part
902 of this chapter, uses an Alternative Management Entity, as defined
in part 902 of this chapter, for development of replacement housing and
complies with any applicable provisions of its Memorandum of Agreement
executed with HUD under that part; and
(vi) The PHA undertakes any development of replacement housing in
accordance with applicable HUD requirements and regulations.
(5) Failure to provide replacement housing in a timely fashion.
(i) A PHA will be subject to the actions described in paragraph
(j)(6)(ii) of this section if the PHA does not:
(A) Use the restored funding that results from the use of the RHF
to provide replacement housing in a timely fashion as provided in
paragraph (j)(6)(i) of this section and in accordance with applicable
HUD requirements and regulations, and
(B) Make reasonable progress on such use of the funding, in
accordance with applicable HUD requirements and regulations.
(ii) If a PHA fails to act as described in paragraph (j)(5)(i) of
this section, HUD will require appropriate corrective action under
these regulations, may recapture and reallocate the funds, or may take
other appropriate action.
(6) Requirement to obligate and expend RHF funds within specified
period.
(i) In addition to the requirements otherwise applicable to
obligation and expenditure of funds, PHAs are required to obligate
funds received as a result of the RHF within:
(A) 24 months from the date that funds become available to the PHA;
or
(B) With specific HUD approval, 24 months from the date that the
PHA accumulates adequate funds to undertake replacement housing.
(ii) To the extent the PHA has not obligated any funds provided as
a result of the RHF within the time frames required by this paragraph,
or expended such funds within a reasonable time frame, HUD shall reduce
the amount of funds to be provided to the PHA.
(k) Performance reward factor.
(1) High performer. A PHA that is designated a high performer under
the PHA's most recent final PHAS score may receive a performance bonus
that is:
(i) 3 percent above its base formula amount in the first 5 years
these awards are given (for any year in this 5-year period in which the
performance reward is earned); or
(ii) 5 percent above its base formula amount in future years (for
any year in which the performance reward is earned);
(2) Condition. The performance bonus is subject only to the
condition that no PHA will lose more than 5 percent of its base formula
amount as a result of the redistribution of funding from non-high
performers to high performers.
(3) Redistribution. The total amount of Capital Funds that HUD has
recaptured or not allocated to PHAs as a sanction for violation of
expenditure and obligation requirements shall be allocated to the PHAs
that are designated high performers under PHAS.
Subpart E--Use of Capital Funds for Financing [Reserved]
Subpart F--Development Requirements
Sec. 905.600 General.
(a) Applicability. This subpart F applies to the development of
public housing units to be included under an ACC and receive Capital
and/or Operating Funds. PHAs must comply with all of the requirements
in this part, as applicable. Pursuant to Sec. 905.106, when a PHA or
owner/management entities and its partners submit and execute a
development proposal and, if applicable, a site acquisition proposal,
[[Page 6675]]
and submit an executed ACC Amendment covering those same units, it is
deemed to have certified by those executed submissions its past,
current, and future compliance with this subpart. Noncompliance with
any provision of this part or other applicable statutes or regulations,
or the ACC, Amendment, and any Amendment thereto may subject the PHA
and/or its partners to sanctions contained in Sec. 905.804.
(b) Description. A PHA may develop public housing through the
construction of new units or the acquisition of existing units that may
or may not require rehabilitation prior to occupancy. As noted in
paragraph (c) of this section, a PHA may use a variety of funding
sources to develop public housing. When developing new public housing
with Capital Funds, pursuant to 24 CFR 905.304, the term of the ACC
Amendment will be 40 years. However, a PHA may develop a mixed-financed
project with no public housing funds used for construction of the units
and receive only Operating Fund assistance for an ACC term, as
determined by HUD pursuant to section 9(e) of the 1937 Act (42 U.S.C.
1437(g)(e) and 24 CFR 905.604(k)).
(c) Capital Fund Financing. For Capital Fund Financing, only the
general development process will be as follows:
(1) The PHA must include any public housing development in its CFP
5-Year Action Plan.
(2) After approval of the CFP 5-Year Action Plan by HUD, the PHA
will contract for services necessary to develop the project.
(d) All financing. For all financing, the general development
process will be as follows:
(1) The PHA or partner will locate properties and/or sites, prepare
plans and specifications, and obtain HUD approval of the site
acquisition and development proposals.
(2) Upon HUD approval of the development proposal, HUD and the PHA
must execute the ACC Amendment and the PHA will enter the applicable
project information into HUD's data systems. The PHA may request
predevelopment funding necessary for preparation of the development
proposal, as described in Sec. 905.612(a).
(3) After HUD approval of the development and/or site acquisition
proposals, the PHA and/or its partner will acquire sites and/or
properties, and record the Declaration of Trust/Declaration of
Restrictive Covenants for all properties acquired. After HUD approval
of the development proposal, the PHA and/or its partner will solicit
construction bids, and award contracts and construct the units.
(4) Upon completion of the project, the PHA will establish the
DOFA. After the DOFA, the PHA will submit a cost certificate to HUD
attesting to the actual cost of the project that will be subject to
audit.
(e) Funding sources. A PHA may engage in development activities
using any one or a combination of the following sources of funding:
(1) Capital Funds;
(2) HOPE VI funds;
(3) Proceeds from the sale of units under a homeownership program
in accordance with 24 CFR part 906;
(4) Proceeds resulting from the disposition of PHA-owned land or
improvements;
(5) Private financing used in accordance with Sec. 905.604, Mixed
Financed Development;
(6) Capital Fund Financing Program (CFFP) proceeds under Sec.
905.500;
(7) Operating Funds pursuant to an Operating Fund Financing Program
(OFFP) approved by HUD pursuant to 24 CFR part 990; and
(8) Funds available from any other source.
Sec. 905.602 Program requirements.
(a) Local cooperation. Except as provided under Sec. 905.604(d)
for mixed-finance projects, the PHA must enter into a Cooperation
Agreement with the applicable local governing body that includes
sufficient authority to cover the public housing being developed under
this subpart, or provide an opinion of counsel that the existing,
amended, or supplementary cooperation agreement between the
jurisdiction and the PHA includes the project or development.
(b) New construction limitation. These requirements apply to the
construction of public housing and are not applicable to development of
public housing through the acquisition of existing housing. All
proposed new construction projects must meet both of the following
requirements:
(1) Limitation on the number of units. A PHA may not use Capital
Funds to pay for the construction cost of public housing units if such
construction would result in a net increase in the number of public
housing units that the PHA owned, assisted, or operated on October 1,
1999. A PHA may develop public housing units in excess of the
limitation if:
(i) The units are available and affordable to eligible low-income
families and the CF formula does not provide additional funding for the
specific purpose of allowing construction and operation of such excess
units; or
(ii) The units are part of a mixed-finance project or otherwise
leverage significant additional investment, and the cost of the useful
life of the projects is less than the estimated cost of providing
tenant-based assistance under section 8(o) of the 1937 Act.
(2) Limitations on cost. A PHA may not construct public housing
unless the cost of construction is less than the cost of acquisition or
acquisition and rehabilitation of existing units, including the amount
required to establish, as necessary, an upfront reserve for replacement
accounts for major repairs. A PHA shall provide evidence of compliance
with this subpart either by:
(i) Demonstrating through a cost comparison that the cost of new
construction in the neighborhood where the PHA proposes to construct
the housing is less than the cost of acquisition of existing housing
with or without rehabilitation in the same neighborhood; or
(ii) Documenting that there is insufficient existing housing in the
neighborhood to acquire.
(c) Federalization. Existing PHA-owned nonpublic housing properties
financed with or without city or state funds may not be federalized, as
described in section 9(n) of the 1937 Act (see 42 U.S.C. 1437g(n)),
under a public housing CF ACC under this part, or by any other means.
(d) Site and neighborhood standards. Each proposed site to be newly
acquired for a public housing project or for construction or
rehabilitation of public housing must be reviewed and approved by the
Field Office as meeting the following standards, as applicable:
(1) The site must be adequate in size, exposure, and contour to
accommodate the number and type of units proposed. Adequate utilities
(e.g., water, sewer, gas, and electricity) and streets shall be
available to service the site.
(2) The site and neighborhood shall be suitable to facilitating and
furthering full compliance with the applicable provisions of Title VI
of the Civil Rights Act of 1964, Title VIII of the Civil Rights Act of
1968, Executive Order 11063, and HUD regulations issued under these
statutes.
(3) The site for new construction shall not be located in an area
of minority concentration unless:
(i) There are sufficient, comparable opportunities outside the
areas of minority concentration for housing minority families in the
income range that are to be served by the proposed project; or
[[Page 6676]]
(ii) The project is necessary to meet overriding housing needs that
cannot otherwise feasibly be met in that housing market area.
``Overriding housing needs'' shall not serve as the basis for
determining that a site is acceptable if the only reason that these
needs cannot otherwise feasibly be met is that, due to discrimination
because of race, color, religion, creed, sex, disability, familial
status, or national origin, sites outside areas of minority
concentration are unavailable.
(4) The site for new construction shall not be located in a
racially mixed area if the project will cause a significant increase in
the proportion of minority to nonminority residents in the area.
(5) Notwithstanding the foregoing, after demolition of public
housing units a PHA may construct public housing units on the original
public housing site or in the same neighborhood if the number of
replacement public housing units is significantly fewer than the number
of units demolished. One of the following criteria must be satisfied:
(i) The number of public housing units being constructed is not
more than 50 percent of the number of units in the original
development; or
(ii) In the case of replacing an occupied development, the number
of public housing units being constructed is the minimum number needed
to house current residents that want to remain at the site, so long as
the number of units is significantly fewer than the number being
demolished; or
(iii) The public housing units being constructed constitute no more
than 25 units.
(6) The site shall promote greater choice of housing opportunities
and avoid undue concentration of assisted persons in areas containing a
high proportion of low-income persons.
(7) The site shall be free from adverse environmental conditions,
natural or manmade, such as: Toxic or contaminated soils and
substances; mudslide or other unstable soil conditions; flooding;
septic tank backups or other sewage hazards; harmful air pollution or
excessive smoke or dust; excessive noise or vibration from vehicular
traffic; insect, rodent or vermin infestation; or fire hazards. The
neighborhood shall not be seriously detrimental to family life. It
shall not be filled with substandard dwellings nor shall other
undesirable elements predominate, unless there is a concerted program
in progress to remedy the undesirable conditions.
(8) Through the use of public transportation, the site shall be
accessible to social, recreational, educational, commercial, health
facilities, health services, and other municipal facilities and
services that are at least equivalent to those typically found in
neighborhoods consisting largely of similar unassisted standard
housing.
(9) Through the use of public transportation, the site shall be
accessible to a range of jobs for low-income workers and for other
needs.
(10) The project may not be built on a site that has occupants
unless the relocation requirements at Sec. 905.308(b)(9) are met.
(11) The site shall not be in an area that HUD has identified as
having special flood hazards and in which the sale of flood insurance
has been made available under the National Flood Insurance Act of 1968,
unless the development is covered by flood insurance required by the
Flood Disaster Protection Act of 1973 and meets all applicable HUD
standards and local requirements.
Sec. 905.604 Mixed-finance development.
(a) General. A PHA may use a combination of private financing and/
or other public funds and Capital Funds to develop public housing
units. There are many potential scenarios for ownership and transaction
structures, ranging from the PHA or its partner(s) holding no ownership
interest, a partial ownership interest, or 100 percent of the ownership
of public housing units that are to be developed.
(1) PHAs and/or their partner(s) may choose to enter into a
partnership or other contractual arrangement with a third entity for
the mixed-financed development and/or ownership of public housing
units. If this entity has primary responsibility along with the PHA for
the development of these units, it is referred to for purposes of this
subpart as the PHA's ``partner.'' The entity, other than the PHA itself
that ultimately owns the public housing units, whether or not the PHA
retains an ownership interest, is referred to as the ``owner entity.''
(2) The resulting ``mixed-financed'' developments may consist of
100 percent public housing units or may consist of public and nonpublic
housing units. The term ``mixed-finance development'' applies to all
projects developed by an owner entity regardless of whether there is a
combination of private or other public sources. The term ``mixed-
finance modernization'' applies to public housing projects modernized
using the mixed-finance method. Projects developed by ownership
entities that are modernized using the mixed-finance method shall
maintain the DOFA that existed prior to mixed-finance modernization.
Projects modernizing using the mixed-finance method shall have a
covenant to maintain and operate the project as public housing pursuant
to 24 CFR 905.304(a)(2). In addition, if a PHA decides to limit the
term of the ACC by receiving Operating Fund or Capital Fund Only
assistance, as described in Sec. 905.600(b) and (c), it must follow
the general development procedures discussed in this subpart.
(b) Definitions applicable to this section--(1) Development. A
housing facility consisting of public housing units and that may also
consist of nonpublic housing units, that has been developed, or that
will be developed, using mixed-finance strategies under this subpart.
(2) Mixed-finance. The use of publicly and/or privately financed
sources of funds for development under this subpart, owned by an owner
entity of public housing units.
(3) Owner entity. The owner entity is the entity that will own the
public units, if the PHA holds less than 100 percent of the ownership
interest. The owner entity may be a partnership in which the PHA owns a
partnership interest.
(4) Participating party. Any person, firm, corporation, or public
or private entity that:
(i) Agrees to provide financial or other resources to carry out the
approved proposal or specified activities in the proposal; or
(ii) Otherwise participates in the development and/or operation of
the public housing units and will receive funds derived from HUD with
respect to such participation. The term ``participating party''
includes an owner entity or partner.
(5) Partner. A third-party entity with which the PHA has entered
into a partnership or other contractual arrangement to provide for the
mixed-finance development of public housing units pursuant to this
subpart. The Partner has primary responsibility with the PHA for the
development and operation of public housing units under the terms of
the approved proposal and in compliance with the applicable Public
Housing Requirements.
(6) PHA instrumentality. An Instrumentality is an entity related to
the PHA whose assets, operations, and management are legally and
effectively controlled by the PHA, and through which PHA functions or
policies are implemented, and which utilizes public housing funds or
public housing assets for the purpose of carrying out public housing
development functions of the PHA. For the Department's purposes, an
Instrumentality assumes the role of the
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PHA and is the PHA under the Public Housing Requirements for purposes
of implementing public housing development activities and programs.
Instrumentalities must be authorized to act for and to assume such
responsibilities. In addition, an Instrumentality must abide by the
Public Housing Requirements that would be applicable to the PHA.
(c) Structure of projects. Each mixed-finance project shall be
developed in a manner that:
(1) Ensures the continued operation of public housing in accordance
with all Public Housing Requirements; and
(2) Will bear the approximate same proportion to the total number
of units in the mixed-financed project as the value of the total
financial commitment provided by the PHA bears to the total financial
commitment of the project, or shall not be less than the number of
units that could have been developed under the conventional public
housing program with the assistance, or as otherwise approved by the
Secretary.
(d) Process. Development of a mixed-finance project under this
subpart is similar to the development of public housing financed
entirely with Capital Funds. PHAs will be expected to submit
development and site acquisition proposals as identified in Sec. Sec.
905.606 and 905.608. There are unique provisions applicable to mixed-
finance projects that are further explained in this section.
(e) Local cooperation. A PHA may elect to exempt all public housing
units in a mixed-finance project from provisions under section 6(d) of
the Act and from the finding of need and cooperative agreement
provisions under sections 5(e)(1)(ii) and (e)(2) of the Act, 42 U.S.C.
1437c(e)(1)(ii) and (e)(2), and instead subject units to local real
estate taxes, but only if the development of the units is not
inconsistent with the jurisdiction's comprehensive housing
affordability strategy. If no election is made, the Cooperation
Agreement as provided in 905.602(a) is required.
(f) Conflicts. In the event of a conflict between the requirements
for a mixed-finance project and other requirements of this subpart, the
mixed-finance public housing requirements shall apply, unless HUD
determines otherwise in writing.
(g) HUD approval. For purposes of this section only, any action or
approval that is required by HUD pursuant to the requirements set forth
in this section shall be construed to mean HUD Headquarters, unless the
Field Office is authorized in writing by Headquarters to carry out a
specific function in this section.
(h) Irrevocable financial commitment. Irrevocability of funds means
that binding legal documents, such as loan agreements, mortgages/deeds
of trust, partnership agreements or operating agreements or similar
documents committing funds have been executed by the applicable
parties, though disbursement of such funds may be subject to meeting
progress milestones, the absence of default, and other commercially
reasonable conditions precedent under such documents. For projects
involving revolving loan funds, the irrevocability of funds means that
funds in an amount identified to HUD as the maximum revolving loan have
been committed pursuant to legally binding documents, though
disbursement of such funds may be subject to meeting progress
milestones, the absence of default, and other commercially reasonable
conditions precedent under such documents. The PHA must ensure the
availability of the participating party or parties' financing, the
amount and source of financing committed to the proposal by the
participating party or parties, and the irrevocability of those funds.
(1) To ensure the irrevocable nature of the committed funds, the
PHA shall: Review the legal documents committing such funds to ensure
that the progress milestones and conditions precedent contained in such
contracts are commercially reasonable, as commonly accepted by the
industry; that the PHA and/or its ownership entity are ready, willing,
and able to attain such milestones and comply with such preconditions;
and confirm, after conducting sufficient due diligence, that such
documents are properly executed by persons or entities legally
authorized to bind the entity committing such funds.
(2) The PHA is not required to ensure the availability of funds by
enforcing documents to which it is not a party.
(3) The PHA may certify as to the irrevocability of funds through
the submission of an opinion of the PHA's counsel attesting that
counsel has examined the availability of the participating party or
parties' financing, and the amount and source of financing committed to
the proposal by the participating party or parties, and has determined
that such financing has been irrevocably committed by the participating
party or parties for use in carrying out the proposal, and that such
commitment is in the amount required under the terms of the proposal.
(i) Comparability. Public housing units built in a mixed-financed
development must be comparable in size, location, external appearance,
and distribution to nonpublic housing units within the development.
(j) Mixed-finance procurement. The requirements of 24 CFR part 85
and 24 CFR 905.316 are applicable to this subpart with the following
exceptions:
(1) PHA may select a development partner using competitive
proposals procedures for qualifications-based procurement, subject to
negotiation of fair and reasonable compensation, and compliance with
TDC and other applicable cost limitations;
(2) An owner entity (which, as a private entity, would normally not
be subject to 24 CFR part 85) shall be required to comply with 24 CFR
part 85 if HUD determines that the PHA or PHA Instrumentality or either
of their members or employees exercises significant decision-making
functions within the owner entity with respect to managing the
development of the proposed units. HUD may, on a case-by-case basis,
exempt such an owner entity from the need to comply with 24 CFR part 85
if it determines that the owner entity has developed an acceptable
alternative procurement plan.
(k) Operating Fund and Capital Fund only assistance. (1) General.
PHAs and their partners may develop public housing without the use of
Capital Funds but for which the PHA agrees to provide only Operating
Fund assistance. These Operating Fund-only newly developed units will
be included in the calculation of the Capital Fund formula in Sec.
905.400. Where the PHA elects in the future to use Capital Funds for
modernization of Operating Fund only units, the PHA must sign an ACC
Amendment with a 20-year use restriction and record a Declaration of
Trust in accordance with Sec. 905.304. In addition, PHAs and their
partners may develop public housing without the use of Operating Funds
but for which the HUD and the PHA agree to provide only Capital Fund
assistance for the development of new units, or, annually, in the
future, for modernization and capital improvements, and the PHA must
sign an ACC Amendment with a 40-year use restriction for development of
new units and a 20-year use restriction for modernization and capital
improvements and record a Declaration of Trust in accordance with Sec.
905.304.
(2) ACC Term and Formula. (i) The term of the mixed-finance ACC
amendment will be determined based on the assistance as provided in
Sec. 905.304. For units constructed with the benefit of public housing
capital assistance, there shall be no disposition of the public housing
units without the prior written approval of HUD during a 40-year period
and the public housing
[[Page 6678]]
units shall be maintained and operated in accordance with all
applicable Public Housing Requirements (including the ACC), as required
by section 9(d)(3) of the Act, 42 U.S.C. 1437g(d)(3), as those
requirements may be amended from time to time. For Operating Fund only
units, there shall be no disposition of the public housing units
without the prior written approval of HUD during, and for 10 years
after the end of, the period in which the public housing units receive
operating subsidy from the PHA, as required by 42 U.S.C. 1437g(e)(3),
as those requirements may be amended from time to time. For units
modernized with Capital Funds, the PHA would have to execute an ACC
Amendment providing for no disposition of the public housing units
without the prior written approval of HUD during a 20-year period, and
the public housing units shall be maintained and operated in accordance
with all applicable Public Housing Requirements (including the ACC), as
required by 42 U.S.C. 1437g(d)(3), as those requirements may be amended
from time to time.
(ii) If the PHA is no longer able to provide Operating Fund
assistance, the PHA (on behalf of the owner entity) may request to
terminate the CF ACC early. Where the ACC is terminated early, the PHA
must provide the resident with a decent, safe, sanitary, and affordable
unit to which he or she can relocate, which may include a public
housing unit in another development or a Housing Choice Voucher, and
pay for the tenant's reasonable moving costs. The URA is not applicable
in this situation.
(3) Procedures. PHAs and their partners will develop Operating Fund
only or Capital Fund only projects in accordance with this part by
submitting development proposals, site acquisition proposals, and
closing documents, except that the development proposals submitted,
pursuant to Sec. 905.606, need only address Sec. 905.606(a), (b) (c),
(j), (k), and (l). Upon HUD approval of the development proposal and
closing documents, the PHA and HUD will execute a Mixed-Finance
Amendment to the ACC for Operating Fund only or Capital Fund only
assistance projects.
(l) [Reserved]
(m) [Reserved]
(n) Mixed-finance operations--Deviation from HUD requirements
pursuant to section 35 (h) of the 1937 Act.
(1) An entity that develops, owns, and operates a mixed-finance
development in which 20 percent or more of the units are for the rental
of nonpublic housing may include a provision in the agreement that it
may deviate from the requirements of the Mixed-Finance ACC and
applicable public housing regulations regarding rents and income
eligibility, as provided in paragraph (n)(2) of this section, only when
there is a reduction in appropriations under section 9(e) of the 1937
Act (see 42 U.S.C. 1437g(e)), or any other change in law preventing the
PHA from providing Operating Funds as provided in its contractual
agreement with the entity.
(2) Allowable deviations. The agreement may provide for deviations
from Public Housing Requirements as follows:
(i) Increased public housing tenant rents, to the extent necessary
to preserve the viability of units.
(ii) The owner entity rents vacant public housing units to persons
who earn more than 80 percent of the adjusted median income (AMI) or to
persons who are paying more than 30 percent adjusted income for rent.
(iii) If an owner determines that the amount of income being
generated after renting the vacant public housing units is still
insufficient to cover the projected shortfall in operating subsidies
and if the owner has expended all operating subsidy reserve funds put
aside for such eventuality, the owner may give written notice to the
public housing residents that the owner intends to increase the rent
being charged for the unit. In this case, the owner may increase the
amount of the public housing rent above the amount established under
section 3 of the Act, 42 U.S.C. 1437a, but any increased rental charges
must be strictly limited to the amount needed to meet the projected
shortfall in operating subsidies.
(iv) If, after notifying public housing residents of a proposed
rent increase under Sec. 905.604(n)(2)(iii) of this section, the
resident is unable to remain in the unit because the new rent is more
than 40 percent of the tenant's income, the PHA must provide the
resident with a decent, safe, sanitary, and affordable unit to which he
or she can relocate, which may include a public housing unit in another
development or a Housing Choice Voucher, and pay for the tenant's
reasonable moving costs. The URA is not applicable in this situation.
Pending the tenant's relocation to another unit, the owner may not
evict the tenant for nonpayment of rent if the reason for the eviction
is the resident's inability to pay the incremental increase in rent
under Sec. 905.604(n)(2)(iii) of this section.
(v) The owner must have included in each of its leases with public
housing residents in the mixed-finance development a disclosure that
the residents may be required to pay a higher rent for the unit, or to
relocate to another unit, and specific conditions under which a higher
rent might be charged; that is, a change in subsidy under section 9 of
the Act, 42 U.S.C. 1437g, or other applicable law.
(3) Alternative management plan. If the agreement between the PHA
and the entity contains a provision permitting a deviation from the
Public Housing Requirements pursuant to section 35(h) of the 1937 Act
and this part, the alternative management plan between the PHA and the
entity must be approved by HUD before the implementation of such plan.
The plan must contain the following:
(i) A statement describing the owner's reasons for invoking the
alternative management plan (and, if the plan is being invoked because
of changes in applicable law(s), a statement as to how the statutory
changes will materially affect the viability of the public housing
units);
(ii) An explanation of the owner's proposed remedies including, but
not limited to:
(A) How the owner will select the residents (including a statement
of their income levels) and units to be affected by the proposed
remedies;
(B) The number and income levels of the families proposed to be
admitted to those public housing units;
(C) The owner's timetable for implementing the proposed remedies in
the alternative management plan;
(iii) An amended agreement between the Owner and PHA that includes
provisions ensuring that:
(A) The alternative management plan is reevaluated and approved
annually by HUD to ensure that implementation of the remedies continues
to be appropriate;
(B) The owner complies with the requirements of this part in its
management and operation of the public housing units following the
invocation of remedies;
(C) The owner returns to the PHA any income that is generated by
the public housing units in excess of the owner's expenses on behalf of
those units, as a result of its invocation of remedies;
(D) The owner reinstates all Public Housing Requirements (including
rent and income eligibility requirements) with respect to the original
number of public housing units and number of bedrooms, in the mixed-
finance development following the PHA's reinstatement of operating
subsidies at the level originally agreed to in the regulatory and
operating agreement; and
(E) The owner provides written notice to each of the public housing
residents
[[Page 6679]]
in the mixed-finance development of its intention to invoke remedies
under a submitted alternative management plan. Such notice must comply
with all relevant federal, state, and local substantive and procedural
requirements and, at a minimum, must provide public housing residents
with 90 days advance notice of any proposal to increase rents or to
relocate public housing residents to alternative housing.
(iv) Additional evidence. The PHA must provide documentation that:
(A) The revenues being generated by the public housing units (in
combination with the reduced allocation of operating subsidy) are
inadequate to cover the reasonable and necessary operating expenses of
the public housing units;
(B) The deficit in operating revenues is attributable solely to the
reduction in operating subsidy for the public housing units;
(C) A demonstration that the PHA cannot meet its contractual
obligation;
(D) The reduction in appropriations under section 9 of the 1937 Act
or other changes in applicable law materially affects the viability of
the public housing units; and
(E) The owner has attempted to offset the impact of reduced
operating subsidies, or changes in applicable law, by expending more
than 50 percent of the funds from any operating reserve that may have
been established on behalf of the public housing units.
(4) HUD review. HUD will review the alternative management plan to
ensure that the plan meets the requirements of this subpart, and that
any proposed deviation from standard Public Housing Requirements will
be implemented only to the extent necessary to preserve the viability
of the public housing units, while maintaining the low-income character
of the units to the maximum extent practicable. HUD will complete its
review of the alternative management plan and provide a decision within
30 days of its receipt. HUD may disapprove a PHA's request, made on
behalf of the owner, to invoke or continue remedies under the
alternative management plan for any of the following reasons:
(i) That the circumstances upon which the owner's request to invoke
remedies under the plan are premised do not qualify in accordance with
section 35(h) of the Act (42 U.S.C. 1437z-7(h)), as determined by HUD,
or that the original circumstances that triggered the remedies no
longer continue to apply;
(ii) In HUD's sole discretion, the owner's proposed deviation(s)
from standard Public Housing Requirements are not limited to the
maximum extent practicable to preserving the viability of the public
housing units and maintaining the low-income character of those units;
(iii) HUD has factual information available to it that contradicts
the PHA's and/or the owner's assertions that each of the required
preconditions for invoking remedies has been satisfied; or
(iv) HUD has evidence that the proposed alternative management plan
is not in compliance with the civil rights laws, including the
requirement to affirmatively further fair housing.
(5) HUD reevaluation and reapproval. HUD reevaluation and
reapproval of the alternative management plan is required annually once
an owner has invoked remedies under an alternative management plan, in
order to ensure that the circumstances originally triggering the need
for such remedies, as well as the scope of the remedies, remain valid
and appropriate.
Sec. 905.606 Development proposal.
(a) In order to develop any public housing, including mixed-finance
public housing for rental occupancy, the PHA shall submit a development
proposal, in the form prescribed by HUD. The development proposal shall
include some or all of the following documentation, as deemed necessary
by HUD. Failure to submit and obtain HUD approval may result in the
Capital Funds used in conjunction with the project being deemed to be
ineligible expenses. In determining the amount of information to be
submitted by the PHA, HUD shall consider whether the documentation is
required for HUD to carry out mandatory statutory, regulatory, or
Executive Order reviews; the quality of the PHA's past performance in
implementing development projects under this part; and the PHA's
demonstrated administrative capability.
(b) Project description. A description of the proposed project,
including the proposed development method (e.g., mixed-finance, new
construction, acquisition); the household type (e.g., family, elderly);
number and type of units (with bedroom breakout and count) of public
and nonpublic housing units, if applicable; the method of completing
construction, including the extent to which the PHA shall use force
account labor and use of procured contractors; schematic drawings of
the proposed building and unit plans; and the types and size of
nondwelling space to be provided. For new construction projects, the
PHA must include determinations required under Sec. 905.602. If the
project involves the acquisition of existing properties less than 2
years old, the PHA must include an attestation from the PHA and owner
that the property was not constructed with the intent that it would be
sold to the PHA or that the property was constructed in compliance with
all applicable requirements (e.g., Davis-Bacon wage rates,
accessibility, etc.).
(c) Site information. An identification and description of the
proposed site, site plan, and neighborhood, and a neighborhood map
shall be contained in the development proposal and must meet the site
and neighborhood standards required under Sec. 905.602(d).
(d) Participant description. Identification of participating
parties and a description of the activities to be undertaken by each of
the participating parties and the PHA; and legal and business
relationships between the PHA and each of the participating parties, as
applicable.
(e) Development project schedule. A schedule for the development
project that includes each major stage of development through and
including the submission of an Actual Development Cost Certificate to
HUD.
(f) Accessibility. A PHA must provide sufficient information for
HUD to determine that dwelling units and other public housing
facilities meet accessibility requirements specified at Sec. 905.312,
including, but not limited to, the number, location, and bedroom size
distribution of UFAS-accessible dwelling units.
(g) Project costs.
(1) Budgets. The PHA shall submit a budget in the form prescribed
by HUD reflecting the total cost from all sources based on the
schematic drawings, outline specifications, and construction cost
estimate. For mixed-financed projects, the PHA shall submit a budget
for the construction period, a draw schedule identifying the timing of
construction financing contributions from all sources, and a separate
budget showing the permanent financing in the project
(2) TDC comparison. A calculation of the TDC subject to Sec.
905.314.
(3) Financing. A PHA must submit a detailed description of all
financing necessary for the implementation of the project, specifying
the sources. In addition, HUD may require all documents relating to the
financing (e.g., loan agreements, notes, etc.) and establishment of
project reserves.
(4) Safe harbor standards. HUD will review the project terms when
receiving development proposals, budgets, and/or other documents that
contain negotiated terms. In order to expedite the mixed-finance review
process and control costs, HUD may make available safe
[[Page 6680]]
harbor and maximum fee ranges for a number of costs. If a project is at
or below a safe harbor standard, no further review will be required by
HUD. If a project is above a safe harbor standard, additional review by
HUD will be necessary. In order to approve terms above the safe harbor,
the PHA must demonstrate to HUD in writing that the negotiated terms
are appropriate for the level of risk involved in the project, the
scope of work, any specific circumstances of the development, and the
local or national market for the services provided.
(h) Operating pro-forma/Operating Fund methodology. Projects shall
submit a 10-year operating pro-forma including all assumptions to
assure that operating expenses do not exceed operating income. For
mixed-finance development, the PHA must describe its methodology for
providing and distributing operating subsidy to the owner entity for
the public housing units.
(i) Local cooperation agreement. Documentation regarding local
cooperation agreement in accordance with 905.602(a) or 905.604(e) for
mixed-finance transactions.
(j) Environmental requirements. All activities under this part are
subject to an environmental review by a responsible entity under HUD's
environmental regulations at 24 CFR part 58 and must comply with the
requirements of the National Environmental Policy Act of 1969 (NEPA)
(42 U.S.C. 4321 et seq.) and the related laws and authorities listed at
24 CFR 58.5. HUD may make a finding in accordance with Sec. 58.11 of
this title and may perform the environmental review itself under the
provisions of 24 CFR part 50. In those cases where HUD performs the
environmental review under 24 CFR part 50, it will do so before
approving a proposed project, and will comply with the requirements of
NEPA and the related requirements at 24 CFR 50.4.
(k) Relocation. Information concerning any displacement of the site
occupants, including identification of each person displaced, the
distribution plan for notices, and anticipated cost and source of
funding for relocation assistance in accordance with Sec. 905.308
(b)(9). If displacement is due to a HUD-approved demolition or
disposition of existing public housing, no submission will be required,
since relocation was required to be addressed prior to demolition/
disposition HUD approval.
(l) Market analysis. For a mixed-finance development that includes
nonpublic housing units, the PHA must include an analysis of the
projected market for the proposed project.
(m) Program income and fees. HUD will require the PHA to disclose
information on program income and fees the PHA or its affiliate or
instrumentality receives.
(n) Additional HUD-requested information. PHAs are required to
provide any additional information that HUD may need to determine
whether it can approve the proposal.
Sec. 905.608 Site or property acquisition proposal.
(a) When a PHA determines that it is necessary to acquire land or
property using the Capital Fund for the development of public housing
prior to approval of the Development Proposal, the PHA shall submit a
site/property acquisition proposal to HUD for review and approval in
accordance with 24 CFR 905.610. If site or property will be purchased
at closing, then the items stated in paragraphs (e) and (f) of this
section need to be included in the development proposal. The
acquisition of a site or property for additional public housing is
subject to requirements contained in Sec. 905.308(b)(9). The site
acquisition proposal shall include the following:
(b) Justification. A justification for acquiring property prior to
Development Proposal submission.
(c) Description. A description of the property (i.e., proposed site
or project) to be acquired.
(d) Project description; site and neighborhood standards. An
identification and description of the proposed project, site plan, and
neighborhood, together with information sufficient to enable HUD to
determine that the proposed site meets the site and neighborhood
standards at Sec. 905.602(d).
(e) Zoning. Documentation that the proposed project is permitted by
current zoning ordinances or regulations or evidence to indicate that
needed rezoning is likely and will not delay the project.
(f) Appraisal. Documentation attesting that an appraisal of the
proposed property by an independent, state-certified appraiser has been
conducted and that the acquisition is in compliance with Sec.
905.308(b)(9). The purchase price of the site/property may not exceed
the appraised value without HUD approval.
(g) Schedule. A schedule of the activities to be carried out by the
PHA.
(h) Environmental assessment. An environmental review or request
for HUD to perform the environmental review pursuant to Sec.
905.308(b)(2).
(i) Relocation. Information concerning any displacement of the site
occupants, including identification of each person displaced, the
distribution plan for notices, and anticipated cost and source of
funding for relocation assistance in accordance with Sec.
905.308(b)(9). If displacement is due to a HUD-approved demolition or
disposition of existing public housing, no submission will be required
since relocation was required to be addressed prior to HUD approval of
the demolition or disposition.
Sec. 905.610 Technical processing.
(a) Review. HUD shall review all development proposals and site/
property acquisition proposals for compliance with the statutory,
Executive Order, and regulatory requirements applicable to the
development of public housing. In addition, HUD shall conduct any
necessary statutory and Executive Order reviews with respect to each
proposal. For mixed-finance proposals, HUD's review will evaluate
whether the proposed sources and uses of funds are eligible and
reasonable, and whether the financing and other documentation establish
to HUD's satisfaction that the development is viable and structured so
as to adequately protect the federal investment of funds in the
development. For this purpose, HUD will consider the PHA's proposed
methodology for allocating operating subsidies on behalf of the public
housing units, the projected revenue to be generated by any nonpublic
housing units in a mixed-finance development, and the 10-year operating
pro-forma and other information contained in the proposal. If public
housing development funds are to be used to pay for more than the pro
rata cost of common area improvements, HUD will evaluate the proposal
to ensure that:
(1) On a per-unit basis (taking into consideration the number of
public housing units for which funds have been reserved) the PHA will
not exceed TDC limits; and
(2) Common area improvements will benefit the residents of the
development in a mixed-finance project.
(b) Approval. If HUD determines that a proposal is approvable, upon
approval of the Request for Release of Funds and the environmental
certification submitted in accordance with 24 CFR part 58, HUD shall
notify the PHA in writing of its approval. The HUD approval will
include the CF ACC for signature and return by the PHA for execution by
HUD. Until HUD approves a proposal, a PHA may only draw down funds for
costs for materials and services related to proposal preparation
[[Page 6681]]
and predevelopment costs approved by HUD.
(c) Amendments to approved development proposals. The PHA shall
amend any approved development proposal to which a material change is
made. HUD's review and approval is required for all amendments to
approved development proposals. HUD defines a material change as:
(1) A change in the number of units;
(2) A change in the number of bedrooms by an increase/decrease of
more than 10 percent;
(3) A change in cost or financing by an increase/decrease of more
than 10 percent;
(4) A change in the site; or
(5) A schedule change that results in a PHA's failure to meet
obligation and expenditure deadlines.
Sec. 905.612 Disbursement of capital funds--predevelopment costs.
(a) Predevelopment Costs. After inclusion of a new development
project in the HUD-approved CFP 5-Year Action Plan and the development
has been entered into applicable HUD data systems, the PHA may request
funding for predevelopment expenses. Failure to request and obtain HUD
approval for predevelopment assistance may result in the costs
associated with the new project being deemed ineligible costs.
Predevelopment funds may be approved by HUD in accordance with the
following requirements:
(1) Predevelopment assistance may be used to pay for materials and
services related to proposal development and may also be used to pay
for costs related to the demolition of units on a proposed site or for
preliminary development work.
(2) For non-mixed-finance projects, predevelopment funding up to 5
percent does not require HUD approval. HUD shall determine on a case-
by-case basis that a higher amount that may be drawn down by a PHA to
pay for necessary and reasonable preliminary development costs, based
upon a consideration of the nature and scope of activities proposed to
be carried out by the PHA. For mixed-finance projects, all funding for
predevelopment must be reviewed and approved by HUD.
(3) Before a request for predevelopment assistance may be approved,
the PHA must provide to HUD information and documentation specified in
Sec. Sec. 905.606 and 905.608 as HUD deems appropriate.
(4) The requirements in Sec. 905.612(b) to disburse funds for
mixed-finance projects in an approved ratio to other public and private
housing do not apply to disbursement of predevelopment funds.
(b) Standard drawdown requirements.
(1) General. If HUD determines that the proposed development is
approvable, it may execute with the PHA a CF ACC Amendment, or mixed-
finance amendment to the CF ACC, as applicable, to provide funds for
the purposes, and in the amounts approved by HUD. Upon approval of the
development proposal and all necessary documentation evidencing and
implementing the development plan, the PHA may disburse amounts as are
necessary and consistent with the approved development and site
acquisition proposal without further HUD approval, unless HUD
determines that such approval is necessary. Once HUD approves the
acquisition plan, the PHA may request funds for acquisition activities.
Each Capital Fund disbursement from HUD is deemed to be an attestation
of compliance by the PHA with the requirements of this part, as
prescribed in Sec. 905.106. If HUD determines that the PHA is in
noncompliance with any provision of this part, the PHA may be subject
to the sanctions in subpart H, Sec. 905.800 of this part.
(2) Mixed-finance projects. Upon HUD approval of final, fully
executed and, where appropriate, recorded closing documents submitted
pursuant to Sec. 905.604(l), the PHA may disburse funds from HUD only
in an approved ratio to other public and private funds, in accordance
with a disbursement schedule prepared by the PHA and approved by HUD.
The ratio applies to the overall project and not to each drawdown. The
PHA will release funds to its partner consistent with Sec. 905.316.
Subpart G--Other Security Interests
Sec. 905.700 Other security interests.
(a) The PHA may not pledge, mortgage, enter into a transaction that
provides recourse to public housing assets, or otherwise grant a
security interest in any public housing project, portion thereof, or
other property of the PHA without written approval of HUD.
(b) The PHA shall submit the request in the form and manner
prescribed by HUD.
(c) HUD shall consider:
(1) The ability of the PHA to complete the financing, the
improvements, and repay the financing;
(2) The reasonableness of the provisions in the proposal; or
(3) Any other factors HUD deems appropriate.
Subpart H--Compliance, HUD Review, Penalties, and Sanctions
Sec. 905.800 Compliance.
As provided in Sec. 905.106, PHAs or other owner/management
entities and their partners are required to comply with all applicable
provisions of this part. Execution of the CF ACC Amendment received
from the PHA, submissions required by this part, and disbursement of
Capital Fund grants from HUD are individually and collectively deemed
to be the PHA's certification that it is in compliance with the
provisions of this part and all other Public Housing Program
Requirements. Noncompliance with any provision of this part or other
applicable requirements may subject the PHA and/or its partners to
sanctions contained in Sec. 905.804.
Sec. 905.802 HUD review of PHA performance.
(a) HUD Determination. HUD shall review the PHA's performance in
completing work in accordance with this part at least annually. HUD may
make such other reviews when and as it determines necessary. When
conducting such a review, HUD shall, at minimum, make the following
determinations:
(1) HUD shall determine whether the PHA has carried out its
activities under this part in a timely manner and in accordance with
its CFP 5-Year Action Plan and other applicable requirements.
(2) HUD shall determine whether the PHA has a continuing capacity
to carry out its Capital Fund activities in a timely manner.
(3) HUD shall determine whether the PHA has accurately reported its
obligation and expenditures in a timely manner.
(4) HUD shall determine whether the PHA has accurately reported
required building and unit data for the calculation of the formula.
(5) HUD shall determine whether the PHA has obtained approval for
any CFFP or OFFP proposal and any PHA development proposal.
(b) [Reserved]
Sec. 905.804 Sanctions.
(a) If at any time, HUD finds that a PHA has failed to comply
substantially with any provision of this part, HUD may impose one or a
combination of sanctions, as it determines is necessary. Sanctions
associated with failure to obligate or expend in a timely manner are
specified at Sec. 905.306. Other possible sanctions for noncompliance
by the PHA that HUD may impose include, but are not limited to the
following:
[[Page 6682]]
(1) Issue a corrective action order at any time by notifying the
PHA of the specific program requirements that the PHA has violated, and
specifying that any of the corrective actions listed in this section
must be taken. Any corrective action ordered by HUD shall become a
condition of the CF ACC.
(2) Reimburse from non-HUD sources.
(3) Limit, withhold, reduce, or terminate Capital Fund or Operating
Fund assistance.
(4) Issue a Limited Denial of Participation or Debar responsible
PHA officials pursuant to 24 CFR part 24, subpart J.
(5) Withhold assistance to the PHA under section 8 of the Act, 42
U.S.C. 1437f.
(6) Declare a breach of the CF ACC with respect to some or all of
the PHA's functions.
(7) Take any other corrective action or sanction, as HUD deems
necessary.
(b) Right to Appeal. Before taking any action described in
paragraph (a) of this section, HUD shall notify the PHA and provide an
opportunity, within a prescribed period of time, to present any
arguments or additional facts and data concerning the proposed action
to the Assistant Secretary for Public and Indian Housing
PART 941--[REMOVED]
4. Remove part 941, consisting of Sec. Sec. 941.101-941.616.
PART 968--[REMOVED]
5. Remove part 968, consisting of Sec. Sec. 968.101-968.435.
PART 969--[REMOVED]
6. Remove part 969, consisting of Sec. Sec. 969.101-969.107.
Dated: December 23, 2010.
Sandra B. Henriquez,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 2011-2303 Filed 2-4-11; 8:45 am]
BILLING CODE 4210-67-P