[Code of Federal Regulations]
[Title 24, Volume 4]
[Revised as of April 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 24CFR886.107]

[Page 133-134]
 
                 TITLE 24--HOUSING AND URBAN DEVELOPMENT
 
  CHAPTER VIII--OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL 
 
PART 886_SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM_SPECIAL 
ALLOCATIONS--Table of Contents
 
 Subpart A_Additional Assistance Program for Projects With HUD-Insured 
                         and HUD-Held Mortgages
 
Sec. 886.107  Approval of applications.

    HUD shall approve applications, after considering all pertinent 
information including comments (if any) received during the comment 
period from the unit of general local government, based on the following 
criteria:
    (a) The Owner's Affirmative Fair Housing Marketing Plan is 
approvable.
    (b) The HUD-approved unit rents are approvable within the Fair 
Market Rent limitations contained in Sec. 886.110.
    (c) The residential units meet the housing quality standards set 
forth in Sec. 886.113, except for such variations as HUD may approve. 
Local climatic or geological conditions or local codes are examples 
which may justify such variations.
    (d) A significant number of residents, or potential residents, in 
the case of projects having a vacancy rate over 10 percent, are eligible 
for and in need of Section 8 assistance.
    (e) The infusion of Section 8 assistance into the subject project 
should not affect other HUD-related multifamily housing within the same 
neighborhood in a substantially adverse manner. Examples of such adverse 
effects are (1) substantial move-outs from nearby HUD-related projects 
precipitated by much lower rents in the subject project, or (2) 
substantial diversion of prospective applicants from such projects to 
the subject project.
    (f) A first priority is given to HUD-Insured or Secretary-Held 
projects with presently serious financial problems, which are likely to 
result in a claim on the insurance fund in the near future. To the 
extent resources remain available, assistance also may be provided to 
projects with potentially serious financial problems which, on the basis 
of financial and/or management analysis, appear to have a high 
probability of producing a claim on the insurance funds within 
approximately the next five years.
    (g) The infusion of Section 8 assistance into the subject project 
solves an identifiable problem, e.g., high vacancies and/or turnover, 
and provides a

[[Page 134]]

reasonable assurance of long-term project viability. A determination of 
long-term viability shall be based upon the following considerations:
    (1) The project is not subject to any serious problems that are non-
economic in nature. Examples of such problems are poor location, 
structural deficiencies or disinterested ownership.
    (2) The Owner is in substantial compliance with the Regulatory 
Agreement. Owners are not diverting project funds for personal use. No 
dividends are being paid during any period of financial difficulty.
    (3) The management agent is in substantial compliance with the 
management agreement. The current management agreement has been approved 
by HUD. Financial records are adequately kept. Occupancy requirements 
are being met. Marketing and maintenance programs are being carried out 
in an adequate manner, based upon available financial resources.
    (4) The project's problems are primarily the result of factors 
beyond the control of the present ownership and management.
    (5) The major problems are traceable to an inadequate cash flow.
    (6) The infusion of Section 8 assistance will solve the cash flow 
problem by:
    (i) Making it possible to grant needed rent increases;
    (ii) Reducing turnover, vacancies and collection losses.
    (7) The Owner's plan for remedying any deferred maintenance, 
financial problems, or other problems is realistic and achievable. There 
is positive evidence that the Owner will carry out the plan. Examples of 
such evidence are the Owner's past performance in correcting problems 
and, in the case of profit-motivated Owners, any cash contributions made 
to correct project problems.
    (h) Any plan submitted pursuant to Sec. 886.105(d) is found by HUD 
to be adequate.