[Code of Federal Regulations]

[Title 24, Volume 4]

[Revised as of April 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 24CFR968.112]



[Page 503-507]

 

                 TITLE 24--HOUSING AND URBAN DEVELOPMENT

 

CHAPTER IX--OFFICE OF ASSISTANT SECRETARY FOR PUBLIC AND INDIAN HOUSING, 

               DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

 

PART 968_PUBLIC HOUSING MODERNIZATION--Table of Contents

 

                            Subpart A_General

 

Sec.  968.112  Eligible costs.



    (a) General. A PHA may use financial assistance received under this 

part for the following eligible costs:

    (1) For a CGP PHA, the eligible costs are:

    (i) Undertaking activities described in its approved Annual 

Statement under Sec.  968.325 and approved Five-Year Action Plan under 

Sec.  968.315(e)(5);

    (ii) Carrying out emergency work, whether or not the need is 

indicated in the PHA's approved Comprehensive Plan, including Five-Year 

Action Plan, or Annual Statement;

    (iii) Funding a replacement reserve to carry out eligible activities 

in future years, subject to the restrictions set forth in paragraph (f) 

of this section;

    (iv) Preparing the Comprehensive Plan and Five-Year Action Plan 

under Sec.  968.315 and the Annual Submission under Sec.  968.325, 

including reasonable costs necessary to assist residents to participate 

in a meaningful way in the planning, implementation and monitoring 

process; and

    (v) Carrying out an audit, in accordance with 24 CFR part 44.

    (2) For a CIAP PHA, the eligible costs are activities approved by 

HUD and included in an approved CIAP budget.

    (b) Demonstration of viability. Except in the case of emergency 

work, a PHA shall only expend funds on a development for which the PHA 

has determined, and HUD agrees, that the completion of the improvements 

and replacements (for CGP PHAs, as identified in the Comprehensive Plan) 

will reasonably ensure the long-term physical and social viability of 

the development at a reasonable cost (as defined in Sec.  968.105), or 

for essential non-routine maintenance needed to keep the property 

habitable until the demolition or disposition application is approved 

and residents are relocated.

    (c) Physical improvements. Eligible costs include alterations, 

betterments, additions, replacements, and non-routine maintenance that 

are necessary to meet the modernization and energy conservation 

standards prescribed in Sec.  968.115. These mandatory standards may be 

exceeded when a PHA (and HUD in the case of CIAP PHAs) determines that 

it is necessary or highly desirable for the long-term physical and 

social viability of the individual development. Development specific 

work includes work items that are modest in design and cost, but still 

blend in with the design and architecture of the surrounding community 

by including amenities, quality materials and design and landscaping 

features that are customary for the locality and culture. The Field 

Office has the authority to approve nondwelling space where such space 

is needed to administer, and is of direct benefit to, the public housing 

program. If demolition or disposition is proposed, a PHA shall comply 

with 24



[[Page 504]]



CFR part 970. Additional dwelling space may be added to existing units.

    (d) Turnkey III developments--(1) General. Eligible physical 

improvement costs for existing Turnkey III developments are limited to 

work items that are not the responsibility of the homebuyer families and 

that are related to health and safety, correction of development 

deficiencies, physical accessibility, energy audits and cost-effective 

energy conservation measures, or LBP testing, interim containment, 

professional risk assessment and abatement. In addition, management 

improvements are eligible costs.

    (2) Ineligible costs. Routine maintenance or replacements, and items 

that are the responsibility of the homebuyer families are ineligible 

costs.

    (3) Exception for vacant or non-homebuyer-occupied Turnkey III 

units. (i) Notwithstanding the requirements of paragraph (d)(1) of this 

section, a PHA may substantially rehabilitate a Turnkey III unit 

whenever the unit becomes vacant or is occupied by a non-homebuyer 

family in order to return the unit to the inventory or make the unit 

suitable for homeownership purposes. A PHA that intends to use funds 

under this paragraph must identify in its CIAP application or CGP annual 

submission the estimated number of units proposed for substantial 

rehabilitation and subsequent sale. In addition, a PHA must demonstrate, 

for each of the Turnkey III units proposed to be substantially 

rehabilitated, that it has homebuyers who both are eligible for 

homeownership, in accordance with the requirements of 24 CFR part 904, 

and have demonstrated their intent to be placed into the unit.

    (ii) Before a PHA may be approved for substantial rehabilitation of 

a unit under this paragraph, it must first deplete any Earned Home 

Payments Account (EHPA) or Non-Routine Maintenance Reserve (NRMR) 

pertaining to the unit, and request the maximum amount of operating 

subsidy. Any increase in the value of a unit caused by its substantial 

rehabilitation under this paragraph shall be reflected solely by its 

subsequent appraised value, and not by an automatic increase in its 

selling price.

    (e) Demolition and conversion costs. Eligible costs include:

    (1) Demolition of dwelling units or non-dwelling facilities, where 

the demolition is approved by HUD under 24 CFR part 970, and related 

costs, such as clearing and grading the site after demolition and 

subsequent site improvement to benefit the remaining portion of the 

existing development; and

    (2) Conversion of existing dwelling units to different bedroom sizes 

or to non-dwelling use.

    (f) Replacement reserve costs (for CGP only). (1) Funding a 

replacement reserve to carry out eligible activities in future years is 

an eligible cost, subject to the following restrictions:

    (i) Annual CGP funds are not needed for existing needs, as 

identified by the PHA in its needs assessments; or

    (ii) A physical improvement requires more funds than the PHA would 

receive under its annual formula allocation; or

    (iii) A management improvement requires more funds than the PHA may 

use under its 20% limit for management improvements (except as provided 

in paragraph (n)(2)(i) of this section), and the PHA needs to save a 

portion of its annual grant, in order to combine it with a portion of 

subsequent year(s) grants to fund the work item.

    (2) The PHA shall invest replacement reserve funds so as to generate 

a return equal to or greater than the average 91-day Treasury bill rate.

    (3) Interest earned on funds in the replacement reserve will not be 

added to the PHA's income in the determination of a PHA's operating 

subsidy eligibility, but must be used for eligible modernization costs.

    (4) To the extent that its annual formula allocation and any 

unobligated balances of modernization funds are not adequate to meet 

emergency needs, a PHA must first use its replacement reserve, where 

funded, to meet emergency needs, before requesting funds from the 

reserve under Sec.  968.104. Use of the replacement reserve is not 

required for emergencies if the amount that otherwise would be used from 

that reserve is an accumulation from application of the replacement 

housing factor



[[Page 505]]



(Sec.  968.103(e) (3) and (f)(4)) that is necessary so that replacement 

housing can be provided efficiently and effectively.

    (5) A PHA is not required to use its replacement reserve for costs 

related to natural and other disasters.

    (g) Management improvement costs--(1) General. Management 

improvements that are development-specific or PHA-wide in nature are 

eligible costs where needed to upgrade the operation of the PHA's 

developments, sustain physical improvements at those developments or 

correct management deficiencies. A PHA's ongoing operating expenses are 

ineligible management improvement costs. For CIAP PHAs, management 

improvements may be funded as a single work item.

    (2) Eligible costs. Eligible costs include:

    (i) General management improvement costs. Eligible costs include 

general management improvement costs, such as: management, financial, 

and accounting control systems of the PHA; adequacy and qualifications 

of PHA personnel, including training; resident programs and services 

through the coordination of the provision of social services from tribal 

or local government or other public and private entities; resident and 

development security; resident selection and eviction; occupancy; rent 

collection; maintenance; and equal opportunity.

    (ii) Economic development costs. Eligible costs include job training 

for residents and resident business development activities, for the 

purpose of carrying out activities related to the modernization-funded 

management and physical improvements. HUD encourages PHAs, to the 

greatest extent feasible, to hire residents as trainees, apprentices, or 

employees to carry out the modernization program under this part, and to 

contract with resident-owned businesses for modernization work.

    (iii) Resident management costs. Eligible costs include technical 

assistance to a resident council or resident management corporation 

(RMC), as defined in part 964, in order to: determine the feasibility of 

resident management to carry out management functions for a specific 

development or developments; train residents in skills directly related 

to the operations and management of the development(s) for potential 

employment by the RMC; train RMC board members in community 

organization, board development, and leadership; and assist in the 

formation of an RMC.

    (iv) Resident homeownership costs. Eligible costs are limited to the 

study of the feasibility of converting rental to homeownership units and 

the preparation of an application for conversion to homeownership or 

sale of units.

    (v) Preventive maintenance system. Eligible costs include the 

establishment of a preventive maintenance system or improvement of an 

existing system. A preventive maintenance system must provide for 

regular inspections of building structures, systems and units and 

distinguish between work eligible for operating funds (routine 

maintenance) and work eligible for modernization funding (non-routine 

maintenance).

    (h) Drug elimination costs. Eligible costs include drug elimination 

activities involving management or physical improvements, as specified 

by HUD.

    (i) Lead-based paint costs. Eligible costs include lead-based paint 

activities, such as insurance coverage and cleanup and disposal, in 

accordance with part 35 of this title.

    (j) Administrative costs. Administrative costs necessary for the 

planning, design, implementation and monitoring of the physical and 

management improvements are eligible costs and include the following:

    (1) Salaries. The salaries of non-technical and technical PHA 

personnel assigned full-time or part-time to modernization are eligible 

costs only where the scope and volume of the work are beyond that which 

could be reasonably expected to be accomplished by such personnel in the 

performance of their non-modernization duties. A PHA shall properly 

apportion to the appropriate program budget any direct charges for the 

salaries of assigned full- or part-time staff (e.g., to the CIAP, CGP or 

operating budget);

    (2) Employee benefit contributions. PHA contributions to employee 

benefit plans on behalf of non-technical and technical PHA personnel are 

eligible costs in direct proportion to the



[[Page 506]]



amount of salary charged to the CIAP or CGP, as appropriate;

    (3) Preparation of CIAP or CGP required documents;

    (4) Resident participation. Eligible costs include those associated 

with ensuring the meaningful participation of residents in the 

development of the CIAP Application or the CGP Annual Submission and 

Comprehensive Plan and the implementation and monitoring of the approved 

modernization program; and

    (5) Other administrative costs, such as telephone and facsimile, as 

specified by HUD.

    (k) Audit costs (CGP only). Eligible costs are limited to the 

portion of the audit costs that are attributable to the modernization 

program.

    (l) Architectural/engineering and consultant fees. Eligible costs 

include fees for planning, identification of needs, detailed design 

work, preparation of construction and bid documents and other required 

documents, LBP professional risk assessments and testing, and inspection 

of work in progress.

    (m) Relocation costs. Eligible costs include relocation and other 

assistance for permanent and temporary relocation, as a direct result of 

rehabilitation, demolition or acquisition for a modernization-funded 

activity, where this assistance is required by 49 CFR part 24 or Sec.  

968.108.

    (n) Cost limitations--(1) CIAP costs. (i) Management improvement 

costs. Management improvement costs shall not exceed a percentage of the 

CIAP funds available to a Field Office in a particular FFY, as specified 

by HUD.

    (ii) Planning costs. Planning costs are costs incurred before HUD 

approval of the CIAP application and which are related to developing the 

CIAP application or carrying out eligible modernization planning, such 

as detailed design work, preparation of solicitations, and LBP 

professional risk assessment and testing. Planning costs may be funded 

as a single work item. If a PHA incurs planning costs without prior HUD 

approval, a PHA does so with the full understanding that the costs may 

not be reimbursed upon approval of the CIAP application. Planning costs 

shall not exceed 5 percent of the CIAP funds available to a Field Office 

in a particular FFY.

    (2) CGP costs. (i) Management improvement costs. Notwithstanding the 

full fungibility of work items, a PHA shall not use more than a total of 

20 percent of its annual grant for management improvement costs in 

account 1408, unless specifically approved by HUD or the PHA has been 

designated as both an over-all high performer and mod-high performer 

under the PHMAP.

    (ii) Administrative costs. Notwithstanding the full fungibility of 

work items, a PHA shall not use more than a total of 10 percent of its 

annual grant on administrative costs in account 1410, excluding any 

costs related to lead-based paint or asbestos testing (whether conducted 

by force account employees or by a contractor), in-house architectural/

engineering (A/E) work, or other special administrative costs required 

by State or local law, unless specifically approved by HUD.

    (3) Program benefit. Where the physical or management improvement, 

including administrative cost, will benefit programs other than Public 

Housing, such as Section 8 or local revitalization programs, eligible 

costs are limited to the amount directly attributable to the public 

housing program.

    (4) No duplication. Any eligible cost for an activity funded by CIAP 

or CGP shall not also be funded by any other HUD program.

    (o) Ineligible costs. Ineligible costs include:

    (1) Luxury improvements;

    (2) Indirect administrative costs (overhead), as defined in OMB 

Circular A-87;

    (3) Public housing operating assistance;

    (4) Direct provision of social services, through either force 

account or contract labor, from FFY 1996 and future FFYs funds, unless 

otherwise provided by law; and

    (5) Other ineligible activities, as specified by HUD.

    (p) Expanded eligibility for FFY 1995 and prior year modernization 

funds. The FFY 1995 Rescissions Act expanded the eligible activities 

that may be funded with CIAP or CGP assistance provided from FFY 1995 

and prior FFY funds.



[[Page 507]]



Such activities include, but are not limited to:

    (1) New construction or acquisition of additional public housing 

units, including replacement units;

    (2) Modernization activities related to the public housing portion 

of housing developments held in partnership, or cooperation with non-

public housing entities; and

    (3) Other activities related to public housing, including activities 

eligible under the Urban Revitalization Demonstration (HOPE VI).



[61 FR 8738, Mar. 5, 1996, as amended at 62 FR 27126, May 16, 1997; 63 

FR 46108, Aug. 28, 1998; 64 FR 50229, Sept. 15, 1999]