Changes to Admission and Occupancy Requirements in the Public Housing and Section 8 Housing Assistance Programs
Federal RegisterMar 29, 2000
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 5, 880, 881, 884, 886, 891, 960, 966, 984 and 985
[Docket No. FR-4485-F-03]
RIN 2501-AC59
Changes to Admission and Occupancy Requirements in the Public Housing and Section 8 Housing Assistance Programs
AGENCY:
Office of the Secretary, HUD.
ACTION:
Final rule.
SUMMARY:
This final rule implements changes to the admission and occupancy requirements for the public housing and Section 8 assisted housing programs made by the Quality Housing and Work Responsibility Act of 1998. These changes concern choice of rent, community service and self-sufficiency in public housing, and admission preferences and determination of income and rent in public housing and Section 8 housing assistance programs. This final rule follows a proposed rule published on April 30, 1999, and takes into consideration the public comments received on the proposed rule.
DATES:
Effective Date:
The provisions of this rule are effective on April 28, 2000, except for the provisions of § 5.661, which will become effective when the information collections it contains receive approval from the Office of Management and Budget. The announcement of approval and the effective date will be published in the
Federal Register
.
FOR FURTHER INFORMATION CONTACT:
For the public housing and Section 8 tenant-based housing assistance programs—Patricia Arnaudo, Senior Program Manager, Office of Public and Assisted Housing Delivery, Department of Housing and Urban Development, 451 Seventh Street, SW, Room 4224, Washington, DC, 20410; telephone (202) 708-0744, or the Public and Indian Housing Resource Center at 1-800-955-2232.
For the Section 8 project-based programs—Willie Spearmon, Director, Office of Multifamily Business Products, Office of Housing, Department of Housing and Urban Development, 451 Seventh Street, SW, Room 6138, Washington, DC, 20410; telephone (202) 708-3000.
(With the exception of the telephone number for the PIH Resource Center, these are not toll-free telephone numbers.) Persons with hearing or speech impairments may access these numbers via TTY by calling the Federal Information Relay Service at (800) 877-8339. You also may contact the individuals listed above by e-mail: Patricia_S._Arnaudo@hud.gov and Willie_Spearmon@hud.gov.
SUPPLEMENTARY INFORMATION:
Organization of this Preamble
I. Background
II. Changes Made at the Final Rule Stage
A. Reorganization of program regulations
B. Common occupancy requirements
C. Section 8 project-based programs
D. Public housing program
E. Removal of outdated references to federal preferences
F. Summary of regulatory changes
1. Family disclosure of HUD notice concerning family income—§ 5.240 (proposed rule § 5.211)
2. Selection preferences—§§ 5.655 and 960.206 (proposed rule § 5.410)
3. Definition of economic self-sufficiency program—§ 5.603(b)
4. Income eligibility and income targeting for admission—(For most Section 8 project-based programs, § 5.653; for public housing, § 960.202) (proposed rule § 5.607)
5. Annual income—§ 5.609
6. Adjusted income—§ 5.611
7. Public housing self-sufficiency incentives—§ 960.255 (proposed rule § 5.612)
8. Choice of rent in public housing—§ 960.253 (proposed rule § 5.614)
9. Minimum rent—5.630(b) (proposed rule § 5.616)
10. Public housing and Section 8 tenant-based assistance programs: How welfare benefit reduction affects family income—§§ 5.603 and 5.615 (proposed rule § 5.618)
11. Occupancy by police officers in public housing and Section 8 project-based housing—§§ 5.661 and 960.503-505
12. How PHA administers service requirement—§ 960.605
13. Assuring resident compliance—§ 960.607
14. Definitions—§ 984.103
15. Administrative fees—§ 984.302
16. Utility reimbursements—§ 5.632
17. Family income and verification—§ 960.259
III. Discussion of the Public Comments
A. General
B. Using Computer Matching—Results—Family disclosure of income (proposed rule § 5.211; final rule § 5.240)
C. Repeal of Preference for Elderly, Disabled, and Displaced over Other Single Persons (proposed and final rule § 5.405)
D. Repeal of Federal Preferences (proposed rule: removed §§ 5.415, 5.420, 5.425 and 5.430 and revised § 5.410; final rule removes in addition to above §§ 5.405 and 5.410, adds a new § 5.655, and revises §§ 960.204-960.206)
E. Income Targeting (proposed rule § 5.607; final rule §§ 5.653 and 960.202)
F. Annual Income, Adjusted Income (proposed and final rule §§ 5.603, 5.609, and 5.611)
1. Exclusions vs. Deductions
2. Permissive Deductions—Applicable to Public Housing Only
G. Minimum Rents (proposed rule § 5.616; final rule § 5.630)
H. Self-Sufficiency Incentives—Public Housing Only (proposed rule § 5.612; final rule § 960.255)
1. Disallowance of Increases in Income as a Result of Employment
2. Individual Savings Account
I. Income Changes Resulting From Noncompliance with Welfare Program Requirements (proposed rule § 5.618; final rule §§ 5.603, 5.613, and 5.615)
J. Rents in Public Housing (proposed rule §§ 5.603 and 5.614; final rule §§ 5.603 and 960.253)
1. Income-Based Rents
2. Flat Rents
3. Family Choice
4. Switching Rent Methods to Lower Rent Because of Financial Hardship
5. Retaining Ceiling Rents
K. New Community Service and Self-Sufficiency Requirements for Public Housing (proposed rule §§ 960.603-960.611; final rule §§ 960.601-960.609)
1. General
2. Exemptions
3. Noncompliance
L. Reexamination and Verification of Family Income and Composition (proposed rule §§ 5.617 and 960.209; final rule §§ 5.657, 960.257, and 960.259)
M. Occupancy by Police Officers and Over-Income Families (proposed and final rule §§ 5.619 and 960.503-960.505)
N. Changes to Existing Self-Sufficiency Programs—Public Housing and Section 8 Certificate/Voucher Programs (proposed and final rule Part 984)
O. Lease Requirements (proposed and final rule § 966.4)
P. Escrow Deposits (proposed and final rule § 966.55)
IV. Findings and Certifications
I. Background
On April 30, 1999 (64 FR 23460), HUD published a proposed rule that addressed several changes related to admission and occupancy requirements in HUD's public housing and Section 8 assisted housing programs. These were made by the Quality Housing and Work Responsibility Act of 1998 (title V of the FY 1999 HUD appropriations Act, Public Law 105-276, 112 Stat. 2518, approved October 21, 1998) (referred to in this rule as “the 1998 Act”) which amended the United States Housing Act of 1937 (42 U.S.C. 1437,
et seq.
, “the
1937 Act”). The 1998 Act made comprehensive changes to HUD's public housing, Section 8 tenant-based and project-based programs. Some of the reforms made by the 1998 Act affect public housing only, and others affect Section 8 tenant-based and project-based programs in addition to public housing.
The preamble to the April 30, 1999 proposed rule provided a detailed overview of the changes made to admission and occupancy requirements for the public housing and Section 8 housing assistance programs by the 1998 Act. The preamble to the proposed rule also addressed admission and occupancy provisions of the 1998 Act that are already in effect, and those admission and occupancy provisions proposed to be implemented through the April 30, 1999 rule. The preamble to the April 30, 1999 proposed rule also listed which sections of the 1998 Act were addressed by the proposed rule, and which HUD programs were affected by the changes. This information was described in the preamble to the April 30, 1999 proposed rule, and also presented in chart form (see 64 FR 23462). The preamble to this final rule does not repeat that information.
In addition to the rulemaking, HUD published a notice in the
Federal Register
on August 6, 1999 (64 FR 42956), which provided guidance pending publication of this final rule. That notice instructed PHAs to implement certain rent provisions effective October 1, 1999, based on the proposed rule. The notice stated that PHAs following the guidance would not be penalized for any changes made by HUD to the proposed rule provisions at the final rule stage and would be provided adequate time to adjust their policies.
The public comment period on the proposed rule closed on June 29, 1999. At the close of the public comment period, HUD had received 113 public comments. The commenters included housing authorities, national organizations representing housing authorities or residents, property managers, organizations representing victims of domestic violence, legal services organizations, policy organizations, and city and county organizations that provide housing or human services. All the comments were carefully considered and significant issues raised by the comments are addressed in Section III of this preamble. Section II of this preamble, which immediately follows, highlights the changes made at this final rule stage.
II. Changes Made at the Final Rule Stage
A. Reorganization of Program Regulations
At this final rule stage, HUD has reorganized the program regulations in a number of ways to make it easier to find and view specific requirements that apply to a particular program. Therefore, the provisions on preferences for admission and income targeting for the public housing and Section 8 tenant-based assistance programs, as well as public housing choice of rents, were moved from Part 5 to the applicable program regulations (24 CFR part 960 for public housing, and 24 CFR part 982 for the Section 8 tenant-based assistance programs). Provisions that only apply to Section 8 tenant-based assistance programs were covered in the Housing Choice Voucher Program final rule (amendments to 24 CFR part 982), published October 21, 1999 (64 FR 56894-56915). Most of the tenant-based program public comments were addressed in that rule.
B. Common occupancy requirements
Part 5 is reorganized by grouping common requirements for determination of “family income” and “family payments” that apply to both Section 8 and public housing.
The rule adds a heading for provisions on “family income” (§ 5.609 to § 5.632). The provisions under this heading cover determination of annual income (§ 5.609), adjusted income (§ 5.611), cooperation with welfare agency (§ 5.613), and effect of welfare benefits reduction on family income (§ 5.615).
The rule also adds a heading for provisions on “family payment” (§ 5.628 to § 5.632). The provisions under this heading cover determination of total tenant payment (§ 5.628), minimum rent (§ 5.630), and utility reimbursements (for the public housing and Section 8 programs, except for the Section 8 voucher program) (§ 5.632).
C. Section 8 Project-Based Programs
Before this rule, there was no place to group regulatory “occupancy requirements” that only apply to the Section 8 project-based assistance programs. This rule therefore adds a new heading in 24 CFR part 5 to consolidate occupancy requirements for the various Section 8 project-based assistance programs (§§ 5.653 to 5.661). The provisions for Section 8 project-based assistance under this heading cover determination of income eligibility and income targeting (§ 5.653), owner selection preferences (§ 5.655), family information and verification (§ 5.659), and approval for security personnel to live in a project (§ 5.661).
D. Public Housing Program
For a clearer presentation, the final rule reorganizes and consolidates public housing admission and occupancy requirements in the existing part 960.
Subpart A of part 960 specifies that part 960 applies to public housing and lists defined terms. Subpart A also states the requirement to administer public housing in accordance with applicable civil rights laws and regulations, the PHA duty to affirmatively further fair housing, and the requirement for the PHA to submit applicable equal opportunity certifications.
Subpart B of part 960 reorganizes, revises, and consolidates public housing admission requirements. This subpart covers:
—requirements for eligibility and for targeting assistance to extremely low income families (§ 960.202);
—policies and criteria for selecting families (§§ 960.204 and 960.205);
—waiting list and local preferences in admission (§ 960.206).
Subpart C of part 960 reorganizes and consolidates public housing requirements concerning reexamination of income and determination of rent for public housing residents. This subpart covers:
—the new choice of rent requirements under the 1998 Public Housing Reform Act, that allow the family to choose annually whether to pay a flat market-based rent or an income-based rent (§ 960.253);
—the requirement for the PHA to disregard increases in income as a result of employment in calculating income-based rent (§ 960.255);
—policies on regular and interim reexamination of family income and composition (§ 960.257);
—requirements for obtaining and verifying family information (§ 960.259); and
—restrictions on eviction when family income increases (§ 960.261).
A new subpart E of part 960 contains provisions describing the circumstances in which a PHA may permit occupancy of public housing units by persons who are not eligible for assistance in the public housing program:
—A PHA with a small public housing program (fewer than 250 units) may lease a public housing unit to “over-income” families—who are not income eligible for admission to the public housing program (§ 960.503).
—A PHA may allow professional police officers to reside in public housing to
increase security for public housing residents (§ 960.505).
Subpart F of part 960 states the requirements for PHA administration of the new community service and economic self-sufficiency requirements for public housing residents under the 1998 Public Housing Reform Act. The rule also incorporates related changes in the public housing lease and grievance requirements at 24 CFR part 966. These include amendments concerning the term and renewal of a public housing lease in accordance with the 1998 law (§ 966.4).
One change made to § 966.4(l) is to clarify the relationship between a revision to the lease and the right of a PHA to terminate tenancy. Section 966.3 provides that the PHA can modify the lease at any time during the lease term, so long as it follows the requirements of notice to tenants and resident organizations and consideration of their comments before adopting any new lease form. That remains unchanged. This rule does modify the provisions for a written rider executed by both parties (§ 966.4(o) and (p)) and moves it to a new location, § 966.4(a)(3). The revised § 966.4(a)(3) provides that the lease may be modified at any time by written agreement of the tenant and the PHA. The rule also adds a provision concerning termination of tenancy to § 966.4(l), to permit a PHA to terminate a tenancy if the tenant refuses to accept a revision to the lease after being given
at least
60 days notice of its proposed effect and being allowed a reasonable time to respond to the offer.
E. Removal of Outdated References to Federal Preferences
A number of the regulations for Section 8 project-based programs continued to include a paragraph concerning the federal preferences, which have been eliminated by statute, and outdated references to parts 812 and 813, which no longer exist. Therefore, these superfluous references to Federal preferences are removed and the outdated references to parts 812 and 813 are corrected in this rule. (See the revisions to parts 880, 884, 886, and 891.) HUD will make any necessary conforming changes to parts 882 and 982, to reflect changes in income targeting, owner selection, and family information and verification in a separate rule.
F. Summary of Regulatory Changes
HUD also made the following changes to the April 30, 1999 proposed rule.
1. Family disclosure of HUD notice concerning family income—§ 5.240 (proposed rule § 5.211).
The final rule provides that a family must promptly furnish to the responsible entity (the PHA or owner responsible for determining family income) any letter from HUD concerning the amount or verification of family income. This requirement applies to a family that resides in a dwelling unit with assistance in the public housing program or the Section 8 tenant-based assistance program, or for which project-based assistance is provided under Section 8, Section 202, or Section 811. (The rule implements section 3(f) of the 1937 Act (42 U.S.C. 1437a(f)), as amended by the 1998 Public Housing Reform Act, and as further amended by the HUD FY 2000 appropriation act (Public Law 106-74, section 214(a), approved October 20, 1999. The FY 2000 appropriation extends applicability of this provision from just public housing and Section 8 tenant-based assistance, as provided under the 1998 act, to project-based assistance under Section 8, Section 202, and Section 811.)
The PHA or other responsible entity must verify the information received from the family and make appropriate adjustments in the amount of income, rent, or housing assistance payment. With respect to families no longer in occupancy, the PHA or other responsible entity should pursue abuses regarding excess rental assistance, such as reporting the deficiency of payments to credit bureaus, if it is practical to do so, and recovery of such amounts, if they have the resources to do so.
2. Selection Preferences—§§ 5.655 and 960.206 (proposed rule § 5.410).
Residency Preference
HUD has clarified at § 5.655 (for Section 8 projects) and § 960.206(b)(1)(i) (for public housing) that residency requirements are still prohibited, and that any residency preferences must be implemented in accordance with applicable nondiscrimination and equal opportunity requirements listed at § 5.105(a). The final rule provides that use of a residency preference may not have the “purpose or effect” of delaying or otherwise denying admission to a project or unit based on the race, color, ethnic origin, gender, religion, disability or age of any member of an applicant family.
“Residency preference” is defined as a preference for admission of persons who reside in a specified geographic area. For public housing, the rule provides that the PHA may adopt a preference for admission of a resident of a county or municipality. However, the PHA may not adopt a residency preference for an area smaller than a county or municipality.
A PHA that administers a public housing program or a Section 8 tenant-based program must include any PHA residency preference in its statement of PHA policies that govern eligibility, selection and admission to the program. (For public housing, see § 960.206(b)(1).) Such policies are included in the PHA Plan submitted to HUD, in accordance with 24 CFR part 903. HUD may disapprove the plan if any part of the plan is not consistent with applicable laws and regulations—including the applicable civil rights authorities and regulations. In the case of the Section 8 project-based assistance programs, the owner of a project must adopt a written tenant selection plan in accordance with HUD requirements, including civil rights authorities and regulations (see § 5.655(b)(2)).
If an owner adopts a residency preference, it must use one approved by HUD. There are several ways that a residency preference could be approved by HUD: (1) Prior approval in the owner's affirmative fair housing marketing plan; (2) prior approval in the jurisdiction's PHA Plan; or (3) modification of the owner's affirmative fair housing marketing plan. In applying any residency preference, the rule requires the owner to treat an applicant who is working or has been hired in the residency preference area as a resident of the residency preference area. The project owner may treat as residents applicants who are graduates of, or active participants in, education and training programs in the residency preference area if the education or training program is designed to prepare individuals for the job market.
Preference for Working Families
HUD also has clarified, in § 960.206(b)(2) (public housing) and in § 5.655 (Section 8 projects), that a PHA or Section 8 project owner may adopt a preference for working families (families where the head, spouse, or sole member, is employed). If the responsible entity chooses to adopt a working family preference, an applicant must be given the benefit of the working family preference if the head and spouse, or sole member, is age 62 or older, or is a person with disabilities, as defined for eligibility purposes (see § 5.403(a)). A working family preference cannot be based on the amount of earned income. (See § 5.655(c)(2)(ii).) By statute and this rule, the owner is prohibited from preferring higher income families over families of lower income to occupy a project or unit (§ 5.655(b)(3); 42 U.S.C. 1437n(c)(4)).
Preference for Person With Disabilities
A Section 8 owner or PHA administering public housing may adopt a preference for admission of families that include a person with disabilities, but not for persons with a specific disability (§§ 5.655(c)(3) and 960.206(b)(3)).
Preference for Victims of Domestic Violence
The PHA or owner should consider whether to adopt a preference for victims of domestic violence, as provided in §§ 5.655(c)(4) and 960.206(b)(4).
Preference for Single Persons
The law no longer mandates a federally directed priority for elderly or disabled over other single persons. The final rule specifies that the responsible entity may adopt a preference for admission of single persons who are elderly, displaced, homeless, or persons with disabilities over other single persons (§§ 5.655(c)(5) and 960.206(b)(5)).
3. Definition of economic self-sufficiency program—§ 5.603(b).
HUD has added a new definition of the term “economic self-sufficiency program”. It is defined as any program designed to encourage, assist, train, or facilitate the economic independence of assisted families or to provide work for such families. Economic self-sufficiency programs can include job training, employment counseling, work placement, basic skills training, education, English proficiency, workfare, financial or household management, apprenticeship, and any other program necessary to ready a participant to work (such as substance abuse or mental health treatment). As defined in this rule, “economic self-sufficiency program” includes any work activities as defined in the Social Security Act (42 U.S.C. 607(d)). (See the definition of work activities at § 5.603(c).)
The new definition of the term “economic self-sufficiency program” is used in the following regulatory provisions, pursuant to the Public Housing Reform Act:
• Provision that family income (for the public housing and Section 8 tenant-based assistance programs) includes welfare benefits reduced because of family failure to comply with welfare agency requirements to participate in an economic self-sufficiency program (§ 5.615); and
• The requirement for public housing residents to participate in an economic self-sufficiency program or other eligible activities (24 CFR part 960, subpart F).
4. Income eligibility and income targeting for admission—(For most Section 8 project-based programs, § 5.653; for public housing, § 960.202) (proposed rule § 5.607).
In the final rule, provisions concerning Section 8 project-based admission and income targeting are found in § 5.653, and for public housing in § 960.202.
Eligibility
The rule provides that no family other than a low income family is eligible for admission to the public housing program or the Section 8 project-based assistance program (other than the project-based voucher program) (§ 5.653(b); § 960.202(a)). The final rule adds a definition of the term “low income family” (in §§ 5.603), replacing a previous statutory reference. Generally, “low income” designates a family whose income does not exceed 80 percent of area median income, with certain adjustments.
Targeting
The Public Housing Reform Act targets available Section 8 and public housing units to families with incomes below thirty percent of the area median income (Section 513 of the Act). In the rule, such families are called “extremely low income families”.
The law sets the minimum percent of Section 8 or public housing units that must be rented to extremely low income families each year. In the Section 8 tenant-based program, the PHA must generally target at least 75 percent of annual admissions to such families. In public housing, the PHA must generally target at least 40 percent of annual admissions to such families (with credit if the PHA exceeds the target number of admissions in its Section 8 tenant-based program). In the Section 8 project-based programs, the owner must target 40 percent of annual project admissions to units assisted under the program to extremely low income families.
As originally enacted, the Public Housing Reform Act provided that HUD was authorized to adjust the extremely low income (30 percent of median income) limit only “for smaller and larger families” (42 U.S.C. 1437n). However, the law was subsequently amended to also permit adjustments necessary “because of unusually high or low family incomes” (at section 205 of the fiscal year 2000 HUD appropriation act, Public Law 106-74, 10/20/99). In the final rule, the definition of the term “extremely low income family” is revised to incorporate this statutory change (§ 5.603). This definition applies to the three categories of 1937 Act housing subject to income targeting.
The final rule restates the provisions that specify public housing targeting requirements, including the calculation of public housing targeting credits for admission to the PHA's tenant-based voucher program (§ 960.202(b)).
The final rule provides that the responsible entity (PHA or owner) must comply with HUD prescribed reporting requirements, including income reporting requirements that will permit HUD to maintain the data necessary to monitor compliance with income-eligibility and income-targeting requirements (§ 5.653(f); § 960.202(d)).
5. Annual Income—§ 5.609.
a. Income of minors—§ 5.609(c)(1)). The proposed rule would have removed the existing provision that specifies that annual income does not include earned income of minors and made it a deduction instead. That proposal is not adopted in this final rule.
b. Resident stipend for member of PHA governing board (§ 5.609(c)(iv)). The Public Housing Reform Act provides that the governing board of a PHA must generally contain at least one member who is directly assisted by the PHA (42 U.S.C. 1437(b)). To support and facilitate implementation of this new statutory requirement, HUD is clarifying that the resident service stipend exclusion covers amounts received by residents who serve on the PHA governing board. HUD is concerned that without this clarification, residents may be discouraged from participating. This provision was not included in the April 30, 1999 proposed rule. However, the added language does not reflect any change in HUD's position, but instead clarifies what is permissible under current regulations.
6. Adjusted Income—§ 5.611.
The rule is revised (at § 5.611(a)(3)(ii)) to clarify that the allowance for unreimbursed reasonable attendant care and auxiliary apparatus expenses may not exceed the employment income received by family members (including the person with disabilities) who are 18 years of age or older and who are able to work as a result of the assistance to the person with disabilities.
7. Public housing self-sufficiency incentives—§ 960.255 (proposed rule § 5.612).
The final rule comprehensively restates and revises the provisions for disallowance of increases in income as a result of employment in calculation of annual income of a public housing family after a family member is first employed (§ 960.255). The new provisions include:
—Definitions of disallowance, previously unemployed, and qualified family (§ 960.255(a)).
—A revised technical description of the calculation of the disallowance during the initial twelve months, the second twelve month exclusion and phase in, and the maximum four year period of disallowance for increases in income as a result of employment of individual family members (§ 960.255(b)).
—Specification that the disallowance of increases in income as a result of employment only applies for calculation of rent after admission to the program, but does not apply in determination of income eligibility or income targeting for admission (§ 960.255(c)).
—Specification that the disallowance of increases in income as a result of employment applies to persons who are or were assisted, within 6 months, under any State program of temporary assistance for needy families funded under part A of title IV of the Social Security Act only if the amount of TANF-funded assistance, benefits or services is at least five hundred dollars.
During the first 12 months after commencement of employment of a family member, the PHA disallows the incremental increase in a family member's income as a result of employment. In the second 12-month period, the PHA disallows 50 percent of the incremental increase. The final rule clarifies that the amount of the incremental increase in income is calculated by comparing the amount of the family member's income before the beginning of qualifying employment to the amount of such income after beginning the employment. It is this amount that is subject to being disregarded.
The rule is revised to specify the maximum disallowance for income as a result of employment of an individual family member (§ 960.255(b)(3)). The family may receive the disallowance only as follows:
—Disallowance is limited to one forty-eight month period from the beginning of the first month after commencement of qualifying employment of an individual family member; and
—During this forty-eight month period, for a maximum of twelve months, the incremental increase is disregarded, and for a maximum of twelve months, 50 percent of the incremental increase is disregarded. (If the period of increased income does not last for 12 consecutive months, the disallowance period may be resumed at any time within the 48 month period. However, each qualifying family member is only entitled to a total of 12 months of each disallowance.)
The final rule also specifies that the disallowance of an incremental increase of income as a result of employment is only applied to determine the annual income of families residing in public housing units, not to determine annual income of applicants for purposes of income eligibility or targeting (§ 960.255(c)).
8. Choice of Rent in Public Housing—§ 960.253 (proposed rule § 5.614).
Once a year, the PHA must give a public housing tenant the opportunity to choose between paying a “flat rent,” based on the unit's rental value, or an “income-based rent,” based on family income. The final rule substantially revises and clarifies the regulatory requirements for choice of rent that are provided in the 1998 Public Housing Reform Act.
Flat rent (§ 960.253(b))
The final rule provides that the flat rent is based on the market rent. The market rent is the rent charged for comparable units in the private, unassisted rental market at which the PHA could lease the public housing unit after preparation for occupancy. In determining the flat rent, a PHA must consider:
—The location, quality, and the size, type and age of the unit; and
—Any amenities, housing services, maintenance, and utilities provided by the PHA.
The PHA must use a reasonable method to determine flat rent and must keep records that document this method. The PHA records must show how the PHA determines flat rents in accordance with its method and document flat rents offered to families.
For families who pay an income-based rent, the PHA reimburses the family if the allowance for tenant paid utilities is greater than the family's total tenant payment. This is called a “utility reimbursement.” The final rule provides that the PHA will not pay a utility reimbursement for a family that has chosen to pay a flat rent for its home.
Income-based rent (§ 960.253(c))
If a family chooses to pay an “income-based rent,” the tenant rent paid to the PHA is based on family income and the PHA rental policies. The PHA will use a percentage of family income or some other reasonable system to set income-based rents.
The PHA has broad flexibility in deciding how to set income-based rent for its tenants. However, the income-based tenant rent plus the PHA's allowance for tenant paid utilities may not exceed the “total tenant payment” as determined by a statutory formula.
The rule provides that if the utility allowance for tenant paid utilities exceeds the total tenant payment, the PHA must pay the excess as a “utility reimbursement” on behalf of the family. The rule provides that the PHA may choose to pay the utility reimbursement either to the family, or directly to the utility supplier for the utility bills on behalf of the family. If the PHA elects to pay the utility supplier, the PHA must notify the family of the amount of utility reimbursement paid to the utility supplier (§ 960.253(c)(3).
9. Minimum Rent—§ 5.630(b) (proposed rule § 5.616).
Section 8 and public housing families are required to pay a minimum rent (42 U.S.C. 1437a(a)(3); § 5.630(a)). However, the family is exempt from minimum rent if the family shows that it is unable to pay the minimum rent because of a “financial hardship” situation (§ 5.630(b)).
In the public housing program, the Section 8 certificate and voucher programs (including both tenant-based and project-based assistance under these programs), and the Section 8 moderate rehabilitation program, the PHA may establish a monthly minimum rent from $0 to $50 for a family (§ 5.630(a)). In the public housing and the Section 8 tenant-based assistance programs, the PHA policies for determining the amount of minimum rent up to this maximum are described in submissions with the PHA's annual plan, and in the PHA's Section 8 administrative plan (§ 903.7). In the other Section 8 programs, the owner is required to charge a fixed minimum rent of $25 set by HUD.
The final rule modifies the provision that allows a hardship exemption for a family that has lost eligibility or is awaiting an eligibility determination for a Federal, State, or local assistance program. The rule provides that the exemption applies to a family with a member who is a noncitizen lawfully admitted for permanent residence under the Immigration and Nationality Act who would be entitled to public benefits but for title IV of the Personal Responsibility and Work Opportunity Act of 1996 (§ 5.630(b)(1)).
The final rule provides that hardship includes a situation where the family would be evicted “because it is unable to pay the minimum rent” (§ 5.630(b)(1)(ii)). The rule also provides that the financial hardship exemption only applies to payment of minimum rent—not to rent based on the other
branches of the formula for determining the total tenant payment (§ 5.630(b)(2)(iii)(C)).
10. Public housing and Section 8 tenant-based assistance programs: How welfare benefit reduction affects family income—§§ 5.603 and 5.615 (proposed rule § 5.618).
A welfare agency may reduce welfare benefit payments to sanction a family for noncompliance with welfare self-sufficiency or work activities requirements. The 1998 Public Housing Reform Act provides that the rental contribution of a family assisted in the public housing or tenant-based assistance programs “may not be decreased” if welfare benefits are reduced for this reason (Public Law 105-276, section 512(d); 42 U.S.C. 1437j(d)). This requirement is triggered when a family's rental contribution is calculated on the basis of family income. The law requires that family income include the amount of the welfare benefits that would have been paid if not for the welfare agency sanction. Therefore, the family rental contribution is not decreased because of the welfare sanction. The final rule substantially revises the proposed regulation to implement the statutory requirement.
For this purpose, the final rule (§ 5.615(b)) adds three defined terms to designate and describe key statutory and regulatory concepts.
Covered Families
The statutory term “covered families” designates the universe of families who are required to participate in a welfare agency economic self-sufficiency program and may, therefore, be the subject of a welfare benefit sanction for noncompliance with this obligation. As defined in the rule, “covered families” means families who receive welfare assistance or other public assistance benefits from a State or other public agency under a program for which Federal, State, or local law requires that a member of the family must participate in an economic self-sufficiency program as a condition for the assistance.
Specified Welfare Benefit Reduction
The term “specified welfare benefit reduction” designates those reductions of welfare agency benefits (for a covered family) that may not result in a reduction of the family rental contribution. As defined in the rule, “specified welfare benefit reduction” means a reduction of welfare benefits by the welfare agency, in whole or in part, for a family member, as determined by the welfare agency, because of fraud by a family member in connection with the welfare program; or because of welfare agency sanction against a family member for noncompliance with a welfare agency requirement to participate in an economic self-sufficiency program.
Imputed Welfare Income
The term “imputed welfare income” is defined in this rule, “imputed welfare income” means the amount of annual income not actually received by a family, as a result of a specified welfare benefit reduction, that is nonetheless included in the family's annual income. This amount is included in family annual income and, therefore, reflected in the family rental contribution based on this income. The final rule provides that a family's annual income includes the amount of imputed welfare income plus the total amount of other annual income (§ 5.615(c)(1)). However, the rule provides that the amount of imputed annual income is offset by income from other sources received by the family that starts after the sanction is imposed.
The rule is revised to clarify the relationship between the welfare agency, which is responsible for determining the amount of any specified reduction in welfare benefits, and the PHA, which is responsible for determining family income (including any imputed welfare income because of the welfare agency's reduction of welfare benefits.
The 1998 Public Housing Reform Act provides that the PHA must count imputed welfare income of a covered family only after the PHA has received notice of the welfare reduction from the welfare agency (42 U.S.C. 1437j(d)(4)). Accordingly, the rule provides that the PHA bases its imputed welfare income on information provided to it by the welfare agency (§ 5.615(c)(1)). The rule provides that, at the request of the PHA, the welfare agency will inform the PHA in writing of the amount and term of any specified welfare benefit reduction for a family member and the reason for such reduction (§ 5.615(c)(2)). The welfare agency will also inform the PHA of any subsequent change in the term or amount of a specified benefit reduction.
The implementation of the statutory imputed rent requirement (i.e., the prohibition of a decrease in rent paid by the family because of the welfare sanction), as well as other efforts to promote economic independence of assisted families, requires close cooperation between the PHA and local welfare agencies. The final rule, therefore provides that PHAs must make their best efforts to enter into cooperation agreements with welfare agencies (§ 5.613). These cooperation agreements will be designed:
—To target public assistance, benefits and services for families assisted in the PHA's Section 8 and public housing programs to achieve self-sufficiency; and
—To verify information on welfare benefits for applicants and participants in these programs.
Function of PHA
The PHA is responsible for determining the amount of imputed welfare income that is included in the family's annual income—which is used to determine maximum income-based rent for a public housing family—and the amount of the housing assistance payment for a voucher family (§ 5.615(c) and (e)(1)). During the term of the welfare agency's welfare benefit reduction, the PHA includes imputed welfare benefits in family income, as determined by the PHA at an interim or regular reexamination (§ 5.615(c)(3)). For this purpose, as provided in the law, the PHA uses the information provided to the PHA by the welfare agency. The welfare agency informs the PHA of the fact, amount, and reason for a welfare benefit reduction (§ 5.615).
Under the rule, the PHA is required to ask welfare agencies to inform the PHA of any welfare benefit reduction that may result in imputed welfare income, the term of the reduction, and the amount of a specified welfare benefit reduction. In computing a family's annual income, the PHA must include the imputed welfare income because of the welfare agency determination to reduce the family's welfare benefit. However, the final rule specifies that the PHA is not responsible for determining that a reduction of welfare benefits was correctly determined by the welfare agency in accordance with welfare agency requirements and procedures (§ 5.615(e)(2). The rule states that:
Such welfare agency determinations are the responsibility of the welfare agency, and the family may seek appeal of such determinations through the welfare agency's normal due process procedures. The PHA shall be entitled to rely on the welfare agency notice to the PHA of the welfare agency's determination of a specified welfare benefit reduction. (§ 5.615(e)(3)
Review of PHA decision
In the public housing program and the Section 8 tenant-based assistance programs, the family may seek an administrative hearing for review of the PHA determination of family income, or the calculation of the family rent or housing assistance payment, in
accordance with HUD requirements. The final rule specifies that the family may invoke the PHA's regular program hearing processes for review of a PHA determination of the amount of imputed welfare income in accordance with HUD requirements (§ 5.615(d)).
The final rule provides that if a family (public housing tenant or Section 8 participant) claims that the PHA has not correctly calculated the amount of imputed welfare income, and if the PHA denies the family's request to modify such amount, the PHA must give the family written notice of such denial, with a brief explanation of the basis for the PHA determination. The PHA notice must state that if the family does not agree with the PHA determination, the family may request a hearing in accordance with the applicable program hearing procedures (the public housing grievance procedures under part 966 or the Section 8 hearing procedures under § 982.555). In the case of public housing, the rule specifies that the tenant is not required to deposit the disputed amount in escrow in order to obtain a grievance hearing. (There is no parallel escrow requirement for Section 8. The participant may obtain a hearing without deposit of an escrow.)
11. Occupancy by police officers in public housing and Section 8 project-based housing—§§ 5.661 and 960.503-505.
Section 8 Projects
The final rule provides (§ 5.661) that a Section 8 project owner may ask the contract administrator (PHA or HUD) for approval to lease a Section 8 assisted unit to a police officer or other security personnel, for the purpose of increasing security for Section 8 families residing in the development. The rule defines the terms “security”, “security personnel” and “police officer.” Security includes the protection of project residents, including resident project management, from criminal or other activity that is a threat to person or property, or that arouses fear of such threat. Security personnel means a police officer or other qualified security officer. A police officer is a full-time duly licensed police officer. Other security personnel must have adequate training and experience to provide security for project residents.
The owner's application must include:
—A description of criminal activity in the project and community;
—The effect of criminal activity on resident security;
—Qualifications of proposed security personnel who will live in the housing;
—How the owner proposes to check their backgrounds and qualifications;
—Disclosure of a family relationship between the owner and any security personnel;
—How residence by security personnel will increase security of Section 8 residents;
—Rent to be paid and terms of occupancy by resident security personnel.
The contract administrator has discretion whether to approve or disapprove occupancy by security personnel in a Section 8 project, and such approval may be withdrawn at the discretion of the contract administrator. The amount of contract rent for a unit does not change when the unit is occupied by security personnel. However, the monthly housing assistance payment to owner equals the contract rent (as determined in accordance with the Housing Assistance Payments Contract and HUD requirements) minus the amount of monthly rent payable by security personnel residing in the housing.
Public housing
For public housing, before a PHA permits occupancy by police officers, the PHA must include in the PHA Plan or supporting documents a description of the terms and conditions for them to occupy units and a statement that this action was taken to increase security for public housing residents.
12. How PHA administers service requirement—§ 960.605. HUD has revised the rule to clarify that the PHA's notice to the resident on the community service and economic self-sufficiency requirements must also describe the process to change exemption status of family members.
13. Assuring Resident Compliance—§ 960.607. HUD has revised § 960.607(c) to clarify how a PHA should respond to a report that an individual covered by community service has moved from the household.
14. Definitions—§ 984.103. HUD has revised the definition of “welfare assistance” for the FSS program to refer only to cash maintenance payments for ongoing basic needs, funded under Federal or State welfare programs such as the TANF program. The definition borrows from the Department of Health and Human Services' TANF definition of “assistance” and excludes nonrecurring short term benefits designed to address individual crisis situations. For FSS purposes, the following do not constitute welfare assistance: food stamps; emergency rental and utilities assistance; and SSI, SSDI, and Social Security.
15. Administrative fees—§ 984.302. HUD has revised § 984.302(a) to delete the reference to the minimum program size of the public housing FSS programs. The performance funding system provides for the inclusion of reasonable eligible administrative costs for both mandatory and voluntary public housing FSS programs.
16. Utility Reimbursements—§ 5.632. HUD has revised the provision previously found at § 5.615, which required PHAs to get the consent of a public housing family before sending a utility reimbursement directly to the utility supplier. Section 5.632 now allows PHAs to send the utility reimbursement directly to the utility supplier without the consent of the public housing family that is paying an income-based rent. This change was first mentioned in the preamble to the proposed rule, Streamlining the Public Housing Admission and Occupancy Requirements, published in the
Federal Register
on May 9, 1997 (62 FR 25731). A similar provision has been in effect since July 3, 1995, for the tenant-based Section 8 program. In response to a comment received on that rule, § 5.632 also requires that the PHA notify the public housing family of the amount paid to the utility supplier.
17. Family Income and Verification—§ 960.259.
HUD has made a conforming change, at § 960.259, to mirror the Section 8 requirement for third party verification of information. If third party documentation is not available, the reason must be documented in the file.
In addition to these substantive changes, HUD has made editorial changes in some of the regulations, such as adding subheadings to certain paragraphs to make the subject matter of the paragraph easily identifiable, and dividing a lengthy paragraph into subparagraphs. As HUD proceeds with the rulemaking required under the 1998 Act to make the changes required to various components of the public housing and Section 8 program regulations, HUD may, at a later date reorganize Chapter IX of the HUD regulations, as well as certain subparts of part 5, to better reflect where requirements applicable to public housing and the Section 8 programs are identical and where they differ, and to better highlight the new additions to the regulations such as the PHA Plans, the Capital Fund and the Operating Fund.
III. Discussion of the Public Comments
A. General
This section presents HUD responses to the significant issues raised by the
individuals and entities who submitted comments on the April 30, 1999 proposed rule. The organization of the discussion of public comments generally follows the organization of changes made to admission and occupancy requirements as set out in Section II of the preamble of the April 30, 1999 proposed rule. The heading “Comment” states the comment made by a commenter or commenters and the heading “Response” presents HUD's response to the issue or issues raised by the commenter or commenters.
There were certain concerns raised by the commenters that were directed to more than one change in admission and occupancy requirements. The majority of the commenters expressed concern about the administrative burden imposed by the changes, particularly the community service requirements. Some commenters also were concerned that the income targeting requirements will substantially reduce affordable housing for some persons, such as elderly families in need whose income may be above the targeting requirements. As the commenters recognized, these are statutory requirements and the flexibility that HUD has to implement these statutory requirements is very limited.
Other commenters recognized that there are limits to the amount of information that HUD can provide in regulatory text, and requested that HUD provide additional guidance and information on many of the new admission and occupancy requirements. HUD recognizes that the changes made by the 1998 Act to public housing and Section 8 programs are significant and there is much information to absorb. As HUD stated in its guidance published on February 18, 1999 (64 FR 8192), HUD staff, and especially staff of HUD's Office of Public and Indian Housing at Headquarters and in the Field Offices are ready to assist PHAs and owners in understanding the provisions of the 1998 Act, and with carrying out their responsibilities under the new statute. As noted in the February 18, 1999 guidance, HUD's Office of Public and Indian Housing has established a website that is devoted to providing additional information about the various provisions of the statute, as well as additional information and guidance on 1998 Act rules issued by HUD. (See http://www.hud.gov/pih/legistitlev.html; Public Housing Reform link; the Multifamily Tenant Characteristics System (MTCS) website can be found at http://www.hud.gov/pih/systems/mtcs/pihmtcs.html.) HUD intends to provide additional training and guidance during the coming year.
The following provides a discussion of specific issues raised by the commenters.
B. Using Computer Matching Results—Family Disclosure of Income (Proposed Rule § 5.211; Final Rule § 5.240)
Comment.
The final rule should (1) provide for HUD to notify the PHA that the income discrepancy letter was sent to the family, and (2) specify the time limit for the family to contact the PHA. The rule should provide that PHAs be notified by HUD of the date that the family was sent an income discrepancy letter or mailed a copy of the letter, and that a time limit of less than 10 working days be established for the family to contact the PHA.
Response.
PHAs or owners, as the responsible entity, have the primary responsibility for income verification, reexamination, and debt collection. The responsible entity can enforce § 5.240(b) and implement § 5.240(c) through their contractual relationships with assisted families. HUD's authority to use Federal tax return data from the Internal Revenue Service (IRS) is limited by statute to disclosure to tenants. HUD will provide responsible entities with a list of tenants to whom it has sent income discrepancy letters. The rule does require tenants who receive such letters, containing information about Federal tax return data, to disclose the letter to the responsible entity promptly. Usually, the responsible entity should interpret this prompt submission requirement to mean that the family must disclose the letter within 30 days of receipt.
Comment.
The final rule should require PHAs to take appropriate action (for example, to recover excessive housing assistance received by tenants) only with respect to current residents and tenant-based participants and not former residents and participants.
Response.
The final rule has been modified to reflect the language of section 508(d) of the 1998 Act by limiting application of the income matching provisions to families that (1) reside in a public housing dwelling unit; (2) receive Section 8 assistance; or reside in a project assisted under the Section 202 or Section 811 program. Responsible entities who have the resources to pursue abuses regarding recovery of excess rental assistance of former tenants may do so.
C. Repeal of Preference for Elderly, Disabled, and Displaced Over Other Single Persons (Proposed and Final Rule § 5.405) (Section 506 of the 1998 Act Amending Section 3(b) of the 1937 Act)
Comment.
The repeal of the preference for elderly, persons with disabilities, and displaced persons over other single persons will cause a shortage of affordable housing for these persons. Without the preference, these groups will face a more difficult time in finding affordable housing.
Response.
The 1998 Act eliminated the statutory preference for single persons who are elderly, have disabilities, or are displaced over other single persons. However, the repeal of federal preferences does not prevent a PHA from choosing to establish a local preference for single persons who are elderly, have disabilities, are displaced, or are homeless over other single persons.
Comment.
While it was appropriate for HUD to implement the statutory elimination of Federal preferences, the result is the elimination of the rule in § 5.415(b) that PHAs must give households of elderly persons and persons with disabilities the benefits of any employment preference and not discriminate among applicants based on the amount of employment income.
Response.
HUD revised § 960.206(b)(2) to include some of the language from former § 5.415, which states that if a working family preference is adopted as a local preference, the preference must be extended to households whose head and spouse, or sole member, is age 62 or older or meets the definition of a person with disabilities.
Comment.
The final rule should: (1) Expand the implicit meaning of “disabled” in the old rule, as well as in the new § 5.410(c), to give the benefit of employment preferences to those who can provide evidence of a disability, but who may not be receiving benefit payments based on the inability to work; (2) broaden the employment preference exception to include individuals who satisfy the definition of “disabled” under section 3(b)(3)(E) of the U.S. Housing Act of 1937 or otherwise cannot comply with the terms of the preference due to a disability; and (3) exempt those individuals with serious disabilities lasting less than twelve months. These changes are needed to prevent discrimination based on disability status.
Response.
As noted in the preceding response, HUD has retained some of the language previously found at § 5.415(b) and expanded the benefit to apply to
persons who meet the definition of “persons with a disability”, regardless of whether they are receiving disability income. Sections 5.655 and 960.206 remind PHAs and owners that their admission preferences must comply with certain governing statutes, regulations and executive orders pertaining to nondiscrimination, including HUD's affirmative fair housing objectives. In addition, the PHA system of local preferences is included in the PHA Plan, which requires civil rights certifications. (Although § 5.410, which described nondiscrimination provisions has been removed in this final rule, § 5.105(a) lists the applicable requirements.)
D. Repeal of Federal Preferences (Proposed Rule Removed §§ 5.415, 5.420, 5.425 and 5.430 and Revised § 5.410; Final Rule Removes in Addition to Above §§ 5.405 and 5.410, Adds a new § 5.655, and Revises §§ 960.204-960.206)
Comment.
With permanent repeal of Federal preferences, can owners still apply them voluntarily? When federal preferences were suspended, owners were advised that they could still use them if they so chose, and asked whether the permanent repeal of these preferences precludes owners from continuing to exercise this option.
Response.
By law, the selection of tenants from among eligible applicants is left to the discretion of the owner. Now the owner may choose to use any or all of the federal preferences and may determine the hierarchy of any preferences it adopts.
Comment.
Many PHAs will continue to use the formerly required federal admission preferences as part of their local preferences, and therefore the final rule should eliminate the duplicate tenant notification requirements when PHAs alter their federal admission preferences. It should be sufficient for PHAs to notify the public and tenants through resident advisory board consultation and the public inspection and hearing requirements associated with the PHA Plan.
Response.
The public comment process for the PHA Plan provides the method of public consultation concerning the establishment of local preferences. The rule does eliminate a separate process just for approval of preferences, now that the statutory foundation for that provision has been eliminated.
Comment.
The proposed rule was right to encourage consideration of preferences for individuals who are victims of domestic violence. The final rule should give battered women priority consideration for housing.
Response.
The final rule keeps the language of the proposed rule concerning consideration of preferences for individuals who are victims of domestic violence. The final rule, consistent with the statute, eliminates Federal preferences and permits PHAs to establish local preferences, including preferences for victims of domestic violence.
Comment.
The final rule should require that all preferences be based solely on the need for housing.
Response.
Consistent with the statute, the rule requires that any local preferences be based on housing needs and priorities, not solely housing need.
Comment.
The discretion of Section 8 owners to develop their own preferences must be limited to ensure that they do not exclude extremely low-income tenants, minority applicants, or victims of domestic violence.
Response.
The statute urges PHAs to consider granting a preference for victims of domestic violence in public housing and Section 8 tenant-based programs. Section 8 owners may choose to adopt a preference for victims of domestic violence. Of course, under the new § 5.655, owner preferences are still subject to anti-skipping, residency preference, and fair housing requirements.
Comment.
The final rule should require resident input on selection preferences for private owners.
Response.
The law does not require the owner to solicit resident input regarding an owner's selection preferences. The law gives the owner the discretion to develop its own selection preferences. The owner, however, may provide opportunity for resident comment.
Comment.
Section 5.410(b) needs to clarify that PHAs are not required to add preferences based on public comment regardless of merit.
Response.
The language in § 960.206(a)(1), “as determined by the PHA,” is clear that a PHA has the discretion to determine whether public comments should be adopted.
Comment.
The admission preference information required to be provided to applicants by § 5.410(h) of the proposed rule should be required to include brief descriptions of the preferences.
Response.
PHAs generally are aware that the preference information provided to applicants should clearly convey through description who is eligible for the preference. Section 5.410 has been removed in the final rule. The requirement for informing applicants has been moved to §§ 5.655 and 960.206.
Comment.
The final rule should include the requirement that PHAs' local preferences must be consistent with the needs identified in the applicable Consolidated Plan(s) and the requirements of civil rights statutes and the obligation to affirmatively further fair housing. It is not sufficient, as the proposed rule states, that a PHA must consider public comments on the Consolidated Plan and the PHA Plan in setting local preferences. The preferences must be consistent with the needs identified in the applicable Consolidated Plans.
Response.
The system of local preferences is included in the PHA Plan, which requires civil rights certifications. The PHA Plan is the vehicle in which PHAs describe any local preferences and the PHA Plan must be consistent with the Consolidated Plan for the jurisdiction in which the PHA is located.
Comment.
The final rule should ensure that any local preferences do not result in discrimination against persons protected by civil rights laws by requiring: (1) The PHA or owner to consider the applicable Analysis of Impediments to Fair Housing Choice; (2) the PHA or owner to analyze the potential discriminatory effects of any proposed preference on the protected classes; and (3) the PHA or owner to refrain from setting a preference that will have a discriminatory effect, undermine the ability of the PHA or local jurisdiction to affirmatively further fair housing or remove impediments to fair housing choice, or impede implementation of an affirmative marketing plan.
Response.
As noted earlier in this preamble, the final rule does require preferences to comply with nondiscrimination requirements. In addition, the final rule reinstates the language of former § 5.415(b) requiring that elderly families and persons with disabilities be given the same preference as working families (§§ 5.655(e)(2) and 960.206(b)(2)). “Working family” means a family whose head, spouse, or sole member is employed. If a Section 8 owner chooses to adopt a working family preference, the preference may not be based on the amount of earned income. This restriction does not apply to selection by a PHA for admission to public housing.
Comment.
The final rule should provide for HUD approval of residency preferences for compliance with civil rights laws. Although the rule retains the prohibition against residency requirements, the rule fails to include
the former requirement for the Section 8 tenant-based programs that HUD approve residency preferences after review for compliance with civil rights laws, and this omission may be inconsistent with section 511 of the 1998 Act.
Response.
For both the public housing and Section 8 tenant-based programs, a PHA's residency preferences are part of the PHA's Annual Plan (see new § 903.7(c)). There is no separate HUD approval of a PHA's residency preferences, and the entire plan is subject to input by the Resident Advisory Board (§ 903.13), a public hearing, and public comments (§ 903.17). PHA plan approval requires certification by the PHA of its compliance with civil rights requirements (§ 903.7(o)). Part 960 states that public housing admission policies must contain a statement that any residency preferences will not have the purpose or effect of delaying or otherwise denying admission to the program based on the race, color, ethnic origin, gender, religion, disability, or age of any member of an applicant family. The final rule provides that if an owner adopts a residency preference, it must comport with its Affirmative Fair Housing Marketing plan or be identical to the one in the PHA Plan for the jurisdiction. (See discussion above.)
E. Income Targeting (Proposed Rule § 5.607; Final Rule § 5.653 and 960.202) (Section 513 of the 1998 Act Amending Section 16 of the 1937 Act)
Comment.
The targeting requirement will reduce affordable housing for elderly persons who are not extremely low-income. A significant number of elderly persons are not at or below 30% of median income, and they will lose access to affordable housing as a result of the targeting requirements. Voluntary income targeting should be adopted, not mandatory targeting.
Response.
The targeting requirement is a statutory requirement, directed to providing housing to those most in need of housing. There are many elderly persons who will be assisted by the targeting requirements. In addition, other HUD programs, for example, HUD's Section 202 Program for Elderly Persons, and programs administered by other public and private entities, will work to maintain affordable housing for those elderly persons who are not at or below 30% of median income.
Comment.
The Welfare Reform Act employment requirements will make it difficult to meet the public housing admission requirement for 40% extremely low income families, since many families are required to seek and maintain employment. Additionally, the 40% targeting requirement will cause major lease problems for PHAs who have high rent jurisdictions.
Response.
The Welfare Reform Act has moved millions of families from welfare to work, but there are many families—including those remaining on welfare and those who have moved into entry level jobs—who remain in need of housing assistance. HUD believes that the reality for most jurisdictions is that it will not be difficult for a jurisdiction to meet the 40% targeting requirement.
Comment.
The 40% targeting requirement will greatly reduce the number of public housing families who pay a reasonable portion of total tenant payment (TTP).
Response.
The purpose of targeting is to ensure that some of the neediest families will continue to have access to housing assistance. The number of families served by funding for these programs is an issue not addressed in this rule.
Comment.
The proposed rule provided, in § 5.607(b)(i), for a limitation of 30 percent of the area median income with “adjustments” for smaller and larger families. The final rule should clarify the type of adjustment that will be used. Additionally, the final rule omits any standard to govern HUD's discretion to determine a higher or lower percent of area median income as may be necessary because of unusually high or low family incomes.
Response.
The adjustments for smaller and larger families are incorporated into the income limits for the public housing and Section 8 programs, which are issued by HUD each fiscal year.
Comment.
The targeting requirement simply steers PHAs to focus on percentages rather than families. This will result in families on the waiting list being “skipped” in order to admit another family based solely on income.
Response.
PHA admission policies to achieve both the goals of reducing poverty and income mixing in public housing may generally include skipping over certain applicants on the waiting list based on incomes. Skipping may be necessary to serve the required percentage of the neediest families (extremely low income). Such skipping is not new, however, with respect to assisted housing admissions; both federal and local preferences always have involved skipping of families on the waiting list in the public housing program, provided it is uniformly applied.
Comment.
The final rule should exempt small PHAs and PHAs with high vacancy rates from income targeting requirements. The final rule must specify a standard for good cause requests made by PHAs to establish different targeting requirements, and what documentation the PHA must provide to HUD.
Response.
HUD understands that some PHAs may have challenges regarding income targeting; however, these requirements are statutory. For most jurisdictions, it will not be difficult to meet the 40% targeting requirement for public housing.
Comment.
The final rule should clarify whether the income targeting requirement is applicable to “move-in” actions only or also includes situations where an initial certification is done to move someone from a section 236 project to a section 8 project.
Response.
The rule has been revised to clarify that the income targeting requirement applies upon initial admission to the Section 8 project-based assistance program.
Comment.
The final rule should define the term “relatively low incomes,” which is used in § 5.607(a)(3). Another comment suggests that the final rule needs to clearly express the prohibition against concentration in public housing.
Response.
The rule, at § 960.202, is revised to refer to the deconcentration requirements (more detail is in the PHA Plan rule), as well as the targeting requirements. The term “relatively low incomes” is no longer referenced.
Comment.
The final rule should clarify that income targeting standards are to be applied on a PHA-wide basis and not on a project-by-project basis.
Response.
The rule, at § 960.202(b)(1)(i), requires that at least 40% of the admissions to the public housing program in each fiscal year must be extremely low income families. This language clearly reflects that the requirement is applied on a PHA-wide basis. The rule at § 960.202(b)(ii) also reflects that this requirement is applicable to PHAs on a PHA-wide basis.
Comment.
HUD must be cognizant that PHAs will be in a quandry when attempting to simultaneously implement the skipping provision, associated with the deconcentration policy, and the targeting requirement for annual admissions to public housing. HUD should consider the income mix and deconcentration policies that agencies submit as part of their PHA Plan, and the HUD respect the “good faith efforts” that PHAs undertake to create mixed-income communities based on the PHA management discretion and local conditions.
Response.
The deconcentration of poverty and income mixing requirements are discussed in the final rule on the PHA Plan.
Comment.
In some jurisdictions, there are apparent discrepancies between SSI grant levels, minimum wage earnings, and the extremely low income level in some counties, but these discrepancies can be administratively addressed by HUD.
Response.
HUD makes adjustments every year for areas with unusually high or low housing costs relative to means. HUD also has made further adjustments for unusually high or low incomes for income eligibility to take into account State Supplemental Security Income (SSI) benefit levels. HUD issued Notice PDR 99-04 on July 21, 1999, to make changes that relate to the “30 percent of area median income” limits. These income limits have been increased wherever necessary to ensure that the one-person 30 percent income limit is at least as high as the State Supplemental Security Income (SSI) benefit level. The SSI program provides a minimum entitlement income standard for elderly and disabled households.
HUD will not make further adjustments to fiscal year income limits to accommodate minimum wage households, because this would drastically alter the 30 percent standard and would be inconsistent with Congressional intent.
F. Annual Income, Adjusted Income (Proposed and Final Rule § § 5.603, 5.609, and 5.611) (Section 508 of the 1998 Act Amending Section 3 of the 1937 Act)
1. Exclusions vs. Deductions
Comment.
The mandatory deduction from income for the earned income of minors will have the consequences of reducing the number of households eligible to move in. HUD has the statutory authority discretion to exclude (not deduct) income from minors.
Response.
HUD agrees with this comment. The final rule maintains the language § 5.609(c)(1) that excludes the income of minors from the definition of annual income. HUD provided advance notice of this provision to PHAs in its notice on “Public Housing Rent Policies; Guidance Pending Publication of Final Rule on Admission and Occupancy Requirements” published on August 6, 1999 (64 FR 42956). The change from the proposed rule applies to all Section 8 programs as well as to public housing.
Comment.
HUD should revise the mandatory deduction language pertaining to the $480 for each dependent. Section 5.611(a)(1) should be modified to read as follows: “$480 for each member of the family residing in the household (other than the head of the household or his or her spouse) who is less than 18 years of age or is attending school or vocational training on a full-time basis, or who is 18 years of age or older and is a person with disabilities.”
Response.
The suggested revision is not necessary. The $480 deduction applies for each dependent. The term “dependent” is defined in § 5.603(d) and includes the recommended categories of dependent.
Comment.
Section 5.611(a)(3)(ii) of the current rule places a limit on the amount of the deduction for unreimbursed reasonable attendant care and auxiliary apparatus expenses. It states that “this allowance may not exceed the employment income received by family members who are age 18 years of age or older.” The proposed provision does not contain any limit on the amount of the deduction. The limitation language in the existing rule should be retained.
Response.
HUD agrees with this comment and has revised § 5.611(a)(3)(ii) to clarify that the allowance may not exceed the employment income received by family members who are 18 years of age or older and who are able to work as a result of the assistance to the person with disabilities.
Comment.
Section 508 of the 1998 Act does not support HUD's interpretation that certain exclusions from income be treated as deductions. Congress refers to the items listed in section 508 as mandatory exclusions from income not deductions. HUD's interpretation, as reflected in § 5.611, applies the permissive exclusions to adjusted income but not to annual income. Since PHAs do have the authority under the current regulation to exclude earned income from annual income, and this rule removes that authority, this rule renders certain families ineligible for assistance. The statutory grant of authority to PHAs—to adopt “permissive exclusions” (42 U.S.C. 1437a(b)(5)(B)—does not deprice HUD of the authority pursuant to which it granted PHAs the discretion to adopt non-mandatory exclusions for the purpose of ascertaining public housing income eligibility under § 5.609(d), which HUD now proposes to repeal.
Response.
The language on “permissive exclusions” (found in section 508 of the 1998 Act, which amends section 3(b) of the 1937 Act) makes a change in the determination of “adjusted income” (which is used to determine rent), not in “annual income” (which is used to determine eligibility). HUD has distinguished between subtractions from these terms by calling the subtractions from annual income “exclusions” and the subtractions from adjusted income “deductions.” Therefore, the statutory change directs that there be permissive deductions from adjusted income. Of course, adjusted income is an amount that is based on “annual income,” so an exclusion from annual income also impacts “adjusted income.”
Since the new statutory language mandates permitting a deduction from “adjusted income” and an exclusion from “annual income” on the same basis could result in a double benefit with respect to the same type of income, HUD has eliminated the permissive exclusion from annual income for earned income. However, HUD notes that the new permissive deduction is much broader than the language in the regulations regarding optional exclusions for earned income. Although the new rule provides flexibility with respect to the subsidy amount paid to the family as a result of the rent calculation rather than flexibility on what families are admitted (based on an eligibility determination), it permits a PHA to grant a permissive deduction for categories other than working families. Therefore, the proposed language in § 5.611 is not revised in this final rule.
Comment.
The term “adult co-tenant” used in § 5.611(a)(5) should be added to the definition of “family head or spouse.” The final rule should also clarify whether an adult co-tenant has the same status as a spouse for eligibility determination and other purposes.
Response.
The rule does not currently define “family head or spouse,” and HUD does not believe a definition of “adult co-tenant” is necessary. A PHA has the discretion to define “family” and a PHA can include in its definition of family the term “adult co-tenant.”
2. Permissive Deductions—Applicable to Public Housing Only
Comment.
Permissive deductions should be extended to the Section 8 tenant-based programs. Permissive deductions should not be limited to public housing.
Response.
Section 508(a)(5)(B) of the 1998 Act explicitly provides that permissive deductions are applicable only to the income of families residing in public housing units. HUD therefore is precluded by statute from extending permissive deductions to the Section 8 tenant-based programs.
Comment.
The statute provides several examples of permissive deductions for public housing such as excessive travel expenses up to $25 per week and earned income in certain situations, and these examples should be included in the rule.
Response.
While HUD recognizes that examples are helpful, HUD believes that regulatory text generally is not the appropriate place to include examples, guidance and similar information. There are better formats other than codified regulations (which are updated only once a year) to provide this sort of information. HUD will provide examples in future guidance.
Comment.
Section 5.611(b) of the rule provides that the PHA must describe its permissive deductions in its written policies. The final rule should provide that private entities administering public housing units are allowed to diverge from the PHA's plan, and these entities can implement permissive income exclusions without being included in the PHA's plan.
Response.
The PHA and any private entity administering public housing units on behalf of a PHA must follow the PHA's written policies, which are required to be available to the public locally in connection with the PHA's Plan.
G. Minimum Rents (Proposed Rule § 5.616; Final Rule § 5.630) (Section 507 of the 1998 Act Amending Section 3(a) of the 1937 Act)
Comment.
For project-based Section 8, there are a set of exemptions to minimum rent. It is unclear in this rulemaking whether these exemptions are eliminated and replaced by the financial hardship exemption, or is financial hardship being added to the list?
Response.
The financial hardship exemption constitutes the only statutory exemption to minimum rent. The statute then establishes subcategories of financial hardship exemptions.
Comment.
While HUD has taken the minimum rent requirements directly from the statute, these requirements, as written in the proposed rule, make the imposition and collection of minimum rent meaningless. Since the law (and proposed rule) would prohibit the eviction of any family who fails to pay the minimum rent. PHAs have no way to enforce collection. The impact of the no eviction policy on public housing will result in an increase in operating subsidy needs to offset uncollected rents. By prohibiting PHAs from evicting those who do not pay, PHAs will likely experience an increase in tenant accounts receivable. Additionally, the hardship exemption eliminates any need for minimum rent. The exemption from payment of minimum rent due to financial hardship will have the effect of causing PHAs to establish a minimum rent of $0, and a minimum rent of $0 should be allowed only for exceptional situations.
Response.
The exemption that prohibits public housing and Section 8 evictions resulting from the minimum rent is statutorily required. PHAs still have the option to determine the level of minimum rent. For public housing and the Section 8 certificate, voucher and moderate rehabilitation programs, the minimum rent maybe set any where from $0 to $50. For other project-based Section 8, the minimum rent is $25.
Comment.
The initial rent freeze for hardship determinations should be reduced from 90 days to 30 days. This will benefit the family should the PHA find that a hardship does not exist, resulting in the family having to pay retroactive rent for a period that the rent was frozen. If a hardship does exist, PHAs could extend the rent freeze in 30 day increments (with documentation from the family). A maximum limit for hardships should be established at the discretion of the PHA.
Response.
The statute dictates the 90-day waiting period. This would not preclude a family from paying back amounts owed prior to that period.
Comment.
Although the choice of minimum rents is discretionary on the part of the PHA, the final rule should be explicit that this discretionary decisionmaking is subject to all the due process protections of any lease change, especially given the fact that electing to institute a minimum rent affects residents' property rights.
Response.
Protections regarding any lease changes are already provided under 24 CFR part 966.
Comment.
The final rule should direct PHAs to make sure that they have procedures in place to prevent any eviction against a family in minimum rent status. The final rule should make clear that the tenants in minimum rent status my not be evicted for non-payment of the minimum rent in excess of the tenant rent otherwise payable; that is (1) eviction restriction is not limited to a 90-day period and (2) it does not apply to section 8 families.
Response.
The rule already provides that PHAs must have written policies governing hardship. Those policies must include an exemption of payment of the minimum rent when the family would be evicted as a result of the imposition of the minimum rent requirement. (See § 5.630.)
Comment.
The final rule should clarify that inability to pay minimum rent cannot be grounds to reject an applicant for housing if the applicant qualifies for a hardship exemption.
Response.
Eligibility for housing is a separate determination from calculation of rent. If a family is income-eligible and meets the PHA of owner's screening criteria, then the family's applicant for housing would not be rejected. Once the family signs a lease, it has the same protections as all families with respect to hardship exemptions.
Comment.
Notwithstanding the authority to set a minimum rent in project-based settings of not more than $50 per month, HUD has chosen to continue its previous decision to set a minimum rent amount of $25 for all project-based settings. In light of the burden and complexity of the decisionmaking process concerning hardship requests which HUD delegated to project-based owners, HUD should set the minimum rent at a maximum of $25 for project-based owners and let the private owner at its operation choose to impose a $0 minimum rent.
Response.
The final rule maintains the language of the proposed rule. The statute directed HUD to establish the minimum rent for the project-based Section 8 assistance programs of not more that $50 month. HUD selected a mid-point figure of $25 as a reasonable minimum for these programs.
Comment.
The statutory language is clearer than HUD's rule on the hardship exemption, and the rule should more closely mirror the statutory language. Another comment suggests that the final rule should make clear that § 5.616(b)(1) includes situations where a tenant has requested government assistance, been denied, and is appealing the denial, either through the administrative or a judicial process. Another comment states the proposed rule omitted language from the 1998 Act regarding families with a member who is an alien lawfully admitted for permanent resident, and suggests that § 5.616(b)(1) be revised accordingly.
Response.
HUD has revised § 5.60(b)(1)(i) in this final rule to read as follows: “When the family has lost eligibility for or is awaiting an eligibility determination for a Federal, State, or local assistance program, including a family that includes a member who is a noncitizen lawfully admitted for permanent residence under the Immigration and Nationality Act who would be entitled to public benefits but for title IV of the Personal Responsibility and Work Opportunity Act of 1996.” HUD believes that this revision will address the first and third
comments. HUD disagrees that additional language is necessary on the second matter regarding appeals. The language in the regulation mirrors the statutory language.
Comment.
It is not clear why HUD established different standards in § 5.616 for public housing tenants and Section 8 tenants. For public housing this section provides that one a family requests an exemption, the PHA must immediately suspend the minimum rent until a hardship determination is made. With respect to Section 8 tenants, the rule provides that the PHA must suspend the minimum rent beginning the month following the request, not immediately. There seems no reason to provide less protection to section 8 tenants.
Response.
HUD interprets “Immediately” to mean the month following the family's hardship request until the responsible entity determines whether there is a qualifying financial hardship, and whether or not it is temporary or long term. The rule now contains identical language regarding suspension of the minimum rent requirement beginning the month following the hardship request for both the public housing and Section 8 tenant-based programs (§ 5.630(b)(2)).
Comment.
The final rule should clarify that temporary hardship is 90 days or less, and a long term hardship is one that is of more than 90 days duration. Once the hardship lasts 90 days, the rule should require the PHA to treat the hardship as long term, grant the exemption and make it retroactive to the beginning. The final rule should further provide that in situations where it is immediately clear that an income loss will last longer than 90 days or that income loss has already lasted more than 90 days, HUD should require the PHA to grant the exemption.
Response.
The statute does not provide 90 days as an absolute in defining temporary hardship versus long term hardship. The 90 days relates to a prohibition on eviction commencing on the date of the family's request for exemption from the minimum rent in excess of the tenant rent otherwise payable.
Comment.
The final rule should provide a specific time frame for notifying residents of their right to request a minimum rent hardship exemption.
Response.
HUD declines to provide a specific time frame for notification to residents. The statute, and consequently the rule also, leave this decision to the PHA.
Comment.
The minimum rent exception policy does not address (and should address) the family's inability to repay a retroactive rent without creating another hardship. The temporary hardship period should be debt free. Additionally, the rule needs to address more fully the repayment agreement process.
Response
. HUD declines to adopt this suggestion, which is not supported by the statute. The language in the regulation that requires the PHA or owner to offer the family a reasonable repayment agreement addresses this concern in a manner consistent with the statute.
Comment
. Allowing housing authorities to set a minimum rent based on local conditions is a good idea. However, the exemption from payment of the minimum rent due to financial hardship will result in housing authorities electing not to establish a minimum rent. A minimum rent of $0 should only be allowed for exceptional situations.
Response
. The exemption for hardship cases is statutorily required.
H. Self-Sufficiency Incentives—Public Housing Only (Proposed Rule § 5.612; Final Rule § 960.255) (Section 508 of the 1998 Act Amending Section 3 of the 1937 Act)
1. Disallowance of Increases in Income as a Result of Employment
Comment
. The April 30, 1999 proposed rule did not place a limit on the number of times a family or individual can benefit from disallowance of increases in income as a result of employment, but HUD specifically sought comment on that issue. The majority of commenters who commented on this issue favored a limit. Some commenters favored a limit but did not make suggestions on what the limit should be. One commenter simply opposed the disallowance. Specific suggestions on the limits that should be placed on claiming an income disregard were as follows: (1) Limit to fixed number of months, as opposed to some fixed number of times an individual could qualify to begin the period of earning disallowances; (2) limit one time per household; limit one time per household but allow family to retain welfare benefits longer; (3) limit two times per household; (4) limit two times in a five-year period; (5) limit 3 times and each time the 12 month period is decreased; and (6) allow PHAs to set limit.
Response
. HUD appreciates and carefully considered all proposals. HUD has revised the rule to limit each member of a family to receipt of the benefit of the 12 month cumulative income disregard (and the subsequent 12 month phase in) for no more than twelve months of each benefit (the full disregard and the phase-in) over a four year period commencing the first time the individual is eligible for the benefit. After that 48-month period, there would be no further eligibility of the family member for this disregard. Additionally, the rule also limits eligibility for persons who are or were assisted, within 6 months, under any State program of temporary assistance under part A of title IV of the Social Security Act only when the amount of TANF-funded assistance, benefits or services during the 6 month period totals at least $500. The $500 floor was chosen because that amount demonstrated that the person was not receiving only minimal assistance. These limitations both recognize the potential administrative burden for PHAs, and support the self-sufficiency efforts by individuals who need to use this provision more than one time for valid reasons (newly working families often have changes in jobs and experience periods of unemployment, especially during the first few years of starting employment). A Congressional floor colloquy [144 Cong. Rec. S11840 (daily ed. October 8, 1998) (statement of Sen. Mack)] before enactment of the statute, suggested that the rules implementing the disallowance of increased income as a result of employment should provide flexibility but at the same time not encourage households to change their employment patterns to take advantage of the disregard.
Comment
. HUD should not impose a limit on the income disregard. The statute imposes no limit on the availability of the income disregard, and neither should the rule.
Response
. HUD has the authority to implement the disallowance of increases in income as a result of employment in a flexible manner that creates incentives for work, but does not allow for abuse of this benefit. The floor colloquy cited earlier directed HUD to do this.
Comment
. PHAs should not have to wait to increase a family's rent and also be limited in the amount of increase.
Response
. The new statute clearly requires PHAs to delay increase in the rent of a newly employed family for one year, and then limits the amount of increase for another year.
Comment
. In § 5.612(a)(1), HUD should replace the phrase “established minimum wage” with the “highest applicable minimum wage.” This change, if implemented, will account for variations in minimum wage among jurisdictions and where the state
minimum wage is higher, assure that the higher wage is used in the calculation.
Response
. HUD recognizes that the minimum wage may be higher in some states, and that the higher minimum wage of the state is the prevailing wage for HUD purposes. The language of the rule is clear on this point and no elaboration is needed.
Comment.
The final rule should clarify the continued application of existing § 5.609(c)(13) for transition purposes. The preamble to the proposed rule repeats the statute's continued application of § 5.609(c) for residents qualified prior to October 1, 1999. This continued coverage should be stated in the final rule, to minimize difficulty with implementation of the income disregard.
Response.
The continued application of § 5.609(c)(13) is clear and no elaboration of this point is needed in the rule.
Comment.
HUD needs to develop a fool proof data tracking system for monitoring the periods used for this disregard. This tracking system could be incorporated into the HUD 50058 form and the Multifamily Tenant Characteristics System (MTCS).
Response.
HUD is in the process of updating MTCS to capture all of the changes necessary as a result of the changes made by the 1998 Act.
Comment.
The final rule should clarify that the burden is on the family to notify the PHA of eligibility for an income disallowance. Section 5.612 should contain language that requires a family to notify the PHA of its eligibility for a disallowance for increases in income as a result of employment, and to provide the requisite information in support of any requested disallowance.
Response.
It is at the PHA's discretion to establish policies prescribing when and under what conditions a family must report changes in income, if other than at the annual re-examination, and to establish reasonable income verification. Additionally, under revised § 960.257(b), a family may request an interim reexamination of income at any time.
Comment.
The final rule should provide a broad interpretation of participation in a self-sufficiency or job training program to include not only the phase of the program spent in job training or job preparation but also to include the work experience phase of self-sufficiency training in which participants are working full-time but still receive monitoring or counseling from the self-sufficiency program.
Response.
There is nothing in the proposed rule or this final rule that limits the interpretation suggested by the comment. No additional clarification is needed.
Comment.
The final rule should clarify that eligibility for the disallowance for increases in income as a result of employment begins at the time the income is earned.
Response.
The rule is clear that eligibility for this disallowance begins on the date the employment starts or the date income from employment increases (see revised § 960.255(b)(1)).
Comment.
To serve as a self-sufficiency incentive, the rule needs to accord favorable treatment to increased earnings that occur shortly after completion of a training program, rather than during participation in one. Section 5.612(a)(2) of the proposed rule leads one to the conclusion that increased earnings that occur after completion of a training program would not qualify for special treatment under the rule because the increase did not occur “during participation.”
Response.
The statute is clear regarding this provision. Eligible amounts to be excluded under § 960.255(a)(ii) are any income increases received by a family member during participation in any family self-sufficiency or other job training program and not increases that occur after participation in a self-sufficiency or other job training program. For example, a family member could be eligible for this exclusion if a component of the training program provides training, monitoring, or assistance after the person becomes employed. However, a family member whose income does not increase during participation in a family self-sufficiency or other job training program may still be eligible for a disallowance of increases in income under paragraph § 960.255(a)(i) or (a)(iii).
Comment.
The rule should state clearly that families may qualify for the limit on rent increases when they begin employment or increase their earnings. The rule should clarify that for the purposes of determining eligibility for disregard of earned income, a family has been assisted within 6 months “under any state program for temporary assistance for needy families funded under Part A of Title IV of the Social Security Act.” The final rule should clarify that there are two programs under Part A of Title IV of the Social Security Act that qualify a family for the earned income disregard, and that there are several benefits and services funded from federal or state TANF funds.
Response.
The two programs under Part A of Title IV of the Social Security Act include the TANF program administered by the State or local welfare agency and the Welfare-to-Work (WTW) program administered by the State or local WTW agency. Under the TANF program, the State or local welfare agency can use funds to pay for benefits or services, such as wage subsidies, child care, and transportation, as well as a one-time payment of assistance or diversion assistance funded from Federal or State TANF funds. Families assisted under any program under Part A of Title IV of the Social Security Act and who meet the other criteria under § 5.612 are eligible for the disallowance for increases in income as a result of employment. The PHA needs to coordinate and verify with its local welfare and WTW agencies to help the PHA determine who is eligible under § 5.612 for this disallowance.
Comment.
The final rule should clarify that training includes technical schools and community colleges. The final rule also should clarify in § 5.612 that family self-sufficiency includes training programs for people with disabilities that provide stipends or very low wages in a sheltered workshop type of job prior to transitioning to competitive employment.
Response.
There is nothing in the rule that would preclude technical schools, community colleges and training programs for persons with disabilities from being considered as family self-sufficiency or job training. The rule cannot list all eligible programs that may qualify as training, but this could be addressed further in future guidance issued by the Department.
2. Individual Savings Account
Comment.
The final rule should clarify that individual savings accounts are permissive on the part of PHAs and not mandatory.
Response.
The statute and regulation, at § 960.255(d), clearly state that a public housing agency
may
establish an individual savings account. The PHA has the option of offering individual savings accounts. The rule reflects the statutory language. Therefore, a family cannot require the PHA to establish an individual savings account.
Comment.
Section 5.612(c) gives the PHA the choice of offering individual savings accounts to eligible families and the choice transfers to the residents. This is not what the statute provides. The statute places the choice first with the eligible family, not the PHA. The rule should be revised to conform to the statutory language.
Response.
HUD disagrees with this comment. As noted in the preceding response, the statute clearly gives the PHA the option to offer individual
savings accounts. A family cannot compel the PHA to offer these accounts.
Comment.
The final rule should clarify conditions of authorized withdrawals from the individual savings account, and specifically should provide guidance on the term “moving out.”
Response.
Sections 960.255(d)(3) and (6) of the rule address the conditions under which a family receives its account when moving out.
Comment.
Section 5.612(c) states: “The PHA must provide that any balance in such an account when the family moves out is the property of the family unless the family is not in compliance with the lease.” The rule language is not clear whether the family loses its savings account if the family is evicted for any reason.
Response.
A family does not automatically lose its savings account if the family is not in compliance with the lease and is evicted. If a family is evicted for non-compliance with the lease, the family would receive its savings account, less any amounts the family owes the PHA.
Comment.
HUD's individual savings accounts should be modeled on accounts developed by other Federal agencies or organizations.
Response.
Both the statute and the regulation provide a PHA with flexibility in establishing individual savings accounts. Given this flexibility, HUD declines to require a PHA to establish an individual savings account in accordance with a specific model. However, the final rule does clarify that a PHA may not charge a fee for maintaining an account for a family, but it may pass along to the family any fee that a financial institution imposes on it for maintaining the account.
I. Income Changes Resulting From Noncompliance With Welfare Program Requirements (Proposed Rule § 5.618; Final Rule §§ 5.603, 5.613, and 5.615) (Section 512 of the 1998 Act Amending Section 12 of the 1937 Act)
Comment.
Section 5.618(a) lists those households whose rental payments may not reflect welfare reductions. It includes failure to satisfy economic self-sufficiency requirements imposed by the welfare agency. This list should be expanded to include categories such as failure to comply with child support requirements.
Response.
The statute is specific regarding compliance with welfare program requirements, including fraud eradication and support for economic self-sufficiency and work activity requirements. When determining tenant rent for families participating in the public housing and tenant-based Section 8 programs, PHAs are required not to consider reductions in income attributable to the welfare agency's sanctioning and enforcement of other welfare program requirements that are not related to economic self-sufficiency and work activity requirements. The statute contains a definition of economic self-sufficiency programs, which the regulation incorporates (§ 5.615).
Comment.
The list of households exempt from the limitation on rent reduction should also include a household that may have lost welfare income due to economic self-sufficiency sanction, but has subsequently obtained income from new sources.
Response.
The definition of “covered family” in the statute means a family that (1) receives benefits for welfare assistance or public assistance from a State, or other public agency under a program for which the Federal State, or local law relating to the program requires, as a condition of eligibility for assistance under the program, participation of a member of the family in an economic self-sufficiency program, and (2) resides in a public housing dwelling unit or is provided tenant-based assistance under Section 8. The comment suggests adding as an exemption, persons who were sanctioned but have since obtained employment or have gained other sources (of income).
This exception to the usual rent rules provided by the statute is for loss or reduction of welfare assistance or public assistance benefits due to sanctioning. The amount of income not actually received by the family as a result of sanctioning is included in the annual income as “imputed welfare income”. If the member of the family is no longer receiving any such benefits (because the family member is now working) the exception is not applicable. If, however, the member of the family is still receiving some portion of welfare/public assistance benefits (due to a reduction and not a total loss of benefits as a result of sanctioning), the exception remains applicable, even if the member of the family has income from other sources. A PHA should continue to include the imputed welfare income until either the sanction term ends or the family's income from other resources is at least equal to the imputed welfare income.
Comment.
It is not clear in § 5.618(a) that the only households subject to the rent reduction limitation at issue are those who meet the definition of “covered family” in the statute at 42 U.S.C. 1436j(d)(1). The final rule should clarify this point.
Response.
HUD revised the rule, at § 5.615(b), to include a definition of “covered family” that tracks the statutory language.
Comment.
The final rule should provide clarification of the term “fraud.” PHA staff is not always knowledgeable about welfare law and the subtleties involved in welfare fraud issues, and therefore it may not be clear to a PHA employee that the allegation of fraud that results in restitution and participation in civil rehabilitation programs results in no welfare fraud allegation or conviction.
Response.
As noted earlier, each State or local welfare agency determines for its program when a family has failed to comply with particular requirements or has committed fraud. The PHA must work with the State or local welfare agency to understand what constitutes fraud or noncompliance that results in a reduction of welfare assistance or public assistance benefits of a covered family.
Comment.
Section 5.618(b) needs to clarify that a PHA cannot deny a rent reduction pursuant to the statutory requirements before the PHA obtains notice described in the statute that justifies application of 42 U.S.C. 1437j(d)(2) and (3) and justifies its denial of rent reduction.
Response.
The final rule, at § 5.615(c)(2), is clear regarding the obligation of the PHA to obtain written verification from the welfare agency of the basis for the reduction of welfare assistance or public assistance benefits and the term of the reduction of benefits.
Comment.
Section 5.618(b) should state with specificity that the PHA is bound by federal confidentiality laws as well as state and local data privacy and confidentiality laws in its sharing of information with the welfare agency.
Response.
The verification of income or welfare benefits is covered under HUD existing regulations that provide for confidentially and use of information obtained from third parties.
Comment.
HUD must provide clear guidance to PHAs on what information is appropriately required from the welfare agency. The PHA will probably need a release from the family to obtain the verification the statute and regulation require. HUD must provide guidance in clearly limiting the scope of the release to protect the resident and the housing authority staff from overreaching inquiries and unnecessary release of protected information that may leave the housing authority open to liability if information is carelessly
handled. HUD should provide PHAs with a model release form.
Response.
HUD is in the process of developing a model cooperation agreement, which can be used to specify the verification process to determine welfare assistance or public assistance benefits, as well as obtaining verification of any loss of benefits due to noncompliance or fraud. PHAs, however, may not delay the implementation of this provision based on the Department's timetable for design or issuance of a model cooperation agreement. The PHA is required to make its best efforts to enter into such cooperation agreements, with State, local or other agencies providing assistance to covered families under welfare assistance or public assistance programs, as may be necessary.
Comment.
Section 5.618(c) references the hearing procedures in § 982.555, which are applicable to tenant-based Section 8 tenants. This section should also refer to the hearing procedures for public housing residents in § 966.55(e)(2).
Response.
The rule was revised, at § 5.615(d)(1), to reference the public housing hearing procedures in part 966.
Comment.
A PHA's notice to a family of the PHA's decision to deny the rent reduction after obtaining verification of income reduction for noncompliance with economic self-sufficiency requirements should be in writing, timely provided, specifically state the decision of the PHA and the basis for the decision in law and fact, and advise the family of the procedure for seeking review.
Response.
The final rule, at § 5.615(d), provides that a PHA must notify the family in writing that they have a right to ask for an explanation stating the specific grounds of a PHA determination, and that the family may request a hearing under the grievance procedure if they disagree with the determination.
Comment.
The rule should be revised to require final action on the part of the welfare agency before rent reduction can be refused. Section 5.618(b), as proposed, permits responsible entities to delay rent adjustments until verification is obtained from the welfare program. The proposed rule conflicts with the statutory basis for the rule, 42 U.S.C. 1437j(d), which states at subsection (d)(4) that the PHA may not refuse to take action to reduce rent until written notification is obtained from the welfare program.
Response.
The final rule provides, at § 5.615(c)(2), that the PHA must rely on the written determination of the welfare agency to base its decision concerning rent reduction, which tracks the statutory requirement.
Comment.
Rent reduction limitation also should apply to families for which other benefits are decreased due to fraud, for example, Social Security benefits which have decreased due to defrauding the Social Security Administration.
Response.
The treatment of income changes resulting from welfare program requirements which prohibit the reduction of rent due to noncompliance or fraud is statutory and is applicable to welfare assistance and public assistance benefits specifically. HUD does not have the authority to expand this provision to other federal assistance programs.
Comment.
The rent reduction process results in additional administrative burden, specifically, increased reporting requirements and tracking of eligible families.
Response.
HUD is aware that the rent reduction process will require PHAs to obtain written verification of sanctioning from welfare agencies. HUD believes that the administrative responsibility imposed by the verification process can be simplified and minimized through cooperative relationships with the welfare agencies.
Comment.
HUD must provide additional guidance for § 5.618 because of the complex nature of the various welfare programs and PHA unfamiliarity with their operation.
Response.
The best guidance concerning the nature and operation of the various welfare programs comes from the welfare agencies who administer these programs. HUD anticipates that these welfare agencies will be cooperative in assisting PHAs in understanding their programs. HUD strongly encourages PHAs to coordinate with their State or local welfare agencies to improve the reporting of income and detection of fraud and to streamline the process where possible. Additionally, HUD encourages PHAs to use the cooperation agreements, as described in section 12(d)(7) of the 1937 Act, as amended by section 512 of the 1998 Act, to improve the service delivery between the two agencies to promote self-sufficiency and otherwise address the needs of low-income families.
J. Rents in Public Housing (Proposed Rule §§ 5.603 and 5.614; Final Rule §§ 5.603 and 960.253) (Section 523 of the 1998 Act Amending Section 3(a) of the 1937 Act)
1. Income-Based Rents
Comment.
The preamble language in the proposed rule that stated HUD cannot provide assurance of its ability to subsidize ceiling rents is inappropriate. Whenever Congress has conditioned a commitment on the availability of future appropriations, it has explicitly said so. There is no such language conditioning the statutory commitment to provide a fair and equitable level of operating assistance for tenancies that pay flat rents or ceiling rents established in accordance with section 523 of the 1998 Act.
Response.
While the 1998 Act does not explicitly condition this provision on the availability of future appropriations, the subsidy of either flat rents or ceiling rents is an issue being considered during the operating fund negotiated rulemaking because of the cost implications. The subsidy to pay for any particular level or type of rent cannot be assured.
2. Flat Rents
Comment.
The language in § 5.614(a)(1) concerning the use of comparability studies to justify a flat rent system seems contrary to the Federal Government's policy disfavoring statements in the Code of Federal Regulations that give advice about what a regulated entity should do, rather than stating what it must do. With respect to the specific suggestion that a PHA should use a comparability study to justify a flat rent system, section 523 of the 1998 Act, which establishes the requirement for alternative rent systems, does not employ the term “comparability.” To the extent that comparability studies may constitute one manner for developing flat rents, section 523 of the 1998 Act, makes it one method among equals.
Response.
It is important that there be a uniform standard for setting flat rents, to ensure that the rents established meet the statutory requirements and are established in a comparable manner across all PHAs. The cost implications of flat rents further make a uniform policy necessary. HUD has revised § 960.253(b)(2) to more clearly articulate the statutory link between flat rents and the rental market. The rule has been further revised to clarify the requirement for documenting the method for setting the flat rents equal to comparable market rents. In addition, we note that to have adequate information about the income levels of families served by the 1937 Act programs, HUD may seek income information on a sampling basis from families paying flat rents, whose incomes are not regularly required to be examined more often than every three years.
Comment.
If a comparability study is used, the rule needs to make sure that such study includes certain additional factors, such as crime level in the project and in the vicinity; drug activities in the project and in the vicinity; and gang activities in the project and in the vicinity, to name a few.
Response.
Section 960.253(b)(3) broadly identifies the factors a PHA must consider when determining flat rents. HUD has clarified that the flat rent must be the estimated rent at which the PHA actually could rent the unit once it is prepared for occupancy.
3. Family Choice
Comment.
The family's ability to choose between an income-based rent and a flat rent will be an administrative burden for the PHA.
Response.
Choice of rent is required by section 523 of the 1998 Act. Section 523 increases a PHA's flexibility regarding rent policies, while also requiring that a family be given a choice of flat or income-based rent.
Comment.
Section 523 of the 1998 Act requires that tenants who pay a ceiling or flat rent receive income reexaminations not less than once every three years. HUD should adopt the statutory three-year standard. While the statute allows the family to “elect annually” without showing hardship to change its rent-payment method, that is the family's choice, and in the absence of that election, a PHA should not be required to go through the costly, unnecessary task of conducting an annual income-based rent determination for a family who does not want one and does not need one.
Response.
As stated in the comment, section 523 of the 1998 Act requires PHAs to provide families residing in public housing the choice to elect annually, which rent option they prefer, even if they are paying a ceiling rent or flat rent, but permits income to be reviewed every three years if the family chooses the flat rent. HUD emphasizes that a family must be offered a choice of rent options annually, and must be provided sufficient information to make an informed choice. To illustrate, if a family elected an income-based rent (because according to their calculations, the income based rent is less than the flat rent), but upon re-examination by the PHA discovered that the income-based rent is actually higher than the flat rent, the family should be allowed to opt for the flat rent at that time (because the information regarding choice of rents seems insufficient for the family to have made a reasonable choice). In response to the comment, however, the final rule provides that where a family previously has elected a flat rent (prior to the three year required reexamination), the PHA must provide the calculation of the income-based rent only at the family's request.
Comment.
The PHA is responsible for providing the rent option to the family every year along with sufficient information for the family to make an informed choice. The rule should clarify the meaning of “sufficient information.” Additionally, the preamble to the proposed rule provides that the PHA should provide each affected family a worksheet so that it may compute its own income-based alternative rent. The preamble language appears to contradict proposed § 5.614(c), which requires the PHA to conduct an annual rent determination for the family—as though the family had elected to pay rent based on income—and provide the family a copy of its policy on switching between rent systems.
Response.
The preamble to the proposed rule provided a discussion of the minimum amount of information a PHA should, and the types of information a PHA could provide to a family regarding choice of rents. The regulation clearly states what minimum amount of “sufficient” information is necessary. The preamble suggested a worksheet as a possible alternative, in a manner similar to PHAs who provide residents worksheets at annual re-examination.
Comment.
All residents should be notified by the PHA about the flat rent and income-based rent prior to implementation.
Response.
HUD believes that a PHA's obligations concerning rent options and notification to families of their options is appropriately addressed in the rule. The rule requires the PHA to (1) establish written policies concerning rent policies, and (2) inform families of their rent options.
4. Switching Rent Methods to Lower Rent Because of Financial Hardship
Comment.
Switching rents due to financial hardship creates a significant administrative burden.
Response.
As noted earlier in this preamble, choice of rent is explicitly required by section 523 of the 1998 Act, as is the ability to switch rents because of financial hardship. Choice of rents is intended to provide increased amount of flexibility regarding rent policies for PHAs and residents, as families transition from welfare to work. Congress believed it necessary, however, to have hardship provisions for families who may need additional assistance at certain points in the transition.
Comment.
Granting a rent waiver to one family penalizes other families who are meeting their obligations; additional rent collections will decrease. A sizable percentage of all households living in public housing experience financial hardship frequently, yet the PHA expects them to pay their rent in full, on time. In special circumstances, a family may sign a payment agreement to make up rent which is in arrears. However, granting a rent “waiver” to one family penalizes others who are meeting their rent obligation. Ultimately rent collection rates will go down.
Response.
Section 960.257(b) now provides that families may request an interim reexamination of family income or composition because of any changes since the last determination. Families who experience an unanticipated reduction in income are able to request an interim reexamination, and have their rent adjusted accordingly. Therefore, these families are not penalized, as suggested by the comment.
Comment.
The final rule should make clear that a family must specifically notify the PHA of its wish to switch rent methods due to financial hardship, and the rule should provide that the rent be lowered no later than the first of the month following the month the family reports the hardship is unreasonable and should be revised.
Response.
As stated in the proposed rule, the PHA must switch the family's rental payment immediately if there is a hardship. However, HUD realizes that the PHA may not be able to immediately adjust its systems to switch a family's rental payment. When establishing its policies, a PHA should indicate the timeframe in which a family must notify the PHA of a financial hardship, and the need to switch rent systems, and the PHA should be able to act within 30 days, which includes verifying the financial hardship, before switching the family from one rent system to another. Such policies should attempt to maintain administrative simplicity while being responsive to unforeseen changes in family circumstances.
Comment.
There should be a limit on the number of times within a specified period of time that a family or individual can claim the hardship exemption.
Response.
The rule provides such a limitation. The rule provides that once a family switches to income based rent due to financial hardship, the family must wait until its next annual option to select the type of rent.
Comment.
The final rule should clarify that circumstances for
exemptions for death apply only to family members on the lease or principal wage earners, to prevent multiple requests for hardships due to death for other circumstances not envisioned by the Congress or HUD.
Response.
The statute indicates that financial hardship policies must include situations where the family has experienced a decrease in income because of a death in the family. HUD does not believe that this was intended to be limited to the death of family members who are wage earners, but rather any family members on the lease for the unit, whose death created a loss of income in the household.
Comment.
The statute requires a PHA to “immediately” provide for the family to switch to an income-based rent upon a determination that a family is unable to pay the previously chosen flat rent because of financial hardship. The rule seems to imply that the PHA can make its own policy on switching from a flat rent to income-based; however, it appears that the statute gives the PHA no choice in certain specific instances. HUD needs to clarify this matter.
Response.
As stated in the proposed rule, the PHA must switch the family's rental payment immediately if there is a hardship. Though the PHA does not have discretion in determining whether or not to switch a family's rent because of hardship, the PHA does have discretion in establishing its hardship policies, including the time frame in which a family must notify the PHA of a financial hardship, and the need to switch, the type of verification required, etc. When establishing such policies, the PHA should attempt to maintain administrative simplicity while being responsive to unforeseen changes in the family circumstances.
5. Retaining Ceiling Rents
Comment.
HUD should provide the option to use ceiling rents beyond three years. HUD's interpretation that the statute limits the retention of ceiling rents is wrong. The 1998 Act explicitly permits PHAs with ceiling rents to retain them, instead of developing flat rents based on neighborhood market rental levels for comparable housing.
Response.
HUD is not revising the ceiling rent provision from that provided in the proposed rule. As stated in the proposed rule, PHAs that have already established ceiling rents may continue to use those ceiling rents in lieu of establishing a flat rent for those units for three years. After the three year period, ceiling rents will continue to be allowed as a cap on an income based rent, but not as an alternative to flat rents.
At the time the 1998 Act was enacted, a proposed rule was pending which would have resulted in a requirement that ceiling rents reflect the market in a manner similar to that required by the statute and this regulation for flat rents. That rule would have been finalized accordingly. HUD thus believes that a maximum 3-year time period on retention of ceiling rents as an alternative to flat rents is both reasonable and fully consistent with Congressional intent. Of course, the flat rents will have a similar effect to ceiling rents set at market. In addition, tenants for whom the flat rents are higher than the current ceiling rents always can choose to pay the income-based rent, which will not exceed thirty percent of their adjusted incomes.
K. New Community Service and Self-Sufficiency Requirements for Public Housing (Proposed Rule §§ 960.603-960.611; Final Rule §§ 960.601-960.609) (Section 512 of the 1998 Act Amending Section 12 of the 1937 Act)
1. General
Comment.
There is a significant administrative burden associated with the new community service and self-sufficiency requirements. The community service requirement is punitive to public housing residents. The requirement to establish a community service program exceeds the PHA's charter. These requirements clearly constitute an unfunded mandate. HUD must take steps to minimize the burden to the fullest extent without compromising statutory intent.
Response.
The new community service and self-sufficiency requirements are statutory. HUD has strived to provide as much flexibility as possible to PHAs to allow them to administer this provision without creating significant burden.
HUD urges implementation of this provision in a manner consistent with its intent, as discussed in the Senate Committee Report (S. Rep. No. 63, 105th Cong., 1st Sess. 1997). The Report states that the provision is not intended to be perceived as punitive, but rather considered as rewarding activity that will assist residents in improving their own and their neighbors' economic and social well-being and give residents a greater stake in their communities.
Comment.
The final rule should eliminate the requirement for a PHA to identify and notify each individual of the community service status. The PHA should only be obligated to notify all families of the general requirements and exemptions and place the burden upon the family to notify the housing authority of the required participation of some of its family members, under the pain of lease violation and subsequent eviction actions. Additionally, the final rule should permit the resident to self-certify concerning his or her ability to comply with the community service requirement.
Response.
HUD has revised §§ 960.605 and 960.607 to provide PHAs as much flexibility as possible, while still meeting the statutory requirement. The revision to § 960.605(c) requires PHAs to verify compliance annually, at least 30 days before the expiration of the lease term. Self-certification by residents is not acceptable; third party certification must be provided by the entity with whom the resident is working.
There are various community service models that PHAs may want to consider in developing their process for administration of the community service requirement. One of the models is based on a high school requirement for graduation used by high schools, that each student is required to perform a certain number of hours of community service in order to graduate. Similarly, PHAs could provide guidance lists of acceptable activities to residents, along with ways to contact various groups or PHA-sponsored activities that meet the requirement and intent of the community service provision. Residents could, perhaps two months prior to the end of the lease, have a signed certificate from the community service or self-sufficiency activity contact, that in fact they have provided the requisite amount of service.
Additionally, PHAs may, but are not required to, provide advance approval of a community service activity. Advance approval by the PHA may avoid the possibility of refusing to recognize the activity as eligible after it was performed by the resident. Advance approval also may help to ensure that the activity is not performed under conditions that would be considered hazardous, or that the work is not labor that would be performed by the PHA's employees responsible for essential maintenance and property services, or that the work is otherwise unacceptable.
Comment.
Residents who are not exempt from community service should be provided a statement of rights and obligations.
Response.
The rule provides, at § 960.605(c), for written notification of the provisions of the community service requirement to all residents, including a description of the service requirement, who is exempt, and how the exemption will be verified.
Comment.
A community service contribution of 8 hours a month is too low. The requirement should be at least 16 hours a month. Another comment suggests that the rule should clarify whether required hours may be accrued.
Response.
The statute is clear that the expectation is that each adult member of the family unless otherwise exempt is required to contribute eight hours per month of community service. HUD, however, believes that there should be some flexibility for PHAs to allow individuals, based on circumstances that may prevent the individual from performing the eight hours of community service/economic self-sufficiency each month, to remedy this requirement by performing the activity prior to the renewal of the lease or within a reasonable period determined by the PHA.
Comment.
The final rule should go further and require residents to provide verification that they applied for employment in 3 different locations each week.
Response.
This suggestion exceeds the requirement imposed by the statute. The rule reflects the statutory requirement to engage in community service.
Comment.
The final rule should provide for duly-elected resident councils to administer community service requirements and have community service activities include activities to develop and strengthen the capacity of resident councils. Additionally, the final rule needs to address issue of acceptable community service providers.
Response.
As noted earlier in this preamble, HUD's position is to allow PHAs as much flexibility as possible in administering the community service and self-sufficiency requirements. PHAs have the discretion to involve duly-elected resident councils in the administration of community service requirements. Additionally, PHAs are in the best position to determine acceptable community service activities within the broad parameters established. HUD encourages PHAs to involve qualified resident councils where they can facilitate effective implementation of the community service requirement.
Comment.
HUD should provide funding from resident initiatives funds for third party administration of the community service requirement.
Response.
This comment is outside the scope of this rulemaking. The purpose of this rulemaking is limited to implementing the changes in admission and occupancy requirements made by the 1998 Act.
Comment.
With respect to § 960.607(d) that provides, in relevant part, “if the noncompliant adult moves from the unit, the lease may be renewed,” the rule should explain how a PHA should respond to a report that a covered individual has moved from the household.
Response.
HUD believes the following revision to § 960.607(c)(2) will address this issue. Section 960.607, which addresses “Assuring Resident Compliance,” is revised at the final rule stage to add the following language: “All members of the family who are subject to the service requirement are complying with the service requirement or are no longer residing in the unit.”
Comment.
There is concern about liability that may be attributable to PHAs for requiring or explicitly approving community service activities. HUD and the Congress must fully consider the implications of this requirement and implement this provision so as to ensure maximum protection for PHAs against possible litigation in this regard.
Response.
Again, PHAs are given considerable discretion to implement the community service and self-sufficiency requirements as they determine appropriate, taking into consideration their resident population and local circumstances (e.g., using local community service providers). PHAs can and should implement community service programs in a prudent manner that will minimize liability.
Comment.
The final rule should provide no adverse action against a resident if a community service provider is not responsive. Since PHAs will rely on other agencies for verification of resident community service activity, it is essential that no adverse action be taken against a resident if the third party agency fails to respond to housing authority and resident requests for verification. Another comment suggests that the rule should provide owners and PHAs with the right to require tenants to provide reasonable documentation for activities that meet community service requirements. Another comment suggests that the rule also should require PHAs to provide notice to residents of programs in which the residents may participate to meet the community service requirement. Another comment suggests that the rule should provide that the 8 hour per month requirement can be a combination of the community service and economic self-sufficiency requirements. Another comment suggests that HUD should advise whether it will issue a form of certification to be executed by entities for which residents perform community service activities; if the certification appears valid on its face, may the PHA rely on the certification, or must it take any further action to confirm that the certification is accurate.
Response.
The rule strikes the appropriate balance of setting out the basic requirements for community service (and the exemptions) and self-sufficiency, as required by the statute, and providing PHAs with the flexibility to establish the manner in which they will administer these requirements. HUD therefore declines to adopt all of these specific suggestions. The regulation has been revised to clarify that the eight hours can be a combination of the community service and economic self-sufficiency activities to meet the requirement.
Comment.
The final rule needs to address the relationship between a person performing community service and the PHA or community service provider. The rule should clearly specify that: the resident performing community service is neither an employee of the PHA nor the community service provider; the resident is not entitled to a stipend, unemployment or worker's compensation or disability benefits.
Response.
The statute and this regulation clearly do not create or contemplate an employer/employee relationship between the public housing resident performing community service and the PHA or other community service provider.
2. Exemptions
Comment.
Persons with disabilities should not be exempt from community service requirements, because generally all persons with disabilities can perform some type of community service—for example, collating material for a nonprofit agency. In contrast to this first comment were the following comments. Persons with disabilities should be exempt on basis of any existing documentation already in place of their status, and not require new certification. There should not be a dual test to exempt persons with disabilities, i.e., disability and inability to work. The final rule must provide clear standards on how to determine that a person with disabilities is unable to work. The final rule should exempt persons with disabilities who are not yet officially labeled as such. Persons receiving disability assistance under a state disability program should be automatically exempt.
Exempt all persons with disabilities absent clear evidence to the contrary.
Response.
The exemption from the community service requirement for persons with disabilities who are also not able to perform community service is statutory. In terms of documentation of a disability, standards already exist, as provided in the language of § 960.601. Existing documentation will be accepted as evidence of a disability, and disabled individuals will be permitted to self-certify that they can or cannot perform community service or self-sufficiency activities. The rule cannot exempt persons with disabilities who are not yet officially classified as such, because documentation is required, as provided in § 960.601 and in the statute. Persons receiving disability assistance under a State disability program may be exempt, if they meet the disability definition in section 12 of the 1937 Act and in § 960.601.
Comment.
Any PHA verification of disability is not consistent with Fair Housing Act regulations.
Response.
Verification of disability is not inconsistent with the Fair Housing Act regulations. The new law establishes a community service requirement and provides a definition of person with disabilities that is separate from the definition provided under the Fair Housing Act.
Comment.
Documentation that a family is receiving assistance under the TANF Program should be sufficient verification of a family member's exemption from community service requirement. If PHAs verify that the resident family is receiving assistance under the TANF program without sanction for non-compliance with a work activity requirement, there should be no additional verification.
Response.
To determine whether a family member is exempt from the community service requirement, the PHA must verify with the welfare agency that the person is complying with a work activities requirement. “Work activities” is broadly defined in Section 407(d) of the Social Security Act (42 U.S.C. 607(d)), and it is expected that individuals participating in these work activities will be exempt from community service requirements under this part. (HUD will make the definition of work activities available through its website and through additional guidance.) Additionally, the PHA has the discretion to adopt the verification process suggested by the commenter.
Comment.
Exemption for welfare status will be difficult to determine and enforce because status can change frequently.
Response.
To minimize burden to the PHA, HUD suggests that PHAs include the determination of welfare status in the cooperation agreement they enter into with the local welfare agency.
Comment.
The final rule should provide that PHAs are to rely on documentary evidence from other agencies bearing responsibility for determining an exemption category. PHAs are not responsible for making an independent determination of status.
Response.
Nowhere in the rule is a burden placed on PHAs to determine an exemption category of a family member that is related to welfare programs. That determination is clearly left to welfare agencies, and PHAs are to look to these agencies for the determination of exemption of a family member.
Comment.
The process for qualification for an exemption needs to be addressed by the rule. The proposed rule did not adequately address how a PHA would determine whether an adult, non-elderly household member would establish qualification for an exemption from the community service requirement.
Response.
As stated in an earlier response, the rule strikes the appropriate balance of setting out the basic requirements for community service (and the exemptions) and self-sufficiency as required by the statute, and providing PHAs with the flexibility to establish the manner in which they will administer these requirements. HUD declines to establish by rule a process for qualification for an exemption.
Comment.
The final rule should exempt primary caregivers; retirees below the age of 62; homemakers; and pregnant women.
Response.
The categories of individuals exempt from the community service and self-sufficiency requirements are statutory. HUD does not have the authority to add additional categories.
Comment.
The final rule should codify in the regulatory text the preamble language that states that PHAs must establish policies that permit residents to change exemption status during the year if their situation changes. This language should be added to paragraph (2) of § 960.605(c).
Response.
HUD has included language at § 960.605(c) that requires PHAs to establish and describe policies addressing categories of individuals exempt from the service requirement. The PHA policy should include how the PHA will deal with any changes in exemption status.
3. Noncompliance
Comment.
The rule should clarify whether a person who has been declared to be required to participate in community service has the right to a grievance hearing to challenge the decision of the PHA.
Response.
Section 512 of the 1998 Act contains the requirement of due process for residents when the PHA is reviewing and determining resident compliance with the community service and self-sufficiency requirements.
Comment.
Notice of noncompliance and a copy of any agreement for cure should be given to both the noncompliant resident and the leaseholder. It is critical that the leaseholder be included because it is the leaseholder's obligation to ensure compliance.
Response.
HUD agrees. The rule (at § 960.607(b)) already specifies that the noncompliant adult and the head of household must sign any noncompliance and cure agreement.
L. Reexamination and Verification of Family Income and Composition (Proposed Rule §§ 5.617 and 960.209; Final Rule §§ 5.657, 960.257, and 960.259)
Comment.
For a family paying income-based rent, it is of paramount importance that the rent is income-based and that an interim reexamination be processed immediately, not “within a reasonable time after the family request.” The responsible entity should be required to make the reexamination immediately, or within 5 working days of the family's request to prevent hardship to the family. Another comment suggests that § 5.617 should require that any reduction must be effective either in the month in which the family loses income or the following month and that reductions can be retroactive. Another comment suggests the final rule specify how long an interim reexamination must take, as the current regulations do, otherwise delays in decreases in rent can cause tenants to be able to afford rents and be evicted.
Response.
HUD does not prescribe the time period between the reexamination and implementation of the new rent. Whatever action the responsible entity intends to take in this regard and the time periods involved should be reasonable, consistent with and according to State law. When establishing its lease policies, the responsible entity should attempt to maintain administrative simplicity, while being responsive to unforeseen changes in family's circumstances. Additionally, current regulations do not
specify how long an interim reexamination must take.
Comment.
The rule requires strict annualization of interim income changes in every case, and annualization can cause substantial increases in rent for assisted tenants even where significant income reductions are quite foreseeable in the future. The rule should permit responsible entities to be able to “look back” at a family's historical income patterns in appropriate cases if available information is not reliable for predicting income for the reasonably foreseeable future.
Response.
Annual income is defined in § 5.609(a)(2) as “all amounts monetary or not, which . . . are anticipated to be received from a source outside the family during the 12-month period following admission or annual reexamination effective date . . .” This definition always has allowed PHAs to base anticipated income for the next year on historical patterns rather than current or immediate past income, and PHAs will have an additional incentive to do this in situations where the family's income then will assist the PHA in meeting income targeting goals. To provide additional flexibility in this area, section 5.609 (e) of the existing rule, which permits PHAs to anticipate income for a shorter period when 12 months is not feasible, has been further revised in the new § 5.609(d). It now references seasonal or cyclic income and permits—but does not require—annualization when the PHA believes that past income is the best available indicator of expected future income. PHAs should consider the effect of their policy on the treatment of seasonal or cyclic income on their ability to satisfy the requirement for targeting admission to very low income families.
Comment.
Section 5.617 requires at least annual income and family composition determinations for public housing residents paying income-based rent, but notes that the rule does not require this determination for public housing residents who have chosen flat rents. Annual reexaminations of income and family composition are necessary for families paying flat rents because PHAs must allow families to choose their rent structure annually.
Response.
The statute specifically states that for families electing to pay a flat rent, the PHA need only reexamine their income every three years. As reflected in responses to other comments, during the three-year period, PHAs are required to provide families paying a flat rent with the calculation of the income-based rent only if the family requests that information.
Comment.
Section 5.617(b)(2) should be revised to assure that any interim reporting process include oral and written explanation to the resident of the factors considered in the rent recalculation, particularly disregard of increases in income from employment, choice of rent, and child care and medical care deductions.
Response.
A PHA must establish policies and procedures regarding interim reexaminations, and such policies are reported in connection with the PHA Annual Plan. It is at the PHA's discretion to establish policies on how it will conduct an interim reexamination, beyond what is specified in § 960.257(b) for the public housing program.
M. Occupancy by Police Officers and Over-Income Families (Proposed and Final Rule §§ 5.619 and 960.503-960.505) (Sections 524 and 548 of the 1998 Act Amending Sections 3 and 8 of the 1937 Act)
Comment.
In light of the public nature of the PHA planning process, the portion of the plan that addresses police officer placement in public housing should not contain the level of detail demanded by the current rule with respect to the number and location of officers to be placed in particular projects.
Response.
The regulation clarifies that the PHA Plan or supporting documents include the number and location of the public housing units to be occupied by police officers and the terms and conditions of their tenancies and a statement that the action is taken to increase security for public housing residents. The new law provided substantial relief to PHAs in this area compared to previous requirements found in 24 CFR part 960. Reporting of this limited information in connection with the PHA Plan is not unreasonable.
Comment.
The rule requires owners of Section 8 project-based buildings to submit a written plan to the local HUD Field Office for authorization to lease a unit to over income police officers. Such plans should be submitted to the PHA for approval or disapproval in those instances where the housing authority is the contract administrator.
Response.
HUD agrees with this comment and has revised the rule to adopt this suggestion.
N. Changes to Existing Self-Sufficiency Programs—Public Housing and Section 8 Certificate/Voucher Programs (Proposed and Final Rule Part 984) (Section 509 of the 1998 Act Amending Section 23 of the 1937 Act)
Comment.
The change to the definition of “welfare assistance” for purposes of the Family Self-Sufficiency Program in § 984.103 (i.e., removing Medicaid and SSI from the definition) will assist low-income families by allowing working participants to complete the program successfully without sacrificing their family's health associated benefits.
Response.
HUD agrees that the new definition of “welfare assistance” for purposes of the Family Self Sufficiency (FSS) program supports welfare reform. This definition remains basically unchanged in the final rule, except that we have borrowed language from the definition of assistance used in the TANF program. Additional clarifications are addressed in the following comments and responses.
Comment.
The final rule should clarify whether the new definition of welfare assistance covers emergency assistance and food stamps.
Response.
HUD has revised the language in § 984.103 to confirm that Food Stamps and emergency rental and utilities assistance are not included in welfare assistance for purposes of the FSS program.
Comment.
The definition of welfare assistance in § 984.103 should be revised to read as follows: “Welfare assistance does not include the income assistance received by non-head-of-house family members for their disabilities (SSI, SSDI, etc.) or for Social Security.” Without this change an FSS participant is penalized for having a disabled or elderly family member.
Response.
HUD has revised the language at § 984.103 to confirm that SSDI, SSI, and Social Security benefits are not welfare assistance.
Comment.
The final rule should clarify participants to which the new definition of “welfare assistance” is applicable.
Response.
Guidance on this issue is more appropriate for implementing instructions and guidance documents than for this rule.
Comment.
The definition of “welfare assistance” appears contradictory, because it states that the term “welfare assistance” does not include programs that provide “health care, child care, or other services to working families”, but the TANF program provides these very services and the TANF program is included in the definition of welfare assistance.
Response.
HUD has revised the definition of “welfare assistance” for purposes of the FSS program to clarify what is and is not included.
Comment.
The rule should clarify that for voluntary or mandatory FSS programs, HUD reimburses PHAs for the cost of the FSS escrow.
Response.
This comment is not within the scope of this rulemaking. The issue of reimbursement is a matter to be addressed by the negotiated rulemaking committees for the Section 8 Renewal Fund and the Public Housing Operating Fund.
Comment.
The rule should include authorization for Section 8 FSS families to use their escrow accounts funds for homeownership through HUD programs, as well as other governmental programs.
Response.
The rule does not provide any restriction to use escrow account funds for homeownership through HUD programs or other governmental programs. Therefore no explicit authorization is needed.
Comment.
The rule should address PHA approval of portability moves during the initial year of the FSS contract. Additionally, the rule should clarify whether a tenant has a right to a hearing if a PHA denies the tenant's request to move outside of a PHA's jurisdiction during the first 12 months after the effective date of the contract.
Response.
The rule is not the appropriate place to address the various situations in which a PHA should or should not approve requests for moves during the first year of the FSS contract. Specifying the circumstances in which a PHA must approve a move would unnecessarily limit the PHA's discretion in administering its programs. Although a PHA should not arbitrarily restrict moves where there is good cause for the tenant to move, the decision to approve or disapprove the move rests with the PHA. A hearing is not required if a PHA denies the tenant's request to move outside of a PHA's jurisdiction. Families, however, always have the option of bringing their complaints to HUD if they believe that the PHA has acted without justification. Also, see § 982.353 for portability restrictions during the first 12 months after admission.
Comment.
The rule should contain a specific requirement that in determining whether to grant a FSS participant's request to move within the initial 12 month period of tenancy, the PHA must consider its duty to affirmatively further fair housing.
Response.
The Department will not adopt this suggestion. A PHA's duty to affirmatively further fair housing is a consideration at the basis of many PHA decisions with respect to tenants. This is only one factor, however, considered by a PHA with respect to a tenant's request to move. Others include the availability of appropriate services, training, and employment opportunities.
O. Lease Requirements (Proposed and Final Rule § 966.4) (Section 512 of the 1998 Act Adding Section 6(l)(1) to the 1937 Act)
Comment.
The requirement for a 12-month lease will adversely affect PHAs both financially and with respect to unit occupancy. The 12-month lease will have an adverse impact on Tenant Accounts Receivable. The 12-month lease term should be optional. Allow PHAs to establish lease terms based on local practices and conditions. The rule should provide exceptions to the 12-month lease term.
Response.
The requirement for a 12-month lease is statutory, as well as the requirement that the PHA lease be renewable for all purposes except noncompliance with community service requirements. Regardless of the term of the lease, PHAs may allow for a 30-day (or less) notice period for tenants to notify the PHA that they wish to terminate the lease. This will eliminate any adverse impact on tenants or Tenant Accounts Receivable. In establishing the initial term, a PHA may extend the period a few days beyond 12 months to make the lease term extend to the end of a month.
P. Escrow Deposits (Proposed and Final Rule § 966.55)
Comment.
Escrow deposits, as provided in § 966.55, should be required only when the PHA asserts that rent is due because of the family's act or failure to act.
Response.
The regulatory language is clear that an escrow deposit is required only in instances where a hearing is scheduled in any grievance involving the amount of rent. The rule goes on to say that the escrow deposit is the amount of rent the PHA states is due and payable as of the first of the month preceding the month in which the family's act, or failure to act, took place. No additional clarification is necessary.
Comment.
Escrow requirements should be waived whenever recent hardship or welfare benefit rent reductions are involved.
Response.
The regulatory language is clear that the PHA must waive the requirement for an escrow deposit in cases where either (1) a family is appealing a financial hardship determination related to minimum rent requirements, or (2) the family is appealing a PHA's decision not to reduce the annual income of a family as a result of a reduction in welfare benefits attributable to fraud or a failure to participate in an economic self-sufficiency program or to comply with a work activities requirement. No additional clarification is necessary.
IV. Findings and Certifications
Public Reporting Burden
The information collection requirements contained in this final rule are unchanged from the proposed rule. The final rule, however, reorganized certain regulatory sections of the proposed rule. The sections containing the information collections affected by the proposed and final rules are stated in the chart below. These information collections were reviewed by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2577-0230. In accordance with the Paperwork Reduction Act, no agency may 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.
Section of 24 CFR in Proposed Rule
Section of 24 CFR in
final rule
5.410 Residency Preferences
5.655(c)
960.206(b)
5.611 New Deductions
5.611
5.612(c) Individual Savings Accounts
960.255(d)
5.614(c) Written Rent Options
960.253(e)
5.618(b) Welfare Rent Verification
5.615(c)
5.618(c) Welfare Rent Notice
5.615(d)
960.605(c) Community Service
960.605(c)
960.505 Over Income Families in Small PHAs
960.505
Regulatory Review
The Office of Management and Budget (OMB) reviewed this final rule under Executive Order 12866,
Regulatory Planning and Review.
OMB determined that this final rule is a “significant regulatory action,” as defined in section 3(f) of the Order (although not economically significant, as provided in section 3(f)(1) of the Order). Any changes made to the final rule subsequent to its submission to OMB are identified in the docket file, which is available for public inspection in the office of the Department's Rules Docket Clerk, Room 10276, 451 Seventh Street, SW, Washington, DC 20410-0500.
Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act, 5 U.S.C. 605(b), has reviewed and approved this rule and in so doing certifies that this rule would not have a significant economic impact on a substantial number of small entities. The rule implements changes to admission and occupancy requirements in public housing made by the Quality Housing and Work Responsibility Act of 1998. These are statutory changes, and these admission and occupancy requirements apply to all families residing in public housing or receiving Section 8 assistance or applying for public housing or Section 8 assistance. The Congress did not provide exceptions for admission and occupancy requirements to families because t
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