# Public Housing Program: Demolition or Disposition of Public Housing Projects, and Conversion of Public Housing to Tenant-Based Assistance

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URL: https://www.frixlaw.com/law-library/documents/fr%3A2014-24068

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** October 16, 2014
- **Citation:** 79 FR 62250

## Text

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 970 and 972
[Docket No. FR-5399-P-01]
RIN 2577-AC82
Public Housing Program: Demolition or Disposition of Public Housing Projects, and Conversion of Public Housing to Tenant-Based Assistance

AGENCY:

Office of the Assistant Secretary for Public and Indian Housing, HUD.

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would revise and update HUD's regulations governing the demolition and disposition of public housing. Currently, demolitions and dispositions are approved based on certification by a public housing agency (PHA) that certain conditions are met. This rule increases the oversight of demolition and disposition of public housing by requiring PHAs to submit more detailed justifications supporting such certifications, and specifying the requirements concerning the use of disposition proceeds, and other matters. The rule would also clarify and provide more detail related to existing requirements applicable to demolition and disposition such as resident relocation, and fair housing and civil rights compliance to ensure that PHAs properly abide by such requirements. The rule proposes to allow a PHA to request HUD permission to retain public housing property free of restrictions under the declaration of trust and annual contributions contract. In addition, the rule would update regulatory provisions to conform to certain requirements under the Housing and Economic Recovery Act of 2008, and clarify the definition of “conversion” in HUD's conversion of public housing regulations.

DATES:

Comment Due Date:
December 15, 2014.

ADDRESSES:

Interested persons are invited to submit comments regarding this proposed rule to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW., Room 10276, Washington, DC 20410-0500. Communications must refer to the above docket number and title. There are two methods for submitting public comments. All submissions must refer to the above docket number and title.

1.
Submission of Comments by Mail.
Comments may be submitted by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street SW., Room 10276, Washington, DC 20410-0500.

2.
Electronic Submission of Comments.
Interested persons may submit comments electronically through the Federal eRulemaking Portal at
www.regulations.gov.
HUD strongly encourages commenters to submit comments electronically. Electronic submission of comments allows the commenter maximum time to prepare and submit a comment, ensures timely receipt by HUD, and enables HUD to make them immediately available to the public. Comments submitted electronically through the
www.regulations.gov
Web site can be viewed by other commenters and interested members of the public. Commenters should follow the instructions provided on that site to submit comments electronically.

Note:

To receive consideration as public comments, comments must be submitted through one of the two methods specified above. Again, all submissions must refer to the docket number and title of the rule.

No Facsimile Comments.
Facsimile (FAX) comments are not acceptable.

Public Inspection of Public Comments.
All properly submitted comments and communications submitted to HUD will be available for public inspection and copying between 8 a.m. and 5 p.m. weekdays at the above address. Due to security measures at the HUD Headquarters building, an advance appointment to review the public comments must be scheduled by calling the Regulations Division at 202-402-3055 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number via TTY by calling the Federal Relay Service, toll-free, at 800-877-8339. Copies of all comments submitted are available for inspection and downloading at
www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:

Kathleen Szybist, Program Analyst, Special Applications Center, Office of Public and Indian Housing, Department of Housing and Urban Development, 121 S. Main Street, Suite 300, Providence, RI 02903; telephone number 401-277-8310 (this is not a toll-free number); email
kathleen.a.szybist@hud.gov.
Hearing- or speech-impaired individuals may access this number through TTY by calling the toll-free Federal Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

A. Purpose of Regulatory Action

Need for regulation.
HUD last updated its demolition and disposition regulations in 24 CFR part 970 in 2006 (71 FR 62362, October 24, 2006). This regulation is necessary in order to update HUD's regulations in accordance with the Housing and Economic Recovery Act of 2008 (Pub. L. 110-289, approved July 30, 2008) (HERA), which made certain changes to the requirements applicable to qualified PHAs, which are non-troubled PHAs whose public housing and Section 8 units combined are fewer than 550 units. Such PHAs are relieved from annual plan filing requirements, and consequently from demolition and disposition requirements that involve the annual plan. In addition, this regulation is necessary to add clarifications and requirements related to resident consultation, application processing, and other requirements that have until now been placed in notices to PHAs. This regulation would provide the requirements applicable to real property transactions and retention of projects by PHAs, a topic which HUD has addressed in practice under 24 CFR part 85 but which until now has not had specific regulatory standards. Finally, this regulation makes a needed clarification to HUD's regulations at 24 CFR part 972, which govern the conversion of public housing assistance to tenant-based assistance (conversion regulations).

How this rule would meet the need.
This rule would promulgate the HERA-related changes and the needed clarifications to the demolition and disposition regulations, would substantially clarify the existing regulations, and correct HUD's conversion regulations.

Legal authority for the regulation.
HUD has general authority to make such rules and regulations as needed to carry out its functions, powers, and duties under 42 U.S.C. 3535(d). In addition, HUD has specific authority over the demolition and disposition of public housing under 42 U.S.C. 1437p. HUD has authority over conversion of assistance under 42 U.S.C. 1437t and 1437z-5.

B. Summary of the Major Provisions

The rule would divide HUD's 24 CFR part 970 into two subparts. Subpart A would comprise the current regulations applicable to demolitions and dispositions of public housing projects as provided under section 18 of the 1937 Act. Subpart B would provide the requirements applicable to real property

transactions and retention of projects by PHAs. Additionally, this rule would issue a clarification to 24 CFR part 972 on conversion of assistance.

Subpart A

Rules regarding leasing of the project and reconfiguration of interior space would be tightened to address abuses that have occurred. Currently, 24 CFR 970.3(b)(10) does not limit the purposes for which a lease may be entered into. In order to clarify that leases should not be entered into to avoid obligations under the Annual Contributions Contract (ACC), this proposed rule would clarify this exception to indicate these leases should only be entered into for the limited purposes of allowing an owner-entity to show site control. Thus, the rule at § 970.3(b)(7), would permit, as an exception, the leasing of the entire project only for one year or less for the strictly limited purpose of allowing a prospective owner-entity to show site control in an application for funding for the redevelopment of the project. The rule would clarify that reconfiguration as an exception to demolition may only be done for an authorized use related to the normal operation of public housing and without demolition, as permitted by the ACC.

The material on de minimis demolition, which is allowed by statute, would be revised to ensure that HUD receives a notice of the proposed action before it takes place and ensures that the statutory requirements are being met prior to the action.

Generally, under the currently codified rule and this proposed rule, PHA property must be disposed of for fair market value (FMV). While the current rule, as an exception to the requirement that PHA property generally must be disposed for FMV, allows for the disposition of public housing for less than FMV if there is a commensurate public benefit to the community, the PHA, or the Federal Government, there are no further requirements ensuring that commensurate benefit is actually obtained. The proposed rule would add informational requirements to ensure that commensurate public benefit is actually being obtained for these types of dispositions. The information required would include anticipated future use of the property, a detailed description of any housing to be located on the property, the length of time the future use would be maintained, and other pertinent information.

The rule would strengthen the application and resident consultation requirements. Regarding application requirements, the rule would enhance the information provided with the application to ensure that HUD has enough information regarding the action to make sure the PHA's supporting certifications are correct so that HUD makes the appropriate decision. Demolition requests would (as the statute requires), be granted unless HUD has or obtains information contrary to the supporting certification of the PHA, or the application was not developed in consultation with the affected residents and appropriate local government officials.

Regarding resident consultation, the proposed rule would provide more specificity to the resident consultation requirements to give PHAs better guidance and to ensure that resident consultation is as effective as possible. The rule would require the supporting evidence to include a description of the process of the consultations summarizing the dates, meetings, and issues raised by the residents and the PHA's responses to those issues; meeting sign-in sheets; any written comments submitted by affected residents/groups along with the PHA's responses to those comments; and any certifications or other written documentation that the PHA receives from the resident advisory board (RAB) and resident council regarding resident support or opposition.

Regarding the relocation of residents made necessary by demolition or disposition, the rule would continue to incorporate the requirement that the housing being offered must meet Housing Quality Standards (HQS) (or such successor standard that HUD may adopt) and be in a location “not less desirable” than the housing the resident is being displaced from. However, the currently codified regulation does not define a “not less desirable” location. The proposed rule would define the “not less desirable” location, within the definition of “comparable housing,” as not less desirable than the original neighborhood in terms of access to public transportation, employment, education, service, child care, medical services, shopping, recreational, and other amenities, considered in the aggregate (such that, for example, a large increase with respect to shopping and employment would outweigh a small deficit as to recreation).

The proposed rule would also strengthen the notice to be provided to residents who would be relocated. The written notice would have to include a statement that the demolition, disposition, or combined application has been approved and that the action will occur, and a description of the process to relocate the residents. The written notice must be provided through an effective means of communication to persons with disabilities in accordance with 24 CFR 8.6 and in the appropriate non-English language or languages to persons with limited English proficiency as needed. The rule would specify that the notice must include a description of the (statutorily required) housing counseling services that will be available, including mobility counseling, and how a resident may access those services. The timing of the notice to residents would be specified as at least 90 days prior to the displacement date, except in cases of imminent threat to health and safety, but not before HUD has approved the application.

The rule would codify HUD's practice of allowing for timely demolitions made necessary by natural disasters and accidents to ensure the health and safety of residents. In such a case, if the PHA rebuilds the same number of dwelling units or non-dwelling structures that comprised the demolished project, the demolition (and any additional demolition required to carry out the redevelopment) shall not be subject to 24 CFR part 970. If the PHA rebuilds less than all of the demolished structures or the project, the PHA shall submit a demolition application under this part within one year of such demolition to formalize and request official HUD approval for the action under this part.

There has been increased frequency of dispositions that remove all of the housing and other property in a PHA's inventory. To clarify the PHA's obligations in this situation, a section would be added to require that once the action is complete and the PHA has no plans to develop any additional units, the PHA shall not expend any remaining Operating Funds, including operating reserves, other than for purposes related to the close-out of its public housing inventory, including audit requirements required by this section. Any remaining Operating Funds (including operating reserves and any unspent asset-repositioning fees received pursuant to 24 CFR 990.190(h)) would be required to be returned to HUD within 90 days of the date of removal of the project. The PHA may spend no more of its Capital Funds other than, with HUD approval, amounts required to close out contract obligations incurred prior to HUD's approval of the action.

The proposed rule would add civil rights requirements, including documentation that the PHA is not in violation of any civil rights law, compliance agreement, settlement

agreement, or court order. Certifications would be required that the action will not violate any such law, settlement, order or other nondiscrimination requirements, and does not serve to maintain or increase segregation based on race, ethnicity, or disability. The rule would require a description of the civil rights-related characteristics (including race, color, religion, sex, national origin, familial status, and disability) of both the residents who will be displaced by the action, the residents anticipated to remain in a public housing project that is partially demolished or disposed of, and of the residents on the PHA's waiting list (by bedroom size). The purpose of these requirements is to ensure that PHAs that request demolition or disposition are not in violation of any civil rights-related laws, agreements, or orders.

Finally, the rule would revise currently codified § 970.35, “Reports and records” to strengthen HUD's oversight and monitoring of demolition and disposition actions.

Subpart B

The proposed rule would add a subpart B to 24 CFR part 970, to allow PHAs and other owners of public housing to retain public housing property, including dwelling units, without the use restrictions under the ACC and Declaration of Trust (DOT). Section 18 does not apply to cases where a PHA retains property, rather than disposing of it to another party.

Part 972—Conversion of Assistance

HUD is also proposing to revise the definition of “conversion” in the part 972 regulations that cover both voluntary and required conversion of public housing to tenant-based assistance to more accurately reflect what “conversion” means in the relevant statutory sections (for voluntary conversion, section 22 of the 1937 Act (42 U.S.C. 1437t); for required conversion, section 33 of the 1937 Act (42 U.S.C. 1437z-5). Currently, the regulations at 24 CFR 972.103 and 972.203 (for voluntary and required conversion, respectively), define conversion as the removal of public housing units from the inventory of a Public Housing Agency (PHA), and the provision of tenant-based, or project-based assistance for the residents of the PHA. While it is true that under the statutes the residents of a project undergoing conversion may be provided with alternate housing including project-based assistance, the statute provides that the conversion is only from public housing to tenant-based assistance. Therefore, HUD is proposing to revise these definitions accordingly to remove the reference to project-based assistance.

C. Costs, Benefits, and Transfers

Costs and Benefits

The inception of this proposed rule does not come from a perceived market failure, but rather, from the desire to strengthen and streamline the demolition and disposition processes to reflect changes that have occurred in the public housing program over the last 20 years. As such, while this proposed rule would marginally increase the administrative burden, it would provide greater clarity regarding the demolition and disposition process.

The rule adds increased clarity and guidance to assist PHAs in determining when a demolition and/or disposition may be appropriate for their public housing inventories (e.g., so a PHA would be less likely to put the time into preparing and submitting an application to HUD that would not meet the criteria necessary for HUD approval and thus would not waste its or HUD's staff time and resources. Based on the clarified and new guidance in the rule, some PHAs may sometimes opt not to apply for demolition/disposition and instead pursue other HUD tools—e.g., CFFP financing—for their public housing stock).

The rule adds increased clarity and guidance on what HUD will require to approve an application submitted by a PHA (e.g., HUD will re-do the paperwork burden—HUD form—to make the application easier to fill out by PHAs). Applications submitted by PHAs will be more likely to be approved by HUD because PHAs will be better able to show they are meeting the applicable HUD criteria. Further, HUD's review time will likely be significantly reduced, a benefit to both PHAs and HUD.

On average, HUD's special application center (SAC) estimates that the total additional administrative burden as a result of this rule is 162 hours per application per year. Each year, the center receives between 150 and 200 applications for demolition and or disposition. If HUD assumes that the average hourly rate is $200, the total compliance cost would be between $4.86 million and $6.48 million a year. For example, the proposed rule would require that the determination of obsolescence be found by an independent architect or engineer that is not a regular employee of the PHA (§ 970.15(a)(2)).

In addition, units that are demolished or disposed of do not receive full funding under the public housing operating and capital funds. Under the public housing program, these units receive a proration and under the capital funds, they receive replacement housing factor funds. Funds retained under the capital fund program are redistributed to PHAs (including the applying PHA) by formula. The same units removed from the inventory and the PHA will no longer receive operating funds for those units, but the PHA will also not have any operating or maintenance expenses for those units.

The proposed rule would create very little additional financial flux. It is likely that the proposed rule may generate up to $2.23 million in additional compliance costs. These costs would constitute transfers to architects, engineers, lawyers, accountants, etc. For example, the proposed rule requires that the determination of obsolescence be found by an independent (that is not a regular employee of the PHA) architect or engineer.

II. Background

The Quality Housing and Work Responsibility Act of 1998 (Pub. L. 105-276, approved October 21, 1998) (QHWRA) made extensive amendments to the United States Housing Act of 1937 (42 U.S.C. 1437
et seq.
) (1937 Act) for the purpose of reforming and improving HUD's public housing and tenant-based Section 8 housing assistance programs. Prior to QHWRA, HUD had to make specific findings regarding the obsolescence and the cost of rehabilitation of public housing, prior to approving any demolition or disposition of public housing. At that time, the Nation's public housing supply had a large stock of dilapidated and unusable housing. QHWRA, among other things, amended section 18 of the 1937 Act (42 U.S.C. 1437p) to allow for demolition if the PHA requesting demolition certifies to HUD that: (1) The project or portion of the public housing project is obsolete as to physical condition, location, or other factors, making it unsuitable for housing purposes; and (2) no reasonable program of modifications is cost-effective to return the public housing project or portion of the project to useful life.

The 1937 Act provides that, in the case of partial demolition, the PHA must certify that the demolition will help to ensure the viability of the remaining portion of the project. In the case of disposition by sale or transfer, the PHA must certify that: (1) Conditions in the area surrounding the project adversely affect the health or safety of the residents or the feasible operation of the project by the PHA; or

(2) disposition allows the acquisition, development, or rehabilitation of other properties that will be more efficiently or effectively operated as low-income housing. The PHA may also certify that the disposition is appropriate for other reasons, as long as those reasons are in the best interests of the residents and the PHA; consistent with the goals of the PHA as set forth in the PHA plan; and otherwise consistent with the goals of the 1937 Act. In the case of both demolition and disposition, the 1937 Act contains specific requirements to which the PHA must certify for notice to residents residing in the project 90 days prior to the action. Residents to be displaced, by statute, must be offered replacement housing, which may include tenant-based or project-based vouchers in addition to other public housing.

There are several other statutory requirements governing demolition and disposition of public housing that relate to the following: Resident and local government consultation; the PHA planning process; relocation rights of residents; the use of the proceeds that result from disposition; residents' opportunity to purchase the property subject to disposition in the case of a proposed disposition; consolidation of occupancy; demolition of a minimum number of units under an exception to many of the requirements of the statute (de minimis demolition); and the non-applicability of the Uniform Relocation Assistance and Real Property Acquisition Policies Act (42 U.S.C. 4601
et seq.
) (URA) to demolition and disposition (section 18(g) of the 1937 Act (42 U.S.C. 1437p(g)) (although displaced residents have specific rights to be relocated, and the PHA specific relocation responsibilities, including payment of the actual and reasonable relocation expenses of residents being displaced, section 18(a)(4)(B) of the 1937 Act (42 U.S.C. 1437p(a)(4)(B))).

In accordance with section 18(a) of the 1937 Act (42 U.S.C. 1437p(a)), HUD approves a demolition or disposition application from a PHA as long as the proper certification is made and the specified requirements are met. The only statutory exceptions to this requirement are: (1) That the PHA's certifications pertaining to the demolition or disposition are inconsistent with information and data that is made available to HUD or that is requested by HUD; and (2) the PHA did not comply with the resident and local government consultation process. Under exception (1) HUD has the statutory right to request “information and data” regarding the proposed action in order to ascertain whether the PHA's certifications do in fact comport with the facts (see section 18(b)(1) of the 1937 Act (42 U.S.C. 1437p(b)(1)).

III. This Proposed Rule

HUD's demolition and disposition regulations (24 CFR part 970), were promulgated by a final rule published on October 24, 2006, at 71 FR 62362, and no significant changes to the regulations have been made since that date.
1

The Housing and Economic Recovery Act of 2008 (Pub. L. 110-289, approved July 30, 2008) (HERA) made certain changes to the requirements applicable to qualified PHAs, as this term was defined by section 2702 of HERA, and these changes therefore require certain corresponding changes to HUD's demolition and disposition regulations. However, as recent notices issued by HUD's Office of Public and Indian Housing (PIH) reflect, HUD has clarified, through such notices, existing regulatory requirements applicable to demolition and disposition, such as resident consultation, application processing, and PHA Plan requirements because the regulations did not provide the details that PHAs needed to execute the requirements as contemplated by law.
2

Therefore, as more fully discussed below, this proposed rule revises HUD's demolition and disposition regulations to add the details and further clarify certain requirements as presented in recent notices issued by PIH.

1
Certain technical corrections were made to the regulations by a January 23, 2008, final rule published at 73 FR 3868.

2
See Notice PIH 2012-7, issued February 2, 2012, pertaining to demolition/disposition of public housing and associated requirements; Notice PIH-2011-18, issued April 12, 2011, providing guidance on re-occupying public housing units proposed or approved for demolition, disposition, or transition to homeownership; Notice PIH-2008-17, providing guidance in the disposition of certain public housing assets.

Proposed Organization of Part 970

This rule proposes to divide HUD's regulations on demolition and disposition in 24 CFR part 970 into two subparts. Subpart A would comprise, with revisions, the current regulations applicable to demolitions and dispositions of public housing projects as provided under section 18 of the 1937 Act. Subpart B would provide the requirements applicable to real property transactions and retention of projects by PHAs, to which 24 CFR part 85, which provides the administrative requirements for grants and cooperative agreements to state, local, and federally recognized Indian tribal governments, would apply. Part 85 does not apply to subpart A, as subpart A is issued pursuant to a superseding statutory authority, 42 U.S.C. 1437p. This non-applicability is consistent with 24 CFR 85.31(b), which provides an exception to part 85 for real property pursuant to Federal statutes.

A. Purpose and Applicability (Subpart A)

Purpose (§ 970.1).
Section 970.1, which addresses the purpose of the part 970 regulations, would be revised to reflect the new structure of the regulations.

Applicability (§ 970.3).
The applicability of subpart A, as stated in § 970.3, would be revised to reflect changes to the applicability of the regulations. A new § 970.3(b)(1) would exempt from applicability, of the part 970 regulations, those public housing projects that PHAs apply to retain under subpart B of this rule. The current § 970.3(b)(1), which exempts PHA-owned section 8 housing, or housing leased under former sections 10(c) or 23 of the 1937 Act, would be redesignated as § 970.3(b)(2), and the current § 970.3(b)(2), which exempts demolition or disposition before the date of funding availability (DOFA) of property acquired incident to the development of a public housing project, would be redesignated at § 970.3(b)(3). The conveyance exception for providing homeownership opportunities under § 970.3(b)(3) would be redesignated as § 970.3(b)(4) and revised to clarify that this homeownership exception applies to certain specified homeownership opportunities for low-income families. In addition, the references to specific homeownership programs would be updated to reflect new homeownership programs since the regulations were promulgated in 2006. Discontinued programs like the section 5(h) homeownership program (section 5(h) of the 1937 Act (42 U.S.C. 1437c(h)) would remain referenced in this section to reflect the continued applicability of the part 970 regulations to any units that remain to be administered under these discontinued programs.

The exception for the leasing of non-dwelling space incidental to the operation of the PHA is updated and clarified in proposed § 970.3(b)(5). Agreements with third parties in the form of leases or license agreements, only insofar as they are for authorized non-dwelling purposes related to public housing, are permitted, provided that such an agreement benefits the PHA and its residents; is consistent with the PHA's plan, as determined by HUD; is consistent with the PHA's annual contributions contract (ACC); and is approved in writing by HUD.

Proposed § 970.3(b)(6) would revise the currently codified § 970.3(b)(5), on the use of common areas and unoccupied dwelling units, similarly to clarify that the use must be for authorized non-dwelling purposes related to public housing.

Proposed new § 970.3(b)(7) would permit, as an exception, the leasing of the entire project only for one year or less for a strictly limited purpose. That purpose is to allow a prospective owner-entity to show site control in an application for funding for the redevelopment of the project, such as low-income housing tax credits (LIHTC). Only the entire project, not individual dwelling units, may be leased under this exception.

Proposed § 970.3(b)(8) would revise currently codified § 970.3(b)(6) on reconfiguration of interior space to clarify that reconfiguration as an exception to demolition may only be done for an authorized use related to the normal operation of public housing and without demolition as defined in 24 CFR 970.5, as permitted by the ACC. As proposed, such reconfiguration would have to be done in accordance with all HUD requirements and approvals, and any resulting reduction in bedroom numbers would have to be reflected in the Inventory Management System (IMS)/PIH Information Center (PIC) or any future system for collecting similar information.

Proposed § 970.3(b)(9) would revise currently codified § 970.3(b)(7), which relates to transfers, easements, and transfers of utility systems. The proposed rule would require that such easements, rights of way, and transfers be approved in writing.

Based on experience since the regulations were promulgated in 2006, HUD has found that the general exception for leases of units or land for one year or less (currently codified § 970.3(b)(10)) is not always being used for the intended purpose. Specifically, HUD has found that some PHAs have incorrectly relied on this exception to enter into leases that did not otherwise comply with the PHA's ACC with HUD and other public housing requirements and this was never the intent of this exception. In addition, HUD has found that some PHAs incorrectly used this exception to avoid the disposition requirements of section 18 of the 1937 Act (42 U.S.C. 1437p), for instance, by structuring a long-term lease as a one-year lease and then renewing that lease every year. As a result, § 970.3(b)(10) is proposed to be removed by this rule. Proposed § 970.3(b)(5) specifies the conditions under which leases of units and other PHA property will be allowed. The current § 970.3(b)(8), which exempts a whole or partial taking by a public or quasi-public agency, would be redesignated at § 970.3(b)(10). Proposed § 970.3(b)(11) would clarify currently codified § 970.3(b)(11), which addresses conveyance of PHA property to allow for mixed-finance development under 24 CFR 905.604. As proposed, real property, including land, improvements, or both, may be acquired by a PHA with public housing or other funds, or donated to a PHA, and sold or otherwise transferred to an owner entity prior to DOFA, to enable the owner entity to develop the property using the mixed finance method in 24 CFR 905.604.

Proposed § 970.3(b)(12) clarifies that this exemption for disposition of vacant land for mixed-finance development is only an exemption from these regulations, and not from the statutory requirements in section 18 of the 1937 Act, and only if the PHA submits an application in the form prescribed by HUD, and receives HUD approval of the application before commencing disposition of the property.

Section 18(f) of the 1937 Act (42 U.S.C. 1437p(f)) and the currently codified regulations at § 970.3(b)(13)) provide an exception for most requirements under the statute for demolition of the lesser of 5 dwelling units or 5 percent of the PHA's total units in any 5-year period (referred to as de minimis demolition). HUD determined that environmental review, which has authority separate from the 1937 Act, applies, which the current regulation reflects, and the proposed rule would continue to reflect. In addition, the 1937 Act states that such de minimis exception only applies if the space occupied by the demolished unit is used for meeting the service or other needs of public housing residents or the demolished unit was beyond repair. This proposed rule would revise § 970.3(b)(13) to require that the PHA must receive acknowledgment by HUD of the required notification prior to the commencement of the demolition. Such requirement would confirm that HUD is in fact aware of the proposed demolition and proposed use of space before the demolition commences.

Proposed § 970.3(b)(15) clarifies the current language to indicate that demolition of severely distressed units as a part of a revitalization plan in connection with a Choice Neighborhoods grant is exempt from these regulations.

The proposed rule would add a new § 970.3(b)(16) to provide for demolition of projects made necessary by disaster or sudden accident or casualty loss. It has been HUD's practice, as reflected in the ACC, to allow for such demolitions in order to ensure the health and safety of public housing residents.

At proposed § 970.3(b)(17), the rule would add an exception to this rule for dispositions of a de minimis nature that are necessary to correct and/or clarify legal descriptions to deed or ownership documents, provided such de minimis dispositions are approved by HUD. Generally, these are dispositions of a very small amount of property, in some cases literally a few square feet, that should never have been owned by the PHA but through an error were added to the legal description of the property. It is necessary to correct these small inaccuracies because, if a PHA's deed to public housing property reflects other than what was originally intended in the PHA's acquisition of the property, a PHA may be subject to unanticipated liabilities. These small dispositions are authorized under section 18(a)(2)(B) of the 1937 Act (42 U.S.C. 1437p(a)(2)(B)), which states that a justification for disposition is that retention of the property is not in the best interests of the PHA because “the public housing agency has otherwise determined the disposition to be appropriate for reasons that are in the best interests of the residents and the public housing agency.”

The proposed rule would add a new § 970.3(b)(18), which would reorganize the consolidation of occupancy exception currently found at § 970.25(b), and authorized under section 18(e) of the 1937 Act (42 U.S.C. 1437p(e)). The purpose of such consolidation must be to improve the living conditions of residents or to provide greater efficiency in serving the residents. For example, in the case of older projects that are badly in need of modernization, health hazards, such as lack of heating and issues with plumbing, may occur in certain buildings. Residents can be consolidated into healthier buildings with vacancies so that the PHA can concentrate on providing services over a more compact and manageable area, and the residents have a better living environment.

In addition, as it proposes for other exceptions, the rule would add legal parameters to ensure that PHAs take such consolidation actions pursuant to applicable federal laws and requirements, including the PHA's written policies on admissions and continued occupancy, the PHA's section 8 Administrative Plan (24 CFR part 982), and PHA Plan requirements (24 CFR part 903). The PHA would be required as well to notify HUD in

advance of such occupancy consolidation.

HUD proposes to add a new 24 CFR 970.3(c) to clarify that the enumerated activities in § 970.3(b) are exempt from section 18 requirements only. As described in § 970.21(g) of this proposed rule, section 104(d) of the Housing and Community Development Act of 1974 (42 U.S.C. 5304(d) (section 104(d)) operates independently of section 18 and cannot be limited administratively by HUD. If any of the activities listed in § 970.3(b) involve demolition or conversion of a lower-income dwelling unit, as those terms are defined in 24 CFR part 42, subpart C, and include funding pursuant to the Community Development Block Grant Program (42 U.S.C. 5301
et seq.
), the Urban Development Action Grant Program (42 U.S.C. 5318) or the HOME Investment Partnerships Program (42 U.S.C. 12701
et seq.
), the relocation assistance and one-for-one replacement requirements of section 104(d) may apply.

Definitions (§ 970.5).
The proposed rule would add several new definitions to this section, and revise or remove others.

• Accessible or accessibility would be added, referencing the definition of “accessible” at 24 CFR 8.3.

• Commensurate public benefit would be added. While this phrase is used in current § 970.19 to describe a standard for disposition of a property for less than fair market value where there are other compensating benefits. However, currently the phrase is not defined. In order to eliminate any possible ambiguity about the applicable standard, HUD proposes to define this phrase. The definition would make clear that public benefits in this context are “as approved by HUD.” The definition also supplies four general cases of commensurate public benefits: (1) Rental units with a 30-year use restriction; (2) homeownership units affordable to low-income families; (3) non-dwelling structures or facilities to serve low-income families as approved by HUD; and (4) other or additional benefits as approved by HUD, which may include, in part, planning and carrying out related activities under section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701u).

• “Comparable housing” would be added. This term means housing that meets HQS (or such successor standard that HUD may adopt) and is appropriate in size for the household, and located in an area that is generally not less desirable than the location of the displaced resident's current public housing unit. In determining comparable housing, a PHA shall also consider the following criteria (in aggregate): neighborhood safety; quality of local schools; accessibility of amenities (e.g., transportation, employment); and exposure to adverse environmental conditions. The comparable location should not expose displaced persons to increased segregation by race or national origin, poverty, crime or adverse environmental conditions. For residents with disabilities, comparable housing must include the accessibility features that the resident needs and must be located in the most integrated setting appropriate for the resident with respect to the residents' ability to interact to the fullest extent possible with non-disabled persons and access to community-based services. Such housing is often subsidized housing, but does not have to be if there is comparable non-subsidized housing available on the private market.

• “Demolition” would be revised from the definition in the currently codified § 970.5. The revised term defines demolition as the removal by razing or other means, in whole or in part, of one or more permanent buildings of a project such as to render the building(s) uninhabitable as defined by the applicable building occupancy code. The revised definition states that a demolition involves not only any four or more of the factors listed in the current definition (including envelope removal (roof, windows, exterior walls), kitchen removal, bathroom removal, electrical system removal (unit service panels and distribution circuits, and plumbing system removal (e.g., either the hot water heater or distribution piping in the unit, or both)), but also the lifting and relocating of a building from its existing site to another not covered by the same Declaration of Trust.

• “Declaration of Trust (DOT)” is proposed to be added. This term is not currently defined in 24 CFR part 970, and it would be beneficial to define what the term means in this context. Generally, this term would refer to a legal instrument that grants HUD an interest in a project, and provides public notice that the project must be operated in accordance with all federal requirements for public housing.

• “Displaced resident” would be added to § 970.5. This term means a resident of public housing, one that is assisted with Section 8, or is eligible for assistance under an MTW agency's HUD-approved annual MTW plan, that is relocated permanently from the project as a direct result of a demolition and/or disposition action under this part. The term includes any members of the resident's household and over-income residents who are, at the time of displacement, eligible for occupancy under PHA policies for continued occupancy or other special rent exceptions.

• “Disposition” would be added. The proposed definition would include both sales and transfers to an independent legal entity under the relevant state's law, including an affiliate that is legally independent. Under this definition, a PHA would be able to make a transfer to an affiliate such as a non-profit in which the PHA has a controlling interest, so long as the non-profit is a separate legal entity. A PHA could not dispose to an instrumentality of the PHA, because the instrumentality essentially is the PHA—it is fully controlled by the PHA and assumes the role of the PHA. “Affiliate” and “instrumentality” are both defined at 24 CFR 905.604(b)(3) and (4).

• “Emergency” would be added. This term is defined to mean any occasion or instance, for which, in the determination of the President or HUD, federal assistance is needed to supplement state and local efforts and capabilities to save lives and protect property and public health and safety, or to lessen or avert the threat of a catastrophe in any part of the United States. This proposed definition is based on the definition of “emergency” found in 42 U.S.C. 5122.

• “Fair Market Value (FMV)” would be added. This definition provides that FMV is the estimated value of a project, as determined by an independent appraiser contracted but not employed by the PHA, and completed within 6 months of the application, unless HUD approves a longer time. This definition would capture the importance of the appraiser being independent of the PHA and the appraisal being completed on a timely basis.

• “Major disaster” would be added. This term is defined to mean any natural catastrophe (including any hurricane, tornado, storm, high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, or drought), or, regardless of cause, any fire, flood, or explosion, in any part of the United States, which in the determination of the President causes damage of sufficient severity and magnitude to warrant major disaster assistance to supplement the efforts and available resources of states, local governments, and disaster relief organizations, or causes severe danger, hardship, or suffering, as determined by HUD. This proposed definition is based

on the definition of “major hazard” found in 42 U.S.C. 5122.

• The rule incorporates the general definition of “public housing agency (PHA),” at 24 CFR 5.100.

• The rule would incorporate the definition of “public housing funds” from § 905.108, and specify that as to disposition proceeds that are public housing funds, § 970.20(d) applies.

• The rule would add a definition of “project” to clarify that the term refers to all public housing property (units, vacant land, air rights, non-dwelling and dwelling buildings, and appurtenant equipment and personal property purchased by the PHA using 1937 Act funds) and has the same meaning as development, which is often used in other HUD issuances and guidance. In the currently codified part 970, both terms are used. This proposed rule would use the term “project” as defined in preference to “development.” This rule would clarify that the term “project” includes mixed-finance public housing units. Additionally, because by definition the term now includes appurtenant equipment and property, when a PHA disposes of a project or portion of a project, it is generally expected that the related appurtenances will be disposed of as well.

• “Public housing unit” would be added to clarify what HUD means by the term in the context of demolition and disposition. The definition includes any dwelling unit in a project, including a dwelling unit developed for homeownership under the 1937 Act (other than units developed for homeownership under section 8(y) of the 1937 Act (42 U.S.C. 1437f(y)), because that is a tenant-based program and does not constitute a unit “developed” for homeownership) prior to the transfer of title of that unit to the homebuyer.

• The phrase “related to the normal operation of the project for public housing purposes” would be added to mean activities that are required or permitted to meet the obligations of the ACC, including the provision of low-income housing and related services and other benefits to the residents of the PHA. This phrase is used in § 970.3.

• “Resident” would be defined. The purpose of the definition is to clarify that a resident under part 970 includes an individual or family assisted under HUD's Housing Choice Voucher program (section 8 program), or one that is eligible for assistance under an MTW agency's HUD-approved annual MTW plan, in addition to those who reside in public housing, in accordance with the 1937 Act.

• The term “qualified PHA” would be added and defined as a PHA that is considered a “qualified public housing agency” under section 2702 of HERA, codified at section 5A(b)(3)(C) of the 1937 Act (42 U.S.C. 1437c-1(b)(3)(C)). Essentially, this is a non-troubled PHA that does not have a recent failing Management Assessment Program score, and which has 550 or fewer units, considering only public housing units and vouchers under 42 U.S.C. 1437f(o).

The proposed rule would add definitions for the following terms—“Housing Quality Standards (HQS)”, housing construction cost (HCC)”, “low-income families”, “low-income housing”, “PHA or Public Housing Agency,” “PHA Plan”, and “Resident Management Corporation (RMC)”—by cross-referencing to those terms found elsewhere in HUD's codified regulations. The definition of “total development cost” would be removed because total development cost would be replaced by HCC.

The proposed rule would also revise some existing definitions. The definition of “chief executive officer of a unit of local government” would clarify that the officer must have the authority to contractually bind the local government jurisdiction. The definition of “firm financial commitment” would be revised to remove the requirement that contingencies must be satisfied before the closing of the transaction. Other minor editorial changes are made to definitions to update terminology or correct errors.

General requirements for HUD review and approval of a demolition, disposition, or combined application (§ 970.7).
The proposed rule would make substantial revisions to § 970.7, the title of which would be revised to read “General requirements for HUD review and approval of a demolition, disposition, or combined application.” A paragraph on “Sufficiency of application” would be added to make explicit that HUD will not consider an application for demolition, disposition, or both, unless the application contains all the substantive information required in § 970.7 and in this part.

Section 970.7(c), which addresses an application's supporting documentation, would be revised to require additional material.

Paragraph (c)(1) would require that the PHA not only “describe” the demolition or disposition action, but that the PHA has specifically authorized the action in its PHA plan or significant amendment to that plan, and the plan is consistent with any plans, policies, assessment, or strategies prepared pursuant to the PHA plan, for example, the deconcentration plan under 24 CFR 903.2 or the obligation to affirmatively further fair housing (42 U.S.C. 3608(e)(5)). An exception would be provided for qualified PHAs (those non-troubled PHAs whose public housing and Section 8 units combined are fewer than 550 units), which are not required to file PHA plans under HERA. In those cases, the qualified PHA must describe the proposed action at its required annual public hearing (or second public hearing if it determines to submit an application for demolition and/or disposition between its annual public hearings). Also, the PHA will certify that the proposed activities are consistent with its Deconcentration Plan (24 CFR 903.2), its obligation to affirmatively further fair housing (42 U.S.C. 3608(e)(5)), and any applicable Consolidated Plan (24 CFR 91.2).

Paragraph (c)(2), requiring a description of the property to be demolished, would be revised to require bedroom size, whether the units meet the accessibility requirements of Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and HUD's implementing regulations at 24 CFR part 8, and the acreage and legal description of the land. The description would include both dwelling and non-dwelling units.

A new paragraph (c)(3) would be added to § 970.7 and would require information about the number of vacant units approved for the demolition, disposition, or combined action, and a narrative explanation of the reasons for any vacancies. The explanation could be, for example, health or safety issues have arisen; the PHA is consolidating occupancy under § 970.3(b)(18); or there is an emergency or major disaster.

Paragraph (c)(4) would require a description of the demolition and/or disposition action, and, if disposition is involved, the method of disposition, which may include methods in addition to sale, such as leases, negotiated dispositions, and public bids. To ensure that future use of the property to be disposed of or demolished would be used for low-income housing purposes, this paragraph would also require a statement about the proposed future use of the property, including any anticipated subsidies expected to be used for future low-income housing on the site of the former project.

The current § 970.7(a)(4), which requires the inclusion of a general timetable for the proposed action, would be redesignated at § 970.7(c)(5). The current § 970.7(a)(5), which requires a statement and other supporting documentation justifying the proposed demolition and/or disposition under the applicable criteria of

§§ 970.15 or 970.17, would be redesignated at § 970.7(c)(6).

Proposed § 970.7(c)(2) would require the portion of the application that contains a description of all identifiable property to include appurtenant personal property and equipment, in conformance to the proposed definition of “project.” Such property and equipment would consist of items purchased with 1937 Act funds for use in connection with the project.

Proposed § 970.7(c)(7) would revise currently codified § 970.7(a)(6) to add more specificity to the information submitted in the resident relocation plan, which is required when any residents will be displaced by a proposed demolition and/or disposition action. This additional information would include:

• A certification that the PHA will comply with the relocation provisions of this part;

• The estimated number of individual residents and families to be displaced;

• The comparable housing resources the PHA will provide to displaced residents;

• The type of housing counseling services the PHA plans to provide, including mobility counseling for residents, and affirmative marketing outreach to persons in groups whose representation among applicants and participants in the PHA's housing programs is significantly less than in the PHA's service area and those least likely to apply, including outreach appropriate to individuals with limited English proficiency, and accessible to persons with disabilities;

• An estimate of the costs for housing counseling services and resident relocation (which requirement is currently in § 970.7(a)(11), which would be removed), and the expected source for payment for these expenses;

• Evidence that displaced residents will be relocated in compliance with all civil rights and fair housing laws, including all affirmatively furthering fair housing regulations, the laws, and authorities listed in 24 CFR 5.105, and the identification of accessible units for displaced residents with disabilities;

• Evidence that residents with disabilities will be relocated in housing that meets their accessibility needs in the most integrated setting appropriate to their needs, that is, the setting that enables individuals with a disability to interact with non-disabled persons to the greatest extent possible and provides access to community-based services;

• A relocation timetable, which indicates the estimated number of days after HUD approval of the demolition, disposition, or combined action that the PHA plans to begin relocating residents;

• Evidence that displaced residents will be relocated in compliance with all nondiscrimination and equal opportunity requirements;

• A plan for determining and meeting the functional needs of displaced residents with disabilities, including communications assistance under 24 CFR 8.6 and assistance in locating units that provide appropriate access to social services, reasonable accommodations, compliance with section 504 of the Rehabilitation Act of 1973;

• A marketing plan that informs residents of affordable housing units or other new developments in the market area, especially to persons who may not be aware of the housing opportunity, and including information in languages other than English as needed; and

• A plan and information under § 970.21(d) if applicable.

The relocation timetable information will be used to determine the PHA's Operating Fund eligibility under 24 CFR part 990, which may include the PHA's eligibility for an asset-repositioning fee (or add-on to Operating Funds) under 24 CFR 990.190(h). As to comparable housing resources the PHA will provide to displaced residents, if some residents are not eligible to move to other public or assisted housing, the PHA must describe why such residents are not eligible and what resources it will make available to provide comparable housing for such displaced residents.

This additional relocation information is to ensure that the PHA is ready and able to comply with Section 18 relocation requirements if and when HUD approves the demolition, disposition, or combined action. The proposed § 970.7(c)(7) would also clarify that the Relocation Plan must be a separate written document that the PHA must prepare and submit as part of its application for demolition or disposition, or both.

Proposed § 970.7(c)(8) would require more supporting evidence on a PHA's required resident consultation than the current § 970.7(a)(7). The supporting evidence under the proposed rule must include: A description of the process of the consultations summarizing the dates, meetings, and issues raised by the residents and the PHA's responses to those issues; meeting sign-in sheets; any written comments submitted by affected residents/groups along with the PHA's responses to those comments; and any certifications or other written documentation that the PHA receives from the RAB (or equivalent body) and resident council regarding resident support or opposition. In addition, there must be a description and/or documentation evidencing that the PHA communicated with affected residents and other required groups in a manner that was effective for persons with hearing, visual, and other communications-related disabilities; that public hearing facilities and services were physically accessible to persons with disabilities; and that appropriate written or oral translations and language assistance services, as required, were provided for Limited English Proficient (LEP) individuals, consistent with the requirements of 24 CFR 8.6. These requirements are to ensure that the required consultations are held and issues raised by residents are considered.

The current § 970.7(a)(8), which requires the inclusion of evidence of compliance with the offering to resident organizations in the case of disposition, would be redesignated at § 970.7(c)(9). The current § 970.7(a)(9), which requires, in the case of disposition, the inclusion of the FMV of the project as established on the basis of at least one independent appraisal, unless otherwise determined by HUD, would be redesignated at § 970.7(c)(11). The current § 970.7(a)(10), which requires, in the case of disposition, the inclusion of estimates of the gross and net proceeds to be realized, would be redesignated at § 970.7(c)(12).

Under proposed § 970.7(c)(13), in the case of a sale for less than FMV based on commensurate public benefit, HUD will consider the anticipated future use of the project after disposition required in § 970.7(c)(4)(iii). In addition, the supporting information for the application shall include: A detailed description of any housing that will be located on the property, including the number of units, bedroom size, accessibility, affordability, and priorities for displaced residents; the proposed length of time in which the acquiring entity will maintain the former project for the proposed future use (HUD will generally require the proposed future use remain as such for not less than 30 years, but will consider other factors such as the extent of public benefits (e.g. number of affordable units) arising from proposed disposition and the FMV of the property in determining if a period of less than 30 years is acceptable); proposed legal documentation (e.g. use restriction, provision in ground lease, declaration of restrictive covenant) the PHA proposes to ensure the approved use; a plan to implement the requirement that income-eligible, displaced residents be offered an opportunity to return if housing units will be developed on-site at the former

project as outlined in § 970.21(d); and other information that HUD may require in order to make the determination.

HUD's part 970 regulations currently allow PHAs to request a waiver of the requirement to apply the proceeds of disposition to the repayment of outstanding debt (see § 970.19(e)(1)), which is required unless waived by HUD under section 18p(a)(5)(A) of the 1937 Act (42 U.S.C. 1437p(a)(5)(A)). Proposed § 970.7(c)(14) provides more details about the types of debt waivers that can and cannot be requested. HUD does not have the statutory authority to waive modernization debt, such as Capital Fund Financing Program (CFFP) debt, Energy Performance Contracting (EPC) debt, and Operating Fund Financing Program (OFFP) debt.

The current § 970.7(a)(13), which requires the inclusion a copy of a resolution by the PHA's Board of Commissioners approving the specific demolition and/or disposition application, would be redesignated at § 970.7(c)(16). The current § 970.7(a)(14), which requires evidence that the application was developed in consultation with appropriate government officials, would be redesignated at § 970.7(c)(17). The proposed rule at § 970.7(c)(18) would revise the environmental review requirement in currently codified § 970.13 to address environmental justice issues as applicable.

The proposed rule would add submission requirements related to civil rights compliance. Proposed § 970.7(c)(19) would add a requirement to submit a statement as to whether the PHA is subject to a voluntary compliance agreement (VCA), conciliation agreement, settlement agreement, consent order, consent decree, or any other civil rights related final judicial ruling or decision, in connection with the civil rights and fair housing rights of residents who will be affected by the proposed demolition, disposition, or combined action, and a certification that the demolition or disposition, or combined action does not violate any civil rights law, remedial order or agreement, VCA, conciliation agreement, final judgment, consent order, consent decree, settlement agreement, or any other civil rights related final judicial ruling or decision.

This section would also require a certification that the proposed activities will not violate nondiscrimination or equal opportunity requirements, and that the PHA will meet affirmative obligations to provide equal housing opportunity, supported by: A statement that the proposed demolition and/or disposition will not prevent the PHA from fulfilling any VCA, conciliation agreement final judgment, consent order, consent decree, settlement agreement, or any other civil rights related final judicial ruling or decision, as well as a description of how the proposed demolition and/or disposition will help the PHA meet its affirmative obligations, including but not limited to the obligations to overcome discriminatory effects of the PHA's use of 1937 Act funds pursuant to 24 CFR part 1 to address the obligation to affirmatively further fair housing (42 U.S.C. 3608(e)(5)); deconcentration plans adopted by the PHA pursuant to 24 CFR part 903; and housing accessibility, effective communications, and integration requirements under 24 CFR part 8.

The PHA would also certify that it does not have any outstanding charges from HUD or a substantially equivalent state or local fair housing agency concerning a violation of the Fair Housing Act (42 U.S.C. 3601-19); it is not a defendant in a Fair Housing Act lawsuit filed by the Department of Justice; it does not have outstanding letters of findings identifying noncompliance under title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d-200d-4), section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 294), or section 109 of the Housing and Community Development Act of 1974 (42 U.S.C. 5309); and it has not received a cause determination from a substantially equivalent state or local fair housing agency concerning a violation of provisions of a state or local law prohibiting discrimination in housing based on sexual orientation, gender identity, or source of income; and any additional supporting information that may be requested by HUD, that shows that the proposed demolition and/or disposition will not maintain or increase segregation on the basis of race, ethnicity, or disability and will not otherwise violate applicable nondiscrimination or equal opportunity requirements, including a description of any affirmative efforts to prevent discriminatory effects. The purpose of these requirements is to ensure that PHAs that request demolition or disposition do not discriminate against residents, are not in violation of any civil rights-related law, agreements or orders, and that HUD can ensure that the residents who are displaced are not unlawfully segregated or denied appropriate housing because of their membership in a protected class.

Proposed § 970.7(c)(20) would require a description of the civil rights-related characteristics (including race, color, religion, sex, national origin, familial status, and disability) of both the residents who will be displaced by the action, the residents anticipated to remain in a public housing project that is partially demolished or disposed of, and of the residents on the PHA's waiting list (by bedroom size). The purpose of these requirements is to ensure that PHAs that request demolition or disposition are not in violation of any civil rights-related
laws,
agreements, or orders, and that HUD can ensure that the residents who are displaced are not unlawfully segregated or denied appropriate housing because of their membership in a protected class.

Proposed §§ 970.7(c)(10), (c)(15), and (c)(21) would require material related to legal eligibility to undertake the demolition or disposition. In the case of disposition, a legal opinion would be required that the acquiring entity is a separate entity (i.e., an affiliate or fully independent entity rather than an instrumentality of the PHA) under the applicable state law. In the case where the PHA has applied for or been approved for financing under a HUD financing program such as the Capital Fund Financing Program (CFFP), the Operating Funding Financing Program (OFFP), or the Energy Performance Contract (EPC) program, the PHA must submit a legal opinion stating that the demolition, disposition, or combined action is permitted pursuant to the legal documentation associated with any such CFFP, OFFP, or EPC program. In addition the PHA must submit a general certification that it will comply with the program regulations and any conditions of HUD's approval.

Finally, proposed § 970.7(c)(22) would permit HUD to request any additional documentation it determines necessary to support the application and assist HUD in making a determination whether or not to approve it.

Under both the current regulations and this proposed rule, a PHA must obtain written approval from HUD prior to demolishing or disposing of public housing (see § 970.7(a)). This proposed rule would allow HUD to require PHAs to adhere to certain terms and conditions based on the approval documents. Proposed § 970.7(d) states that if a PHA includes documentation, certifications, assurances, or legal opinions in its application that exceed the requirements of section 18 of the 1937 Act or the regulations of part 970 (e.g., that commit to provide residents with an opportunity to return to new affordable housing units that may be developed with disposition proceeds and/or on the public housing property when such an opportunity is not

required by this part), HUD may establish additional requirements, based on such documentation, in its approval of the demolition, disposition, or combined action. Further, this proposed section states that the PHA cannot vary from the terms and conditions of HUD approval without prior written approval from HUD.

Currently codified § 970.7(b)(1) allows for PHAs to request rescission of an approval of a demolition or disposition application based on a board resolution and documentation that the conditions that led to the original request have significantly changed or been removed. Proposed § 970.7(e) would also allow a PHA to amend an earlier approval, on a case-by-case basis, based on the PHA's submission (in the form prescribed by HUD) of an explanation and documentation, if applicable, evidencing the reason for the requested change. The current requirement at § 970.7(b)(2), which provides that substitution or addition of units requires the submission of a new application for those units would be removed.

Resident Participation and Opportunity To Purchase (§ 970.9).
The proposed rule would provide more specificity to the resident consultation requirements to give PHAs better guidance and to ensure that resident consultation is as effective as possible. Proposed § 970.9(a) would list with specificity the residents and resident groups with which the PHA must consult, as well as specific steps required to be taken. Included in the consultation, in addition to residents residing in the project proposed for the action, would be any resident councils, resident organizations for the project, PHA-wide resident organizations that will be affected, and the applicable RAB. Consultation would mandatorily include the following: Providing a copy of the demolition, disposition, or combined application, or posting it on the PHA's Web site, which must be accessible; consulting on any report on the environmental or health effects of the proposed activities; consulting on the final application; consulting on the relocation plan and opportunity to return to ACC units, if applicable; stating that residents and groups have the right to submit written comments, that the PHA will respond to those comments, and that the comments and responses will be submitted to HUD as part of the PHA's application materials. The PHA would have to provide residents and resident groups with a reasonable time frame to submit written comments, and must respond to those comments within a reasonable time frame.

In addition, PHAs must take steps to ensure that they communicate with public housing and rental assistance applicants and residents that are effective for persons with hearing, visual, and other communications-related disabilities consistent with section 504 of the Rehabilitation Act of 1973, and as applicable, the Americans with Disabilities Act (42 U.S.C. 12101
et seq.
). This includes ensuring that notices, policies, and procedures are made available via accessible communication methods including the use of alternative formats, such as Braille, audio, large type, sign language interpreters, assistive listening devices, and other similar methods, and are written using plain language. Additionally, PHAs must ensure that the public meeting facilities and services used are physically accessible to persons with disabilities in accordance with section 504 of the Rehabilitation Act of 1973 and that Limited English Proficient (LEP) individuals will have meaningful access to programs and activities, in accordance with Title VI of the Civil Rights Act of 1974, as amended, 42 U.S.C. 2000, and Executive Order 13166.

As part of the consultation, in addition to the requirement for the PHA to consult residents and resident organizations on the application as stated in proposed § 970.9(a)(5)(i) and (ii), the PHA must consult with the residents and resident organizations on any report on the environmental or health effects of the proposed demolition, disposition, or combined action (see proposed § 970.9(a)(5)(iii)).

Proposed § 970.9(b) would require, similarly to the currently codified section, the PHA in appropriate circumstances to offer to sell the project proposed for disposition to any “Established Eligible Organization,” which is defined as a resident organization, resident management corporation (RMC), or a nonprofit organization acting on behalf of the residents. Exceptions in proposed § 970.9(b)(3) would be similar to those in the currently codified rule, with a few clarifications and updating of vocabulary. Proposed § 970.9(b)(4) would remove language referencing the partial disposition of PHA property and use the term “project” instead, under the proposed revised definition of which a partial disposition would be included. If there is no exception to the resident offer requirement and if an Established Eligible Organization has expressed an interest under § 970.9(c), then the procedures in proposed § 970.11, “Procedures for the offer of sale to established eligible organizations,” would apply.

Procedure for the Offer of Sale to an Established Eligible Organization (§ 970.11).
Proposed § 970.11 would be generally similar to the currently codified section. However, current paragraph (d), “Contents of the initial written notification,” which states the information the PHA must provide to the Established Eligible Organization when it notifies them of the upcoming disposition, would be moved and redesignated as § 970.11(b), to immediately follow the requirement to send the notification (current paragraphs (b) and (c) accordingly would be redesignated (c) and (d)).

Proposed § 970.11(b) would be revised largely to update terminology; however, a couple of substantive changes are proposed. Proposed § 970.11(b)(1) replaces the phrase “development, or portion of the development,” with the term “project,” which would also include a portion of a project. In addition, the proposed rule would add “the number of accessible units or units that otherwise contain accessible features” to the information that must be provided in the initial written notification. Proposed § 970.11(b)(5) would revise currently codified § 970.11(d)(5), which states that public housing developments sold to resident organizations will not receive capital or operating funds after the disposition. The proposed rule would revise this general statement to indicate that if the Established Eligible Organization is an RMC and enters into an ACC with HUD, it will receive Operating and Capital Funds in accordance with 24 CFR part 964 (Tenant Participation and Tenant Opportunities in Public Housing), the ACC, and applicable federal law and regulation.

Proposed § 970.11(e), “Response to notice of sale,” would be updated to state that the count of the 30-day response time begins with the date the PHA's notice is postmarked.

Proposed § 970.11(h) would change the addressee for the letter of appeal from the field office director to HUD, and break the single paragraph into 2 numbered paragraphs solely for better readability, and would specify the initial 30-day clock for HUD's response begins to run on the date on which HUD receives the appeal. Proposed § 970.11(i), which states the required contents of the Established Eligible Organization's proposal, except for the use of updated terminology (for instance, using the terms “project” and “Established Eligible Organization”),

would be substantively the same as the current regulation.

Proposed § 970.11(i)(6), which would require the resident organization's proposal to include a plan for financing the purchase of the project similar to the currently codified § 970.11(i)(6), would also require the financing to include paying for any necessary accessibility modifications.

Proposed § 970.11(j) summarizes the PHA's responsibilities, which are to: Prepare and distribute the notice of disposition; evaluate the proposals received and make selections based on regulatory criteria in § 970.11(b); obtain the certifications from the executive director or board of commissioners required in § 970.11(k); consult with residents as required in § 970.9(a); not act in an arbitrary and capricious manner and give full and fair consideration to any offer from an Established Eligible Organization; and accept an offer if the offer meets the terms of sale. This section does not change the obligations that PHAs must currently meet under the codified regulations, but updates some terminology and provides some clarification to existing language where HUD thought further clarification would enhance understanding of the obligations required.

Proposed § 970.11(k) would change its title from “PHA post-offer requirements” to “Offer by an Established Eligible Organization,” and, like the current § 970.11(k), would state the procedures that the PHA is to follow once a resident offer is made. Except for the removal of language related to a partial disposition because it is no longer needed under the new definition of “project,” this section is the same as in the currently codified regulation. Essentially, this section requires the PHA to fully document that it correctly followed the resident offer requirements, including a board resolution of each eligible organization that the eligible organization received the PHA's offer, that the organization understands the offer, and that it waives its opportunity to purchase; alternatively, a certification of the executive director or board of commissioners of the PHA that the 30-day time has expired and no resident offer was received; or a certification, with supporting documentation, that the offer was rejected by the PHA.

Civil Rights and Equal Opportunity Review (§ 970.12).
The proposed rule would add a new § 970.12 that describes compliance with civil rights and equal opportunity requirements. HUD will review the PHA's civil rights certification under section 5A(d)(16) of the 1937 Act (42 U.S.C. 1437c-1(d)(16)), and other related information that may be available to HUD or requested by HUD. Pursuant to § 970.29, HUD will disapprove a PHA's application for demolition and/or disposition if HUD determines that any civil rights certifications or submissions required under this part are incomplete, inaccurate, or inconsistent with the requirements stated in this section.

Environmental Review Requirements (§ 970.13).
The environmental review requirements in proposed § 970.13 would be substantively the same as in the currently codified § 970.13. Environmental review requirements apply to the demolition, disposition, or combined action being taken and any known future re-use. The current regulation and this proposed rule state four factors to be considered in determining whether a future re-use is “known.” These factors are as follows: (1) That funding has been committed; (2) a grant application involving the site has been filed; (3) a government (federal, state, or local) has made a commitment to take an action that will facilitate a particular re-use of the site, and this may or may not be a physical action; and (4) that there are architectural, engineering, or design plans that go beyond preliminary stages.

Section 3 Compliance
(§ 970.14). Pursuant to section 3 of the Housing and Urban Development Act of 1968 (section 3) (12 U.S.C. 1701u), and HUD's regulation at 24 CFR part 135, HUD requires programs or projects funded by public housing funds to provide employment, training, contracting, and economic opportunities to the greatest extent feasible, to low and very-low income persons. The proposed rule would implement this requirement by adding a new § 970.14. This requirement applies to demolition and disposition (and combined) actions if public housing funds are used. If public housing funds are not used so that the requirement does not apply, planning and carrying out section 3 activities related to these proposed actions would satisfy, in part, the commensurate public benefit requirement for below FMV dispositions pursuant to § 970.19.

Specific Criteria for HUD Approval of a Demolition Application (§ 970.15).
Proposed § 970.15, like currently codified § 970.15, states the specific criteria for HUD approval of demolition applications, although the section would be reorganized and more detail would be added to some of the requirements. The proposed rule would reorganize this section to keep similar material together; for example, proposed § 970.15(a)(1) would cover the factor of obsolescence making a project unsuitable for housing purposes, and then include the list of major problems indicative of obsolescence to subparagraphs.

The problems that cause obsolescence for purposes of this rule are structural deficiencies, serious outstanding capital needs, and design or site issues such as severe erosion or flooding. While the currently codified regulation, at § 970.15(b)(1)(i), lists specific kinds of structural deficiencies, HUD believes that other structural deficiencies than those mentioned could cause obsolescence. At the same time, HUD acknowledges that there must be some degree of objectivity in the obsolescence determination. Therefore, this rule would propose at § 970.15(a)(1)(i) that obsolescence be found by an independent (that is, not a regular employee of the PHA) architect or engineer. HUD will review the determination and supporting documentation, and may obtain additional information, to ensure against any discriminatory effects of the proposed demolition—such as avoidance of the obligation to provide accessible housing for persons with disabilities. Furthermore, HUD seeks to clarify that, if the issue is a site issue related to the location of the project, such as physical deterioration of the neighborhood, a change from residential to industrial or commercial development in the neighborhood, or environmental conditions as determined by an environmental review in accordance with HUD's environmental regulations at 24 CFR part 50 or part 58, which jeopardize the suitability of the site or a portion of the site and its housing structures for residential use, then the proposed rule would require that the PHA simultaneously submit a disposition application. The reason for this proposed change is that if the site is not suitable for public housing such that existing public housing had to be demolished, it should not be redeveloped for low-income housing purposes in the future, even if of a lesser density. Instead, the PHA should dispose of the unsuitably located property.

The criteria of “no reasonable program of modifications will be cost-effective to return the project to its useful life” would be addressed in proposed § 970.15(a)(2). The test for cost effectiveness in this context would be revised from a percentage of total development cost based on type of structure (elevator or non-elevator), to a simple test as to whether the cost of modifications would exceed the HCC for new housing in effect at the time the

application is submitted to HUD. HCC is regularly updated and well understood by the public housing industry.

In the case of partial demolitions, proposed § 970.15(b) would revise currently codified § 970.15(c) to remove the requirement for an additional PHA certification that the proposed action would reduce development density to allow better access by emergency services or improve marketability. Instead, in the case of contiguous (non-scattered site) projects, the PHA would have to certify that the demolition will help to ensure the viability of the remaining portion of the project. In the case of scattered site projects, the viability certification would not be required. Where there is no contiguous project, there is no “remaining portion of the project” that would be affected, so the viability concern would not apply.

Proposed § 970.15(c) would require the PHA, unless the PHA also submits an application for disposition of the project at the same time it submits the demolition application, to also certify that the vacant land comprising the project after the demolition of the buildings shall be used for low-income housing purposes as permitted by the ACC, which purposes may initially include land banking as approved in writing by HUD if a use is not determined. In addition, proposed § 970.15(d) would require a demolition to be completed in 2 years of the date of HUD approval, unless the PHA receives from HUD an extension in writing. Proposed paragraphs (c) and (d) of § 970.15 would be new requirements.

Specific Criteria and Conditions for HUD Approval of a Disposition (§ 970.17).
Proposed § 970.17, like currently codified § 970.17, states the specific reasons for which HUD may approve of disposition applications. The standard would in part remain the same as currently codified in regulation, which is that HUD will approve an application for disposition when retention of the project is not in the best interests of the residents or the PHA for at least one of these reasons: The conditions in the area surrounding the project adversely affect the health and safety of the residents (proposed § 970.17(a)); disposition allows for the acquisition, development, or rehabilitation of other properties that will be operated as low-income housing more efficiently, effectively, or both (proposed § 970.17(b)); the PHA has determined the disposition to be appropriate (proposed § 970.17(c)); and, in the case of a disposition that does not include dwellings, the PHA must certify that the portion disposed of exceeds the needs of the project or the disposition is incidental to, or does not interfere with, the continued operation of the remainder of the project.

In addition, the proposed rule would revise and add more detail to some of the existing standards. Proposed § 970.17(b) would add examples of what would be considered more efficient and effective operation. In addition, the rule would require the PHA to demonstrate to the satisfaction of HUD that the units will be replaced with other low-income housing units. Section 970.17(b)(2) clarifies that the PHA must demonstrate to the satisfaction of HUD that sufficient replacement units are being provided in connection with the disposition of the property. The PHA should obtain sufficient value for the units to attain this replacement goal, which ensures that the PHA receives sufficient value for its units and also safeguards the Nation's valuable low-income housing stock. It is worth noting in this connection that the Senate Committee on Appropriations, in Senate Report 112-83 (September 21, 2011) stated, in a discussion of leveraging resources, that “The Committee is concerned that without an infusion of new resources to bring public housing stock into a state of good repair, irreplaceable affordable housing will be permanently lost” (p. 108). The Committee also notes that the public housing stock continues to age, and that the current backlog of capital needs is $25.6 billion. In this environment, when disposing of public housing units, PHAs must receive sufficient compensation, after any required retirement of outstanding debt not waived by HUD, from the disposition to replace the dwelling units with other low-income housing units through acquisition, development, or rehabilitation.

The replacement housing may, for example, be public housing units or project-based voucher units. Section 970.17(b)(3) would provide that replacement housing units be developed on another property, that the PHA must have the replacement housing units or land for the new construction of the units identified at the time it submits its request to HUD, and that the PHA provide its financing plan for the replacement units. The disposition of the project must be an arms-length transaction at FMV and 100 percent of the proceeds must be used to acquire, develop, or rehabilitate the replacement units. The proposed rule would revise § 970.17(c), which currently states that the PHA may also dispose of a project if the PHA has otherwise determined the disposition to be consistent with the goals of the PHA, the PHA Plan, and the 1937 Act, to add that the disposition under this section (c) must be in the best interests of the residents and the PHA. In addition, the proposed rule would add an additional condition under this section. Specifically, the PHA may not dispose of a project under this section if the reason for disposition, as determined by HUD, falls under another regulatory section (such as § 970.7(a) or (b)); another law (such as voluntary conversion under section 22 of the 1937 Act (42 U.S.C. 1437t) and required conversion under section 33 of the 1937 Act (42 U.S.C. 1437z-5) or homeownership under section 32 of the 1937 Act (42 U.S.C. 1437z-4)), or an eminent domain taking. HUD would consider the following reasons for disposition to be acceptable under this section: The project meets the criteria for obsolescence under § 970.15; the units will be rehabilitated through mixed-finance development method, and to reduce the number of public housing units in the project, the criteria under § 970.15 or another section of this part must be met; and other reasons determined by HUD to meet this criteria. In addition, proposed § 970.17(d) would revise currently codified § 970.17(d) by clarifying the language of the provision.

Requirements for the Disposition of a Project (§ 970.19).
Proposed § 970.19 would require that a project be disposed of for not less than FMV, unless HUD authorizes a disposition for less than FMV under § 970.19(b), which requires that a commensurate public benefit result from the disposition. The statute does not cover the amount that the PHA is required to obtain when disposing of public housing property, but instead appears to leave that element up to HUD regulation. In the case where there are proceeds from the disposition, the statute requires specified uses to be made of the proceeds, that is, retirement of bond debt that originally financed the project unless waived by the Secretary (see 42 U.S.C. 1437p(a)(5)(A)), and, to the extent that other proceeds remain, the provision of low-income housing or to benefit the residents of the public housing agency, or on-site commercial enterprises to serve the needs of the residents (see 42 U.S.C. 1437p(a)(5)(B)). Thus, the statute evidences an intent that the proceeds of disposition inure to the benefit of public housing residents. The statute does not explicitly cover the situation, however, where disposition is for less than FMV and hence there are no proceeds from the disposition to be applied as directed. Instead, that scenario is left to HUD regulation.

HUD believes that in below-FMV dispositions, there needs to be some

assurance that the federal investment in public housing is not lost and the purpose of the investment continues to be fulfilled. Hence, the proposed rule would add a new § 970.19(c), while currently codified paragraph (c), which relates to obtaining an estimate of FMV, would be redesignated as paragraph (c)(i). This new paragraph would require that where a PHA disposes of a project at below FMV on the basis that there is a commensurate public benefit, the PHA execute a use restriction or other arrangement of public record, in a form acceptable to HUD, that will ensure that the property will be used for not less than 30 years for the public use that HUD approved. This period is commensurate with other PIH use restrictions. This proposed new measure would ensure that public funds are being used for appropriate purposes. The use restriction or other similar arrangement must be in a first priority lien position that would survive any other liens or foreclosures. The PHA would be responsible for monitoring and enforcing the use restriction throughout the term of the use restriction. HUD may take enforcement action against the PHA if the PHA fails to enforce the use restriction.

Proposed § 970.19(a) and (b) are substantively similar to currently codified § 970.19(a), with the exception that the definition of commensurate public benefit is moved, to proposed § 970.5.

A new § 970.19(d) would provide that if a PHA is unable to dispose of a project containing obsolete units that is approved for disposition under § 970.17(c)(1) in its “as is” condition despite due diligence and reasonable efforts, as determined by HUD, if requested by the PHA, HUD will approve a demolition of the project, in accordance with § 970.15 so that the PHA can proceed with demolition and then the disposition of only the vacant land comprising the project.

In order to ensure timely action, the proposed rule would require at § 970.19(e) that the disposition shall occur within 2 years of HUD's approval, unless HUD extends the time in writing. In HUD's experience, 2 years is usually sufficient time. This time limit is the same as HUD is proposing for demolition (see proposed § 970.15(d)).

The proposed rule would also specifically address dispositions in which the property is transferred for more than one, but less than 30 years, such as by lease. Proposed § 970.19(f) would require the PHA to return the project to either return the property to the public housing inventory, including adding the property again to its ACC and placing a DOT on the property, or submit another disposition or other removal (e.g. demolition, homeownership, voluntary conversion) application, at the end of the temporary period.

Proposed § 970.19(g) would require the PHA to ensure that the use of the property that HUD approved as the commensurate public benefit begin within 2 years of the date of disposition of the project, unless the PHA receives an extension from HUD in writing. This proposal, again, is intended to ensure timeliness in the use of public funds. Current § 970.19(b), which allows for the PHA to pay for the reasonable expenses of disposition and relocation cost for displaced residents, is redesignated § 970.19(h).

Proposed § 970.19(h) and (i) would revise existing § 970.19(c) on obtaining an estimate of FMV and would add a provision on obtaining an estimate of FMV when a project is proposed for disposition via negotiated sale at less than FMV based on commensurate public benefit. In that case, HUD may accept any reasonable valuation of the property, which need not be obtained by hiring an independent appraiser, such as a tax assessor's valuation. Because of the commensurate public benefit being obtained in lieu of FMV, the market valuation is not as critical, so HUD can rely on a less expensive and more easily available form of valuation than an appraisal.

Use and treatment of Proceeds (§ 970.20).
The proposed rule would move and revise the content on use of proceeds found in currently codified § 970.19(e) and (f) into a new § 970.20, entitled “Use and treatment of proceeds.” The proposed revisions would provide additional detail on what HUD considers the appropriate uses of proceeds of disposition after the payment of HUD-approved costs of disposition and relocation. According to the 1937 Act, the proceeds are to be used: (1) For the retirement of outstanding debt, unless waived by HUD; (2) to the extent that any proceeds remain, for the provision of low-income housing or “to benefit the residents of the public housing agency”; or (3) leveraging amounts for commercial enterprises appropriate to the needs of the residents. The proposed revisions would provide more detail regarding HUD's interpretation of “to benefit the residents.”

The proposed new section would provide that uses of proceeds that remain after debt obligations for providing low-income housing could include: Modernization of existing projects; development of a project; funding of homeownership units under sections 9, 24, or 32 of the 1937 Act (42 U.S.C. 1437g, 1437v, and 1437z-4, respectively); construction, rehabilitation, and acquisition of units to be used as Section 8 housing, provided that the PHA complies with safe harbors in connection with such construction, rehabilitation, and/or acquisition, and executes a use agreement in a form acceptable to HUD ensuring that the property will be operated exclusively as Section 8 housing for not less than 30 years, roughly commensurate with other use restrictions (along with other requirements, such as compliance with program regulations); benefits to the residents for uses permitted by HUD's Operating Fund rule; and funding of shortfalls (
but not
new allocations) of vouchers under section 8 of the 1937 Act (42 U.S.C. 1437f), subject to further HUD approval and discretion considering the applicable section 8 statutory, regulatory, and funding requirements. Benefits to the residents (that is, benefits for public housing residents) for which funds could be used include, for example, job training, child care programs, and service coordination. Other housing and benefits to the residents may be approved by HUD as well. The net proceeds may be leveraged with other funds so long as the net proceeds are used on a pro-rata basis to fund only the approved uses.

The proposed rule would require, in other contexts, expenditures of proceeds for the provision of low-income housing or for the benefit of PHA residents under this section to begin within 2 years from the date of disposition approval and be completed (i.e., entirely expended for the approved use) within 4 years unless HUD approves an extension in writing. The purpose of this proposal is to ensure timely use of public funds for their appropriate purposes, and to prevent banking public funds. These funds are appropriated and approved for particular public purposes, and should be used for those purposes in a timely manner.

The rule would also provide that proceeds generated from dispositions are subject to all laws, regulations, and other requirements applicable to use approved by HUD unless otherwise approved by HUD in writing. Thus, for example, for development, equal opportunity and environmental requirements, requirements pertaining to section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701u) and the labor standards provisions of section 12 of the 1937 Act (42 U.S.C. 1437j), may all be applicable.

The one exception to this general rule is that where disposition proceeds are used with HUD approval for the development of public housing units, the disposition proceeds will not count toward the total development cost (TDC) limit pursuant to 24 CFR 905.314(c).

If a PHA fails to use proceeds as required, HUD may recapture or require repayment of the proceeds, or take all other remedies available under law. Finally, the rule would require that upon immediate receipt of proceeds, and until expended for an approved use, a PHA must deposit the proceeds into an interest bearing account, subject to a HUD General Depository Agreement and/or an escrow agreement in a form acceptable to HUD. All accrued interest will be treated as additional proceeds, subject to this section.

Relocation of Residents (§ 970.21).
Proposed § 970.21(a) would revise the currently codified § 970.21(a) to include material concerning the written notice to residents who will be displaced, now required at § 970.21(e), with additional details provided. The written notice would have to include a statement that the demolition, disposition, or combined application has been approved and that the action will occur, and a description of the process to relocate the residents. The written notice must be provided through an effective communications means to persons with disabilities in accordance with 24 CFR 8.6 and in the appropriate non-English language to persons with limited English proficiency as needed. This section would also continue to incorporate the requirement that the housing being offered must meet HQS (or such equivalent or successor standard that HUD may adopt) and be in a location “not less desirable” than the housing the resident is being displaced from. The currently codified regulation does not define a “not less desirable” location. Under the proposed rule, a PHA would, in determining comparable housing, also consider the following criteria (in aggregate): Neighborhood safety; quality of local schools; accessibility of amenities (e.g., transportation, employment); and exposure to adverse environmental conditions. Relocation associated with demolition and disposition plans must be consistent with the PHA's obligation to affirmatively further fair housing (42 U.S.C. 3608(e)(5)). In no event shall a PHA commence a demolition or disposition of the building (or a combined action) in which a resident lives until each resident of the building is provided relocation assistance.

Under proposed § 970.21(a)(4), the written notice would include a description of the comparable housing options that the PHA is offering to the resident, including the location of the housing to public transportation, employment, education, child care, medical services, shopping, and other amenities. The housing may include the types of housing currently codified at § 970.21(a)(1)-(3) (as of the April 1, 2013 edition of the Code of Federal Regulations).

Under § 970.21(a)(5), the notice shall include statements that the PHA shall offer displaced residents comparable housing on a nondiscriminatory basis with respect to race, color, religion, national origin, disability, familial status, or sex, as required by civil rights laws. Under proposed § 970.21(a)(6), the PHA shall offer residents with disabilities comparable housing that includes the accessibility features needed by the resident and located in the most integrated setting appropriate for the resident. The most integrated setting appropriate to the needs of individuals with disabilities is the setting that enables individuals with disabilities to interact with nondisabled individuals to the fullest extent possible, in furtherance of the Supreme Court's decision in
Olmstead
v.
L.C.,
527 U.S. 581 (1999), and pursuant to HUD's regulations at 24 CFR 8.4(d). The statement shall also include the right of displaced residents to a reasonable accommodation under Section 504 of the Rehabilitation Act of 1973, the Fair Housing Act, and the Americans with Disabilities Act, as applicable, and how to request such an accommodation.

Section 18(a)(4)(B) of the 1937 Act (42 U.S.C. 1437p(a)(4)(B)) requires the payment of “actual and reasonable relocation expenses” of each resident being displaced, as does the current regulation at § 970.21(e)(2). The proposed rule would add more detail to what constitutes “actual and reasonable relocation expenses.” Under proposed § 970.21(a)(7), the PHA would provide for the payment of actual and reasonable relocation costs for each displaced resident, including reasonable accommodations for residents with a disability in accordance with Section 504 of the Rehabilitation Act of 1973, essentially similar to currently codified 970.21(e)(2). The proposed rule would further specify that the PHA shall pay for moving cost assistance, the payment of a displaced resident's security or utility deposit (or both), at a comparable housing unit (provided that loans or grants made directly to displaced residents for new deposits are not permitted if the PHA's source is either Capital or Operating Funds). The PHA would pay such deposits directly to the utility company, the landlord, or both, with the resident holding no interest in the funds. Any returns or refunds would go to the PHA directly.

Section 18(a)(4)(D) of the 1937 Act (42 U.S.C. 1437p(a)(4)(D)) provides that a PHA, as a condition of approval of its application, must provide “any necessary counseling for residents who are displaced” as a result of the demolition, disposition, or combined action. Proposed § 970.21(a)(8) would specify that the notice must include a description of the housing counseling services that will be available, including mobility counseling, and how a resident may access those services.

Proposed § 970.21(a)(9) requires that if the provisions of section 104(d) of the Housing and Community Development Act of 1974 (42 U.S.C. 5304(d) (section 104(d)), referenced in § 970.21(g), apply to the project, the notice required by § 970.21(a) must explain the assistance available under section 104(d), which requires a residential antidisplacement and relocation assistance plan for certain grants.

Proposed § 970.21(b) covers the timing of the notification to residents of the upcoming action. Like currently codified § 970.21(e)(1), proposed § 970.21(b) requires notification to residents at least 90 days prior to the displacement date, except in cases of imminent threat to health and safety. The proposed rule would define displacement date as the earliest date by which a resident who will be displaced by a demolition, disposition, or combined action shall be required to move. A PHA may not issue the notification prior to the date that HUD approves the application. Section 18(a)(4)(A)(iii) of the 1937 Act (42 U.S.C. 1437p(a)(4)(A)(iii)) and the current regulation at § 970.21(e)(1)(iii) require that each resident who is displaced from housing must be offered comparable housing and must be provided with actual and reasonable relocation assistance. The notice provisions in proposed § 970.21(a) reflect these requirements.

Proposed § 970.21(c)(1) would provide that if a PHA offers a resident comparable housing in the form of tenant-based assistance under section 8 of the 1937 Act, and the resident is unable to lease a dwelling unit during the initial 60-day leasing period provided under the Housing Choice Voucher program, the PHA may either (i) grant one or more extensions to the initial term in accordance with the voucher program regulations at 24 CFR 982.303 as reflected in the PHA's administrative plan; or (ii) provide the resident with another form of

comparable housing (e.g., public housing unit or project-based unit under section 8 of the 1937 Act). Proposed § 970.21(c)(2) would provide that a PHA shall not commence the HUD-approved demolition or complete the HUD-approved disposition of a building until each resident who will be displaced by the action is relocated in accordance with the requirements of this part.

As discussed in this preamble, the proposed rule would allow dispositions at below FMV based on commensurate public benefit. In such a case, if housing is developed on the site of the former project and is income-eligible, proposed § 970.21(d) would provide that income-eligible residents shall be offered the opportunity to return to the site once appropriately-sized units are available for occupancy. As part of its application for this type of disposition, the PHA would provide a plan that addresses how residents will be notified of the opportunity to return; the amount of time residents will have to exercise this opportunity; the source of funds from which the PHA or the new owner will pay the moving costs for moving the displaced residents back into the new units; and the process for selecting displaced residents who will be offered an opportunity to return (for example, lottery) if the number of new public housing units cannot accommodate all lease-compliant displaced residents at appropriate bedroom sizes. A displaced resident is “lease-compliant” for this purpose if the displaced resident (including household members whose names appear on their public housing lease) has not engaged in serious or repeated violations of material terms of the lease that result, or could result, in good cause to evict or terminate the assistance;

Proposed § 970.21(e) would provide that if a resident who will be displaced by a demolition, disposition, or combined action, refuses to move or otherwise rejects the PHA's offer(s) of comparable housing and relocation counseling and advisory services despite the PHA's due diligence, the PHA may evict the tenant under state law as long as the PHA exercises due diligence in making continued efforts to offer the resident comparable housing and relocation counseling.

Proposed § 970.21(f) would specify some of the sources of funding that may be used for relocation. Proposed § 970.21(f) would state that sources of funding for relocation expenses include gross proceeds a PHA receives under this part, Capital Funds, section 8 administrative fee funding (where section 8 assistance is offered as comparable housing), or other federal funds available for this purpose.

Proposed § 970.21(g) would specify that if federal financial assistance under the Community Development Block Grant (CDBG) program (42 U.S.C. 5301
et seq.
); the Urban Development Action Grant (UDAG) program (42 U.S.C. 5318
et seq.
); or the HOME Investment Partnerships (HOME) program (42 U.S.C. 12701
et seq.
) is used in connection with the demolition of lower-income dwelling units, or conversion of such units to a use other than lower-income dwelling units, the project is subject to section 104(d) of the HCD Act of 1974, including the relocation payment and one-for-one replacement provisions as provided at 24 CFR part 42, subpart C. Proposed § 970.21(h) states that the URA does not apply to this part.

Costs of Demolition and Relocation of Displaced Residents (§ 970.23).
Proposed § 970.23 would add provisions and clarifications to currently codified § 970.23. Proposed § 970.23(a) would clarify that a PHA may pay for relocation expenses with non-Federal funds or any eligible HUD funds, which may include Capital Funds. Proposed § 970.23(b) would provide that the PHA may pay for the costs of demolition with non-Federal or any eligible funds, including Capital Fund. Proposed § 970.23(c) would provide that where HUD has approved the demolition of a project and the proposed action is part of a program under the Capital Fund Program (24 CFR part 905), that the expenses of the demolition and of relocation of displaced residents must be included in the Capital Fund Submission pursuant to section 9(d) of the Act (42 U.S.C. 1437g(d)) or other eligible HUD funds.

Required and Permitted Actions Prior to Approval (§ 970.25).
Proposed § 970.25 would update and clarify currently codified § 970.25. In addition to updating language, proposed § 970.25(a) would clarify that HUD permission to take any actions related to demolition, disposition, or a combined action prior to HUD approval of the application, may only be granted in writing, and that a PHA may not delay or withhold maintenance on a project in such a way as to cause or allow it to meet the demolition criteria under § 970.15.

The consolidation of occupancy requirements would be covered under proposed § 970.3(b)(18), and so would be removed from currently codified § 970.25(b) by this proposed rule. Proposed § 970.25(b) would provide that a PHA may lease public housing units at turnover while HUD is considering approval or after HUD has approved its application subject to the following conditions: The units are in decent, safe, and sanitary condition; the PHA determines that due to community housing needs or for other reasons consistent with its PHA Plan, leasing turnover units is in the best interests of the PHA, its residents, and community; and residents of units leased during such a period are provided with the relocation assistance required by proposed § 970.21. Where units are leased under this provision, the PHA's Operating Fund continues to be calculated as stated in 24 CFR part 990 (Public Housing Operating Fund).

De Minimis Exception to Demolition Application Requirements (§ 970.27).
Proposed § 970.27 is essentially the same as the current codified section. The basic requirements—that the demolition be limited to the lesser of 5 dwelling units or 5 percent of the total number of units owned by the PHA, and that the space occupied by the demolished units be used for meeting the needs of PHA residents, or, alternatively, that the units were beyond repair—are found at proposed § 970.27(a) and (c).

The explanation of the 5-year period currently found at § 970.27(c) would be moved to proposed § 970.27(b). The reporting and recordkeeping requirements would be updated at proposed § 970.27(e).

Proposed § 970.27(f) would clarify that any resident displaced by de minimis demolition would be entitled to housing assistance in accordance with federal laws and requirements, which include the PHA's Admissions and Continued Occupancy Policy (24 CFR part 966), the PHA's section 8 Administrative Plan (24 CFR part 982), PHA Plan requirements (24 CFR part 903), and, except where the PHA provides the residents to be displaced with another public housing unit from its inventory, the URA. If CDBG or HOME funds are involved, the displaced resident shall be provided assistance under section 104(d) of the Housing and Community Development Act of 1974, where applicable.

Criteria for HUD Disapproval of Demolition or Disposition Application (§ 970.29).
Proposed § 970.29 would revise the currently codified § 970.29, specifically, the provision that an application can be rejected if it is clearly inconsistent with the PHA Plan. The section would explicitly state that failing to satisfy the application requirements is grounds for disapproval. The proposed rule would also specify in particular the civil rights related

requirements under § 970.12. There are minor technical updates to language.

Effect on the Operating Fund Program and Capital Fund Program (§ 970.31).
The proposed rule would remove § 970.31 on replacement units as this material will be moved to the Capital Fund rule at 24 CFR part 905. Currently codified § 970.33, which states the applicability of the Operating Fund program (24 CFR part 990) and the Capital Fund program (24 CFR part 905), would be redesignated as § 970.31.

Demolition Due to Emergency, Major Disaster, or Accidental Loss (§ 970.33).
Proposed § 970.33 would codify HUD's practice in cases where PHAs must demolish housing due to an emergency or natural disaster. These terms are defined at proposed § 970.5. An “emergency” is defined as it is in section 102(1) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122(1)) (Stafford Act). “Major disaster” is defined similarly to the definition in the Stafford Act (see 42 U.S.C. 5122(2)), with the addition that it includes any natural catastrophe or, regardless of cause, fire, flood, or explosion, that causes damage of sufficient severity or magnitude to warrant demolition to alleviate the danger, loss, hardship, or suffering caused thereby. In such a case, if the PHA rebuilds the same number of dwelling units or non-dwelling structures that comprised the demolished project, the demolition (and any additional demolition required to carry out the redevelopment) shall not be subject to 24 CFR part 970. If the PHA rebuilds less than all of the demolished structures or the project, the PHA shall submit a demolition application under this part within one year of such demolition to formalize and request official HUD approval for the action under this part.

Removal of All Projects in the PHA's Public Housing Inventory (§ 970.35).
Proposed § 970.35 would be added to address the increased frequency of such actions and to clearly codify the PHA's responsibilities in this case, as well as to assist HUD and HUD field offices in monitoring and enforcing these requirements. In cases where a disposition application proposes to remove all structures and land in a PHA's public housing inventory and the PHA has no plans to develop any additional projects, once the disposition is complete, the PHA shall not expend any remaining Operating Funds, including operating reserves, other than for purposes related to the close-out of its public housing inventory, including audit requirements required by this section. Any remaining Operating Funds (including operating reserves and any unspent asset-repositioning fees received pursuant to 24 CFR 990.190(h)) would be required to be returned to HUD within 90 days of the date of disposition of the project. The PHA may spend no more of its Capital Funds other than, with HUD approval, amounts required to close out contract obligations incurred prior to HUD's approval of the disposition and amounts required to address imminent health and safety issues that arise at the project prior to completion of the disposition transaction.

If the disposition was approved at below FMV based on commensurate public benefit, prior to expending any Capital Funds on the project for the purposes identified above, the PHA must notify HUD in writing of the planned expenditure of Capital Funds so that HUD can determine if any changes are necessary to the terms of its commensurate public benefit and/or if the disposition price should be adjusted to reflect the expenditure of funds; no Capital Funds may be expended after the date of disposition of the project and any remaining Capital Funds shall be returned to HUD within 180 days of such date of disposition. The PHA shall be ineligible to receive any Capital Funds (replacement housing factor funds) under 24 CFR 905.10(i), and any funds issued under this section shall be recaptured by HUD.

Within 60 days after the disposition of all projects in its inventory, the PHA shall dispose of all equipment in its inventory that was acquired in whole or in part with 1937 Act funds in accordance with 24 CFR 85.32(c) (which addresses equipment acquired under a grant or subgrant), pursuant to a plan acceptable to HUD; and within 90 days of the date of disposition, the PHA must have an independent audit conducted on the close-out of its public housing inventory.

Reports and Records (§ 970.37).
Proposed § 970.37 would revise currently codified § 970.35, “Reports and records” to strengthen HUD's oversight and monitoring of demolition and disposition actions. The information on demolition and sale or lease contracts currently found at § 970.35(a)(1) and (2) would be retained at proposed § 970.37(a)(1) and (2), and a new paragraph (a)(3) would be added.

This section would revise currently codified § 970.35 to require a report, in a form and frequency to be prescribed by HUD, until HUD determines that the report no longer needs to be submitted, containing the following information: (i) A description of resident relocation and timetable, including the number of families actually relocated by bedroom size; the types and location of comparable housing provided to each family; demographic information on family size, race, national origin, sex, and disability of relocated residents; reasonable accommodations that were provided in connection with the comparable housing; units to which residents were relocated that meet the accessibility requirements of Section 504 of the Rehabilitation Act of 1973 and HUD's implementing regulations at 24 CFR part 8 or that otherwise contain accessible features; the status of the Opportunity to Return Plan, including residents who express an interest in the plan; and the comparable housing offered to families that include a member with a disability that was located in a non-segregated setting, or, if non-segregated housing was not offered, an explanation of why the setting that was offered was the most integrated setting appropriate for the family, that is, the setting that enables the family to interact with non-disabled persons to the fullest extent possible and have access to community-based services; (ii) a description of the PHA's use of the proceeds of disposition by providing a financial statement showing how the gross and net proceeds were expended by item and dollar amount, as approved by HUD; (iii) a description of any remaining disposition proceeds, including current balance (plus interest), bank information of where such proceeds are being held, and plans for expending such proceeds for the use approved by HUD within the required timeframe; (iv) for dispositions approved by HUD at less than FMV based on commensurate public benefit, a description of the current use of the property (e.g., owner, number of housing units developed), and a statement of how the property is being used for the HUD-approved use; (v) a description of whether any project-based voucher contracts under section 8 of the 1937 Act have been executed on a former public housing property approved for disposition and/or at housing developed, acquired, or constructed with disposition proceeds; and (vi) evidence that an audit has been conducted on the demolition, and/or disposition action within 3 years of completion of the demolition and/or disposition action. In addition, as in the current regulation, HUD would be able to ask for such additional information as HUD may require from time to time.

B. Retention of Projects by PHAs Under 24 CFR Part 85

The proposed rule would add a subpart B to 24 CFR part 970, to allow

PHAs and other owners of public housing to retain public housing property, including dwelling units and appurtenant personal property and equipment that were purchased with 1937 Act funds, without the use restrictions under the ACC and DOT. Section 18 does not apply to cases where a PHA retains property rather than disposing of it to another party. In the case of retention, 24 CFR part 85 applies, particularly, § 85.31.

Definitions (§ 970.39).
Proposed § 970.39 would provide that the de

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2014-24068. Public record. Not legal advice.