# Housing Opportunity Through Modernization Act of 2016-Housing Choice Voucher (HCV) and Project-Based Voucher Implementation; Additional Streamlining Changes > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2024-08601 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** May 7, 2024 - **Citation:** 89 FR 38224 ## Text DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 24 CFR Parts 5, 8, 42, 50, 91, 92, 93, 247, 290, 882, 888, 891, 903, 908, 943, 945, 960, 972, 982, 983, 985, and 1000 [Docket No. FR-6092-F-03] RIN 2577-AD06 Housing Opportunity Through Modernization Act of 2016—Housing Choice Voucher (HCV) and Project-Based Voucher Implementation; Additional Streamlining Changes AGENCY: Office of the Assistant Secretary for Public and Indian Housing, HUD. ACTION: Final rule. SUMMARY: This final rule amends HUD's regulations to implement changes to the Housing Choice Voucher (HCV) tenant-based program and the Project-Based Voucher (PBV) program made by the Housing Opportunity Through Modernization Act of 2016 (HOTMA). HOTMA made several amendments to the HCV and PBV programs, including establishing a statutory definition of public housing agency (PHA)-owned housing, and amending several elements of both programs. In response to public comments, HUD has also included additional regulatory changes in this final rule that are intended to reduce the burden on public housing agencies, by either modifying requirements or simplifying and clarifying existing regulatory language. DATES: Effective date: June 6, 2024, except the following sections, which are delayed indefinitely: instruction 69, § 982.451(c); instruction 98, § 983.154(g) and (h); instruction 100, § 983.157; and instruction 103, § 983.204(e). For more information, see SUPPLEMENTARY INFORMATION . Compliance dates: Compliance with this rule is required no later than June 6, 2024, except for the following requirements: 1. 90 days after effective date. PHAs are not required to comply with changes to the requirements in the following sections until September 4, 2024: 24 CFR 982.301; 24 CFR 982.503; 24 CFR 982.625-641; 24 CFR 983.58(b); 24 CFR 983.252; 24 CFR 983.260; and 24 CFR 985.3. 2. 180 days after effective date. PHAs are not required to comply with the new requirements in the following section until December 3, 2024: 24 CFR 982.505. 3. One year after the effective date. Several sections in this final rule require PHAs to update their Administrative Plans. PHAs are not required to update their Administrative Plans in compliance with these new requirements until June 6, 2025. Additionally, PHAs are not required to comply with the new requirements in the following sections until June 6, 2025: 24 CFR 983.57; 24 CFR 983.155(b); 24 CFR 983.251(e); and 24 CFR 983.262. FOR FURTHER INFORMATION CONTACT: Ryan Jones, Director, Housing Voucher Management and Operations Division, Department of Housing and Urban Development, 451 7th Street SW, Washington, DC 20011; telephone number 202-708-1112 (this is not a toll-free number); email HOTMAVoucher@hud.gov. HUD welcomes and is prepared to receive calls from individuals who are deaf or hard of hearing, as well as from individuals with speech or communication disabilities. To learn more about how to make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs. SUPPLEMENTARY INFORMATION: I. Background The HOTMA Statute On July 29, 2016, HOTMA was signed into law (Pub. L. 114-201, 130 Stat. 782). HOTMA makes numerous significant changes to statutes that govern HUD programs, including section 8 of the United States Housing Act of 1937 (1937 Act) (42 U.S.C. 1437f). The Proposed Rule On October 8, 2020, HUD issued a proposed rule 1 to codify the HOTMA provisions that HUD implemented through the HOTMA Implementation Notices 2 in the Federal Register . The proposed rule also sought to make changes to regulatory provisions unrelated to HOTMA to eliminate obsolete regulatory provisions and reduce the burden on public housing agencies, by either modifying requirements or simplifying and clarifying existing regulatory language. The proposed rule sought to codify the following HOTMA provisions: 1 Housing Opportunity Through Modernization Act of 2016-Housing Choice Voucher (HCV) and Project-Based Voucher Implementation; Additional Streamlining Changes, 85 FR 63664 (Oct. 8, 2020). 2 See 81 FR 73030 (Oct. 24, 2016); 82 FR 5458 (Jan. 18, 2017); 82 FR 32461 (Jul. 14, 2017); additional guidance was provided in Notices PIH 2017-18, PIH 2017-20, and PIH 2017-21. • Section 101: In accordance with HOTMA section 101(a)(1), the proposed rule included a provision regarding non-life-threatening deficiencies and an alternative inspections requirement in HOTMA section 101(a)(1) at §§ 982.405, 982.406, and 983.103. The proposed rule also proposed to revise the definition of life-threatening deficiencies at § 982.401. Additionally, the proposed rule sought to include regulations to enforce Housing Quality Standards (HQS) in section 101(a)(3) at §§ 982.404 and 983.208. • Section 105: In accordance with HOTMA section 105, the proposed rule sought to modify and align the definition of “PHA-owned unit” with HOTMA's revised definition of the term at §§ 982.4 and 983.3. • Section 106: In alignment with HOTMA sections 106(a)(2) and 106(a)(3), the proposed rule proposed to include regulations on PBV program cap, PBV units not subject to project cap or program cap, and PBV project cap in §§ 983.6, 983.54, and 983.59. • Section 106: Additionally, to conform to the changes in HOTMA section 106(a)(4), the proposed rule included regulations on entering into a PBV Housing Assistance Payments (HAP) contract for rehabilitated and newly constructed housing projects without an agreement to enter into HAP contract at § 983.154. The proposed rule sought to codify regulations surrounding PBV additional contract conditions and tenant-based assistance for families at termination/expiration without renewal of PBV HAP contract; PBV priority of assistance contracts; PBV adding units to HAP contract without competition; and PBV initial term of HAP contract and extension of term, in sections 106(a)(4) and 106(a)(5) throughout Part 983. The proposed rule sought to codify regulations that allow for rent adjustments using an operating cost adjustment factor (OCAF) in HOTMA section 106(a)(6) at § 983.302. • Section 106: Further, to conform to the changes in HOTMA sections 106(a)(7) through (a)(9), the proposed rule sought to codify HOTMA's changes to PBV preference for voluntary services in section 106(a)(7) at § 983.251 and owner-maintained waiting lists in section 106(a)(7) at § 983.251. The proposed rule also sought to codify changes to environmental requirements for existing housing in section 106(a)(8) at § 983.56 and attaching PBVs to projects where the PHA has an ownership interest in section 106(a)(9) at § 983.51. The proposed rule also sought to implement the following HOTMA HCV provision: • Section 112: In accordance with HOTMA section 112, the proposed rule proposed to include the manufactured home space rent calculation in section 112 at § 982.623, and to address the PHA option to make housing assistance payments directly to families instead of an owner for manufactured home space rentals in a proposed change to § 982.623. HUD also proposed changes that were not statutorily required, to better clarify or revise existing regulatory requirements, including changing the current requirements to refine the Davis-Bacon wage requirements and inserting references to obligations under Section 504 of the Rehabilitation Act of 1973 (Section 504) and the Americans with Disabilities Act (ADA). Through these changes, HUD sought to improve the administration of the program, simplify program rules, and reduce administrative burden and cost. For additional information, please see the proposed rule. 3 3 85 FR 63664 (Oct. 8, 2020), https://www.federalregister.gov/documents/2020/10/08/2020-21400/housing-opportunity-through-modernization-act-of-2016-housing-choice-voucher-hcv-and-project-based. HUD received 44 comments on the proposed rule, which were considered and are discussed in Section IV of this preamble. Additional details about the proposed changes may be found in the “Housing Opportunity Through Modernization Act of 2016-Housing Choice Voucher (HCV) and Project-Based Voucher Implementation; Additional Streamlining Changes” proposed rule at 85 FR 63664 (Oct. 8, 2020). The NSPIRE Rulemaking On May 11, 2023, after the proposed rule was published, HUD published the “Economic Growth Regulatory Relief and Consumer Protection Act: Implementation of National Standards for the Physical Inspection of Real Estate (NSPIRE) final rulemaking (“the NSPIRE final rule”). 4 The NSPIRE final rule established a new approach to defining and assessing housing quality by consolidating and modernizing inspection standards for public housing, multifamily housing, Community Planning and Development programs, and the HCV and PBV programs. Several of the changes made in this final rule from the proposed rule are designed to incorporate or be consistent with the NSPIRE final rule, and some additional changes are made to build upon changes made by the NSPIRE final rule. 4 See 88 FR 30442. II. The Final Rule After considering the public comments received on the October 8, 2020, proposed rule, and after further review, HUD makes the following changes at this final rule stage. Where a section has been relocated either from the prior regulations or from what HUD proposed, the section numbers shown in the headings of this preamble refer to the regulation sections as they appear in this final rule. Notes concerning application of this rulemaking to projects underway. HUD wishes to clarify that no change in this rulemaking requires a PHA, or any other party, to repeat a stage in the selection or development process which has already been completed for a PBV project prior to the compliance date of this rulemaking. If, for instance, a PHA has selected a site under the prior site selection standards before the effective date of this rulemaking, the PHA is not required to complete a new selection. Similarly, an Agreement to enter into HAP contract signed before the effective date of this rulemaking does not need to be amended to incorporate changes to this rulemaking. Additionally, if parties wish to amend an existing Agreement to enter into HAP contract to take advantage of changes made by this rulemaking, such as the changes made to include a description of broadband infrastructure work in the Agreement, nothing in this rulemaking prevents such an amendment after the rule is in effect. However, HUD notes that if a project is under an Agreement to enter into HAP contract as of the effective date of this rule, parties cannot nullify the Agreement to enter into HAP contract to proceed without an Agreement as will be otherwise allowed under this rule when § 983.154(f) and (g) take effect. § 888.113 Fair Market Rents for Existing Housing: Methodology In response to public comments, HUD revises § 888.113 to increase flexibility for PHAs. This final rule will provide PHAs the option in the HCV program to use Small Area Fair Market Rents (SAFMRs) in a non-metropolitan area with notification to their local HUD field office, which provides PHAs operating in non-metropolitan counties the same opportunity to establish payment standards that better align with rents that vary significantly between zip code areas within the non-metropolitan counties. In paragraph (a) this final rule modifies the requirement under § 888.113 that the FMR calculation exclude newly built units. HUD no longer publishes separate FMRs for newly constructed rental units; therefore, the FMRs calculated under § 888.113 should be reflective of the entire rental market. This final rule also clarifies existing practice in paragraph (c)(3) that where a PHA that elects to use SAFMRs may exercise this option in one metropolitan area or non-metropolitan county, and is not required to exercise this option in other metropolitan areas or non-metropolitan counties. This final rule changes paragraph (c)(3) which will allow PHAs to notify HUD when opting-in to use SAFMRs, rather than require HUD's approval. This final rule revises paragraph (h) to align with the change to paragraph (c)(3) described above and to improve readability. Paragraph (h) is also revised to include a cross-reference to separate requirements regarding applicability of exception payment standards based on Small Area FMRs to PBV projects, to more clearly signal that Small Area FMRs may impact PBVs both as described in paragraph (h) and where HUD approves use of exception payment standards. This final rule also revises paragraph (h)(1) to clarify that the PHA and owner may mutually agree to apply the SAFMR to a PBV project where the project was selected before “either or both” the SAFMR designation and the PHA administrative policy. The intent of this provision, as explained in the preamble to the Small Area FMR final rule (81 FR 80567, published November 16, 2016), was to permit a PHA that had established an Administrative Plan policy to apply Small Area FMRs to all future PBV projects to also establish a policy permitting the PHA to apply the Small Area FMRs to current PBV projects, provided the owner was willing to mutually agree to do so. This approach was intended to offer “maximum flexibility” to the PHA for varied circumstances. However, the prior language the use of “both” inadvertently created confusion with respect to projects selected between the two events (the Small Area FMR designation and the PHA administrative policy extending Small Area FMRs to future PBV projects). Consequently, HUD is making a technical correction to paragraph (h)(1) to clarify that if the PHA is applying the Small Area FMRs to future PBV projects, the PHA may also establish a policy to extend the use of Small Area FMRs to current PBV projects, including those projects selected after the Small Area FMR designation but prior to the effective date of the PHA administrative policy, if the owner is willing to do so. This final rule also makes minor revisions to paragraphs (h)(1) and (h)(2). First, the final rule includes “county-wide FMRs,” for consistency with other changes in the regulation that allow voluntary use of SAFMRs in non- metropolitan areas and to avoid any implication that the PBV Small Area FMR flexibilities in paragraph (h) would not be available in non-metropolitan counties where HUD publishes SAFMRs. Second, this final rule changes “designation” to “designation/implementation” to improve clarity; this is not a substantive change, but rather it reflects that the applicable date for a PHA that chooses to implement Small Area FMRs under paragraph (c)(3) of this section would more appropriately be termed the date of “implementation.” This final rule also clarifies the effective date of a rent increase due to Small Area FMR. The proposed rule left unchanged a provision stating that the effective date of a rent increase would occur on the “first annual anniversary” of the HAP contract, but this final rule replaces “first annual anniversary” with “next annual anniversary” to clarify that the effective date of a rent increase occurs on the next annual anniversary after the agreement, even if that is not the first anniversary of the project. Finally, this final rule revises paragraph (i)(2) to reflect the renumbering of § 982.503(e) to (f). This final rule also revises paragraph (i)(3) to reflect the phase-out of success rate payment standards in 982.503(f). § 903.3 What is the purpose of this subpart? This final rule clarifies HUD's intent regarding applicability of part 903 to the project-based voucher program. Previously, § 903.4(a)(2)(i) defined tenant-based assistance to broadly mean assistance provided under section 8(o) of the 1937 Act, which included project-based assistance under section 8(o)(13). When § 903.12 was amended to make express reference to project-based assistance under section 8(o)(13), an unintended consequence was confusion regarding whether the term “tenant-based assistance” should still be interpreted to include project-based assistance under section 8(o)(13). In § 903.3(b)(2), the term “project-based” is added to the reference of participants who benefit from PHA plans as a source to locate basic PHA policies, rules and requirements concerning the PHA's operations, programs and services. § 903.4 What are the public housing agency plans? This final rule revises and defines both tenant-based assistance and project-based assistance under 903.4(a)(2)(i) to address confusion regarding whether the existing regulatory language also covers project-based assistance under section 8(o)(13). HUD now also makes specific reference to tenant-based assistance, project-based assistance, and/or tenant and project-based assistance throughout part 903 to bring clearer meaning to each provision. § 903.6 What information must a PHA provide in the 5-Year Plan? HUD adds paragraph (c) to § 903.6 to clarify that when a PHA intends to select one or more projects for project-based assistance without competition, the PHA must first include a statement of this intent in its 5-Year Plan to put the public on notice. The proposed rule referenced this requirement in 983.51(c)(1) but only generically referenced the PHA Plan. § 903.7 What information must a PHA provide in the Annual Plan? This final rule clarifies the requirements for PHAs that provide project-based assistance under section 8(o)(13) with respect to what information a PHA must provide in the Annual Plan. HUD now makes specific references to project-based assistance in paragraphs (a)(1), (c), (d), (e)(4), (f), and (l)(1)(iii) and (2). HUD also inserts a new paragraph (r) which contains text that was previously located in § 903.12, as HUD determined that the project-based assistance statement requirement in that section was not appropriately located. Finally, in the Federal Register notice published on January 18, 2017 (82 FR 5458), HUD stated, “The HOTMA amendments permit a PHA to establish a preference based on who qualifies for voluntary services, including disability-related services, offered in conjunction with the assisted units.” HUD further provided “The revised statute permits such a preference to be established if it is consistent with the PHA Plan. As part of the PHA Plan review process, the Office of Fair Housing and Equal Opportunity, in consultation with the Office of General Counsel, will review each proposed preference for consistency with fair housing and civil rights requirements. As part of this process, HUD may request the PHA or owner provide any additional documentation necessary to determine consistency with the PHA Plan and all applicable Federal fair housing and civil rights requirements.” In this final rule, HUD clarifies that the Office of Fair Housing and Equal Opportunity, in consultation with the Office of General Counsel, may review proposed preferences as part of the PHA Plan review process. Approval of a PHA Plan does not constitute compliance with federal fair housing and civil rights requirements. As stated in the comment discussion of § 983.251, adoption of such preferences cannot conflict with Section 504 or other federal civil rights requirements. Further explanation of these issues is located in that discussion and in HUD's January 2017 notice. § 903.11 Are certain PHAs eligible to submit a streamlined Annual Plan? HUD makes a minor revision to § 903.11(c)(1) and (3) to include the requirement that a PHA must identify its participation in the project-based assistance program in the streamlined Annual Plan consistent with the changes to § 903.7 made by this final rule. HUD is also revising paragraphs (a)(3) and (c)(3). These paragraphs allow PHAs to submit a streamlined Annual Plan if they do not own or operate public housing. This final rule clarifies that PHAs that participate in the project-based assistance program are still eligible to submit a streamlined Annual Plan. § 903.12 What are the streamlined Annual Plan requirements for small PHAs? In this final rule, HUD moves the PBV requirements previously located in § 903.12 to § 903.7 as described above. HUD makes a minor revision to § 903.12 to include the requirement that in the streamlined Annual Plan for Small PHAs, a PHA must identify its participation in the PBV program consistent with the changes to § 903.7 made by this final rule. HUD also makes express reference to project-based assistance in paragraph (b). § 903.13 What is a Resident Advisory Board and what is its role in development of the Annual Plan? This final rule clarifies in § 903.13(b)(1) and (3) the requirements that Resident Advisory Board composition provides for reasonable representation of families receiving project-based assistance, in addition to families receiving tenant-based assistance. § 903.15 What is the relationship of the public housing agency plans to the Consolidated Plan and a PHA's Fair Housing requirements? This final rule clarifies in paragraph (c) that all admission and occupancy policies for section 8 project-based housing programs, in addition to public housing and section 8 tenant-based must comply with Fair Housing Act requirements and other civil rights laws and regulations and with a PHA's plans to affirmatively further fair housing. § 982.4 Definitions In this final rule, HUD has revised the organizational structure of the cross-references for clarity and consistency with cross references in other sections. In addition, this final rule makes the following changes to definitions: HUD adds the definition of “building,” to clarify that a building is a structure with a roof and walls that contains one or more dwelling units. HUD adds the definitions of “foster adult” and “foster child” to the HCV program to clarify that foster adult and foster child are members of the household, but not members of a family. These definitions are identical to the definitions added by the Housing Opportunity Through Modernization Act of 2016: Implementation of Sections 102, 103, and 104 final rule. 5 5 See “Housing Opportunity Through Modernization Act of 2016: Implementation of Sections 102, 103, and 104” final rule at 88 FR 9600 (Feb. 14, 2023). HUD revises the definition of “housing quality standards” to make a technical correction to the existing definition and eliminate confusion regarding the use of the alternative inspection option. Under the statute, the term “housing quality standards” (HQS) refers to the standards prescribed by HUD under section 8(o)(8)(B)(i) or variations approved by HUD under section 8(o)(8)(B)(ii) of the United States Housing Act of 1937. While the alternative inspection option at § 982.406 allows a PHA to comply with the initial and regular inspection requirements by relying on an alternative inspection ( i.e., an inspection conducted for another housing program), that does not mean the standards of the alternative inspection become the applicable HQS for the HCV program. For example, assume a PHA places a unit under a HAP contract by using the alternative inspection option for initial inspections under § 982.406(e). Under that option, the PHA may place a unit under HAP contract on the basis that the unit passed an alternative inspection for a different housing program if certain conditions are met prior to conducting its own inspection. However, the PHA must still conduct its own HQS inspection within 30 days of receiving the Request for Tenancy Approval (RFTA) and may not make housing assistance payments to the owner until the PHA has inspected the unit. The PHA conducts its inspection of the unit based on the HQS established by HUD for the HCV program, not the housing standards that were applicable under the alternative inspection. Likewise, any interim inspection conducted by the PHA for a unit under HAP contract is to determine that the unit meets the HQS established by HUD for the HCV program, regardless of whether the PHA is relying on an alternative inspection of another housing program (that may have different standards) for regular inspections. For these same reasons, HUD is also revising the definition of HQS for the PBV program at § 983.3 and making conforming changes to §§ 982.401, 982.605(a), 982.609(a), 982.614(a), 982.618(b), 982.621, and 983.101(a) in this final rule. HUD revises the definition of “independent entity” from the definition in the proposed rule to clarify when the unit of general local government meets the definition of an independent entity and more clearly explain the requirements and prohibited connections for a HUD-approved entity. HUD revises the proposed definition of “Request for Tenancy Approval (RFTA)” to make clear that the RFTA may be submitted not just by the family, but also on behalf of a family. HUD revises the definition of “Small Area Fair Market Rents” from the proposed rule to remove language suggesting that the definition only applies to areas meeting the definition at § 888.113(d)(2). HUD removed this reference because the SAFMRs in part 982 are not meant to be limited to the mandatory Small Area FMR metropolitan areas, and as such the “Small Area Fair Market Rents” definition deleted the citation to § 888.113(d)(2), which only covers mandatory metropolitan areas designated as Small Area FMR areas. HUD revises the definition of “tenant-paid utilities” by stating that utilities and services may include those required by HUD through Federal Register notice with opportunity for comment. § 982.54 Administrative Plan This final rule revises the requirements for the PHA Administrative Plan. Specifically, this final rule requires PHAs at § 982.54(d)(22) to specify in the Administrative Plan the PHA's policy for withholding HAP for units that do not meet HQS. This final rule also requires at § 982.54(d)(4)(iv) that the PHA Administrative Plan include the PHA's policy concerning residency for foster children and adults and requires at § 982.54(d)(23) that the PHA's Administrative Plan include the PHA's policy on assisting families with relocating and finding a new unit. This final rule also modifies § 982.54(d)(4)(iii) to include §§ 982.552, 982.554, and 982.55 as regulations that PHAs must follow in establishing their standards for denying admission or terminating assistance based on criminal activity or alcohol abuse and which must be included in their Administrative Plan. HUD's directives and guidance on a PHA's use of criminal activity as an admission screening factor are contained in PIH Notice 2015-19, Guidance for Public Housing Agencies (PHAs) and Owners of Federally-Assisted Housing on Excluding the Use of Arrest Records in Housing Decisions. Through this notice and other issuances, such as the 2016 Office of General Counsel's Guidance on the Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions, HUD has required PHAs to adopt admission policies that do not intentionally discriminate against members of a protected class or otherwise have an unjustified discriminatory effect on members of a protected class, even when the PHA has no intent to discriminate. HUD urges PHAs to achieve a sensible and effective balance between allowing individuals with a criminal record to access HUD-subsidized housing and ensuring the safety of all residents of such housing. Consistent with the NSPIRE final rule, HUD modifies § 982.54(d)(21)(i) to require the PHA to include in its Administrative Plan any life-threatening deficiencies adopted by the PHA. Under the proposed rule, the PHA's Administrative Plan had to include the specific life-threatening conditions that would be identified through the PHA's inspections, including the HUD required life-threatening conditions and any life-threatening deficiencies adopted by the PHA prior to January 18, 2017. Since the deficiencies that HUD requires must be considered life-threatening are mandatory and not a matter of PHA administrative policy, requiring the PHA to list the HUD-required life-threatening deficiencies in the Administrative Plan is unnecessary and burdensome. In addition, singling out life-threatening deficiencies adopted by the PHA prior to January 18, 2017, which was related to how HUD initially implemented the non-life-threatening initial inspection option in the HOTMA Implementation Federal Register notice (82 FR 5458, published January 18, 2017), may create confusion. The revised text in this final rule clarifies that the Administrative Plan must include a list of any PHA designated life-threatening deficiencies that, in addition to all HUD-required life-threatening deficiencies, will be applied by the PHA, regardless of date that the PHA designated the deficiency as life-threatening. § 982.301 Information When Family Is Selected This final rule makes changes to the information provided to a family when they are selected. For transparency and to ensure equal access, this section specifies that PHAs must provide information in a way that ensures meaningful access to individuals with limited English proficiency. Additionally, the final rule expands upon the requirement in the proposed rule to provide information on reasonable accommodation policies and procedures in the information packet, by also requiring that the packet specifically address an increase in the payment standard as a reasonable accommodation. The final rule also includes a requirement that reasonable accommodations must also be covered in the oral briefing. In this section, this final rule removes all references to the welfare to work program, since it no longer exists. Finally, this rule reorganizes paragraph (a) so that paragraph (a)(1) represents a list of what must be provided in an oral briefing, moving some content from paragraphs (a)(2) and (3); this reorganization does not change the requirements of paragraph (a) in any way. § 982.305 PHA Approval of Assisted Tenancy This final rule reorganizes § 982.305(b) of the proposed rule by relocating paragraph (b)(2)(iii) of the proposed rule to a new paragraph (b)(3) and moving the previous paragraph (b)(3) to a new paragraph (b)(4). For clarity and simplicity, this final rule removes the requirement that the PHA determine that the unit is covered by the alternative inspection and simplifies this provision to state that an alternative inspection is allowed and alternatively cross references what the PHA is subject to and the alternative inspection option at § 982.406. In addition, this final rule does not make the proposed non-substantive change to paragraph (c)(3). § 982.352 Eligible Housing This final rule changes proposed § 982.352(b)(1)(v)(A)( 3 ) by removing the exception of applicability of § 982.405(e), acknowledging that sometimes independent entities schedule inspections, and in those cases, they must consider complaints and any other information brought to their attention. § 982.401 Housing Quality Standards NSPIRE includes the new standards for setting HQS at § 5.703 for all HUD programs including the standards for life-threatening and non-life-threatening conditions and the amount of time required to correct such deficiencies. Other than a conforming change related to the revised definition of HQS discussed previously in the description of the changes to § 982.4, this final rule makes no change to the section as codified in the NSPIRE rule (88 FR 30442 (May 11, 2023)). § 982.404 Maintenance: Owner and Family Responsibility; PHA Remedies HUD makes several clarifying revisions to this section, which includes changes to certain terminology such as changing “fails to comply” to “has HQS deficiencies” and consistently changing “defect” to “deficiency.” These clarifying changes also make it clear that a unit is “not in compliance with HQS” when it has deficiencies that are not remedied within the appropriate timeframe. This final rule also revises paragraph (a)(2) to provide clarifying changes from the proposed rule text that ensure the paragraph is clear that it does not provide a different requirement from the remainder of the section, and amends paragraph (a)(4) to align with the HOTMA statutory text. HUD provides in paragraph (b)(4) that, in the case of a family being responsible for HQS deficiency repairs, the family need not itself make the repairs but rather is responsible for taking all steps permissible under the lease and State and local law to ensure the deficiency is corrected. This is in response to commenters who pointed out that in some cases the lease or local law may prevent the family from undertaking the repairs itself. The proposed rule used varying terminology to explain HQS inspections throughout parts 982 and 983. To promote clarity, this final rule replaces the varied terminology to explain HQS inspections and consistently uses the inspection terms outlined in § 982.405. This rule specifically names each type of inspection that exists within its respective section and specifies when actions or provisions apply to specific inspections. As such, this final rule also removes references to “regular inspection” since it was undefined in the proposed rule, and this final rule clarifies that § 982.404(d) applies to every inspection type other than initial inspections. This final rule also adds the requirement at paragraph (d)(1) that a PHA's Administrative Plan contains the conditions for withholding HAP from an owner for such deficiencies, to align with § 982.54. In paragraph (d)(2)(i), this final rule clarifies that the abatement requirement includes amounts that had previously been withheld. To better protect families from homelessness, in paragraph (d)(2)(ii), HUD outlines the timeframe in which a PHA must issue a family its voucher to include at least 30 days prior to the termination of the HAP contract. In paragraph (d)(3), this final rule specifies that the family has discretion to terminate their lease and that the termination will occur either immediately or when the family vacates the unit, whichever is earlier. This final rule also includes the requirement that PHAs promptly issue the family a voucher to move. In paragraph (e)(3), HUD expands what is included in costs associated with relocating to include temporary housing costs. The final rule further provides that if the PHA uses the withheld and abated assistance payments to assist with the family's relocation costs, the PHA must provide security deposit assistance to the family as necessary, and that PHAs must assist families with disabilities in locating available accessible units in accordance with 24 CFR 8.28(a)(3). Lastly, in paragraph (f), HUD provides that the revised § 982.404 applies to HAP contracts that are executed on or after the effective date of this final rule, as well as HAP contracts renewed after the rule's effective date. § 982.405 PHA Initial and Periodic Unit Inspection HUD has made technical organizational changes to § 982.405 by dividing paragraphs and changing the headers to consistently use identifiable names for each inspection type. New paragraph (d) splits up the proposed paragraph (g) to specifically outline the types of interim inspections to include life-threatening, non-life-threatening, and extraordinary circumstances. § 982.406 Use of Alternative Inspections HUD revises § 982.406 primarily to address issues with respect to compatibility between parts 982 and 983. Paragraph (a) now applies only to HCV, part 982 as HUD moved generally applicable language at proposed paragraph (a)(2) to paragraph (d) and removed the language at proposed paragraph (a)(3) applicable only to PBV. HUD also revises paragraph (c)(2)(ii) to align with the renumbering in § 982.405. This final rule revises paragraph (d) regarding use of alternative inspections to apply to both HCV and PBV, by removing specific citations to § 982.405. These changes continue to require that any alternative inspection standard be identified in the PHA Administrative Plan for both HCV and PBV. § 982.451 Housing Assistance Payments Contract In this final rule, the text from paragraph (c)(1)(i) has been moved under paragraph (c)(1), resulting in a renumbering of paragraphs (c)(1)(i)(A)-(E) from the proposed rule to (c)(1)(i)-(v) in the final rule. Paragraph (c)(1) now expressly states the requirement that the separate legal entity must execute the HAP contract with the PHA if it chooses the option of establishing a separate legal entity to serve as the owner. HUD deletes paragraph (c)(1)(ii) of the proposed rule and moves the text of proposed (c)(2)(i) under paragraph (c)(2) in the final rule. This final rule also revises paragraph (c)(2)(i) to clarify that the PHA-owned certification obligates the PHA, as the owner, to all of the requirements of the HAP contract. This revision prevents confusion with other regulations that reference HAP contracts, but not the PHA-owned certification. Finally, other minor changes were made in paragraph (c) to align with corresponding requirements in § 983.204(e). § 982.503 Payment Standard Areas, Schedule, and Amounts HUD makes clarifying edits to paragraph (a)(1) to reflect HUD's practice of setting SAFMRs for ZIP codes outside designated SAFMRs. HUD also revises paragraph (d)(1) to explain the areas in which an exception payment standard may be established. In addition, in response to public comment, HUD revises paragraph (d)(2) to allow PHAs to set SAFMR-based exception payment standards above 110 percent of the FMR for non-metropolitan counties, just as they are currently permitted to do for metropolitan areas. This ensures parity between metropolitan and non-metro PHAs and provides non-metropolitan PHAs with the ability to establish exception payment standards that better reflect actual market conditions based on HUD's SAFMR determinations. In paragraph (d)(2), this final rule also allows PHAs that qualify for exception payment standards above 110 percent of the applicable FMR to set exception payment standards up to the same percentage of the SAFMR for the applicable ZIP code. HUD also divides proposed paragraph (d)(3) into paragraphs (d)(3) and (4) and moves proposed paragraph (d)(4) to (d)(5). In order to provide PHAs more flexibility to respond to rapidly changing rental markets, paragraph (d)(3) now provides set situations in which HUD will allow PHAs the discretion to establish an exception payment standard amount between 110 percent and 120 percent of applicable FMR upon notification to HUD that the PHA meets a specified criterion instead of requiring prior HUD approval. The PHA must meet one of three criteria: (i) Fewer than 75 percent of the families to whom the PHA issued tenant-based rental vouchers during the most recent 12-month period for which there is success rate data available have become participants in the voucher program; (ii) More than 40 percent of families with tenant-based rental assistance administered by the agency pay more than 30 percent of adjusted income as the family share; or (iii) Such other criteria as the Secretary establishes by notice. This change will allow PHAs to more quickly respond to changing rental market conditions, which will help them better manage program utilization, success rates, and rent burdens. New paragraph (d)(4) outlines how the PHA must request approval from HUD to establish payment standards above 110 percent of the applicable FMR except as provided in paragraphs (d)(2), (d)(3), and (d)(5). This new paragraph consolidates requirements related to exception payment standards for PHAs in designated SAFMR areas and for PHAs subject to the metropolitan area or non-metropolitan county FMRs. It also establishes criteria for designated SAFMR PHAs to request an exception payment standard over 110 percent of the SAFMR, which the current regulation previously stated would be provided in a separate Federal Register notice. Further, HUD revises paragraph (d)(4) to explain the application of the exception payment standard to the entire fair market rent area and the use of rental market data, specifically allowing the use of local rental market data. HUD provides clarifying changes to relocated paragraph (d)(5), which now specifies existing policy that PHAs may establish an exception payment standard of up to 120 percent of the applicable FMR without prior notification to HUD if they are seeking a reasonable accommodation for a person with a disability. HUD also amends paragraph (e) by establishing a modified standard for approving payment standards below the basic range which will require a projection of rent burden based on the lower payment standard, rather than measuring rent burden based on current program participants prior to that reduction. The standard does allow HUD to approve a payment standard below the basic range to help prevent termination of assistance in the case of a PHA budget shortfall. In this final rule, HUD does not adopt the proposed rule modification to paragraph (e) and removes the PHA's option to go below the basic payment standard range for Small Area FMR ZIP code areas without HUD approval. In addition, HUD amends paragraph (f) to eliminate the option to establish success rate payment standards. HUD determined that the new flexibility provided in the rule to set payment standards up to 120 percent of the FMR makes this option unnecessary. In paragraph (h), this final rule specifies that HUD will monitor rent burdens only of families assisted with tenant-based rental assistance, because PBV tenants are unlikely to have rent burdens above 30 percent. § 982.505 How To Calculate Housing Assistance Payment In this final rule, HUD revises paragraph (c)(3)(iv) to eliminate the option in the proposed rule for PHAs to adopt different policies related to applying decreases in payment standards in different geographic areas out of concern that this could result in discriminatory policies. Additionally, in response to public comment, HUD revises paragraph (c)(4)(ii) to require PHAs to apply payment standard increases at the family's next regular reexamination or the next interim recertification (in addition to the other events listed) and adds paragraph (c)(5) to give PHAs the flexibility to adopt policies to apply increases in the payment standard earlier than required. HUD also revised paragraph (c)(6), which was previously paragraph (c)(5), to clarify that while the new family unit size must be used in the recalculation by the first regular reexamination following the change, it may be used immediately. § 982.517 Utility Allowance Schedule In response to public comments HUD is not going forward with the proposed § 982.517(a)(2), which would have required PHAs to provide the utility allowance schedule to HUD only when HUD requests it, and instead maintains the current requirement that the PHA provide HUD with the utility allowance schedule regardless of whether HUD requests it, and to only require the PHA to provide information or procedures used in preparation of the schedule when HUD requests it. HUD also revises paragraph (b)(1)(i) to allow for the possibility of an expansion of utility allowances in the future through a Federal Register notice. Additionally, in paragraph (b)(1)(ii), this final rule expands the category of utilities and services to include applicable surcharges. In paragraph (b)(1)(iv), HUD removed wireless internet from the list of non-essential utility costs so that HUD could consider such inclusion of wireless internet as essential in a Federal Register notice under paragraph (b)(1)(i). In paragraph (b)(2)(ii), HUD expands the utility allowance standards to include criteria for applying utility allowance to retrofitted units. The revised paragraph (b)(2)(ii) clarifies that while the entire building must meet Leadership in Energy and Environmental Design (LEED) or Energy Star standards, in the future HUD may provide by notice, when an energy-efficient utility allowance (EEUA) may be used for retrofitted units even if the entire building does not meet the standard. The revisions notes that there are only two design standards that can be used for energy-efficient utility allowance (EEUA) to prevent EEUAs from being applied broadly. HUD also moves paragraph (b)(2)(iv) to paragraph (b)(2)(v) and adds a new paragraph (b)(2)(iv) to state that the PHA must use the project-specific utility allowance schedule for tenant-based participants in projects that have an approved project-specific utility allowance under § 983.301(f)(4). This requirement was previously in § 983.301(f)(4) of the proposed rule and § 983.301(f)(2)(ii) of the previous regulatory text but has been moved from part 983. The Administrative Plan requirements to include PHAs state their policy for utility allowance payments are consistent with § 982.54. § 982.552 PHA Denial or Termination of Assistance for Family This final rule makes a conforming change to remove § 982.552(c)(1)(viii), which denies housing assistance for a family's failure to comply with the FSS contract of participation, to align with a statutory amendment to the Family Self-Sufficiency (FSS) program authorizing language and the program's regulations, which amended 24 CFR 984.303(b)(5) through a final rule effective on June 16, 2022 (87 FR 30020). This change is in accordance with the Economic Growth, Regulatory Relief, and Consumer Protection Act (“the Economic Growth Act”) (Pub. L. 115-174) 6 which states that, “Housing assistance may not be terminated as a consequence of either successful completion of the contract of participation or failure to complete such contract.” 6 See The Economic Growth, Regulatory Relief, and Consumer Protection Act (“the Economic Growth Act”) (Pub. L. 115-174). §§ 982.605; 982.609; 982.614; 982.618; 982.621 The final rule makes a conforming change to §§ 982.605; 982.609; 982.614; 982.618; and 982.621 to align the text with the revised definition of HQS discussed previously in the description of the changes to § 982.4. § 983.2 When the Tenant-Based Voucher Rule (24 CFR Part 982) Applies HUD revises § 983.2(c) to outline the specific part 982 provisions that do not apply to PBV assistance and revises paragraphs (c)(1) and (2) to specify that the HAP contract retention provisions at § 983.158(e)(2) do not apply to PBV assistance. HUD also clarifies in paragraph (c)(5) which provisions of part 982, subpart I do not apply to PBV assistance and in paragraph (c)(7)(i) which provisions of § 982.503 do not apply. § 982.641 Homeownership Option: Applicability of Other Requirements The final rule amends paragraph (d) to clarify that § 982.406 (Use of alternative inspections), along with § 982.405 (PHA unit inspection) as the CFR previously provided, does not apply to the homeownership option. Because no HAP or downpayment assistance may be paid until the PHA inspects a family's homeownership unit and determines it passes HQS (see 24 CFR 982.631(a)), §§ 982.405 and 982.406 describing inspection requirements particular to rental assistance are incompatible with the homeownership option. HUD notes that this is not a substantive change. § 983.3 PBV Definitions In response to public comment about the utility of establishing SAFMRs in some non-metropolitan counties, this final rule revises the definition of “area where vouchers are difficult to use” to include areas where 90 percent of the SAFMR exceeds 110 percent of FMR not just for metropolitan areas, but also for non-metropolitan counties. HUD determines that, when used in a non-metropolitan context, the difference between the SAFMR and FMR remains an easily identifiable and consistent data point for determining if an area is one in which vouchers are difficult to use. This final rule also revises the definition of an “area where vouchers are difficult to use” to include a census tract with a poverty rate of 20 percent or less. This is not a substantive change, but rather a reorganization of the rule text for streamlining. In the proposed rule, § 983.54(b), regarding the project cap (income-mixing requirement), contained two separate categories of projects that were subject to a higher project cap: these categories were projects “located in a census tract with a poverty rate of 20 percent or less” and projects “located in an area where vouchers are difficult to use.” Similarly, § 983.6(d), regarding the program cap (percentage limitation), included both units “located in a census tract with a poverty rate of 20 percent or less” and units “located in an area where vouchers are difficult to use” as two separate categories of units eligible for an increased cap. For both the program cap and project cap, there was no difference between the requirements applicable to the two categories of projects and units. To simplify §§ 983.54(b) and 983.6(d), HUD examined whether the 1937 Act permitted the PBV regulatory definitions to consider a project or unit “located in a census tract with a poverty rate of 20 percent or less” to be a type of project or unit “located in an area where vouchers are difficult to use.” In the case of the program cap, section 8(o)(13)(B)(ii) of the 1937 Act provides for a specific 10 percent authority category for areas where vouchers are difficult to use “as specified in subparagraph (D)(ii)(II),” which is the subparagraph applying an exception to the project cap for areas where vouchers are difficult to use and for census tracts with a poverty rate of 20 percent or less. As a result, HUD determines that the authority for an exception to the program cap for census tracts with a poverty rate of 20 percent or less derives from the program cap exception for areas where vouchers are difficult to use, and therefore it would be more appropriate to include census tracts with a poverty rate of 20 percent or less within the definition of “areas where vouchers are difficult to use.” While the project cap exceptions for census tracts with a poverty rate of 20 percent or less and areas where vouchers are difficult to use are both mandated by section 8(o)(13)(D)(ii)(II) of the 1937 Act, given that the exception is identical for each category HUD determines the streamlining benefit makes placing census tracts with a poverty rate of 20 percent or less in the definition of “areas where vouchers are difficult to use” appropriate for purposes of codification of the project cap categories in the CFR. Also, in response to public comment, HUD in this final rule changes the term “comparable rental assistance” to “comparable tenant-based rental assistance,” amends the definition consistent with section 8(o)(13)(E) of the 1937 Act, and outlines the minimum requirements for assistance to qualify as comparable tenant-based rental assistance. HUD also finds that the proposed definition of “development activity,” in referring to both rehabilitation and new construction done for the project to receive PBV assistance and for other work occurring later during the term of the PBV HAP contract, produced significant confusion. As a result, HUD removes work occurring later during the term of the HAP contract from the proposed definition of “development activity” in this final rule and instead covers this work under a definition of “substantial improvement.” HUD revises the content of the term “substantial improvement” for additional clarity. This final rule also revises the definition of “excepted units” to clarify that excepted units exclusively serve certain families in accordance with § 983.54(c)(2) and to distinguish its definition from “excluded units,” which is a newly added definition that excludes units that meet certain requirements from the program and project cap. As suggested by commenters, HUD revises the definition of “existing housing” to mean housing that meets or substantially complies with HQS, which housing is distinct from housing that will soon undergo development activity. “Substantial compliance” in this definition provides specific limitations to ensure the deficiencies in the project require minor work that can reasonably be completed within a 30-day period of time. These revisions reflect the need to better distinguish rehabilitated housing from existing housing so PHAs can comply with the distinct program requirements applicable to each housing type while also recognizing that HQS corrections may take a longer time than the period noted in the proposed rule. HUD changes the relevant time period in which existing housing is not expected to undergo or need substantial improvement from five years to two years after the HAP contract effective date in response to public comment. HUD also revises the definitions of “newly constructed housing” and “rehabilitated housing” by establishing a standard determined on a project-basis, rather than the prior unit-basis which was in the proposed rule, consistent with prior HUD guidance that a project can only be one type overall, and therefore specifying between the two types on a per-unit basis was impractical. HUD further amends the definition of “rehabilitated housing” to more directly note the difference between such projects and “existing housing.” HUD also clarifies the definition of “independent entity” to specify how it relates to the PBV program and revises the definition of “waiting list admission” to include owner-maintained waiting lists. This final rule added to the definition of “project” to more clearly describe the discretion PHAs already have to modify the definition of project in their Administrative Plans. This final rule adds a definition of “tenant rent” as applicable to the PBV program. This final rule also adds the definitions for building, gross rent, manufactured home, PHA Plan, program receipts, total tenant payment, utility allowance, and utility reimbursement to clarify that these terms apply to the PBV program. This final rule removes the term “eligible” from the definition of “in-place family,” and instead discusses the eligibility of an in-place family in § 983.251. HUD also changes “proposal selection date” to “proposal or project selection date” to align with changes made to § 983.51 (described below). This final rule makes a conforming change to align the PBV program definition of “housing quality standards” with the revised HCV program definition discussed previously in the description of the changes to § 982.4. In addition, this final rule removes the definition of “project-based certificate (PBC) program” because it is no longer in existence. Finally, this final rule removes the definition of “request for release of funds and certification” and moves the relevant information that was contained in the proposed rule to a more appropriate location, § 983.56. § 983.4 Cross-Reference to Other Federal Requirements HUD proposed to revise HUD's labor standards cross-reference regarding applicability of regulations implementing the Davis-Bacon Act, but HUD at this final rule removes this change. As explained in the summary of changes to § 983.153, HUD requires Davis-Bacon compliance regardless of whether an Agreement (referring to an Agreement to enter into a HAP contract) is used in this final rule so the change to this section is no longer necessary. HUD notes that under section 12(a) of the 1937 Act, the labor standards provisions cross-referenced in § 983.4 only apply where there is an agreement for section 8 use before construction or rehabilitation is commenced. As discussed in reference to the changes to § 983.153, the PHA's pre-construction offer and owner's acceptance of PBV assistance to be provided once the units are constructed or rehabilitated constitutes an agreement triggering Davis-Bacon requirements on projects with 9 or more assisted units, in accordance with section 12(a) of the 1937 Act, regardless of whether an Agreement is used. Finally, as a technical matter, HUD has revised § 983.4 to remove the reference to the definitions in 24 CFR part 5, subpart D. Because HUD has revised § 982.4(a)(2) to properly incorporate the relevant definitions in 24 CFR part 5, subpart D, and because § 983.4 incorporates 982.4, this incorporation is not necessary. § 983.5 Description of the PBV Program HUD makes a minor revision to the proposed § 983.5(a)(1) to include the citation to the consolidated annual contributions contract (ACC). This final rule also revises paragraph (a)(3) to better describe the options available for development of newly constructed and rehabilitated housing, including adding reference to the option added in this final rule to § 983.157 (which is described in greater detail below). HUD revises paragraph (c) to require PHAs to provide notice to HUD when the PHA executes, amends, 7 or extends a HAP contract, to align with system development already in progress, 8 and makes changes to align with the language in § 983.10, to require the PHA to address all PBV related matters over which the PHA has policymaking discretion. 7 Amendments in this context refers to changes such as those that add or substitute contract units, rather than substantive revisions to contractual text. The general requirement per 24 CFR 982.162 to use HUD-prescribed forms, including PBV HAP contracts, without modification remains in place. 8 See 84 FR 70986 (Dec. 26, 2019); 85 FR 60249 (Sep. 24, 2020); 88 FR 28594 (May 4, 2023). § 983.6 Maximum Amount of PBV Assistance (Percentage Limitation) This final rule revises paragraphs (a) and (e) to explain how to calculate the maximum number of PBV units to prevent the possibility of the PHA miscalculating the cap and project-basing more units than it should. This change reflects that the cap is 20 percent as adjusted, and not a flat 20 percent of all Annual Contributions Contract (ACC) units because the PHA must remove excluded units when calculating the cap. This final rule also corrects the date in paragraph (a)(2), and in paragraph (a)(3) expands the conditions under which the PHA may not add units to PBV HAP contracts to include paragraph (e). In paragraph (b), HUD clarifies that the PBV assistance percentage limitation applies to all PBV units which the PHA has selected, and that selection takes place from the time of the proposal or project selection date. This final rule also revises language in paragraph (d)(1)(iii) to require that the Administrative Plan describe the availability of supportive services in alignment with the language in § 983.10. HUD amends paragraph (d)(1)(iv) to remove the separate exception category for census tracts with a poverty rate of 20 percent or less, given the revised definition of an “area where vouchers are difficult to use” now includes a census tract with a poverty rate of 20 percent or less, as explained further in the discussion of § 983.3 above, and moves the proposed paragraph (d)(1)(v) to (d)(1)(iv). HUD adds a new exception in response to public comment to paragraph (d)(1)(v) for units that replace, on a different site, the units removed from the housing types listed in § 983.59(b)(1)-(2) (see discussion of comments received regarding § 983.59). HUD revises paragraph (d)(2) to increase the program cap and project cap for PBV units to include the Fostering Stable Housing Opportunity (FSHO) authority enacted in section 103 of division Q of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260, 134 Stat. 1182). 9 Pursuant to section 103(c)(1) of FSHO, the percentage limitation ( i.e., the program cap) now includes units that are exclusively made available to eligible youth receiving FUP/FYI assistance under the 10 percent increased cap. This final rule adds a new paragraph (d)(3) to clarify requirements to fill units under certain 10 percent increased cap categories with the appropriate families. 9 See 87 FR 3570 (Jan. 24, 2022). This final rule also revises paragraph (e) by explaining that units previously subject to federally required rent restrictions or that received long-term rental assistance from HUD are removed for purposes of calculating the percentages under paragraphs (a) and (d) of this section. This final rule also revises paragraph (1)(ii) by adding “space service” to the definition of “veteran” to accurately include types of service encompassed within the current statutory definition of “veteran” found in the Department of Veterans Affairs governing statutes ( i.e., 38 U.S.C. 101(2)). By adding “space service,” it will ensure that no type of service for a veteran or veteran family goes unaccounted for. § 983.10 PBV Provisions in the Administrative Plan HUD revises the structure of § 983.10 to outline the areas in which PHAs have policymaking discretion specific to the PBV program and requires these policies be included in the PHA Administrative plan. The PHAs' policymaking discretion is noted throughout part 983 consistent with this section. Section 983.10 includes a brief description of the provisions that must be in the Administrative Plan for a PHA that operates a PBV program and a citation in each provision to the regulation that provides complete details about the requirement. However, HUD notes that the policies listed in § 983.10 are the minimum that the PHA must include in its Administrative Plan. There are additional areas, beyond those listed in § 983.10, where a PHA may properly exercise policy-making discretion consistent with language in other sections in this part. In cases where a PHA exercises this discretion, these additional policies must be included in the PHA's Administrative Plan. § 983.11 Project-Based Certificate (PBC) Program In the proposed rule, HUD proposed to move § 983.10, dealing with Project-Based Certificates (PBC), to § 983.11. However, the PBC program was replaced by the PBV program in 2001 and no units remain in the PBC program. 10 Therefore, in this final rule, references to the PBC program have instead been removed. The currently codified § 983.10, dealing with PBC, is instead being removed entirely. Because the previous § 983.10 is not being moved to § 983.11, the proposed § 983.12 is, in this final rule, moved up to § 983.11. Section 983.12 of this final rule is new to this final rule and discussed further below. 10 Units under a PBC Agreement executed by the PHA and Owner prior to January 16, 2001, remained in the PBC program. The maximum term for PBCs under standard-form PBC HAP contracts was an aggregate 15 years (generally, three 5-year terms). Therefore, no more valid PBC HAP contracts should exist. Upon expiration of a PBC HAP contract, a PHA and Owner could agree to renew the PBC contract as a PBV contract, consistent with section 6904 of the Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007, Public Law 110-28, and the now repealed 24 CFR 983.310(b)(1)(ii). § 983.11 Prohibition of Excess Public Assistance In response to public comments, HUD revises paragraph (d)(2) dealing with subsidy layering review. Instead of requiring Subsidy Layering Review (SLR) any time new funding of any amount or percentage is added to the project during the term of the HAP contract, HUD will specify when a new SLR is required via a Federal Register notice, consistent with current practice. HUD concluded that finalizing paragraph (d)(2) as proposed would be administratively burdensome. § 983.12 Project Record Retention This final rule adds a new § 983.12 to cover program accounts and records for the PBV program (§ 982.158 continues to apply to records applicable to both the tenant-based and project-based programs, except as now specified in § 983.2). While these documents should already be maintained for compliance with HUD's regulations, this section provides a specific list of documents, location, and time period for retention of the PBV HAP contract and any PBV-specific documents ( e.g., Agreement to enter into HAP contract (Agreement), completion documents, SLR, environmental review, selection materials), including records demonstrating the independent entity's review of a PHA-owned project selection. This section includes retention provisions for records newly required under new PBV program components of this final rule. § 983.51 Proposal and Project Selection Procedures This final rule amends § 983.51 throughout to clarify the distinction between competitive selection of proposals versus noncompetitive selection of projects since selection without competition does not entail solicitation or selection of competing proposals. As recommended by commenters, this final rule revises paragraph (a) by allowing entities that have site control to submit PBV proposals. HUD intends to provide further guidance on what HUD considers to be “site control” through PIH notice. Paragraph (a) also specifies that an owner may submit PBV proposals to cover multiple projects where each consists of a single-family building. Consistent with § 983.10, HUD clarifies the requirement that the PHA Administrative Plan must describe the procedures for submission and selection of PBV proposals under the methods of competitive selection in paragraph (b) and selection of projects under an exception to competitive selection under paragraph (c), including under what circumstances the PHA will use the selection methods described in paragraphs (b) and (c). HUD amends paragraph (b)(1) to address the methods the PHA must use for competitive selection of PBV proposals. This change clarifies that the PHA request for proposal (RFP) selection method can be a part of another competition or run simultaneously with another competition. This change also addresses public concerns about the inability or difficulty of awarding PBVs to projects that also compete and receive other funds, specifically development dollars through Low-Income Housing Tax Credits (LIHTC), Housing Trust Fund (HTF), and HOME investment partnerships program. HUD also makes clarifying changes to paragraph (b)(2) to remove the language concerning LIHTC and HOME to avoid confusion because, in practice, LIHTC and HOME almost always require the PBVs to be awarded prior to receiving applications. HUD clarifies in paragraph (c) that prior to a PHA selecting one or more projects for PBV assistance without competition, the PHA must notify the public of its intent to do so in its 5-Year Plan. HUD also reorganizes paragraph (c)(1) in the proposed rule by moving applicable requirements to new paragraphs (c)(1)(i)-(ii). Further, in response to public comments, HUD adds clarifying language to paragraphs (c)(1) and (c)(2) to better align with the statutory language in section 8(o)(13)(N) of the 1937 Act as amended by HOTMA, including a clarification under (c)(1)(i) and a new paragraph at (c)(2)(iv) regarding the number of units permitted to be replaced. This final rule also adds a new paragraph (c)(3), which provides increased flexibility for PHAs to noncompetitively select a project comprised of PHA-owned units. HOTMA expressly allows PHAs to attach PBVs to projects in which the PHA has an ownership interest without following a competitive process in cases where the PHA is engaged in an initiative to improve, develop, or replace a public housing property or site. HUD implemented this provision in 2017. Based on HUD's experience with these noncompetitive selections and after careful consideration, HUD believes that it is advisable to extend the exception to PHA-owned units in general. The main benefit of this final rule change is to strengthen the PHA's ability to preserve and expand affordable housing by increasing the viable options and paths available to the PHA through strategies such as acquisition followed by rehabilitation. HUD further adds paragraph (c)(4) to streamline the process of project-basing units when a family chooses to relinquish their enhanced voucher for PBV assistance. The new paragraph extends the types of housing that can be selected without going through a competition. HUD also notes that PIH Notice 2013-27 provides essential background on the voluntary relinquishment of enhanced voucher assistance (and regular housing choice voucher assistance) in exchange for PBV assistance. HUD clarifies paragraph (e)(2)(i) to state that all contract units must fully or substantially comply with HQS on the proposal or project selection date. HUD also restructures and amends paragraph (f) of the proposed rule to add new paragraphs (1) through (5) to address the separate notice requirements depending upon whether a proposal is selected competitively, or a project is selected without competition and to provide a cross-reference to applicable language that must be in the notice for certain projects. Finally, HUD clarifies in paragraph (h) that under no circumstances may a HAP contract be effective for any of the subsidized housing types set forth in § 983.53(a). § 983.52 Prohibition of Assistance for Ineligible Units HUD clarifies the meaning of paragraphs (a), (a)(3), (b), and (d) by replacing the term “attach” with clearer statements of the prohibited actions for the listed units, to align with the changes to § 983.53 described below. This final rule creates an exception to the total prohibition in the original PBV rule on project-basing for manufactured homes under paragraph (a)(5) where both the manufactured home is permanently attached to the ground and the owner owns both the manufactured home and the land. Allowing PBVs for manufactured homes will likely decrease the cost to build, allow PBVs to be in areas where traditional building would be difficult, and avoid requiring changes to construction plans solely for the purpose of compliance. Paragraph (c) provides that a PHA may attach assistance to an occupied unit only if the occupant is eligible. HUD amends paragraph (c) to specify what “eligible” means in this context, and to clarify when eligibility is determined. Eligibility of the family is determined in accordance with § 982.201 prior to attaching assistance to the unit ( i.e., executing a HAP contract or amending a HAP contract by adding or substituting a unit). For the unit to be eligible, the unit must be appropriate for the size of the family and the tenant's total tenant payment (TTP) must be lower than the gross rent. These changes in paragraph (c) ensure PHAs are aware of existing requirements, including that the family's TTP cannot be so high as to eliminate the need for assistance (commonly calling being “zero-HAP”) at admission. HUD updates the exceptions applicable to paragraph (d), adding that the requirements are not applicable if the PHA is undertaking rehabilitation after HAP contract execution per § 983.157 of this final rule. Also, because an Agreement may be executed prior to its effective date, HUD revises paragraph (d) to be clear that the construction or rehabilitation is prohibited prior to the Agreement's effective date rather than the execution date. HUD also modifies paragraph (d) to allow PHAs to approve exceptions, in recognition that there may be circumstances in which the prohibition is inappropriate. § 983.53 Prohibition of Assistance for Units in Subsidized Housing For better readability, in this final rule, HUD restructures the list of subsidized housing that is prevented from receiving PBV assistance. In paragraph (a), HUD replaces the introductory text with “A HAP contract may not be effective and no PBV assistance may be provided for any of the following:” for several reasons. First, HUD determines that PBV program requirements should not prevent execution of an Agreement for the listed subsidized housing types, as this reduces administrative flexibility even though no HAP is paid when an Agreement is executed. HUD notes that this is a change from the prior regulatory requirement and use of this flexibility will be subject to any requirements of the relevant non-PBV subsidy program. Second, because a HAP contract must be executed prior to the effective date of the contract (when HAPs may begin), there was no need to separately specify that the HAPs cannot be made for the subsidized housing types. Finally, HUD believes the wording changes improve readability. This final rule also removes proposed rule paragraphs (e) and (j) concerning rental assistance payments (RAP) and rent supplement projects (Rent Supp) because the Rent Supp and RAP programs have ended. However, unlike the Rent Supp program, there were some RAP projects remaining less than five years prior to the effective date of this final rule. Consequently, units in a few former RAP projects may still qualify for a limited period of time as excepted units from the program cap and project cap under the requirements at § 983.59. Please see the related discussion in the description of § 983.59 below regarding the reference to units in former RAP projects in that section. § 983.54 Cap on Number of PBV Units in Each Project (Income-Mixing Requirement) In this final rule, HUD clarifies in § 983.54(a) that a PHA cannot select a proposal where the project cap is not being met, in addition to the prohibition on entering the Agreement or HAP contract. HUD amends paragraph (b) to remove the separate exception categories, given the revision of the definition of an “area where vouchers are difficult to use” to include a census tract with a poverty rate of 20 percent or less, as explained previously in the discussion of § 983.3 above. HUD further clarifies in paragraph (c) that exception categories in a project may be combined; expands the exception categories to include eligible youth using Family Unification Program (FUP) assistance in paragraph (c)(2)(ii); and provides that supportive services must be made available in a reasonable period of time not to exceed 120 calendar days in paragraph (c)(2)(iii). Additionally, in paragraph (c)(2)(iii), which was paragraph (c)(2)(ii) in the proposed rule, this final rule does not include a requirement that a PHA offering FSS must not solely rely on FSS to meet the exception to the project cap. HUD revises paragraph (c)(3) to specify that units covered by a PBV HAP contract under § 983.59 will not count towards the project cap and that these units are removed to ensure accuracy when calculating the percentages of dwelling units. In paragraph (d), HUD updates and expands provisions applicable to HAP contracts already in effect to include HAP contracts in effect prior to December 27, 2020, when the FUP exception became available. § 983.55 Site Selection Standards HUD revises paragraph (b)(3) to include the site selection standards that were formerly found in § 982.401(l) and were removed in the NSPIRE final rule (88 FR 30442 (May 11, 2023)). HUD also takes this opportunity to amend the standards to add a specific reference to contamination, which is particularly important to the health of occupants, and to add a qualification that the serious adverse environmental conditions at issue are those that could affect the health or safety of the project occupants. As recommended by commenters, use of these standards provides an important protection for families, especially in cases in which an environmental review is not performed. HUD also revises paragraph (e)(7) to remove a typo concerning “new construction,” which appears in the current regulations and the proposed rule. § 983.56 Environmental Review In the proposed rule, HUD proposed to revise the environmental review requirements for existing housing in accordance with section 106(a)(8) of HOTMA to exempt existing housing from further environmental review if an existing housing project has ever undergone an earlier environmental review pursuant to receiving any form of Federal assistance. In other words, if a project that meets the definition of “existing housing” as defined in the PBV regulations for program purposes has not previously undergone a Federal environmental review because it did not receive Federal assistance, then the project would not be exempt from an environmental review. In endeavoring to give full effect to the words of section 8(o)(13)(M)(ii) of the 1937 Act, HUD recognizes the statute provides only a partial exemption to environmental reviews. Specifically, the applicability of the provision is limited to “existing projects.” Environmental reviews continue to be applicable to PBV rehabilitation and new construction projects. The limited scope of the proposed exemption from environmental reviews reflects Congress's continuing emphasis on the importance of Federal assistance being used in an environmentally sound manner. Upon consideration of comments, HUD revises paragraph (a)(2) to better balance the words of the amended section 8(o)(13)(M)(ii) of the 1937 Act with Congress's continued environmental emphasis by excusing existing housing from undertaking an environmental review before entering into a HAP contract, except where a Federal environmental review is required by law or regulation relating to funding other than PBV housing assistance payments. This paragraph (a)(2) applies to projects selected using the site selection standards applicable upon the effective date of this final rule. In paragraph (a)(2), HUD changes the characterization of the exception for existing housing so as not to imply that the project has been determined to be “exempt” pursuant to an environmental review. HUD makes minor technical revisions throughout the section, such as to consistently use the phrasing of paragraph (a) of the proposed rule that environmental reviews apply to “activities” (see responses to comment on § 983.56 for further discussion of technical changes). HUD amends the description of the “responsible entity” in paragraph (b) to explain more clearly which unit of general local government serves as the responsible entity. HUD also removes the final sentence of paragraph (b) of the proposed rule, as it was duplicative of text that appeared later in the regulation. HUD also removes the proposed rule's reference in paragraph (d) to amending a HAP contract, to conform to changes described below relating to § 983.207. Further, HUD clarifies in (d)(2) that HUD will approve the Request for Release of Funds and Certification by issuing a Letter to Proceed or form HUD-7015.16 when a responsible entity must complete an environmental review. In paragraph (e), HUD clarifies that the reference to the prohibited activities refers only to the listed actions by the PHA, the owner, or its contractors, rather than the actions by described in paragraphs (d)(1)-(3) that are taken by the responsible entity or HUD. Lastly, HUD revises paragraph (f) to require PHAs to document mitigating measures in accordance with part 50 or 58 of title 24, as applicable, and to complete or require the owner to carry out such measures and conditions. § 983.57 PHA-Owned Units This final rule makes an edit to paragraph (b) to remove superfluous words. HUD also revises paragraph (b)(1) to clarify that the independent entity calculates the amount of reasonable rent and any rent adjustments by an OCAF, due to confusion the wording in the proposed rule raised given that HUD determines the OCAF. In response to comments received, HUD removes paragraph (b)(2) from the proposed rule, which results in a renumbering of paragraphs (b)(3) and (b)(4) to paragraphs (b)(2) and (b)(3) in this final rule. HUD also revises redesignated paragraph (b)(3) to clarify that the independent entity is responsible for not only reviewing the work completion certification, but also determining if the units are compliant with § 983.156. This final rule also makes this change to align redesignated paragraph (b)(3) with corresponding § 983.212 (which was § 983.157 in the proposed rule), per changes to § 983.212 described below. This final rule adds paragraph (b)(4) to expand the independent entity functions to include determining whether to approve substantial improvement to units under a HAP contract, since PHAs are required to perform this function for substantial improvement on units under a HAP contract for non-PHA-owned units. Finally, HUD reorganizes and slightly modifies the language at paragraph (c) to achieve consistency with a similar provision at 982.352(b)(1)(v)(B) regarding compensation of independent entities. § 983.58 PHA Determination Prior to Selection In this final rule, HUD revises proposed § 983.58 for clarity purposes, to avoid any misinterpretation that budget authority is intertwined with the program cap. HUD also adds a new paragraph (b) to require that PHAs analyze the impact of having a high percentage of vouchers committed as PBVs. The PHA should consider the needs of the community, including families on the waiting list and eligible PBV families that wish to move under § 983.261. The analysis performed by the PHA must be available as part of the public record. § 983.59 Units Excepted From Program Cap and Project Cap HUD clarifies in paragraph (b) that excluded units must fall into one of the outlined categories provided that the units are removed from all categories by the time of execution of the Agreement or HAP contract. This clarification aligns with the statutory language stating, “units previously subject to federally required rent restrictions or receiving another type of long-term subsidy” and means that the units must no longer be subject to the rent restriction or receiving subsidy. This final rule removes paragraph (b)(1)(v), because the Rent Supplement Program ended more than five years ago and no longer exists. HUD notes that the Rental Assistance Program (RAP) (section 236(f)(2) of National Housing Act of 1965) also expired, but, unlike the Rent Supplement Program, the RAP expired at the end of 2019, less than 5 years ago. Because paragraph (b) of § 983.59 allows project-basing of units that were removed from the listed programs up to 5 years prior to the request for proposals (RFP) or the proposal or project selection date, RAP units may still be eligible for project-basing under paragraph (b). HUD has amended § 983.59(b)(2) and included two additional types of units in the list of units “previously subject to federally required rent restrictions” that were not included in the list of excepted units implemented under the HOTMA Implementation Notices 11 in the Federal Register : (1) units financed with Low-Income Housing Tax Credits (26 U.S.C. 42) and (2) units subsidized with Section 515 Rural Rental Housing Loans (42 U.S.C. 1485). The final rule also amends § 983.59(b)(2) to provide that the list of excepted units “previously subject to federally required rent restrictions” shall also include any other program subsequently identified by HUD through a Federal Register notice that is subject to public comment. 11 See 81 FR 73030 (Oct. 24, 2016); 82 FR 5458 (Jan. 18, 2017); 82 FR 32461 (Jul. 14, 2017). Further, to provide regulatory streamlining, this final rule removes proposed rule paragraph (c) which provided that other excluded units include both HUD's Rental Assistance Demonstration (RAD) program and HUD VASH set-aside vouchers from the PBV program and project caps (these programs continue to be governed by the applicable notices and waivers therein). Instead, HUD redesignates proposed rule paragraph (d) as paragraph (c), which discusses replacement units. In redesignated paragraph (c), HUD clarifies that replacement units can be built on the original project site, instead of the “public housing development.” This clarification removes the limitation of “public housing development” and expands the qualification of an original project site to include all of the formerly assisted or restricted projects covered by this section. In new paragraph (e), this final rule clarifies that the 10 percent exception under § 983.6 and the project cap exception under § 983.54(c)(2) are inapplicable to units excluded under this section. § 983.101 Housing Quality Standards This final rule makes a conforming change to align paragraph (a) with the revised PBV program definition of HQS at § 983.3. § 983.103 Inspecting Units HUD revises § 983.103(a) to clarify that the regulatory inspection provisions of paragraph (c) of this section apply only when the pre-selection inspection determines the project meets the definition of existing housing. HUD amends paragraph (b) to specify the times at which an initial inspection is required for newly constructed or rehabilitated housing or for units that underwent substantial improvement prior to being added to the HAP contract. The times at which an initial inspection is required, and the specific units which are to be inspected, depend on whether the work was development activity or substantial improvement, and, in the case of rehabilitation, whether the development activity occurs before or after HAP contract execution. HUD believes separating the requirements in this final rule will improve readability. HUD also revises paragraph (c)(1) to better explain the Administrative Plan provisions that are applicable. Paragraph (c)(2)(ii) of the proposed rule provided that the PHA must give a notice to families offered a unit with non-life-threatening deficiencies that explains, among other things, that the owner's failure to correct the deficiencies within the cure period will result in removal of the unit from the HAP contract. This final rule revises paragraph (c)(2)(ii) to also require the PHA to provide a similar notice to families offered units without deficiencies, if some units in the project have non-life-threatening deficiencies and the PHA's Administrative Plan provides that the PHA will terminate the entire PBV HAP contract if the owner fails to correct the deficiencies within the cure period. In paragraph (c)(2)(iv), HUD revises the regulatory language to be clear that PHAs must release the withheld payment to the owner once the deficiencies are corrected within the cure period, as required by section 8(o)(8)(G)(ii) the 1937 Act. This statutory requirement provides that the PHA must resume assistance payments and must cover the withheld period if the owner made the repairs before the cure period ends. This change to align the regulations with the statute is also reflected in paragraphs (c)(3)(vii), (c)(4)(iv), and (c)(4)(v). This final rule also modifies paragraph (c)(2)(v) (which was mistakenly labeled as paragraph (c)(2)(iv) in the proposed rule) by requiring PHAs to provide any affected family tenant-based assistance when the PHA terminates the PBV HAP contract or removes the unit from the HAP contract due to the owner's failure to correct deficiencies. The provision of tenant-based assistance in this circumstance is required by section 8(o)(13)(F)(iv) of the 1937 Act and was inadvertently omitted from the proposed rule's description of the process. This final rule makes the same modification to paragraphs (c)(3)(viii) and (c)(4)(vi). HUD revises paragraphs (c)(3) and (c)(4) to align with changes in § 982.406 that apply to PBV. This final rule subjects the PHA's adoption of an alternative inspection option to the procedures and requirements outlined in § 982.406(b), (c), (d), and (g). The changes in paragraph (c)(3)(v) provide clarifying changes to existing established policy. To ensure that the PHA is transparent to families that are referred to and provided a unit with non-life-threatening deficiencies, this final rule revises paragraph (c)(4)(i) to require that PHAs provide these families a list of those deficiencies and inform them of the option to decline the unit without losing their place on the PBV waiting list. In paragraph (c)(4)(v), HUD clarifies that PHAs make retroactive payments upon correction of deficiencies beginning at the later of the effective date of the HAP contract or the PBV lease effective dates. This final rule revises paragraph (c)(4)(v) and (c)(4)(vi) explaining the PHA's requirements when the owner fails to make repairs within the applicable time periods. For the safety of the family, this final rule adds a requirement to paragraph (c)(4)(v) that explicitly prohibits PHAs from referring families from the PBV waiting list to occupy units with life-threatening deficiencies. In alignment with § 983.10, paragraph (c)(4)(vi)(B) clarifies that the PHA's Administrative Plan must specify whether the PHA will remove only a unit with deficiencies from the HAP contract for the owner's failure to correct the deficiencies, as opposed to terminating the entire HAP contract (only the latter, terminating the contract, had been included in paragraph (c)(4)(vi)(B) of the proposed rule). This final rule also amends paragraph (e) concerning periodic inspections, to provide that the alternative inspection option is available for periodic inspections and to specify which provisions of § 982.406 apply. HUD makes changes to paragraph (e) to specify how to comply with the sampling requirement in the event that fewer than 20 percent of contract units are available for occupancy in accordance with development activity occurring under § 983.157. HUD also makes changes to align with the NSPIRE final rule (88 FR 30442 (May 11, 2023)) in paragraph (e), which incorporates the requirement that small rural PHAs inspect random sample units at least once every three years. This final rule makes changes to paragraph (f), which specifies the PHAs' timing and inspection requirements for life-threatening deficiencies, non-life-threatening deficiencies, and extraordinary circumstances, to align with § 982.405, which covers PHA inspections. The changes in paragraph (i) are a change in terminology to avoid conflict with the term “mixed finance” as used in public housing projects. § 983.152 Nature of Development Activity This final rule revises § 983.152(a)(2) to remove discussion of substantial improvement to add previously unassisted units and instead provide reference to the development activity applicable to a rehabilitated project undergoing work after HAP contract execution per § 983.157 of this final rule. As discussed in the description of changes to § 983.3 above, HUD determines that “development activity” should be clearly distinguished from “substantial improvement.” As a result, HUD removes the corresponding reference to activities now classified as “substantial improvement” in (a)(2) and deletes paragraph (b)(2), moving pertinent requirements applicable to substantial improvement to add or substitute units to § 983.207(d) of this final rule. The new language of paragraph (a)(2) is added to clearly describe the nature of the development activity under § 983.157, which is completed following HAP contract execution instead of beforehand. HUD also updates paragraph (b) to appropriately reference the new requirements applicable to § 983.157. § 983.153 Development Requirements This final rule makes several minor revisions to citations in § 983.153 for consistency with the changes to § 983.152 described above. Also, this final rule makes a minor clarifying revision to the first sentence in paragraph (b)(2), by requiring subsidy layering review before a PHA attaches assistance to a project, instead of subsidy layering review occurring before a PHA commits to provide assistance to a project. This clarifying change is to prevent any possible ambiguity about whether the subsidy layering review is required before the proposal or project selection date; in other words, HUD makes clear that the rule only requires that the subsidy layering review occur no later than execution of an Agreement or HAP contract. This final rule requires in § 983.153(b)(4) that the owner disclose changes to the information provided for the subsidy layering review, to ensure that the change(s) may be reviewed and that it does not result in excessive public assistance to the project. This final rule revises paragraph (c) of the proposed rule to require Davis-Bacon compliance regardless of whether an Agreement is used. The PBV program is subject to statutory labor standards provisions in section 12(a) of the 1937 Act. Section 12(a) of the 1937 Act requires the applicability of Davis-Bacon prevailing wages to the development of low-income housing projects containing nine or more section 8-assisted units, where there is an agreement for section 8 use before construction or rehabilitation is commenced. In reconsidering both HUD's current position and the alternative suggested in the proposed rule with respect to the meaning of “agreement” in section 12(a), HUD has determined that an “agreement” under section 12(a) encompasses more than the PBV Agreement ( i.e., Form HUD-52531) and includes the agreement that consists of the PHA's project selection and resulting offer of assistance to the owner, and the acceptance of PBV assistance by the owner. HUD also recognizes the importance of Davis-Bacon prevailing wage requirements to the workers in the community where the owner has sought a commitment of PBVs in advance of development, as commenters suggested. Consequently, HUD will require the notice of proposal selection to require payment of Davis-Bacon prevailing wages for development of newly constructed or rehabilitated projects containing nine or more section 8-assisted units regardless of whether the PHA and owner will be using an Agreement. This final rule also makes a slight modification to paragraph (c)(1) to correct the citation in paragraph (c)(1). HUD also consolidates paragraphs (c)(2) and (c)(3) of the proposed rule into a single paragraph (c)(2), to better reflect that the labor requirements at issue apply in the case of development involving nine or more contract units. This final rule adds a citation to § 983.51(f) in paragraph (c)(3) (which had been paragraph (c)(4) in the proposed rule) and makes paragraph (c)(3) consistent with § 983.51(f), which discusses a PHA's written notice of proposal selection. This final rule revises the development requirements that apply to PBV development activity by removing the reference that section 3 of the HUD Act of 1968 12 applies (proposed rule paragraph (d)), since section 3 no longer applies to PBV per the final rule on Enhancing and Streamlining the Implementation of Section 3 Requirements for Creating Economic Opportunities for Low- and Very Low-Income Persons and Eligible Businesses (85 FR 61524 (Sep. 29, 2020)). As a result of this removal, this final rule also redesignates proposed rule paragraphs (e) through (g) as final rule paragraphs (d) through (g). Additional citation corrections occur in redesignated paragraphs (d), (e), and (f). Further, consistent with § 983.51(k), this final rule expands paragraph (g) to include in the list of participants ineligible to participate in Federal programs and activities those who are debarred, suspended subject to a limited denial of participation, or otherwise excluded under 2 CFR part 2424. Finally, HUD adds a cross-reference § 982.161 to paragraph (g)(2) of this final rule, to clarify the existing requirement of the conflict of interest provision. 12 12 U.S.C. 1701u. § 983.154 Development Agreement This final rule amends paragraph (a) to clarify project-basing of single-family scattered sites. As commenters suggested, paragraph (a) allows one Agreement to cover multiple projects that each consist of a single-family building. Finally, this final rule makes minor amendments to paragraph (a) to remove reference to § 983.152, consistent with changes to that section as described above, and to add reference to the new paragraph (g). This final rule specifies in paragraph (b) that paragraph (f), concerning PHA discretion to execute an Agreement after construction or rehabilitation in compliance with § 983.153, is an exception for the timing of the Agreement. HUD also adds clarification that the Agreement must be executed on the same day as or in advance of its effective date. This final rule inserts a new paragraph (c) to specify that the PHA and owner may agree to amend the Agreement per paragraph (e). In paragraph (d), this final rule clarifies that paragraphs (f) and (g) provide exceptions to the prohibition on entering into an Agreement if development activity has commenced. HUD also makes additional changes in paragraph (d) to clarify the timing of the Agreement that correspond to the change to paragraph (b) described above. This final rule revises paragraph (e) to expand the content of the agreement to include a description of any rehabilitation work agreed to, a deadline for the completion of work, and any additional design, architecture or quality requirements placed on the owner by the PHA. The addition of a deadline for completion of work addresses the oversight in the proposed rule wherein § 983.155(a) of the existing regulation was removed rather than relocated. This final rule clarifies in paragraph (f) when the PHA may execute an Agreement later than the timing provided in paragraph (b) and corrects the applicability of requirements in the case of a project that is noncompetitively selected. The changes in paragraph (f) also provide PHAs with discretion to not use an Agreement or execute an Agreement after construction or rehabilitation for development activity in compliance with the requirements under § 983.153. Paragraph (f) also requires that the PHA explain the circumstances under which the PHA will enter a PBV HAP contract without first entering into an Agreement and the circumstances the PHA will enter into an Agreement after construction or rehabilitation in the Administrative Plan. This paragraph also requires that the PHA comply with the new requirement at § 983.153(c)(3) and confirm owner compliance with the owner's requirements under § 983.153. Finally, this final rule makes a minor amendment to paragraph (f) to remove reference to § 983.152, consistent with changes to that section as described above. This final rule adds paragraph (g) to explain the exception to the requirement to enter into an Agreement established in § 983.157. Paragraph (g) also explains the relationship between the Agreement and the HAP contract in the event that some work occurs under an Agreement before the PHA exercises the option at § 983.157. Lastly, this final rule adds paragraph (h) explaining the PHA's options when the units are PHA-owned with no separate legal entity to serve as the owner. A PHA cannot execute an Agreement with itself. In the proposed rule, HUD stated that a PHA-owned agreement certification is not needed as an alternative to an Agreement because projects may now be developed without an Agreement. Upon further review, HUD determined that there may be situations in which development without an Agreement is not feasible, such as when a lender requires use of an Agreement or equivalent commitment prior to development. Therefore, this final rule provides that unless a PHA is exercising its discretion not to use an Agreement, the PHA will need to follow a process similar to the process adopted in this final rule for executing the HAP contract or an equivalent certification (see § 983.204). For consistency with § 983.204 of this final rule, HUD provides that PHAs have the option to either establish a separate legal entity to execute the Agreement or use a PHA-owned agreement certification in this final § 983.154(h). § 983.155 Completion of Work In tandem with requiring the owner to submit evidence and certify to the PHA that development activity or substantial improvement is completed, this final rule adds that a PHA must review the owner's completion evidence and determine whether development activity or substantial improvement was completed. This final rule also adds a new paragraph (b) for consistency throughout part 983 and to specifically address completion of work for PHA-owned units. Paragraph (b) provides in the case of a PHA-owned unit, the PHA must submit that evidence to the independent entity and the review is the responsibility of the independent entity. Finally, HUD clarifies that the form and manner of the submission and certification is specified in the PHA's Administrative Plan. § 983.156 PHA Acceptance of Completed Units This final rule makes a minor revision to paragraph (a) to clarify that the PHA inspection is to determine whether the units comply with HQS and additional PHA requirements. HUD revises paragraph (b) to provide specific instruction with regard to completion of units, depending on whether the units are completed prior to HAP contract execution, following HAP contract execution, or in order to be added to the HAP contract. These changes to paragraph (b) accommodate changes to §§ 983.152 and 983.157, as discussed further in the description of changes to those sections. In response to public comments, this final rule adds a new paragraph (c) to provide that HAP contracts for projects that are not subject to § 983.157 may be executed in stages, as units in a newly constructed or rehabilitated project are completed. This final rule also adds paragraph (d) for consistency throughout part 983, to separate PHA-owned units from other units. Under new paragraph (d), this final rule requires that independent entities inspect units and determine whether those units are HQS-compliant. § 983.157 Rehabilitated Housing: Option for Development Activity After HAP Contract Execution In the proposed rule, HUD proposed to include provisions on substantial improvements (previously termed “development activity,” as explained in the discussion of § 983.3 above) to units under a HAP contract in § 983.157. However, HUD determines that such provisions are inappropriate under subpart D of part 983 (Requirements for Rehabilitated and Newly Constructed Units), as placing the provision there produced confusion about the distinction between development activity for newly constructed and rehabilitated projects and work to improve units well after a HAP contract is in effect (which could be performed in any type of project). Therefore, in this final rule, the provisions proposed to be in § 983.157 have been moved to § 983.212 and are discussed in that section below. Section § 983.157, as codified in this final rule, instead is new to this final rule and discussed further here. This final rule adds the new provisions of § 983.157 in response to public comment. Commenters described situations in which development activity would be undertaken in rehabilitated projects that are already occupied and may meet HQS. HUD determined that occupants of such projects, if they qualify for PBV assistance, would benefit from receipt of assistance as soon as possible. Accordingly, and in addition to the options already available to the PHA under current regulations and in this final rule, § 983.157 of this final rule provides that the PHA may allow an owner of a rehabilitated housing project to conduct some or all of the development activity during the term of the HAP contract. Under this option, the PHA and owner place all proposed PBV units under the HAP contract before the owner completes development activity, subject to the limitations established in § 983.157 of this final rule. During the period of development activity, the PHA makes assistance payments to the owner for the contract units that are occupied and meet HQS. HUD determines this option is permissible in accordance with section 106(a)(4) of HOTMA. Section 983.157 of this final rule provides for the PHA to exercise its discretion to use this option in accordance with the PHA's Administrative Plan. It establishes conditions that must be met to use this option and a contract framework, which applies a contract rider during the development period. Section 983.157 of this final rule also establishes requirements applicable to the occupancy of units during the rehabilitation period, completing the rehabilitation, and PHA-owned units. Under this option, the owner agrees to develop the contract units to comply with HQS, and the PHA agrees that, upon timely completion of such development activity in accordance with the terms of the rider, the rider will terminate and the HAP contract will remain in effect. HUD makes conforming changes throughout part 983 to accommodate this option (discussed further in the review of general technical changes below). The final rule clarifies that existing households be given an absolute selection preference to return to the project when a household needed to vacate for development activity. HUD notes that the leasing of units in a PBV project must comply with federal fair housing and related requirements, including ensuring that any designated accessible units are occupied by households who need the accessibility features, and that emergency transfers under VAWA are provided. § 983.202 Purpose of HAP Contract In response to public comments, HUD revises paragraph (a) to better clarify the existing flexibility that allows PHAs and owners to place multiple projects that each consist of a single-family building under one HAP contract. § 983.203 HAP Contract Information HUD in this final rule revises § 983.203(h) to require that the HAP contract include units that are restricted to certain occupants via the project cap or program cap. The purpose of the change is in hopes of minimizing the possibility of PHAs losing track of what units must be set aside by ensuring that the HAP contract clearly specifies units that are restricted to certain occupants by virtue of the project cap or program cap . The changes in this section are consistent with the Fostering Stable Housing Opportunities (FSHO) notice, 13 which notes that the increased program cap applies only if a family eligible for that 10 percent authority resides in the unit—this means PHAs need to keep track of the units that are under the increased program cap that must be set aside for occupancy by qualifying families (as was already required for the project cap). 13 See 87 FR 3570 (Jan. 24, 2022). § 983.204 Execution of HAP Contract or PHA-Owned Certification This final rule amends § 983.204(b) and (c) to clarify that HAP contracts must be promptly executed and effective as described. This final rule also amends paragraph (c) to specify requirements applicable to projects undergoing development activity after HAP contract execution, as described further above in the discussion of changes to § 983.157. This final rule inserts a new paragraph (d) to clarify that the effective date of a PBV HAP contract must be on or after the execution date of the PBV HAP contract. HUD also amends and reorganizes paragraph (e), which was paragraph (d) in the proposed rule, to align with corresponding requirements in § 982.451(c). Redesignated paragraph (e)(1) now expressly states the requirement that the separate legal entity must execute the HAP contract with the PHA, and HUD deletes paragraph (d)(1)(ii) from the proposed rule. HUD has revised paragraph (e)(2)(i) of this final rule to clarify that the PHA-owned Certification obligates the PHA, as owner, to all of the requirements of the HAP contract. This revision prevents ambiguity with other regulations that reference HAP contracts but not the PHA certifications. § 983.205 Term of HAP Contract HUD amends the extension of term provision in § 983.205(b) to clarify the process for HAP contract term extensions and, while it retained the maximum extension term of 20 years that was in the proposed rule, provides a mechanism to execute multiple extensions concurrently as supported by commenters. Also, HUD removes the proposed paragraph (c) concerning independent entity oversight of the contract term and extensions for PHA-owned units, in response to public comments. § 983.206 Contract Termination or Expiration and Statutory Notice Requirements HUD makes changes in this final rule to clarify the process for when a PHA manages the issuance of tenant-based vouchers to tenants at PBV contract termination, and related issues. Specifically, for § 983.206(a)(3), this final rule expands the definition of the term “termination” to include termination of the HAP contract by agreement of PHA and owner. As a necessary precondition of the statutory right to remain, in paragraph (b), this final rule also adds provisions specifying that the right to remain in a unit depends on the unit continuing to be used for rental housing and clarifies procedures for voucher issuance. As suggested by public comments, HUD provides additional clarification in paragraph (b) to specify that the PHA must issue vouchers, provide a timeframe for issuance, and require units to be removed from the contract if the family moves. HUD also moved the language in proposed paragraphs (b)(4) and (b)(5) into paragraph (b) to cover all families that are issued a voucher as the result of a PBV contract termination or expiration. This final rule made this change because the language in paragraphs (b)(4) and (b)(5) are applicable regardless of whether the family uses the voucher in the same project or in other housing. After consideration of public comments, this final rule revises paragraph (b)(4) (proposed paragraph (b)(6)) to expand upon the exceptions in which an owner may refuse to initially lease and to limit “other good cause” to tenant misconduct and where the owner uses the unit for a non-residential purpose or renovates the unit. However, HUD provides a process by which families must be permitted to remain in or return to the project, if possible, when a renovation occurs, to best fulfill the PBV statutory requirement allowing the family to remain, as provided by HOTMA section 106(a)(4). This final rule also changes paragraph (c) to clarify that expiring funding increments, which are a normal part of PHA operations, do not constitute insufficient funding. Paragraph (c)(2) includes a change specifying the respective section and paragraph that applies for HAP contract breaches involving failure to comply with HQS and other contract breaches. Lastly, this final rule adds paragraph (e), which provides the PHA and owner the discretion to terminate and how the owner and PHA can terminate their HAP contract. § 983.207 HAP Contract Amendments (To Add or Substitute Contract Units) This final rule clarifies in paragraph (a) that substituted units may be vacant or, subject to paragraph (c), occupied. The final rule also removes the phrase “and subject to all PBV requirements” from paragraph (a) since the phrase is unnecessary and created confusion as to what requirements were at issue. HUD notes that this textual change is made for clarity only, and substitutions under paragraph (a) remain subject to all PBV requirements. HUD also clarifies the HQS and reasonable rent requirements to affirm that the unit must meet HQS and the rent must be reasonable in order to substitute the unit. Finally, the final rule includes in paragraph (a) a cross-reference to the requirements regarding units undergoing repairs or renovation before substitution (paragraph (d) in this final rule) and units that are newly built (paragraph (e) in this final rule). HUD adds a requirement in paragraph (b), which provides that prior to adding a unit, the PHA must inspect the unit to determine that it complies with HQS, and the PHA must determine the reasonable rent for the unit. These additional requirements correspond to the same requirements that apply when substituting a unit. This final rule removes from paragraph (b)(1), which covers excluded and excepted units to the program or project cap, the citation to § 983.6, which discusses the percentage limitation for PBV units and discusses the types of units that will count toward the program cap. HUD also revises paragraph (b)(3), moving the content of the proposed paragraph (b)(3) to a new paragraph (d) and including in paragraph (b)(3) only a cross-reference to paragraph (d). Paragraph (d) also contains significantly different text than that which appeared in proposed paragraph (b)(3). In accordance with the change to the definition of “development activity” described above in the discussion of changes to §§ 983.3 and 983.152, HUD replaces reference to “development activity” with reference to “substantial improvement.” Because projects containing units needing substantial improvement within the first two years must be categorized as rehabilitated housing (per discussion of changes to § 983.3 above), this final rule establishes that units may not undergo substantial improvement to be added to the project during this timeframe, barring extraordinary circumstances. For units that will undergo substantial improvement, HUD adds explanation of applicable requirements within paragraph (d), rather than referencing § 983.152 as proposed. HUD similarly revises paragraph (b)(4) by moving the content of the proposed paragraph (b)(4) to a new paragraph (e) and instead including in paragraph (b)(4) only a cross-reference to paragraph (e). Paragraph (e) of this final rule also contains additional criteria beyond those that appeared in paragraph (b)(4) of the proposed rule. This final rule adds, in paragraph (e)(2), an amendment to the proposed requirement to address instances in which contract units are completed in stages. Further, the rule adds, in paragraph (e)(3), that a unit can be added to a HAP contract under certain situations in which part of the building is reconfigured into additional units. This latter addition expands the type of units that may be added to a HAP contract. To clarify the requirements for adding units that are occupied, this final rule adds paragraph (b)(5), which cross-references the requirements regarding occupied units found in paragraph (c) of this final rule. This final rule moves paragraph (c) of the proposed rule to paragraph (g) and adds new paragraph (c) to address the requirements for substituting or adding occupied units and provide PHAs with the flexibility to place occupied units on the HAP contract. In alignment with the requirements under § 983.10, HUD adds paragraph (f) requiring that PHAs describe in their Administrative Plan under what circumstances they will add or substitute contract units. Finally, this final rule adds a new paragraph (h) explaining that HUD may establish procedures via Federal Register notice for a PHA and owner to merge two or more HAP contracts or bifurcate a single HAP contract. Allowing merger would facilitate administrative efficiency, to avoid a PHA having to repeat the same administrative actions for multiple contracts with the owner of a single project. It also follows from the HOTMA provision allowing units to be added to a contract at any time. Under the prior policy, HUD is aware that there may be projects for which the PHA and owner were unable to add units to a HAP contract due to the three-year limitation and therefore selected the project again for a separate HAP contract. This change would enable the contracts to be aligned going forward. Allowing bifurcation would provide administrative relief in other scenarios, such as if there is cause to establish separate ownership or management of two or more portions of a project. § 983.208 Condition of Contract Units HUD revises § 983.208(a)(3) to require that the PHA specify conditions under which it will require additional housing quality requirements in its Administrative Plan consistent with § 983.10. To ensure that housing is decent, safe, and sanitary, this final rule requires in paragraph (b)(1) that the PHA take enforcement action against owners who fail to maintain a dwelling unit in accordance with HQS. HUD revises paragraph (b)(2) to align with § 982.404, and to remove the unclear phrasing “considered to be.” This final rule also specifies in paragraph (b)(2)(i) that “other inspector” is a person who is authorized by the State or local government. The proposed rule cross-referenced to §§ 982.401(a)(5) and 982.401(o) to cover the timeframes for units in noncompliance with HQS; however, in this final rule HUD outlines the timeframes for noncompliant units in paragraphs (b)(2)(iii)(A) and (B) in place of the cross-references. HUD clarifies in paragraph (b)(3) that the HAP is not withheld or abated in cases where the PHA waives the owner's responsibility for repairs, and revises the paragraph to better align with HOTMA in terms of when the waiver may be applied, namely for an HQS deficiency that the PHA determines is caused by the tenant, any member of the household, or any guest or other person under the tenant's control, other than damage resulting from ordinary use. HUD adds paragraphs (b)(4) and (5) to provide flexibility for PHAs to conduct substantial improvement in the case of an HQS deficiency caused by an extraordinary circumstance or to conduct development activity after HAP contract execution, respectively, and requires that the PHA withhold or abate HAP and remove or terminate HAP as long as the contract unit with deficiencies is occupied by an assisted family. HUD also inserts a new paragraph (c) addressing family obligation. The addition of paragraph (c) reflects the contents of § 982.404, as § 982.404 is no longer applicable to PBVs in accordance with § 983.2 of this final rule. The changes in paragraph (c) outline how a family may be held responsible for a breach of the HQS, the family's required actions to cure the deficiency if the HQS breach is life-threatening, and the actions that the PHA must take in case of a breach of the HQS. In revised paragraph (d), proposed paragraph (c), HUD replaces the use of the undefined term “regular inspections” with the specific inspections referred to, consistent with changes throughout this final rule. Consistent with § 983.10, revised paragraph (d) also requires that the PHA specify the conditions under which it will withhold HAP and abate HAP or terminate the contract for units other than the unit with HQS deficiencies in its Administrative Plan. Revised paragraph (d) also outlines the PHA's remedies when HQS deficiencies are identified in an inspection, excluding pre-selection, initial, or turnover inspections. In accordance with the 1937 Act as amended by HOTMA, this final rule revises paragraph (f) discussing the applicability of § 983.208 to HAP contracts. Per the statute, HUD determines that paragraph (f) applies to any dwelling unit for which a HAP contract is entered into or renewed after the effective date of this final rule, with “renew” under the statute meaning the earlier of agreement to extend or effective date of extension in the case of PBV. § 983.210 Owner Certification To clarify the meaning of the certification in paragraph (a), given that compliance with HQS can include complying with requirements under part 983 to take specific actions in certain circumstances in which units do not fully meet HQS, HUD amends paragraph (a) to specify that the owner's compliance with HQS is subject to the requirements of part 983. To prevent a possible conflict with §§ 983.157 and 983.212, which allow the family to be temporarily housed while development activity or substantial improvement occurs, this final rule revises § 983.210(d) to specifically provide §§ 983.157(g)(6)(ii) and 983.212(a)(3)(ii) as an exception to the requirement that the unit be the family's only residence. § 983.211 Removal of Unit From HAP Contract HUD moves from § 983.211(c) to paragraph (b) the requirement that reinstatement or substitution must be permissible under § 983.207. For clarification, HUD revises this requirement to reference § 983.207(a) and (b) specifically. This final rule also adds clarifying changes to paragraph (c) to require that the anniversary and expiration dates match all other units under the HAP contract. This clarification prevents the PHA and owner from matching the dates on the HAP contract for all other units with the dates for the reinstated or substituted units. § 983.212 Substantial Improvement to Units Under a HAP Cont [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2024-08601. Public record. Not legal advice.