HOME Investment Partnerships Program: Program Updates and Streamlining

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 91, 92, 570, and 982

[Docket No. FR-6144-P-01]

RIN 2506-AC50

HOME Investment Partnerships Program: Program Updates and Streamlining

AGENCY:

Office of the Assistant Secretary for Community Planning and Development, Department of Housing and Urban Development, HUD.

ACTION:

Proposed rule.

SUMMARY:

HUD's HOME Investment Partnerships Program (HOME program or HOME) provides formula grants to States and units of general local government to fund a wide range of activities to produce and maintain affordable rental and homeownership housing and provides tenant-based rental assistance for low-income and very low-income households. This proposed rule would revise the current HOME regulations to update, simplify, or streamline requirements, better align the program with other Federal housing programs, and implement recent amendments to the HOME statute. This rule also includes minor revisions to the regulations for the Community Development Block Grant and Section 8 Housing Choice Voucher (HCV) Programs consistent with the implementation of proposed changes to the HOME program.

DATES:

Comment Due Date:

July 29, 2024.

ADDRESSES:

There are two methods for submitting public comments. All submissions must refer to the above docket number and title.

1.

Electronic Submission of Comments.

Comments may be submitted electronically through the Federal eRulemaking Portal at

www.regulations.gov.

HUD strongly encourages commenters to submit comments electronically. Electronic submission of comments allows the commenter maximum time to prepare and submit a comment, ensures timely receipt by HUD, and enables HUD to make comments immediately available to the public. Comments submitted electronically through

www.regulations.gov

can be viewed by other commenters and interested members of the public. Commenters should follow the instructions provided on that website to submit comments electronically.

2.

Submission of Comments by Mail.

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

Note:

To receive consideration as a public comment, comments must be submitted through one of the two methods specified above.

Public Inspection of Public Comments.

HUD will make all properly submitted comments and communications available for public inspection and copying during regular business hours at the above address. Due to security measures at the HUD Headquarters building, you must schedule an appointment in advance to review the public comments by calling the Regulations Division at 202-708-3055 (this is not a toll-free number). HUD welcomes and is prepared to receive calls from individuals who are deaf or hard of hearing, as well as 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.

Copies of all comments submitted are available for inspection and downloading at

www.regulations.gov.

In accordance with 5 U.S.C. 553(b)(4), a summary of this proposed rule may be found at

www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:

Virginia Sardone, Director, Office of Affordable Housing Programs, Office of Community Planning and Development, Department of Housing and Urban Development, 451 7th Street SW, Room 7160, Washington, DC 20410; telephone number (202) 708-2684 (this is not a toll-free number). HUD welcomes and is prepared to receive calls from individuals who are deaf or hard of hearing, as well as 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 HOME Program

The HOME program is authorized by title II of the Cranston-Gonzalez National Affordable Housing Act

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(“NAHA”) and has been in operation since 1992. The HOME program provides grants to States, local jurisdictions, and consortia of local jurisdictions (collectively, participating jurisdictions or PJs) and is used, often in partnership with local nonprofit groups, to fund a wide range of activities to build, buy, or rehabilitate affordable housing for rent or homeownership or to fund direct rental assistance to low-income people.

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HOME program funds are awarded annually as formula grants to participating jurisdictions. After the Department obligates funds to a participating jurisdiction, the Department establishes a HOME Investment Trust Fund

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for each participating jurisdiction, providing a line of credit that a participating jurisdiction may draw upon as needed.

1

42 U.S.C. 12721

et seq.

2

See

HUD's HOME Investment Partnerships Program web page at

https://www.hud.gov/program_offices/comm_planning/home.

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HUD's regulations for the HOME Investment Trust Fund can be found at 24 CFR 92.500.

The HOME program is the largest Federal block grant to States and local governments designed exclusively to create affordable housing for low-income households. Each year, the program allocates approximately $1.5 billion among States and approximately 600 localities nationwide. In fiscal year 2023, participating jurisdictions completed 6,848 rental housing units and 4,051 homebuyer units, assisted 2,717 low-income homeowners to repair their homes, and provided tenant-based rental assistance to 13,016 low-income households. HOME funds are most often used as gap financing for rental projects, particularly for projects that have been awarded Low-Income Housing Credits (26 U.S.C. 42) (“LIHTC”). Currently, there are 245,122 HOME-assisted rental units operating in their periods of affordability (

i.e.,

subject to ongoing HOME income and rent requirements). The HOME program is designed to reinforce several important values and principles of community development. First, the HOME program's flexibility empowers people and communities to design and implement strategies tailored to their own needs and priorities. Second, the HOME program's emphasis on consolidated planning expands and strengthens partnerships among all levels of government and the relationship with the private sector in the development of affordable housing. Third, the HOME program's technical assistance activities and set-aside for qualified community housing development organizations help to build the capacity of and partnerships with these community-based nonprofit organizations. Fourth, the HOME program's requirement that participating jurisdictions match 25 cents of every dollar in program funds helps to mobilize community resources in support of affordable housing.

While participating jurisdictions may undertake housing development activities directly, they also may provide HOME funds to for profit developers, public agencies, or private non-profit organizations to develop affordable housing for rent or sale to income-eligible households. Participating jurisdictions may provide HOME funds for affordable housing as grants, direct loans, loan guarantees, or other forms of credit enhancement, or for rental assistance or security deposits. Non-development activities such as tenant-based rental assistance or downpayment assistance for homeownership are generally administered by the participating jurisdiction, another public agency, or a non-profit organization as subrecipients acting on behalf of the participating jurisdiction.

The participating jurisdiction ensures compliance with HOME affordability requirements during the required period of affordability through the execution and recording of regulatory agreements on HOME-assisted housing and other enforceable measures such as deed restrictions or similar instruments. All HOME-assisted units must be occupied by income-eligible households. HOME-assisted rental units must have their rents approved by the participating jurisdiction and require owners to restrict the rent paid by tenants to amounts at or below the HUD-published maximum HOME rent limits. Owners of HOME-assisted rental housing must follow their adopted written tenant selection policies and criteria and select tenants from a written waiting list in chronological order of their application, insofar as practicable. Owners of HOME-assisted rental housing must also affirmatively market the availability of units in a manner likely to reach eligible tenants. Generally, participating jurisdictions maintain information on HOME-assisted rental housing (

e.g.,

websites, brochures, fliers) that prospective tenants may access to identify housing opportunities. HOME-assisted housing for homebuyers is also subject to a period of affordability. If the HOME-assisted homeownership housing is sold during the period of affordability, either the property must be sold at an affordable price to another low-income homebuyer or all or a portion of any purchase assistance provided to the seller must be recaptured from the net proceeds of the sale.

The HOME program regulations are codified in 24 CFR part 92 and were last substantively revised on July 24, 2013 (the 2013 HOME Final Rule).

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The 2013 HOME Final Rule focused on improving a participating jurisdiction's performance and accountability to HOME grant funds and addressing a participating jurisdiction's operational challenges as it adopted more complex program designs and its portfolio of existing projects grew. In 2016, the Department issued an interim regulation,

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finalized on September 22, 2022 (“the 2022 HOME Final Rule”),

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that implemented a grant-specific method for determining compliance with the 24-month commitment and CHDO set-aside commitment deadlines. The 2022 HOME Final Rule also eliminated the use of first-in-first-out accounting for fiscal year 2015 and later HOME grants.

4

78 FR 44627.

5

81 FR 86947 (Dec. 2, 2016).

6

87 FR 57821.

The HOME program provisions contained in title II of NAHA are prescriptive and the statute has not been significantly revised since the HOME program was last reauthorized by Congress in 1992. The constraints of prescriptive statutory authority that have not been significantly revised in over 30 years limits the scope of changes that the Department can propose to the HOME program regulations. Working within these limitations, the Department conducted a comprehensive review of title II of NAHA and current HOME program regulations to determine whether previously unrecognized opportunities might exist to revise current regulatory provisions. In creating this proposed rule, the Department focused on its commitment to equity and wealth-building and considered input from stakeholders throughout the years on the most challenging aspects of administering and using HOME funds to provide affordable housing. Through this proposed rule, the Department seeks to reduce burden and increase flexibility for participating jurisdictions and other program participants, while adhering to statutory intent and requiring responsible management of State and local HOME programs.

II. This Proposed Rule

HUD proposes to make multiple changes to 24 CFR part 92. The proposed changes include significant revisions to the community housing development organization (CHDO) requirements, a change in the approach to HOME rents, simplified requirements for small-scale rental projects, enhanced flexibility in HOME tenant-based rental assistance (“TBRA”) programs, and simplified provisions and new flexibilities for community land trusts (CLTs). The proposed rule would significantly strengthen and expand tenant protections by requiring that a HOME tenancy addendum with a set of uniform tenant protections be appended to the leases of all tenants of HOME-assisted rental housing units. HUD also proposes requiring that a HOME tenancy addendum with a streamlined set of uniform tenant protections be appended to the leases of all tenants receiving TBRA. Additionally, HUD proposes to create incentives for meeting a more advanced property standard that incorporates green building standards, higher levels of energy efficiency, and innovative building techniques in new construction, reconstruction, and rehabilitation of housing. The proposed rule would also clarify the resale requirements for homeownership housing and would make technical amendments and simplifications to conform provisions to certain changes made in the 2013 HOME Final Rule. HUD's proposed changes are described more fully in each of the sections below.

This proposed rule incorporates changes made by the Housing Opportunity Through Modernization Act of 2016 (HOTMA), published in the

Federal Register

on February 14, 2023 (88 FR 9600) (“HOTMA Final Rule”), Economic Growth Regulatory Relief and Consumer Protection Act: Implementation of National Standards for the Physical Inspection of Real Estate (NSPIRE), published in the

Federal Register

on May 11, 2023 (88 FR 30442) (“NSPIRE Final Rule”). This proposed rule also updates citations, in paragraphs where other changes are being made, to citations to conform with recent changes to the Office of Management and Budget (OMB) regulations at 2 CFR part 200. HUD intends to publish a future rulemaking to ensure that all citations throughout HUD's regulations are consistent with these changes. This proposed rule also proposes further revisions to the changes made to 24 CFR part 92 by the HOTMA Final Rule, and the NSPIRE Final Rule.

A. Changes to the HOME Program Regulations (24 CFR Part 92)

1. Definitions (24 CFR 92.2)

Removal of definitions related to 24 CFR part 92, subpart M.

HUD proposes to remove the definition of “ADDI Funds,” “Displaced homemaker,” and “First-Time Homebuyer” because the Department proposes to delete 24 CFR part 92, subpart M, which implemented

the American Dream Downpayment Initiative (ADDI) and associated definitions.

Commitment.

HUD proposes to make two minor changes to the definition of “commitment.” This term is currently defined to generally mean that a participating jurisdiction has executed a legally binding agreement with a State recipient, a subrecipient, or a contractor to use a specific amount of HOME funds for a specified use or for a specified local project. The proposed rule would make a technical correction in paragraph (1) of the definition to change the word “official” to “officials” in the description of an agreement between the participating jurisdiction and a subrecipient that is controlled by the participating jurisdiction. The proposed rule would also replace the term “downpayment assistance” with “homeownership assistance.” The use of the term “downpayment assistance” was a drafting error which unintentionally implied that written agreements with State recipients or subrecipients to provide other forms of homeownership assistance (

i.e.,

direct financial assistance to homebuyers or rehabilitation assistance to low-income homeowners) do not constitute commitments. The proposed rule would also remove “or subrecipient” from paragraph (2)(ii)(A) of the definition because a subrecipient, unlike a State recipient, is not permitted to acquire or assist standard housing with HOME funds it administers. This change would conform to proposed clarifications in the definitions of “State recipient” and “subrecipient.”

Community housing development organization.

HUD proposes to revise paragraph (4) of the “community housing development organization” (CHDO) definition to clarify the three options for meeting the requirement that the CHDO be a private nonprofit organization that is tax exempt. The proposed rule would insert the language “Is tax exempt as follows:” and add paragraphs (i), (ii), and (iii) to paragraph (4) to distinguish the three options to meet the tax exempt requirement. The first option is a tax exemption ruling from the Internal Revenue Service (IRS) under section 501(c)(3) or (4) of the Internal Revenue Code of 1986 and would be paragraph (4)(i). The second option's current language “is classified as a subordinate of a central organization non-profit under section 905 of the Internal Revenue Code of 1986” reflects the Department's decision in the 2013 HOME Final Rule to accommodate the IRS's recognition of a group of subordinate organizations as tax exempt if they are affiliated with a central organization.

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To avoid the need for each of the subordinate organizations to apply for an exemption individually, the IRS provides the central organization with a group exemption letter which is a ruling or determination issued to the central organization (generally, a State, regional, or national organization) which holds that one or more subordinate organizations (usually a post, unit, chapter, or local) are exempt from Federal income tax by virtue of being subordinate organizations of the central organization. In order to benefit from a group exemption letter, the subordinate organization must be listed in the 501(c)(3) or (4) central organization's group exemption letter. Rather than the general reference to section 905 of the Internal Revenue Code (IRC) in the current language, the proposed language in paragraph (4)(ii) of the CHDO definition would describe the applicable IRS requirement. The third option in paragraph (4) has also been revised in proposed paragraph (4)(iii) to clarify that a private nonprofit organization is tax exempt if it is wholly owned by a community housing development organization that meets the requirement of the definition in § 92.2, including either paragraph (4)(i) or (ii), and is disregarded as an entity separate from its owner organization for federal tax purposes. The 2013 HOME Final Rule included this option to permit private nonprofit organizations that were wholly owned by a CHDO to meet the tax exempt requirement in paragraph (4). However, the language for this third option in the 2013 HOME Final Rule was confusing. The proposed paragraph (4)(iii) would clarify that a private nonprofit organization may also meet the tax exempt requirement because its owner organization (that qualifies as a CHDO) has a 501(c)(3) or (4) ruling or is a subordinate organization included in a 501(c)(3) or (4) central organization's group exemption letter by the IRS.

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See

26 CFR 1.6033-2(a)(2)(ii)(I); Rev. Proc. 80-27, 1980-1 C.B. 677, available at

https://www.irs.gov/pub/irs-tege/rp1980-27.pdf.

As part of the Department's effort to provide more community-based nonprofit organizations access to the HOME CHDO set-aside within the constraints of NAHA, the proposed rule would revise several provisions of the CHDO definition to make it easier for these organizations to meet the low-income board representation and staff capacity requirements in § 92.2. These proposed changes, when combined with the proposed revisions to the required role of the CHDO as owner, developer, or sponsor of housing at § 92.300, would enable more community-based housing organizations to qualify as CHDOs and access the CHDO set-side.

The first proposed change would revise paragraph (5) of the CHDO definition to make the limitation on public officials and employees of a governmental entity on the CHDO governing board less restrictive. The regulations currently require an individual who is an employee or public official of any governmental entity to be limited to one-third of the CHDO board members. The proposed rule would revise paragraph (5) of the definition to apply this requirement only to officials and employees of the participating jurisdiction designating the CHDO and, if the CHDO was created by a governmental entity (

e.g.,

public housing agency), to officials and employees of the governmental entity. This change would mean that officials or employees of other governmental entities besides the participating jurisdiction designating the CHDO or governmental entity that created the CHDO (

e.g.,

employees of other units of general local government, public school teachers, university professors) would not be required to be counted toward the one-third board membership limitation on officials or employees. The proposed requirements would also clarify that no governmental entity (which includes the participating jurisdiction) may appoint more than one-third of the organization's board members and that those board members are not permitted to appoint any of the remaining members of the board.

In addition, paragraph (8)(i) of the current definition of CHDO requires a CHDO to reserve at least one-third of the membership of its governing board for residents of low-income neighborhood organizations, other low-income community residents, or elected representatives of low-income neighborhood organizations. The proposed rule would broaden eligible low-income representatives required in paragraph (8)(i) by permitting (1) an individual designated by a low-income neighborhood organization to qualify as a low-income representative, rather than only elected leadership of these organizations and (2) an authorized representative of a nonprofit organizations in the community that addresses the housing or supportive service needs of residents of low-income neighborhoods to qualify as a low-income representative. Examples of “nonprofit organizations in the community” include homeless providers, Community Action Agencies, Fair Housing Initiatives Program

providers, Legal Aid, disability rights organizations, and victim service providers. These proposed changes would facilitate State and local participating jurisdiction efforts to identify more organizations that can undertake activities using CHDO set-aside funds.

Further, State and consortia participating jurisdictions located in rural areas face unique challenges in identifying organizations that can meet the governing board and capacity requirements to become CHDOs. To help address these challenges, the Department also proposes to revise the provision in paragraph 8(i) of the CHDO definition that defines the term “community” for rural areas as “a neighborhood or neighborhoods, town, village, county, or multi-county area (but not the entire State)” to remove the text in parentheses. This change would permit CHDOs operating in rural areas to count qualified low-income representatives from anywhere in the State toward the low-income board representation requirement. This change to the definition of “community” for rural areas would also apply to paragraph (10) of the CHDO definition, effectively permitting an organization that wishes to operate as a CHDO in a rural area to meet the requirement that it have at least a one-year history serving the community with a service history anywhere in the State. This change would make it possible for nonprofits with statewide service areas to qualify as CHDOs and increase the use of CHDO set-aside funds in rural areas.

HUD proposes to make numerous revisions to paragraph (9) of the CHDO definition, which includes the statutory requirement that an organization have demonstrated staff capacity to qualify as a CHDO. The proposed rule would broaden the requirement that an organization have demonstrated capacity for carrying out projects assisted with HOME funds to also include housing projects assisted with other Federal funds, LIHTC, or local and State affordable housing funds. In addition, the proposed rule would improve the clarity of paragraph (9) by adding paragraphs (i), (ii), and (iii) to separately address the requirements for developer, owner, and sponsor.

The proposed rule would ease the current prohibition in paragraph (9) of the CHDO definition against using the capacity or experience of volunteers to meet the demonstrated capacity requirement. The Department made this prohibition more explicit in the 2013 HOME Final Rule to implement the staff capacity provision contained in the Consolidated and Further Continuing Appropriations Act of 2012 (Pub. L. 112-55) and the Consolidated and Further Continuing Appropriations Act of 2013 (Pub. L. 113-6), which required CHDOs to have staff with demonstrated development experience. Because the connection of volunteers to an organization may be tenuous or temporary, using the capacity of volunteers to meet demonstrated staff capacity is inconsistent with both NAHA and with the provisions in the Consolidated and Further Continuing Appropriations Acts. The proposed rule would, however, permit participating jurisdictions to consider the capacity and experience of volunteers who are board members or officers of the organization in determining whether an organization meets the CHDO capacity requirements, provided that the volunteer is not compensated by or their services are not donated by another organization.

Specific solicitation of comment #1. The Department specifically solicits public comment about any additional changes it should consider, within statutory constraints, that will improve CHDO availability and capacity in rural areas.

Community land trust.

HUD proposes to add the definition of “community land trust” (CLT) to § 92.2. Section 233(f) of NAHA (42 U.S.C. 12773(f)) contains a definition of community land trust which the statute expressly states is only for the purposes of establishing the specific characteristics of CLTs that qualify to receive CHDO technical assistance funding. This statutory definition in section 233(f) of NAHA, which was developed in 1990, is not reflective of actual CLTs operating in participating jurisdictions. However, in the absence of a separate regulatory definition or any other definition of CLT in another Federal program, the Department applied the statutory definition in section 233(f) in the implementation of the amendment to NAHA in the Consolidated Appropriations Act, 2016 (Pub. L. 114-113). The amendment permitted CLTs to hold and exercise purchase options, rights of first refusal, or other preemptive rights to preserve the affordability of the housing developed by the CLT.

Recognizing the problems in applying a CLT definition for HOME that the statute expressly states is only for the purpose of allowing qualifying CLTs to receive CHDO technical assistance funding, the Department proposes a regulatory definition of CLT that encompasses the purposes for which CLTs are formed and which would generally apply in the HOME program, except where stated otherwise in the proposed rule. The proposed regulatory definition would require a community land trust to be a nonprofit organization that has the development and maintenance of housing that is permanently affordable to low and moderate-income persons as its primary purposes, uses enforceable mechanisms to require housing and related improvements on land held by the CLT to be affordable to low- and moderate-income persons for at least 30 years, and retains a right of first refusal or preemptive right to purchase the affordable housing on land held by the CLT to maintain long-term affordability. Adoption of the proposed regulatory definition for CLT would allow the Department to discontinue application of the CLT definition expressly specified only for CHDO technical assistance in all other uses of HOME funds.

Homeownership.

The proposed rule would make a technical correction to the definition of “homeownership” in § 92.2, striking the words “in a” from the phrase “1- to 4-unit dwelling or in a condominium unit . . . .” The proposed rule would also revise paragraph (4) of the definition by deleting “Tax” from the referenced term “Low-Income Housing Tax Credits” and adding the IRC statutory citation for the term. The changed term “Low-Income Housing Credits” would match the title of section 42 of the IRC.

Period of Affordability.

HUD proposes to add the definition of “period of affordability,” which is used throughout 24 CFR part 92. The definition would (1) clarify that the term means the required period specified in § 92.252 and § 92.254 during which the requirements of part 92 apply to HOME-assisted housing and (2) distinguish the required period specified in § 92.252 and § 92.254 from an extended period of affordability or additional compliance period that a participating jurisdiction may impose on HOME-assisted housing. The proposed rule would also make technical corrections in numerous sections of part 92 by replacing “affordability period” with “period of affordability.”

Program Income.

HUD proposes to make minor changes to the definition of “program income.” First, the phrase “at any time” is added to the definition to clarify that program income is gross income received by the participating jurisdiction, State recipient, or a subrecipient directly generated from the use of HOME funds or matching contributions “at any time” and is not bound by a specific timeframe such as

the period of affordability or closeout of the HOME grant.

The proposed rule would also remove the term “subrecipient” from the beginning of paragraph (2) of the “program income” definition that refers to ownership of rental property. This change would clarify that a subrecipient, by definition, is a governmental entity or nonprofit organization selected by the participating jurisdiction to administer all or some of the participating jurisdiction's HOME program to produce affordable housing, provide homeownership assistance, or provide TBRA and cannot, in that capacity, also receive HOME funds to be an owner or developer of affordable housing. The proposed rule would also remove “sponsor” from the parenthetical in paragraph (2) of the “program income” definition because only a CHDO may be a “sponsor” and, pursuant to § 92.300(a)(4), a “sponsor” must be a project “owner” or “developer.” Therefore, the inclusion of “sponsor” in paragraph (2) of the definition is duplicative and would be deleted in the definition for clarity. The proposed definition of “program income” would also clarify that the amount of gross income from the use, rental, or sale of real property received by the project owner or developer that must be paid to the participating jurisdiction, subrecipient or State recipient is program income. Finally, the proposed rule would further clarify in paragraph (3) that program income includes payments and repayments of grants, loans, or investments made using HOME funds or matching contributions, including such payments and repayments made after the period of affordability, and is not limited to the payment of loans made using HOME funds or matching contributions.

Reconstruction.

HUD proposes to revise the definition of “reconstruction” to clarify that, although reconstruction is considered rehabilitation for purposes of the HOME program, the property standards for new construction in § 92.251 apply to all HOME-assisted reconstruction projects.

Single family housing.

HUD proposes to revise the definition of “single family housing” to improve the clarity of the term. The current definition states that single family housing is a one-to-four family residence, condominium unit, combination of manufactured housing unit and lot, or manufactured housing lot. The proposed change would revise “family” to “unit” to reflect current program practice and guidance, changing the definition to a one-to-four- “unit” residence, condominium unit, cooperative unit, combination of manufactured housing and lot, or manufactured housing lot. The proposed change would clarify that the defined term is based on units and not occupancy.

Small-scale housing.

HUD proposes to add the definition of “small-scale housing,” which would be defined as a rental housing project containing no more than four units or a homeownership project with no more than three rental units on the same site. HUD is proposing this definition to permit these types of projects to follow streamlined procedures for income determinations, ongoing physical inspections, and written tenant waiting lists. The definition and the streamlined provisions would facilitate participation of owners of small rental properties (

e.g.,

accessory dwelling units, duplexes, triplexes, or other small rental projects) in the HOME program.

State recipient.

The current definition of “State recipient” consists of a cross reference to § 92.201(b)(2). The proposed rule would eliminate the cross reference and instead list the definition directly in § 92.2. States are not required to use State recipients, but if a State distributes HOME funds to one or more unit(s) of general local government to carry out HOME programs, the unit(s) of general local government is a “State recipient.” The proposed definition would also clarify that, unlike a “subrecipient,” a “State recipient” is permitted to own or develop affordable housing as well as administer all or some of the participating jurisdiction's HOME programs, provide homeownership assistance, or provide TBRA. This change further distinguishes a “State recipient” from a “subrecipient.”.

Subrecipient.

HUD proposes to make changes to the definition of “subrecipient.” To be consistent with the proposed change to the definition of “commitment,” the term “downpayment assistance” as it is used in the current definition of “subrecipient” would be revised to “homeownership assistance.” Also, the term “public agency” as it is used in the current definition of “subrecipient” would be revised to “governmental entity” because “governmental entity” is used throughout part 92, whereas “public agency” is only used in the current “subrecipient” definition. These proposed changes would also reflect the current practice to permit entities such as a public housing authority, housing finance agency, or redevelopment authority to be subrecipients.

The proposed rule would also remove the word “solely” to clarify that a governmental entity or nonprofit organization that receives HOME funds as a developer or owner of a housing project is not acting as a “subrecipient,” even if it also receives funds from the participating jurisdiction to administer other HOME-funded activities as a “subrecipient.” Subject to the requirements of part 92, a governmental entity or nonprofit organization may be an owner or developer of a housing project under a written agreement to acquire, rehabilitate, or construct the housing, while also operating as a “subrecipient” of other HOME programs or activities (

i.e.,

not the housing program in which it is an owner or developer) under a separate written agreement with the participating jurisdiction.

Tenant-based rental assistance.

The proposed rule would revise the definition of “tenant-based rental assistance” to replace the use of the term “dwelling” with “housing” to align with the requirements for TBRA in § 92.209 which applies to “housing.”

2. Formula Allocation (24 CFR 92.50)

The proposed rule would remove the use of the term “poor household” in the formula allocation section and replace it with “households below the poverty line.” The proposed term reflects the actual data that HUD uses for this formula factor when determining annual HOME allocations.

3. Consortia (24 CFR 92.101)

The proposed rule would revise § 92.101(a) to permit, under certain conditions, a unit of general local government that is separated by a body of water from the other units of general local government belonging to a consortium and only accessible to the public through a permanent means other than a connecting road, bridge, railway, or highway to be considered geographically contiguous for purposes of inclusion in a HOME consortium. The consortium would be required to demonstrate that the unit of general local government separated by the body of water is part of the same housing market and local commuting area as one or more members of the consortium. This change would allow a unit of general local government that is separated from one or more other consortium members by a body of water but that is accessible by ferry, for example, to become a member of the consortium. In the past, the Department had no regulatory basis for approving these units of general local government to be consortium members. HUD anticipates this change would allow

some consortia to increase members or new consortia to form.

The proposed rule would add language to § 92.101(d) to clarify the relationship between a representative unit of general local government (frequently referred to as the lead entity) and member units of general local government in a consortium. The proposed revision explains that, while member units of general local government in a consortium are not subrecipients, the requirements for subrecipients, including the written agreement requirements at § 92.504(c)(2), apply when the representative unit of general local government distributes HOME funds to member units of general local government in a consortium. This change would not affect the requirement in § 92.101(a)(2)(ii) for a legally binding cooperation agreement between all members of a consortium.

The proposed rule would add language that describes the effect of a change to the representative unit of general local government of a consortium. If a consortium changes the representative unit of general local government but the membership of the consortium does not change, the consortium is considered to be the same unit of general local government. However, the proposed rule states that if a representative unit of general local government of a consortium changes, and the composition of the consortium also changes because one or more members have been added or removed from the consortium, then the consortium is considered a new unit of general local government and must comply with all applicable consolidated plan requirements in 24 CFR part 91. The Department already treats a consortium as the same unit of general local government if only the representative unit of general local government changes. With this proposed rule change, HUD would codify this approach. This change is proposed to help consortia that are contemplating a change to the representative unit of general local government or other membership to understand the programmatic consequences of those decisions.

4. Distribution of Assistance (24 CFR 92.201)

The proposed rule would add a sentence to the end of § 92.201(a)(2) clarifying that a participating jurisdiction may not commit funds to a project within the boundaries of a contiguous local jurisdiction until it has secured the required financial contribution of the jurisdiction in which the project is located. The sentence would clarify the necessary preconditions for using HOME funds outside of a participating jurisdiction's geographic boundaries and would prevent a participating jurisdiction from providing HOME funds to a project that does not have the support of the jurisdiction or community where it is located.

The proposed rule would also remove the definition of State recipient from § 92.201(b)(2) and add it to the definitions section of § 92.2 where it will be easier for practitioners to locate. Other proposed changes to clarify the definition are discussed in the preamble for § 92.2.

5. Income Determinations (24 CFR 92.203)

In the HOTMA Final Rule, published on February 14, 2023,

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the Department revised the income regulations for the Public Housing, Section 8, Community Development Block Grant (CDBG), HOME, Housing Trust Fund, Housing Opportunities for Persons With AIDS, Supportive Housing for the Elderly, and Supportive Housing for Persons with Disabilities programs. The effective date of the regulatory changes made through the HOTMA Final Rule is January 1, 2024.

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8

88 FR 9600.

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For clarity, the revisions HUD is proposing in this section of this proposed rule are revisions to the regulations as they will exist after the effective date of the HOTMA Final Rule on January 1, 2024.

As part of the HOTMA Final Rule, the Department comprehensively revised the HOME regulation (effective January 1, 2024) at § 92.203 to align the HOME income regulations with income regulations from other HUD and Federal programs that HOME funds were most likely to be used with, most notably the Section 8 program. To that end, the Department required that participating jurisdictions use income determinations made by owners and program administrators in section 8 project-based voucher and rental assistance programs instead of requiring the participating jurisdiction to engage in a separate, duplicative income review. The Department also allowed participating jurisdictions to use income determinations made by public housing agencies or other providers of Federal tenant-based rental assistance instead of requiring the participating jurisdiction to engage in a separate, duplicative income review.

As the Department was preparing guidance and training participating jurisdictions and others on how to implement the requirements of the HOTMA Final Rule, the Department determined there were still ways to be clearer about a participating jurisdiction's responsibilities regarding income determinations, including when HOME funds are used in a project with either Federal project-based or tenant-based rental assistance or subsidy programs.

HUD is proposing to revise the paragraph heading of § 92.203(a) to read “Income eligibility” to more closely align with the purpose of the paragraph. The Department is also proposing to remove the first sentence of § 92.203(a) because it is confusing and is not necessary to the requirements in § 92.203. The first sentence of the current § 92.203(a) states that income targeting requirements apply to both a participating jurisdiction's HOME program and to its HOME projects. While the statement is true, § 92.203 does not establish the HOME income targeting requirements which are contained in § 92.216. By removing the first sentence of the current § 92.203(a), the second sentence of the current § 92.203(a) would be revised to make it the lead-in sentence to the three options of determining income eligibility for HOME under § 92.203(a). HUD believes this elimination of unnecessary and confusing verbiage would better allow participating jurisdictions to understand HOME income requirements.

The proposed rule would revise the paragraph heading of § 92.203(b) from “Required documentation for annual income calculations” to “Determining and documenting annual income” and the paragraph heading of § 92.203(c) from “Defining income for eligibility” to “Definitions of annual income” to reflect the requirements more accurately in each paragraph. The citation to § 92.252 in § 92.203(b)(1) would also be revised to conform to the renumbering of paragraph (h) to (g) in § 92.252 and the citation to § 92.252(b)(2)(i) in § 92.203(f)(1)(ii) would also be revised to “§ 92.252(a)(2)(ii) or (iii)” to conform to the revisions in § 92.252. The proposed rule would also revise the second sentence of § 92.203(b)(1)(ii) to add “by the participating jurisdiction or owner” at the end. The proposed rule would also add the requirement currently in § 92.252(g) to the end of paragraph (ii) of § 92.203(b)(1) that if there is evidence that a tenant's statement and certification failed to completely and accurately state information about the family's size or income, a tenant's income must be re-examined in accordance with § 92.203(b)(1)(i).

The proposed rule would revise § 92.203(b)(1)(iii) to clarify that the method requires the government

program to examine the annual income of the family each year and to be a program that provides government benefits to the family. The proposed rule would also revise § 92.203(d) to clarify when the participating jurisdiction is permitted to use the definitions of “annual income” in § 92.203(c). Specifically, the proposed rule would further clarify that when the participating jurisdiction is accepting a public housing agency, owner, or rental assistance provider's determination of annual and adjusted income for units assisted by a Federal or State project-based rental subsidy program or tenants receiving Federal tenant-based rental assistance in a rental housing project, the participating jurisdiction must calculate annual income in accordance with § 92.203(c)(1) for the rental housing project so there is consistency in the definition of annual income throughout the project.

The proposed rule would revise the heading of paragraph (d) of this section from “Using income definitions” to “Use of income definitions” and would remove the third sentence of paragraph (d) because it may be read to either conflict with or duplicate requirements in paragraph (c) of this section. In addition, the proposed rule would make other minor revisions to paragraph (d) for clarity. The proposed rule would also make several technical corrections to §  92.203(d). The last sentence of paragraph (d) cites to “paragraph (c)(i) of this section.” This is a drafting error, and the citation should be corrected to “paragraph (c)(1) of this section.”

The citations to 24 CFR part 5 requirements in the section would also be revised for consistency with the format of citations to 24 CFR part 5 in other sections of the current regulation.

6. Eligible Activities: General (24 CFR 92.205)

The proposed rule would revise § 92.205(a)(2) to clarify that acquisition of vacant land or demolition may only be undertaken for a project that will provide affordable housing and meets the requirements for a specific local project in paragraph (2)(i) of the definition of “commitment” in § 92.2. Commitment of HOME funds to a specific local project can only occur for an identifiable project for which all necessary financing has been secured, a budget and schedule have been established, and underwriting has been completed and under which construction is scheduled to start within 12 months of the execution date of the written agreement. Although the provision at § 92.205(a)(2) has been in the HOME regulations since inception of the HOME program, some participating jurisdictions continue to mistakenly believe that HOME funds can be used to acquire land without the development of affordable housing (

e.g.,

“land banking”) or to demolish buildings with no intention to build new affordable housing (

e.g.,

elimination of slums or blight). This provision would be revised to further clarify the requirement that an affordable housing project must be completed when HOME funds are used for the acquisition of vacant land or demolition.

The Department proposes to move the text at the end of paragraph (b)(1) that states that a participating jurisdiction establishes the terms of HOME assistance (

e.g.,

loan terms) subject to the requirements of the regulation to a new paragraph (b)(3) and would revise the language to better emphasize and clarify that the terms of assistance are established by the participating jurisdiction, subject to the requirements of this part.

HUD is proposing to revise § 92.205(e)(2) to clarify that if project completion, as defined in § 92.2, does not occur within 4 years from the date that the participating jurisdiction committed funds to a specific local project, then the project is terminated and the participating jurisdiction must repay all funds invested in the project. There remains a great deal of confusion surrounding the 4-year deadline, and the Department is again clarifying that a project must meet the requirements of part 92 in order to be considered complete. HUD already has a clear definition of project completion and hopes that using the same terminology will better enable participating jurisdictions to comply with the regulations.

7. Eligible Project Costs (24 CFR 92.206)

The proposed rule would make several technical corrections to § 92.206. These corrections would update the citation in § 92.206(a)(1) regarding new construction standards to § 92.251(a), update the citation in § 92.206(a)(2) regarding rehabilitation standards to § 92.251(b), and revise §  92.206(b) to change “affordability period” to “period of affordability.”

The proposed rule would revise §  92.206(b)(2)(ii) to change “over an extended affordability period” to “over the minimum period of affordability of 15 years.” The proposed rule would also revise paragraph (c) to clarify that the costs of securing a long-term ground lease are eligible acquisition costs and permitted in the development of HOME-assisted housing. HUD also proposes to revise paragraph (d)(1) to add the costs of conducting environmental assessments and reviews to the list of permissible development costs that could be reimbursed with HOME funds if the cost is incurred not more than 24 months before the date that HOME funds are committed to the project and the participating jurisdiction expressly permits HOME funds to be used to pay the costs in the written agreement committing the funds. Lack of funding for necessary environmental studies of sites proposed for development can be an obstacle to the provision of affordable housing. The proposed rule would also remove the current § 92.206(d)(8) because the costs of environment reviews and assessments have been added to paragraph (d)(1) and replace it with the cost of property insurance during development as one of the eligible related soft costs in paragraph (d).

8. Eligible Administrative and Planning Costs (24 CFR 92.207)

The Department proposes to revise § 92.207(e) to remove the term “under a cost allocation plan prepared” from the regulation. This is an oversimplification of the underlying requirements in 2 CFR part 200, subpart E and HUD is proposing the removal of the language to reduce confusion and improve clarity.

9. Eligible Community Housing Development Organization (CHDO) Operating Expense and Capacity Building Costs (24 CFR 92.208)

Through this proposed rule, the Department seeks to correct a drafting error made in the 2013 HOME Final Rule that created an unintended barrier to using CHDO operating expense and capacity building funding provided through HOME to assist organizations to meet the requirements for CHDO designation. Paragraph (9) of the definition of CHDO in § 92.2 requires that a CHDO have demonstrated capacity to be designated as a CHDO, while the current § 92.208 limits operating and capacity building assistance to organizations that are CHDOs. These provisions inadvertently prohibit the use of CHDO operating or capacity building funds to assist an organization that meets all other provisions of the CHDO definition except the demonstrated capacity requirement. The proposed rule would add a new paragraph (c) to § 92.208 stating that an organization that meets the definition of “community housing development organization” in § 92.2 except for the capacity requirement in paragraph (9) may receive HOME funds

for operating expenses and capacity building costs in order to develop demonstrated capacity and qualify as a CHDO. This change would make it possible for a nonprofit organization to receive the necessary financial assistance to attain CHDO designation. Pursuant to § 92.300(e), a participating jurisdiction may only provide operating or capacity building funds to an organization to which it expects to commit CHDO set-aside funds for a project within 24 months.

10. Tenant-Based Rental Assistance: Eligible Costs and Requirements (24 CFR 92.209)

The proposed rule would revise § 92.209(c)(1) to eliminate the requirement that adjusted income be determined annually for families receiving TBRA. Because TBRA contracts are limited by statute to two years and must be executed every time a tenant enters into a new lease, the proposed rule would permit a participating jurisdiction to provide TBRA to a family and not redetermine adjusted income during the contract's period of assistance. Rather, proposed § 92.209(c)(1) would only require the participating jurisdiction to determine adjusted income before execution of a new contract or renewal of an existing rental assistance contract. A family receiving TBRA whose income decreases during the term of the contract is still permitted to request an income redetermination by the participating jurisdiction during the term of the rental assistance contract so the family's subsidy can be recalculated. However, as is the case under the current regulations, the choice to redetermine adjusted income of a family that experienced a change in income during the term of the contract is a participating jurisdiction's program design decision and would be based upon the participating jurisdiction's policies and procedures. This means that unless the participating jurisdiction has a written policy and a rental assistance contract that requires a family's subsidy be redetermined based upon changes in income during the period of assistance, the family's payment toward rent will not change due to changes in income during the contract term.

Consistent with HUD's Plan for Bridging the Wealth Gap: An Agenda for Economic Justice and Asset Building for Renters,

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biennial income redeterminations would facilitate family savings and improve housing stability by facilitating longer stays in housing and avoiding evictions or economic displacement from housing. Reducing the frequency of income determinations would also significantly reduce administrative burden on participating jurisdiction staff and on participating landlords, potentially expanding units available to families receiving TBRA.

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See

https://www.hud.gov/sites/dfiles/PIH/documents/Bridging_Wealth_Gap.pdf.

The proposed rule would revise the first sentence of § 92.209(c)(2)(iv) by adding the word “assistance” to “rental payments” to further clarify that this is describing TBRA payments. The proposed rule also clarifies that when all or a portion of the homebuyer-tenant's monthly contribution toward rent is set aside for closing costs or a downpayment, it must be set aside in accordance with the lease-purchase agreement. These clarifications are required because the Department determined that some participating jurisdictions were not explicitly stating that all or a portion of a tenant's contribution to rent was being set aside for closing costs or a downpayment on the housing in the lease-purchase agreement or providing for how the set aside would occur.

The proposed rule would revise § 92.209(c)(3) to clarify that a participating jurisdiction may select and provide TBRA to low-income families currently residing in housing units that will be rehabilitated or acquired with HOME funds. The low-income family may choose to use the TBRA in a unit rehabilitated or acquired with HOME funds or in other qualified housing. Using TBRA funds in this manner may reduce displacement or assist in decreasing the cost of compliance with the Uniform Relocation Assistance and Real Property Acquisition Policies Act (42 U.S.C. 4601

et seq.

) (URA), which applies to the use of HOME funds for a project involving acquisition, rehabilitation, or demolition.

The proposed rule would revise § 92.209(g) to update the reference to § 92.253 to specify § 92.253(a)-(c) and (d)(2). The proposed rule would revise § 92.209(h)(2) to permit participating jurisdictions to establish hardship policies that provide exceptions to the requirement that families receiving TBRA contribute a minimum amount toward rent. Some families receiving TBRA have little or no income. Due to this, some families may be unable to comply with the requirement for a minimum tenant contribution toward rent or compliance with the requirement may be detrimental to the family (

e.g.,

use limited financial resources that are needed for medical care and other necessities). This revision would align HOME with other Federal tenant-based rental assistance programs in permitting a participating jurisdiction to provide relief to a family from a minimum tenant contribution in its TBRA program by increasing the assistance in accordance with the participating jurisdiction's written policies.

The Department proposes to further clarify the basis of the rent standard that a participating jurisdiction may use for its TBRA program by adding the specific regulatory citation of 24 CFR 982.503 for the Section 8 HCV payment standard to § 92.209(h)(3)(ii). With the inclusion of the specific regulatory citation, a participating jurisdiction that chooses to use the Section 8 HCV program payment standard as its TBRA payment standard will be able to quickly locate the referenced requirements.

The proposed rule would revise § 92.209(i) to clarify the requirement that the participating jurisdiction must inspect the housing initially to mean that the participating jurisdiction must determine compliance with the property standards at § 92.251 at the time of entering into a rental assistance contract. The proposed rule would require that initially and annually thereafter, the participating jurisdiction must determine that the housing complies with its property standards and is decent, safe, sanitary, and in good repair in accordance with § 92.251(f).

Currently, program participants are required to inspect housing annually. Under § 92.251(f)(4)(ii) of this proposed rule, HUD would allow program participants to forego their own inspection and instead rely on an inspection conducted for another HUD program under 24 CFR part 5, subpart G. Section 92.251(f)(4)(ii) would also allow HUD to identify other alternative inspection standards through

Federal Register

notice which may count for the annual inspection. This proposed change would reduce administrative burden on the participating jurisdiction for performing inspections and the burden on property owners from undergoing multiple inspections by multiple parties using the same inspection standards, while posing minimal risk of substandard units being occupied by tenants assisted with TBRA. The requirement that the participating jurisdiction must reinspect annually for compliance with the property standards at § 92.251 after determining initial compliance is not proposed to be changed. The participating jurisdiction may determine compliance with the property standards at § 92.251 annually, under the same methods available to the participating jurisdiction in the initial determination.

The proposed rule would make several revisions to § 92.209(j). First, the use of “dwelling” would be replaced with “housing” in paragraph (j)(1) to specify that the use of TBRA is for housing and not “dwelling units” which part 92 does not define. Second, § 92.209(j)(5) would be revised to remove “Housing Quality Standard” to align with the proposed changes in § 92.209(i). Third, as further discussed below, the proposed rule would also add a new § 92.209(j)(6) to prohibit the use of surety bonds or security deposit insurance as a form of security deposit in units occupied by families receiving TBRA.

Some participating jurisdictions have asked about the use of surety bonds and security deposit insurance in their TBRA programs while others have requested that the Department provide them with an interpretation that surety bonds or security deposit insurance constituted a security deposit. In response, the Department investigated the nature of surety bonds and security deposit insurance and determined as a matter of law that they are not security deposits within the meaning of NAHA nor are they treated as such under state statutes. Moreover, surety bonds or security deposit insurance may disadvantage tenants without necessarily benefitting landlords. Generally, tenants pay the cost of purchasing the surety bond or security deposit insurance in lieu of a security deposit. The surety bond obligates the bond issuer to repair all covered damage to the unit attributed to the tenant but may have coverage limits and is dependent upon the financial sufficiency of the issuer's fund. For security deposit insurance, a tenant pays a premium to purchase a policy from an insurance company that provides coverage to the landlord, as insured party, for most claims for damages to a unit. Even if there is no damage to the unit, the premium for the surety bond or security deposit insurance is not refundable to the tenant. However, if the bond issuer or the insurance company refuses to cover the damages, the landlord may be forced to litigate against both the bond issuer or insurer and the tenant for damages under the terms of the lease and may be left with little or no recourse beyond obtaining judgment liens against each, potentially damaging the tenant's credit and forcing a tenant to obtain legal counsel. The proposed prohibition on the use of surety bonds and security deposit insurance as a form of security deposit is a change made throughout the proposed rule. HUD does not believe that prohibiting the use of surety bonds and security deposit insurance will impact a family's access to the rental housing market. Section 92.209 continues to allow participating jurisdictions to use HOME funds as loans or grants for security deposits.

The proposed rule would also remove § 92.209(l) because paragraph (l) implements section 212(a)(3)(D) of NAHA which is an outdated provision that applies only when the participating jurisdiction receives Federal assistance under section 1437f of the U.S. Housing Act of 1937 (the “1937 Act”) (42 U.S.C. 1437f) (

i.e.,

section 8 program) to be used for TBRA.

11. Troubled HOME-Assisted Rental Housing Projects (24 CFR 92.210)

The proposed rule would amend § 92.210(a) to clarify that HUD may consider the physical condition of the housing or financial viability when preserving HOME-assisted units at risk of failure or foreclosure. The use of the term “Headquarters” is proposed to be removed in § 92.210(c) for phrasing consistency with other parts of the proposed rule; however, all approvals under § 92.210 must still be made by HUD Headquarters.

The Department has provided technical assistance for workouts to several participating jurisdictions with troubled projects, and physical viability is as much a consideration as financial viability when determining whether to permit additional flexibilities to preserve the affordability of a project. The physical viability of a property may be negatively impacted due to unanticipated extreme weather conditions or emergencies such as fire, flooding, and earthquakes. Changes to physical characteristics and factors may substantively impact the physical viability of a project, including unexpected structural or design issues, deferred maintenance due to unanticipated financial limitations, or unforeseen capital needs. Further, in determining the long-term viability of a project, the Department must consider the property's physical condition and needs in its review. Therefore, the proposed rule would revise the provisions of § 92.210 to permit HUD to consider preservation of a project based on the substantive deterioration of a project's physical viability due to unforeseen circumstances. It would also allow HUD to consider the future physical viability of a project in determining whether a project may access the flexibilities under § 92.210.

The proposed rule would also clarify in § 92.210(a) that a HOME-assisted rental project is no longer financially viable if its operating costs significantly exceed its operating revenue and reserves and if it has insufficient resources to cover necessary capital repair costs. The proposed rule would revise the current requirement that the Department consider the likelihood of “long-term viability” to include physical viability and replace with the likelihood of the project's “long-term physical and financial viability to preserve affordability.” The Department's consideration of a project's “long-term” physical and financial viability does not mean that the Department will not consider projects that are near the end of their HOME periods of affordability nor does it mean that the Department's considerations of viability will be limited to a project's “long-term” performance.

The proposed rule would revise § 92.210(b) to change the amount of additional HOME funds a participating jurisdiction may invest in a troubled HOME-assisted rental project to make it financially and physically viable during the period of affordability. The total investment (original investment plus additional investment) must be the amount needed to address the physical and financial viability of the project and may not exceed the HOME per-unit subsidy limit in effect at the time of the additional investment. The use of HOME funds may include, but is not limited to, rehabilitation of the HOME units and recapitalization of project reserves to fund capital costs. The Department also proposes to clarify that it may impose conditions on the investment of additional HOME funds, including requiring the participating jurisdiction to extend the period of affordability, increase the number of HOME-assisted units, and/or change the number or designation of Low HOME rent and High HOME rent units.

The proposed rule would revise § 92.210(c) to clarify that even if there are no additional HOME funds invested in the troubled HOME-assisted rental project, the Department may, through written approval, permit participating jurisdictions to not only reduce the total number of HOME units but change the designation of units from Low HOME rent units to High HOME rent units in troubled projects with more than the minimum number of Low HOME rent units. Pursuant to 42 U.S.C. 12745 and 24 CFR 92.252, HOME requires at least 20 percent of HOME-assisted units in a project be restricted as Low HOME rent units with the other HOME-assisted units restricted as High HOME rent units. Low HOME rent units must be occupied by those at 50 percent of the

Area Median Income (“AMI”) and below, while High HOME rent units must be occupied by those at 80 percent AMI and below. Further, in accordance with the requirements for HOME rent limits set forth in § 92.252, the Low HOME rent units are restricted at lower rent levels than High HOME rent units. The Department has reviewed several troubled project requests in which converting Low HOME rent units to High HOME rent units (when there are more than the required minimum 20 percent Low HOME rent units) is sufficient to preserve the project by increasing the ongoing rental revenue to the project to cover project expenses and financially stabilize the property. Permitting participating jurisdictions to undertake such actions for troubled HOME-assisted rental projects will support and preserve HOME units through the required period of affordability.

12. Pre-Award Costs (24 CFR 92.212)

The proposed rule would add a new paragraph (b)(2) to address pre-award costs in a fiscal year when there is not a timely appropriation by Congress for the HOME program. The proposed rule would permit a participating jurisdiction, in a year when there is not a timely appropriation, to incur eligible administrative and planning costs as of the beginning of its program year or the date that the Department receives the consolidated plan describing the HOME allocation to which the costs will be charged, whichever is earlier. The proposed rule would also establish that an appropriation is not timely if the appropriation to the HOME program was signed into law less than 90 days before a participating jurisdiction's program year start date. The Department has waived the current § 92.212(b) to permit pre-award costs under these conditions for many of the past fiscal years. The delay in the receipt of annual appropriations by the Department may have negative consequences for participating jurisdictions, including interruption of activities. Adding this new language to § 92.212(b) would avoid the need for approvals of a waiver of this requirement each year that there is a delayed appropriation and would assist participating jurisdictions to better plan for such years to minimize their impact.

13. Prohibited Activities and Fees (24 CFR 92.214)

The proposed rule would make several revisions to § 92.214 to expand, revise, and clarify the prohibited activities and fees for which HOME funds cannot be used. The proposed revisions to § 92.214 are described more thoroughly in the text that follows.

The proposed rule would revise § 92.214(a)(6) to add that investing additional HOME funds in a troubled project in accordance with § 92.210 is an exception to the requirement that a participating jurisdiction cannot provide additional HOME funds to a previously assisted project. Section 92.214(a)(6) would also be amended to explicitly state that the maximum per-unit subsidy applicable to a project receiving additional HOME funds within one year of project completion is the maximum per-unit subsidy applicable at the time of project underwriting. The proposed rule would further revise § 92.214(a)(6) to align with the new definition of period of affordability added as a defined term to § 92.2.

The proposed rule would make minor revisions to § 92.214(a)(7) to improve clarity and readability.

The proposed rule would add a new paragraph (10) to § 92.214(a). As noted in the TBRA preamble discussion on § 92.209(j), the Department is concerned that surety bonds, security deposit insurance, and similar instruments disadvantage tenants as the tenant pays the cost of purchasing the bond or insurance in lieu of a security deposit but does not recoup any of the cost of the bond or security deposit policy upon vacating the unit. In addition, if there is damage to the unit, the bond issuer or insurer may pursue the tenant to cover any costs incurred to repair damage, negatively affecting the tenant's credit or forcing the tenant to secure legal counsel. In response to these concerns, the proposed rule would prohibit the use of HOME funds for surety bonds, security deposit insurance, or similar instruments in lieu of or in addition to a security deposit in units occupied by TBRA by adding a new paragraph (10) to § 92.214(a).

The proposed rule would add language similar to that in the proposed § 92.214(a)(10) in a new paragraph (i) of § 92.214(b)(3) to prohibit project owners from charging for surety bonds, security deposit insurance, or similar instruments in lieu of or in addition to a security deposit in units. The proposed rule would also add a new paragraph (iii) to § 92.214(b)(3) to explicitly prohibit project owners from charging fees to inspect units or correct deficiencies in the property condition of units or common areas of the project that were not caused by the tenant. The costs associated with normal wear and tear or damage to a unit or common areas of a project that are not the result of negligence, recklessness, or intentional acts by the tenant, must be paid from project operations and not passed on to the tenant.

Finally, to accommodate the proposed revisions to § 92.214(b)(3), the proposed rule would add a new paragraph (4) to § 92.214(b), which would detail the fees that owners are permitted to charge tenants.

14. Income Targeting: Tenant-Based Rental Assistance and Rental Units (24 CFR 92.216)

HUD proposes to revise § 92.216(a)(2) and (b)(2) to replace the use of the term “dwelling” with “housing” which is the accurate term for application of the requirement. While part 92 uses “housing” and “dwelling” interchangeably, these terms have been revised over the years to have separate definitions in other programs. Therefore, to avoid confusion, HUD would revise part 92 to replace “dwelling” with “housing,” where appropriate.

15. Income Targeting: Homeownership (24 CFR 92.217)

HUD proposes to revise § 92.217 to replace the use of the term “dwelling” with “housing.”

16. Recognition of Matching Contribution (24 CFR 92.219)

The proposed rule would add the term “tenant protection requirements” in § 92.219(a)(2)(ii) to clarify the substance of the requirements at § 92.253(a)-(c) and (d)(2) that are cited to in the regulation. The regulatory citations for § 92.253 would also be updated to reflect the changes to this section.

17. Match Credit (24 CFR 92.221)

The proposed rule would revise § 92.221(b) to clarify the requirements a participating jurisdiction must meet when using excess match contributions earned in a previous year, also referred to as “carry-over” or “carried over” match to meet a later year's HOME match obligation. In 2015, HUD's Office of Inspector General issued an audit report on HOME matching contributions that found widespread problems with participating jurisdictions not adequately documenting the validity and eligibility of match contributions.

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Specifically, the HUD Inspector General found that many participating jurisdictions did not maintain required match logs or that logs were insufficient, did not identify all contributions in their carry-over match balances,

included nonexistent contributions in their carry-over balances, and did not fully support matching contributions they credited toward meeting their 25 percent match obligation.

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See HUD OIG Audit Report Number: 2015-KC-0002, available at

https://www.hudoig.gov/sites/default/files/documents/2015-KC-0002.pdf.

To ensure that these deficiencies do not continue, the Department proposes to add a new paragraph (1) to § 92.221(b) to explicitly require a participating jurisdiction to have documentation supporting the source, eligibility, and value of match contributions that have been carried over from previous years at the time that they apply the contribution toward their match obligation. The proposed rule would also add a new paragraph (2) to § 92.221(b) to require participating jurisdictions to maintain records related to the source (

i.e.,

the project to which the contribution was made), eligibility, and amount of match contributions for 5 years from the date that they apply the match credit toward their match liability. The proposed rule would include conforming changes to the recordkeeping provisions at § 92.508(a)(2)(ix) to describe the scope and retention period that would apply for records of carried over match contributions.

18. Maximum Per-Unit Subsidy Amount, Underwriting, and Subsidy Layering (24 CFR 92.250)

The proposed rule would make several revisions to the HOME program's maximum per-unit subsidy limits regulations at § 92.250. Section 212(e) of NAHA (42 U.S.C. 12742(e)) requires the Department to establish limits on the amount of HOME funds that may be invested on a per-unit basis. For multifamily housing, NAHA requires that such maximum per-unit subsidy limits not be less than the per-unit limitations set forth in the mortgage insurance program authorized in section 221(d)(3) of the National Housing Act (12 U.S.C. 1715l) (“section 221(d)(3) limitations”), as adjusted by HUD to reflect the costs of land and construction in the area that exceeds the national average of such costs, up to 240 percent of the base mortgage limits. The Department has additional authority to adjust the 240 percent limits further based on the market area, number of bedrooms, eligible activity type (

e.g.,

homeownership, rental), and work performed (

e.g.,

rehabilitation, new construction). Notwithstanding the statutory language, the Department has historically implemented a maximum cap on the amount of HOME funds that may be used for the subsidy. However, after further review of the statutory language and Congressional record of the amendments made to title II of NAHA by section 206 of the Housing and Community Development Act of 1992 (Pub. L. 102-550), the Department has determined that Congress intended the adjusted 221(d)(3) limitations to establish a floor, rather than a cap, for the maximum subsidy amount.

Due to the discontinuation of the section 221(d)(3) mortgage insurance program, the Department must establish an alternate benchmark as the maximum subsidy limit for the HOME program. The Department is currently operating under an interim policy that directs participating jurisdictions to use the basic mortgage limitations for section 234 of the National Housing Act's Condominium Housing, for elevator-type projects (“section 234 limitations”), in place of the discontinued section 221(d)(3) limitations.

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The Department is currently adjusting the section 234 limitations using the High Cost Percentages that the Department calculates for its mortgage insurance programs. The Department chose this policy because it determined in 2015 that “[o]ver time, the limits issued by HUD for the Section 234 program have been identical to the 221(d)(3) limits.”

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As the section 234 limitations were identical to the section 221(d)(3) limitations prior to the discontinuation of the section 221(d)(3) limitations, the Department still believes that the section 234 limitations are a reasonable alternative to the section 221(d)(3) limitations and consistent with section 212(e) of NAHA. However, due to HUD's determination that Congress intended the adjusted 221(d)(3) limitations to establish a floor, rather than a cap, for the maximum subsidy amount, HUD proposes to codify that the total amount of HOME funds that a participating jurisdiction may invest on a per-unit basis may not exceed the per unit dollar limits established by HUD in accordance with the requirements in section 212(e) of NAHA rather than codify the section 234 limitations. At § 92.250(a), HUD proposes to publish the methodology for determining maximum per-unit subsidy amounts in accordance with section 212(e) through a notice published in the

Federal Register

with the opportunity for comment. The proposed rule would also clarify § 92.250(a) by stating that HUD will use that methodology to publish the maximum per-unit subsidy limits for the area in which the housing is located annually, in accordance with the published methodology, and will make adjustments annually. HUD intends to publish these limits on HUD's website.

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See Notice CPD-15-003, “Interim Policy on Maximum Per-Unit Subsidy Limits for the HOME Program,” available at

https://www.hud.gov/sites/documents/15-03CPDN.PDF.

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Id.

at 2.

Section 212(e) of NAHA requires that the Department consider on a market-per-market basis the cost of multifamily construction that meets State and local housing and building codes and the costs of land, with inflationary adjustments. HUD declines to maintain its use of the section 234 limitations for HOME because the section 234 limitations may not align with section 212(e) in the future, such as if the cost of multifamily construction or market conditions of the participating jurisdiction require a higher limit under section 212(e). Therefore, revising § 92.250 to refer to the statutory requirements and the process for publishing a methodology in accordance with the statutory requirements would avoid the need to waive or change HOME regulations to align with section 212(e) in the future.

The proposed rule would revise § 92.250(a) to require HUD to determine maximum per-unit subsidy limits for HOME on an annual basis in accordance with the statute and publish those limits (

i.e.,

on the HUD website or by notice).

14

Based on the Congressional record clarifying the intent of section 212(e) of NAHA,

15

the Department has determined that the statutory requirement provides much greater direction on the use of the section 221(d)(3) limitations as a floor while allowing for adjustments to the limitations based on specific criteria that affect project costs. To implement a revised methodology for the annual determination of the maximum per unit subsidy limit, HUD intends to issue a

Federal Register

notice in conjunction with this HOME rulemaking process. The notice for the revised methodology would identify an existing limit (

e.g.,

mortgage insurance limit) or outline a proposed method for establishing a limit in accordance with section 212(e) and request comments from industry stakeholders and the public. This would provide HUD with the opportunity to perform a higher level of review of current development and construction costs, evaluate ongoing changes in costs due to changes in building codes and industry practices, determine whether different eligible activities (

i.e.,

homeownership vs. rental) should have different methodologies, and to consider and respond to comments in the implementation of the revised methodology. Until a revised methodology is finalized, HUD would establish the maximum per unit subsidy limit as 270 percent of the section 234 limitations.

14

See

42 U.S.C. 12742(e)(1)-(3).

15

See House Report 102-760, 1992 U.S.C.C.A.N. 3281 at Page 3301, which clarified that Public Law 102-550 amending Section 212 of NAHA, “[a]mends cost limits requirements to establish minimum cost limits equal to the per unit dollar limitation for the section 221(d)(3) program, as adjusted . . .”

The proposed rule would also add a new paragraph (c) to § 92.250 to permit a participating jurisdiction to exceed the maximum per-unit subsidy described in § 92.250(a) by 5 percent for a project that meets one of the acceptable Green Building standards enumerated by the Department. HUD shall allow participating jurisdictions and developers this flexibility because the Department is pursuing groundbreaking and innovative program designs in addressing the ambitious climate and green energy goals set by HUD leadership. By providing the flexibility to participating jurisdictions to exceed the per unit maximum subsidy limit by up to 5 percent to cover increased costs, HUD would be incentivizing participating jurisdictions and owners to create projects that meet a physical condition standard that involves the use of durable green building materials, innovative building methods, and renewable energy systems. The Department recognizes that the development of affordable housing that meets a green building standard and is more resilient to extreme weather events and climate change will result in increases to the costs of production. The Department believes that permitting a participating jurisdiction to exceed the maximum per-unit subsidy described in § 92.250(a) by up to 5 percent will sufficiently enable the participating jurisdiction and developer to absorb the higher costs associated with complying with a higher standard as well as some additional development costs unrelated to meeting the green building standard. The qualifying standards will be published in the

Federal Register

or HUD website.

Specific solicitation of comment #2: The Department specifically requests public comment from participating jurisdictions, developers, and other affected members of the public about the green building standards that the Department should establish in the

Federal Register

. In addition, the Department seeks public comment about stakeholder experiences regarding the percentage increase in the cost of constructing or rehabilitating affordable housing to a green building standard and whether a 5 percent increase in the maximum per unit subsidy limit is sufficient. Finally, the Department requests public comment on whether permitting participating jurisdictions to exceed the maximum per unit subsidy limit by an amount in excess of the additional costs of green building measures (i.e., to provide additional HOME funds to cover a larger portion of other HOME-eligible development costs),would create a sufficient incentive to developers and owners to meet green building standards in projects that would otherwise not be designed to meet those standards.

In addition, the proposed rule would amend the language at § 92.250(b)(3)(i) to clarify that a participating jurisdiction must underwrite a homeowner's ability to repay the HOME-assistance for a homeowner rehabilitation project only if the assistance is provided as an amortizing loan.

19. Property Standards (24 CFR 92.251)

Changes to § 92.251 Generally

The proposed rule would retitle § 92.251 as “Property standards and inspections.” The proposed rule would move the inspection and financial oversight requirements currently at § 92.504(d) to the applicable paragraphs in § 92.251 to consolidate the property standards and inspection requirements in one section of the regulation. In addition, the Department proposes several revisions to the property standards applicable to HOME-assisted properties to implement statutory energy efficiency requirements; impose carbon monoxide detector requirements; incorporate green building standards when a participating jurisdiction elects to exceed the maximum per unit subsidy limit for a project pursuant to proposed § 92.250(c); provide administrative relief to reduce duplicative physical inspections and provide additional flexibility for small-scale housing; and correct an inadvertent limitation on homebuyer acquisition programs. Finally, the proposed rule also incorporates further conforming regulatory changes to the NSPIRE Final Rule.

16

The specifics of these changes are described in further detail below.

16

88 FR 30442 (May 11, 2023).

Changes to Paragraph (a)

The proposed rule would reorganize §  92.251(a) by creating a new paragraph (a)(2) which would contain and expand upon the requirements for construction progress inspections currently in § 92.251(a)(2)(v). The rest of the current paragraph (a)(2) would be moved to a new paragraph (a)(3). In addition, the completion inspection requirements currently imposed at § 92.504(d)(1)(i) would be added to the proposed paragraph (a)(2) (for new construction) and paragraph (b)(3) (for rehabilitation). Redesignated paragraph (a)(3) would also be revised to clarify that the listed requirements in paragraphs (a)(3)(i) through (vii) must be met by projects upon project completion, unless an earlier deadline is otherwise specified by the applicable statute, regulation, or standard. For example, the accessibility requirement in paragraph (a)(3)(i) of §  92.251 must be met prior to project completion, and the project must comply with the required deadline under the applicable statute or regulation.

The proposed rule at § 92.251(a)(3)(ii) would codify the statutory requirement that all HOME-assisted rental and homebuyer new construction projects meet the energy efficiency standards promulgated by HUD in accordance with section 109 of NAHA,

17

including any revisions adopted by HUD and the U.S. Department of Agriculture (USDA). The 2013 HOME Final Rule did not include energy efficiency standards in § 92.251 because HUD intended to propose new standards for energy and water efficiency in a separate proposed rule. Pursuant to sections 215(a)(1)(F) and (b)(4) of NAHA (42 U.S.C. 12745(a)(1)(F) and (b)(4)), all newly constructed HOME-assisted housing must meet the energy efficiency codes promulgated by the Secretary in accordance with section 109 of NAHA (42 U.S.C. 12709). In addition, the Energy Independence and Security Act of 2007 (EISA) (Pub. L. 110-140) established procedures for HUD and the USDA to adopt periodic revisions to the International Energy Conservation Code (IECC) and to ANSI/ASHRAE/IES Standard 90.1: Energy Standard for Buildings, Except Low-Rise Residential Buildings (ASHRAE 90.1), subject to a determination by HUD and USDA that the revised energy codes do not negatively affect the availability or affordability of new construction of single and multifamily housing covered by EISA, and a determination by the Secretary of Energy that the revised codes “would improve energy efficiency.”

17

42 U.S.C. 12709.

Carbon Monoxide Detector Requirements

In the NSPIRE Final Rule, the Department codified carbon monoxide detection requirements in Public Law 116-20 for certain covered programs at

24 CFR 5.703(d)(6).

18

Because HOME is not a covered program subject to these statutory carbon monoxide detection requirements, the Department determined that rulemaking is necessary to implement these changes for the HOME program. Consequently, the proposed rule would add new paragraphs at § 92.251(a)(3)(vi) (for new construction) and § 92.251(b)(1)(xi) (for rehabilitation) and amends § 92.251(c)(3) (for acquisition of standard housing for homeownership) to impose carbon monoxide detection requirements for all HOME-assisted projects which will be adopted by HUD through a notice published in the

Federal Register

. The Department intends to evaluate the specific standards for installation of carbon monoxide alarms or detectors at 24 CFR 5.703(d)(6) for feasibility in new construction, rehabilitation, and homebuyer acquisition projects, respectively.

18

See section 101, “Carbon Monoxide Alarms or Detectors in Federally Insured Housing” of Title I of Division Q, Financial Services Provisions and Intellectual Property, of the Consolidated Appropriations Act, 2021 (Pub. L. 116-260), 134 Stat. 2162 (2020), which included amendments to section 3(a) and 8 of the United States Housing Act of 1937 (42 U.S.C. 1437a(a) and 42 U.S.C. 1437(f) (the “1937 Act”), section 202(j) of the Housing Act of 1959 (12 U.S.C. 1701q(j)), and sections 811(j) and 856 of the NAHA (42 U.S.C. 8013(j) and 42 U.S.C. 12905).

Smoke Detector Requirements

Similar to the carbon monoxide detector requirements implemented through the 2021 Consolidated Appropriations Act, described above, the 2023 Consolidated Appropriations Act

19

created additional smoke alarm requirements in federally assisted housing. These requirements apply to several HUD programs but not HOME. These requirements include that federally assisted housing comply with National Fire Protection Association Standard (NFPA) 72, or any successor standard, to use hardwired smoke alarms or sealed and tamper resistant smoke alarms with ten-year non rechargeable, nonreplaceable batteries, that provide notification for persons with hearing loss. These requirements take effect December 29, 2024. HUD believes that in most jurisdictions similar requirements already exist, as many jurisdictions already align with NFPA 72.

19

See section 601, “Smoke Alarms in Federally Assisted Housing” of Title VI of Division AA, Financial Services Matters, of the Consolidated Appropriations Act, 2023 (Pub. L. 117-328), 136 Stat. 4459 (2022), which included amendments to section 3(a) and 8 of the 1937 Act, section 202(j) of the Housing Act of 1959 (12 U.S.C. 1701q(j)), and sections 811(j) and 856 of the NAHA (42 U.S.C. 8013(j) and 42 U.S.C. 12905).

HUD is still working to provide guidance on these requirements for covered programs. This proposed rule does not include proposed regulatory text to align with the 2023 Consolidated Appropriations Act's smoke alarm requirements. However, HUD requests public comment on how such requirements would impact participating jurisdictions, owners, and developers of HOME-assisted housing. HUD is particularly interested in public comment on the feasibility of these requirements in HOME-funded homeownership programs that do not include rehabilitation or construction of housing (

e.g.,

downpayment assistance programs). HUD is considering, at the final rule stage, revising the HOME regulations consistent with the forthcoming HUD guidance on these statutory requirements.

Specific solicitation of comment #3: The Department specifically seeks public comment on the proposal to require HOME-assisted units comply with NFPA 72, or any successor standard, to use hardwired smoke alarms or sealed or tamper resistant smoke alarms with ten-year non rechargeable, nonreplaceable batteries, that provide notification for persons with hearing loss. The Department is particularly interested in public comment on the feasibility of these requirements in HOME-funded homeownership programs that do not include rehabilitation or construction of housing (e.g., downpayment assistance programs).

Green Building Standard

HUD proposes to add paragraphs (a)(3)(vii) (for new construction) and (b)(1)(xii) (for rehabilitation) to § 92.251 to correspond with HUD's proposal at § 92.250(c) to require the housing meet one of the qualifying green building standards published in the

Federal Register

or HUD website when a participating jurisdiction exceeds the maximum per-unit subsidy limit pursuant to the proposed § 92.250(c), upon completion of the project.

Changes to Paragraph (f)

The proposed rule would require participating jurisdictions to establish written property standards that meet the minimum requirements at § 92.251(f)(1) for housing occupied by tenants assisted with TBRA, including compliance with State and local codes and ordinances, health and safety, and lead-based paint requirements. The proposed rule would also retitle § 92.251(f) as “Ongoing property condition standards and inspections: Rental housing and housing occupied by tenants receiving HOME tenant-based rental assistance.”

The Department also proposes to make a minor amendment to paragraph (f)(1)(i) to add the term “HOME” before “rental housing” to clarify that the

Federal Register

notice which HUD will publish will be specific to the HOME program.

Project Inspections

Through the NSPIRE Final Rule, the Department improved alignment of the HOME inspection standards with the standards of other HUD-assisted housing programs. The Department understands that HOME is frequently one of many financing sources in a multifamily rental development project and, therefore, HOME projects are often subject to the requirements of many other public and private funding sources. Consequently, HUD is proposing to provide administrative relief in this proposed rule by adding to § 92.251 paragraphs (b)(1)(viii)(A) (for rehabilitation projects), (f)(3)(i)(B) (for ongoing inspections of rental housing), and (f)(4)(ii) (for housing occupied by tenants receiving TBRA) to permit a participating jurisdiction to accept the completion or ongoing inspection, as applicable, conducted for another funding source in accordance with the National Standards for the Condition of HUD housing (24 CFR part 5, subpart G) or an alternative inspection standard, which HUD may establish through

Federal Register

notice to determine that the project and units are decent, safe, sanitary, and in good repair. The participating jurisdiction must still conduct initial and progress inspections of rehabilitation projects and determine compliance with the participating jurisdiction's HOME rehabilitation standards, State and local codes, ordinances, and zoning requirements. Under this proposed rule, a participating jurisdiction may accept an inspection performed under the Uniform Physical Condition Standards prior to the NSPIRE effective date. Inspections that occur after the effective date of NSPIRE for HOME and used by the participating jurisdiction to verify the housing is decent, safe, sanitary, and in good repair must be conducted under NSPIRE or an alternative inspection standard, as described in the proposed § 92.251.

For ongoing inspections of rental housing, HUD proposes to amend paragraph (f)(3) to permit a participating jurisdiction to accept an inspection that occurred within the past 12 months. However, the Department encourages participating jurisdictions to align the

project's ongoing inspection schedule with the schedule of inspections of other HUD programs or funders. The proposed rule would require that a participating jurisdiction perform an on-site inspection within 12 months after project completion and every three years during the period of affordability. The participating jurisdiction may not accept the determination of another funder under § 92.251 for the first ongoing inspection occurring 12 months after project completion but may accept the determination of another funder in accordance with § 92.251 every three years thereafter.

For ongoing annual inspections for housing with tenants receiving TBRA, HUD proposes to insert a new paragraph (f)(4) for TBRA to state that a participating jurisdiction may accept an inspection performed for another funding source in accordance with § 92.251 that occurred within the past three months. The Department proposes a shorter timeframe for accepting inspections of TBRA units performed by other funders under § 92.251 because TBRA ongoing inspections are required annually after initial occupancy while inspections of HOME-assisted rental projects may be conducted every three years during the period of affordability.

The proposed rule would also add § 92.251(b)(1)(viii)(B) (for rehabilitation projects) and includes language at § 92.251(f)(3)(i)(B) (for ongoing inspections of rental housing) and § 92.251(f)(4)(ii) (for housing occupied by tenants receiving TBRA) to require that the participating jurisdiction document a determination by another funder that the project and unit(s) are decent, safe, sanitary, and in good repair. To document a determination means that the participating jurisdiction must obtain the inspection report that indicates that all deficiencies have been corrected. These paragraphs would also clarify that when the participating jurisdiction documents a determination by another funder under § 92.251, it is not required to conduct a duplicative HOME on-site inspection.

The proposed rule would restructure paragraph (c)(3) and add paragraph (c)(3)(ii) to eliminate the requirement at §  92.251(c)(3) that a homebuyer acquisition project (

e.g.,

downpayment assistance) that does not meet HOME property standards must be rehabilitated or it cannot be acquired with HOME funds. This requirement was added in the 2013 HOME Final Rule and the Department is concerned that it had the unintended impact of reducing the supply of housing available for purchase by HOME-assisted homebuyers by prohibiting rehabilitation after the HOME-assisted acquisition to meet required property standards. Currently, a home that does not meet property standards cannot be purchased with HOME funds. Also, the Department understands that sellers are often unwilling to perform rehabilitation to a home prior to its acquisition by a HOME-assisted homebuyer, making many properties ineligible for purchase with HOME funds. The proposed rule would add paragraph (c)(3)(ii) to § 92.251 to permit housing to be purchased by a homebuyer prior to compliance with HOME property standards if the homebuyer written agreement with the participating jurisdiction requires the project to meet HOME property standards within six months of acquisition and determines that funds are secured for rehabilitation. The participating jurisdiction would be required to conduct a final inspection within six months of the title transfer to determine compliance with the required property standards.

Through this proposed rule, the inspection standards for periodic on-site inspections of HOME-assisted rental housing including frequency of inspections, inspection samples, and annual certifications by owners at § 92.504(d)(1)(ii) would be moved to a new paragraph (f)(3). The inspection sample requirements in the proposed rule at § 92.251(f)(3)(iii) would require that the sample of units for an onsite inspection be a random sample rather than a statistically valid sample. While the Department's software creates a statistically valid sample of units for its inspection of HUD-assisted housing conducted using the NSPIRE Standards, HUD is proposing this change because it is concerned that participating jurisdictions do not have software capability to develop a statistically valid sample of units. In addition, participating jurisdictions have sought guidance about the requirement currently at § 92.504(d)(1)(ii)(D) regarding what constitutes a sample size appropriate for the size of the HOME-assisted project. Consequently, in the proposed § 92.251(f)(3)(iii) the Department would require inspection of a sample size of 20% of the HOME-assisted units in a project, except for a project with one to four HOME-assisted units where the requirement that 100% of the units be inspected remains unchanged.

When conducting inspections, the jurisdiction should consider the project's compliance with accessibility requirements as determined by 24 CFR part 8, which implements Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), Titles II and III of the Americans with Disabilities Act (42 U.S.C. 12131-12189) implemented at 28 CFR parts 35 and 36, and the Fair Housing Act (42 U.S.C. 3601-19) implemented at 24 CFR part 100, as applicable. These accessibility requirements apply to a project as a whole, including both HOME and non-HOME-assisted units. Where practicable, HUD recommends a participating jurisdiction select a random sample of units using a methodology that captures different unit types, features, and accessibility designations, and to the extent feasible, that the same units are not inspected in every inspection.

Specific solicitation of comment #4: The Department specifically seeks public comment on the proposal to require that a participating jurisdiction inspect at least 20% of the HOME-assisted units during its ongoing on-site inspections of rental housing.

In addition, the proposed rule would move the requirements § 92.504(d)(1)(iii) for annual on-site inspections of HOME-assisted housing occupied by tenants receiving TBRA to a new paragraph (f)(4) and clarify that inspections must determine whether the housing meets the property standards in § 92.251(f)(1).

The proposed rule would move the financial oversight requirements for HOME-assisted rental projects currently at § 92.504(d)(2) to § 92.251(f)(3)(iv). This change is proposed to consolidate the other periodic review requirements for rental housing during the period of affordability into one section of the regulation. In addition, the proposed rule would clarify the Department's intent that the financial oversight requirements apply to rental projects with 10 or more HOME-assisted units, which was discussed in the preamble to the 2013 HOME Final Rule but has remained a source of confusion for participating jurisdictions.

HUD proposes to move the requirements for re-inspections and the requirement to adopt a more frequent inspection schedule as the result of health and safety deficiencies currently at § 92.504(d)(1)(ii)(B) to the corrective and remedial action requirements of § 92.251, which HUD proposes to move to paragraph (f)(5). Relatedly, pursuant to section 226(c) of NAHA.

20

the proposed rule would provide an exception for small-scale housing from the requirement that a participating jurisdiction must adopt a more frequent inspection schedule for properties that have been found to have health and safety deficiencies. If all health and safety deficiencies are corrected, the

proposed rule would permit but not require a participating jurisdiction to adopt a more frequent inspection schedule for small-scale housing. In the future, the Department hopes to simplify ongoing inspections for small-scale rental housing projects by developing a streamlined list of specific deficiencies for which participating jurisdictions would inspect. The changes described in this paragraph correspond to the administrative relief provided for small-scale housing at § 92.252.

20

42 U.S.C. 12756(c).

The Department also proposes to move the requirements currently at § 92.251(f)(5) to paragraph (g) of § 92.251 and revise the new § 92.251(g) to add further clarity to the requirements for inspection procedures.

Specific solicitation of comment #5: The Department specifically requests public comment from participating jurisdictions and program participants regarding the challenges they have encountered in using HOME funds to assist small-scale housing, as defined in this proposed rule. The Department also requests public comment regarding the costs and benefits of the changes that HUD is proposing for small-scale housing in requirements for the frequency of income determinations and inspections and the use of alternative waiting lists.

20. Qualification as Affordable Housing: Rental Housing (24 CFR 92.252)

The Department most recently revised § 92.252 in the HOTMA Final Rule.

21

Those changes become effective on January 1, 2024. The changes made to § 92.252(b)(2) in the HOTMA Final Rule divided the Low HOME Rent limit provision in § 92.252(b)(2) into paragraphs (b)(2)(i) and (b)(2)(ii) to separate the conditions that a HOME-assisted unit that also receives Federal or State project-based rental subsidy must meet in order for a project owner to charge the maximum rent allowable under the Federal or State project-based rental subsidy program.

21

88 FR 9600 at 9612, 9614-9615.

The HOTMA Final Rule also revised § 92.252(h). These provisions are being renumbered, reorganized, and revised in the proposed § 92.252(g).

The proposed rule would amend the introductory text of § 92.252 to eliminate the requirement that a participating jurisdiction must submit a marketing plan to HUD for any HOME-assisted rental units that have not achieved initial occupancy within six months of project completion in IDIS. The participating jurisdiction would still be required to take action to ensure the unit is rented if the unit is not occupied within six months and repay the HOME investment if the unit does not achieve initial occupancy within 18 months. The Department does not currently approve marketing plans, so this change would provide administrative relief to participating jurisdictions without eliminating the requirement that participating jurisdictions work with the project owner to develop and implement a marketing plan to meet the deadline for initial occupancy. This change does not revise any affirmative marketing requirements in § 92.351.

The proposed rule would also implement several changes to the rent limits at § 92.252 for HOME-assisted rental housing. The proposed rule would reorganize the general requirements that are currently in effect and apply to all rent limits by moving these requirements to the introductory text of § 92.252(a) rather than repeating the requirements in each paragraph. These general requirements include that the rent for a HOME-assisted unit must not exceed the rent limits, the Department will publish the HOME rent limits on an annual basis, with adjustments for number of bedrooms in the unit, the participating jurisdiction may designate (in its written agreement with the owner) more than the minimum HOME units (both High HOME and Low HOME rent units) in a rental housing project, and the rent limits apply to the rent plus the utilities or utility allowance. The proposed rule would also remove several duplicative requirements in § 92.252 to improve clarity and readability.

The proposed rule would reorganize § 92.252 by moving the requirements for High HOME Rent limits in § 92.252(a), Low HOME Rent limits in § 92.252(b), and SRO Housing rent limits in § 92.252(c) to the proposed § 92.252(a)(1), (a)(2), and (a)(3), respectively. The proposed rule would title the proposed § 92.252(a) as “HOME Rent Limits,” title the proposed § 92.252(a)(1) as “High HOME Rent Limits,” title the proposed § 92.252(a)(2) as “Low HOME Rent Limits,” and title the proposed § 92.252(a)(3) as “HOME Rent Limits for SRO Projects.”

The Housing and Economic Recovery Act of 2008 (HERA) (Pub. L. 110-289, 122 Stat. 2654, approved July 30, 2008) amended the 1937 Act and made comprehensive and significant reforms to HUD's Section 8 Tenant-Based Voucher and Project-Based Voucher programs. Many of the required regulatory changes at 24 CFR parts 982 were implemented through “The Housing and Economic Recovery Act of 2008 (HERA): Changes to the Section 8 Tenant-Based Voucher and Section 8 Project-Based Voucher Programs,” final rule (79 FR 36146), published on June 25, 2014 (the “HERA Final Rule”). One of the changes required by section 2835(a)(2) of HERA added section 8(o)(10)(F) to the 1937 Act (42 U.S.C. 1437f(o)(10)(F)) which streamlined the procedure for determining the rent reasonableness standard for assistance under the section 8 tenant-based voucher program in units receiving LIHTC or HOME funds. HUD fully implemented this streamlined process for LIHTC units in the HERA Final Rule. However, the HERA Final Rule did not fully implement the streamlined process for HOME-assisted units. Instead, as explained in the HERA Final Rule, the rent reasonableness requirements at § 982.507 for HOME-assisted units included a placeholder pending a future HOME rulemaking (which had just been completed in 2013) to revise conflicting HOME regulations. HUD anticipated that the future HOME rulemaking would revise the HOME regulations at 24 CFR part 92 to prevent participating jurisdictions and owners of HOME-assisted projects from being in non-compliance with HOME rent limits when receiving the rent amount determined by a public housing authority (PHA), pursuant to the rent reasonableness process established by HERA for a tenant with a section 8 housing choice voucher (HCV). As described in detail in this section, HUD is now proposing to make the required revisions to § 92.252 to align HOME rent limit requirements with the rent reasonableness requirements for HOME-assisted units in the proposed § 982.507(c)(3). The proposed changes would prevent the participating jurisdiction and an owner of HOME-assisted units from being in noncompliance with HOME rent limits when a PHA complies with the 1937 Act, as amended by HERA, in its HCV rent payments to owners. Section D. of the proposed rule discusses the proposed changes to § 982.507(c)(3) to fully implement the HERA section 8 HCV rent reasonableness process for HOME-assisted units.

The proposed rule would implement the following changes to remove conflicts with the proposed rent requirements for the section 8 HCV program at § 982.507(c)(3). HUD proposes to remove the applicability of the HOME rent limits in § 92.252 to payments provided under a Federal or State rental assistance or subsidy program. This change in proposed § 92.252(a) would revise current

program requirements in § 92.252 by permitting an owner to receive the rent determined by a PHA, in accordance with proposed § 982.507(c)(3), or under another Federal or State rental assistance or subsidy program even though the rent for HCV or another Federal or State rental assistance or subsidy program exceeds the HOME rent limits. HUD would still implement the requirements for rents in section 215(a) of NAHA (42 U.S.C. 12745(a)) by continuing to apply the HOME rent limits to the rent and utilities required to be paid by the tenant. This change would align the HOME program with the changes to the 1937 Act required by HERA for the PHA's determination of rent for HCV in HOME units. As the PHA must determine the HCV rent in compliance with sections 8(o)(10)(A) and (F) of the 1937 Act (42 U.S.C. 1437f(o)(10)(A) and (F)) as proposed in § 982.507(c)(3), the proposed changes to § 92.252 would prevent an owner from being in noncompliance with HOME rent limit requirements when receiving the required rent from a PHA on behalf of a tenant with HCV. Additionally, the existing rent limit requirements in § 92.252 can be confusing for owners and these revisions would provide additional clarity so that participating jurisdictions and owners understand that the HOME rent limit requirements do not conflict with the rent requirements for Federal rental assistance or subsidy programs or LIHTC.

22

These proposed changes also align with the LIHTC requirements for rent, including when there is section 8 HCV assistance and other comparable forms of rental assistance applicable to the unit or household.

23

22

The rent limits under the Low-Income Housing Credits or LIHTC are governed by 26 U.S.C. 42(g)(2)(A).

23

Under 26 U.S.C. 42(g)(2)(B)(i), LIHTC gross rent does not include any payment under section 8 of the United States Housing Act of 1937 (42 USCS § 1437f) or any comparable rental assistance program applicable to either the rental unit or the household occupying the unit.

As discussed in further detail in the Regulatory Impact Assessment, estimates of increased potential annual gross rent collection arising from the proposed changes to HOME rent limits would only be fully realized if all HOME units have tenants that receive rental assistance. Precise data on how many tenants in HOME units that also receive tenant-based rental assistance like HCV does not exist, but it is unlikely that a majority of HOME units without a project-based subsidy are occupied by tenants with a tenant-based subsidy. Data reported to HUD at the time of initial HOME rental project lease-up suggests that 24 to 30 percent of tenants in units without project-based subsidies receive HCVs. HUD anticipates that the changes in the proposed rule to conform to the changes by HERA, will result in an annual increase in payments to property owners of roughly $78-$125 million, which is approximately 0.3 to 0.5 percent of HCV's budget authority for rental assistance in FY 2023. The proposed changes therefore may potentially leave PHAs unable to provide rental assistance to 6,000-11,000 households that they otherwise would have if the PHAs had provided rental assistance payments up to the current HOME rent limits rather than the reasonable rent determined by a PHA. It is also possible that future Congressional appropriations would cover the same number of vouchers regardless of relatively small changes in per voucher costs, in which case the number of assisted households would not be affected. Nonetheless, Congress specifically provided for these proposed changes for HOME units in HERA and under the proposed rule, HOME rent limits would still apply to the rent and utilities paid by the tenant. The only impacts on tenants and prospective tenants are that tenants with HCVs or other tenant-based rental assistance would become more desirable to owners, and that residents of HOME-assisted projects could experience improved housing conditions (since some projects would see improved cash flow).

The proposed revisions would make the treatment of payments consistent under Federal or State project-based and tenant-based rental assistance programs for both High HOME and Low HOME rent units. As a result, the proposed revisions would also decrease administrative burden for participating jurisdictions and owners. Consequently, a participating jurisdiction may focus its monitoring and enforcement of HOME rent limit requirements on the amount that is required to be paid by the tenant to an owner rather than on whether payments for rent under a Federal or State tenant-based or project-based rental assistance or subsidy program meet the Low HOME and High HOME rent limit requirements.

The Department also proposes to move the requirement that subsequent rents for a project are not required to be lower than the HOME rent limits for the project in effect at the time of project commitment from § 92.252(f) to the proposed § 92.252(a). The proposed revision would clarify that the rent floor for a project is established at the time of commitment of HOME funds to the project and may apply to rents at the time of initial occupancy as well as subsequent rents.

The proposed § 92.252(a)(2)(i) would clarify that the maximum rent is 30 percent of the annual income of a family whose income equals 50 percent of AMI, as determined by HUD, except when 30 percent of the annual income of a family with income at 50 percent AMI is higher than the fair market rent under the proposed § 92.252(a)(1)(i). This change would clarify that the only circumstance in which the High HOME Rent would be lower than the Low HOME Rent is if the fair market rent permitted in § 92.252(a)(1)(i) is lower than 30 percent of the annual income of a family whose income equals 50 percent AMI, as described in the proposed § 92.252(a)(2)(i). This proposed change is appropriate because the Department does not establish the 65 percent AMI rent limit, as permitted under § 92.252(a)(1)(ii), to be lower than the 50 percent AMI rent limit in § 92.252(a)(2)(i). As a result, there is no need to continue using “applicable rent” in the proposed § 92.252(a)(2)(i). The proposed revisions would clarify that if the fair market rent, as permitted under § 92.252(a)(1)(i), is lower than the rent limit of 30 percent of the annual income of a family whose income equals 50 percent AMI, as determined by HUD, the Low HOME rent limit in § 92.252(a)(2)(i) is the fair market rent permitted under the High HOME rent limit at § 92.252(a)(1)(i).

HUD is also proposing other changes to remove conflicts with the changes implemented by HERA in the proposed § 92.252(a)(2)(ii). The proposed rule would revise the current requirements at § 92.252(b)(2)(i) and (ii) by removing § 92.252(b)(2)(i) which currently applies to Low HOME rent units with tenant-based rental assistance and revising § 92.252(b)(2)(ii) to be the proposed § 92.252(a)(2)(ii). The proposed § 92.252(a)(2)(ii) would conform the requirement on rent contribution by the family to the proposed change that the HOME rent limits do not apply to payments provided under a Federal or State rental assistance or subsidy program by removing references to “Federal or State project-based rental subsidy” and “Federal or State project-based rental subsidy program.”

In the 2013 HOME Final Rule, the Department removed the discretion for a participating jurisdiction to use the local PHA utility allowance and required the use of the HUD Utility Model or a project-specific utility allowance based on the utilities used in the project. The Department identified and explained the permissible methods

of determining the utility allowance for a HOME-assisted rental project that align with LIHTC.

24

The purpose of the change in the 2013 HOME Final Rule was to require more accurate utility allowances and reward energy efficiency measures with the possibility of higher rental revenue to the owner. In doing so, the Department unintentionally created a conflict between the HOME program and the Section 8 project-based voucher (PBV) and HUD Veterans Affairs Supportive Housing (HUD-VASH) PBV programs, which require the use of a local PHA's utility allowance. Due to these conflicting requirements, the Department has approved numerous waivers of this requirement in § 92.252 when HOME and PBVs or HUD-VASH PBVs are combined in the same projects. Consequently, the proposed rule at § 92.252(b) would restore the option to use the local PHA's utility allowance for HOME-assisted rental projects to realign utility allowance requirements in HOME and PBVs.

24

HOMEfires Vol. 13, No. 2 Guidance on How to Establish Utility Allowances for HOME-Assisted Rental Units, available at

https://www.hudexchange.info/resource/5034/homefires-vol-13-no-2-guidance-on-how-to-establish-utility-allowances-for-home-assisted-rental-units/.

Specific solicitation of comment #6: Rather than permitting all HOME-assisted projects to use the local PHA's utility allowance, should HUD limit the use of the PHA utility allowance to only HOME-assisted projects which also receive PBV or HUD-VASH PBV assistance?

The proposed rule would clarify the period of affordability requirements in proposed § 92.252(d) by removing “not less than” to require that HOME-assisted units meet the program requirements for the required period of affordability, beginning from the date of project completion, to prevent further confusion that the period of affordability must be more than the required period in the table in § 92.252 and to specify that the period of affordability starts at project completion. The proposed rule would also clarify in proposed § 92.252(d) that the affordability requirements for HOME rental housing include the applicable rent limits, period of affordability, and income requirements. The Department would also clarify that the means of enforcement for the affordability requirements include deed or use restrictions, liens on real property, a covenant running with the land, a recorded agreement restricting the use of the property, or any other mechanism approved in writing by HUD, under which the participating jurisdiction has the right to require specific performance. The Department also proposes to revise § 92.252, as well as §§ 92.254 and 92.504, to make the means of enforcement for affordability requirements consistent throughout the proposed rule. The proposed § 92.252(e)(3) would also increase the minimum number of days for prior written notice of any increase in rents for HOME-assisted units from not less than 30 days to not less than 60 days.

Due to changes to the rent limit requirements in § 92.252(a), this proposed rule would renumber § 92.252(a) through (i).

The proposed rule would also update terminology to be consistent throughout the section. This includes revising the use of the term “maximum rent limit” to “rent limit” in paragraphs (a), (c), and (e) because the applicable rent limit is the maximum rent and the use of the term “maximum rent limit” in some places is confusing. In addition, the proposed rule would update any references to the renumbered paragraphs throughout the rule.

While the proposed rule in paragraph (b) would realign utility allowance requirements in HOME and PBVs, the proposed rule would still require that the utility allowance account for energy efficiency measures of the project. Despite this requirement, the Department recognizes that certain Federal or State tax credits and other incentives are available to owners of affordable housing projects in order to encourage energy retrofits and the installation of solar and/or wind facilities. Often these types of incentive programs require that the low-income tenants of the affordable rental housing receive financial benefit from the energy efficiency measures. Because the participating jurisdiction is required to update the project's utility allowance annually and must account for any energy efficiency measure of the project, the utility allowance provided to the tenant would likely decrease following any energy efficiency upgrades. This decrease in the utility allowance could therefore result in a financial benefit to the owner rather than the tenant. In addition, because the tenant may receive no financial benefit, the owner may not receive the tax credit or other incentives. Ultimately, as proposed, the HOME utility allowance requirements may disincentivize energy efficiency upgrades. As described below, HUD seeks public comment on how to avoid disincentivizing energy efficiency upgrades.

Specific solicitation of comment #7:

The Department seeks input on whether and how the rule should facilitate the conveyance of a financial benefit to low-income tenants when the project owner makes energy efficiency upgrades such as the installation of small-scale wind or solar facilities in connection with an eligible Federal or State program. HUD has issued guidance that currently describes how certain utility discounts or rebates can be treated under HUD income and utility allowance regulations.

25

HOME is subject to the same income requirements under 24 CFR 5.609 as other program areas issuing guidance on the treatment of these discounts and rebates. The Department therefore also requests comment from the public on whether to go farther than this guidance for HOME projects through this HOME rulemaking. For example, should HUD maintain the same utility allowance for the project following energy efficiency upgrades to allow the tenant to realize the benefit of decreased utility costs? Both the current income regulations at 24 CFR 5.609 and 24 CFR 5.609 as revised in the HOTMA Final Rule exclude lump-sum additions to assets, as well as non-recurring income. However, if a HUD program provided a recurring financial benefit directly to a low-income tenant, should the rule exclude this income from the HOME income determinations?

25

See

https://www.hud.gov/sites/dfiles/Housing/documents/MF_Memo_Community_Solar_Credits_signed.pdf; https://www.hud.gov/sites/dfiles/Housing/documents/MF_Memo_re_Community_Solar_Credits_in_MM_Buildings.pdf;

and

https://www.hud.gov/sites/dfiles/PIH/documents/Community%20Solar%20Credits%20in%20PIH%20Programs.pdf.

Specific solicitation of comment #8: The Department specifically requests public comment from participating jurisdictions, developers, and other affected members of the public about the appropriateness of the length of the HUD-required periods of affordability for HOME-assisted rental housing. The current regulation at 24 CFR 92.252(e) establishes periods of 5 years for a per-unit HOME investment of under $15,000, 10 years for a per-unit investment between $15,000 and $40,000, and 15 years for a per-unit investment of more than $40,000, 15 years for any unit involving refinancing of existing debt, and 20 years for any unit involving new construction. Section 215(a)(1)(E) of NAHA (42 U.S.C. 12745(a)(1)(E)) requires that the period of affordability be for the remaining useful life of the HOME-assisted property, as determined by HUD, without regard to the term of the mortgage or to transfer of ownership, or for such other period that HUD determines is the longest feasible period of time consistent with sound economics

and the purposes of NAHA. Since the Department established these periods of affordability in 1991, costs have increased significantly, LIHTCs have become the primary funding mechanism for rental housing, and the housing affordability crisis in the country has worsened significantly. The Department seeks input about whether the length of the periods of affordability and the dollar thresholds and activity thresholds that are the basis of the current periods of affordability remain appropriate. In addition, the Department seeks input about any project feasibility challenges of the current HOME periods of affordability and factors that the HUD should consider in contemplating changes to the current periods of affordability.

Through this rule, the Department proposes to streamline procedures and simplify requirements in proposed §§ 92.252(g)(1), 92.253(e)(5), and 92.251(f)(5)(i) for small-scale rental housing projects (one to four total units) for reexamination of annual income, tenant selection, and ongoing physical inspections. Section 226(c) of NAHA permits HUD to provide streamlined procedures in monitoring compliance with HOME requirements for small-scale housing when HUD determines it is appropriate. While current HOME requirements may be standard for larger rental projects managed by professional landlords or property management companies, the requirements can be a significant disincentive to participation in the program for landlords or would-be landlords of small-scale properties such as homeowners adding an accessory dwelling unit (ADU) or HOME-assisted homebuyers purchasing duplexes or triplexes. Such small-scale projects may be an attainable method for participating jurisdictions with less resources to address their rental housing needs while generating income or supporting owner-occupants (irrespective of whether their own unit is HOME-assisted). Reducing administrative burden would make HOME a viable funding option for such programs that create ADUs or provide financing for resident landlords.

The proposed rule would revise § 92.252 to clarify requirements for tenant income re-examination, align with the requirements in § 92.203(a) and (b), and to provide flexibilities for small-scale housing, multifamily projects with a period of affordability of ten years or more, and for units with Federal or State project-based subsidy or tenant-based rental assistance. The proposed rule would revise the first paragraph of proposed § 92.252(g) to recognize the exceptions from § 92.203(b)(1)(i) for a participating jurisdiction that accepts an annual income determination in accordance with § 92.203(a)(1) or (2) or determines income in accordance with § 92.203(b)(2). Currently, § 92.203(a)(1) requires a participating jurisdiction to accept a Federal or state project-based subsidy provider's determination of a family's annual income if a family is applying for a HOME unit assisted by a Federal or state project-based subsidy program. Similarly, pursuant to § 92.203(a)(2), a participating jurisdiction has the option to accept a rental assistance provider's determination of a family's annual income if the family is applying for a HOME unit and is receiving tenant-based rental assistance (

e.g.,

a Housing Choice Voucher). This rule's revision to proposed § 92.252(g) would make the regulations at § 92.203 consistent with proposed § 92.252(g). The proposed rule would also revise the first paragraph in proposed § 92.252(g) to require the participating jurisdiction to require the owner to re-examine each tenant's annual income in accordance with the option in § 92.203(b)(1) that the participating jurisdiction selects and includes in the written agreement. The proposed rule would add paragraphs (1) through (3) to proposed § 92.252(g) to establish exceptions to this general re-examination requirement.

The proposed rule would reduce burdens on landlords of small-scale housing by adding paragraph (g)(1) to § 92.252 to permit a participating jurisdiction to permit an owner of small-scale housing to reexamine each tenant's annual income every three years rather than annually. For owners of small-scale housing that select the option at § 92.203(b)(1)(ii) and are located in participating jurisdictions which permit owners of small-scale housing to reexamine a tenant's annual income every three years, the proposed rule would except these owners of small-scale housing from the requirement to obtain annual self-certifications from their tenants within the three-year period following completion of these tenants' income examinations. This proposed change to the schedule of reexamining tenant annual income for small-scale housing would have a minimal effect on the landlord's rental income because the rent limit would not change until the tenant's income increased above 80 percent of AMI. In addition, this proposed change aligns with the other proposed changes for small-scale housing in § 92.251 to permit a three-year physical inspection requirement schedule rather than a risk-based schedule and § 92.253 to permit the participating jurisdiction, upon request by an owner of small-scale housing, to establish alternative procedures to a written waiting list for small-scale housing, subject to HUD's written approval of the procedures and determination that the selection of a tenants from a waiting list in chronological order by the owner is impracticable.

The proposed rule would add paragraph (g)(2) to § 92.252 to impose and further clarify the existing requirement for owners of a multifamily project with a period of affordability of 10 years or more. Currently, during the period of affordability, an owner may re-examine tenant income annually using a statement and certification, in accordance with § 92.203(b)(1)(ii). The proposed rule would clarify that if a participating jurisdiction permits the owner to re-examine income using a statement and certification, the participating jurisdiction must require the owner to re-examine the income of each tenant using source documentation, at minimum, every six years, in accordance with § 92.203(b)(1)(i). This reflects the same requirement currently in § 92.252(g), but the language has been revised to clarify that the participating jurisdiction must enforce compliance by the owner with this requirement.

To align with the requirements in § 92.203(a), the proposed rule would also include an exception for units with Federal or State project-based subsidy or tenant-based rental assistance by adding paragraph (3) to 92.252(g). The proposed 92.252(g)(3) would except an owner from re-examining a tenant's annual income in accordance with § 92.203(b) for HOME when a participating jurisdiction accepts an annual income determination under § 92.203(a)(1) or (2).

The proposed rule would renumber the existing § 92.252(i)(2) to § 92.252(h)(2) and makes several changes to the proposed § 92.252(h)(2) to improve readability and clarity regarding over-income tenant requirements. In addition to creating new paragraphs (h)(2)(i) and (ii), the proposed rule would clarify in the proposed § 92.252(h)(2)(i) that the participating jurisdiction may permit tenants of HOME-assisted units subject to rent restrictions under LIHTC to pay the rent amount required under LIHTC requirements. In the proposed § 92.252(h)(2)(ii), HUD would further clarify that an over-income tenant in a floating HOME-assisted unit must pay a rent amount no greater than the fair

market rent for comparable, non-HOME-assisted units in the neighborhood.

In proposed § 92.252(i), the proposed rule would also explicitly prohibit the use of surety bonds, security deposit insurance, or similar instruments to be used in lieu of or in addition to a security deposit in HOME-assisted units.

The proposed revisions to § 92.252(j) and (k) update citations to conform with the redesignation of the current § 92.253(d) as § 92.253(e) and the Department's proposal to move the requirements for on-site inspections and financial oversight of rental projects from § 92.504(d) to § 92.251(f) respectively.

21. Tenant Protections and Selection (24 CFR 92.253)

The Department is proposing significant revisions to the tenant protections and selection provisions in § 92.253, consistent with the priorities set out in the Administration's Renters' Bill of Rights.

26

HUD's proposed revisions to the HOME program in § 92.253 would provide a robust set of tenant protections appropriate to the HOME program. These tenant protections are based on the Department's review of existing HUD programs (

e.g.,

the Section 8 PBV program

27

and the public housing program

28

), a number of State statutes and local ordinances (

e.g.,

Virginia,

29

Washington, DC,

30

California,

31

Texas,

32

and Florida

33

), and the Military Housing Privatization Initiative

34

). To implement the new tenant protections, HUD is proposing in § 92.253(a)(4) to require that all tenants in HOME-assisted rental housing units or receiving TBRA have a new HOME tenancy addendum appended to their lease. This HOME tenancy addendum would include the new tenant protections listed in § 92.253(b). Through this proposed rule, the Department would replace the list of prohibited lease terms currently in § 92.253(b) with a description of the provisions that HUD will include in the HOME tenancy addendum.

26

Available at

https://www.whitehouse.gov/wp-content/uploads/2023/01/White-House-Blueprint-for-a-Renters-Bill-of-Rights.pdf.

27

See

HUD's Tenancy Addendum Section 8 Project-Based Voucher Program, available at

https://www.hud.gov/sites/dfiles/OCHCO/documents/52530C.pdf;

24 CFR 983.256.

28

24 CFR part 966.

29

Va. Code Ann. §§ 55.1-1200 through 1262.

30

D.C. Official Code, Title. 42, Ch. 35.

31

Cal. Civ. Code, D. 2; Cal Civ. Code, D. 3, Pt. 4, T. 5.

32

Tex. Prop. Code Title 8, Ch. 92.

33

Fla. Stat. Title VI, Ch. 83.l.

34

10 U.S.C. 2890 and the Military Housing Privatization Initiative Tenant Bill of Rights, available at

https://media.defense.gov/2020/May/18/2002302053/-1/-1/1/TENANT_BILLOFRIGHTS.PDF.

The proposed rule at § 92.253(a) would revise the heading of paragraph (a) to “Lease Contents” to more accurately describe the requirements within the paragraph, as proposed. The introductory text clarifies that the protections apply to both tenants of HOME-assisted rental housing as well as tenants receiving TBRA. The paragraph also clarifies an existing requirement that the tenant lease be in writing and adds a new requirement that the owner provide the participating jurisdiction a copy of the written lease before it is executed and when the written lease is revised. This new requirement gives the participating jurisdiction the ability to verify that the owner's lease includes the HOME tenancy addendum and otherwise complies with the revised requirements of this section.

The proposed rule at § 92.253(a)(1) would require that a tenant's lease contain more than one convenient method to communicate directly with the owner or the property management staff, including in person, by telephone, email, or through a web portal. This provision would provide tenants with a reasonable way to contact an owner's property management staff to request any repairs or maintenance that is necessary for the unit or the common areas of the project. Similarly, the proposed rule at § 92.253(a)(2) would require that a lease provide the participating jurisdiction's HOME program contact information so that a tenant can contact the participating jurisdiction. The proposed rule at § 92.253(a)(3) maintains the requirement that the Violence Against Women Act (VAWA) lease requirements contained in § 92.359(e) be included in a HOME tenant's lease, except as otherwise provided in § 92.359(b). The proposed rule at § 92.253(a)(4) would establish the requirement that a HOME tenancy addendum, as further described below, is contained in the lease.

The introductory text to proposed § 92.253(b) would establish that the HOME tenancy addendum shall prevail over any conflicting provisions of the lease. The introductory text would also explain that the lease, the HOME tenancy addendum, the VAWA addendum, and any addenda required by a Federal or State affordable housing program shall constitute the sole agreement between the owner and the tenant.

Specific solicitation of comment #9: The Department currently applies only the tenant protections contained in the current § 92.253(a) and (b) to tenants receiving TBRA. The proposed rule would apply proposed paragraphs (a)-(c) and (d)(2) to tenants receiving TBRA, including tenants that only receive HOME security deposit assistance. The Department is seeking public comment on whether the requirements at § 92.253(b) and (d)(2) should be required for tenants that receive TBRA. If not, what tenant protection requirements should apply to tenants that receive TBRA?

The proposed rule at § 92.253(b)(1) would describe tenant protections surrounding the physical condition of the tenant's unit and the project. Section 92.253(b)(1)(i) describes the requirement that the owner maintain the physical condition of the unit and the project in accordance with the participating jurisdiction's ongoing physical condition standards in § 92.251(f).

The proposed rule at § 92.253(b)(1)(i) would establish that an owner shall repair and maintain the unit and the common areas in accordance with § 92.253(b)(1)(i). The proposed rule at § 92.253(b)(1)(ii)(A) would require that owners, as soon as practicable, provide tenants with expected time frames for maintaining and repairing units. The Department believes that this requirement is necessary to ensure transparent communications regarding when units will be repaired. The proposed rule at § 92.253(b)(1)(ii)(B) would require that owners, as soon as practicable, make repairs and perform maintenance on units and common areas in a professional manner and in accordance with the participating jurisdiction's property standards. The Department recognizes that repairs cannot always be performed immediately but seeks to clarify that the owner is still under an obligation to perform required repairs and to do so as soon as practicable. The proposed rule at § 92.253(b)(1)(ii)(C) would prohibit owners from charging tenants for the costs of addressing normal wear and tear or damage to a unit or common areas other than that caused by the tenant's negligence, recklessness, or intentional acts.

The proposed rule at § 92.253(b)(1)(iii) would require that, when a life-threatening deficiency in the physical condition of the tenant's unit or project impacts the tenant, the tenant shall be promptly relocated into either a housing unit that is decent, safe, sanitary, and in good repair, or placed into physically suitable lodging until repairs on the tenant's housing unit or project are completed. The Department anticipates that tenant relocation would only be necessary if repairs could not be completed on the day the life-

threatening deficiency is identified, in which case the proposed rule would require that the housing unit or lodging used for tenant relocation be provided at no additional cost to the tenant. The proposed § 92.253(b)(1)(iii) would be added because the Department seeks to prevent HOME tenants from remaining in housing that poses a threat to their physical safety and from being subjected to additional costs as a result of physical housing conditions outside their control.

The proposed rule at § 92.253(b)(1)(iv) would require that, where the owner controls the utilities, owners provide tenants with uninterrupted utility service in projects. The proposed rule at § 92.253(b)(1)(iv) would provide an exception to the proposed requirement for when utility services are interrupted for a reason that is beyond the control of the owner. The Department is proposing this revision to counteract a disturbing trend of so-called “self-help” evictions where owners use their ability to control utilities in a manner that is detrimental to tenants as a means to compel tenants to terminate their tenancy. In many States this “self-help” eviction practice is already illegal,

35

but, by addressing this issue in the proposed HOME tenancy addendum, the proposed rule would prohibit the practice throughout HOME-assisted rental housing and TBRA.

35

See, e.g.,

Fla. Stat. § 83.67; Va. Code Ann. § 55.1-1243.1; Cal. Civ. Code § 789.3; Mont. Code Ann. § 70-24-411.

The proposed rule at § 92.253(b)(2)(i) would explain that a family has the right to reside with a foster child, foster adult, or live-in aide in the unit. The proposed requirement to allow foster children and adults to reside in a unit with a family is similar to the requirements contained in the Section 8 HCV program.

36

The proposed requirement to allow a live-in aide to reside in a unit with a family is part of the nondiscrimination requirements contained in § 92.350.

36

24 CFR 982.551(h)(4).

The proposed rule at § 92.253(b)(2)(ii) would explain that, except for shared housing arrangements in TBRA, the tenant's household shall have exclusive use and occupancy of their unit. One of the rights of tenancy is the tenants' exclusive use of their unit. Similar rights are contained in the HUD Section 8 project-based voucher program tenancy addendum,

37

in the lease requirements for public housing tenants,

38

and in other leases used by servicemembers.

39

37

Available at

https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf.

38

24 CFR 966.4(d).

39

See

10 U.S.C. 2890.

The proposed rule at § 92.253(b)(2)(iii) would set out the permitted situations where an owner may enter a tenant's unit. The proposed rule at § 92.253(b)(2)(iii)(A) would allow an owner to enter a unit during reasonable hours when the owner is performing routine inspections and maintenance, making repairs to the unit, or showing the unit to prospective tenants. Before the owner may enter the unit under proposed § 92.253(b)(2)(iii)(A), the owner must give the tenant at least 2 days' notice, which must include the purpose for entering the unit. The proposed rule at § 92.253(b)(2)(iii)(B) would allow an owner to enter a unit at any time, without advance notice, if the owner has a reasonable belief that an emergency requires entry to the unit. The proposed rule at § 92.253(b)(2)(iii)(C) would require that an owner that enters a unit when the tenant and all adult members of the household are absent from the unit must provide a written statement to the tenant explaining the date, time, and purpose of their entry of the unit.

The proposed rule at § 92.253(b)(2)(iv) would describe a tenant's rights to reasonable access and use of the common areas of the project. This language is proposed to clarify HUD's existing policy and explicitly prohibit owners from having separate amenities such as gyms, pools, spas, elevators, rooftop gardens, storage areas, and playrooms that only non-assisted tenants can access or use.

The proposed rule at § 92.253(b)(2)(v) would provide tenants the right to organize, create tenant associations, convene meetings, distribute literature, and post information at a project. Tenants have these explicit protections in other HUD programs, including HUD Multifamily Housing programs.

40

This is also a tenant right provided in a number of jurisdictions.

41

The Department proposes to add these explicit protections to the HOME program because the Department has found that tenant organizations are especially helpful in providing tenants with representation in addressing community-wide issues and that tenant organizations may provide a more sufficient counterweight to owners of larger projects who are not compliant with lease provisions or HUD requirements.

40

See

24 CFR part 964 for tenant participation and tenant opportunities in public housing; 24 CFR part 245 for tenant participation in Multifamily Housing projects.

41

See

D.C. Official Code § 42-3505.06; New York Consolidated Laws, Real Property Law—RPP § 230; Cal. Civ Code § 1942.6.

The proposed rule at § 92.253(b)(2)(vi) would state that a tenant may not be required to accept supportive services that are offered at the housing unless the tenant is living in transitional housing and such services are required in connection with that housing. This language is proposed to clarify HUD's existing policy and is part of the prohibited lease provisions in the current § 92.253(b)(9).

The proposed rule at § 92.253(b)(3) would describe certain notices that must be provided to a tenant by an owner. The proposed rule at § 92.253(b)(3)(i) would require that an owner notify a tenant in writing of the specific grounds for any proposed adverse action by an owner. These actions can be a variety of different actions, including charging a tenant for tenant-caused damages. This proposed requirement is similar to requirements of other HUD programs such as HUD's public housing program.

42

42

See

24 CFR 966.4(e)(8).

The proposed rule at § 92.253(b)(3)(ii) would require that a tenant be notified within 5 business days of any changes in ownership to the project, including through a foreclosure. The proposed rule at § 92.253(b)(3)(ii) would also require that owners provide tenants with 30 days' notice of an impending sale or impending foreclosure of the property. These proposed requirements are similar to requirements contained in a variety of State statutes

43

and the Department proposes these policies so that tenants are informed about changes in ownership in their projects. Requiring that tenants receive notice of this potential change earlier in the process helps better prepare those tenants for these and other disruptive impacts that occur when there is a change of ownership at a project. Changes in ownership of a project may lead to more extensive changes in properties, including rehabilitation of units or termination of affordability restrictions. As such, reasonable notification requirements would allow tenants to better prepare for any future changes to their housing. Section 92.253(b)(3)(iii) clarifies the existing lease prohibition contained at § 92.253(b)(4), which prohibits an owner from instituting a lawsuit against the tenant without providing the tenant with notice.

43

See, e.g.,

Va. Code Ann. § 55.1-1237; Md Code, Real Property § 7-105.11.

The proposed rule at § 92.253(b)(4) would describe and further specify a tenant's rights to available legal proceedings and remedies. Most of the proposed § 92.253(b)(4) reflects tenant protections that already exist in the existing HOME rule, which are proposed to be revised for inclusion in the tenancy addendum or for clarification.

The proposed rule would renumber and slightly rephrase, for the purposes of the HOME tenancy addendum, the prohibited lease terms from the current § 92.253(b)(1)-(3) to § 92.253(b)(4)(i)-(iii), respectively. The proposed rule at § 92.253(b)(4)(iv) would provide additional clarification that a tenant has the right to independent legal representation in any legal proceedings in connection with the lease. A tenant is not required to appoint the owner as attorney-in-fact as part of the lease and has the right to independent counsel that can assist the tenant in any dispute relating to their lease, including non-binding arbitration or alternative dispute resolution processes that can precede a civil court proceeding. Preliminary studies have demonstrated that when a tenant has representation, a court is less likely to execute a warrant of eviction or enter a decision in favor of the owner.

44

While the Department is not proposing to provide HOME tenants with funds to obtain counsel, given the benefits that counsel can provide, the Department believes it is necessary to clarify that tenants always have the right to independent counsel.

44

See

Ellen, I.G., O'Regan, K., House, S. and Brenner, R., 2021, Do lawyers matter? Early evidence on eviction patterns after the rollout of universal access to Counsel in New York City, Housing Policy Debate, 31(3-5), pp.540-561.

The proposed rule at § 92.253(b)(4)(iv)(B) and (C) reframes the current regulatory requirements for prohibited lease terms contained in § 92.253(b)(4) and (5) into affirmative tenant protections for inclusion in the HOME tenancy addendum. The proposed § 92.253(b)(4)(iv)(B) and (C) explains that a tenant may not be required to waive any right to a trial by jury or waive the tenant's right to appeal or otherwise challenge a court decision in connection with a lease. Similarly, the proposed rule at § 92.253(b)(4)(v) would reframe the current prohibited lease term contained in § 92.253(b)(8) into a tenant protection. The proposed affirmative tenant protection in § 92.253(b)(4)(v) states that a tenant may only be required through the lease to agree to pay the owner's attorney's fees or other legal costs if the tenant loses the court proceeding with the owner.

The proposed rule at § 92.253(b)(5)(i) would state that an owner may not unreasonably interfere with the tenant's comfort, safety, or enjoyment of a rental unit or retaliate against a tenant. The proposed rule at § 92.253(b)(5)(i)(A)-(E) would provide that retaliation includes, but is not limited to, an owner's attempts, during a tenant's lease, to recover possession of the housing unit in a way that is not consistent with HUD requirements, decrease the services to be provided to the unit, interfere with a tenant's rights to privacy under State or local law, harass a household or their lawful guests, or refuse to honor the terms of the lease.

The proposed rule at § 92.253(b)(5)(ii) would describe the rights that a tenant may exercise without fear of retaliation by an owner. These rights of tenancy that a tenant may exercise include, but are not limited to, a tenant's rights to report inadequate housing conditions of the housing unit or project to the owner, participating jurisdiction, code enforcement officials, or HUD; the ability to request enforcement of the lease or any protection guaranteed under 24 CFR part 92; and the ability to request or obtain enforcement of any applicable protections under Federal, State, or local law. The Department believes that tenants must be able to exercise their rights under their lease and applicable law free from worry of reprisal or coercion. Several States have also prohibited retaliation against tenants when the tenant has complained to a governmental agency responsible for code enforcement, made a complaint to or filed a legal action against the owner, organized or has become a member of a tenant's organization, or has testified in a court proceeding against the owner.

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Moreover, the Department believes that establishing this as a right within the lease itself will assist in addressing situations where owners retaliate against persons with disabilities that request reasonable accommodations in HUD-assisted housing units.

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See, e.g.,

Fla. Stat. § 83.64; Tex. Prop Code § 92.331; Mont. Code § 70-24-431.

The proposed rule at § 92.253(b)(6) would establish confidentiality requirements to safeguard a tenant or applicant's personally identifiable information.

The proposed rule at § 92.253(c) would establish new security deposit requirements for HOME-assisted rental housing and TBRA. Under these proposed requirements, security deposits must be refundable and may be no greater than two months' rent. The proposed rule would also prohibit the use of surety bonds or security deposit insurance to be used in lieu of or in addition to security deposits. Additionally, proposed § 92.253(c) would also provide that if an owner charges any amount against a tenant's security deposit, then the tenant must be provided a list of all items charged against the security deposit and be promptly refunded the remainder of the security deposit balance. The proposed change to § 92.253(c) is distinct from the current HOME regulation, which does not require refundable security deposits or that the owner identify the individual charges made against a security deposit. This proposed change is consistent with various State statutes

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and other HUD programs

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and provides another layer of protection for tenants in HOME-assisted rental housing and with TBRA.

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46

See, e.g.,

Tex. Prop Code § 92.104; SDCL § 43-32-24; Md. Code, Real. Prop. § 8-203.

47

See

HUD's Section 8 Project-Based Voucher Program Tenancy Addendum, part B.12, available at

https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf. See also

24 CFR 960.509(b)(3)(v) for public housing requirements related to security deposits.

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Disputes surrounding the retention of a security deposit, if they arise, would typically remain a matter of state or local landlord-tenant law.

The proposed rule at § 92.253(d) would revise the termination of tenancy provisions for both HOME-assisted rental housing and TBRA currently found at § 92.253(c). Currently, the rules are silent on what protections apply to termination of tenancy for tenants with tenant-based rental assistance, as tenant-based rental assistance is not subject to the termination of tenancy provisions in the current rule at § 92.253(c).

The proposed rule at § 92.253(d)(1)(i) would clarify that an owner may not terminate the tenancy of any tenant or household member or refuse to renew the lease of a tenant except for serious or repeated violation of the terms and conditions of the lease; for violation of applicable Federal, State, or local law; for completion of the tenancy period for transitional housing or failure to follow any required transitional housing supportive services plan; or for other good cause. The Department is proposing this clarification to the language currently found at § 92.253(c) in response to questions about situations where an owner wishes to evict a member of the household but not the entire household. The Department recognizes that other HUD programs are more specific about the requirements that apply when expelling a single member of the household and is proposing these revisions to clarify the

termination of tenancy requirements that apply to each household member.

The proposed rule at § 92.253(d)(1)(i)(A)-(D) would provide a more detailed explanation of “good cause” to terminate or refuse to renew a tenancy. The proposed rule at § 92.253(d)(1)(i)(A) would clarify that a tenant's assets or the type of income or assets that the tenant possesses is not good cause to terminate or refuse to renew a tenancy. This was clarified in the preamble to the HOTMA Final Rule. In that rule, the Department stated that “[a] HOME PJ may only terminate the tenancy or refuse to renew the lease of a tenant of rental housing assisted with HOME funds for good cause, as defined in § 92.253(c), which does not include having the type of assets or an amount of assets in excess of the limitations in § 5.618.”

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Because § 92.253 was not part of the HOTMA Final Rule, the Department proposes to use this opportunity to codify the requirements in proposed § 92.253(d)(1)(i)(A).

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88 FR 9600, 9613 (Feb. 14, 2023).

The proposed rule at § 92.253(d)(1)(i)(B) would describe other bases for other good cause, such as when a tenant creates a documented nuisance under applicable state or local law or when a tenant unreasonably refuses to provide the owner access to the unit to allow the owner to repair the unit. The Department holds these to be reasonable grounds for other good cause in other HUD programs, most notably the Section 8 PBV program,

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and proposes to align HOME requirements with these other programs.

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See

PBV Tenancy Addendum, Part B, paragraph 8.d, available at

https://www.hud.gov/sites/dfiles/OCHCO/documents/52530CENG.pdf.

The proposed rule at § 92.253(d)(1)(i)(C) would establish that other good cause can also include where an owner must terminate a tenancy to comply with an order by a governmental entity or court that requires the tenant vacate the project or unit or a local ordinance that necessitates vacating the project or unit. In these instances, the Department believes it is reasonable for an owner to terminate a tenancy or refuse to renew a lease. Depending upon the nature of the order, under the proposed rule, the owner may still be found in violation of other HOME program requirements and their written agreement with the participating jurisdiction. For instance, if a governmental entity or court order to vacate was caused by the owner's failure to maintain the property condition, then the owner of the HOME rental housing may still be found in violation of the participating jurisdiction's ongoing property condition standards.

The Department proposes to revise the notice requirements for termination or refusal to renew tenancy, currently found in § 92.253(c).

The proposed rule at § 92.253(d)(1)(i)(D) would clarify that in order for an owner to establish good cause for a violation of applicable Federal, state, or local law, there must be a record of conviction for a crime during the tenancy period that has a direct bearing on the tenant's continued tenancy in the HOME rental housing project, such as a violation of law that affects the safety of persons or property. The proposed rule would also clarify that an owner shall not use a record of arrest, parole or probation, or current indictment to establish a violation of applicable Federal, state, or local law.

However, the prop

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