Multifamily Property Disposition; State Housing Finance Agency Demonstration Program

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Housing-Federal Housing

Commissioner

[Docket No. N-94-3695; FR-3525-N-02]

Multifamily Property Disposition; State Housing Finance Agency

Demonstration Program

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing

Commissioner, HUD.

ACTION: Notice of demonstration program.

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SUMMARY: This notice announces the effective date of a demonstration

program for the purpose of developing innovative methods for disposing

of HUD-owned multifamily projects in a manner that furthers the

Department's mission to provide decent and affordable housing, and to

do so in a cost effective manner. The notice also responds to the

public comments received on a previous notice announcing the program,

which was published for comment on September 16, 1993 (58 FR 48528).

Under the demonstration, HUD will enter into agreements with State

housing finance agencies (SHFAs) to undertake the responsibility for

the management and disposition of a limited number of HUD-owned

projects. The results of the demonstration are expected to show

innovative and cost effective solutions to the problem of the growing

inventory of distressed multifamily housing, and will help the

Department determine whether to utilize SHFAs, on a permanent basis, in

its property disposition program.

EFFECTIVE DATE: January 20, 1994.

FOR FURTHER INFORMATION CONTACT: Audrey Hinton, Deputy Director, Office

of Multifamily Housing Preservation and Property Disposition,

Department of Housing and Urban Development, 451 Seventh Street SW.,

Washington, DC 20410; telephone (202) 708-3555; TDD (202) 708-4594.

(These are not toll free numbers.)

SUPPLEMENTARY INFORMATION:

I. Background and Response to Public Comments

On September 16, 1993, HUD published a notice announcing a

demonstration for the development of innovative methods for disposing

of HUD-owned multifamily projects through agreements with State housing

finance agencies (SHFAs) for the management and disposition of the

projects. Readers are invited to refer to the September 16, 1993 notice

for the full requirements of the program.

Under the provisions of section 470(a) of the Housing and Urban-

Rural Recovery Act of 1983, the Department was required to invite

public comments on the demonstration before making it effective. During

the public comment period, which expired on October 18, 1993, HUD

received five comments, from a citizens organization in Massachusetts,

the National Council of State Housing Agencies, the Massachusetts

Housing Finance Agency, the Washington State Department of Community

Development, and an individual.

The citizens organization stated a concern about the lack of a

requirement for citizen participation in any transfer process, as well

as a lack of adequate assurance that properties sold under the

demonstration would remain affordable subsequent to the transfer.

Citizen, or community, participation has never been a statutory or

regulatory requirement in connection with the sale of multifamily

properties by HUD. HUD regulations at 24 CFR part 290, which govern the

disposition of multifamily properties, do require notice to the

residents of the properties and an opportunity for their participation

in the decisionmaking process regarding the sale of the property in

which they reside. (24 CFR 290.100 and 290.102.) These regulations will

apply to the disposition of properties under this demonstration. SHFA

resident and community relations is one of the basic criteria upon

which decisions of participation in the demonstration program are to be

made.

With respect to the organization's concerns regarding continued

affordability, participants in the demonstration program must comply

with all relevant statutory requirements. With respect to statutory

requirements for the disposition of HUD-owned multifamily properties,

section 203 of the Housing and Community Development Amendments of

1978, as amended, requires that continued affordability by low- and

moderate-income families be a condition of the sale of any subsidized

HUD-owned multifamily property, and in general, of any unsubsidized

project for units occupied by income eligible tenants. Under this

demonstration program, the assurances of continued affordability to

low- and moderate-income families, for the same period of time, are the

same as if HUD were conducting the dispositions. Since the result is

the same, regardless of the disposing party, the Department does not

believe any changes to the demonstration requirements are necessary.

The comment from the National Council of State Housing Agencies

stated that FHA insurance and project-based Section 8 assistance are

necessary to the success of the program. The Department notes that the

demonstration program does not preclude the use of FHA insurance and

project-based Section 8 assistance. Further, it is HUD's position that

the opportunity to explore and utilize other options for assistance is

also not precluded.

The Council also suggested that HFAs may be able to assist HUD by

helping restructure troubled projects in HUD's portfolio before

foreclosure or sale by HUD, and suggested that HUD consider the

possibility of HFAs acquiring mortgages, at a discount, to facilitate

workouts or refundings.

Section 203(h)(3) of the Housing and Community Development

Amendments of 1978, as amended, provides that the Secretary may carry

out negotiated sales of subsidized or formerly subsidized mortgages

held by the Secretary, without the competitive selection of purchasers

or intermediaries, to agencies of State or local governments, or groups

of investors that include at least one such agency, if the negotiations

are conducted with such agencies. Sometime in the near future, HUD

intends to ascertain State and local government interest in purchasing

HUD-held mortgages and will consider offering mortgages for sale to

interested governments on a negotiated basis.

The Council also recommended that HUD consider giving participating

HFAs exclusive prior notice of the availability of potential properties

before making this information available to other entities. Section

203(e) of the Housing and Community Development Amendments of 1978, as

amended, and HUD regulations at 24 CFR 290.109 provide for a right of

first refusal to units of local government and SHFAs for HUD-owned

rental housing projects, except in the case of a negotiated sale to a

State or local government.

The Washington Department of Community Development expressed

concern about limiting participation to State HFAs, and recommended

that any housing agency sponsored or funded by a state government be

allowed to propose creative solutions that build on experiences,

expertise, and willingness to help preserve this source of housing

stock.

The Department appreciates the comment, but believes that the

demonstration should be limited to SHFAs principally because their

common experience includes housing development, management, and

financing. While there might be other agencies and entities with the

same expertise, HUD prefers at this time not to have to promulgate

broad participant requirements and spend staff resources on judging

capabilities of disparate entities.

The individual commenter suggested that all agreements between HUD

and SHFAs participating in the demonstration program should include a

requirement that a significant number of job training and/or

apprenticeship opportunities be provided first for interested residents

and then community members, and that there be some mechanism for

monitoring by HUD.

HUD supports SHFAs that have goals for participation by minority

business enterprises (MBEs), and believes they are sufficient for

providing opportunities to both community members and residents. A

large number of specialized skills will be needed to manage these

properties and to make them, and their communities, better places to

live. The Department is concerned that including MBE participation as a

condition would result in so few SHFAs participating that the goals of

the demonstration would not be realized.

The comment from the Massachusetts HFA was not directed to the

demonstration, but rather to the concerns raised in the comment from

the citizens organization. Consequently, the comment does not require a

response.

II. Invitation for Proposals

The demonstration requirements are unchanged from the September 16

notice. Upon publication of this notice, the Department will enter into

discussions with or accept proposals from SHFAs that desire to

participate in the demonstration, in accordance with the requirements

in the September 16 notice.

III. Other Matters

Any information collections that may be required under this

demonstration program will not add any additional burden than that

already approved for the multifamily property disposition program by

the Office of Management and Budget under the Paperwork Reduction Act.

A Finding of No Significant Impact with respect to the environment

was made, in accordance with HUD regulations at 24 CFR part 50

implementing section 102(2)(C) of the National Environmental Policy Act

of 1969, prior to publication of the September 16 notice. The Finding

is available for public inspection between 7:30 a.m. and 5.30 p.m.

weekdays in the Office of the Rules Docket Clerk, Office of the General

Counsel, Department of Housing and Urban Development, room 10276, 451

Seventh Street SW., Washington, DC 20410.

The General Counsel, as the designated official under Executive

Order 12612, Federalism, finds that this demonstration program will not

have a substantial, direct effect on the States or on the relationship

between the Federal government and the States, or on the distribution

of power or responsibilities among the various levels of government.

Any terms and conditions imposed by HUD on States that may acquire

projects under the demonstration will be statutory requirements under

section 203 of the Housing and Community Development Amendments of

1978. Such requirements will be clearly the intent of Congress, and

therefore no further review is necessary or appropriate.

HUD has determined that this demonstration will not have a

significant impact on family formation, maintenance, and general well-

being within the meaning of Executive Order 12606, The Family, because

it does not affect the eligibility of families for admission into

multifamily housing projects that may be disposed of under the

demonstration.

Dated: January 6, 1994.

Nicolas P. Retsinas,

Assistant Secretary for Housing-Federal Housing Commissioner.

[FR Doc. 94-1310 Filed 1-19-94; 8:45 am]

BILLING CODE 4210-27-P