Single Family Property Disposition; Lease and Sale of HUD-Acquired Properties; Final Rule DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

SUMMARY: This final rule amends the Department's regulations governing

the Single Family Property Disposition program for the lease and sale

of HUD-acquired properties for the homeless by implementing section

1407 of the Housing and Community Development Act of 1992 (Pub. L. 102-

550, approved October 28, 1992), with regard to notifying eligible

applicants of available properties in their areas.

EFFECTIVE DATE: July 7, 1994.

FOR FURTHER INFORMATION CONTACT: David H. Patton, Acting Director,

Single Family Property Disposition, room 9170, Department of Housing

and Urban Development, 451 Seventh Street SW., Washington, DC 20410;

telephone (202) 708-1832; (TDD number for the hearing- and speech-

impaired (202) 708-4594). (These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

I. Background

The Single Family Property Disposition program (24 CFR part 291),

which disposes of one-to-four family properties acquired by HUD or

otherwise held by HUD, includes an initiative by the Department for the

lease and sale of properties to governmental entities, tribes, and

private nonprofit organizations for use by homeless persons (subpart E

of part 291).

Under the current regulations, applicants that have been

preapproved by HUD are notified of the availability of properties for a

10-day consideration and inspection period before the properties are

offered for sale to the general public. (See 24 CFR 291.410(d).)

Properties are leased or sold to applicants on a first come-first

served basis. No more than 10 percent of the total inventory, as of

October 1, may be leased under the program; there is no limitation on

the sale of properties.

Applicants may purchase properties, at a discount, either through a

direct sale or by submitting a competitive bid. Applicants that choose

to lease properties may purchase them at any time during the leasehold.

Leases are for a one-year term, renewable for up to four additional

one-year terms, for $1 a year. Lessees are responsible for all

utilities, taxes, and other costs associated with operating the

property. Under 24 CFR 291.415(d), lessees are required to establish an

escrow account, with HUD as a co-signer, and make monthly deposits to

the account in an amount sufficient to reimburse HUD for any taxes on

the property.

II. Amendments by the Housing and Community Development Act of 1992

Section 1407 of the Housing and Community Development Act of 1992

(Pub. L. 102-550, approved Oct. 28, 1992; hereafter referred to as

``1992 HCD Act'') directs the Secretary to make several amendments to

this discretionary program. Subsection 1407(a) prohibits the Secretary

from making a property available for lease under the homeless

initiative program unless the property has first been listed and made

generally available for sale to the public for at least 30 days.

Subsection 1407(b) of the 1992 HCD Act provides an exception to

subsection 1407(a) with respect to any area in which the Secretary

determines that there will not be a sufficient quantity of decent,

safe, and sanitary affordable housing available for use under the

program if properties located in the area are first made generally

available to the public. In such exception cases, the Secretary will

make available to preapproved applicants up to 10 percent of the total

number of properties in the HUD inventory for the area before offering

those properties to the general public. The Secretary is also directed

to consult with the unit of general local government for the area in

determining which properties should be reserved.

The 1992 HCD Act, in subsection 1407(c), also directs the Secretary

to identify and describe, upon request by an applicant or lessee, any

exemptions or reductions related to the payment of property taxes under

State or local laws that may be applicable to lessees or to the leased

properties. Finally, subsection 1407(c) of the 1992 HCD Act also

provides that the Secretary may not require the lessee to make deposits

for the payment of taxes into an escrow account, where such an

exemption or reduction is provided.

III. Final Rule

On August 11, 1993, the Department published a proposed rule (58 FR

42707) which would implement the changes required by section 1407 of

the 1992 HCD Act, as well as some additional conforming changes. This

final rule implements those proposed changes as described below.

30-day Marketing Period and Exception

In accordance with subsection 1407(a), this final rule amends 24

CFR 291.400(c) to reflect the statutory requirement that HUD make

property available for sale to the general public for at least 30 days

before HUD makes the property available for lease under the program. In

addition, this final rule also requires that the property be vacant,

and not under contract or committed to another program for availability

under the lease program.

This final rule also adds conforming changes to Sec. 291.410(d)

regarding notification to applicants of available properties. After the

public sale period, the HUD Field Office will notify applicants of

eligible properties available in the ZIP Code areas previously

designated by them. Specific properties selected by an applicant will

be held off the market for a 10-day consideration and inspection

period, which will begin to run upon written notification by the

applicant to the Field Office. (The Department encourages applicants to

notify Field Offices by Facsimile (FAX).) Only those properties in

which an applicant has submitted a written expression of interest will

be held off the market. If no further communication from the applicant

is received by the end of the 10-day consideration and inspection

period, the Field Office will resume offering the properties for sale

to the public.

In accordance with section 1407(b) of the 1992 HCD Act, the final

rule provides an exception to the 30-day listing for general sale in

Field Offices having 200, or fewer, total properties in inventory as of

October 1 of each year. HUD has determined that these offices are less

likely to have properties available for applicants after 30 days on the

market. HUD will select these ``exception'' field offices based upon

the number of properties held in inventory as of October 1, of each

year (initially October 1, 1993), the number of properties the

Department anticipates acquiring over the ensuing 12-month period and

the speed with which such properties are selling. In ``exception''

Field Offices, if homeless providers have requested to lease

properties, properties will be offered to them for a 10-day

consideration and inspection period before the properties are listed

for sale to the general public. Field Offices subject to this exception

will notify applicants of properties in designated ZIP Code areas prior

to public listing until such time as 10 percent of their total

inventory, as of October 1, has been leased. The Assistant Secretary

for Housing-Federal Housing Commissioner will supply a list of the

exception Field Offices to the Assistant Secretary for Community

Planning and Development and all field offices on an annual basis.

The final rule also provides that, in those Field Offices subject

to the exception, HUD will consult with units of general local

government to identify areas where there is a need for units for

homeless persons and will make this information available to

applicants. However, local governments will not have veto-power over

where properties used by the homeless are located.

Exception From or Reduction of State and Local Property Taxes

The final rule also amends 24 CFR 291.415(d) to describe HUD's duty

under subsection 1407(c) of the 1992 HCD Act to provide information to

applicants or lessees regarding any exemption from or reduction of

property taxes under State and local laws. Under this final rule, where

State or local law grants such an exemption or reduction, HUD will not

require that the applicant establish an escrow account for that portion

of the payment of property taxes.

While the amendment necessitated by subsection 1407(c) is included

in the final rule, the Department previously determined that this

provision is effective as of October 28, 1992, the date of enactment of

the 1992 HCD Act. HUD Field Offices were instructed to provide this

information upon the request of an applicant or lessee.

Miscellaneous Changes

This final rule also amends part 291 to reflect changes to the

Department's Supportive Housing program. The 1992 HCD Act terminated

the Supportive Housing Demonstration (formerly implemented in 24 CFR

parts 577 and 578), and replaced it with a new Supportive Housing

program. An interim rule for that program was published on March 15,

1993 (58 FR 13870), and is codified at 24 CFR part 583.

Changes to the Proposed Rule

Finally, the Department has made several changes to the proposed

rule in this final rule. Those changes are as follows:

A. This final rule requires that applicants submit a certification

of compliance with fair housing laws, as well as other

nondiscrimination and equal opportunity requirements, as part of the

preapproval process.

B. In Sec. 291.410(d), the references to a 45-day period have been

changed to 30-day period. The 45-day reference was inadvertently put in

the proposed rule, and this change reflects a technical correction.

C. In Sec. 291.410(d), and with regard to re-offering a property to

an applicant, the rule is changed to provide that an unsold property

will be re-offered to an applicant if no offer from the public has been

accepted by HUD, rather than just received by HUD.

D. Section 291.410(d) is further modified to show that written

notification of interest in a particular property by the applicant may

be sent via facsimile, and the Department encourages applicants to use

this method of notification. Signed leases may also be transmitted in

this manner, followed by submission of the original.

E. Section 291.410(e) has been deleted from the final rule. The

Department believes that this provision was redundant since

Sec. 291.110, as published on October 20, 1993, in an interim rule

amending the Single Family Property Disposition program, sets forth the

same notification procedures. In the interest of simplification and

readability, the Department has removed this provision.

F. Paragraphs (b) and (c) of Sec. 291.425 have been changed to

indicate that the sales price of any HUD-owned property acquired under

this program will be discounted in an amount determined appropriate by

the Secretary, but not less than 10 percent. This change will make the

rule governing the homeless initiative consistent with an amendment to

Sec. 291.110(a) in the October 20, 1993 interim rule for the Single

Family Property Disposition program.

IV. Discussion of Public Comments From Interim Rule

The Department received 38 public comments in response to the

proposed rule published on August 11, 1993. The following discussion

summarizes the comments and provides HUD's responses to those comments.

Every comment was reviewed and considered, although it may not be

specifically addressed in this preamble.

30-day Public Listing Period: Sec. 291.400(c)(1)

Comment: The Department received twenty-one comments objecting to

the regulatory change which requires that HUD offer properties for sale

to the public for 30 days prior to making them available for leasing to

homeless providers. These commenters were generally concerned that only

the least desirable properties would remain in the inventory after the

30-day public listing period for a variety of reasons: (a) The

increased costs associated with repairing the least desirable

properties; (b) the unsuitability of leasing remainder properties

because of problems with accessibility to supportive services; and (c)

the location of remainder properties often being in crime ridden areas.

HUD's response: Section 1407(a) of the 1992 HCD Act requires that

HUD first offer properties to the general public for at least 30 days

before HUD makes such properties available for leasing to homeless

providers. However, HUD believes that homeless providers will have a

sufficient number of acceptable properties available for their programs

in most housing markets when the 30 day marketing priority takes

effect. This belief is based upon the number of single family

properties currently in the Department's inventory and the number of

new acquisitions projected throughout any given year. In addition, the

Department will administer the exception provision of the law with

attention to valid concerns of the participating homeless providers,

and if in general a sufficient number of acceptable properties are not

available to applicants after the public listing period, the Department

will revisit the exception provision in the future.

Exception to Public Listing Period and Consultation With Units of Local

Government: Sec. 291.400(c)(2)

Comment: Three commenters objected to the 200-unit exception to the

30-day public listing period requirement. One commenter suggested that

exceptions be determined based upon the current level of usage of the

homeless leasing program in an area, and input from each field office

as to where and whether the exception should apply. One commenter

recommended that the exception to the 30-day public listing period

should apply whenever the inventory in a field office is less than 500

units. One commenter recommended that the Community Planning and

Development Division in each field office work with Property

Disposition staff to determine whether the exception to the 30-day

listing period requirement should apply.

HUD's response: The 200 property threshold, which will determine

what field offices must offer their inventory to homeless providers on

a priority basis, is based on HUD's experience administering the

Homeless Initiative Program nationwide. The Department believes this is

a reasonable benchmark which will ensure adequate property availability

for homeless providers; however, if future program experience

demonstrates a need for modification of this criterion to determine

exception areas, the Department will respond appropriately.

Comment: Section 1407(b) of the Housing and Community Development

Act of 1992 requires that HUD consult with units of local government in

determining the area in which properties should be reserved for

disposition under the exception to the 30-day public listing period.

Several commenters recommended that HUD give local governments more

input into the program. Eight commenters objected to HUD's exclusion of

local communities from reviewing and approving of properties for the

homeless on a case-by-case basis. Eight commenters suggested that HUD

require that the program be consistent with the local CHAS.

HUD's response: HUD has no control over which properties enter its

inventory or where they will be located; therefore, there is no

guarantee of property availability in areas designated by the locality

for providing services to the homeless. However, in areas subject to

section 1407(b), HUD will consult with local officials on an annual

basis to determine which neighborhoods are targeted by the locality for

provision of adequate supportive services necessary to conduct homeless

programs. This consultation will be carried out in a manner to minimize

any delay in making HUD owned properties available to homeless

providers. While the language in section 1407(b) of the 1992 HCD Act

provides for consultation on ``which properties should be reserved,''

HUD believes that Congress intended that the Department seek input from

local governments on the specific geographic areas in these communities

where the homeless population could best be served rather than seeking

input on a property-by-property basis. Such a process would be

administratively burdensome for both HUD and the unit of local

government. HUD will make every effort to work with local governments

and applicants; however, the decision on which properties are available

is ultimately determined by the location of properties coming into

inventory.

Notification by ZIP Codes: Sec. 291.410

Comment: Several commenters objected to the exclusive use of ZIP

codes in Sec. 291.410 for identifying areas of interest by homeless

providers for leasing properties, and notifying the providers of

available properties since many communities share the same ZIP codes,

but not the same housing patterns.

HUD's response: Property listings must be based upon some generally

recognized geographic designation that is part of HUD's existing data

base. The Department currently tracks its property acquisitions by ZIP

code. Moreover, the Department is not aware of a better method for

tracking and identifying properties. Finally, the Department has not

experienced any difficulties using this approach in the past, nor has

it had any complaints regarding this method from program participants.

Fair Housing Requirements

Comment: Several commenters objected to the absence of fair housing

requirements in the rule. These commenters recommended that HUD require

that the homeless providers submit a fair housing action plan and an

affirmative marketing plan. One commenter suggested that the Department

require that homeless providers submit a certification of compliance

with fair housing laws.

HUD's response: Since the Department cannot control which

properties or what geographic areas are represented in its inventory, a

requirement that participating agencies submit a fair housing action

plan and an affirmative marketing plan is not appropriate. However, the

Department requires that all of its programs be administered in a non-

discriminatory manner, and Sec. 291.435 expressly makes applicants

subject to the Fair Housing Act, as well as other nondiscrimination and

equal opportunity requirements. The Department agrees that applicants

should submit a certification of compliance with applicable fair

housing laws. Accordingly, this final rule amends Sec. 291.410(c) to

require that applicants submit a certification of compliance with fair

housing laws, as well as other nondiscrimination and equal opportunity

requirements, as part of the preapproval process.

Miscellaneous Comments

Comment: Several commenters recommended that HUD change the rule to

require that HUD notify local municipalities of all property

disposition properties.

HUD's response: On request, HUD does notify local officials of all

properties which become available for purchase within their

jurisdiction.

Comment: Several commenters suggested that HUD give local

municipalities an opportunity to purchase homes on a more competitive

basis. A few commenters recommended that HUD offer substantial

discounts for bulk purchases.

HUD's response: The Department believes that the current pricing

structure is appropriate. HUD offers to public agencies and nonprofits

wishing to purchase a HUD-owned property the following discounts: a 10

percent discount off the list price on single purchases, a 15 percent

discount off the list price on the purchase of five or more properties,

and a 30 percent discount off the list price for properties located in

certain designated ``revitalization areas.''

Comment: Several commenters suggested that HUD change the leasing

program to place a greater emphasis on supportive services, and require

that providers set up a reserve account for participants to assist the

participants in moving toward independence.

HUD's response: The Department agrees that it is important to place

a greater emphasis on the availability of appropriate supportive

services in order to maximize the long term benefits of the Homeless

Initiative program; however, requiring that homeless providers

establish reserve accounts to help move tenants towards independence

seems overly burdensome to homeless providers participating in the

program at this time.

Comment: Section 291.400(f) currently provides that, to the extent

practical and possible, HUD will avoid excessive concentration in a

single neighborhood of properties leased or sold under this program.

Although the Department did not propose to change this provision in the

proposed rule, a number of commenters recommended that the Department

define ``excessive concentration'' in the final rule.

HUD's response: The Department previously addressed this issue in

the final rule published September 16, 1991, where we stated that ``HUD

believes that the need to avoid excessive concentration in a single

neighborhood is important to the goal of integrating former homeless

persons into the community. However, rigid standards * * * would be

counterproductive, and do not recognize the diversity of communities

and needs. The need for flexibility outweighs the need to establish

strict standards to ease delivery of supportive services.'' Based upon

past experience in this program, the Department continues to believe

that a rigid definition would be counterproductive. Accordingly, the

rule is unchanged on this issue. However, if in the future, this proves

to be a problem, the Department will revisit the issue at that time.

Comment: One commenter objected to the single family property

disposition homeless initiative program in general, arguing that it is

incompatible with local municipal housing patterns, and that leasing PD

properties to homeless providers causes declining property values.

HUD's response: There is no evidence that leasing PD properties to

homeless providers has caused values to decline. However, in most

housing markets, HUD properties will now be offered first to the

general public before being made available for lease to homeless

providers. This should enhance homeownership opportunities, as well as

provide greater stability in residential neighborhoods.

Comment: Three commenters supported the proposal that HUD limit the

number of properties held off market for any applicant at any one time

based upon the applicant's financial capacity and past performance.

HUD's response: HUD believes that the number of properties held off

the market for an applicant should relate to that applicant's prior

housing experience and demonstrated capacity to administer the program.

Field offices currently have the discretion to determine the

appropriate number of properties for any applicant.

Comment: Two commenters recommended that HUD grant the field

offices more discretion in the program's administration.

HUD's response: On November 2, 1993 (58 FR 58560), the FHA

Commissioner redelegated to field offices the authority to waive

handbooks, notices, directives and other issuances for Housing programs

unless a regulatory or statutory provision is involved. As a result of

this redelegation of authority, field offices now have more flexibility

in program administration of the single family property disposition

homeless initiative program.

Comment: Two commenters recommended that HUD change the way it

administers the ten percent cap on leasing property to homeless

providers. These commenters believe that leased properties are counted

toward the annual ten percent cap each time their annual lease is

renewed.

HUD's response: Properties leased to homeless providers are counted

only once against the ten percent of annual inventory cap. Renewal of a

lease does not mean that an individual property is counted twice in one

year towards the limitation on the number of properties which may be

leased for this purpose. Moreover, in the past, the Department as a

whole has never leased ten percent of the nationwide inventory to

homeless providers, so that individual field offices exceeding their

own ten percent threshold may request reallocation of authority to

lease from other areas.

V. Other Matters

A. Executive Order 12866

This rule was reviewed by the Office of Management and Budget (OMB)

under Executive Order 12866 on Regulatory Planning and Review. Any

changes made in this rule as a result of that review are clearly

identified in the docket file, which is available for public inspection

in the Office of the Rules Docket Clerk, room 10276, 451 Seventh Street

SW., Washington, DC.

B. Environmental Impact

A Finding of No Significant Impact with respect to the environment

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

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

1969 for the proposed rule published on August 11, 1993. The Department

has determined that the Finding is not affected by the changes in this

final rule. 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,

room 10276, 451 Seventh Street SW., Washington, DC.

C. Executive Order 12612, Federalism

The General Counsel has also determined, as the Designated Official

for HUD under section 6(a) of Executive Order 12612, Federalism, that

the policies contained in this rule do not have federalism implications

and, thus, are not subject to review under that Order.

D. Executive Order 12606, the Family

The General Counsel, as the designated official under Executive

Order 12606, The Family, has determined that the Single Family Property

Disposition Homeless Initiative, generally, has a positive and

beneficial impact on the formation, maintenance, and general well-being

of homeless families, and the amendments made by this rule will not

significantly change the overall impact of the rule on families.

Therefore, the rule is not subject to review under that Order.

E. Regulatory Flexibility Act

The Secretary, in accordance with the Regulatory Flexibility Act (5

U.S.C. 605(b)), has reviewed this rule before publication and by

approving it certifies that this rule will not have a significant

economic impact on a substantial number of small entities.

Specifically, the rule modifies the procedures under which HUD makes

properties available for lease to governmental entities and private

nonprofit organizations for use by homeless persons.

F. Paperwork

The amendments made to 24 CFR part 291 by this final rule will not

add any additional information collection burden to that already

approved by the Office of Management and Burden under the Paperwork

Reduction Act and assigned OMB approval numbers 2502-0412 and 2502-

0306.

G. Regulatory Agenda

This rule was listed as Sequence No. 1606 in the Department's

Semiannual Agenda of Regulations published at 59 FR 20424, 20452 on

April 25, 1994, under Executive Order 12866 and the Regulatory

Flexibility Act.

List of Subjects in 24 CFR Part 291

Community facilities, Conflict of interests, Homeless, Lead

poisoning, Low and moderate income housing, Mortgages, Reporting and

recordkeeping requirements, Surplus government property.

Accordingly, for the reasons stated in the preamble, part 291,

subpart E, of title 24 of the Code of Federal Regulations is amended as

follows:

PART 291--DISPOSITION OF HUD-ACQUIRED SINGLE FAMILY PROPERTY

1. The authority citation for 24 CFR part 291 is revised to read as

follows:

Authority: 12 U.S.C. 1709 and 1715b; 42 U.S.C. 1441, 1441a, and

3535(d).

2. In Sec. 291.400, paragraph (b) is amended by removing the word

``Demonstration''; and paragraphs (c), (d), and (e) are revised to read

as follows:

Sec. 291.400 Purpose and scope.

* * * * *

(c) Property available for lease with option to purchase. (1) HUD

will make available up to 10 percent of its total inventory of

properties as of October 1, 1993. Thereafter, on October 1 of each

year, the 10 percent figure will be adjusted upward or downward to

reflect increases or decreases in the total inventory. Property will be

available for lease under the terms and conditions described in

Sec. 291.415, in accordance with the following criteria:

(i) The property has been listed for sale for at least 30 days,

except as provided in paragraph (c)(2) of this section;

(ii) The property is vacant; and

(iii) A sales contract has not been accepted for the property, or

the property has not been committed to another program.

(2) Where a Field Office has 200, or fewer, total properties in

inventory on October 1 of each year, and where applicants have

requested to lease properties in certain designated areas, such

properties will be offered first to applicants for lease before being

listed for sale to the general public until 10 percent of the total

inventory of the Field Office has been leased. HUD will also take into

consideration the number of properties that the Department anticipates

acquiring over the next 12-month period and the speed with which

acquired properties are selling in the area. HUD will consult, on an

annual basis, with units of general local government in the area on

parts of the area where there is a need for housing for homeless

persons.

(d) Property available under a McKinney Act Supportive Housing

program lease-option agreement. Eligible properties will be available

under a lease-option to purchase agreement, under the terms and

conditions described in Sec. 291.420, to Supportive Housing program

applicants for acquisition grants under 24 CFR part 583.

(e) Properties available for sale. Eligible properties will be

available for competitive sale or direct sale for fair market value,

less a discount determined appropriate by the Secretary but not less

than 10 percent, under the terms and conditions described in

Sec. 291.425.

* * * * *

Sec. 291.405 [Amended]

3. In Sec. 291.405, the definition of ``Applicant'' is amended by

removing the word ``Demonstration'', and by removing the words ``24 CFR

577.5 or 578.5'' and replacing them with ``24 CFR part 583'' in the

last sentence; the definition of ``Eligible properties'' is amended by

adding the word ``vacant'' before ``single family properties''; and the

definition of ``Supportive Housing Demonstration'' is removed.

4. Section 291.410 is amended by revising paragraph (c)

introductory text, adding paragraph (c)(6), and revising paragraph (d),

to read as follows:

Sec. 291.410 Applicant preapproval; notification of eligible

properties.

* * * * *

(c) Applicant data and certification. To obtain preapproval,

applicants must provide the appropriate HUD Field Office with the

following data and certification:

(1) * * *

(2) * * *

(3) * * *

(4) * * *

(5) * * *

(6) A certification of the applicant's intent to comply with the

requirements of the nondiscrimination and equal opportunity

requirements set forth in Sec. 291.435.

(d) Notification of eligible properties available for lease. (1)

Applicants, preapproved by HUD as described in paragraph (a) of this

section, must designate geographic areas of interest by ZIP Code to the

appropriate HUD Field Office(s), and must indicate their intention to

lease properties in those areas.

(2)(i) Upon request, and after properties have been listed for sale

to the general public for at least 30 days, except as provided in

paragraph (d)(2)(ii) of this section, Field Offices will notify

applicants, in writing, of available eligible properties in the ZIP

Code areas previously designated by the applicant. Specific properties

selected by the applicant will be held off the market for a 10-day

consideration and inspection period beginning to run upon notification

by the applicant to the Field Office. (Where notification is by mail,

the 10-day period will begin to run five days after mailing.) Only

those properties in which the applicant has expressed an interest will

be held off the market. If a signed lease is not received from the

applicant by the end of the 10-day consideration and inspection period,

the Field Office will resume offering the properties for sale.

(Facsimile (FAX) transmissions are acceptable.)

(ii) Where properties are made available to applicants before being

listed for sale to the public, as described in Sec. 291.400(c)(2), upon

request, Field Offices will notify applicants, in writing, when

eligible properties become available in the ZIP Code areas previously

designated by the applicant. Those properties will remain available for

a 10-day consideration and inspection period before being listed for

sale to the public. The 10-day period will begin to run upon

notification of the applicant by the Field Office. (Where notification

is by mail, the consideration period will begin to run five days after

mailing.) Applicants must submit a signed lease to the Field Office by

the end of the 10-day period. (Facsimile (FAX) transmissions are

acceptable.) If a signed lease is not received by the end of the 10-day

period, the Field Office will offer the properties for sale to the

general public. After the initial 10-day consideration and inspection

period, a property will not be available to applicants for lease again

until it has been offered to the public for 30 days. If an applicant

expresses an interest in leasing a property during or after the 30-day

public sale period, the Field Office will offer the property to the

applicant for 10 days after the public sale period, provided the

property is unsold, no offer from the public has been accepted, and the

property is not in a public bid-offering period or committed to another

purpose or program.

(iii) In notifying applicants of available properties, Field

Offices will coordinate the dissemination of the information to ensure

that where more than one applicant designates a specific area, those

applicants receive the list of properties at the same time, based on

intervals agreed upon between HUD and the applicants. Properties will

be leased or sold to applicants on a first come-first served basis.

(iv) HUD may limit the number of properties held off the market for

an applicant at any one time, based upon the applicant's financial

capacity and past performance as determined by HUD from information

provided in the preapproval process and observations made during

monitoring of a program in progress.

5. Section 291.415 is amended by redesignating paragraph (d)(1) as

paragraph (d)(1)(i), by adding paragraph (d)(1)(ii), and by revising

the first sentence of paragraph (f)(1), to read as follows:

Sec. 291.415 Lease with option to purchase properties for use by the

homeless.

* * * * *

(d) Property operating costs and insurance.

(1)(i) * * *

(ii) Upon request by an applicant or lessee, HUD will identify and

describe any exemptions or reductions relating to payment of property

taxes under State or local laws, for the jurisdiction requested by the

applicant or lessee, that may be applicable to lessees or to properties

leased under this subpart. If a lessee of a property under this subpart

is provided an exemption from any requirement to pay State or local

property taxes, or a reduction in the amount of any such taxes, the

lessee will be required to establish an escrow account to cover only

the amount of taxes owed.

* * * * *

(f) Purchase of leased properties. (1) Lessees that desire to

purchase leased properties during the lease term will be offered the

properties at the lower of the fair market value established at the

time of the initiation of the lease or at the time of the sale, less a

discount determined appropriate by the Secretary but not less than 10

percent, provided lessees agree to use the properties either to house

low-income tenants for a period of not less than 10 years or to resell

the properties to low-income buyers. * * *

* * * * *

6. Section 291.420 is amended by revising the section heading and

paragraphs (a) (1) and (3), and by removing the word ``Demonstration''

from the first sentence of paragraph (b), to read as follows:

Sec. 291.420 Supportive Housing program lease-option to purchase

properties.

(a) Lease-option for Supportive Housing program applicants. (1)

Eligible properties will be available under a lease-option agreement to

applicants for acquisition grants under the Supportive Housing program,

as described in 24 CFR part 583. An applicant may enter into a lease-

option agreement with HUD for up to six months while its application

for Supportive Housing assistance is being reviewed by HUD.

* * * * *

(3) The applicant may purchase the property for fair market value,

less a discount determined appropriate by the Secretary but not less

than 10 percent, at any time during the lease period in accordance with

the terms of Sec. 291.415(f).

* * * * *

7. Section 291.425 is amended by revising paragraphs (b) and (c) to

read as follows:

Sec. 291.425 Sale of properties for use by the homeless.

* * * * *

(b) Direct sales. In accordance with Sec. 291.110(a), the purchase

price for the property will be at the fair market value established for

the property in the approved disposition program, less a discount

determined appropriate by the Secretary but not less than 10 percent.

(c) Competitive sales. As an alternative to direct sales, an

applicant, whether or not preapproved, may submit a competitive bid on

any property listed for sale to the general public, as described in

Sec. 291.105. If the HUD Field Office accepts the bid, the net amount

due HUD will be reduced by a discount determined appropriate by the

Secretary but not less than 10 percent.

* * * * *

8. Section 291.435(a)(1) is amended by replacing the period at the

end of the paragraph with a semi-colon, and by adding the following

language after the final semi-colon:

Sec. 291.435 Applicability of other Federal requirements.

* * * * *

(a) Nondiscrimination and equal opportunity. * * * and, where

applicable, the Americans with Disabilities Act (42 U.S.C. 12131) and

implementing regulations at 28 CFR parts 35 and 36.

* * * * *

Dated: April 5, 1994.

Nicolas P. Retsinas,

Assistant Secretary for Housing-Federal Housing Commissioner.

[FR Doc. 94-13729 Filed 6-6-94; 8:45 am]

BILLING CODE 4210-27-P