Preferences for Admission to Assisted Housing; Final Rule DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

SUMMARY: This document revises the tenant selection preference

provisions of regulations of several project-based assisted housing

programs. The rule implements a statutory change that decreases the

number of families that must be admitted on the basis of qualifying for

a federal selection preference and specifically authorizes adoption of

local selection preferences by housing agencies to be used in admitting

some applicants. If a housing agency wants to use such local

preferences, the rule requires the agency to adopt ones that respond to

local housing needs and priorities after conducting public hearings. If

the owner of a project assisted under one of the covered Section 8

programs wants to admit applicants that do not qualify for the federal

preferences, the owner would be required to use the housing agency's

duly adopted local preferences for the Section 8 Certificate and

Voucher program.

With respect to the public housing, Indian housing, and Section 8

Moderate Rehabilitation programs, the rule also disqualifies from a

selection preference for three years any individual or family that has

been evicted from certain HUD assisted housing for drug-related

criminal activity.

EFFECTIVE DATE: August 17, 1994, except for Secs. 905.303(b)(2)(i) and

960.211(b)(2)(i), which become effective January 18, 1995.

FOR FURTHER INFORMATION CONTACT: For the public housing and Section 8

Moderate Rehabilitation programs (Parts 882, 904, and 960), Edward

Whipple, Director, Occupancy Division, Office of Public Housing, (202)

708-0744 (voice); (202) 708-9300 (TDD).

For the Section 8 programs except for the Moderate Rehabilitation

program (Parts 880, 881, 883, 884, 885, 886, and 889), Barbara D.

Hunter, Acting Director, Planning and Procedures Division, Office of

Multifamily Housing, (202) 708-3944 (voice); (202) 708-4594 (TDD).

For the Indian housing programs (Part 905), Dominic A. Nessi,

Director, Office of Native American Housing, (202) 708-1015 (voice);

(202) 708-0850 (TDD).

For the Section 5(h) homeownership program (Part 906), Gary F. Van

Buskirk, Office of Resident Initiatives, (202) 708-4233 (voice); (202)

708-0850 (TDD).

None of these telephone numbers is toll-free. All of the

individuals listed are located at the Department of Housing and Urban

Development, 451 Seventh Street, SW, Washington, DC 20410.

SUPPLEMENTARY INFORMATION: The information collection requirements for

the preference provisions of the assisted housing programs are included

in the paperwork burden of the application procedures and have been

approved by the Office of Management and Budget (OMB) under the

Paperwork Reduction Act of 1980 (42 U.S.C. 3501-3520) under approval

numbers 2502-0372, for the programs administered by the Office of

Housing, 2577-0105 for the Indian housing and public housing programs,

and 2577-0169 for the Section 8 Moderate Rehabilitation program.

Table of Contents

I. Background

II. Response to Public Comments

A. Overall System of Preferences

1. Counting Federal Preference and Local Preference Admissions

2. Management of Waiting Lists; Ranking Preferences

3. Non-Preference Selection Issues

4. Preference Disqualification for Eviction Based on Drug-

Related Activity

5. Eligibility of Public Housing Residents for Federal

Preference

B. Preference for Working Families

C. Broad Range of Incomes

D. Residency Preference

E. Other Local Preferences

F. Definitions of Federal Preferences

1. Flexibility

2. Substandard Housing

3. Involuntary Displacement

4. Rent Burden

G. Interaction of Section 8 and Public Housing

III. Transition

IV. Findings and Certifications

A. Impact on the Economy

B. Impact on the Environment

C. Federalism Impact

D. Impact on the Family

E. Impact on Small Entities

F. Regulatory Agenda

G. Public Reporting Burden

H. Catalog

I. Background

This final rule is being issued pursuant to the Housing and

Community Development Act of 1992 (Pub. L. 102-550, 106 Stat. 3672,

approved October 28, 1992). Section 104 of that Act requires that the

Department give notice and opportunity for public comment before

issuing a rule for effect. That section also requires issuance of a

final rule to implement the tenant selection preference provisions

originally enacted by the National Affordable Housing Act (Pub. L. 101-

625, 104 Stat. 4079, approved November 28, 1990), no later than April

26, 1993, to take effect upon issuance.

Although the deadline for issuance of a final rule had passed, the

Department published a proposed rule, as required by the statute, on

August 25, 1993 (58 FR 44968) to solicit public comments on its

content. See the final rule published elsewhere in this issue of the

Federal Register for the provisions dealing with the tenant selection

preference provisions enacted in 1990 that are not covered by this

rule.

One additional statutory amendment enacted since the publication of

the proposed rule has been implemented in this final rule. That is to

add to the examples of owner action that qualifies an applicant for the

involuntary displacement federal preference, ``displacement because of

disposition of a multifamily housing project under section 203 of the

Housing and Community Development Amendments of 1978,'' in accordance

with the amendments made by section 101(c) of the Multifamily Housing

Property Disposition Reform Act of 1994 (108 Stat. 342).

This rule will take effect 30 days following publication, except

for the provisions requiring that a housing agency must adopt local

preferences for admission of families that do not qualify for federal

preference only after conducting public hearings. Those provisions,

Secs. 905.303(b)(2)(i) and 960.211(b)(2)(i), do not become effective

until 6 months after publication of this rule, because it may take HAs

that long to comply with the hearing requirement. Other provisions of

the rule, such as the use of ranking preferences for organizing an

owner's list of applicants who are federal preference holders, may be

implemented without conducting public hearings. Since the review of

residency preferences is to be handled in a separate rulemaking,

residency preferences are unaffected by this rule.

II. Response to Public Comments

A. Overall System of Preferences

1. Counting Federal Preference and Local Preference Admissions

There were several criticisms of the way the proposed rule provided

for counting an admission as either a federal preference admission or a

local preference admission. Permitting admission of an applicant who

does not qualify for a federal preference to count as a federal

preference admission when there is no federal preference holder

eligible for the assistance (so long as the applicant is not chosen

using a local income-based preference) was criticized as unjustified

under the statute. Concern was expressed about the difficulty of

maintaining the data necessary to document that, on the date of

admission, there were no similarly situated applicants who qualified

for a federal preference.

The language of the final rule dealing with this issue differs

somewhat from that of the proposed rule. It frames the ``counting'' in

terms of a limit on the number of ``local preference'' admissions that

can be made during a one-year period. Only 30 or 50 percent of annual

admissions, depending on the program involved, may be families selected

on the basis of local preference. Under the rule, a family that

qualifies for a ``federal preference'' is not precluded from being

admitted on the basis of its ``local preference,'' but the admission

would be counted against the HA's local preference limit.

This method of counting was developed to respond to the situation

that occurs with some frequency, particularly with respect to the

project-based Section 8 programs. There may not be the required

percentage (70%) of federal preference holders available to occupy a

project. Since the concept of a ``preference'' operates when there is

competition between a family that qualifies for it and one that does

not, it is incongruous to apply the limit when there is no such

competition. This method of counting may provide somewhat of a

documentation problem, but it offers infinitely more flexibility in the

admissions procedures in areas where there is not an abundant supply of

federal preference holders.

One commenter asked at what

point the percentages must be met--throughout the year, end of calendar

year, end of fiscal year. The final rule continues the practice of

referring only to annual admissions. The housing agency or owner may

determine what 12-month period is used for this purpose.

One commenter asked why the percentage of local preference

admissions is different in the various programs, and, in particular,

why the percentage for Indian housing (30%) is different from the

percentage for public housing (50%). The percentages were specified in

sections 501 and 545 of NAHA: 10% for tenant-based assistance, and 30%

for project-based assistance. In the Housing and Community Development

Act of 1992, the percentage was increased for public housing to 50%.

However, since this change did not specifically refer to its

applicability to Indian housing, it did not apply (by virtue of section

201(b)(2) of the 1937 Act, 42 U.S.C. 1437aa(b)(2)). Therefore, the

percentage that still applies to Indian housing is 30%.

While the Department believes that this difference in percentages

of local preference admissions between public housing and Indian

housing is the result of an oversight on the part of Congress, it does

not have the discretion to change the law and expand the percentage for

IHAs without legislative change.

2. Management of Waiting Lists; Ranking Preferences

Several commenters urged the rule to specify one particular way of

managing waiting lists. They suggested that there should be three

categories of applicants on the waiting list: those with federal

preference, those with local preference, and those with no preference.

Within each group, the applicants could then be ordered by date and

time of application. If no other ``ranking preferences'' were applied,

the system would be easier to understand for applicants, Housing Agency

(HA) employees, and anyone attempting to audit the system. The

commenter suggested that this system be described as an option.

The Department agrees that such a system is permissible under the

rule and may be suitable for many HAs. No HA or owner is required to

use ranking preferences to select among federal preference holders.

However, many HAs may have goals with respect to their own

circumstances that warrant the use of ranking preferences. For example,

if an HA determined that applicants were refusing offers of units

because of the racial composition of the project or the location, it

could adopt a ranking preference for applicants that had not previously

been offered a unit or who had not refused an offer other than for good

cause. As another example, an HA or owner may have determined that it

wants to provide role models for children living in its developments,

where most families are on public assistance, and therefore adopts a

preference for working families.

Other commenters suggested that HAs should not be allowed to rank

federal preference holders through the use of local preferences,

because that practice would defeat the purpose of requiring federal

preferences. Under current regulations, HAs and owners are permitted to

use their own system to select among applicants who qualify for a

federal preference. The use of these ``ranking preferences'' has

allowed HAs and owners to address local objectives while meeting the

statutory requirement to serve federal preference holders. ``Ranking

preferences'' is the term used in this rule and preamble for factors

used only to distinguish among federal preference-holders, whereas

``local preferences'' is used to refer to those factors adopted after

the hearing procedure to use in admitting applicants as an alternative

to admission of federal preference holders.

This rule continues to permit selecting among federal preference

holders according to ranking preferences. Permitting different elements

of federal preference to be given differing weight, which the current

rule has permitted, is similar to permitting the use of other ranking

preferences.

The statutory change that is being implemented in this rule is one

that opens up the admissions process to more flexibility for local

choice and increasing the percentage of locally based admissions

preferences for other programs. The Department believes that it would

be contrary to the spirit of that statute to use this rule to limit the

existing practices of using ranking preferences or to prescribe one

method of managing a waiting list.

Another commenter stated that date and time should not be

considered independently for federal preference holders and for local

preference holders. The rule does not prescribe such a result. An

applicant should be placed on every preference's waiting list (federal

and local) for which the persons qualifies, one commenter suggested.

This is a permissible method of administering preferences under the

rule.

Ranking preferences should be the subject of public hearings, one

commenter advocated, suggesting that HUD should review these

preferences for their impact on fair housing goals. Another commenter

expressed the view that ranking preferences should not be required to

be the subject of a public hearing.

In fact, HUD does periodic monitoring reviews of HA activities to

assure that there are no violations of fair housing requirements.

Owners' preference systems are also subject to review for fair housing

impact, if they use residency preferences or any system of local

preferences. If citizens in a particular jurisdiction wish to challenge

the ranking preferences used by an HA, they may raise the issue in the

required public hearing if the HA chooses to use a system of local

preferences.

3. Non-Preference Selection Issues

Commenters praised the recognition given to the question of

matching family characteristics to the unit. That provision of the

proposed rule is retained in the final rule.

One commenter recommended that the rule be more specific about the

minimum and maximum family sizes for units. It suggested that the

Occupancy Task Force's recommendation that HAs inform applicants of the

minimum and maximum sizes for which they qualify and let them decide

the size of unit(s) for which they would like to be considered be

embodied in the rule. Although the Department believes this approach

may be useful, the Department intends to address it in a separate

proposed rulemaking to be instituted in the near future.

4. Preference Disqualification for Eviction Based on Drug-Related

Activity

There was general approval of the disqualification from a

preference for persons evicted from housing assisted under United

States Housing Act of 1937 (``1937 Act'') for drug-related criminal

activity. A suggestion was made that the disqualification should be

extended to evictions from State-aided housing, as well. There was also

a complaint from one HA that it should not be required to research

evictions from housing programs that it does not administer. The rule

provides only what the statute requires: disqualification from a

preference for families evicted on this basis from housing assisted

under the 1937 Act. However, the statute does not limit the use of

general screening criteria that an HA may apply to all applicants.

This disqualification applies to the public housing, Indian

housing, and Section 8 Existing Housing programs. The Section 8

Existing Housing programs covered by this rule are the Moderate

Rehabilitation program (Part 882, Subparts D and E), the Loan

Management Setaside program (Part 886, Subpart A), and the Property

Disposition program (Part 886, Subpart C). The other Section 8 programs

covered by this rulemaking are not subject to this disqualification.

One question raised by commenters was when the three year

disqualification starts to run--from the date of eviction or the date

the family applies for assistance. The statute states that the

disqualification is based on the eviction. Another question was whether

a family can be prevented from applying for assistance until the three

years has expired. There is no legal basis for a refusal to accept an

application, but such an applicant would not qualify for a preference

until the expiration of the three year period. In addition, an owner or

HA may screen applicants for previous criminal activity as well as

disruptive behavior and other factors at any point, so long as it

considers mitigating circumstances, if it has a stated policy to that

effect.

One organization suggested that an eviction for drug use, as

distinguished from drug distribution, should not be considered an

eviction for drug-related criminal activity. However, the rule covering

when such evictions are authorized (24 CFR 966.4) specifies that drug

use is a ``drug-related criminal activity'' for which eviction is

appropriate.

The issue of what is successful completion of an approved

rehabilitation of a person evicted for drug-related criminal activity

was also raised. A few HAs suggested that HUD should provide examples.

One example suggested by another commenter was completion of a drug

rehabilitation program that is federally funded. As a test of

``successful completion'' of a program, an HA could require

certification from a health professional that the person was tested and

found drug free on a particular date before admission. On this issue,

as on a number of others, the Department prefers to give maximum

flexibility to HAs to adopt standards that make sense in their own

communities.

Guidance was also sought by a commenter for adequate proof that an

individual did not participate in or have knowledge of drug-related

criminal activity--a basis for permitting members of a family that had

been evicted to distinguish themselves from the family member who had

been the cause of a previous eviction. Again, the Department leaves

this type of determination to the HA's best judgment.

One commenter suggested that persons undergoing such rehabilitation

or who have completed it are entitled to reasonable accommodation as

``disabled persons.'' Even if such persons are ``disabled persons,''

the specific statutory disqualification applies unless the HA or owner

has determined that there has been successful completion of an

appropriate program by the person evicted for drug-related criminal

activity.

5. Eligibility of Public Housing Residents for Federal Preference

One commenter expressed concern about a resident of an assisted

project never being able to establish eligibility for a federal

preference because of an assumption that all assisted housing is not

substandard. The commenter asked that HUD at least prohibit a housing

provider from categorically refusing to consider applicants residing in

assisted housing based on presumptive ineligibility for a federal

preference. The Department agrees that each family's application should

be considered on the facts presented by its own situation, rather than

automatically treated in a particular way because of residency in

another type of assisted housing. The rule has been revised to include

such a provision.

The commenter also sought assurance in the rule that an applicant

for the Section 8 program who had accepted a unit in a public housing

development who had originally qualified for a federal preference would

be permitted to retain that preference on the Section 8 waiting list.

That issue is addressed in the rule being published concerning

admissions issues in Section 8 tenant-based assistance.

B. Preference for Working Families

Public comments addressed the question of a preference for working

families in several respects. One comment requested that HUD clarify

whether a local preference can be given for working families, designed

to achieve a broad range of incomes, to permit admission of a higher

income working family before a lower income non-working family whose

place on the waiting list is higher. Other comments were received on

the proposed language of Sec. 960.205 permitting a preference based on

a family's employment status. One housing agency and two organizations

of housing agencies expressed approval of the change, and a legal

services organization expressed disapproval of this change.

The Department is convinced that housing agencies must have the

flexibility to give preference to working families to assure diversity

in the residency of projects and to include families who can serve as

role models for other families. Consequently, the final rule preserves

the removal of the current rule's prohibition on using employment as a

selection criterion.

Moreover, an HA is free to adopt a preference for working families

as a ``local preference'' for admission of families who do not qualify

for a ``federal preference'', as well as to use such a criterion as a

``ranking preference'', to be used to select among applicants who do

qualify for a ``federal preference.'' Housing owners also may use this

criterion as a ``ranking preference'', and as a ``local preference'' if

it is included in the local preference system adopted by the relevant

HA for the Section 8 Certificate and Voucher programs.

There are, however, two limits on the use of a preference for

working families. First, the preference may not be administered in a

way that will violate the legal prohibitions against discrimination.

Second, the preference may not be used in a way that will violate the

legal prohibition contained in section 16 of the United States Housing

Act of 1937 (42 U.S.C. 1437n) against selecting a higher income

applicant before a lower income applicant who is higher on the waiting

list.

Both of these limits are expressed in an example of the use of a

ranking preference in the rule: this type of preference may be used so

long as the prohibition against selection of higher income families and

the nondiscrimination provisions that protect against discrimination on

the basis of age or disability are not violated. If such a preference

is used, it may not give greater weight to an applicant based on the

amount of employment income, and an applicant household shall be given

the benefit of the preference if the head and spouse, or sole member,

are age 62 or older, or are receiving social security disability or

supplemental security income disability benefits, or any other payments

based on an individual's inability to work. The owner also could give

preference to graduates of, as well as active participants in,

educational and training programs that are designed to prepare

individuals for the job market.

When used as a ``local preference'' instead of as a ``ranking

preference,'' the concern about selection of a higher income applicant

is not a limitation if it is being used in the public housing program

or the Indian housing program. In these programs, a local preference

for working families, designed to achieve a broad range of incomes, may

be used to admit a higher income working family over a lower income

non-working family whose place on the waiting list is higher.

The distinction between programs is made because of specific

language found in section 16 with respect to public housing that

exempts such projects when ``local preferences'' are being used (to

attain a broad range of incomes, presumably), and because the section

16 restriction does not apply to Indian housing. The nondiscrimination

limitation does continue to apply when such a preference is applied as

a local preference. It should be noted that section 16's exception for

IHAs permits them to use income ranges as a local preference, ranking

preference, or both.

Housing agencies are not the only entities that may avail

themselves of a preference for working families. Private owners may

also adopt such a preference as a ranking preference--with both limits

described above applicable to them.

C. Broad Range of Incomes

The statutory requirement for an HA to seek a tenancy that

represents a broad range of incomes applies to public housing and

Indian housing, but not to the Section 8 program. The rule's

elimination of the requirement for studies of the income level of

families in an HA's jurisdiction was praised as beneficial, while the

rule's retention of the requirement that an HA's admission policies

further selection of families with a broad range of incomes was

praised. One commenter also commended the rule for recognizing that the

goal of attaining residents with a broad range of incomes might be

furthered through means other than local preferences.

One commenter sought approval of a practice of selection of

applicants from waiting lists of federal preference holders organized

by income within the category of very low-income families where higher

income families would be selected ahead of lower income families--all

from the category of very low income families. The commenter argued

that section 16 of the 1937 Act does not prohibit such use of income

categories for federal preference holders so long as the family

selected is a very low-income family. The Department's legal

interpretation is that selection of higher income families over lower

income families that are higher on the waiting list is permitted only

pursuant to admission on the basis of a local preference. Therefore, a

practice as described above, which involves federal preference

admissions, would violate our interpretation of the law.

One commenter asked what is meant by the term ``project'' in the

requirement that families with a broad range of incomes be sought for

each project. The term ``project'' is used in the public housing

program to mean the entity with a single project number.

When an HA has only scattered sites or small concentrations of

assisted units, how is the requirement to be applied? It can be applied

to the project that includes several sites. The regulatory language

focuses on the goal to be achieved, rather than the specific method

used by the HA.

Can a rural HA use each waiting list (for a geographical area) as a

project? If so, the rent range policy can be implemented in a manner

that would obviate the need for operating subsidy. If an HA determines

that it can achieve the broad range of income in each project result by

applying an income range local preference for a group of projects, HUD

would not object to that procedure.

The language of Sec. 960.204(a)(2)(i) on avoiding concentrations of

families with serious social problems should be revised to eliminate

the reference to ``low-income families'' and to emphasize preventing

concentrations of ``the most economically deprived families [with

serious social problems].'' The Department agrees, and the rule has

been revised accordingly.

D. Residency Preference

There was great praise for and great criticism of the requirement

for advance HUD approval of the use of residency preferences in all of

the programs covered by this rule. The praise was based on the greater

assurance the procedure would give to furthering fair housing goals, an

objective that HUD is charged with advancing. The criticism focused on

the lack of stated criteria to be used for disapproving residency

preferences and the lack of a mechanism for HAs to challenge a

disapproval action.

The Department agrees with the commenters that residency

preferences need to be reviewed for their impact on fair housing goals.

The Department also agrees that more specific criteria need to be

provided for HAs to use in assessing the impact of any residency

preference they might consider adopting. Therefore, a separate

rulemaking is being initiated to provide the opportunity for public

comment on criteria that the Department is developing. Until that rule

takes effect, the current requirements with respect to residency

preferences will continue to apply.

E. Other Local Preferences

Commenters suggested that the rule text should list the statutory

examples of local preferences. Since the list is only advisory, the

Department believes it unnecessary to include it in the rule. However,

the examples (from section 545 of the Cranston-Gonzalez National

Affordable Housing Act) are repeated here, for reference:

--Assisting very low-income families who either reside in transitional

housing assisted under the McKinney Act or participate in a program

designed to provide public assistance recipients with greater access to

employment and educational opportunities;

--Assisting families identified by local public agencies involved in

providing for the welfare of children as having a lack of adequate

housing that is a primary factor in the imminent placement of a child

in foster care, or in preventing the discharge of a child from foster

care and reunification with the child's family;

--Assisting youth, upon discharge from foster care, in cases in which

return to the family or extended family or adoption is not available;

and

--Assisting persons displaced by the rental rehabilitation program.

--Assisting disabled veterans who are being discharged from a medical

facility but do not have an accessible unit to which to return.

--Achieving other objectives of national housing policy as affirmed by

Congress.

Another commenter suggested that the preamble should give more

useful examples of local preferences. Additional examples of local

preferences would be preferences for working families, veterans, and

category of time on the waiting list (such as more than two years).

While one commenter advocated that any local preferences should be

required to be consistent with the goal of promoting access to assisted

housing by those most in need and the objectives of national housing

policy, another stated that local preferences need not further any of

the objectives of national housing policy. Yet another commenter urged

that the local preferences be required to be consistent with the needs

identified in the jurisdiction's Comprehensive Housing Affordability

Strategy, unless the HA justifies a variation. Under current policy for

the public housing program, the Department does not purport to review

local preferences for approval, despite a suggestion by a commenter to

the contrary. Therefore, HAs, in consultation with the public in

hearings, will make the decision about what needs and priorities local

preferences should serve.

Various arguments were advanced for circumstances that would

warrant an exemption for an HA from holding public hearings on the

adoption of local preferences:

--Date and time for non-federal preference admissions;

--Preferences based on income, to advance the broad range of income

goal;

--Adoption of preferences, such as a veteran's preference, that are

required by State law;

--When cost of hearings is high, low response is typical, and the HA is

a ``high-performing housing authority.''

The statute requires that an HA establish its written system of

local priorities after conducting a public hearing to respond to local

housing needs and priorities. The hearing provides citizens an

opportunity to suggest alternatives. Since it is required by the

statute, this rule provides no exemptions from the requirement.

Some commenters wanted the rule to give more specific requirements

concerning the hearing: specific requirements for notice to the public

and public participation in the hearing, and more detail about the

purpose of the hearing. The Department believes that each HA will

conduct its hearing in accordance with the federal statute, and with

State and local laws. Many localities have ordinances concerning the

conduct of public hearings. The Department has no desire to add to such

requirements.

A comment was made that the three month period given in the

proposed rule for HAs to conduct a public hearing on local preferences

after the effective date of a final rule was insufficient time. The

period of time has been lengthened to six months. Of course, HAs are

encouraged to act as soon as possible after the effective date of this

rule to establish any system of local preferences in accordance with

the hearing requirement. However, existing local preferences that have

not been approved in that manner by the expiration of six months after

the effective date of this rule will become invalid. Thereafter, until

the procedure is followed, the only authorized preferences used in

admitting applicants will be the federal preferences (including any

ranking preferences).

One organization recommended that the rule provide that applicants

denied eligibility for a local preference be given an opportunity to

contest the denial. The Department believes that this suggestion has

merit. The final rule extends to denials of local preferences the same

informal meeting/review process that the current rules provide for

federal preference denials.

In the preamble to the proposed rule, an example of a valid local

preference was stated to be one that would prefer members of one Indian

tribe over members of other tribes and over non-Indians. Some

commenters stated that such a preference violates nondiscrimination

laws. An Indian Housing Authority commented that such a preference

presumes that all such persons are eligible for its programs, which

they may not be if tribal law limits eligibility for housing operated

by the tribal housing authority.

Under the Indian housing program, there are federal statutory

provisions that recognize limits to the eligibility of some types of

housing. (In the Mutual Help Homeownership Opportunity program, non-

Indians may only be admitted under very limited circumstances.)

Moreover, in recognition of the status of IHAs created under tribal

law, tribal law as well as federal law governs the operation of the IHA

programs. Therefore, the example still stands as a legitimate type of

local preference, but there may not be any need for such a preference.

F. Definitions of Federal Preferences

1. Flexibility for HAs To Define Terms

One legal services organization stated that HAs should not be

allowed to adopt their own definitions of the federal preference

categories because there should be uniformity. Most HAs, as represented

by an organization of housing administrators and one HA, like this

flexibility. The statute being implemented by this rule is not a cause

for a change to the Department's longstanding policy of permitting this

flexibility.

Two legal services organizations suggested that HAs be given

standards for exercising the discretion and that they not be permitted

to adopt more restrictive definitions (or verification procedures) than

those set forth in the regulations. In HUD's experience, HAs do not

seek approval of more restrictive definitions.

One HA asked for examples of acceptable expansions of the

definitions. HUD would consider favorably such an expansion as a

definition of ``income'' for purposes of the rent burden preference to

use adjusted income instead of annual income. This change would benefit

larger families, families with large medical expenses, and elderly and

disabled persons. The Department would also give favorable

consideration to a definition of ``substandard housing'' that included

overcrowding, as requested by two commenters.

A legal services organization advocated that HAs be able to adopt

their own definitions with respect to all Section 8 programs, as well

as for their public housing or Indian housing and Section 8 moderate

rehabilitation programs. HAs have a different role with respect to any

project-based Section 8 program. In such a case, there is still a

project owner who is responsible for tenant selection.

HUD field offices must be directed to give great weight to local

conditions when reviewing an HA's revised definitions, one organization

urged. This type of instruction is appropriate for inclusion in the HUD

handbook, which provides operational guidance, rather than in this

rule.

The verification procedures that have been included in the Indian

housing and public housing rules for federal preferences have been

optional, and the rule has specifically stated that HAs could adopt

different procedures. These programs have traditionally given HAs the

discretion to adopt verification procedures with respect to eligibility

issues. Only the regulations with respect to federal preferences have

attempted to specify verification procedures. Therefore, the Department

is taking this opportunity to deregulate by removing the suggested

procedures from the regulations for these programs.

The provision that purports to give HUD authority to specify

special conditions that would satisfy federal preference definitions

for owner-administered housing (comparable to the HA's flexibility),

Sec. 880.614(l), is of no effect, one commenter argued. Any change

other than an interpretation would require advance publication and

opportunity for comment.

Under this rule, HAs administering the public housing and Section 8

Moderate Rehabilitation programs may adopt local definitions of the

individual federal preferences. These definitions must be approved by

HUD, within the requirements of the statute. For Section 8 programs

where tenants are selected by a private owner, the rule provides that

HUD may specify additional conditions under which the federal

preferences can be satisfied, referring to HUD Handbook 4350.3. This

procedure is comparable to the action taken with respect to HAs in

approving their proposed definitions that may vary from those specified

in the regulation.

2. Substandard Housing

Several HAs and a management agent supported the Department's

decision not to include overcrowding in the rule's definition of

``substandard housing.'' They agreed with this position since the term

is traditionally used (for census purposes, for example) to deal solely

with the condition of the unit and not its ability to properly house

the number of occupants residing in it. On the other hand, one HA and a

few organizations advocating including overcrowding in this definition,

at least where the extent of overcrowding constitutes a housing code or

health code violation. Another commenter suggested that overcrowding

could amount to imminent displacement.

The final rule maintains virtually the same definition of

substandard housing. If an HA wants to include overcrowding, it may. If

an HA believes overcrowding constitutes imminent involuntary

displacement, it may submit such a definition to HUD for approval. The

HA may include overcrowding as a ranking preference without HUD

approval.

With reference to a person with mobility impairment, one commenter

urged that the definition of substandard housing should include housing

that is inaccessible. Since a bathroom that cannot be entered or used

by a person with a mobility impairment causes the unit to be without a

``usable flush toilet'' or ``usable bathtub'' for that person, it

constitutes substandard housing for that person, the commenter argued.

Given the Department's preference for dealing with the fit of a unit

with an individual family under the category of involuntary

displacement, we would prefer to permit qualification under that

category of preference for a person whose mobility impairment renders

the person's current unit significantly deficient and the owner cannot

make changes to the unit as a reasonable accommodation for the disabled

person. The rule has ben amended to reflect this decision.

The same commenter also urged coverage under the substandard

housing category of preference of a person in an institution who is

ready for discharge but cannot be released because the person's prior

unit is no longer available. If that person has no housing unit to

which to return, the person would qualify under the definition of a

``homeless person,'' discussed below.

Two organizations urged that the definition of ``homeless person''

in the definition of substandard housing be revised to require either

that the person lacks a fixed, regular and adequate nighttime residence

or that one has a primary nighttime residence that is a temporary

shelter, an institution that is a temporary residence for individuals

to be institutionalized, or a place not intended as habitation for

human beings. The statute and implementing regulations now require

satisfaction of both sets of conditions. Therefore, this rule also

requires that they both be satisfied.

Commenters advocated that the definition of ``homeless person''

should explicitly include persons living in transitional housing, since

it is temporary housing. The definition has been revised to include

transitional housing in the examples of temporary living

accommodations.

One commenter also had a suggestion with respect to deferring the

effectiveness of a preference for a family in transitional housing.

When an applicant in transitional housing reaches the top of the

waiting list and is selected for housing, the commenter suggested that

the family be given the option of being admitted or remaining at the

same place on the waiting list while completing the transitional

program. The Department agrees that if the applicant is not ready or

able to leave the transitional housing unit when an offer is made, the

applicant's rejection of the unit would be for good cause and the

applicant's qualification for preference would continue. However, the

rule does not require any change to reflect this position.

3. Involuntary Displacement

Comments were submitted dealing with the qualification for this

preference if displacement is anticipated within six months. Some HAs

erroneously believed that if displacement had occurred more than six

months before the applicant applied and the applicant had been living

in temporary quarters, the applicant would lose preference status.

Another commenter stated that the six month period might present

insurmountable verification problems. Nothing about this six month

period is new. It reflects the current rule.

The language concerning domestic violence victims was praised. One

commenter wanted acknowledgement in the rule that the HA has a ``right

to exercise prudent judgment and to establish reasonable criteria for

determining, on a case-by-case basis, the legitimacy of a claimed

preference.'' Any standards that an HA wants to establish as part of

its admissions policy are welcome. Moreover, the language of the final

rule excluding the alleged abuser from the unit has been made stronger.

The new language responds to comments by making it clear that the

alleged abuser may not be included in the household without the advance

written approval of the HA or owner. Violation of the applicant's

certification that this person will be excluded is stated as grounds

for denial or termination of assistance. These revisions should assist

in assuring that the preference is not claimed unjustifiably.

Two commenters suggested that an abuser should be permitted to live

in the unit if the abuser has successfully completed a rehabilitation

program, and that standards should be provided in the rule to guide the

HAs and owners in making such a determination. The Department has not

added anything on this subject to the rule. HAs and owners should use

their own best judgment on this issue.

One commenter recommended that the definition of involuntarily

displaced should be expanded to include a person in an institution who

is ready for discharge but cannot be released because the person's

current unit is inaccessible because of disability. This is one of the

examples given in the statute of a local preference. It is certainly an

appropriate category of persons to be given a preference under an HA's

system of local preferences, and would be covered under involuntary

displacement by mobility impairment, discussed above.

Two changes have been made in the final rule's definition of

involuntary displacement--not in response to public comment--but as

part of the Administration's efforts to support law enforcement

activities and protect families against hate crimes. A category of

displacement has been added to cover displacement to avoid reprisals.

This category is to cover situations where a family member was a

witness to a crime and the family must be rehoused to avoid risk of

violence as a result of the person's cooperation with law enforcement

officials. The second category covers actual or constructive

displacement caused by ``hate crimes''--actual or threatened physical

violence or intimidation that is directed against a person or his or

her property and that is based on the person's race, color, religion,

sex, national origin, handicap, or familial status.

Two other changes have been made to improve the organization of the

discussion of displacement resulting from owner action and to include a

provision enacted by Congress to cover displacement resulting from HUD

disposition of a multifamily housing project under section 203 of the

Housing and Community Development Amendments of 1978 [Multifamily

Housing Property Disposition Reform Act of 1994, section 101(c), 108

Stat. 357]. The change with respect to owner action places the non-

exclusive list of examples of owner action with the initial statement

of that category of involuntary displacement. The addition of the

element of HUD disposition of a project is added at the end of the

categories of involuntary displacement.

4. Rent Burden

There were only two types of comment on the rent burden category of

federal preference. The first dealt with the 90-day period for

demonstrating excessive rent burden. The second dealt with the

exclusion from the definition of rent any utility costs covered by an

energy assistance program.

The provision that this preference applies only to applicants who

experience excessive rent burden for at least 90 days was added to

assure that applicants would not purposely place themselves in a rent

burdened situation for a very short period merely to qualify for a

preference. Eleven commenters favored this approach. Five commenters

opposed it, indicating that it is unnecessary (because applicants wait

so long to be admitted) and that it would be burdensome to enforce.

Although in some areas waiting lists are so long that this 90-day

provision is unnecessary, there are other areas where waiting lists may

be short. Where it is unnecessary, it will not have any effect, but

elsewhere it will help prevent sham preference applications.

The Department of Health and Human Services submitted the comment

criticizing the exclusion from rent the amount of costs covered by its

Low Income Home Energy Assistance Program. It stated that the statute

authorizing that program prohibits the benefits from being counted as

income or resources under any federal or state law. HUD has had

previous correspondence with the HHS on this matter (1989). Our

position then remains unchanged. Since the amount paid by LIHEAP is not

included in income of the family, the expense it covers is also not

counted as a rental expense of the family.

G. Interaction of Section 8 and Public Housing

It was suggested that this rule explicitly authorize merged waiting

lists for the Section 8 Certificate/Voucher and public housing

programs, and that an HA be required to notify the public before it

actually merges them. The rule for the Section 8 Certificate/Voucher

program does mention merger of waiting lists. The Department believes

it is unnecessary to discuss this subject in this rule, as well.

A few commenters indicated that they thought it would be difficult

for an HA that maintains one waiting list for its public housing and

Section 8 programs to comply with the provisions of this rule and the

one governing the Section 8 Certificate/Voucher rule. The two rules

have been developed in coordination with each other, and compliance

with them should not be difficult. If an HA is looking for particular

characteristics of an applicant when it is selecting a participant for

one program, it can search its merged list for that characteristic.

One commenter urged that differences between an HA's Section 8

program preferences and its public housing program preferences should

be required to be justified on the basis of statutory differences or

other compelling reasons. Another commenter stated that the ability to

adopt different local preferences for the two programs was good. The

Department disagrees with the former suggestion because it would limit

HA discretion unnecessarily. The Department believes that HAs should be

provided flexibility in tailoring their local preferences to local

needs, and, therefore, agrees with the latter suggestion. Since the HA

must respond to the public in the development of local preferences, its

system should not be arbitrary.

Two commenters asked why a system of local preferences that has

been approved by HUD (as it is in the Section 8 Certificate/Voucher

program) must be submitted for approval by a Section 8 project owner.

It is possible that a system of preferences that is applied to

applicants selected for a program in which the participants are

dispersed throughout the jurisdiction may have a very different, and

discriminatory, impact when applied to a particular project.

Two commenters objected to the requirement that if an owner wanted

to use a system of preferences other than the federal preferences it is

required to use the HA's. This is a statutory requirement. Therefore,

the commenter who advocated that an owner should be able to submit its

own system of preferences if the HA in the jurisdiction of the project

had not adopted any must also be disappointed. The statute does not

authorize such a practice.

One organization criticized the provision allowing owners to

establish their own ranking preferences. It stated that a uniform

national system of ordering applicants with federal preference by date

and time only would be fair and easy to monitor. The Department

recognizes that private owners have invested in their projects and need

to have some say over how they select tenants, while complying with the

statutorily required preferences. This is a continuation of existing

policy, which was not changed by Congress when it made other changes.

One commenter advocated that owners should be able to select

tenants by income categories in order to achieve a stable and desirable

economic mix of residents. However, another commenter pointed out that

the rule's provision prohibiting income-based admissions in the Section

8 program must be retained, since such admissions are not authorized

under the law.

Commenters objected to permitting an owner to select the HA whose

local preferences it will apply when there is more than one that has

jurisdiction in the area where the housing is located. In the Section 8

program, an HA may operate anywhere it may legally enter into

contracts--which results in a theoretical multiplicity of HAs with

jurisdiction over a particular project area. The final rule requires

use of the local preferences of the HA for the jurisdiction (using the

statutory language). However, it clarifies that when there is more than

one HA with jurisdiction, the local preferences of the ``HA for the

lowest level of government that has jurisdiction where the project is

located'' are used.

III. Transition

If an HA has not adopted local preferences following a public

hearing in accordance with this rule by six months after August 17,

1994, no local preferences will be in effect, and the federal

preferences (including any ranking preferences) will be used for all

admissions until such time as local preferences are duly adopted.

IV. Findings and Certifications

A. Impact on the Economy

This rule does not constitute a ``major rule'' as that term is

defined in Section 1(b) of Executive Order 12291, Regulatory Planning

Process. Analysis of the rule indicates that it does not: (1) Have an

annual effect on the economy of $100 million or more; (2) cause a major

increase in costs or prices for consumers, individual industries,

Federal, State or local government agencies or geographic regions; or

(3) have a significant adverse effect on competition, employment,

investment, productivity, innovation or on the ability of United

States-based enterprises to compete with foreign-based enterprises in

domestic or export markets.

B. Impact on the Environment

A Finding of No Significant Impact with respect to the environment

has been made in accordance with HUD regulations at 24 CFR part 50 that

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

1969, 42 U.S.C. 4332. The Finding of No Significant Impact is available

for public inspection and copying during regular business hours (7:30

a.m. to 5:30 p.m.) in the Office of the Rules Docket Clerk, room 10276,

451 Seventh Street, SW., Washington, DC 20410-0500.

C. Federalism Impact

The General Counsel, as the Designated Official under section 6(a)

of Executive Order 12612, Federalism, has determined that the policies

contained in this rule have impact on States or their political

subdivisions only to the extent required by the statute being

implemented. The rule specifies to what extent preferences for

admission of particular categories of applicants that are established

by the local housing agency, in accordance with a statutorily-

prescribed hearing procedure, may be used to admit participants. The

only guidelines stated for the local agency's discretion are those

required by the statute: the preferences are to respond to local

housing needs and priorities. Since the rule merely carries out a

statutory mandate and does not create any new significant requirements,

it is not subject to review under the Executive Order.

D. Impact on the Family

The General Counsel, as the Designated Official under Executive

Order 12606, The Family, has determined that this rule does not have

potential for significant impact on family formation, maintenance, and

general well-being, and, thus is not subject to review under the Order.

The rule merely carries out the mandate of federal statute with respect

to admission preferences. (To the extent that an HA adopts a local

preference for admitting families whose children would otherwise be put

in foster care, as is suggested by the statute, there would be a

positive impact on families. However, neither the statute nor the rule

requires adoption of such a preference.)

E. Impact on Small Entities

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

impact on a substantial number of small entities, because it does not

place major burdens on housing authorities or housing owners.

F. Regulatory Agenda

This rule was listed as sequence number 1552 under the Office of

the Secretary in the Department's Semiannual Regulatory Agenda

published on April 25, 1994 (59 FR 20424, 20440) in accordance with

Executive Order 12866 and the Regulatory Flexibility Act.

G. Regulatory Review

This rule was reviewed by the Office of Management and Budget under

Executive Order 12866, Regulatory Planning and Review. Any changes made

to the 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 Department's Rules Docket Clerk, room 10276, 451 Seventh St. SW.,

Washington, DC 20410.

H. Catalog

The Catalog of Federal Domestic Assistance numbers for the programs

affected by this rule are 14.157, 14.182, 14.850, and 14.856.

List of Subjects

24 CFR Part 880

Grant programs--housing and community development, Rent subsidies,

Reporting and record keeping requirements.

24 CFR Part 881

Grant programs--housing and community development, Rent subsidies,

Reporting and record keeping requirements.

24 CFR Part 882

Grant programs--housing and community development, Homeless, Lead

poisoning, Manufactured homes, Rent subsidies, Reporting and record

keeping requirements.

24 CFR Part 883

Grant programs--housing and community development, Rent subsidies,

Reporting and record keeping requirements.

24 CFR Part 884

Grant programs--housing and community development, Rent subsidies,

Reporting and record keeping requirements, Rural areas.

24 CFR Part 885

Aged, Handicapped, Loan programs--housing and community

development, Low and moderate income housing, Reporting and record

keeping requirements.

24 CFR Part 886

Grant programs--housing and community development, Lead poisoning,

Rent subsidies, Reporting and record keeping requirements.

24 CFR Part 889

Aged, Grant programs--housing and community development, Loan

programs--housing and community development, Low and moderate income

housing, Rent subsidies, Reporting and record keeping requirements.

24 CFR Part 904

Grant programs--housing and community development, Loan programs--

housing and community development, Public housing.

24 CFR Part 905

Aged, Grant programs--Indians, Grant programs--housing and

community development, Handicapped, Indians, Loan programs--housing and

community development, Loan programs--Indians, Low and moderate income

housing, Public housing, Reporting and record keeping requirements.

24 CFR Part 906

Grant programs--housing and community development, Low and moderate

income housing, Public housing, Reporting and record keeping

requirements.

24 CFR Part 960

Aged, Grant programs--housing and community development,

Handicapped, Public housing.

Accordingly, chapters VIII and IX of title 24 of the Code of

Federal Regulations are amended as follows:

PART 880--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR NEW

CONSTRUCTION

1. The authority citation for part 880 continues to read as

follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f, and 3535(d).

Sec. 880.603 [Amended]

2. Section 880.603 is amended by removing from the introductory

text of paragraph (b) the phrase ``a Federal selection preference in

accordance with Sec. 880.613'', and by adding in its place the phrase

``selection preferences in accordance with Secs. 880.613 through

880.617''; by removing paragraph (b)(1); and by redesignating

paragraphs (b) (2), (3), and (4) as paragraphs (b) (1), (2), and (3).

3. Section 880.613 is revised and new Secs. 880.614 through 880.617

are added to read as follows:

Sec. 880.613 Selection preferences.

(a) Types of preference. There are three types of admission

preferences.

(1) ``Federal preferences'' are preferences that are prescribed by

federal law and required to be used in the selection process. See

Sec. 880.614(a).

(2) ``Ranking preferences'' are preferences that may be established

by the owner for use in selecting among applicants that qualify for

federal preference. See Sec. 880.614(b).

(3) ``Local preferences'' are preferences that may be established

by the housing agency administering the Section 8 Certificate and

Voucher program in the area, for use in selecting among applicants

without regard to their federal preference status.

(b) System. The owner must establish a system for selection of

applicants from the waiting list that includes the following:

(1) How the federal preferences will be used;

(2) How any ranking preferences will be used;

(3) How any local preferences will be used; and

(4) How any residency preference will be used.

(c) Use of preference in selection process.

(1) Factors other than preference.

(i) Characteristics of the unit. The owner may match other

characteristics of the applicant family with the type of unit

available, e.g., number of bedrooms. In selection of a family for a

unit that has special accessibility features, the owner must give

preference to families that include persons with disabilities who can

benefit from those features of the unit (see 24 CFR 8.27 and

100.202(c)(3)). Also, in selection of a family for a unit in a mixed

population project, the owner will give preference to elderly families

and disabled families (see subpart D of this part).

(ii) Singles preference. See part 812 of this chapter.

(2) Local preference admissions.

(i) If the owner wants to use preferences to select among

applicants without regard to their federal preference status, the owner

must use the local preference system adopted for use in the Section 8

Certificate and Rental Voucher programs (see Sec. 982.209 of this

title) by the housing agency for the jurisdiction. If there is more

than one HA for the jurisdiction, the owner shall use the local

preference system of the HA for the lowest level of government that has

jurisdiction where the project is located.

(ii) Before the owner implements the HA's local preferences, the

owner must receive approval from the HUD Field Office. HUD shall review

these preferences to assure that they are applicable with respect to

any tenant eligibility limitations for the subject housing and that

they are consistent with HUD requirements pertaining to

nondiscrimination and the Affirmative Fair Housing Marketing

objectives. If HUD determines that the local preferences are in

violation of those requirements, the owner will not be permitted to

admit applicants on the basis of any local preferences.

(iii) ``Local preference limit'' means thirty percent of total

annual admissions to the project. In any year, the number of families

given preference in admission pursuant to a local preference over

families with a federal preference may not exceed the local preference

limit.

(d) Informing applicants about admission preferences.

(1) The owner must inform all applicants about available

preferences and must give applicants an opportunity to show that they

qualify for available preferences (federal preference, ranking

preference, or local preference).

(2) If the owner determines that the notification to all applicants

on a waiting list required by paragraph (d)(1) of this section is

impracticable because of the length of the list, the owner may provide

this notification to fewer than all applicants on the list at any given

time. The owner must, however, have notified a sufficient number of

applicants at any given time that, on the basis of the owner's

determination of the number of applicants on the waiting list who

already claim a federal preference and the anticipated number of

project admissions:

(i) There is an adequate pool of applicants who are likely to

qualify for a federal preference; and

(ii) It is unlikely that, on the basis of the owner's framework for

applying the preferences under paragraph (b) of this section and the

federal preferences claimed by those already on the waiting list, any

applicant who has not been so notified would receive assistance before

those who have received notification.

(e) Residency preferences. (1) Restrictions. Local residency

requirements are prohibited. With respect to any residency preference,

applicants who are working or who have been notified that they are

hired to work in the jurisdiction shall be treated as residents of the

jurisdiction. A residency preference may not be based on how long the

applicant has resided in or worked in the jurisdiction.

(2) HUD review. [Reserved]

(f) Nondiscrimination. (1) Any selection preferences that are used

by an owner must be established and administered in accordance with the

following authorities:

(i) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and

the implementing regulations at 24 CFR part 1;

(ii) The Fair Housing Act (42 U.S.C. 3601-3619) and the

implementing regulations at 24 CFR parts 100, 108, 109, and 110;

(iii) Executive Order 11063 on Equal Opportunity in Housing and the

implementing regulations at 24 CFR part 107;

(iv) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794)

and the implementing regulations at 24 CFR part 8;

(v) The Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and

the implementing regulations at 24 CFR part 146; and

(vi) The Americans with Disabilities Act (42 U.S.C. 12101-12213) to

the extent applicable.

(2) Such preferences also must be consistent with HUD's affirmative

fair housing objectives and (where applicable) the owner's HUD-approved

affirmative fair housing marketing plan.

(g) Income-based admission. The owner may not select a family for

admission in an order different from the order on the waiting list for

the purpose of selecting a relatively higher income family for

admission.

(h) Notice and opportunity for a meeting where preference is

denied.

(1) If the owner determines that an applicant does not qualify for

a federal preference, ranking preference, or a local preference claimed

by the applicant, the owner must promptly give the applicant written

notice of the determination. The notice must contain a brief statement

of the reasons for the determination, and state that the applicant has

the right to meet with a representative of the owner to review the

determination. The meeting may be conducted by any person or persons

designated by the owner, who may be an officer or employee of the

owner, including the person who made or reviewed the determination or a

subordinate employee. The procedures specified in this paragraph (d)(1)

must be carried out in accordance with HUD's requirements.

(2) The applicant may exercise other rights if the applicant

believes that the applicant has been discriminated against on the basis

of race, color, religion, sex, national origin, age, disability or

familial status.

(Approved by the Office of Management and Budget under OMB

control number 2502-0372)

Sec. 880.614 Federal preferences: general.

(a) Definition. A federal preference is a preference under federal

law for selection of families that are:

(1) Involuntarily displaced;

(2) Living in substandard housing (including families that are

homeless or living in a shelter for the homeless); or

(3) Paying more than 50 percent of family income for rent.

(b) Ranking preferences: selection among federal preference

holders. The owner's system of administering the federal preferences

may provide for use of ranking preference for selecting among

applicants who qualify for federal preference.

(1) The owner could give preference to working families--so long as

the prohibition of Sec. 880.613(g) against selection based on income

and the nondiscrimination provisions that protect against

discrimination on the basis of age or disability are not violated. (If

an owner adopts such a preference, it may not give greater weight to an

applicant based on the amount of employment income, and an applicant

household shall be given the benefit of the preference if the head and

spouse, or sole member, are age 62 or older or are receiving social

security disability, supplemental security income disability benefits,

or any other payments based on an individual's inability to work.) An

owner could give preference to graduates of, as well as active

participants in, educational and training programs that are designed to

prepare individuals for the job market. The owner also could use the

housing agency's ``local preferences'' for the Section 8 Certificate

and Voucher programs to rank federal preference holders.

(2) The system may give different weight to the federal

preferences, through such means as:

(i) Aggregating the federal preferences (e.g., provide that two

federal preferences outweigh one);

(ii) Giving greater weight to holders of a particular federal

preference (e.g., provide that an applicant living in substandard

housing has greater need for housing than--and, therefore, would be

considered for assistance before--an applicant paying more than 50

percent of family income for rent); or

(iii) Giving greater weight to a federal preference holder who fits

a particular category of a single federal preference (e.g., provide

that those living in housing that is dilapidated or has been declared

unfit for habitation by an agency or unit of government have a greater

need for housing than those whose housing is substandard only because

it does not have a usable bathtub or shower inside the unit for the

exclusive use of the family).

(c) Qualifying for a federal preference. (1) Basis of federal

preference.

(i) Displacement. An applicant qualifies for federal preference if:

(A) The applicant has been involuntarily displaced and is not

living in standard, permanent replacement housing, or

(B) The applicant will be involuntarily displaced within no more

than six months from the date of preference status certification by the

family or verification by the owner.

(ii) Substandard housing. An applicant qualifies for a federal

preference if the applicant is living in substandard housing. An

applicant that is homeless or living in a shelter for the homeless is

considered as living in substandard housing.

(iii) Rent burden. An applicant qualifies for a federal preference

if the applicant is paying more than 50 percent of family income for

rent.

(2) Certification of preference. An applicant may claim

qualification for a federal preference by certifying to the owner that

the family qualifies for federal preference. The owner must accept this

certification, unless the owner verifies that the applicant is not

qualified for federal preference.

(3) Verification of preference.

(i) Before admitting an applicant on the basis of a federal

preference, the owner must require the applicant to provide information

needed by the owner to verify that the applicant qualifies for a

federal preference because of the applicant's current status. The

applicant's current status must be determined without regard to whether

there has been a change in the applicant's qualification for a federal

preference between the time of application and selection for admission,

including a change from one federal preference category to another.

(ii) The owner must use the verification procedures in

Sec. 880.615(c) (involuntary displacement); Sec. 880.616(c)

(substandard housing); and Sec. 880.617(b) (rent burden).

(iii) Once the owner has verified an applicant's qualification for

a federal preference, the owner need not require the applicant to

provide information needed by the owner to verify such qualification

again unless:

(A) The owner determines reverification is desirable because a long

time has passed since verification, or

(B) The owner has reasonable grounds to believe that the applicant

no longer qualifies for a federal preference.

(4) Effect of current residence in assisted housing. No applicant

is to be denied a federal preference for which the family otherwise

qualifies on the basis that the applicant already resides in assisted

housing; for example, the actual condition of the housing unit must be

considered, or the possibility of involuntary displacement resulting

from domestic violence must be evaluated.

(d) Approval of special conditions satisfying preference

definitions. HUD may specify additional conditions under which the

federal preferences, as defined in paragraph (a) of this section, can

be satisfied. In such cases, appropriate certification of qualification

must be provided. (See HUD Handbook 4350.3, which is available at HUD

field offices.)

(Approved by the Office of Management and Budget under OMB control

number 2502-0372)

Sec. 880.615 Federal preference: involuntary displacement.

(a) How applicant qualifies for displacement preference.

(1) An applicant qualifies for a federal preference on the basis of

involuntary displacement if either of the following apply:

(i) The applicant has been involuntarily displaced and is not

living in standard, permanent replacement housing; or

(ii) The applicant will be involuntarily displaced within no more

than six months from the date of preference status certification by the

family or verification by the owner.

(2)(i) ``Standard, permanent replacement housing'' is housing:

(A) That is decent, safe, and sanitary;

(B) That is adequate for the family size; and

(C) That the family is occupying pursuant to a lease or occupancy

agreement.

(ii) ``Standard, permanent replacement housing'' does not include:

(A) Transient facilities, such as motels, hotels, or temporary

shelters for victims of domestic violence or homeless families; or

(B) In the case of domestic violence, the housing unit in which the

applicant and the applicant's spouse or other member of the household

who engages in such violence live.

(b) Meaning of involuntary displacement. An applicant is or will be

involuntarily displaced if the applicant has vacated or will have to

vacate the unit where the applicant lives because of one or more of the

following:

(1) Displacement by disaster. An applicant's unit is uninhabitable

because of a disaster, such as a fire or flood.

(2) Displacement by government action. Activity carried on by an

agency of the United States or by any State or local governmental body

or agency in connection with code enforcement or a public improvement

or development program.

(3) Displacement by action of housing owner. (i) Action by a

housing owner forces the applicant to vacate its unit.

(ii) An applicant does not qualify as involuntarily displaced

because action by a housing owner forces the applicant to vacate its

unit unless:

(A) The applicant cannot control or prevent the owner's action;

(B) The owner action occurs although the applicant met all

previously imposed conditions of occupancy; and

(C) The action taken by the owner is other than a rent increase.

(iii) To qualify as involuntarily displaced because action by a

housing owner forces the applicant to vacate its unit, reasons for an

applicant's having to vacate a housing unit include, but are not

limited to, conversion of an applicant's housing unit to non-rental or

non-residential use; closing of an applicant's housing unit for

rehabilitation or for any other reason; notice to an applicant that the

applicant must vacate a unit because the owner wants the unit for the

owner's personal or family use or occupancy; sale of a housing unit in

which an applicant resides under an agreement that the unit must be

vacant when possession is transferred; or any other legally authorized

act that results or will result in the withdrawal by the owner of the

unit or structure from the rental market.

(iv) Such reasons do not include the vacating of a unit by a tenant

as a result of actions taken by the owner because the tenant refuses:

(A) To comply with HUD program policies and procedures for the

occupancy of under-occupied or overcrowded units; or

(B) To accept a transfer to another housing unit in accordance with

a court decree or in accordance with policies and procedures under a

HUD-approved desegregation plan.

(4) Displacement by domestic violence.

(i) An applicant is involuntarily displaced if:

(A) The applicant has vacated a housing unit because of domestic

violence, or

(B) The applicant lives in a housing unit with a person who engages

in domestic violence.

(ii) ``Domestic violence'' means actual or threatened physical

violence directed against one or more members of the applicant family

by a spouse or other member of the applicant's household.

(iii) To qualify as involuntarily displaced because of domestic

violence:

(A) The owner must determine, in accordance with HUD's

administrative instructions, that the domestic violence occurred

recently or is of a continuing nature; and

(B) The applicant must certify that the person who engaged in such

violence will not reside with the applicant family unless the owner has

given advance written approval. If the family is admitted, the owner

may deny or terminate assistance to the family for breach of this

certification.

(5) Displacement to avoid reprisals.

(i) An applicant family is involuntarily displaced if:

(A) Family members provided information on criminal activities to a

law enforcement agency; and

(B) Based on a threat assessment, a law enforcement agency

recommends rehousing the family to avoid or minimize a risk of violence

against family members as a reprisal for providing such information.

(ii) The owner may establish appropriate safeguards to conceal the

identity of families requiring protection against such reprisals.

(6) Displacement by hate crimes.

(i) An applicant is involuntarily displaced if:

(A) One or more members of the applicant's family have been the

victim of one or more hate crimes; and

(B) The applicant has vacated a housing unit because of such crime,

or the fear associated with such crime has destroyed the applicant's

peaceful enjoyment of the unit.

(ii) ``Hate crime'' means actual or threatened physical violence or

intimidation that is directed against a person or his or her property

and that is based on the person's race, color, religion, sex, national

origin, handicap, or familial status.

(iii) The owner must determine, in accordance with HUD's

administrative instructions, that the hate crime involved occurred

recently or is of a continuing nature.

(7) Displacement by inaccessibility of unit.

An applicant is involuntarily displaced if:

(i) A member of the family has a mobility or other impairment that

makes the person unable to use critical elements of the unit; and

(ii) The owner is not legally obligated to make the changes to the

unit that would make critical elements accessible to the disabled

person as a reasonable accommodation.

(8) Displacement because of HUD disposition of multifamily project.

Involuntary displacement includes displacement because of disposition

of a multifamily rental housing project by HUD under section 203 of the

Housing and Community Develoment Amendments of 1978.

(c) Involuntary displacement preference: Verification. Verification

of an applicant's involuntary displacement is established by the

following documentation:

(1) Displacement by disaster. Certification, in a form prescribed

by the Secretary, from a unit or agency of government that an applicant

has been or will be displaced as a result of a disaster that results in

the uninhabitability of an applicant's unit.

(2) Displacement by government action. Certification, in a form

prescribed by the Secretary, from a unit or agency of government that

an applicant has been or will be displaced by activity carried on by an

agency of the United States or by any State or local governmental body

or agency in connection with code enforcement or a public improvement

or development program.

(3) Displacement by owner action. Certification, in a form

prescribed by the Secretary, from an owner or owner's agent that an

applicant had to or will have to vacate a unit by a date certain

because of owner action.

(4) Displacement because of domestic violence. Certification, in a

form prescribed by the Secretary, of displacement because of domestic

violence from the local police department, social services agency, or

court of competent jurisdiction, or a clergyman, physician, or public

or private facility that provides shelter or counseling to the victims

of domestic violence.

(5) Displacement to avoid reprisals. A threat assessment by a law

enforcement agency.

(6) Displacement by hate crime. Certification by a law enforcement

agency or other reliable information.

(7) Displacement by inaccessibility of unit. Certification by a

health care professional that a family member has a mobility or other

impairment that makes critical elements of the current unit

inaccessible and statement by the owner that it is unable to make

necessary changes to the unit to make it accessible.

(8) Displacement by HUD disposition of multifamily project.

Certification by HUD with respect to the disposition.

Sec. 880.616 Federal preference: substandard housing.

(a) When unit is substandard. A unit is substandard if it:

(1) Is dilapidated;

(2) Does not have operable indoor plumbing;

(3) Does not have a usable flush toilet inside the unit for the

exclusive use of a family;

(4) Does not have a usable bathtub or shower inside the unit for

the exclusive use of a family;

(5) Does not have electricity, or has inadequate or unsafe

electrical service;

(6) Does not have a safe or adequate source of heat;

(7) Should, but does not, have a kitchen; or

(8) Has been declared unfit for habitation by an agency or unit of

government.

(b) Other definitions.

(1) Dilapidated unit. A housing unit is dilapidated if:

(i) The unit does not provide safe and adequate shelter, and in its

present condition endangers the health, safety, or well-being of a

family; or

(ii) The unit has one or more critical defects, or a combination of

intermediate defects in sufficient number or extent to require

considerable repair or rebuilding. The defects may involve original

construction, or they may result from continued neglect or repair or

from serious damage to the structure.

(2) Homeless family.

(i) An applicant that is a ``homeless family'' is considered to be

living in substandard housing.

(ii) A ``homeless family'' includes any person or family that:

(A) Lacks a fixed, regular, and adequate nighttime residence; and

also

(B) Has a primary nighttime residence that is:

(1) A supervised publicly or privately operated shelter designed to

provide temporary living accommodations (including welfare hotels,

congregate shelters, and transitional housing);

(2) An institution that provides a temporary residence for

individuals intended to be institutionalized; or

(3) A public or private place not designed for, or ordinarily used

as, a regular sleeping accommodation for human beings.

(iii) A ``homeless family'' does not include any person imprisoned

or otherwise detained pursuant to an Act of Congress or a State law.

(3) Status of SRO housing. In determining whether an individual

living in single room occupancy (SRO) housing qualifies for federal

preference, SRO housing is not considered substandard solely because it

does not contain sanitary or food preparation facilities.

(c) Substandard housing preference: verification.

(1) Verification that an applicant is living in substandard housing

consists of certification, in a form prescribed by the Secretary, from

a unit or agency of government or from an applicant's present landlord

that the applicant's unit is ``substandard housing'' (as described in

this section).

(2) In the case of a ``homeless family'' (as described in this

section), verification consists of certification, in a form prescribed

by the Secretary, of this status from a public or private facility that

provides shelter for such individuals, or from the local police

department or social services agency.

Sec. 880.617 Federal preference: rent burden.

(a) Rent burden preference: how determined.

(1) ``Rent burden preference'' means the federal preference for

admission of applicants that pay more than 50 percent of family income

for rent.

(2) For purposes of determining whether an applicant qualifies for

the rent burden preference:

(i) ``Family income'' means Monthly Income, as defined in 24 CFR

813.102.

(ii) ``Rent'' means:

(A) The actual monthly amount due under a lease or occupancy

agreement between a family and the family's current landlord; and

(B) For utilities purchased directly by tenants from utility

providers:

(1) The utility allowance for family-purchased utilities and

services that is used in the HA tenant-based program, or

(2) If the family chooses, the average monthly payments that the

family actually made for these utilities and services for the most

recent 12-month period or, if information is not obtainable for the

entire period, for an appropriate recent period.

(iii) Amounts paid to or on behalf of a family under any energy

assistance program must be subtracted from the otherwise applicable

rental amount, to the extent that they are not included in the family's

income.

(3) An applicant does not qualify for a rent burden preference if

either of the following is applicable:

(i) The applicant has been paying more than 50 percent of income

for rent for less than 90 days.

(ii) The applicant is paying more than 50 percent of family income

to rent a unit because the applicant's housing assistance for occupancy

of the unit under any of the following programs has been terminated

because of the applicant's refusal to comply with applicable program

policies and procedures on the occupancy of underoccupied and

overcrowded units:

(A) The Section 8 programs or public and Indian housing programs

under the United States Housing Act of 1937;

(B) The rent supplement program under section 101 of the Housing

and Urban Development Act of 1965; or

(C) Rental assistance payments under section 236(f)(2) of the

National Housing Act.

(b) Rent burden preference: verification of income and rent. The

owner must verify that an applicant is paying more than 50 percent of

family income for rent, as follows:

(1) How to verify income. The owner must verify a family's income

by using the standards and procedures that it uses to verify family

income under 24 CFR part 813.

(2) How to verify rent. The owner must verify the amount due to the

family's landlord (or cooperative) under the lease or occupancy

agreement:

(i) By requiring the family to furnish copies of its most recent

rental (or cooperative charges) receipts (which may include canceled

checks or money order receipts) or a copy of the family's current lease

or occupancy agreement, or

(ii) By contacting the landlord (or cooperative) or its agent

directly.

(3) Utilities. To verify the actual amount that a family paid for

utilities and other housing services, the owner must require the family

to provide copies of the appropriate bills or receipts, or must obtain

the information directly from the utility or service supplier.

PART 881--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR

SUBSTANTIAL REHABILITATION

4. The authority citation for part 881 continues to read as

follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f, and 3535(d).

Sec. 881.603 [Amended]

5. Section 881.603 is amended by removing from the introductory

text of paragraph (b) the phrase, ``a Federal selection preference in

accordance with Sec. 881.613'', and by adding in its place the phrase,

``selection preferences in accordance with Secs. 881.613 through

881.617''.

6. Section 881.613 is revised and new Secs. 881.614 through 881.617

are added, to read as follows:

Sec. 881.613 Selection preferences.

(a) Types of preference. There are three types of admission

preferences.

(1) ``Federal preferences'' are preferences that are prescribed by

federal law and required to be used in the selection process. See

Sec. 881.614(a).

(2) ``Ranking preferences'' are preferences that may be established

by the owner to use in selecting among applicants that qualify for

federal preferences. See Sec. 881.614(b).

(3) ``Local preferences'' are preferences that may be established

by the housing agency administering the Section 8 Certificate and

Voucher program in the area, for use in selecting among applicants

without regard to their federal preference status.

(b) System. The owner must establish a system for selection of

applicants from the waiting list that includes the following:

(1) How the federal preferences will be used;

(2) How any ranking preferences will be used;

(3) How any local preferences will be used; and

(4) How any residency preference will be used.

(c) Use of preference in selection process.

(1) Factors other than preference.

(i) Characteristics of the unit. The owner may match other

characteristics of the applicant family with the type of unit

available, e.g., number of bedrooms. In selection of a family for a

unit that has special accessibility features, the owner must give

preference to families that include persons with disabilities who can

benefit from those features of the unit (see 24 CFR 8.27 and

100.202(c)(3)). Also, in selection of a family for a unit in a mixed

population project, the owner will give preference to elderly families

and disabled families (see subpart D of this part).

(ii) Singles preference. See part 812 of this chapter.

(2) Local preference admissions.

(i) If the owner wants to use preferences to select among

applicants without regard to their federal preference status, the owner

must use the local preference system adopted for use in the Section 8

Certificate and Rental Voucher programs (see Sec. 982.209 of this

title) by the housing agency for the jurisdiction. If there is more

than one HA for the jurisdiction, the owner shall use the local

preference system of the HA for the lowest level of government that has

jurisdiction where the project is located.

(ii) Before the owner implements the HA's local preferences, the

owner must receive approval from the HUD Field Office. HUD shall review

these preferences to assure that they are applicable with respect to

any tenant eligibility limitations for the subject housing and that

they are consistent with HUD requirements pertaining to

nondiscrimination and the Affirmative Fair Housing Marketing

objectives. If HUD determines that the local preferences are in

violation of those requirements, the owner will not be permitted to

admit applicants on the basis of any local preferences.

(iii) ``Local preference limit'' means thirty percent of total

annual admissions to the project. In any year, the number of families

given preference in admission pursuant to a local preference over

families with a federal preference may not exceed the local preference

limit.

(d) Informing applicants about admission preferences.

(1) The owner must inform all applicants about available

preferences and must give applicants an opportunity to show that they

qualify for available preferences (federal preference, ranking

preference, or local preference).

(2) If the owner determines that the notification to all applicants

on a waiting list required by paragraph (d)(1) of this section is

impracticable because of the length of the list, the owner may provide

this notification to fewer than all applicants on the list at any given

time. The owner, must, however, have notified a sufficient number of

applicants at any given time that, on the basis of the owner's

determination of the number of applicants on the waiting list who

already claim a federal preference and the anticipated number of

project admissions:

(i) There is an adequate pool of applicants who are likely to

qualify for a federal preference; and

(ii) It is unlikely that, on the basis of the owner's framework for

applying the preferences under paragraph (b) of this section and the

federal preferences claimed by those already on the waiting list, any

applicant who has not been so notified would receive assistance before

those who have received notification.

(e) Residency preferences. (1) Restrictions. Local residency

requirements are prohibited. With respect to any residency preference,

applicants who are working or who have been notified that they are

hired to work in the jurisdiction shall be treated as residents of the

jurisdiction. A residency preference may not be based on how long the

applicant has resided in or worked in the jurisdiction.

(2) HUD review. [Reserved]

(f) Nondiscrimination. (1) Any selection preferences that are used

by an owner must be established and administered in accordance with the

following authorities:

(i) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and

the implementing regulations at 24 CFR part 1;

(ii) The Fair Housing Act (42 U.S.C. 3601-3619) and the

implementing regulations at 24 CFR parts 100, 108, 109, and 110;

(iii) Executive Order 11063 on Equal Opportunity in Housing and the

implementing regulations at 24 CFR part 107;

(iv) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794)

and the implementing regulations at 24 CFR part 8;

(v) The Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and

the implementing regulations at 24 CFR part 146; and

(vi) The Americans with Disabilities Act (42 U.S.C. 12101-12213) to

the extent applicable.

(2) Such preferences also must be consistent with HUD's affirmative

fair housing objectives and (where applicable) the owner's HUD-approved

affirmative fair housing marketing plan.

(g) Income-based admission. The owner may not select a family for

admission in an order different from the order on the waiting list for

the purpose of selecting a relatively higher income family for

admission.

(h) Notice and opportunity for a meeting where preference is

denied.

(1) If the owner determines that an applicant does not qualify for

a federal preference, ranking preference, or a local preference claimed

by the applicant, the owner must promptly give the applicant written

notice of the determination. The notice must contain a brief statement

of the reasons for the determination, and state that the applicant has

the right to meet with a representative of the owner to review the

determination. The meeting may be conducted by any person or persons

designated by the owner, who may be an officer or employee of the

owner, including the person who made or reviewed the determination or a

subordinate employee. The procedures specified in this paragraph (h)(1)

must be carried out in accordance with HUD's requirements.

(2) The applicant may exercise other rights if the applicant

believes that the applicant has been discriminated against on the basis

of race, color, religion, sex, national origin, age, disability or

familial status.

(Approved by the Office of Management and Budget under OMB control

number 2502-0372)

Sec. 881.614 Federal preferences: general.

(a) Definition. A federal preference is a preference under federal

law for selection of families that are:

(1) Involuntarily displaced;

(2) Living in substandard housing (including families that are

homeless or living in a shelter for the homeless); or

(3) Paying more than 50 percent of family income for rent.

(b) Ranking preferences: selection among federal preference

holders. The owner's system of administering the federal preferences

may provide for use of ranking preference for selecting among

applicants who qualify for federal preference.

(1) The owner could give preference to working families--so long as

the prohibition of Sec. 881.613(g) against selection based on income

and the nondiscrimination provisions that protect against

discrimination on the basis of age or disability are not violated. (If

an owner adopts such a preference, it may not give greater weight to an

applicant based on the amount of employment income, and an applicant

household shall be given the benefit of the preference if the head and

spouse, or sole member is age 62 or older or is receiving social

security disability, supplemental security income disability benefits,

or any other payments based on an individual's inability to work.) An

owner could give preference to graduates of, as well as active

participants in, educational and training programs that are designed to

prepare individuals for the job market. The owner also could use the

housing agency's ``local preferences'' for the Section 8 Certificate

and Voucher programs to rank federal preference holders.

(2) The system may give different weight to the federal

preferences, through such means as:

(i) Aggregating the federal preferences (e.g., provide that two

federal preferences outweigh one);

(ii) Giving greater weight to holders of a particular federal

preference (e.g., provide that an applicant living in substandard

housing has greater need for housing than--and, therefore, would be

considered for assistance before--an applicant paying more than 50

percent of family income for rent); or

(iii) Giving greater weight to a federal preference holder who fits

a particular category of a single federal preference (e.g., provide

that those living in housing that is dilapidated or has been declared

unfit for habitation by an agency or unit of government have a greater

need for housing than those whose housing is substandard only because

it does not have a usable bathtub or shower inside the unit for the

exclusive use of the family).

(c) Qualifying for a federal preference. (1) Basis of federal

preference.

(i) Displacement. An applicant qualifies for federal preference if:

(A) The applicant has been involuntarily displaced and is not

living in standard, permanent replacement housing, or

(B) The applicant will be involuntarily displaced within no more

than six months from the date of preference status certification by the

family or verification by the owner.

(ii) Substandard housing. An applicant qualifies for a federal

preference if the applicant is living in substandard housing. An

applicant that is homeless or living in a shelter for the homeless is

considered as living in substandard housing.

(iii) Rent burden. An applicant qualifies for a federal preference

if the applicant is paying more than 50 percent of family income for

rent.

(2) Certification of preference. An applicant may claim

qualification for a federal preference by certifying to the owner that

the family qualifies for federal preference. The owner must accept this

certification, unless the owner verifies that the applicant is not

qualified for federal preference.

(3) Verification of preference.

(i) Before admitting an applicant on the basis of a federal

preference, the owner must require the applicant to provide information

needed by the owner to verify that the applicant qualifies for a

federal preference because of the applicant's current status. The

applicant's current status must be determined without regard to whether

there has been a change in the applicant's qualification for a federal

preference between the time of application and selection for admission,

including a change from one federal preference category to another.

(ii) The owner must use the verification procedures in

Sec. 881.615(c) (involuntary displacement); Sec. 881.616(c)

(substandard housing); and Sec. 881.617(b) (rent burden).

(iii) Once the owner has verified an applicant's qualification for

a federal preference, the owner need not require the applicant to

provide information needed by the owner to verify such qualification

again unless:

(A) The owner determines reverification is desirable because a long

time has passed since verification, or

(B) The owner has reasonable grounds to believe that the applicant

no longer qualifies for a federal preference.

(4) Effect of current residence in assisted housing. No applicant

is to be denied a federal preference for which the family otherwise

qualifies on the basis that the applicant already resides in assisted

housing; for example, the actual condition of the housing unit must be

considered, or the possibility of involuntary displacement resulting

from domestic violence must be evaluated.

(d) Approval of special conditions satisfying preference

definitions. HUD may specify additional conditions under which the

federal preferences, as defined in paragraph (a) of this section, can

be satisfied. In such cases, appropriate certification of qualification

must be provided. (See HUD Handbook 4350.3, which is available at HUD

field offices.)

(Approved by the Office of Management and Budget under OMB control

number 2502-0372)

Sec. 881.615 Federal preference: involuntary displacement.

(a) How applicant qualifies for displacement preference.

(1) An applicant qualifies for a federal preference on the basis of

involuntary displacement if either of the following apply:

(i) The applicant has been involuntarily displaced and is not

living in standard, permanent replacement housing; or

(ii) The applicant will be involuntarily displaced within no more

than six months from the date of preference status certification by the

family or verification by the owner.

(2)(i) ``Standard, permanent replacement housing'' is housing:

(A) That is decent, safe, and sanitary;

(B) That is adequate for the family size; and

(C) That the family is occupying pursuant to a lease or occupancy

agreement.

(ii) ``Standard, permanent replacement housing'' does not include:

(A) Transient facilities, such as motels, hotels, or temporary

shelters for victims of domestic violence or homeless families; or

(B) In the case of domestic violence, the housing unit in which the

applicant and the applicant's spouse or other member of the household

who engages in such violence live.

(b) Meaning of involuntary displacement. An applicant is or will be

involuntarily displaced if the applicant has vacated or will have to

vacate the unit where the applicant lives because of one or more of the

following:

(1) Displacement by disaster. An applicant's unit is uninhabitable

because of a disaster, such as a fire or flood.

(2) Displacement by government action. Activity carried on by an

agency of the United States or by any State or local governmental body

or agency in connection with code enforcement or a public improvement

or development program.

(3) Displacement by action of housing owner. (i) Action by a

housing owner forces the applicant to vacate its unit.

(ii) An applicant does not qualify as involuntarily displaced

because action by a housing owner forces the applicant to vacate its

unit unless:

(A) The applicant cannot control or prevent the owner's action;

(B) The owner action occurs although the applicant met all

previously imposed conditions of occupancy; and

(C) The action taken by the owner is other than a rent increase.

(iii) To qualify as involuntarily displaced because action by a

housing owner forces the applicant to vacate its unit, reasons for an

applicant's having to vacate a housing unit include, but are not

limited to, conversion of an applicant's housing unit to non-rental or

non-residential use; closing of an applicant's housing unit for

rehabilitation or for any other reason; notice to an applicant that the

applicant must vacate a unit because the owner wants the unit for the

owner's personal or family use or occupancy; sale of a housing unit in

which an applicant resides under an agreement that the unit must be

vacant when possession is transferred; or any other legally authorized

act that results or will result in the withdrawal by the owner of the

unit or structure from the rental market.

(iv) Such reasons do not include the vacating of a unit by a tenant

as a result of actions taken by the owner because the tenant refuses:

(A) To comply with HUD program policies and procedures for the

occupancy of under-occupied or overcrowded units; or

(B) To accept a transfer to another housing unit in accordance with

a court decree or in accordance with policies and procedures under a

HUD-approved desegregation plan.

(4) Displacement by domestic violence.

(i) An applicant is involuntarily displaced if:

(A) The applicant has vacated a housing unit because of domestic

violence, or

(B) The applicant lives in a housing unit with a person who engages

in domestic violence.

(ii) ``Domestic violence'' means actual or threatened physical

violence directed against one or more members of the applicant's family

by a spouse or other member of the applicant's household.

(iii) To qualify as involuntarily displaced because of domestic

violence:

(A) The owner must determine, in accordance with HUD's

administrative instructions, that the domestic violence occurred

recently or is of a continuing nature; and

(B) The applicant must certify that the person who engaged in such

violence will not reside with the applicant's family unless the owner

has given advance written approval. If the family is admitted, the

owner may deny or terminate assistance to the family for breach of this

certification.

(5) Displacement to avoid reprisals.

(i) An applicant family is involuntarily displaced if:

(A) Family members provided information on criminal activities to a

law enforcement agency; and

(B) Based on a threat assessment, a law enforcement agency

recommends rehousing the family to avoid or minimize a risk of violence

against family members as a reprisal for providing such information.

(ii) The owner may establish appropriate safeguards to conceal the

identity of families requiring protection against such reprisals.

(6) Displacement by hate crimes.

(i) An applicant is involuntarily displaced if:

(A) One or more members of the applicant's family have been the

victim of one or more hate crimes; and

(B) The applicant has vacated a housing unit because of such crime,

or the fear associated with such crime has destroyed the applicant's

peaceful enjoyment of the unit.

(ii) ``Hate crime'' means actual or threatened physical violence or

intimidation that is directed against a person or his or her property

and that is based on the person's race, color, religion, sex, national

origin, handicap, or familial status.

(iii) The owner must determine, in accordance with HUD's

administrative instructions, that the hate crime involved occurred

recently or is of a continuing nature.

(7) Displacement by inaccessibility of unit. An applicant is

involuntarily displaced if:

(i) A member of the family has a mobility or other impairment that

makes the person unable to use critical elements of the unit; and

(ii) The owner is not legally obligated to make the changes to the

unit that would make critical elements accessible to the disabled

person as a reasonable accommodation.

(8) Displacement because of HUD disposition of multifamily project.

Involuntary displacement includes displacement because of disposition

of a multifamily rental housing project by HUD under section 203 of the

Housing and Community Development Amendments of 1978.

(c) Involuntary displacement preference: Verification. Verification

of an applicant's involuntary displacement is established by the

following documentation:

(1) Displacement by disaster. Certification, in a form prescribed

by the Secretary, from a unit or agency of government that an applicant

has been or will be displaced as a result of a disaster that results in

the uninhabitability of an applicant's unit.

(2) Displacement by government action. Certification, in a form

prescribed by the Secretary, from a unit or agency of government that

an applicant has been or will be displaced by activity carried on by an

agency of the United States or by any State or local governmental body

or agency in connection with code enforcement or a public improvement

or development program.

(3) Displacement by owner action. Certification, in a form

prescribed by the Secretary, from an owner or owner's agent that an

applicant had to or will have to vacate a unit by a date certain

because of owner action.

(4) Displacement because of domestic violence. Certification, in a

form prescribed by the Secretary, of displacement because of domestic

violence from the local police department, social services agency, or

court of competent jurisdiction, or a clergyman, physician, or public

or private facility that provides shelter or counseling to the victims

of domestic violence.

(5) Displacement to avoid reprisals. A threat assessment by a law

enforcement agency.

(6) Displacement by hate crime. Certification by a law enforcement

agency or other reliable information.

(7) Displacement by inaccessibility of unit. Certification by a

health care professional that a family member has a mobility or other

impairment that makes critical elements of the current unit

inaccessible and statement by the owner that it is unable to make

necessary changes to the unit to make it accessible.

(8) Displacement by HUD disposition of multifamily project.

Certification by HUD with respect to the disposition.

Sec. 881.616 Federal preference: substandard housing.

(a) When unit is substandard. A unit is substandard if it:

(1) Is dilapidated;

(2) Does not have operable indoor plumbing;

(3) Does not have a usable flush toilet inside the unit for the

exclusive use of a family;

(4) Does not have a usable bathtub or shower inside the unit for

the exclusive use of a family;

(5) Does not have electricity, or has inadequate or unsafe

electrical service;

(6) Does not have a safe or adequate source of heat;

(7) Should, but does not, have a kitchen; or

(8) Has been declared unfit for habitation by an agency or unit of

government.

(b) Other definitions.

(1) Dilapidated unit. A housing unit is dilapidated if:

(i) The unit does not provide safe and adequate shelter, and in its

present condition endangers the health, safety, or well-being of a

family; or

(ii) The unit has one or more critical defects, or a combination of

intermediate defects in sufficient number or extent to require

considerable repair or rebuilding. The defects may involve original

construction, or they may result from continued neglect or repair or

from serious damage to the structure.

(2) Homeless family.

(i) An applicant that is a ``homeless family'' is considered to be

living in substandard housing.

(ii) A ``homeless family'' includes any person or family that:

(A) Lacks a fixed, regular, and adequate nighttime residence; and

also

(B) Has a primary nighttime residence that is:

(1) A supervised publicly or privately operated shelter designed to

provide temporary living accommodations (including welfare hotels,

congregate shelters, and transitional housing);

(2) An institution that provides a temporary residence for

individuals intended to be institutionalized: or

(3) A public or private place not designed for, or ordinarily used

as, a regular sleeping accommodation for human beings.

(iii) A ``homeless family'' does not include any person imprisoned

or otherwise detained pursuant to an Act of Congress or a State law.

(3) Status of SRO housing. In determining whether an individual

living in single room occupancy (SRO) housing qualifies for federal

preference, SRO housing is not considered substandard solely because it

does not contain sanitary or food preparation facilities.

(c) Substandard housing preference: verification.

(1) Verification that an applicant is living in substandard housing

consists of certification, in a form prescribed by the Secretary, from

a unit or agency of government or from an applicant's present landlord

that the applicant's unit is ``substandard housing'' (as described in

this section).

(2) In the case of a ``homeless family'' (as described in this

section), verification consists of certification, in a form prescribed

by the Secretary, of this status from a public or private facility that

provides shelter for such individuals, or from the local police

department or social services agency.

Sec. 881.617 Federal preference: rent burden.

(a) Rent burden preference: how determined.

(1) ``Rent burden preference'' means the federal preference for

admission of applicants that pay more than 50 percent of family income

for rent.

(2) For purposes of determining whether an applicant qualifies for

the rent burden preference:

(i) ``Family income'' means Monthly Income, as defined in 24 CFR

813.102.

(ii) ``Rent'' means:

(A) The actual monthly amount due under a lease or occupancy

agreement between a family and the family's current landlord; and

(B) For utilities purchased directly by tenants from utility

providers:

(1) The utility allowance for family-purchased utilities and

services that is used in the HA tenant-based program, or

(2) If the family chooses, the average monthly payments that the

family actually made for these utilities and services for the most

recent 12-month period or, if information is not obtainable for the

entire period, for an appropriate recent period.

(iii) Amounts paid to or on behalf of a family under any energy

assistance program must be subtracted from the otherwise applicable

rental amount, to the extent that they are not included in the family's

income.

(3) An applicant does not qualify for a rent burden preference if

either of the following is applicable:

(i) The applicant has been paying more than 50 percent of income

for rent for less than 90 days.

(ii) The applicant is paying more than 50 percent of family income

to rent a unit because the applicant's housing assistance for occupancy

of the unit under any of the following programs has been terminated

because of the applicant's refusal to comply with applicable program

policies and procedures on the occupancy of underoccupied and

overcrowded units:

(A) The Section 8 programs or public and Indian housing programs

under the United States Housing Act of 1937;

(B) The rent supplement program under section 101 of the Housing

and Urban Development Act of 1965; or

(C) Rental assistance payments under section 236(f)(2) of the

National Housing Act.

(b) Rent burden preference: verification of income and rent. The

owner must verify that an applicant is paying more than 50 percent of

family income for rent, as follows:

(1) How to verify income. The owner must verify a family's income

by using the standards and procedures that it uses to verify family

income under 24 CFR part 813.

(2) How to verify rent. The owner must verify the amount due to the

family's landlord (or cooperative) under the lease or occupancy

agreement:

(i) By requiring the family to furnish copies of its most recent

rental (or cooperative charges) receipts (which may include canceled

checks or money order receipts) or a copy of the family's current lease

or occupancy agreement, or

(ii) By contacting the landlord (or cooperative) or its agent

directly.

(3) Utilities. To verify the actual amount that a family paid for

utilities and other housing services, the owner must require the family

to provide copies of the appropriate bills or receipts, or must obtain

the information directly from the utility or service supplier.

PART 882--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--EXISTING

HOUSING

6. The authority citation for part 882 continues to read as

follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f, and 3535(d).

Subpart E--Special Procedures for Moderate Rehabilitation--Program

Development and Operation

7. Section 882.517 is revised and new Secs. 882.518 through 882.521

are added, to read as follows:

Sec. 882.517 Selection preferences.

(a) Types of preference. There are three types of admission

preferences.

(1) ``Federal preferences'' are preferences that are prescribed by

federal law and required to be used in the selection process. See

Sec. 882.518(a).

(2) ``Ranking preferences'' are preferences that may be established

by the HA to use in selecting among applicants that qualify for federal

preferences. See Sec. 882.518(b).

(3) ``Local preferences'' are preferences used to select among

applicants without regard to their federal preference status.

(b) System. The HA's admission policy, in accordance with its

regulations, must include the following:

(1) How the federal preferences will be used, including any changes

in the definitions of the federal preferences or changes in the

verification procedures from those specified in Secs. 882.518 through

882.521;

(2) How any ranking preferences will be used;

(3) How any local preferences will be used; and

(4) How any residency preference will be used.

(c) Use of preference in selection process.

(1) Factors other than preference.

(i) Characteristics of the unit. The HA may match other

characteristics of the applicant family with the type of unit

available, e.g., number of bedrooms. In selection of a family for a

unit that has special accessibility features, the HA must give

preference to families that include persons with disabilities who can

benefit from those features of the unit (see 24 CFR 8.27 and

100.202(c)(3)). Also, in selection of a family for a unit in a mixed

population project, the owner will give preference to elderly families

and disabled families.

(ii) Singles preference. See part 812 of this chapter.

(2) Local preference admissions.

(i) If the HA wants to use preferences to select among applicants

without regard to their federal preference status, it may use its local

preference system (see Sec. 982.209 of this title).

(ii) ``Local preference limit'' means thirty percent of total

annual admissions to an HA's project-based Section 8 Moderate

Rehabilitation programs. In any year, the number of families given

preference in admission pursuant to a local preference over families

with a federal preference may not exceed the local preference limit.

(3) Prohibition of preference if applicant was evicted for drug-

related criminal activity. The HA may not give a preference to an

applicant (federal preference, local preference or ranking preference)

if any member of the family is a person who was evicted during the past

three years because of drug-related criminal activity from housing

assisted under a 1937 Housing Act program. However, the HA may give an

admission preference in any of the following cases:

(i) If the HA determines that the evicted person has successfully

completed a rehabilitation program approved by the HA;

(ii) If the HA determines that the evicted person clearly did not

participate in or know about the drug-related criminal activity; or

(iii) If the HA determines that the evicted person no longer

participates in any drug-related criminal activity.

(d) Informing applicants about admission preferences.

(1) The HA must inform all applicants about available preferences

and must give applicants an opportunity to show that they qualify for

available preferences (federal preference, ranking preference, or local

preference).

(2) If the HA determines that the notification to all applicants on

a waiting list required by paragraph (d)(1) of this section is

impracticable because of the length of the list, the HA may provide

this notification to fewer than all applicants on the list at any given

time. The HA, must, however, have notified a sufficient number of

applicants at any given time that, on the basis of the HA's

determination of the number of applicants on the waiting list who

already claim a federal preference and the anticipated number of

project admissions:

(i) There is an adequate pool of applicants who are likely to

qualify for a federal preference; and

(ii) It is unlikely that, on the basis of the HA's framework for

applying the preferences under paragraph (b) of this section and the

federal preferences claimed by those already on the waiting list, any

applicant who has not been so notified would receive assistance before

those who have received notification.

(e) Residency preferences--(1) Restrictions. Local residency

requirements are prohibited. With respect to any residency preference,

applicants who are working or who have been notified that they are

hired to work in the jurisdiction shall be treated as residents of the

jurisdiction. A residency preference may not be based on how long the

applicant has resided in or worked in the jurisdiction.

(2) HUD review. [Reserved]

(f) Nondiscrimination. (1) Any selection preferences that are used

by an HA must be established and administered in accordance with the

following authorities:

(i) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and

the implementing regulations at 24 CFR part 1;

(ii) The Fair Housing Act (42 U.S.C. 3601-3619) and the

implementing regulations at 24 CFR parts 100, 108, 109, and 110;

(iii) Executive Order 11063 on Equal Opportunity in Housing and the

implementing regulations at 24 CFR part 107;

(iv) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794)

and the implementing regulations at 24 CFR part 8;

(v) The Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and

the implementing regulations at 24 CFR part 146; and

(vi) The Americans with Disabilities Act (42 U.S.C. 12101-12213) to

the extent applicable.

(2) Such preferences also must be consistent with HUD's affirmative

fair housing objectives and (where applicable) the HA's HUD-approved

equal opportunity plan.

(g) Income-based admission. The HA may not select a family for

admission in an order different from the order on the waiting list for

the purpose of selecting a relatively higher income family for

admission.

(h) Notice and opportunity for a meeting where preference is

denied.

(1) If the HA determines that an applicant does not qualify for a

federal preference, ranking preference, or local preference claimed by

the applicant, the HA must promptly give the applicant written notice

of the determination. The notice must contain a brief statement of the

reasons for the determination, and state that the applicant has the

right to meet with a representative of the HA to review the

determination. The meeting may be conducted by any person or persons

designated by the HA, who may be an officer or employee of the HA,

including the person who made or reviewed the determination or a

subordinate employee.

(2) The applicant may exercise other rights if the applicant

believes that the applicant has been discriminated against on the basis

of race, color, religion, sex, national origin, age, disability or

familial status.

(Approved by the Office of Management and Budget under OMB control

number 2577-0169)

Sec. 882.518 Federal preferences: general.

(a) Definition. A federal preference is a preference under federal

law for selection of families that are:

(1) Involuntarily displaced;

(2) Living in substandard housing (including families that are

homeless or living in a shelter for the homeless); or

(3) Paying more than 50 percent of family income for rent.

(b) Ranking preferences: selection among federal preference

holders. The HA's admission policy may provide for use of ranking

preference to select among applicants who qualify for federal

preference.

(1) The HA could give preference to working families--so long as

the prohibition of Sec. 882.517(g) against selection based on income

and the nondiscrimination provisions that protect against

discrimination on the basis of age or disability are not violated. (If

an HA adopts such a preference, it may not give greater weight to an

applicant based on the amount of employment income, and an applicant

household shall be given the benefit of the preference if the head and

spouse, or sole member is age 62 or older or is receiving social

security disability, supplemental security income disability benefits,

or any other payments based on an individual's inability to work.) An

HA could give preference to graduates of, as well as active

participants in, educational and training programs that are designed to

prepare individuals for the job market. The HA also could use its

``local preferences'' to rank federal preference holders.

(2) The HA may limit the number of applicants who may qualify for

any ranking preference.

(3) The system may give different weight to the federal

preferences, through such means as:

(i) Aggregating the federal preferences (e.g., provide that two

federal preferences outweigh one);

(ii) Giving greater weight to holders of a particular federal

preference (e.g., provide that an applicant living in substandard

housing has greater need for housing than--and, therefore, would be

considered for assistance before--an applicant paying more than 50

percent of family income for rent); or

(iii) Giving greater weight to a federal preference holder who fits

a particular category of a single federal preference (e.g., provide

that those living in housing that is dilapidated or has been declared

unfit for habitation by an agency or unit of government have a greater

need for housing than those whose housing is substandard only because

it does not have a usable bathtub or shower inside the unit for the

exclusive use of the family).

(c) Qualifying for a federal preference--(1) Basis of federal

preference. The HA must use the following definitions of the federal

preferences unless it has received HUD approval of alternative

definitions.

(i) Displacement. An applicant qualifies for federal preference if:

(A) The applicant has been involuntarily displaced and is not

living in standard, permanent replacement housing, or

(B) The applicant will be involuntarily displaced within no more

than six months from the date of preference status certification by the

family or verification by the HA.

(ii) Substandard housing. An applicant qualifies for a federal

preference if the applicant is living in substandard housing. An

applicant that is homeless or living in a shelter for the homeless is

considered as living in substandard housing.

(iii) Rent burden. An applicant qualifies for a federal preference

if the applicant is paying more than 50 percent of family income for

rent.

(2) Certification of preference. An applicant may claim

qualification for a federal preference by certifying to the HA that the

family qualifies for federal preference. The HA must accept this

certification, unless the HA verifies that the applicant is not

qualified for federal preference.

(3) Verification of preference.

(i) Before admitting an applicant on the basis of a federal

preference, the HA must require the applicant to provide information

needed by the HA to verify that the applicant qualifies for a federal

preference because of the applicant's current status. The applicant's

current status must be determined without regard to whether there has

been a change in the applicant's qualification for a federal preference

between the time of application and selection for admission, including

a change from one federal preference category to another.

(ii) Once the HA has verified an applicant's qualification for a

federal preference, the HA need not require the applicant to provide

information needed by the HA to verify such qualification again unless:

(A) The HA determines reverification is desirable because a long

time has passed since verification, or

(B) The HA has reasonable grounds to believe that the applicant no

longer qualifies for a federal preference.

(4) Effect of current residence in assisted housing. No applicant

is to be denied a federal preference for which the family otherwise

qualifies on the basis that the applicant already resides in assisted

housing; for example, the actual condition of the housing unit must be

considered, or the possibility of involuntary displacement resulting

from domestic violence must be evaluated.

(Approved by the Office of Management and Budget under OMB control

number 2577-0169)

Sec. 882.519 Federal preference: involuntary displacement.

(a) How applicant qualifies for displacement preference.

(1) An applicant qualifies for a federal preference on the basis of

involuntary displacement if either of the following apply:

(i) The applicant has been involuntarily displaced and is not

living in standard, permanent replacement housing; or

(ii) The applicant will be involuntarily displaced within no more

than six months from the date of preference status certification by the

family or verification by the HA.

(2)(i) ``Standard, permanent replacement housing'' is housing:

(A) That is decent, safe, and sanitary;

(B) That is adequate for the family size; and

(C) That the family is occupying pursuant to a lease or occupancy

agreement.

(ii) ``Standard, permanent replacement housing'' does not include:

(A) Transient facilities, such as motels, hotels, or temporary

shelters for victims of domestic violence or homeless families; or

(B) In the case of domestic violence, the housing unit in which the

applicant and the applicant's spouse or other member of the household

who engages in such violence live.

(b) Meaning of involuntary displacement. An applicant is or will be

involuntarily displaced if the applicant has vacated or will have to

vacate the unit where the applicant lives because of one or more of the

following:

(1) Displacement by disaster. An applicant's unit is uninhabitable

because of a disaster, such as a fire or flood.

(2) Displacement by government action. Activity carried on by an

agency of the United States or by any State or local governmental body

or agency in connection with code enforcement or a public improvement

or development program.

(3) Displacement by action of housing owner. (i) Action by a

housing owner forces the applicant to vacate its unit.

(ii) An applicant does not qualify as involuntarily displaced

because action by a housing owner forces the applicant to vacate its

unit unless:

(A) The applicant cannot control or prevent the owner's action;

(B) The owner action occurs although the applicant met all

previously imposed conditions of occupancy; and

(C) The action taken by the owner is other than a rent increase.

(iii) To qualify as involuntarily displaced because action by a

housing owner forces the applicant to vacate its unit, reasons for an

applicant's having to vacate a housing unit include, but are not

limited to, conversion of an applicant's housing unit to non-rental or

non-residential use; closing of an applicant's housing unit for

rehabilitation or for any other reason; notice to an applicant that the

applicant must vacate a unit because the owner wants the unit for the

owner's personal or family use or occupancy; sale of a housing unit in

which an applicant resides under an agreement that the unit must be

vacant when possession is transferred; or any other legally authorized

act that results or will result in the withdrawal by the owner of the

unit or structure from the rental market.

(iv) Such reasons do not include the vacating of a unit by a tenant

as a result of actions taken by the owner because the tenant refuses:

(A) To comply with HUD program policies and procedures for the

occupancy of under-occupied or overcrowded units; or

(B) To accept a transfer to another housing unit in accordance with

a court decree or in accordance with policies and procedures under a

HUD-approved desegregation plan.

(4) Displacement by domestic violence.

(i) An applicant is involuntarily displaced if:

(A) The applicant has vacated a housing unit because of domestic

violence, or

(B) The applicant lives in a housing unit with a person who engages

in domestic violence.

(ii) ``Domestic violence'' means actual or threatened physical

violence directed against one or more members of the applicant family

by a spouse or other member of the applicant's household.

(iii) To qualify as involuntarily displaced because of domestic

violence:

(A) The PHA must determine that the domestic violence occurred

recently or is of a continuing nature; and

(B) The applicant must certify that the person who engaged in such

violence will not reside with the applicant family unless the PHA has

given advance written approval. If the family is admitted, the PHA may

deny or terminate assistance to the family for breach of this

certification.

(5) Displacement to avoid reprisals.

(i) An applicant family is involuntarily displaced if:

(A) Family members provided information on criminal activities to a

law enforcement agency; and

(B) Based on a threat assessment, a law enforcement agency

recommends rehousing the family to avoid or minimize a risk of violence

against family members as a reprisal for providing such information.

(ii) The PHA may establish appropriate safeguards to conceal the

identity of families requiring protection against such reprisals.

(6) Displacement by hate crimes.

(i) An applicant is involuntarily displaced if:

(A) One or more members of the applicant's family have been the

victim of one or more hate crimes; and

(B) The applicant has vacated a housing unit because of such crime,

or the fear associated with such crime has destroyed the applicant's

peaceful enjoyment of the unit.

(ii) ``Hate crime'' means actual or threatened physical violence or

intimidation that is directed against a person or his or her property

and that is based on the person's race, color, religion, sex, national

origin, handicap, or familial status.

(iii) The PHA must determine that the hate crime involved occurred

recently or is of a continuing nature.

(7) Displacement by inaccessibility of unit. An applicant is

involuntarily displaced if:

(i) A member of the family has a mobility or other impairment that

makes the person unable to use critical elements of the unit; and

(ii) The owner is not legally obligated to make the changes to the

unit that would make critical elements accessible to the disabled

person as a reasonable accommodation.

(8) Displacement because of HUD disposition of multifamily project.

Involuntary displacement includes displacement because of disposition

of a multifamily rental housing project by HUD under section 203 of the

Housing and Community Develoment Amendments of 1978.

Sec. 882.520 Federal preference: substandard housing.

(a) When unit is substandard. A unit is substandard if it:

(1) Is dilapidated;

(2) Does not have operable indoor plumbing;

(3) Does not have a usable flush toilet inside the unit for the

exclusive use of a family;

(4) Does not have a usable bathtub or shower inside the unit for

the exclusive use of a family;

(5) Does not have electricity, or has inadequate or unsafe

electrical service;

(6) Does not have a safe or adequate source of heat;

(7) Should, but does not, have a kitchen; or

(8) Has been declared unfit for habitation by an agency or unit of

government.

(b) Other definitions.

(1) Dilapidated unit. A housing unit is dilapidated if:

(i) The unit does not provide safe and adequate shelter, and in its

present condition endangers the health, safety, or well-being of a

family; or

(ii) The unit has one or more critical defects, or a combination of

intermediate defects in sufficient number or extent to require

considerable repair or rebuilding. The defects may involve original

construction, or they may result from continued neglect or repair or

from serious damage to the structure.

(2) Homeless family.

(i) An applicant that is a ``homeless family'' is considered to be

living in substandard housing.

(ii) A ``homeless family'' includes any person or family that:

(A) Lacks a fixed, regular, and adequate nighttime residence; and

also

(B) Has a primary nighttime residence that is:

(1) A supervised publicly or privately operated shelter designed to

provide temporary living accommodations (including welfare hotels,

congregate shelters, and transitional housing);

(2) An institution that provides a temporary residence for

individuals intended to be institutionalized; or

(3) A public or private place not designed for, or ordinarily used

as, a regular sleeping accommodation for human beings.

(iii) A ``homeless family'' does not include any person imprisoned

or otherwise detained pursuant to an Act of Congress or a State law.

(3) Status of SRO housing. In determining whether an individual

living in single room occupancy (SRO) housing qualifies for federal

preference, SRO housing is not considered substandard solely because it

does not contain sanitary or food preparation facilities.

Sec. 882.521 Federal preference: rent burden.

(a) ``Rent burden preference'' means the federal preference for

admission of applicants that pay more than 50 percent of family income

for rent.

(b) For purposes of determining whether an applicant qualifies for

the rent burden preference:

(1) ``Family income'' means Monthly Income, as defined in 24 CFR

813.102.

(2) ``Rent'' means:

(i) The actual monthly amount due under a lease or occupancy

agreement between a family and the family's current landlord; and

(ii) For utilities purchased directly by tenants from utility

providers:

(A) The utility allowance for family-purchased utilities and

services that is used in the HA tenant-based program, or

(B) If the family chooses, the average monthly payments that the

family actually made for these utilities and services for the most

recent 12-month period or, if information is not obtainable for the

entire period, for an appropriate recent period.

(3) Amounts paid to or on behalf of a family under any energy

assistance program must be subtracted from the otherwise applicable

rental amount, to the extent that they are not included in the family's

income.

(c) An applicant does not qualify for a rent burden preference if

either of the following is applicable:

(1) The applicant has been paying more than 50 percent of income

for rent for less than 90 days.

(2) The applicant is paying more than 50 percent of family income

to rent a unit because the applicant's housing assistance for occupancy

of the unit under any of the following programs has been terminated

because of the applicant's refusal to comply with applicable program

policies and procedures on the occupancy of underoccupied and

overcrowded units:

(i) The Section 8 programs or public and Indian housing programs

under the United States Housing Act of 1937;

(ii) The rent supplement program under section 101 of the Housing

and Urban Development Act of 1965; or

(iii) Rental assistance payments under section 236(f)(2) of the

National Housing Act.

PART 883--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--STATE

HOUSING AGENCIES

8. The authority citation for part 883 continues to read as

follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f, and 3535(d).

9. Section 883.714 is revised and new Secs. 883.715 through 883.718

are added, to read as follows:

Sec. 883.714 Selection preferences.

(a) Types of preference. There are three types of admission

preferences.

(1) ``Federal preferences'' are preferences that are prescribed by

federal law and required to be used in the selection process. See

Sec. 883.715(a).

(2) ``Ranking preferences'' are preferences that may be established

by the owner to use in selecting among applicants that qualify for

federal preferences. See Sec. 883.715(b).

(3) ``Local preferences'' are preferences that may be established

by the housing agency administering the Section 8 Certificate and

Voucher program in the area, for use in selecting among applicants

without regard to their federal preference status.

(b) System. The owner must establish a system for selection of

applicants from the waiting list that includes the following:

(1) How the federal preferences will be used;

(2) How any ranking preferences will be used;

(3) How any local preferences will be used; and

(4) How any residency preference will be used.

(c) Use of preference in selection process.

(1) Factors other than preference.

(i) Characteristics of the unit. The owner may match other

characteristics of the applicant family with the type of unit

available, e.g., number of bedrooms. In selection of a family for a

unit that has special accessibility features, the owner must give

preference to families that include persons with disabilities who can

benefit from those features of the unit (see 24 CFR 8.27 and

100.202(c)(3)). Also, in selection of a family for a unit in a mixed

population project, the owner will give preference to elderly families

and disabled families.

(ii) Singles preference. See part 812 of this chapter.

(2) Local preference admissions.

(i) If an owner wants to use preferences to select among applicants

without regard to their federal preference status, the owner must use

the local preference system adopted for use in the Section 8

Certificate and Rental Voucher programs (see Sec. 982.209 of this

title) by the housing agency for the jurisdiction. If there is more

than one HA for the jurisdiction, the owner shall use the local

preference system of the HA for the lowest level of government that has

jurisdiction where the project is located.

(ii) Before the owner implements the HA's local preferences, the

owner must receive approval from the HUD Field Office. HUD shall review

these preferences to assure that they are applicable with respect to

any tenant eligibility limitations for the subject housing and that

they are consistent with HUD requirements pertaining to

nondiscrimination and the Affirmative Fair Housing Marketing

objectives. If HUD determines that the local preferences are in

violation of those requirements, the owner will not be permitted to

admit applicants on the basis of any local preferences.

(iii) ``Local preference limit'' means thirty percent of total

annual admissions to the project. In any year, the number of families

given a preference in admission pursuant to a local preference over

families with a federal preference may not exceed the local preference

limit.

(d) Informing applicants about admission preferences.

(1) The owner must inform all applicants about available

preferences and must give applicants an opportunity to show that they

qualify for available preferences (federal preference, ranking

preference, or local preference).

(2) If the owner determines that the notification to all applicants

on a waiting list required by paragraph (d)(1) of this section is

impracticable because of the length of the list, the owner may provide

this notification to fewer than all applicants on the list at any given

time. The owner, must, however, have notified a sufficient number of

applicants at any given time that, on the basis of the owner's

determination of the number of applicants on the waiting list who

already claim a federal preference and the anticipated number of

project admissions:

(i) There is an adequate pool of applicants who are likely to

qualify for a federal preference; and

(ii) It is unlikely that, on the basis of the owner's framework for

applying the preferences under paragraph (b) of this section and the

federal preferences claimed by those already on the waiting list, any

applicant who has not been so notified would receive assistance before

those who have received notification.

(e) Residency preferences--(1) Restrictions. Local residency

requirements are prohibited. With respect to any residency preference,

applicants who are working or who have been notified that they are

hired to work in the jurisdiction shall be treated as residents of the

jurisdiction. A residency preference may not be based on how long the

applicant has resided in or worked in the jurisdiction.

(2) HUD review. [Reserved]

(f) Nondiscrimination. (1) Any selection preferences that are used

by an owner must be established and administered in accordance with the

following authorities:

(i) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and

the implementing regulations at 24 CFR part 1;

(ii) The Fair Housing Act (42 U.S.C. 3601-19) and the implementing

regulations at 24 CFR parts 100, 108, 109, and 110;

(iii) Executive Order 11063 on Equal Opportunity in Housing and the

implementing regulations at 24 CFR part 107;

(iv) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794)

and the implementing regulations at 24 CFR part 8;

(v) The Age Discrimination Act of 1975 (42 U.S.C. 6101-07) and the

implementing regulations at 24 CFR part 146; and

(vi) The Americans with Disabilities Act (42 U.S.C. 12101-12213) to

the extent applicable.

(2) Such preferences also must be consistent with HUD's affirmative

fair housing objectives and (where applicable) the owner's HUD-approved

affirmative fair housing marketing plan.

(g) Income-based admission. The owner may not select a family for

admission in an order different from the order on the waiting list for

the purpose of selecting a relatively higher income family for

admission.

(h) Notice and opportunity for a meeting where preference is

denied.

(1) If the owner determines that an applicant does not qualify for

a federal preference, ranking preference, or local preference claimed

by the applicant, the owner must promptly give the applicant written

notice of the determination. The notice must contain a brief statement

of the reasons for the determination, and state that the applicant has

the right to meet with a representative of the owner to review the

determination. The meeting may be conducted by any person or persons

designated by the owner, who may be an officer or employee of the

owner, including the person who made or reviewed the determination or a

subordinate employee. The procedures specified in this paragraph (h)(1)

must be carried out in accordance with HUD's requirements.

(2) The applicant may exercise other rights if the applicant

believes that the applicant has been discriminated against on the basis

of race, color, religion, sex, national origin, age, disability or

familial status.

(Approved by the Office of Management and Budget under OMB control

number 2502-0372)

Sec. 883.715 Federal preferences: general.

(a) Definition. A federal preference is a preference under federal

law for selection of families that are:

(1) Involuntarily displaced;

(2) Living in substandard housing (including families that are

homeless or living in a shelter for the homeless); or

(3) Paying more than 50 percent of family income for rent.

(b) Ranking preferences: selection among federal preference

holders. The owner's system of administering the federal preferences

may provide for use of ranking preference for selecting among

applicants who qualify for federal preference.

(1) The owner could give preference to working families--so long as

the prohibition of Sec. 883.714(g) against selection based on income

and the nondiscrimination provisions that protect against

discrimination on the basis of age or disability are not violated. (If

the owner adopts such a preference, it may not give greater weight to

an applicant based on the amount of employment income, and an applicant

household shall be given the benefit of the preference if the head and

spouse, or sole member is age 62 or older or is receiving social

security disability, supplemental security income disability benefits,

or any other payments based on an individual's inability to work.) An

owner could give preference to graduates of, as well as active

participants in, educational and training programs that are designed to

prepare individuals for the job market. The owner also could use the

housing agency's ``local preferences'' for the Section 8 Certificate

and Voucher programs to rank federal preference holders.

(2) The system may give different weight to the federal

preferences, through such means as:

(i) Aggregating the federal preferences (e.g., provide that two

federal preferences outweigh one);

(ii) Giving greater weight to holders of a particular federal

preference (e.g., provide that an applicant living in substandard

housing has greater need for housing than--and, therefore, would be

considered for assistance before--an applicant paying more than 50

percent of family income for rent); or

(iii) Giving greater weight to a federal preference holder who fits

a particular category of a single federal preference (e.g., provide

that those living in housing that is dilapidated or has been declared

unfit for habitation by an agency or unit of government have a greater

need for housing than those whose housing is substandard only because

it does not have a usable bathtub or shower inside the unit for the

exclusive use of the family).

(c) Qualifying for a federal preference--(1) Basis of federal

preference.

(i) Displacement. An applicant qualifies for federal preference if:

(A) The applicant has been involuntarily displaced and is not

living in standard, permanent replacement housing, or

(B) The applicant will be involuntarily displaced within no more

than six months from the date of preference status certification by the

family or verification by the owner.

(ii) Substandard housing. An applicant qualifies for a federal

preference if the applicant is living in substandard housing. An

applicant that is homeless or living in a shelter for the homeless is

considered as living in substandard housing.

(iii) Rent burden. An applicant qualifies for a federal preference

if the applicant is paying more than 50 percent of family income for

rent.

(2) Certification of preference. An applicant may claim

qualification for a federal preference by certifying to the owner that

the family qualifies for federal preference. The owner must accept this

certification, unless the owner verifies that the applicant is not

qualified for federal preference.

(3) Verification of preference.

(i) Before admitting an applicant on the basis of a federal

preference, the owner must require the applicant to provide information

needed by the owner to verify that the applicant qualifies for a

federal preference because of the applicant's current status. The

applicant's current status must be determined without regard to whether

there has been a change in the applicant's qualification for a federal

preference between the time of application and selection for admission,

including a change from one federal preference category to another.

(ii) The owner must use the verification procedures in

Sec. 883.716(c) (involuntary displacement); Sec. 883.717(c)

(substandard housing); and Sec. 883.718(b) (rent burden).

(iii) Once the owner has verified an applicant's qualification for

a federal preference, the owner need not require the applicant to

provide information needed by the owner to verify such qualification

again unless:

(A) The owner determines reverification is desirable because a long

time has passed since verification, or

(B) The owner has reasonable grounds to believe that the applicant

no longer qualifies for a federal preference.

(4) Effect of current residence in assisted housing. No applicant

is to be denied a federal preference for which the family otherwise

qualifies on the basis that the applicant already resides in assisted

housing; for example, the actual condition of the housing unit must be

considered, or the possibility of involuntary displacement resulting

from domestic violence must be evaluated.

(d) Approval of special conditions satisfying preference

definitions. HUD may specify additional conditions under which the

federal preferences, as defined in paragraph (a) of this section, can

be satisfied. In such cases, appropriate certification of qualification

must be provided. (See HUD Handbook 4350.3, which is available at HUD

field offices.)

(Approved by the Office of Management and Budget under OMB control

number 2502-0372)

Sec. 883.716 Federal preference: involuntary displacement.

(a) How applicant qualifies for displacement preference.

(1) An applicant qualifies for a federal preference on the basis of

involuntary displacement if either of the following apply:

(i) The applicant has been involuntarily displaced and is not

living in standard, permanent replacement housing; or

(ii) The applicant will be involuntarily displaced within no more

than six months from the date of preference status certification by the

family or verification by the owner.

(2)(i) ``Standard, permanent replacement housing'' is housing:

(A) That is decent, safe, and sanitary;

(B) That is adequate for the family size; and

(C) That the family is occupying pursuant to a lease or occupancy

agreement.

(ii) ``Standard, permanent replacement housing'' does not include:

(A) Transient facilities, such as motels, hotels, or temporary

shelters for victims of domestic violence or homeless families; or

(B) In the case of domestic violence, the housing unit in which the

applicant and the applicant's spouse or other member of the household

who engages in such violence live.

(b) Meaning of involuntary displacement. An applicant is or will be

involuntarily displaced if the applicant has vacated or will have to

vacate the unit where the applicant lives because of one or more of the

following:

(1) Displacement by disaster. An applicant's unit is uninhabitable

because of a disaster, such as a fire or flood.

(2) Displacement by government action. Activity carried on by an

agency of the United States or by any State or local governmental body

or agency in connection with code enforcement or a public improvement

or development program.

(3) Displacement by action of housing owner. (i) Action by a

housing owner forces the applicant to vacate its unit.

(ii) An applicant does not qualify as involuntarily displaced

because action by a housing owner forces the applicant to vacate its

unit unless:

(A) The applicant cannot control or prevent the owner's action;

(B) The owner action occurs although the applicant met all

previously imposed conditions of occupancy; and

(C) The action taken by the owner is other than a rent increase.

(iii) To qualify as involuntarily displaced because action by a

housing owner forces the applicant to vacate its unit, reasons for an

applicant's having to vacate a housing unit include, but are not

limited to, conversion of an applicant's housing unit to non-rental or

non-residential use; closing of an applicant's housing unit for

rehabilitation or for any other reason; notice to an applicant that the

applicant must vacate a unit because the owner wants the unit for the

owner's personal or family use or occupancy; sale of a housing unit in

which an applicant resides under an agreement that the unit must be

vacant when possession is transferred; or any other legally authorized

act that results or will result in the withdrawal by the owner of the

unit or structure from the rental market.

(iv) Such reasons do not include the vacating of a unit by a tenant

as a result of actions taken by the owner because the tenant refuses:

(A) To comply with HUD program policies and procedures for the

occupancy of under-occupied or overcrowded units; or

(B) To accept a transfer to another housing unit in accordance with

a court decree or in accordance with policies and procedures under a

HUD-approved desegregation plan.

(4) Displacement by domestic violence.

(i) An applicant is involuntarily displaced if:

(A) The applicant has vacated a housing unit because of domestic

violence, or

(B) The applicant lives in a housing unit with a person who engages

in domestic violence.

(ii) ``Domestic violence'' means actual or threatened physical

violence directed against one or more members of the applicant family

by a spouse or other member of the applicant's household.

(iii) To qualify as involuntarily displaced because of domestic

violence:

(A) The owner must determine, in accordance with HUD's

administrative instructions, that the domestic violence occurred

recently or is of a continuing nature; and

(B) The applicant must certify that the person who engaged in such

violence will not reside with the applicant family unless the owner has

given advance written approval. If the family is admitted, the owner

may deny or terminate assistance to the family for breach of this

certification.

(5) Displacement to avoid reprisals.

(i) An applicant family is involuntarily displaced if:

(A) Family members provided information on criminal activities to a

law enforcement agency; and

(B) Based on a threat assessment, a law enforcement agency

recommends rehousing the family to avoid or minimize a risk of violence

against family members as a reprisal for providing such information.

(ii) The owner may establish appropriate safeguards to conceal the

identity of families requiring protection against such reprisals.

(6) Displacement by hate crimes.

(i) An applicant is involuntarily displaced if:

(A) One or more members of the applicant's family have been the

victim of one or more hate crimes; and

(B) The applicant has vacated a housing unit because of such crime,

or the fear associated with such crime has destroyed the applicant's

peaceful enjoyment of the unit.

(ii) ``Hate crime'' means actual or threatened physical violence or

intimidation that is directed against a person or his or her property

and that is based on the person's race, color, religion, sex, national

origin, handicap, or familial status.

(iii) The owner must determine, in accordance with HUD's

administrative instructions, that the hate crime involved occurred

recently or is of a continuing nature.

(7) Displacement by inaccessibility of unit. An applicant is

involuntarily displaced if:

(i) A member of the family has a mobility or other impairment that

makes the person unable to use critical elements of the unit; and

(ii) The owner is not legally obligated to make the changes to the

unit that would make critical elements accessible to the disabled

person as a reasonable accommodation.

(8) Displacement because of HUD disposition of multifamily project.

Involuntary displacement includes displacement because of disposition

of a multifamily rental housing project by HUD under section 203 of the

Housing and Community Develoment Amendments of 1978.

(c) Involuntary displacement preference: Verification. Verification

of an applicant's involuntary displacement is established by the

following documentation:

(1) Displacement by disaster. Certification, in a form prescribed

by the Secretary, from a unit or agency of government that an applicant

has been or will be displaced as a result of a disaster that results in

the uninhabitability of an applicant's unit.

(2) Displacement by government action. Certification, in a form

prescribed by the Secretary, from a unit or agency of government that

an applicant has been or will be displaced by activity carried on by an

agency of the United States or by any State or local governmental body

or agency in connection with code enforcement or a public improvement

or development program.

(3) Displacement by owner action. Certification, in a form

prescribed by the Secretary, from an owner or owner's agent that an

applicant had to or will have to vacate a unit by a date certain

because of owner action.

(4) Displacement because of domestic violence. Certification, in a

form prescribed by the Secretary, of displacement because of domestic

violence from the local police department, social services agency, or

court of competent jurisdiction, or a clergyman, physicia

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