Public Housing Program; Demolition or Disposition of Public Housing Projects

SUMMARY: This rule makes final the interim rule which implemented

section 121 of the Housing and Community Development Act of 1987.

Section 121 amended section 18 of the United States Housing Act of

1937, which governs the demolition and disposition of public and Indian

housing. Section 121 combined two of the previous demolition criteria,

so that demolition may be approved if the project is obsolete due to

its physical condition, location, or other factors which make it

unusable for housing, and no reasonable program of modifications, such

as rehabilitation, is feasible to return the project to useful life.

Section 121 also provided that projects may not be demolished or

disposed of unless the public housing agency (PHA) has developed a plan

for the provision of a replacement unit for each unit involved. The

plan must include a schedule for its completion (not to exceed six

years); and HUD must agree, upon approving the plan, to commit the

funds necessary to carry out the plan over the approved schedule, to

the extent such funding is not provided from other sources (e.g., State

or local programs or proceeds of disposition), and HUD's commitment is

subject to the availability of future appropriations. Section 121

repealed a previous statutory provision which made section 18

inapplicable to conveyance of units under homeownership programs. This

rule continues that inapplicability to units under certain established

homeownership programs, including disposition of a public housing

project in accordance with an approved homeownership program under

title III of the United States Housing Act of 1937, as provided by

section 412(b) of the National Affordable Housing Act (``NAHA'').

Section 412(a) of NAHA amended section 18 of the U.S. Housing Act

of 1937 to require that tenant councils, resident management

corporation, and tenant cooperative, if any, be given appropriate

opportunities to purchase the project or portion of the project covered

by the demolition or disposition application. Therefore, a separate

Federal Register document was published on October 6, 1992, at 57 FR

46074, that set forth the procedures and requirements for providing the

opportunity to purchase to tenant councils, resident management

corporations, and tenant cooperatives. This document was open to public

comment and is being made final by this rule.

This rule also contains a provision that states that in the case of

scattered-site housing of a public housing agency, the net proceeds of

a disposition that is less than the full disposition shall be used for

the payment of development cost for the project and for the retirement

of outstanding obligations issued to finance original development or

modernization of the project, in an amount that bears the same ratio to

the total of such costs and obligations as the number of units disposed

of bears to the total number of units of the project at the time of

disposition. This is a direct statutory requirement in compliance with

section 512 of NAHA and, therefore, is contained in this final rule.

Section 116 of the Housing and Community Development Act of 1992

modified section 412(a) and provided for the use of 5-year project-

based and tenant-based assistance in certain instances. It also

provided that a very limited number of units could be demolished before

the replacement requirements must be met. The section 116 provisions

are considered self-executing and, therefore, are contained in this

final rule.

EFFECTIVE DATE: February 17, 1995.

FOR FURTHER INFORMATION CONTACT: William J. Flood, Acting Director,

Office of Construction, Rehabilitation and Management, Office of Public

and Indian Housing, Department of Housing and Urban Development, 451

Seventh Street, S.W., Washington, D.C. 20410, telephone (202) 708-1800.

A telecommunications device for deaf persons (TDD) is available at

(202) 472-6725. (These are not toll-free telephone numbers.)

SUPPLEMENTARY INFORMATION: The information collection requirements

contained in this rule have been submitted to the Office of Management

and Budget (OMB) for review under the Paperwork Reduction Act of 1980

and have been assigned OMB control number 2577-0075.

Background

Section 121 of the Housing and Community Development Act of 1987

(Pub. L. 100-242) (``1987 Act'') amended section 18 of the United

States Housing Act of 1937 (42 U.S.C. 1437p) (``1937 Act'')--the

statutory provision governing the demolition and disposition of public

and Indian housing. On August 17, 1988, the Department published an

interim rule (53 FR 30984) which implemented the 1987 Act amendments

and became effective on October 6, 1988.

Below is a discussion of the public comments received on the

interim rule, as well as the changes made by the interim rule as a

result of the public comments.

Following that is a discussion of the remaining provisions of the

final rule that were not discussed in the interim rule section of this

preamble. This section also includes a discussion of the statutory

changes made by section 412(a) of the National Affordable Housing Act

(Pub.L. 101-625) (``NAHA''), as amended by section 116(a) of the 1992

Act, and the public comments received on the October 6, 1992 Federal

Register notice which implemented section 412(a).

Interim Rule

Section 121 of the 1987 Act combined two of the criteria for

demolition of public housing units, by requiring both that the project

or portion of the project be obsolete as to physical condition,

location, or other factors, making it unusable for housing purposes,

and that no reasonable program of modifications is feasible to return

the project or portion of the project to useful life. One factor that

the Department will take into consideration in determining whether the

program of modifications is reasonable is where the costs of such

program exceed 90 percent of total development cost (TDC). (The use of

a percentage of TDC to establish the reasonable cost for demolition was

set forth previously in HUD Handbook 7486.1.) Before this statutory

change, either criterion could be the basis for demolition of a project

or portion of a project. The regulatory amendment for implementation of

this statutory requirement can be found in Sec. 970.6 of both the

interim rule and this final rule.

The 1987 Act made no change in the alternative demolition criterion

applicable to demolition of only a portion of a project; i.e., where

demolition will help to assure the useful life of the remaining portion

of the project. An example of this would be selective demolition of

units to reduce [[Page 3707]] project density incident to the

modernization of the rest of the project.

The 1987 Act made no change in the disposition criteria.

Section 121 of the 1987 Act also mandated detailed requirements for

a replacement housing plan for the provision of a decent, safe,

sanitary, and affordable rental dwelling unit--on a one-for-one basis--

for each public housing dwelling unit to be demolished or disposed of.

The replacement housing plan must contain a schedule for completing the

plan, within a period consistent with the size of the proposed

demolition or disposition, but the schedule may in no event exceed six

years. Questions have been raised regarding the meaning of

``completion.'' ``Completion'' does not mean that the replacement

housing must be built or rehabilitated within the six years. For

replacement units developed under the public housing development

program, the completion of the plan would be when units have reached

the stage of notice to proceed for conventional units and contract of

sale for Turnkey units. Other replacement plan requirements contained

in the 1987 Act are (1) that the plan be approved by the unit of

general local government1 in which the project is located; (2)

that the plan ensure that the rent paid by the tenant after relocation

will not exceed that permitted under the Act; and (3) that there be no

action to demolish or dispose of any unit until the tenant has been

relocated to decent, safe, sanitary, and affordable housing that is, to

the maximum extent practicable, of the tenant's choice. (Some persons

displaced by a demolition or disposition activity are also covered by

the Uniform Relocation Act, as described later.) The rule also allows

replacement with units of different sizes, after analysis of local

needs as determined by the PHA, to accommodate changes in local

priority needs. However, at least the same total number of individuals

and families must be accommodated. The regulatory amendments for

implementation of these statutory requirements can be found in

Secs. 970.4(d) and 970.11 of both the interim rule and this final rule.

\1\The Department has interpreted the phrase ``unit of general

local government'' to mean the chief executive officer, e.g., the

mayor or the county executive, as discussed later in this preamble.

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Approval of an application for demolition or disposition requires a

commitment for the funds necessary to carry out the plan. To the extent

funding is not provided from other sources (e.g., from State or local

programs or the proceeds of disposition), HUD approval of the

application for demolition or disposition will be conditioned on HUD's

agreement to commit the funds--subject to availability of future

appropriations--necessary to carry out the plan in accordance with its

approved schedule. Because of the responsibility imposed on HUD to

commit the funds necessary to carry out the plan, a high degree of

certainty with respect to State and local commitments is necessary.

Therefore, in order for HUD to determine HUD's commitment, at the time

of application the PHA must provide written documentation of commitment

of State or local funding for the replacement housing if that is what

is contemplated in the replacement housing plan.

The statutory requirements for the plan enumerate the following

types of eligible replacement housing, to be used singularly or in any

combination: (1) The development of additional public housing dwelling

units (by acquisition with or without rehabilitation or new

construction); (2) the use of 15-year project-based assistance under

section 8, when appropriated;\2\ (3) the use of not less than 15-year

project-based assistance under other Federal programs; (4) the

acquisition with or without rehabilitation or development of dwelling

units assisted under a State or local government program that provides

for project-based assistance that is, in terms of eligibility,

contribution to rent, and length of assistance contract (not less than

15 years), comparable to assistance under section 8(b)(1) of the 1937

Act; or (5) any combination of such methods; or (6) the use of 15-year

tenant-based assistance under section 8 (excluding rental vouchers

under section 8(o)), including Section 8 Rental Certificates with 15-

year funding subject to the special additional statutory constraints

discussed below.

\2\Replacement housing under this provision is limited. When

section 121 of the 1987 Act was enacted, all Certificate Program

funding was appropriated with 15 years of budget authority and,

therefore, was readily available with a 15-year term. However, since

1989, Certificate Program funding has been appropriated with only a

5-year term, except for the special appropriations for Public

Housing Demo/Dispo replacement housing. The last such special

appropriation was in FY 1990.

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However, section 116(b) of the 1992 Act modifies the replacement

housing plan requirements by permitting, where 15-year project-based

assistance under section 8, 15-year project-based assistance under

other Federal programs, and 15-year tenant-based assistance under

section 8 (excluding vouchers) is not available, and where an

application proposes demolition or disposition of 200 or more units,

the use of available project-based assistance under section 8 having a

term of not less than 5 years, the use of available project-based

assistance under other Federal programs having a term of not less than

5 years, and the use of tenant-based assistance under section 8

(excluding vouchers) having a term of not less than 5 years,

respectively.

Note: In the case of 15-year project based assistance under

other Federal programs, the Department has determined that low-

income housing credits under Section 42 of the Internal Revenue

Service Code is a Federal program providing 15-year project-based

assistance and, therefore, qualifies as a source of replacement

housing. Any replacement housing plan proposing the use of these

credits must assure that the low-income housing units in the low-

income housing credit project which are designated as replacement

housing will be reserved for low-income families for the requisite

period. Units which at the time of allocation of the credit are also

receiving Federal assistance under Section 8 (except tenant-based

assistance) or Section 23 of the Act, or Section 236, 221(d)(3) BMIR

or Section 221(d)(5) of the National Housing Act, or Section 101 of

the Housing Act of 1965, or other similar Federal program, are not

eligible as replacement housing under this paragraph.

However, in the case of an application proposing demolition or

disposition of 200 or more units, not less than 50 percent of the

dwelling units for replacement housing shall be provided through the

acquisition or development of additional public housing dwelling units

or through project-based assistance, and not more than 50 percent of

the additional dwelling units shall be provided through tenant-based

assistance under section 8 (excluding vouchers) having a term of not

less than 5 years.

Section 116(b) also provides that, in any 5-year period, a PHA may

demolish not more than the lesser of 5 dwelling units or 5 percent of

the total dwelling units owned and operated by the PHA, without

providing an additional dwelling unit for each public housing dwelling

unit to be demolished, but only if the space occupied by the demolished

unit is used for meeting the service of other needs of the public

housing residents. It should be noted that this provision applies only

to demolition and not to disposition.

The provisions of section 116(b) are considered self-executing

also. Accordingly, this final rule contains revisions to Sec. 970.11(a)

and creates a new Sec. 970.11(j).

The following statutory limitations on the use of fifteen-year

section 8 tenant-based assistance should be kept in mind:

With the exception of applications for demolition or disposition of

200 or more [[Page 3708]] units that propose the use of tenant-based

assistance under Section 8 having a term of not less than five years

for the replacement of not more than 50 percent of the units to be

demolished or disposed of, the use of Section 8 tenant-based assistance

(Existing Housing rental certificates) for replacement housing requires

a two-part finding by HUD that (1) project-based assistance (including

public housing, as well as other types of project-based assistance) is

not feasible under the program standards or under any combination of

these programs, and (2) private rental housing is actually available to

those who would be assisted under the plan and that the supply of such

housing is sufficient for the total number of rental certificates and

rental vouchers available in the community and is likely to remain

available for the full 15-year term of the assistance. This two-part

finding must be based on objective information, such as the following

statutory data elements: Rates of participation by landlords in the

section 8 program; size, conditions and rent levels of available rental

housing as compared to section 8 standards; the supply of vacant

existing housing meeting the section 8 housing quality standards with

rents at or below the fair market rent, or the likelihood of adjusting

the fair market rent; the number of eligible families waiting for

public housing or housing assistance under section 8; and the extent of

discrimination against the types of individuals or families to be

served by the assistance.

To justify the two-part finding, the PHA must provide sufficient

information to support both parts of the finding--why any and all

combinations of project-based assistance are not feasible and how the

conditions for tenant-based assistance will be met, based on the

pertinent facts of the particular local situation.

The determination as to the lack of feasibility of project-based

assistance must be based on the standards for feasibility stated in the

regulations pertaining to each type of eligible project-based program

identified in Sec. 970.11, including public housing, as well as the

other types of eligible Federal, State and local programs. Thus, a

finding of lack of feasibility may be made only if the applicable

feasibility standards could not be met under any of the eligible

programs, or any combination of them. For example, with regard to the

feasibility of additional public housing development, relevant factors

would include local needs for new construction or rehabilitation,

availability of suitable properties for acquisition or sites for

construction, and HUD determinations under cost containment policies.

The second part of the finding--availability of housing for tenant-

based assistance--is a matter of whether the facts concerning local

need and housing supply justify such a finding. Above are listed the

statutory data elements on which a finding should be based. HUD may

require additional data as may be relevant in particular circumstances.

Note: The statutory limitations discussed above do not apply to

applications for demolition or disposition of 200 or more units that

propose the use of tenant-based assistance under section 8 having a

term of not less than 5 years for replacement of not more than 50

percent of the units to be demolished or disposed of.

Section 121 of the 1987 Act prohibits the use of rental vouchers

for replacement housing. However, the Department has determined that

rental vouchers may be an acceptable relocation housing resource,

provided the displaced tenant is given referrals to suitable/comparable

replacement housing (comparable housing, if the URA applies) where the

rent paid by the tenant following relocation will not exceed the amount

permitted under section 3(a) of the 1937 Act. (See Sec. 970.5(b)). The

PHA can meet its relocation housing obligation by providing a housing

voucher and referrals to units that fall within the voucher payment

standard and are owned by a person who agrees to rent to a voucher

holder. The rule also makes the PHA responsible for payment of moving

expenses and the provision of appropriate advisory services, including

timely information notices, counseling, and the inspection of housing

to which persons relocate.

The statutory restrictions on types of housing assistance that may

be counted as replacement units do not apply to relocation. For

example, tenants may relocate to other existing public housing units,

or to privately owned housing, with rental certificate or rental

voucher assistance, as qualified above. The purpose of relocation is to

assure that all displaced families obtain other suitable/comparable

housing at affordable rents, while the purpose of one-for-one

replacement is to assure that the total low-income housing stock

available is not diminished.

Public Comments

As a result of the interim rule published on August 17, 1988, at 53

FR 30984, public comments were received from six commenters: Three

legal services organizations, one public housing agency, one community

development organization, and one national association.

The commenters raised a variety of issues concerning the

applicability of part 970, including whether (1) the 1987 Act

amendments are applicable retroactively, (2) ``units approved for

deprogramming'' before the effective date of the 1987 Act should be

exempted, and (3) the exemption for homeownership sales to tenants

should be retained. Below is a discussion of these issues, as well as

some others raised by the commenters, and the Department's responses to

them.

Retroactivity

Some commenters argued that the 1987 Act amendments should be

applicable retroactively to cases where demolition or disposition was

approved by HUD but not completed by the PHA before February 5, 1988,

the effective date of the 1987 Act. These commenters maintained that

even before the 1987 Act, section 18 of the 1937 Act required

replacement housing in all instances of demolition or disposition of

housing units, and that the 1987 amendments did not change the

statutory requirements for replacement, but merely corrected an

erroneous interpretation by HUD in the then-existing regulations.

The effect of acceptance of this argument would be to revoke those

pre-1987 Act approvals, requiring the PHA to meet all added

requirements under the 1987 Act and obtain a new HUD approval. The

Department does not believe this effect to be defensible and disagrees

with the commenters for the reasons set forth below.

HUD's first regulation on the demolition and disposition of public

housing was published as a final rule (24 CFR part 870) on November 9,

1979 (44 FR 65368). At that time, the statutory language on this issue

afforded HUD considerable administrative discretion as to regulatory

policy. (See sections 6(f) and 14(f) of the 1937 Act). Neither these

statutory provisions nor their legislative history contain any mention

of replacement housing (except in connection with relocation), thus

allowing HUD administrative rule making discretion on this issue. HUD

exercised that discretion by providing in the 1979 regulation that ``If

there is a local need for low-income housing, the PHA's request for

demolition or disposition of dwelling units shall include a plan for

replacement housing on a one-for-one basis or as approved by HUD to be

warranted by current and projected needs for low-income housing and

subject to HUD's findings as to the availability of funds.'' Thus,

subject to [[Page 3709]] the need for low-income housing and the

availability of funds, HUD's original regulation required, as a matter

of policy, replacement housing as a condition for HUD approval in all

cases of either demolition or disposition of dwelling units. However,

the Housing and Urban-Rural Recovery Act of 1983 (``1983 Act'')

repealed former sections 6(f) and 14(f) and substituted a new section

18 that was more detailed and prescriptive. HUD decided to impose a

replacement housing requirement only where required by the statute, and

both the statute and the rule allowed the PHA discretion as to the

provision of replacement housing with one exception. The only

circumstance under which the statute and the rule required replacement

housing was where the justification for disposition is that it will

allow acquisition, development or rehabilitation of other units which

will be more efficiently or effectively operated as lower income

housing and will preserve the lower income housing stock available in

the community. (See section 18(a)(2)(A)(i), U.S. Housing Act of 1937,

42 U.S.C.1437p.) No replacement housing requirement was prescribed

under the other two alternative criteria for disposition, and no

replacement requirement was prescribed at all for demolition,

regardless of which of the demolition criteria was applicable.

The argument for retroactive application of the 1987 amendments is

not persuasive. Indeed, in Project B.A.S.I.C. v. Kemp, 907 F.2d 1242

(1st Cir., July 6, 1990) the Court of Appeals for the First Circuit

rejected the retroactive operation of the statute. The Fifth Circuit

was in accord in Walker v. HUD, 912 F.2d 819 (5th Cir., September 27,

1990).

To preclude any further misconceptions on this point, the final

rule adds clarifying language under Sec. 970.2(b). A demolition or

disposition application that received written HUD approval before

February 5, 1988, may be carried out according to the terms and

conditions of the approval and the regulations in effect at the date of

approval, without the necessity for meeting any additional requirements

under the 1987 Act or for seeking any additional HUD approval.

Applicability to Units Approved for Deprogramming

Several commenters objected to the inclusion in the interim rule's

listing of exceptions in Sec. 970.2(g) of ``units deprogrammed before

February 5, 1988'' (the effective date of the 1987 Act). In a

subsequent notice, however, this provision was corrected to read

``units approved for deprogramming before February 5, 1988''. (See 53

FR 40220, October 14, 1988).

The final rule removes the ``units approved for deprogramming''

exception. The term ``units approved for deprogramming'' refers to HUD

approval of a formal written request by a PHA to permanently remove a

unit from both its public housing inventory and its ACC. (See 24 CFR

990.102). The exception for ``units approved for deprogramming prior to

February 5, 1988'' was intended to exclude from the coverage of the

interim rule, units which HUD had approved for demolition or

disposition, prior to the effective date of the 1987 Act amendments.

Because the term ``units approved for deprogramming'' is misinterpreted

by some to include units temporarily removed for non-dwelling use, as

well as, units approved for demolition or disposition, utilizing this

term has caused unnecessary confusion in the administration of HUD's

demolition or disposition regulations. Therefore, the exception which

references ``units approved for deprogramming'' is being deleted. A new

Sec. 970.2(b) of the final rule more clearly states the intended

exception which is that demolitions and dispositions approved by HUD

prior to February 5, 1988, are exempt from the requirements of the 1987

Act. Demolitions or dispositions that were approved by HUD before

February 5, 1988, but not carried out by that date, may be carried out

according to the terms of such approval, without reference to

subsequent amendments to this part and without obtaining any further

HUD approval. Conversions and reconfigurations of interior space are

exempted by Sec. 970.2(a)(5).

Other commenters argued for some degree of flexibility. One urged

that the exception from the replacement housing requirement be extended

to include units that were uninhabitable as of February 5, 1988, and

defined such housing as housing stock that was not suitable and usable

for housing purposes and that was not being used by the PHA as part of

its housing stock as of February 5, 1988. Another commenter suggested

that HUD be authorized to waive the replacement requirement in special

situations, such as where there is an urgent need for demolition, but

special problems preclude replacement. While arguments for some degree

of flexibility have considerable merit the statute does not provide for

such flexibility.

Exemption for Homeownership Sales to Residents

Some commenters argued that the 1987 Act amendments make the

disposition provisions applicable to homeownership sales to tenants,

because the 1987 Act removed the paragraph that specifically excepted

such sales. One commenter asserted that Congress intended to make only

the replacement housing provisions applicable to homeownership sales.

There is nothing to suggest that Congress intended to make

homeownership sales subject to the disposition provisions, including

not only the replacement housing provision, but also the justifiability

provisions under the statutory criteria, the local government approval

provision, and the tenant consultation provision. This means that the

issue is not germane to any of the following homeownership units whose

sales were approved (even if not completed) before February 5, 1988:

--All existing Turnkey III units, because approval for sale was

incident to approval for development. (Development of additional

Turnkey III units was suspended before enactment of the 1987 Act, so

there is no issue as to post-February 5, 1988 approvals for Turnkey III

sales.)

--All Mutual Help units approved for development before February 5,

1988, whether in existence or in the process of development as of that

date. (Like Turnkey III, approval of sales of Mutual Help units were

incident to approvals for development.)

--All units approved for sale under the Public Housing Homeownership

Demonstration, because all such approvals were made before the

effective date of the 1987 Act.

--All units approved for sale under the section 5(h) Homeownership

Program before the effective date of the 1987 Act. (This refers to the

regular Section 5(h) Homeownership Program under which a number of PHAs

have chosen to initiate homeownership sales to tenants over the 15

years since this statutory option was added in 1974, as distinguished

from the demonstration that was undertaken by HUD under the authority

of section 5(h).)

The Department believes that it was not the intent of Congress to

make the disposition requirements applicable to homeownership sales via

resident management corporations under the new Public Housing

Homeownership and Management Opportunities program established by

section 123 of the 1987 Act (section 21 of the 1937 [[Page 3710]] Act),

because the legislative provisions for that program contain separate

requirements on replacement, rights of tenants in occupancy, public

hearings, and use of sale proceeds.

HUD does not believe that Congress intended to make the disposition

requirements applicable to future approvals for sale of Mutual Help

units. Since approval for sale to eligible homebuyers is incident to

approval for development, imposing the disposition requirements would

seriously hinder, if not entirely preclude, development of new Mutual

Help projects that have been expressly authorized by Congress as the

principal vehicle for additional units under the Indian Housing

Program. Also, we do not believe that Congress intends to treat future

approvals for homeownership sales under the Section 5(h) Program as

dispositions subject to part 970. Property that would be suitable for

homeownership could not satisfy the disposition criteria, so that the

effect of interpreting the disposition requirements of section 18 as

applicable to the Section 5(h) Program would be de facto repeal of the

program. This would be contrary to the Conference Report language

regarding section 123(d) of the 1987 Act, which states that ``any

homeownership program in existence prior to enactment may be continued

under existing requirements * * *'' [H.R. Rep. No. 100-426, 100th

Cong., 1st Sess. p. 175 (Conference Report on S. 825)] Also, it should

be noted that the National Affordable Housing Act subjects 5(h)

proposals to replacement housing requirements contained in the HOPE for

Public and Indian Housing Homeownership (HOPE 1) program. This

represents further evidence of congressional intent that 5(h) sales not

be subject to the disposition requirements of section 18. However,

proposals by a PHA to demolish units that are the subject of these

various homeownership programs would have to satisfy the demolition

requirements of section 18 and part 970.

In keeping with section 412(b) of NAHA, the provisions of this rule

do not apply to the disposition of a public housing project in

accordance with an approved homeownership program under title III of

the 1937 Act, as added by section 411 of that legislation, (HOPE 1). In

the case of a homeownership proposal under HOPE 1 or section 5(h) from

a PHA involving partial or total demolition of units, Section 18 and

this rule apply. HOPE for Homeownership of Single Family Homes (Hope 3)

proposals involving public housing units approved prior to the 1992 Act

are likewise covered by the requirements of section 18. [The 1992 Act

took scattered-site single family public housing from under the

requirements of HOPE 3 and moved it to HOPE 1.]

Criteria for Demolition or Disposition

None of the commenters objected to the change in the disposition

criteria under the interim rule. Some, however, objected to the

language in place before the 1988 interim rule regarding the criteria

for demolition which did not change because of the 1987 Act amendments.

The language to which the commenters objected is Sec. 970.6(a)(2),

which lists adverse neighborhood conditions among the three types of

``major problems indicative of obsolescence.'' Section 970.6(a)(2) was

included in the interim rule merely to provide the context for the

change that combined ``obsolescence as to physical condition, etc.''

with ``no reasonable program of modifications, etc.'' as necessary

criteria to justify demolition. Although the language in question is

not open to public comment, the next paragraph provides clarification

on this issue.

Concern for this issue reflects a misreading of the fundamental

rationale of the whole of paragraph (a) of this section. The commenters

mistakenly assume that demolition is necessarily justified when any of

the problems listed in subparagraphs (a)(1) through (3) are found to

exist. That is not the case. The provision is not intended as a

simplistic formula, and no such formula would be adequate for the kind

of complex analysis that is called for in making these types of

determinations. The Department believes that Congress intended a

common-sense viability determination, based on a thorough examination

of all of the facts that are pertinent to both obsolescence and the

feasibility of rehabilitation.

One commenter objected to Sec. 970.6(b)--the alternative criterion

that applies in cases of partial demolition only; i.e., to permit

demolition of a portion of a project where demolition will help assure

the useful life of the remaining portion of the project. [Where

demolition of all units of a project is proposed, the only option is

the criterion of paragraph (a). Where partial demolition is proposed,

the PHA has the choice of seeking approval under either paragraph (a)

or (b)]. This commenter, expressing concern about possible abuse, urged

further amendment of the regulation to add guidelines for interpreting

the alternative criterion in paragraph (b).

The Department believes that Congress intended to give PHAs

reasonable discretion in making the judgments required to determine

when partial demolition may be justified to ``help assure the useful

life of the remaining portion of the project.'' However, the Department

is considering providing some guidance on this provision in the

revision to the Demolition/Disposition/Conversion Handbook (HUD

7486.1).

Tenant Consultation

While not making specific recommendations for changes in the

requirements for tenant consultation (see Sec. 970.4(a)), some

commenters expressed concern about this subject. Neither the interim

nor the final rule changes this provision of the old regulation.

However, in view of the comments, the Department takes this opportunity

to clarify that this regulatory requirement remains unchanged by the

later statutory requirements set forth in the NAHA or the 1992 Act.

Neither the interim rule nor this final rule changes the

requirement that the tenants of the project affected and any tenant

organizations for the project or on a PHA-wide basis must be consulted

in the developmental stage of the PHA's proposal, with fair notice and

opportunity to submit comments and recommendations, including any

recommendations for alternative strategies. While the PHA retains the

authority to make the final decision whether to submit a demolition or

disposition proposal, ``consultation'' implies a requirement for the

PHA to give full and serious consideration to tenant comments and

recommendations before making a decision. Where a building, or group of

buildings, at the development is vacant, the PHA is responsible for

consulting with any remaining residents or resident organizations, as

well as any PHA-wide resident organizations. If the development is

totally vacant, the PHA is still responsible for consulting with PHA-

wide resident organizations on the issue of whether to demolish or

dispose of the property.

Recognizing the variety of local circumstances in a program that

encompasses PHAs of different sizes in many different kinds of

communities throughout a diverse country, the regulation allows

flexibility as to the exact methods that may be employed to satisfy the

tenant consultation requirements, provided that there is genuine

compliance with the essential elements stated in Sec. 970.4(a).

Note: Section 412(a) of NAHA, as amended by the 1992 Act,

amended section 18 of the U.S. Housing Act of 1937, to require that

tenant councils, resident management [[Page 3711]] corporation, and

tenant cooperative, of the project or portion of the project covered

by the application, if any, be given appropriate opportunities to

purchase the project or portion of the project covered by the

demolition or disposition application. Therefore, a separate Federal

Register document was published in the Federal Register on October

6, 1992, at 57 FR 46074, that sets forth the procedures and

requirements for affording the opportunity to purchase to tenant

councils, resident management corporations, or tenant cooperatives.

This document was open to public comment and is being made final by

this rule. Further discussion of this document (and the public

comments received on it) is set forth later in this preamble. The

requirements of section 412(a) are separate and distinct from the

tenant consultation requirements discussed immediately above.

Relocation Assistance

Two commenters recommended that Sec. 970.5 be amended to make it

clear that, when offering a displaced tenant the choice of using a

Section 8 rental voucher or rental certificate, the PHA must inform the

tenant that rent due to the owner under the lease following relocation

may exceed the Section 8 fair market rent. The Department has included

language to clarify its policy. The Department has determined that

rental vouchers may be an acceptable relocation housing resource,

provided the PHA ensures that referrals are made to units where the

monthly amount the family must pay to the owner to cover the family's

portion of the rent due to the owner will not exceed the amount

determined in accordance with 24 CFR 813.107. (See Sec. 970.5(b)). Such

referral may be to other public housing units or units made affordable

with a Section 8 rental certificate or voucher. If the PHA provides

referrals to suitable/comparable relocation housing (comparable housing

when the displacement is subject to the URA) and a tenant with a rental

voucher elects to rent a housing unit with a rent to owner that exceeds

the voucher payment standard as determined by the Housing Voucher

program, the tenant will be responsible for the difference between the

voucher payment standard and the rent to owner. Furthermore,

Sec. 970.5(e)(2) requires the PHA to provide ``counseling and advisory

services to assure that full choices and real opportunities exist for

tenants displaced * * *.'' That language, which remains unchanged from

the old regulation, requires the PHA to give displaced tenants full and

fair information about all relocation options, including use of rental

vouchers where that option is available. As in all other matters, this

implies a duty of good faith and diligence on the part of the PHA.

There is no evidence to support the commenters' assertions that

``tenants will only select rental vouchers if they are presented (or

pushed) by the PHA as the only alternative''.

A more complete discussion of the Uniform Relocation Assistance and

Real Property Acquisition Policies Act of 1970 (URA) requirements is

set forth later in this preamble.

One commenter objected to the statement that tenants become

eligible for relocation assistance as of the date of receipt of

official notice to move, asserting that tenants sometimes vacate before

official notice as a result of PHA pressure or reduction of services.

This commenter recommended that tenants be entitled to relocation

benefits at any time if the PHA is encouraging tenants to move or fails

to maintain the property. The commenter is referred to the definition

of ``displaced person'' under Sec. 970.5(i) and the definition of

``initiation of negotiations'' under Sec. 970.5(k) to determine

eligibility for relocation assistance. A person becomes eligible for

relocation assistance when HUD approves the demolition or disposition

under this part. Also, a person forced to vacate the property by an

action associated with the planned demolition or disposition of the

property, may qualify as a ``displaced person'' who is eligible for

relocation assistance, even if the action occurs before HUD approval of

the demolition or disposition. A person who is dissatisfied with the

PHA's determination of eligibility may appeal to HUD under

Sec. 970.5(g). If HUD determines that the PHA's action resulted from

the demolition or disposition of the property, the PHA would be

required to provide the appropriate relocation assistance.

Note: If the PHA's action was found to be an ``action to

demolish or dispose of'' the property under Sec. 970.12, then the

PHA would be required to cease those actions (e.g., stop vacating a

development). If tenants believe that the PHA's actions are contrary

to its lease obligations, they may pursue the remedies available to

them under the lease.

Actual Availability of Replacement Housing

One commenter expressed concern over the fact that HUD cannot

approve demolition or disposition until there is a commitment of funds

for the necessary replacement units, and recommended that HUD propose

to Congress options for PHAs that ``desperately need to get rid of

units but for which no funds are immediately available''. The commenter

also suggested that Congress be updated regularly on the yearly needs

and costs for pending and approved demolition projects, so that

adequate funding may be appropriated.

The commenter's concern that the Department cannot approve

applications for demolition or disposition until the funds are

committed is unfounded. The Department processes requests for

demolition or disposition under section 18. However, under section 18,

applications are approved subject to the availability of funds for

replacement housing. As a point of clarification, section 513 of the

National Affordable Housing Act of 1990 requires the Department to

report to Congress each year on its replacement housing needs beginning

in FY 1992.

One commenter recommended a requirement that the replacement

housing be available for occupancy before the demolition or disposition

is carried out. This recommendation has not been incorporated into the

final rule, which conditions HUD approval and PHA action on commitment

of funds for the replacement units, rather than availability of the

units for occupancy. Once the decision has been properly approved,

requiring that the actual demolition or disposition be delayed until

replacement units are available for occupancy would be unwarranted. The

old units may be a blight on the neighborhood, vacant and substandard,

and perhaps a threat to public health and safety or a financial drain

on the PHA. In some cases, selective demolition may be an essential

part of a comprehensive modernization plan. One of the disposition

criteria was developed in contemplation of the kind of case where the

existing property will be sold to obtain funds to finance the

replacement units. Where the replacement units are to be produced by

new construction, several years will probably be required before the

new units will be available for occupancy. The commenter's

recommendation may reflect the misconception that replacement units are

always needed for relocation. However, past experience indicates that

replacement units do not normally serve as the source for relocation of

the affected residents. The affected residents are usually relocated to

other units within the PHA's inventory or provided with Section 8

assistance. There is no statutory or regulatory requirement that the

relocated residents be placed in the replacement housing.

This Final Rule

In addition to the regulatory amendments being made as a result of

the public comments discussed above, [[Page 3712]] the following

additional revisions are made in this final rule. These revisions

include modifications and new requirements originating out of the URA,

the NAHA, and the 1992 Act.

Section 970.2, Applicability, is revised to except, from coverage

of the disposition requirements of section 18 and part 970,

homeownership sales under (1) section 21 of the 1937 Act (as added by

section 123 of the 1987 Act); (2) the Turnkey III/IV and Mutual Help

Homeownership Opportunity Programs; and (3) other homeownership

programs established under sections 5(h) or 6(c)(4)(D) of the 1937 Act

and in existence before February 5, 1988, the effective date of the

1987 Act. (Section 21 pertains to homeownership programs through

resident management corporations.) Thus, the demolition/disposition

regulations will be inapplicable to all conveyances under existing

homeownership programs. In addition, in keeping with section 412(b) of

NAHA, the provisions of Part 970 do not apply to the disposition of a

public housing project in accordance with an approved homeownership

program under title III of the 1937 Act, as added by section 411 of

that legislation, (Hope 1 for Public and Indian Housing Homeownership).

However, in the case of a homeownership proposal under HOPE 1 or

section 5(h) from a PHA involving partial or total demolition of units,

Section 18 and this rule apply. Hope 3 proposals involving public

housing units approved prior to the 1992 Act are likewise covered by

the requirements of section 18. [The 1992 Act took homeownership for

scattered-site single family public housing from under the requirements

of HOPE 3 and moved it to HOPE 1.]

Section 970.2 is also revised to except easements, rights-of-way,

and transfers of utility systems incident to the normal operations of

the development.

A correction is made to Sec. 970.4(b) to be redesignated as

Sec. 970.4(c) the paragraph regarding the requirements of the

environmental and historic preservation statutes. Furthermore, this

section requires that where the site for the replacement housing is

known at the time of application for the demolition or disposition, the

site must comply with these requirements. However, the amendment to

this section clarifies that where the site(s) of the replacement

housing is not known at the time of application (whether federally or

non-federally funded), the PHA shall follow the requirements of 24 CFR

50.3(i), as set forth in the rule text at Sec. 970.4(c).

In addition, paragraphs (d), (e), (f), and (g) are added to

Sec. 970.4(c) regarding assurances and certifications for commitment of

funds to carry out the replacement housing plan, compliance with the

offering to resident organizations, relocation of residents, and site

and neighborhood standards.

[Note: In sec. 970.4 of the final rule as it existed prior to

the 1988 interim rule, paragraph (c) required a certification from

the chief executive officer that the proposed activity was

consistent with the housing assistance plan (HAP). The requirements

regarding the HAP were replaced by the Comprehensive Housing

Affordability Strategy (CHAS). However, under 24 CFR 91.1(b)(3), all

public housing programs, except HOPE 1, are excluded from the

requirements of the CHAS.] Therefore, the previous requirement for

consistency with the HAP has been dropped.

Paragraph (c) of Sec. 970.5 of this final rule is added to set

forth the requirements of the URA. Effective April 2, 1989, the URA was

amended to, among other things, expand coverage. It now covers all

persons displaced as a direct result of publicly or privately

undertaken rehabilitation, demolition or acquisition for a Federal or

federally assisted project. Therefore, demolition of any public housing

property that is owned by PHAs and that is subject to the Annual

Contributions Contract under the 1937 Act, or the disposition of the

property to a Federal agency or to any person or entity that acquires

the property for a federally assisted project, would make the

transaction subject to the URA and make any person displaced as a

result of such action eligible for relocation assistance at URA levels.

Families and individuals who are not eligible for relocation assistance

at URA levels are eligible for the relocation assistance described in

section 970.5(e). Required relocation assistance is described in HUD

Handbook 1378, Tenant Assistance, Relocation and Real Property

Acquisition.

Section 970.8, paragraph (f) is revised to clarify that approval of

the replacement housing plan shall be provided by the unit of general

local government which shall be the chief executive officer of the

jurisdiction in which the project is located (e.g., the mayor or the

county executive).

In Sec. 970.9, paragraph (b)(1) is amended to state that net

proceeds (after payment of HUD-approved costs of disposition and

relocation) shall be used for the retirement of outstanding

obligations, if any, issued to finance original development or

modernization of the project. This is in recognition of the possibility

that such obligations may not have been forgiven. (See 42 U.S.C.

1437b.) (If project debt has been forgiven, there will be no

outstanding obligations.) Reference to the payment of development costs

has been removed because development cost is contained in the

outstanding obligation, and double payment should not be implied.

A new paragraph (c) is added to Sec. 970.9 which states that in the

case of scattered-site housing of a public housing agency, the net

proceeds of a disposition shall be used in an amount that bears the

same ratio to the total of such costs and obligations as the number of

units disposed of bears to the total number of units of the project at

the time of disposition. This is a direct statutory requirement in

compliance with section 512 of the National Affordable Housing Act

(Pub. L. 101-625) and, therefore, is contained in this final rule. An

example of how this provision would be applied in cases where debt has

not been forgiven is: If a development project of ten units that cost

$100,000 has one unit disposed of for $10,000, then there would be no

net proceeds after paying off the proportional cost ($100,000 divided

by 10 = $10,000/unit) of the project. If, however, the unit was

disposed of and net proceeds were $12,000, there would be $2,000

available that the PHA would use for the provision of housing

assistance for low-income families.) Where debt has been forgiven, all

the net proceeds may be used by the PHA for the provision for low-

income housing.

Section 970.11(a) is revised to clarify that in the event that the

replacement housing will be located outside the political boundaries of

the locality of the PHA, all relevant program requirements must be

satisfied, including approval of the replacement housing plan by the

unit of general local government in which the project being demolished

or disposed is located, and the execution of such agreements as may be

necessary between the PHA and the locality in which the replacement

housing will be located. In the case of new public housing, this would

require a Cooperation Agreement between the PHA and the locality in

which the replacement housing would be located. It is expected that

replacement housing would be operated or administered by the PHA.

However, in instances where the PHA can make arrangements for another

PHA to develop, operate or administer the new public housing, the

section 8 assisted housing, or other replacement housing such as a

State or Local program Section 8 assisted housing that is outside the

PHA's area of operation, the PHA must ensure that the families that

would have been eligible to occupy the replacement housing if it had

been replaced in the same locality as the project being

[[Page 3713]] demolished or disposed, will be the same families that

benefit from the replacement housing. In addition to the Cooperation

Agreement for public housing, and in the case of Section 8 replacement

housing or other replacement housing, other agreements may be necessary

in order to assure that this and other program requirements are

satisfied.

Section 970.11(c) is revised to reflect the requirement that when

demolition or disposition of dwelling units is proposed, the PHA

application for HUD approval must contain documentation of approval by

the unit of general local government in which the project proposed for

demolition or disposition is located, which approval shall be provided

by the chief executive officer of the jurisdiction in which the project

is located (e.g., the mayor or county executive). Section 970.3 has

been revised to add to the list of definitions, a definition for

``chief executive officer of a State or unit of general local

government.''

Since October 1988 when the interim rule became effective, the

Department has interpreted the phrase ``unit of general local

government'' to mean the local governing body, e.g., the City Council

or the Board of Aldermen. Consequently, in order to comply with this

requirement, a PHA requesting permission to demolish or dispose of one

or more dwelling units was required to provide the Department with a

copy of a resolution from the City Council or the appropriate local

governing body approving the replacement housing plan. However,

experience has demonstrated that obtaining the approval of the local

governing body has proven to be an extremely time consuming and

difficult process, particularly when the replacement housing is public

housing development. In some communities the local governing body has

strenuously objected to putting public housing in the community. The

effect of local governing body opposition to a replacement housing plan

has been to delay approval of demolition or disposition applications

for extended periods of time. After a review of the problem and

research of the legislative history on this point, the Department has

determined that it is permissible to allow the chief executive officer,

e.g., the mayor or the county executive, to approve the replacement

housing plan.

Section 970.11(h) of the interim rule is revised by the final rule

for technical and clarifying reasons. The purpose of this provision is

to assure that the replacement sites will satisfy standards related to

nondiscrimination and housing opportunities. In some instances the time

for compliance with the site and neighborhood standards is during the

demolition or disposition application and review process, and in other

instances compliance is deferred. The requirements regarding site and

neighborhood standards will be as follows:

(1) If funds have been committed to provide replacement units under

the Public Housing Development Program or the Section 8 project-based

assistance program, except when the PHA plans to build back on the same

site, the site and neighborhood standards applicable for those programs

will apply and be assessed at the appropriate time as required by that

program rule or handbook and not at the time of the demolition or

disposition application. The PHA must certify to HUD at the time of the

demolition or disposition application, that once the site is

identified, the PHA will comply with the site and neighborhood

standards applicable for those programs.

(2) If funds have been committed to provide replacement units under

the Public Housing Development Program or the Section 8 project-based

assistance program and the PHA plans to build back on the same site,

the PHA shall comply with the site and neighborhood standards

applicable for those programs when the demolition or disposition

application is submitted to HUD. A complete site and neighborhood

standards review shall be done by HUD subsequent to the submission of

the demolition or disposition application but prior to approval.

(3) If the replacement housing units are to be provided under a

State or local program, and the site is known (including building back

on the same site), the PHA is required to comply with site and

neighborhood standards comparable to 24 CFR part 882 when the

demolition or disposition application is submitted to HUD. A complete

site and neighborhood standards review shall be done by HUD subsequent

to the submission of the demolition or disposition application but

prior to approval.

However, if the site is not known, the PHA shall include in the

application for demolition or disposition a certification that it will

comply with site and neighborhood standards comparable to 24 CFR part

882 once the site is known.

In the case of replacement housing funded by State or local

government funds, the PHA must demonstrate in the application that it

has a commitment for funding the replacement housing.

(4) If the replacement housing units are to be provided out of the

proceeds of the disposition of public housing property, and the site is

known (including building back on the same site), the PHA is required

to comply with site and neighborhood standards comparable to 24 part

941 (or under 24 CFR part 882 in the case of use of Section 8

assistance) when the demolition or disposition application is submitted

to HUD. A complete site and neighborhood standards review shall be done

by HUD subsequent to the submission of the demolition or disposition

application but prior to approval.

However, if the site is not known, the PHA shall include in the

application for demolition or disposition a certification that it will

comply with site and neighborhood standards comparable to 24 CFR part

941 or under 24 CFR part 882 once the site is known.

Section 970.12 of the August 1988 interim rule is not made final by

this final rule. Comments received on Sec. 970.12 will be considered in

the development of a separate proposed rulemaking on the issue of

required and permitted actions prior to approval of an application for

demolition or disposition. Until a final rule is issued on Sec. 970.12,

the provisions of the August 1988 interim rule remain effective.

Changes Required by Section 412(a) of the National Affordable Housing

Act--Resident Organization Opportunity to Purchase

Section 412(a) of the National Affordable Housing Act (``NAHA''),

Pub.L. 101-625, amended section 18 of the U.S. Housing Act of 1937 to

require that ``tenant councils, resident management corporation, and

tenant cooperative, if any,'' be given appropriate opportunities to

purchase the project or portion of the project covered by the

demolition or disposition application.

Section 116(a) of the Housing and Community Development Act of 1992

(the ``1992 Act'') amended section 18 of the U.S. Housing Act of 1937

to require PHAs to limit the opportunity to purchase the development or

portion of the development proposed for demolition or disposition only

to the resident organization(s) at the affected development. This

provision clarifies an ambiguity regarding the breadth of the offer (as

discussed below in the public comments to the October 6, 1992 Notice)

and is considered self-executing. Accordingly, the Department issued

Notice PIH 93-17 (PHA) on April 2, 1993 to inform program

administrators and participants of this clarification and its immediate

effect. This final rule [[Page 3714]] accommodates this clarification

in the new Sec. 970.13.

Section 418 of NAHA permitted the Department to establish by notice

the requirements necessary to carry out this provision. Therefore, the

Department published a notice of guidelines on October 6, 1992, at 57

FR 46075 and solicited public comments on the provisions set forth in

that notice. The Department received public comments from five

organizations: Two large national associations, one housing finance

corporation, one public school system, and a HUD field office. Below is

a listing of the issues raised by the commenters. Each issue is

followed by a discussion of the Department's resolution of the issue.

Comment: There should be a distinction provided between real

property that is developed with dwelling units and is occupied and real

property that is vacant and abandoned (which should be excluded from

the section 412(a) requirements. [a public school system]

Response: Section 412(a) does not apply in the case of totally

vacant or abandoned development. There would be no residents to

organize and, consequently, no organization to receive the offer.

However, if the development is only partially vacant, the PHA is

required to offer the property under application to the existing

resident group, or where no group exists, the PHA must make a

reasonable effort to allow the residents of the affected development to

organize. The PHA has the same responsibility where only a building, or

group of buildings, is vacant within the development.

Comment: There is no rationale for limiting the area of land to be

acquired by a public body to less than two acres. [a public school

system]

Response: On the basis of experiences in the program, the

limitation of two acres was selected to reduce the possibility of

injustice from profit-motivated actions. However, the Department's

experience is rather limited. The threshold was established based upon

experience for the last six years. It is inappropriate to allow more

flexibility in this area without (1) more time to see the impact of the

existing provision, and (2) a better understanding of the number of

PHAs affected by the provision.

Comment: Financial capabilities of resident councils, resident

management corporations, resident cooperatives or other similar legal

instrumentalities should be assessed independent of possible future

Federal grants, because such organizations may flounder when these

resources are gone. [a public school system]

If the units being sold will continue as rental units, the plan for

the use of the property should include financial operations/solvency of

the development. [a HUD field office]

Response: The long-term financial capability of a possible resident

group as a purchaser should be considered by the PHA when it reviews

the group's proposal. Absent any prior experience under the new

resident purchase requirement, the Department sees no reason to require

the PHA to give more weight to one factor over another.

Comment: The guidelines should include realistic but firm

timetables for plan implementation which should be enforced. [a public

school system]

Response: The requirements related to providing resident

organizations the opportunity to organize are very new. To date only

one resident organization has prepared a proposal for PHA

consideration. Based on this experience, there is no reason to require

strict timetables.

Comment: Another case, regarding applicability, which does not

present an appropriate opportunity for resident purchase is when the

housing authority plans to redevelop the real estate with replacement

public housing. [a housing finance corporation]

Response: The PHA is required to consult with residents and

resident organizations under Sec. 970.4 regarding any proposals to

demolish or dispose of any property. This consultation should include

advisements of any PHA plans to reuse the property and a complete

discussion of any replacement housing plans. It is clear that Congress

wanted resident organizations to be given the opportunity to purchase

the property.

Comment: It is an incorrect interpretation that is a violation of

the statute to afford notice and opportunity to purchase to city-wide

resident groups or, in the case where there is no organized resident

group at the affected project, to allow 45 days for a resident

organization to be formed. A process that is already lengthy is made

more protracted and burdensome by the time periods created by the

Department. The statutory reference to tenant groups, ``if any,''

refers to groups already in existence. [two national associations]

HUD cannot avoid the cost/benefit analysis of Executive Order

12291, by designating the document as a guideline. No cost/benefit

analysis or regulatory review was performed prior to the issuance of

the notice. The benefits of imposing a ``notice'' do not outweigh the

cost to PHAs as a result of the long delays and increased liabilities

they will have to face before being permitted to submit an application.

A PHA is permitted to demolish or sell only its very worst projects

which are often extremely unsafe. [one national association]

Response: The Department has examined the notice and the process

for permitting resident organizations to form and recognizes that the

additional time periods may be burdensome. However, the Department

still believes that as a matter of policy, residents should have the

opportunity to form a resident organization. In response to the

concerns raised by the commenter, however, this rule abbreviates the

process considerably. The process can be further truncated into the

already established requirement for tenant consultation under 24 CFR

970.4(a). Therefore, where the affected development does not have an

existing resident council, resident management corporation or resident

cooperative at the time of the PHA proposal to demolish or dispose of

the development or a portion of the development, the PHA shall make a

reasonable effort to inform residents of the development of the

opportunity to organize and purchase the property proposed for

demolition or disposition. Examples of ``reasonable effort'' at a

minimum include at least one of the following activities: Convening a

meeting, sending letters to all residents, publishing an announcement

in the resident newsletter, where available, or hiring a consultant to

provide technical assistance to the residents. The Department will not

approve any application that cannot demonstrate that the PHA has

allowed at least 45 days for the residents to organize a resident

organization. The PHA should initiate its efforts to inform the

residents of their right to organize as an integral part of the

resident consultation requirement under 24 CFR 970.4(a).

While the Department is concerned about the costs and the benefits

as they relate to the PHAs, the Department also has similar regard and

concerns for the residents who are also beneficiaries of the public

housing program. Therefore, we believe that giving residents the

opportunity to purchase projects that the PHA has deemed unusable for

public housing purposes could benefit the residents both socially and

economically. Furthermore, under Executive Order 12866 (which replaced

Executive Order 12291), only ``significant regulatory actions'' are

required to have an assessment of the costs and benefits of the action

prior to promulgation. This final rule does not [[Page 3715]] meet the

definition of ``significant regulatory action.''

Comment: The guidelines should not have been made effective upon

publication but should have permitted public comment before taking

effect. The guidelines are in violation of HUD's part 10 which requires

the Department to follow APA procedures for rulemaking. The guidelines

should be withdrawn and a new proposed rule issued, incorporating the

provisions of the Housing and Community Development Act of 1992. The

term ``notice'' in section 418 of NAHA refers to ``notice and public

comment'' and not the Federal Register format. [two national

associations]

Response: Section 418 of the National Affordable Housing Act,

Public Law 101-625, permitted the Department to establish by notice the

requirements necessary to carry out the provision in a more timely

manner. It is clear that the Congress intended that the Department

establish the requirements and procedures for offerings to resident

organizations as soon as possible. The determination as to the meaning

of ``notice'' was made after substantial consideration.

Comment: The fact that the statute and the guidelines give resident

groups the right to demand to purchase a project, but impose no

requirement on the purchasing group to use the project for housing

purposes, raises serious constitutional and policy questions. The U.S.

Constitution prohibits the Federal Government from appropriating

private property unless just compensation is provided and the taking is

pursuant to a public purpose. Without a use restriction, it is

questionable whether forcing a PHA to transfer its project to a

resident group, and thereby suffer the loss of a competitive price,

serves a valid public purpose when the end result is not increased

housing opportunity. [one national association]

The guidelines should require some type of guarantee by the

resident group purchasers that the units will be utilized as housing

for low-income households. [one national association]

If a PHA may consider an offer that proposes a purchase of less

than fair market value with demonstrated commensurate public benefit,

``demonstrated commensurate public benefit'' should be defined. [a HUD

field office]

Response: There is nothing in the statute or the legislative

history which would lead the Department to believe that Congress

intended that resident organizations be restricted in the use of the

property. Therefore, the Department did not impose such a restriction.

The final rule gives the PHA the authority to establish the terms of

sale and to approve or disapprove of the resident organization's

proposal. With this kind of authority, the PHA is not being forced to

transfer its property to a resident organization.

Examples of ``demonstrated commensurate public benefit'' will be

provided in the new handbook for demolition/disposition activities.

Comment: The Department's ``federalism'' certification under

Executive Order 12612 incorrectly rules that PHAs are not units of

local government. There are serious federalism implications because the

guidelines intrude in to the day-to-day management decisions of PHA

directors, who are State or local officials. The guidelines threaten

the balance of power between the respective levels of government

because they direct State or local officials to incur increased costs

related to delay and maintenance of blighted or unsafe buildings. [one

national association]

Response: The Department recognizes that overall section 18 places

significant requirements on PHAs; however, the requirement that

offerings be made to resident organizations is mandated by statute. The

Department has determined that these requirements do not have

``federalism implications'' because they do not have substantial direct

effects on the States (including their political subdivisions), or on

the distribution of power and responsibilities among the various levels

of government.

Comment: The guidelines cannot be applied to pending applications

because HUD does not have the power to promulgate rules with

retroactive effect. Congressional enactments and administrative rule

will not be construed to have retroactive effect unless their language

requires this result. [one national association]

Response: ``Pending'' does not mean ``approved.'' Section 18

prohibits approval by the Secretary unless all of the requirements of

the section are met.

Note: Other comments received from the HUD field office were

technical corrections related to appropriate cross-references and

definitions. These technical comments were reviewed and accommodated

where indicated.

The regulatory provisions implementing section 412 of NAHA, as

those provisions have been revised to accommodate the public comments

discussed above, can be found at a new Sec. 970.13 added by this rule.

Applicability to the Native American Program

As a result of section 201(b)(1) of the 1937 Act, the provisions of

title I of the 1937 Act apply to low-income housing developed or

operated pursuant to a contract between the Secretary and an Indian

housing authority. Therefore, the demolition and disposition provisions

under part 970 (as it is revised by the 1988 interim rule) extend to

Indian housing authorities and have been incorporated in part 905, the

regulations for the Indian Housing Program. However, under section

201(b)(2) no provision of title I, or amendment to title I, that is

enacted after the date of enactment of the Indian Housing Act of 1988

(June 29, 1988) shall apply to public housing developed or operated

pursuant to a contract between the Secretary and an Indian housing

authority unless the provision explicitly provides for applicability.

Therefore, absent such a provision, section 116 of the 1992 Act does

not extend to Indian housing authorities.

This issue, as well as finalizing the 1988 interim rule in part 905

and sections 412 and 512 of NAHA, as they apply to Indian housing

units, will be addressed in a separate final rule.

Other Matters

Environmental Review

A Finding of No Significant Impact with respect to the environment

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

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

Act of 1969. The Finding of No Significant Impact is available for

public inspection during regular business hours in the Office of the

Rules Docket Clerk, Office of the General Counsel, Department of

Housing and Urban Development, Room 10276, 451 Seventh Street, S.W.,

Washington, D.C. 20410.

Executive Order 12866

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

under Executive Order 12866 on Regulatory Planning and review, issued

by the President on September 30, 1993. Any changes made in the rule

subsequent to its submission to OMB are identified in the docket file,

which is available for public inspection in the Office of the Rules

Docket Clerk, Department of Housing and Urban Development, Room 10276,

451 Seventh Street, SW, Washington, DC 20410.

Executive Order 12612, Federalism

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

of [[Page 3716]] Executive Order 12612, Federalism, has determined that

this rule does not have ``federalism implications'' because it does not

have substantial direct effects on the States (including their

political subdivisions), or on the distribution of power and

responsibilities among the various levels of government. This rule

pertains to certain PHAs that are subject to Annual Contributions

Contracts (ACCs) under the U.S. Housing Act of 1937 and the

requirements that they must meet in order to demolish or dispose of

public housing.

Executive Order 12606, the Family

The General Counsel, as the Designated Official under Executive

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

potential significant impact on family formation, maintenance, and

general well-being because it redefines previous demolition and

disposition criteria so as to hold applications for demolition and

disposition to more stringent requirements.

Information Collection

The collection of information requirements contained in this rule

have been submitted to OMB for review under section 3504(h) of the

Paperwork Reduction Act of 1980 and have been assigned OMB control

number 2577-0075.

Regulatory Flexibility Act

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

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

approving it certifies that this rule does have a significant economic

impact on a substantial number of small entities because the 1987 Act

provides for substantial contributions of funds by the Federal

government to assist in bearing the costs associated with the policy

changes reflected in the rule. This cost sharing is, of course,

available both to large and small PHAs whose demolition and disposition

decisions are affected by the rule.

Semi-Annual Agenda of Regulations

This rule was listed as item number 1899 in the Department's

Semiannual Agenda of Regulations published on November 14, 1994 (59 FR

57632, 57673) in accordance with Executive Order 12866 and the

Regulatory Flexibility Act.

List of Subjects in 24 CFR Part 970

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

Reporting and recordkeeping requirements.

Accordingly, the interim rule amending 24 CFR part 970 which was

published at 53 FR 30984 on August 17, 1988, is adopted as a final rule

with the following changes:

PART 970--PUBLIC HOUSING PROGRAM--DEMOLITION OR DISPOSITION OF

PUBLIC HOUSING PROJECTS

1. The authority citation for part 970 continues to read as

follows:

Authority: 42 U.S.C. 1437p and 3535(d).

2. Section 970.2 is revised to read as follows:

Sec. 970.2 Applicability.

(a) This part applies to public housing projects that are owned by

public housing agencies (PHAs) and that are subject to Annual

Contributions Contracts (ACCs) under the Act. It also applies to

Section 23 bond-financed projects that have received modernization

(i.e., Comprehensive Improvement Assistance Program (CIAP) or

Comprehensive Grant funds (CGP)). This part does not apply to the

following:

(1) PHA-owned Section 8 housing, or housing leased under section

10(c) or section 23 of the Act, except for section 23 bond-financed

projects that have received modernization funding under the CIAP or the

Comprehensive Grant Programs;

(2) Demolition or disposition before the End of the Initial

Operating Period (EIOP), as determined under the ACC, of property

acquired incident to the development of a public housing project;

(however, this exception shall not apply to dwelling units);

(3) The conveyance of public housing for the purpose of providing

homeownership opportunities for lower income families under section 21

of the Act, the Turnkey III/IV or Mutual Help Homeownership Opportunity

Programs, or other homeownership programs established under sections

5(h) or 6(c)(4)(D) of the Act and in existence before February 5, 1988,

the date of enactment of the 1987 Act. (Where a plan submitted by the

PHA for homeownership includes a component of demolition, the plan must

meet the requirements of section 18 and this part.);

(4) The leasing of dwelling or nondwelling space incident to the

normal operation of the project for public housing purposes, as

permitted by the ACC;

(5) The reconfiguration of the interior space of buildings (e.g.,

moving or removing interior walls to change the design, sizes, or

number of units) without ``demolition'', as defined in Sec. 970.3.

(This includes the conversion of bedroom size, occupancy type, changing

the status of unit from dwelling to nondwelling.);

(6) Easements, rights-of-way and transfers of utility systems

incident to the normal operation of the development for public housing

purposes, as permitted by the ACC;

(7) A whole or partial taking by a public or quasi-public entity

through the exercise of its power of eminent domain; however, HUD

requirements with respect to the replacement housing requirement for

one-for-one dwelling units shall be followed (see HUD Handbook 7486.1,

Demolition, Disposition and Conversion);

(8) Disposition of a public housing project in accordance with an

approved homeownership program under title III of the United States

Housing Act of 1937 (42 U.S.C. 1437p) (Hope 1);1

\1\In keeping with section 412(b) of the National Affordable

Housing Act (Pub.L. 101-625), the provisions of this part do not

apply to the disposition of a public housing project in accordance

with an approved homeownership program under title III of the United

States Housing Act of 1937, as added by section 411 of that

legislation, (HOPE 1 for Public and Indian Housing Homeownership).

In the case of a HOPE 1 proposal from a PHA involving partial or

total demolition of units, this part does apply. HOPE 3 proposals

involving public housing units approved prior to the 1992 Act are

likewise covered by the requirements of section 18. [The 1992 Act

took scattered-site single family public housing from under the

requirements of HOPE 3 and moved it to HOPE 1.]

---------------------------------------------------------------------------

(9) Demolition after conveyance of a public housing project to a

non-PHA entity in accordance with an approved homeownership program

under title III of the United States Housing Act of 1937 (42 U.S.C.

1437p) (HOPE 1); and

(10) Units leased for non-dwelling purposes for one year or less.

(b) Demolition or disposition that was approved by HUD before

February 5, 1988, but not carried out by that date, may be carried out

according to the terms of such approval, without reference to

subsequent amendments to this part and without obtaining any further

HUD approval.

3. Section 970.3 is amended by adding in alphabetical order a

definition for ``Chief Executive Officer of a unit of general local

government'', to read as follows:

Sec. 970.3 Definitions.

* * * * *

Chief Executive Officer of a unit of general local government means

the elected official or the legally designated official, who has the

primary responsibility for the conduct of that entity's governmental

affairs. Examples [[Page 3717]] of the ``chief executive officer of a

unit of general local government'' are: the elected mayor of a

municipality; the elected county executive of a county; the chairperson

of a county commission or board in a county that has no elected county

executive; and the official designated pursuant to law by the governing

body of a unit of general local government.

* * * * *

4. Section 970.4 is amended by:

a. Removing paragraphs (b) and (c);

b. Redesignating paragraphs (d) and (e) as paragraphs (b) and (c),

respectively;

c. Revising newly redesignated paragraph (c); and

d. Adding new paragraphs (d), (e), (f), and (g), to read as

follows:

Sec. 970.4 General requirements for HUD approval of applications for

demolition or disposition.

* * * * *

(c) Demolition or disposition (including any related replacement

housing plan) will meet the requirements of the National Environmental

Policy Act of 1969 (42 U.S.C. 4321), the National Historic Preservation

Act of 1966 (16 U.S.C. 469), and related laws, as stated in the

Department's regulations at part 50 of this title. Where the site of

the replacement housing is unknown at the time of submission of the

application for demolition or disposition, the application shall

contain an certification that the applicant agrees to assist HUD to

comply with part 50 of this title and that the applicant shall:

(1) Supply HUD with all available, relevant information necessary

for HUD to perform for each property any environmental review required

by part 50 of this title;

(2) Carry out mitigating measures required by HUD or select

alternate eligible property; and

(3) Not acquire, rehabilitate, convert, lease, repair or construct

property, or commit HUD or local funds to such program activities with

respect to any eligible property, until HUD approval is received.

(d) The public housing agency has developed a replacement housing

plan, in accordance with Sec. 970.11, and has obtained a commitment for

the funds necessary to carry out the plan over the approved schedule of

the plan. To the extent such funding is not provided from other sources

(e.g., State or local programs or proceeds of disposition), HUD

approval of the application for demolition or disposition is

conditioned on HUD's agreement to commit the necessary funds (subject

to availability of future appropriations).

(e) The PHA has complied with the offering to resident

organizations, as required under Sec. 970.13.

(f) The PHA has prepared a certification regarding relocation of

residents, in accordance with Sec. 970.5(h)(1). If relocation is

required, the PHA must submit a relocation plan in accordance with

Sec. 970.5.

(g) The PHA has made the appropriate certifications regarding site

and neighborhood standards, in accordance with Sec. 970.11(h) (2) and

(4).

5. Section 970.5 is revised to read as follows;

Sec. 970.5 Displacement and relocation.

(a) Relocation of displaced tenants on a nondiscriminatory basis.

Tenants who are to be displaced as a result of demolition or

disposition must be offered opportunities to relocate to other

comparable/suitable (see HUD Handbook 1378, Tenant Assistance,

Relocation and Real Property Acquisition) decent, safe, sanitary, and

affordable housing (at rents no higher than permitted under the Act,)

which is, to the maximum extent practicable, housing of their choice,

on a nondiscriminatory basis, without regard to race, color, religion

(creed), national origin, handicap, age, familial status, or sex, in

compliance with applicable Federal and State laws.

(b) Relocation resources. Relocation may be to other publicly

assisted housing. Housing assisted under Section 8 of the Act,

including housing available for lease under the Section 8 Housing

Voucher Program, may also be used for relocation, provided the PHA

ensures that displaced tenants are provided referrals to comparable/

suitable relocation dwelling units where the family's share of the rent

to owner following relocation will not exceed the total tenant payment,

as calculated in accordance with Sec. 813.107 of this title. If the PHA

provides referrals to suitable/comparable relocation housing

(comparable housing if the displacement is subject to the URA) and a

tenant with a rental voucher elects to lease a housing unit where the

family's share of rent to owner exceeds the amount calculated in

accordance with Sec. 813.107 of this title, the tenant will be

responsible for the difference between the voucher payment standard and

the rent to owner. If there are no units with rents at or below the

voucher payment standard to which the PHA may refer families, then the

PHA cannot use vouchers as a relocation housing source.

(c) Applicability of URA rules. (1) The displacement of any person

(household, business or nonprofit organization) as a direct result of

acquisition, rehabilitation, or demolition for a Federal or federally

assisted project (defined in paragraph (j) of this section) is subject

to the Uniform Relocation Assistance and Real Property Acquisition

Policies Act of 1970, as amended, (URA) (42 U.S.C. 4601-4655) and

implementing regulations at 49 CFR part 24. Therefore, if the PHA

demolishes the property, or disposes of it to a Federal agency or to a

person or entity that is acquiring the property for a federally

assisted project, the demolition or acquisition is subject to the URA,

and any person displaced (as described in paragraph (i) of this

section) as a result of such action is eligible for relocation

assistance at the levels described in, and in accordance with the

requirements of 49 CFR part 24.

(2) As described in Sec. 970.11, public housing units that are

demolished must be replaced. Any person displaced (see paragraph (i) of

this section) as a direct result of acquisition, demolition or

rehabilitation for a project receiving Federal financial assistance

(e.g., ACC) that provides the required replacement housing, must be

provided relocation assistance at the levels described in, and in

accordance with the requirements of 49 CFR part 24.

(d) Applicability of antidisplacement plan. If CDBG funds (part 570

of this title), or HOME funds (part 91 of this title) are used to pay

any part of the cost of the demolition or the cost of a project

(defined in paragraph (j) of this section) for which the property is

acquired, the transaction is subject to the Residential

Antidisplacement and Relocation Assistance Plan, as described in the

cited regulations.

(e) Relocation assistance for other displaced persons. Whenever the

displacement of a residential tenant (family, individual or other

household) occurs in connection with the disposition of the real

property, but the conveyance is not for a Federal or federally assisted

project (and is, therefore, not covered by the URA), the displaced

tenant shall be eligible for the following relocation assistance:

(1) Advance written notice of the expected displacement. The notice

shall be provided as soon as feasible, describe the assistance to be

provided and the procedures for obtaining the assistance; and contain

the name, address and phone number of an official responsible for

providing the assistance;

(2) Other advisory services, as appropriate, including counseling

and referrals to suitable, decent, safe, and sanitary replacement

housing. Minority [[Page 3718]] persons also shall be given, if

possible, referrals to suitable decent, safe and sanitary replacement

dwellings that are not located in an area of minority concentration;

(3) Payment for actual reasonable moving expenses, as determined by

the PHA;

(4) The opportunity to relocate to a suitable, decent, safe and

sanitary dwelling unit at a rent that does not exceed that permitted

under section 3(a) of the 1937 Act. All or a portion of the assistance

may be provided under section 8 of the 1937 Act; and

(5) Such other Federal, State or local assistance as may be

available.

(f) Temporary relocation. Residential tenants who will not be

required to move permanently, but who must relocate temporarily (e.g.,

to permit property repairs), shall be provided:

(1) Reimbursement for all reasonable out-of-pocket expenses

incurred in connection with the temporary relocation, including the

cost of moving to and from the temporary housing, any increase in

monthly rent/utility costs, and the cost of reinstalling telephone and

cable TV service.

(2) Appropriate advisory services, including reasonable advance

written notice of:

(i) The date and approximate duration of the temporary relocation;

(ii) The suitable, decent, safe and sanitary housing to be made

available for the temporary period;

(iii) The terms and conditions under which the tenant may lease and

occupy a suitable, decent, safe and sanitary dwelling in the building/

complex following completion of the repairs; and

(iv) The provision for reimbursement of out-of-pocket expenses (see

paragraph (f)(1) of this section).

(g) Appeals. A person who disagrees with the PHA's determination

concerning whether the person qualifies as a ``displaced person'' or

the amount of the relocation assistance for which the person is

eligible, may file a written appeal of that determination with the PHA.

A person who is dissatisfied with the PHA's determination on his or her

appeal may submit a written request for review of the PHA's

determination to the HUD Field Office.

(h) Responsibility of PHA. (1) The PHA shall certify that it will

comply with the URA, implementing regulations at 49 CFR part 24, and

the requirements of this section, and shall ensure such compliance,

notwithstanding any third party's contractual obligation to the PHA to

comply with these provisions.

(2) The cost of required relocation assistance is an eligible

project cost in the same manner and to the same extent as other project

costs. (See definition of ``project'' in paragraph (j) of this

section.) Such costs may also be paid for with funds available from

other sources.

(3) The PHA shall maintain records in detail sufficient to

demonstrate such compliance. The PHA shall maintain data on the race,

ethnic, gender, and handicap status of displaced persons.

(i) Definition of displaced person. (1) General definition. For

purposes of this section, the term ``displaced person'' means any

person (household, business, nonprofit organization, or farm) that

moves from real property, or moves personal property from real

property, permanently, as a direct result of acquisition,

rehabilitation, or demolition for a Federal or federally assisted

project.

(2) Persons who qualify. The term ``displaced person'' includes,

but may not be limited to:

(i) A person who moves permanently from the real property after the

PHA, or the person acquiring the property, issues a vacate notice to

the person, or refuses to renew an expiring lease in order to evade the

responsibility to provide relocation assistance, if the move occurs on

or after the date of HUD approval of the demolition or disposition;

(ii) Any person who moves permanently, including a person who moves

before the date of HUD approval of the demolition or disposition, if

HUD or the PHA determines that the displacement resulted from the

demolition or disposition of the property and is subject to the

provisions of this section; or

(iii) A tenant-occupant of a dwelling who moves permanently from

the building/complex on or after the date HUD approves the demolition

or disposition, if the move occurs before the tenant is provided

written notice offering him or her the opportunity to lease and occupy

a suitable, decent, safe, and sanitary dwelling in the same building/

complex, under reasonable terms and conditions, upon completion of the

project. Such reasonable terms and conditions shall include a monthly

rent and estimated average monthly utility costs that do not exceed

that permitted under section 3(a) of the 1937 Act.

(iv) A tenant-occupant of a dwelling who is required to relocate

temporarily and does not return to the building/complex, if either:

(A) The tenant is not offered payment for all reasonable out-of-

pocket expenses incurred in connection with such temporary relocation

(including the cost of moving to and from the temporarily occupied

unit, any increase in rent/utility costs, and the cost of reinstalling

telephone and cable TV service).

(B) Other conditions of the temporary relocation are not

reasonable.

(v) A tenant-occupant of a dwelling who moves from the building/

complex permanently after he or she has been required to move to

another unit in the same building/complex if either:

(A) The tenant is not offered reimbursement for all reasonable out-

of-pocket expenses incurred in connection with the move; or

(B) Other conditions of the move are not reasonable.

(3) Persons not eligible. Notwithstanding the provisions of

paragraphs (i)(1) and (i)(2) of this section, a person does not qualify

as a ``displaced person'' (and is not eligible for relocation

assistance under this section), if:

(i) The person has been evicted for serious or repeated violation

of the terms and conditions of the lease or occupancy agreement,

violation of applicable Federal, State or local law, or other good

cause, and the PHA determines that the eviction was not undertaken for

the purpose of evading the obligation to provide relocation assistance;

(ii) The person moved into the property after the submission of the

application for the demolition or disposition and, before commencing

occupancy, received written notice of the project, its possible impact

on the person (e.g., the person may be displaced, temporarily

relocated, or suffer a rent increase) and the fact that he or she would

not qualify as a ``displaced person'' (or for assistance under this

section) as a result of the project;

(iii) The person is ineligible under 49 CFR 24.2(g)(2); or

(iv) HUD determines that the person was not displaced as a direct

result of an action covered by this section.

(j) Definition of project. For purposes of this section, the term

``project'' means one or more activities (e.g., real property

acquisition, demolition or construction) paid for in whole or in part

with Federal financial assistance. Two or more activities that are

integrally related, each essential to the other(s), are considered one

project, whether or not all of the component activities are federally

assisted.

(k) Definition of initiation of negotiations. For purposes of

providing the appropriate notices and determining the formula for

computing a replacement housing payment under the URA to a tenant

displaced from a [[Page 3719]] dwelling as a direct result of

demolition or private owner acquisition, the term ``initiation of

negotiations'' means HUD approval of the demolition or disposition

under this part.

6. Section 970.6 is revised to read as follows:

Sec. 970.6 Specific criteria for HUD approval of demolition requests.

In addition to other applicable requirements of this part, HUD will

not approve an application for demolition unless HUD determines that

one of the following criteria is met:

(a) In the case of demolition of all or a portion of a project, the

project, or portion of the project, is obsolete as to physical

condition, location, or other factors, making it unusable for housing

purposes and no reasonable program of modifications, is feasible to

return the project or portion of the project to useful life. The

Department generally shall not consider a program of modifications to

be reasonable if the costs of such program exceed 90 percent of total

development cost (TDC). Major problems indicative of obsolescence are--

(1) As to physical condition: Structural deficiencies (e.g.

settlement of earth below the building caused by inadequate structural

fills, faulty structural design, or settlement of floors), substantial

deterioration (e.g., severe termite damage or damage caused by extreme

weather conditions), or other design or site problems (e.g., severe

erosion or flooding);

(2) As to location: physical deterioration of the neighborhood;

change from residential to industrial or commercial development; or

environmental conditions as determined by HUD environmental review in

accord with part 50 of this title, which jeopardize the suitability of

the site or a portion of the site and its housing structures for

residential use;

(3) Other factors which have seriously affected the marketability,

usefulness, or management of the property.

(b) In the case of demolition of only a portion of a project, the

demolition will help to assure the useful life of the remaining portion

of the project (e.g., to reduce project density to permit better access

by emergency, fire, or rescue services).

7. In Sec. 970.7, paragraph (a)(2) is revised to read as follows:

Sec. 970.7 Specific criteria for HUD approval of disposition requests.

(a) * * *

(2) Disposition will allow the acquisition, development, or

rehabilitation of other properties that will be more efficiently or

effectively operated as lower income housing projects, and that will

preserve the total amount of lower income housing stock available to

the community. A PHA must be able to demonstrate to the satisfaction of

HUD that the additional units are being provided in connection with the

disposition of the property.

* * * * *

8. Section 970.8 is amended by:

a. Revising paragraphs (f) and (g);

b. Redesignating existing paragraphs (h), (i), (j), (k), (l), and

(m), as paragraphs (k), (l), (m), (n), (o), and (p), respectively; and

c. Adding new paragraphs (h), (i), and (j), to read as follows:

Sec. 970.8 PHA application for HUD approval.

* * * * *

(f) A replacement housing plan, as required under Sec. 970.11, and

approved by the unit of general local government which approval shall

be provided by the chief executive officer of the jurisdiction in which

the project is located (e.g., the mayor or the county executive),

indicating approval of the replacement plan.

(g) Evidence of compliance with the offering to resident

organizations, as required under Sec. 970.13.

(h) A certification regarding relocation of residents, in

accordance with Sec. 970.5(h)(1).

(i) Appropriate certifications regarding site and neighborhood

assessment, in accordance with Secs. 970.11(h) (2), (3), and (4).

(j) Appropriate certification regarding compliance with

environmental authorities, where required in accordance with

Sec. 970.4(c).

* * * * *

9. In Sec. 970.9, paragraphs (b) introductory text and (b)(1) are

revised, and a new paragraph (c) is added, to read as follows:

Sec. 970.9 Disposition of property; use of proceeds.

* * * * *

(b) Net proceeds, including any interest earned on the proceeds,

(after payment of HUD-approved costs of disposition and relocation

under paragraph (a) of this section) shall be used, subject to HUD

approval, as follows:

(1) For the retirement of outstanding obligations, if any, issued

to finance original development or modernization of the project; and

* * * * *

(c) In the case of scattered-site housing of a public housing

agency, the net proceeds of a disposition shall be used for the

retirement of outstanding obligations issued to finance original

development or modernization of the project, in an amount that bears

the same ratio to the total of such costs and obligations as the number

of units disposed of bears to the total number of units of the project

at the time of disposition. For example, in cases where debt has not

been forgiven, if a development project of ten units that cost $100,000

has one unit disposed of for $10,000, then there would be no net

proceeds after paying off the proportional cost ($100,000 divided by

10=$10,000/unit) of the project. If, however, the unit was disposed of

and net proceeds were $12,000, there would be $2,000 available that the

PHA would use for the provision of housing assistance for lower income

families. Where debt has been forgiven, all the net proceeds may be

used by the PHA for the provision of low income housing assistance.

10. Section 970.11 is revised to read as follows:

Sec. 970.11 Replacement housing plan.

(a) One-for-one replacement. HUD may not approve an application or

furnish assistance under this part unless the PHA submitting the

application for demolition or disposition also submits a plan for the

provision of an additional decent, safe, sanitary, and affordable

rental dwelling unit (at rents no higher than permitted under the Act)

for each public housing dwelling unit to be demolished or disposed of

under the application, except as provided in paragraph (j) of this

section. A replacement housing plan may provide for the location of the

replacement housing outside the political boundaries of the locality of

the PHA, provided all relevant program requirements are satisfied

including the approval of the replacement housing plan by the unit of

general local government in which the project being demolished or

disposed is located. In order to assure that all program requirements

are satisfied, the PHA must enter into any necessary agreements,

including where applicable, the execution of a Cooperation Agreement

between the PHA and the locality in which the replacement housing will

be located, prior to submission of the replacement housing plan to HUD

for approval. In addition, the PHA must ensure that such agreements

provide that the families selected for occupancy in the replacement

housing will be families who would have been eligible for occupancy in

the replacement housing if it had been replaced in the same locality as

the project being demolished [[Page 3720]] or disposed. The plan must

include any one or combination of the following:

(1) The acquisition or development of additional public housing

dwelling units;

(2) The use of 15-year project-based assistance under section 8, to

the extent available, or if such assistance is not available, in the

case of an application proposing demolition or disposition of 200 or

more dwelling units in a development, the use of available project-

based assistance under section 8 having a term of not less than 5

years;

(3) The use of not less than 15-year project-based assistance under

other Federal programs, to the extent available, or if such assistance

is not available, in the case of an application proposing the

demolition or disposition of 200 or more dwelling units in a

development, the use of available project-based assistance under other

Federal programs having a term of not less than 5 years. (NOTE: In the

case of 15-year project based assistance under other Federal programs,

the Department has determined that low-income housing credits under

Section 42 of the Internal Revenue Service Code is a Federal program

providing 15-year project-based assistance and, therefore, qualifies as

a source of replacement housing. Any replacement housing plan proposing

the use of these credits must assure that the low-income housing units

in the low-income housing credit project which are designated as

replacement housing will be reserved for low-income families for the

requisite period. Units which at the time of allocation of the credit

are also receiving Federal assistance under Section 8 (except tenant-

based assistance) or Section 23 of the Act, or Section 236, 221(d)(3)

BMIR or Section 221(d)(5) of the National Housing Act (12 U.S.C. 1701

et seq.), or Section 101 of the Housing and Urban Development Act of

1965 (12 U.S.C. 1701s), or other similar Federal program, are not

eligible as replacement housing under paragraph (a)(3) of this

section.);

(4) The acquisition or development of dwelling units assisted under

a State or local government program that provides for project-based

rental assistance comparable in terms of eligibility, contribution to

rent, and length of assistance contract (not less than 15 years) to

assistance under section (8)(b)(1) of the Act; or

(5)(i) The use of 15-year tenant-based assistance under section 8

of the Act, (excluding rental vouchers under section 8(o)), under the

conditions described in paragraph (b) of this section, to the extent

available, or if such assistance is not available, in the case of an

application proposing the demolition or disposition of 200 or more

dwelling units in a development, the use of tenant-based assistance

under section 8 (excluding rental vouchers under section 8(o)) having a

term of not less than 5 years.

(ii) However, in the case of an application proposing demolition or

disposition of 200 or more units, not less than 50 percent of the

dwelling units for replacement housing shall be provided through the

acquisition or development of additional public housing dwelling units

or through project-based assistance, and not more than 50 percent of

the additional dwelling units shall be provided through tenant-based

assistance under section 8 (excluding vouchers) having a term of not

less than 5 years. The requirements of Sec. 970.11(b) do not apply to

applications for demolition or disposition of 200 or more units that

propose the use of tenant-based assistance under section 8 having a

term of not less than 5 years for the replacement of not more than 50

percent of the units to be demolished or disposed of.

(b) Conditions for use of tenant-based assistance. Fifteen-year

tenant-based assistance under section 8 may be approved under the

replacement plan only if provisions listed in paragraphs (b)(1) through

(3) of this section are met.

(1) There is a finding by HUD that replacement with project-based

assistance (including public housing, as well as other types of

project-based assistance under paragraph (a) of this section) is not

feasible under the feasibility standards established for project-based

assistance; that the supply of private rental housing actually

available to those who would receive tenant-based assistance under the

plan is sufficient for the total number of rental certificates and

rental vouchers available in the community after implementation of the

plan; and that this available housing supply is likely to remain

available for the full 15-year term of the assistance;

(2) HUD's findings under paragraph (b)(1) of this section are based

on objective information, which must include rates of participation by

landlords in the Section 8 program; size, condition, and rent levels of

available rental housing as compared to Section 8 standards; the supply

of vacant existing housing meeting the Section 8 housing quality

standards with rents at or below the fair market rent or the likelihood

of adjusting the fair market rent; the number of eligible families

waiting for public housing or housing assistance under Section 8; the

extent of discrimination practiced against the types of individuals or

families to be served by the assistance; an assessment of compliance

with civil rights laws and related program requirements; and such

additional data as HUD may determine to be relevant in particular

circumstances; and

(3) To justify a finding under paragraph (b)(1) of this section,

the PHA must provide sufficient information to support both parts of

the finding--why project-based assistance is infeasible and how the

conditions for tenant-based assistance will be met, based on the

pertinent data from the local housing market, as prescribed in

paragraph (b)(2) of this section. The determination as to the lack of

feasibility of project-based assistance must be based on the standards

for feasibility stated in the respective regulations which govern each

type of eligible project-based program identified in paragraph (a) of

this section, including public housing under paragraph (a)(1) of this

section as well as the other types of eligible Federal, State and local

programs of project-based assistance under paragraphs (a)(2) through

(4) of this section. A finding of lack of feasibility may thus be made

only if the applicable feasibility standards cannot be met under any of

those project-based programs, or any combination of them. For example,

with regard to additional public housing development, feasibility would

be determined by reference to part 941 of this chapter and any other

applicable regulations and requirements, to include consideration of

such factors as local needs for new construction or rehabilitation,

availability of suitable properties for acquisition or sites for

construction, and HUD determinations under cost containment policies.

With regard to Section 8 programs involving rehabilitation, an example

of a major feasibility factor would be the prospects for participation

of private owners willing to meet the rehabilitation requirements.

(c) Approval of unit of general local government. The plan must be

approved by the unit of general local government in which the project

proposed for demolition or disposition is located, which approval shall

be provided by the chief executive officer (e.g., the mayor or the

county executive).

(d) Schedule for replacement housing plan. (1) The plan must

include a schedule for carrying out all its terms within a period

consistent with the size of the proposed demolition or disposition,

except that the schedule for completing the plan shall in no event

exceed 6 years from the date specified [[Page 3721]] to begin plan

implementation, which is the date of HUD approval of the demolition or

disposition application.

(2) Where demolition or disposition will occur in phases, the

schedule shall provide for completing the plan within six years from

the date of the HUD approval letter for a specific demolition or

disposition action requested. ``Completion'' does not mean that the

replacement housing must be built or rehabilitated within the six

years. For replacement units developed under the public housing

development program, the completion of the plan would be units that

have reached the stage of notice to proceed for conventional units and

contract of sale for Turnkey units.

(e) Housing the same number of individuals and families. The plan

must include a method which ensures that at least the same total number

of individuals and families will be provided housing, allowing for

replacement with units of different sizes to accommodate changes in

local priority needs, as determined by the PHA and reviewed and

approved by HUD as a part of the demolition or disposition application.

(f) Relocation plan. Where existing occupants will be displaced,

the plan must include a relocation plan in accordance with Secs. 970.5

and 970.8(d).

(g) Assurances regarding relocation. The plan must prevent the

taking of any action to demolish or dispose of any unit until the

tenant of the unit is relocated in accordance with Sec. 970.5. This

does not preclude actions permitted under Sec. 970.12, actions required

under this part for development and submission of the PHA's application

for HUD approval of demolition or disposition, or actions required to

carry out a relocation plan which has been approved by HUD in

accordance with Secs. 970.5 and 970.8(d).

(h) Site and neighborhood standards assessment. With respect to

replacement housing, PHAs must comply with site and neighborhood

standards, as follows:

(1) If units under the Public Housing Development Program or the

Section 8 project-based assistance program have been requested as

replacement housing in the PHA's application, except when the PHA plans

to build back on the same site, the site and neighborhood standards

applicable for those programs will apply and be assessed at the

appropriate time as required by that program rule or handbook and not

at the time of the demolition or disposition application. The PHA must

certify to HUD at the time of application for demolition or

disposition, that once the site is identified, the PHA will comply with

the site and neighborhood standards applicable for those programs.

(2) If units under the Public Housing Development Program or the

Section 8 project-based assistance program have been requested as

replacement housing in the PHA's application and the PHA plans to build

back on the same site, the PHA shall comply with the site and

neighborhood standards applicable for those programs when the

demolition or disposition application is submitted to HUD. A complete

site and neighborhood standards review shall be done by HUD subsequent

to the submission of the demolition or disposition application but

prior to approval.

(3)(i) If the replacement housing units are to be provided under a

State or local program, and the site is known (including building back

on the same site), the PHA is required to comply with site and

neighborhood standards comparable to part 882 of this title when the

demolition or disposition application is submitted to HUD. A complete

site and neighborhood standards review shall be done by HUD subsequent

to the submission of the demolition or disposition application but

prior to approval.

(ii) However, if the site is not known, the PHA shall include in

the application for demolition or disposition a certification that it

will comply with site and neighborhood standards comparable to part 882

of this title once the site is known.

(iii) In the case of replacement housing funded by State or local

government funds, the PHAs must demonstrate in the application that it

has a commitment for funding the replacement housing.

(4)(i) If the replacement housing units are to be provided out of

the proceeds of the disposition of public housing property, and the

site is known (including building back on the same site), the PHA is

required to comply with site and neighborhood standards comparable to

part 941 of this chapter (or under part 882 of this title in the case

of use of Section 8 assistance) when the demolition or disposition

application is submitted to HUD. A complete site and neighborhood

standards review shall be done by HUD subsequent to the submission of

the demolition or disposition application but prior to approval.

(ii) However, if the site is not known, the PHA shall include in

the application for demolition or disposition a certification that it

will comply with site and neighborhood standards comparable to part 941

of this chapter or under part 882 of this title once the site is known.

(i) Assurances regarding accessibility. The plan must contain

assurances that any replacement units acquired, newly constructed or

rehabilitated will meet the applicable accessibility requirements set

forth in Sec. 8.25 of this title.

(j) Exception for replacement housing in cases of demolition. In

any 5-year period, a public housing agency may demolish not more than

the lesser of 5 dwelling units or 5 percent of the total dwelling units

owned and operated by the public housing agency, without providing an

additional dwelling unit for each public housing unit to be demolished,

but only if the space occupied by the demolished unit is used for

meeting the service or other needs of public housing residents. If the

PHA elects to use this exception, it shall meet all other requirements

of this part except Sec. 970.11.

(Approved by the Office of Management and Budget under control

number 2577-0075.)

11. Existing Sec. 970.13 is redesignated as Sec. 970.14, and a new

Sec. 970.13 is added, to read as follows:

Sec. 970.13 Resident organization opportunity to purchase.

(a) Applicability. (1) This section applies to applications for

demolition or disposition of a development which involve dwelling

units, nondwelling spaces (e.g. administration and community buildings,

maintenance facilities), and excess land.

(2) The requirements of this section do not apply to the following

cases which it has been determined do not present appropriate

opportunities for resident purchase:

(i) The PHA has determined that the property proposed for

demolition is an imminent threat to the health and safety of residents;

(ii) The local government has condemned the property proposed for

demolition;

(iii) A local government agency has determined and notified the PHA

that units must be demolished to allow access to fire and emergency

equipment;

(iv) The PHA has determined that the demolition of selected

portions of the development in order to reduce density is essential to

ensure the long term viability of the development or the PHA (but in no

case should this be used cumulatively to avoid Section 412

requirements);

(v) A public body has requested to acquire vacant land that is less

than 2 acres in order to build or expand its services (e.g., a local

government wishes to use the land to build or establish a police

substation); or [[Page 3722]]

(vi) PHA seeks disposition outside the public housing program to

privately finance or otherwise develop a facility to benefit low-income

families (e.g., day care center, administrative building, other types

of low-income housing).

(3) In the situations listed in paragraph (a) of this section, the

PHA may proceed to submit its request to demolish or dispose of the

property, or the portion of the property, to HUD, in accordance with

Section 18 of the United States Housing Act of 1937 and 24 CFR part 970

without affording an opportunity for purchase by a resident

organization. However, resident consultation would be required in

accordance with Sec. 970.4(a). The PHA must submit written

documentation, on official stationery, with date and signatures to

justify paragraphs (a)(2)(i), (ii), (iii), (iv), and (v) of this

section. Examples of such documentation include:

(i) A certification from a local agency, such as the fire or health

department, that a condition exists in the development that is an

imminent threat to residents; or

(ii) A copy of the condemnation order from the local health

department. If, however, at some future date, the PHA proposes to sell

the remaining property described in paragraphs (a)(2)(i) through (iii)

of this section, the PHA will be required to comply with this section.

(b) Opportunity for residents to organize. Where the affected

development does not have an existing resident council, resident

management corporation or resident cooperative at the time of the PHA

proposal to demolish or dispose of the development or a portion of the

development, the PHA shall make a reasonable effort to inform residents

of the development of the opportunity to organize and purchase the

property proposed for demolition or disposition. Examples of

``reasonable effort'' at a minimum include one of the following

activities: convening a meeting, sending letters to all residents,

publishing an announcement in the resident newsletter, where available,

or hiring a consultant to provide technical assistance to the

residents. The Department will not approve any application that cannot

demonstrate that the PHA has allowed at least 45 days for the residents

to organize a resident organization. The PHA should initiate its

efforts to inform the residents of their right to organize as an

integral part of the resident consultation requirement under

Sec. 970.4(a).

(c) Established Organizations. Where there are duly formed resident

councils, resident management corporation, or resident cooperative at

the affected development, the PHA shall follow the procedures beginning

in paragraph (d) of this section. Where the affected development is

fully or partially occupied, the residents must be given the

opportunity to form under the procedures in paragraph (b) of this

section.

(d) Offer of sale to resident organizations. (1) The PHA shall make

the formal offer for sale which must include, at a minimum, the

information listed in this paragraph (d). All contacted organizations

shall have 30 days to express an interest in the offer. The PHA must

offer to sell the property proposed for demolition or disposition to

the resident management corporation, the resident council or resident

cooperative of the affected development under at least as favorable

terms and conditions as the PHA would offer it for sale to another

purchaser:

(i) An identification of the development, or portion of the

development, in the proposed demolition or disposition, including the

development number and location, the number of units and bedroom

configuration, the amount of space and use for non-dwelling space, the

current physical condition (e.g., fire damaged, friable asbestos, lead-

based paint test results), and occupancy status (e.g., percent

occupancy).

(ii) In the case of disposition, a copy of the appraisal of the

property and any terms of sale.

(iii) A PHA disclosure and description of plans proposed for reuse

of land, if any, after the proposed demolition or disposition.

(iv) An identification of available resources (including its own

and HUD's) to provide technical assistance to the resident management

corporation, resident council or resident cooperative of the affected

development to enable the organization to better understand its

opportunity to purchase the development, the development's value and

potential use.

(v) Any and all terms of sale that the PHA requires for the Section

18 action. (If the resident management corporation, resident council or

resident cooperative of the affected development submits a proposal

that is other than the terms of sale (e.g., purchase at less than fair

market value with demonstrated commensurate public benefit or for the

purposes of homeownership), the PHA may consider accepting the offer).

(vi) A date by which the resident management corporation, resident

council or resident cooperative of the affected development must

respond to the HA's offer to sell the property proposed for demolition

or disposition, which shall be no less than 30 days from the date of

the official offering of the PHA. The response from the resident

management corporation, resident council or resident cooperative of the

affected development shall be in the form of a letter expressing its

interest in accepting the PHAs written offer.

(vii) A statement that the resident council, resident management

corporation, and resident cooperative of the affected development will

be given 60 days to develop and submit a proposal to the PHA to

purchase the property and to obtain a firm financial commitment. It

shall explain that the PHA shall approve the proposal from the resident

council, resident management corporation or resident cooperative of the

affected development, if it meets the terms of sale. However, the

statement shall indicate that the PHA can consider accepting an offer

from the resident council, resident management corporation or resident

cooperative of the affected development that is other than the terms of

sale; e.g., purchase at less than fair market value with demonstrated

commensurate public benefit or for the purposes of homeownership. The

statement shall explain that if the PHA receives more than one proposal

from a resident council, resident management corporation or resident

cooperative at the affected development, the PHA shall select the

proposal that meets the terms of sale. In the event that two proposals

from the affected development meet the terms of sale, the PHA shall

chose the best proposal.

(2) After the 30 day time frame for the resident council, resident

management corporation, or resident cooperative of the affected

development to respond to the notification letter has expired, the PHA

is to prepare letters to those organizations that responded

affirmatively inviting them to submit a formal proposal to purchase the

property. The organization has 60 days from the date of its affirmative

response to prepare and submit a proposal to the PHA that provides all

the information requested in paragraph (g) of this section and meets

the terms of sale.

(e) PHA Review of Proposals. The PHA has up to 60 days from the

date of receipt of the proposal(s) to review them and determine whether

they meet the terms of sale set forth in its offer. If the resident

management corporation, resident council or resident cooperative of the

affected development submits a proposal that is other than the terms of

sale (e.g., purchase at less than the fair market value with

demonstrated [[Page 3723]] commensurate public benefit or for the

purposes of homeownership), the PHA may consider accepting the offer.

If the terms of sale are met, within 14 days of the PHA's final

decision, the PHA shall notify the resident management corporation,

resident council or resident cooperative of the affected development of

that fact and that the proposal has been accepted or rejected.

(f) Appeals. The resident management corporation, resident council

or resident cooperative of the affected development has the right to

appeal the PHA's decision to the HUD field office. A letter requesting

an appeal has to be made within 30 days of the decision by the PHA. The

request should include copies of the proposal and any related

correspondence. The field office will render a final decision within 30

days. A letter communicating the decision is to be prepared and sent to

the PHA and the resident management corporation, resident council or

resident cooperative of the affected development.

(g) Contents of Proposal. (1) The proposal from the resident

management corporation, resident council or resident cooperative of the

affected development shall at a minimum include the following:

(i) The length of time the organization has been in existence;

(ii) A description of current or past activities which demonstrate

the organization's organizational and management capability or the

planned acquisition of such capability through a partner or other

outside entities;

(iii) A statement of financial capability;

(iv) A description of involvement of any non-resident organization

(non-profit, for profit, governmental or other entities), if any, the

proposed division of responsibilities between these two, and the non-

resident organization's financial capabilities;

(v) A plan for financing the purchase of the property and a firm

commitment for funding resources necessary to purchase the property and

pay for any necessary repairs;

(vi) A plan for the use of the property;

(vii) The proposed purchase price in relation to the appraised

value;

(viii) Justification for purchase at less than the fair market

value in accordance with Sec. 970.9, if appropriate;

(ix) Estimated time schedule for completing the transaction;

(x) The response to the PHA's terms of sale;

(xi) A resolution from the resident organization approving the

proposal; and

(xii) A proposed date of settlement, generally not to exceed six

months from the date of PHA approval of the proposal, or such period as

the PHA may determine to be reasonable.

(2) If the proposal is to purchase the property for homeownership

under 5(h) or HOPE 1, then the requirements of Section 18 of the United

States Housing Act of 1937 and 24 CFR part 970 do not apply, but the

applicable requirements shall be those under the HOPE 1 guidelines, as

set forth at 57 FR 1522, or the section 5(h) regulation, as set forth

in parts 905 and 906 of this chapter. In order for a PHA to consider a

proposal to purchase under section 412, using homeownership

opportunities under section 5(h) or HOPE 1, the resident council,

resident management corporation or resident cooperative of the affected

development shall meet the provisions of this rule, including

paragraphs (g)(1)(i) through (g)(1)(xii) of this section.

(3) If the proposal is to purchase the property for other than the

aforementioned homeownership programs or for uses other than

homeownership, then the proposal must meet all the disposition

requirements of Section 18 of the United States Housing Act of 1937 and

24 CFR part 970.

(h) PHA obligations. (1) Prepare and disperse the formal offer of

sale to the resident council, resident management corporation and

resident cooperative of the affected development.

(2) Evaluate proposals received and make the selection based on the

considerations set forth in paragraph (b) of this section. Issuance of

letters of acceptance and rejection.

(3) Prepare certifications, where appropriate, as discussed in

paragraph (i)(3) of this section.

(4) The PHA shall comply with its obligations under Sec. 970.4(a)

regarding tenant consultation and provide evidence to HUD that it has

met those obligations. The PHA shall not act in an arbitrary manner and

shall give full and fair consideration to any qualified resident

management corporation, resident council or resident cooperative of the

affected development and accept the proposal if it meets the terms of

sale.

(i) PHA application submission requirements for proposed demolition

or disposition. (1) If the proposal from the resident organization is

rejected by the PHA, and either there is no appeal by the organization

or the appeal has been denied, the PHA shall submit its demolition or

disposition application to HUD in accordance with Section 18 of the

United States Housing Act of 1937 and part 970 of this chapter. The

demolition or disposition application must include complete

documentation that the requirements of this section have been met. PHAs

must submit written documentation that the resident council, resident

management corporation and tenant cooperative of the affected

development have been apprised of their opportunity to purchase under

this section. This documentation shall include:

(i) A copy of the signed and dated PHA notification letter(s) to

each organization informing them of the PHA's intention to submit an

application for demolition or disposition, the right to purchase; and

(ii) The responses from each organization.

(2) If the PHA accepts the proposal of the resident organization,

the PHA shall submit a disposition application in accordance with

Section 18 of the United States Housing Act of 1937 and part 970 of

this chapter, with appropriate justification for a negotiated sale and

for sale at less than fair market value, if applicable.

(3) HUD will not process an application for demolition or

disposition unless the PHA provides the Department with one of the

following:

(i) Where no resident management corporation, resident council or

resident cooperative exists in the affected development and the

residents of the affected development have not formed a new

organization in accordance with paragraph (b) of this section, a

certification from either the executive director or the board of

commissioners stating that no such organization(s) exists and

documentation that a reasonable effort to inform residents of their

opportunity to organize has been made; or

(ii) Where a resident management corporation, resident council or

resident cooperative exists in the affected development one of the

following, either paragraph (i)(3)(ii)(A) or paragraph (i)(3)(ii)(B) of

this section:

(A) A board resolution or its equivalent from each resident

council, resident management corporation or resident cooperative

stating that such organization has received the PHA letter, and that it

understands the offer and waives its opportunity to purchase the

project, or portion of the project, covered by the demolition or

disposition application. The response should clearly state that the

resolution was adopted by the entire organization at a formal meeting;

or

(B) A certification from the executive director or board of

commissioners of the PHA that the thirty (30) day timeframe has expired

and no response was received to its offer.

(Approved by the Office of Management and Budget under control

number 2577-0075.)

[[Page 3724]] Dated: January 5, 1995.

Joseph Shuldiner,

Assistant Secretary for Public and Indian Housing.

[FR Doc. 95-1113 Filed 1-17-95; 8:45 am]

BILLING CODE 4210-33-P