Section 8 Certificate and Voucher Programs Conforming Rule

SUMMARY: This rule combines and conforms rules for tenant-based rental

assistance under the rental certificate and the rental voucher

programs. This rule also amends requirements for project-based

assistance under the rental certificate program.

EFFECTIVE DATE: Information collections in this rule must be reviewed

by the Office of Management and Budget under the Paperwork Reduction

Act of 1980. Upon OMB approval of the information collections, HUD will

publish a notice in the Federal Register announcing the effective date

of the rule and adding the OMB approved control numbers. It is

anticipated that this OMB approval process will be concluded, and that

the rule will be made effective, by 60 days after the date of

publication of this rule.

FOR FURTHER INFORMATION CONTACT: Madeline Hastings, Director, Rental

Assistance Division, Room 4204. Telephone numbers (202) 708-2841

(voice); (202) 708-0850 (TDD). (These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

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 (44 U.S.C. 3501-3520). See

the Notice of Information Collections published elsewhere in today's

issue of the Federal Register, inviting public comment on the estimated

burden on the public associated with the rule. (Of course, as part of

this process, it is possible that there will be changes made to the

information collections.) No person may be subjected to a penalty for

failure to comply with these information collection requirements until

they have been approved and assigned an OMB control number, to be

announced by separate notice in the Federal Register.

Discussion

History and Scope of Rule

On February 24, 1993 HUD published a comprehensive proposed rule to

combine and conform the rules for tenant-based Section 8 rental

assistance under the certificate and voucher programs. (58 FR 11292)

The proposed rule would also have amended requirements for project-

based assistance under the Section 8 certificate program.

HUD received approximately 400 comments on the proposed rule that

generally approve the broad purpose of the rule. Comments object to

particular features of the rule. Many of the objections pertain to

provisions implementing statutory requirements, particularly the

requirement that an owner notify HUD when terminating tenancy for a

business or economic reason, and the prohibition of discrimination by

multifamily owners against certificate or voucher holders.

On July 18, 1994 HUD published the first portion of the

comprehensive rule for the tenant-based program: The final rule on

unified admission procedures. (59 FR 36662) At that time, part 982,

subparts A and E were added. Today's final rule covers other aspects of

the comprehensive rule for the tenant-based programs, adding 8 subparts

and reserving 3 other subparts. The rule also contains the regulations

for the project-based certificate program, included in part 983.

Today's final rule does not include requirements concerning:

--Calculation of the rent and housing assistance payment for the tenant

or project-based programs.

--``Special housing types'': program variants to meet special housing

needs, such as congregate housing, shared housing, single room

occupancy housing and independent group residences.

HUD will issue a final rule on these subjects. Until the final rule

is issued, these subjects will be governed by requirements in the

existing program rules. The final rule may also include further

revisions of program admission procedures, or subjects in today's final

rule.

I. Requirements and Plans for HA Administration of Program

A. Demonstrating HA Authority and Jurisdiction

The rule provides that an HA must furnish HUD a legal opinion on

the HA's jurisdiction and authority to administer the tenant-based

programs. (Sec. 982.51) A comment suggests that agencies already

participating in the program should be exempt from this requirement.

The new rule does not add a new requirement. Since the beginning of

the tenant-based programs, agencies have had to provide evidence of the

HA authority and of the area where the HA was authorized to operate the

programs under State and local law. A correct determination of the HA

jurisdiction has important consequences for day to day administration

of the program by the HA. Families may move anywhere in the HA

jurisdiction, and outside the HA jurisdiction, under portability

procedures. The new rule does not automatically require any new

submission by the HA if the HA legal opinion is already on file with

HUD, and gives HUD the necessary evidence of the HA jurisdiction and

operating area. Of course, the HA must furnish new information if there

is a change in State law or legal authority, such as a court decision

determining the HA jurisdiction.

Under the old program regulations and handbook, the HA was required

to show the governmental jurisdiction in which the HA was ``not legally

barred'' by State law from entering and administering assistance

contracts for program participants. This formulation emphasized the

freedom of the participant to lease a unit anywhere the HA was not

legally prohibited from administering assistance. Since the beginning

of portability, a participant family could move outside the

jurisdiction of the original HA (for non-resident applicants,

portability applies after the first year in the program). In the final

rule, the term ``jurisdiction'' is defined as the area where the HA is

authorized to administer the program under State or local law.

(Sec. 982.4)

B. HA Local Policies

The HA must adopt a plan that states HA local policies for running

the tenant-based program. Under the proposed rule, the HA adopted local

policies governing all major aspects of HA program administration. In

accordance with past practice, the HA would have been required to adopt

both an ``administrative plan'' for general program administration, and

a separate ``equal opportunity plan'' for compliance with fair housing

requirements. The proposed rule provided that the HA administrative

plan and equal opportunity plan be approved in advance by HUD.

Comments largely commend HUD for allowing HAs broad discretion to

adopt local policies for operation of the tenant-based program. HUD

should

[[Page 34661]]

direct what subjects must be covered by HA administrative policies,

while leaving HAs discretion on how to regulate the prescribed

subjects. Comments particularly welcome new regulatory provisions

confirming that an HA may adopt local policies concerning family

absence from the assisted unit, program participation after break up of

the assisted family, maximum security deposit, and enforcement of

participant obligations. (Provisions on these subjects are discussed

later in the preamble.)

However, HA comments express concern with the cost and

administrative burden of adopting and revising HA policies. Comments

ask clarification of a proposed provision stating that the HA must

revise the administrative plan or equal opportunity plan to change the

policies covered by the plan. Comments recommend combining the equal

opportunity and administrative plans.

Comments discuss the difficulty and delay in securing HUD approval

for new HA policies. Some comments recommend a regulatory time limit

for HUD review of the HA policy.

Comments suggest that the HA should be required to give notice of

proposed changes in HA policies to participants and interested

organizations or advocates, and that the HA should be required to give

copies of the HA policies to each applicant or participant.

On reconsideration, HUD has made a number of changes in the

provisions on HA local policies:

--Merging the equal opportunity and administrative plans into a single

plan;

--Limiting the subjects that must be contained in the plan; and

--Eliminating the blanket requirement for HUD advance approval of HA

policies in the administrative plan.

In the final rule, HUD has decided to eliminate the requirement for

separate administrative and equal opportunity plans. An HA's

discretionary policies will be contained in the administrative plan.

This change eliminates the artificial distinction between equal

opportunity issues and ordinary administrative policies. The final rule

removes the requirement for separate overlapping or duplicative

coverage under the prior equal opportunity and administrative plans,

such as policies for selection of program participants. All aspects of

program administration must be consistent with the HA's obligation to

operate the program in accordance with civil rights requirements.

Under the terms of the proposed rule, the administrative plan would

have been a comprehensive statement of HA local policies for

administration of the program. Under the final rule, the mandatory

coverage of the administrative plan is only focussed on equal

opportunity requirements and programmatic policies for the specific

areas listed in the rule. (Sec. 982.54(d)) While HA policy and practice

in other areas (such as financial management) have a vital role in

operation of the tenant-based program, HUD review and oversight will

focus on the results of HA policies, not on whether the HA has adopted

a written policy to achieve these results (or has obtained HUD approval

for such a policy).

Besides listing specific subjects that had to be included in the

administrative plan, the proposed rule also would have required the HA

to include unspecified ``other local HA policies'' for administration

of the program. In the final rule, this residual category is deleted.

The HA is only required to cover the specific subjects listed in the

rule. In defining this mandatory coverage, HUD does not express any

view that other matters are not important, or that the HA should not

adopt formal written policies for the guidance of program officials.

However, the decision whether to adopt such additional policies is left

to the local judgment and managerial experience of the individual HA.

Before this rule, the HA was required to submit the administrative

plan for HUD approval. In the final rule, this requirement is deleted.

For most purposes, the HA may adopt and revise HA policies without

asking for HUD approval. However, the policies in the administrative

plan must comply with HUD requirements. The HA must give HUD a copy of

the administrative plan. (Sec. 982.54(b))

By eliminating the HUD approval requirement, the new rule

substantially increases the HA's day-to-day autonomy in administration

of the program, and minimizes HUD interference in HA policy decisions.

At the same time, HUD retains the authority for necessary oversight and

audit of HA operations. If HA policies violate HUD requirements, the HA

must revise the administrative plan to comply with HUD requirements.

(Sec. 982.54(b)) Instead of using HUD administrative resources for

routine review and approval of policies in the HA administrative plans,

HUD can concentrate available HUD staff on discovery and correction of

the most serious HA problems in managing the program.

Since the rule generally lifts the requirement for prior HUD

approval of HA administrative policies, an HA can revise its policy

more quickly and easily. The HA does not need to wait for HUD approval,

or negotiate changes in HA policy to satisfy the HUD reviewer, so there

is no need to consider or establish a deadline for HUD review of the HA

administrative plan, as suggested by some comments.

Comments ask if changes in the administrative plan must be approved

by the HA board. The final rule provides that the administrative plan

and any revisions of the plan must be formally adopted by the HA board

or other authorized officials. (Sec. 982.54(a))

In certain key areas, HUD rules will continue to mandate advance

HUD approval of HA policies. Residency preferences for selection of

applicants must be approved by HUD. (Sec. 982.208(b) (59 FR 36687, July

18, 1994)) As required by law, the HA family self-sufficiency (FSS)

action plan must also be approved by HUD. (42 U.S.C. 1437u(g)(1)) (If

FSS policies are contained in an HA's administrative plan, the policies

must be moved to the HA's FSS action plan.)

Comments state that the HA administrative plan should include HUD

requirements, not just HA discretionary policies. HA comments ask if an

HA must amend the administrative plan whenever HUD revises regulations

or other requirements. The final rule provides that an administrative

plan must state HA policy ``on matters for which the HA has discretion

to establish local policies.'' (Sec. 982.54(a))

Since the final rule does not require that the HA revise the

administrative plan to merely echo HUD regulations or other

requirements, the HA is only required to revise the administrative plan

to reflect the exercise of policy choices by the individual HA. By

definition, HUD ``requirements'' are binding on the HA in any case.

For practical administration of the program, HAs may elect to

develop procedures or guidance for HA staff that reflect both HUD

requirements and the HA's policy decisions in accordance with HUD

requirements. As noted above, the rule no longer requires that the

administrative plan must be approved in advance by HUD, so it is less

critical to distinguish between HA policy mandated by HUD, as opposed

to HA policy adopted in accordance with local HA discretion.

The final rule drops a proposed provision that would have required

an HA to adopt policies to encourage participation by eligible

families. Since many eligible families are eager to participate in the

program, and most HAs have long waiting lists, HAs have

[[Page 34662]]

little need to stimulate family interest and demand for participation.

C. Equal Opportunity Requirements

The rule lists federal civil rights law and regulations that apply

to the tenant-based programs. (Sec. 982.53)

Requirements under Section 3 of the Housing and Community

Development Act of 1983 apply to construction or rehabilitation under

the Section 8 program, but do not apply to Section 8 tenant-based

assistance. Under the final rule, reference to Section 3 requirements

is moved to 24 CFR part 983, which contains the requirements for

projects constructed or rehabilitated under the Section 8 project-based

certificate program. (Sec. 982.11(c)(3)) HAs are encouraged to recruit

qualified program staff in a manner that furthers Section 3 goals.

Comments recommend that the rule should require HA compliance with

State and local fair housing laws. HUD believes that the federal

program rule and program enforcement should only require compliance

with federal fair housing requirements. State and local governments can

of course impose additional requirements. The federal regulation is not

intended to pre-empt the operation of such State or local laws.

Some comments recommend that the rule should impose extensive

additional fair housing procedures, including HA help for persons who

need assistance in presenting a claim for illegal discrimination; HA

collection of fair housing data and HA analysis of barriers to housing

choice; and fair housing training of HA staff. As noted above, HA

operation of the program is subject to civil rights statutes and

regulations. In addition, the basic structure of the tenant-based

program is a powerful instrument for promoting housing choice by low

income and minority families.

An HA must certify that it will comply with equal opportunity

regulations and requirements. (Sec. 982.53(c)) A comment notes that the

certification is unnecessary, since the HA must follow the law in any

case. HUD agrees that the HA is bound by the law and regulations, but

retains the requirement for equal opportunity certification, in

accordance with historical practice in HUD programs. The certification

is not burdensome, and reminds the HA of its responsibility to

administer its tenant-based program in accordance with the federal fair

housing requirements.

II. Funding and HA Application for Funding

A. Competition for Funds; Criteria for Selection

Some program funding is distributed by HUD to HAs through a

competitive process. So HAs can compete for such funding, the

Department publishes a public notice in the Federal Register, called a

``Notice of Funding Availability'' or ``NOFA''. The HUD Reform Act of

1989 provides that the Federal Register notice must state the

``criteria'' for selection of applicants. The competitive criteria in a

Federal Register NOFA may include any objective measure of housing

need, project merit and efficiency. (HUD Reform Act of 1989, Section

102(a)(3), Pub. L. 101-235, 103 Stat. 1990; 42 U.S.C. 3545(a)(3))

Under the law, HUD must publish a description of how to apply for

assistance under the NOFA, including any deadlines. (Id. section

102(a)(2)) The Reform Act requirements are implemented in a HUD

regulation at 24 CFR part 12. The Section 8 program regulation

describes the procedure for HUD publication of a NOFA to govern

competitive award of funds in accordance with part 12

(Sec. 982.101(c)), for HA submission of applications in accordance with

the NOFA (Sec. 982.102(b)), and for evaluation of HA applications based

on selection criteria in the NOFA (Sec. 982.103(a)(2)).

In recent years, HUD has published a number of NOFAs each federal

fiscal year to distribute Section 8 tenant-based funding for various

purposes identified in the appropriation act and conference report. For

example, in federal fiscal year 1994, HUD published separate NOFAs

stating criteria for award of program funding distributed under a

statutory fair share formula, for funds set aside for homeless persons

with disabilities, for homeless veterans with severe psychiatric or

substance abuse disorders, for family self-sufficiency (FSS) program

coordinators, for elderly service coordinators and for the family

unification program.

Some public comments object to award of funding under selection

criteria in a Federal Register NOFA. The comments recommend that

criteria for award of funds should be determined in a full dress

rulemaking, with notice and opportunity for public comment. Comments

indicate that the competitive criteria should be included in the

standing program regulation.

Comments also object to criteria used by HUD to select HA

applications for funding. Comments state that the selection criteria

should give greater weight to efforts to further fair housing, and

should penalize an applicant HA that has a residency preference or

other policies that have an ``exclusionary'' effect. Comments state

that the criteria for selection should give funding preference to HAs

that do not use a residency preference for selection of applicants, and

that have an open waiting list.

The competitive selection scheme under a HUD NOFA may emphasize the

administrative capability of applicant HAs. Comments claim that

application of this HUD selection criterion to distribution of fair

share funding in some metropolitan areas tends to favor a suburban HA

(with greater presumed administrative competence) over the HA for a

core city. Comments also claim that emphasis on the capability

criterion is too subjective. Other comments recommend that funding

should be distributed by formula, rather than by a competitive process.

HUD believes that award of competitive funds according to criteria

stated in a Federal Register notice carries out precisely the process

intended by the 1989 HUD Reform Act, and the regulation adopted by HUD

to implement the Reform Act requirements (24 CFR part 12). HUD is not

required to establish competitive criteria by notice and comment

rulemaking.

Funding for individual HUD programs, such as the Section 8 tenant-

based assistance programs, is typically appropriated by the Congress in

each separate fiscal year. Each year Congress determines the amount of

funding available for different purposes. The breakdown of Section 8

program funding is not definitively known until enactment of the

appropriation act. (The detailed breakdown is generally expressed in a

Table that is included in the Conference Report.) In this context, the

use of a notice and comment rulemaking process to determine criteria

for competitive award of funds in each fiscal year would paralyze the

administrative process, prevent the timely award of appropriated funds,

and deny flexibility in determining appropriate criteria for award of

funding under the annual appropriation.

Comments recommend that HUD adopt new procedures for denial of HA

funding applications. The comments suggest that HUD should give the

rejected applicant a written statement or checklist of the reasons for

denial of the HA's application. Comments also suggest that a rejected

applicant should be granted the right to appeal HUD's funding decision.

For funding awarded by a competitive process, HUD has issued

regulations

[[Page 34663]]

under the HUD Reform Act of 1989. These regulations give broad public

access to documentation of the basis for HUD decision on HA funding

applications. The Reform Act rule provides that HUD must ensure that

documentation on each application is ``sufficient to indicate the basis

on which HUD provided or denied the assistance.'' (24 CFR 12.14(b)(1))

Under the Reform Act rule, this documentation is available for public

inspection for five years. (12.14(b)(2)) The rule for tenant-based

assistance is revised to add a cross-reference to the documentation and

public inspection requirements under the Reform Act rule.

(Sec. 982.103(b)(3))

HUD has not accepted the recommendation to afford the HA applicant

a right to appeal HUD's decision on HA funding applications, or to

delay distribution of funds pending hearing on an HA appeal. HUD is

deeply concerned that the grant of such a right would severely delay or

paralyze the process for award of funds, would encourage fruitless and

distracting appeals and litigation, and would result in major waste and

diversion of administrative energies by HUD and the HAs. HUD seeks to

award competitive funding by a fair and expeditious competition,

carried out in accordance with criteria stated in a published NOFA.

However, HUD will not encumber this process by adding the right to a

formal appeal or hearing for the HA. Sometimes NOFAs provide a

procedure for correction of allocation inequities.

B. Amount of Funding: Units or Dollars

Several comments ask HUD to provide funding to an HA for a specific

number of units, rather than for a fixed allocation (amount) of funds.

Under the certificate program, the HA was formerly required to maintain

a HUD-approved unit distribution (by bedroom size), using the funding

provided under the consolidated ACC, including any amendment funding.

(Under the ACC, there is a separate ACC term for each funding

increment.) In the voucher program, the unit distribution is not

established by HUD. The HA is responsible for management of available

voucher funding under the consolidated ACC. HUD did not provide voucher

funding for ACC amendments to support a pre-determined unit mix. The HA

controlled the use of available voucher funding by setting the level of

subsidy for each family (payment standard), and by controlling

admissions to the program.

Under recent amendments of regulatory selection requirements for

both the certificate and the voucher programs, admission from the

waiting list may no longer be based on family size. (Sec. 982.204(d),

as amended 7/18/94, 59 FR 36662 et seq.; see preamble discussion at

36666-36667) This change automatically eliminated possible inequities

caused by disparities of wait-times for families of different sizes.

The length of wait does not depend on the size of the family. In

addition, the regulation change eliminated the problems and

complexities of administering separate sub-lists for different unit

sizes, as well as the requirement for the HA to maintain (in the

certificate program) a HUD-determined unit distribution.

Comments ask if the HA will be required to maintain a HUD-approved

unit distribution by bedroom size. Since the HA is prohibited from

selection by unit size for tenant-based assistance, the HA is not

required to maintain a HUD-approved unit distribution.

HUD believes that the new regulatory and administrative system is a

better way of managing program funds. In the annual appropriation

process, the Congress appropriates specific dollar amounts of funding

(budget authority), rather than funding to support a specific number of

units under each HA's consolidated ACC. HUD cannot guarantee that the

funding that is appropriated by the Congress, and obligated by HUD to a

specific HA, will support the changing number of units that will result

from the HA's admission of families without regard to unit size, under

the system provided in HUD's new regulation. Rather, the HA is in the

best position to manage the available funding committed to the HA, so

that the HA can continue to provide assistance for families already

admitted to the program.

C. Family Unification

The proposed rule recites statutory requirements governing award of

funding appropriated for ``family unification'' (also called ``foster

child care'')--which is special Section 8 certificate program funding

to avoid the need to place or keep children in out-of-home care.

Comments recommend against providing categorical funding for family

unification, object to limits on competition for family unification

funds, and question why family unification does not apply to vouchers.

Some comments support special funding for this purpose.

The final rule deletes the rule provisions stating statutory

requirements governing family unification set-asides. When the Congress

provides funding for family unification, statutory and other

requirements can be stated in the NOFA offering any family unification

funding for public competition and award.

III. Annual Contributions Contract and HA Administration of Program

A. Annual Contributions Contract

Comments recommend that funding for all increments in an HA's

certificate or voucher program should be combined in a consolidated

annual contributions contract (ACC). Under this rule and under current

HUD practice, all funding for an HA's Section 8 tenant-based programs

is provided under a single consolidated ACC, with separate ACC

attachments that show all funding for the HA's certificate and voucher

programs.

The final rule provides that commitments for all the funding

increments in an HA's certificate and voucher programs are listed in

one consolidated contractual document called the consolidated annual

contributions contract (consolidated ACC). (Sec. 982.151(a)(2)) The

final rule eliminates a proposed provision that would have required

separate consolidated ACCs for an HA's certificate and voucher

programs. In most respects, the certificate and voucher tenant-based

programs are identical. In 1994, HUD combined the ACC forms for these

programs into a single consolidated ACC. The single consolidated ACC

provides a common contractual basis for unified administration of the

tenant-based programs.

B. Administrative Fees

Administrative fees are paid by HUD to cover HA costs to run the

Section 8 tenant-based assistance program. (Sec. 982.152) Fees must be

approved by HUD. The rule describes the purposes for which fees are

paid. The rule does not state how fees are calculated. The calculation

of fees in each federal fiscal year is affected by the HUD budget and

annual appropriations, and may be affected by other temporary

legislation.

Section 8(q) of the U.S. Housing Act of 1937 (42 U.S.C. 1437f(q))

states requirements for determining administrative fees in the

certificate and voucher tenant-based programs. However, the Section

8(q) requirements only apply if the HUD appropriation act so provides.

Under the terms of HUD appropriations since federal fiscal year 1989,

Section 8(q) requirements apply to calculation of administrative fees

for so called ``incremental'' units. Generally, ``incremental units''

are new federally-assisted units, as contrasted with

[[Page 34664]]

renewal or replacement of expiring assistance. Other units are not

subject to Section 8(q) (generally, units funded before fiscal year

1989 and funding for renewal or replacement). HUD has full discretion

to set HA fees for such units.

HA comments recommend increases in HA administrative fees. Comments

disagree with HUD's statement, in the preamble of the proposed rule,

that administrative fees generally exceed the amount needed to

administer the program. Comments point out that HAs are now required to

carry out many new tasks, such as administration of family self

sufficiency, portability and assistance for special populations, such

as homeless persons or persons with AIDS. Comments urge that the

administrative fee be based on measurement of the time needed to

accomplish tasks required by HUD rules.

The rule is intended to provide a regulatory framework for periodic

determination of administrative fee. The detailed procedures for fee

calculation are not described in the permanent program rule. From time

to time, HUD issues notices and handbooks explaining how to compute the

applicable fees in accordance with the appropriations and other

governing laws.

Comments recommend allowing a one-time fee for implementation of

the new rule. This comment is not adopted. This rule does not radically

change existing program procedures. In certain respects, the rule will

significantly simplify HA administration of the program. Any change in

program requirements entails some administrative burden in changing

existing management practice. However, HUD does not anticipate that the

transition to operation under the new rule will cause problems

justifying a higher administrative fee.

C. Ongoing Administrative Fee

1. How Calculated

HUD pays a fee to the HA for every month after a unit is ``under

Housing Assistance Payments (HAP) Contract''. This is called the

``ongoing administrative fee''. In accordance with current program

practice, the proposed rule provided that the ongoing fee for a unit

equals a HUD specified percentage of the Section 8 existing housing

fair market rent for a two-bedroom unit (regardless of the actual unit

size). In present program usage, different fee percentages apply to

different types of units in the HA's tenant-based program. A ``blended

fee'' percentage is calculated for the HA's whole certificate or

voucher program, reflecting the proportions of these different unit

types in the HA's program.

The proposed rule did not state the percentage of the FMR that is

used to calculate the administrative fee, but provided that the

percentage will be ``HUD-specified''. For units where the ongoing fee

is calculated under Section 8(q) of the U.S.H. Act (42 U.S.C. 1437f(q))

(to date, only ``incremental'' units), the statute provides that the

amount of the administrative fee is 8.2 percent of the fair market rent

for a two bedroom unit.

HUD is currently considering how the administrative fee system

should be revised to fairly and adequately compensate HAs to administer

the program. In the future, administrative fees may or may not be

calculated as a percentage of the fair market rent. Since the future

fee system is not known, the final rule does not provide that the

ongoing administrative fee is calculated as a percentage of the fair

market rent.

The final rule states only that the ongoing fee is established by

HUD. As in the past, the ongoing fee is paid for each program unit

under HAP contract on the first day of the month. (Sec. 982.152(b)(1))

This change leaves flexibility for future adoption of a new

administrative fee system. However, under current law, the ongoing fee

for units under Section 8(q) remains 8.2 percent of the two-bedroom

fair market rent. On January 24, 1995, HUD published a notice revising

the method for calculating administrative fees for units that are not

subject to Section 8(q). (60 FR 4764)

By law, an HA that administers Section 8 assistance may contract to

make assistance payments to itself as a Section 8 owner. (42 U.S.C.

1437f(a)) The final rule adds a new provision confirming that HUD may

pay a lower ongoing administrative fee for HA-owned units.

(Sec. 982.152(b)(3))

2. Higher Ongoing Fee--For Small Program or Program Operating in Large

Area

For units subject to Section 8(q), the law provides that HUD may

decide to increase the ongoing administrative fee ``if necessary to

reflect the higher costs of administering small programs and programs

operating over large geographic areas''. (U.S.H. Act, Section 8(q)(1),

42 U.S.C. 1437f(q)(1)) The proposed rule would have provided that HUD

could approve a higher ongoing fee for an HA program operating over a

``large area''. Such fees may only be approved ``if appropriations are

available'' for this purpose.

Comments state that HUD should not pay a higher fee for an HA that

operates in a large region. Comments want HUD to clarify the meaning of

``large area''. Comments ask HUD to allow a higher fee for an HA that

must service portability families outside the HA's normal State-law

jurisdiction. Comments state that the rule should allow higher ongoing

fees in other cases (not just for an HA operating in a large area),

including higher fees to compensate for ``extenuating problems''.

Comments recommend that the ability to pay higher fees should not be

tied to availability of appropriations.

Unlike Section 8(q), the proposed rule would not have permitted a

higher ongoing fee for ``small programs''. Comments state that the

proposed rule discriminates against HAs with small programs. They state

that the rule should allow a higher fee for small programs, such as

small rural programs, as well as programs operating in larger areas.

HUD can only pay administrative fees from funds (budget authority)

appropriated by the Congress. HUD has amended the final rule to provide

that HUD may decide to approve a higher ongoing fee in the two cases

allowed by the Congress under Section 8(q)--for small programs and for

programs operating in large areas. (Sec. 982.152(b)(2))

The two cases stated in the rule include the major circumstances

where a higher ongoing fee may be justified. An HA operating in a large

area may incur higher expenses to service the assisted units, for

example, because of longer trips to inspect program units scattered in

rural communities, than an HA whose units are clustered closer to HA

offices. HAs with small programs may not benefit from economies of

scale in administration of the program.

The rule does not give HAs that operate in large areas or with

small programs any right to a higher ongoing fee. HUD has full

discretion whether to approve any increase over the normal ongoing fee.

At this time, HUD will not attempt, as suggested by comment, to

further define in this rule when a higher fee may be approved for a

``large'' geographic area or a ``small'' HA program. The field office

will apply these concepts on a case by case basis, in accordance with

HUD Headquarters instructions, to determine if an HA needs a higher fee

for proper administration of its individual program.

D. Preliminary Fee

HUD pays a preliminary fee for each new unit added to the HA

program. (By law, the maximum preliminary fee for

[[Page 34665]]

Section 8(q) units is $275 (42 U.S.C. 1437f(q)(2)(A)(i)), or $300 for

preliminary costs in the family self sufficiency (FSS) program (42

U.S.C. 1437u(h)(1)).) The preliminary fee is primarily used to cover HA

costs to lease up new units under the ACC (but not for turnover or

renewal of program units).

An HA is required to document amounts spent for preliminary costs,

up to the allowable per unit maximum. The HA is only compensated for

qualifying expenses actually ``incurred''. Public comments recommend

eliminating the requirement for an HA to present cost justification in

order to collect a preliminary fee. The comment is not adopted. The

rule is revised to specify, as required by law (for units subject to

Section 8(q)), that preliminary fees cover the cost of preliminary

expenses that the HA ``documents it has incurred'' in connection with

new funding from HUD. (42 U.S.C. 1437f(q)(2)(A)(i); Sec. 982.152(c)(2))

In the past, HAs were required to submit justification to HUD for

payment of the preliminary fee. Under this rule, HAs are no longer

required to submit up-front justification to HUD to receive the fees.

However, HAs must maintain accounting records that document preliminary

costs incurred by the HA, and must make the documentation available

when requested for audit by HUD.

Some comments recommend that HUD should eliminate a separate

preliminary fee, or that a preliminary fee should only be paid for a

new program. HAs should be compensated through the ongoing

administrative fees. Other comments recommend that HUD should pay a

preliminary fee for every new leasing by an assisted family, not just

for the initial lease-up of a new funding increment. At this time, HUD

is retaining provision for a separate preliminary fee as authorized by

current law for fees calculated under Section 8(q) of the U.S. Housing

Act of 1937 (when so provided in HUD's appropriation). As noted above,

HUD is considering modification of the current system for calculating

ongoing administrative fees.

E. Family Self-Sufficiency

The proposed rule would have provided that the preliminary fee may

be used to cover ongoing expenses for family self-sufficiency (FSS)

program activities. Some comments approve the provision for payment of

ongoing family self-sufficiency expenses from the administrative fee.

Other comments object that the use of preliminary fee for this purpose

would reduce the amount available to the HA for preliminary costs. FSS

is an ongoing program. HAs may not have additional program increments

(to generate preliminary fees that may be used for payment of FSS

costs). Comments recommend payment of a special fee for FSS.

The final rule adds authorization for approval of a fee for HA

costs to coordinate supportive services for families participating in

the FSS program. (Sec. 982.152(a)(1)(v)) This special FSS fee is not

linked or limited to FSS coordinator costs in connection with a new

funding increment.

F. Helping Families Find Housing

In accordance with current practice, the proposed rule would have

provided that HUD may approve a ``hard-to-house'' fee to cover the cost

of special assistance to a family with three or more minors. Unlike the

preliminary fee, a hard-to-house fee was to be paid whenever a

qualifying family moved to a new assisted unit, not just for new

program funding. The proposed rule also would have provided that a

hard-to-house fee would not be paid for a unit that is owned by the HA.

Comments recommend an increase in the amount of the hard-to-house

fee, and that the HA should be paid a hard-to-house fee to cover costs

to help a family with a child under seven find a lead-free unit.

Comments urge that the hard-to-house fee should also be paid for

leasing of an HA-owned unit, since the HA must follow the same

procedures as for a private dwelling unit.

Other comments suggest elimination of the hard-to-house fee, or

recommend that HUD should not pay a hard-to-house fee unless the HA has

in fact made special efforts to house a large family. Unlike the

preliminary fee, HUD does not currently require the HA to document

actual costs or administrative effort. The hard-to-house fee is paid

for every qualifying move.

Section 8(q) provides that HUD may determine reasonable fees

for: ``the costs incurred in assisting families who experience

difficulty (as determined by the Secretary) in obtaining appropriate

housing under the programs * * *.'' (42 U.S.C. 1437f(q)(2)(A)(ii))

The final rule provides only that HUD may approve administrative fees

for ``cost to help families who experience difficulty renting

appropriate housing * * *.'' (Sec. 982.152(a)(1)(iii)) The final rule

does not use the term ``hard-to-house'', and does not specify that the

fee is only paid for a family with three or more minors. HUD is

examining all aspects of the administrative fee system. HUD will

consider when HUD should pay an additional fee so that the HA can give

the family additional help in finding a rental unit.

G. Help for Elderly and Disabled

Under a 1992 law, Section 8(q) administrative fees may be used to

employ or retain coordinators of supportive services for elderly or

disabled families who receive tenant-based assistance. (42 U.S.C.

1437f(q)(3)(A), as amended by Section 675 of the Housing and Community

Development Act of 1992, 106 Stat. 3828) The rule is revised to provide

that HUD may approve administrative fees to cover HA cost to coordinate

supportive services for elderly and disabled families.

(Sec. 982.152(a)(1)(iv)) Supportive services include a wide range of

assistance for the elderly and disabled, such as health services,

nonmedical counseling, personal care, case management and other

appropriate services. (See 42 U.S.C. 13631(c))

H. Audit Costs

The rule provides that HUD may approve an administrative fee to

cover cost of audit by an independent public accountant.

(Sec. 982.152(a)(1)(vi)) Currently, HUD pays a fee to cover costs of

required audit by an independent public accountant (IPA). Public

comment states HUD should list this special type of fee in the proposed

rule. HUD agrees, and has revised the rule to specify that HUD may

approve a separate fee for IPA audit costs.

I. Other Costs

In addition to the listing of specific fees that may be approved by

HUD, the final rule provides that HUD may pay an additional

administrative fee for ``other extraordinary costs'' approved by HUD.

(Sec. 982.152(a)(1)(vii)). This category leaves HUD flexibility to

approve additional amounts needed by an HA for special purposes.

The final rule does not provide for a special portability fee.

Portability fees will be eliminated beginning in federal fiscal year

1996.

J. HA Responsibilities

The rule contains a list of some basic HA responsibilities in

administration of the tenant-based programs. (Sec. 982.153) Comments

suggest some additions to the list of HA responsibilities. The final

rule revises and supplements the list of HA responsibilities as stated

in the proposed rule. The final rule provides that:

--The HA determines who can live in the assisted unit, at admission and

during the family's participation in the program. (Sec. 982.153(b)(8))

This new provision is consistent with other

[[Page 34666]]

provisions concerning the HA's authority to determine when a group of

persons qualifies as a ``family'' (Sec. 982.201(c)(3)), to select

families for admission to the program (part 982, subpart E), and to

approve additional occupants of the assisted unit. (Sec. 982.551(h)(2))

--The HA must encourage owners to make units available for leasing in

the program, including owners of suitable units located outside areas

of poverty and racial concentration. (Sec. 982.153(b)(4))

--The HA is responsible for conducting an ``informal review'' of

certain HA decisions concerning an applicant for participation in the

program. (Sec. 982.153(b)(19) and Sec. 982.554) The final rule restores

the distinction in the existing rule between an ``informal review'' of

HA decisions concerning an applicant for participation, and an

``informal hearing'' on HA decisions concerning a family that is

already admitted to the program. (See Sec. 982.554 and Sec. 982.555)

--The HA must obtain and verify evidence of citizenship and eligible

immigration status, as required by HUD regulations implementing

statutory restrictions on assisted occupancy by certain noncitizens.

(Sec. 982.153(b)(9); see 24 CFR part 812)

--The HA must establish and adjust a utility allowance for tenant-

supplied utilities. (Sec. 982.153(b)(16))

--The HA must administer an FSS program. (Sec. 982.153(b)(22))

The final rule also specifies that the HA bears responsibility to

affirmatively further fair housing goals, as well as to comply with

equal opportunity requirements. (Sec. 982.153(b)(5))

K. Administrative Fee Reserve

The rule codifies ACC and handbook provisions concerning the

``administrative fee reserve'' (Sec. 982.155) This account was formerly

called the ``operating reserve''. The administrative fee reserve is

credited with excess administrative fees earned by an HA in prior

years. Generally, if funds in the reserve are not needed for program

administration (to the end of the last ACC funding increment), the HA

has broad discretion to use administrative fee reserve funds for

``other housing purposes''. The purposes must be consistent with State

and local law. (Sec. 982.155(b)(1)) The allowable purposes may include

housing purposes not connected with the Section 8 programs.

In any HA fiscal year, the HA must use fee reserve funds for

program administrative expenses in excess of HUD administrative fees

for the year. Such use has precedence over HA use of the fee reserve

for other non-program housing purposes. HUD may prohibit use of the fee

reserve for certain purposes. (Sec. 982.155(b)(1)) In addition, if the

HA fails to administer the program adequately, the HUD field office may

freeze HA use of fee reserve funds, or may direct the HA to use fee

reserve funds to improve program administration or to restore funds

disbursed for ineligible expenses. (Sec. 982.155(b)(3))

Comments recommend that HUD should relinquish any control over HA

funds in the administrative fee reserve. Administrative fees should be

treated like payments to other contractors for services rendered.

Comments also ask HUD to clarify when the HA may use fee reserve funds

for ``other housing purposes.''

These recommendations are not adopted. Funds in an HA's

administrative fee reserve were paid to the HA by HUD to administer the

HA's Section 8 program. It is important to assure that fee reserve

funds are used first to cover HA administrative costs of the HA's

Section 8 program, and only then are used for other housing-related

purposes. The regulatory standard for use of fee reserve funds leaves

the HA great flexibility to apply the funds for local housing purposes.

In accordance with historical program practice, the rule provides

that the HUD field office may freeze or direct use of reserve funds if

the HA has not ``adequately administered'' any Section 8 program.

(Sec. 982.155(b)(3)) Comment asks HUD to clarify the methodology for

determining when the HA is not adequately administering the program.

HUD believes that the regulatory formula provides sufficient

guidance on the basis for freezing HA use of funds in the

administrative fee reserve. This provision is designed to protect

program funds, and provide a remedy for serious or systemic violations

of program requirements by an HA. Such violations can occur in many

ways. HUD requires a broad authority to restrict HA use of

administrative fee reserve funds if the HA is not running the program

in accordance with HUD requirements.

The final rule adds three limitations on the HA's authority to use

the administrative fee reserve for ``other housing purposes'':

--The HA board of commissioners or other authorized HA officials must

establish the maximum amount that may be charged against the

administrative fee reserve without specific approval.

(Sec. 982.155(b)(2))

--The HA may only use the reserve for other housing purposes if the

funds are not needed to cover HA administrative expenses through the

end of HUD's funding commitment under the consolidated ACC--that is, to

the end of the term of the last expiring funding increment.

(Sec. 982.155(b)(1))

--HUD may prohibit use of administrative fee reserve funds for

specified purposes. (Sec. 982.155(b)(1))

L. Depositary

Program funds must be deposited to and disbursed from the HA's

account with a financial institution acting as program depositary.

(Sec. 982.156) The HUD field office can freeze depositary funds by

giving notice to the depositary institution that prohibits the

depositary from permitting HA withdrawals. In the final rule, the HUD

notice is called a ``freeze notice''.

Comments say that HUD also should notify the HA when the depositary

is frozen. HUD agrees. The rule is revised to provide that HUD must

give the HA a copy of the freeze notice from HUD to the depositary.

M. Budget and Expenditure

Under the rule, the HA must comply with HUD program regulations and

other requirements. (Sec. 982.52(a)) HUD requirements include the

financial management procedures required by HUD. The rule does not

state the details of HUD-required budget and accounting procedures.

The final rule is revised to state that the HA may only use program

funds in accordance with a HUD-approved budget. (Sec. 982.157(b)(1))

The budget must be submitted to HUD at such time and in such form as

HUD requires. (Sec. 982.157(a)) Previously, these requirements were

stated in the consolidated ACC, but were not explicitly recited in the

program rule.

Comments recommend that the Department should consolidate the

budget and requisition process for the certificate and voucher

programs. The Department agrees, and has established uniform budget

procedures for the tenant-based programs. Of course, the budget process

must continue to reflect statutory differences in the program subsidy

computation for the certificate and voucher programs.

Comments ask HUD to eliminate separate budgeting and financial

reporting for renewal funding (funding to provide continued assistance

after the end of an ACC funding commitment). HUD procedures already

have been changed to combine budgets and financial accounting for new

units and renewals.

[[Page 34667]]

N. Program Records

The rule codifies and clarifies basic requirements governing the

HA's obligation to maintain and retain program records. (Sec. 982.158)

Comments approve HUD's clarification of requirements for retention of

program records.

Comments recommend that HUD should reduce the burden of accounting

and record-keeping requirements. Comments suggest that the rule should

describe what record media are allowed or disallowed, and should

specify that record-keeping requirements apply to any form of

permanent, retrievable record (including electronic records), not just

paper files.

The rule provides that HUD and the Comptroller General must be

allowed full and free access to program accounts and records.

(Sec. 982.158(c). See 42 U.S.C. 1435) Comments suggests that the rule

should state specifically that such access must be reasonable, so that

examination of HA records doesn't jeopardize HA operation.

The final rule does not describe what record-keeping media are

allowed or prohibited by HUD. Such details will be provided in program

handbooks or notices. However, the rule is revised to specify that

program records must be in the form prescribed by HUD.

(Sec. 982.158(a))

Since HAs now make extensive use of computers in management of the

program, and since HAs often maintain major program record systems in

computerized form, the rule specifies that the HA must comply with HUD

requirements governing ``computerized or electronic forms of record-

keeping''. (Sec. 982.158(a)) In the rule, HUD also recognizes and

addresses the special problems in examination and audit of computerized

records. Effective examination of such records may require knowledge of

the system (hardware and software), and of passwords, commands and

instructions needed to access data held in the system. The final rule

specifically provides that the HA must grant the examiner (HUD or the

GAO) full and free access:

``to computerized or other electronic records, and to any computers,

equipment or facilities containing such records, and shall provide

any information or assistance needed to access the records.''

(Sec. 982.158(c))

The rule is also revised by restating terminology and language for

consistency and simplicity. In particular, the rule now refers to

``records'', to cover all the various accounts, forms and documentation

used to maintain program information, and including all of the media in

which such data may be maintained.

HUD has not adopted the recommendation to specify that access must

be reasonable. Of course, all requirements should be administered in a

reasonable fashion.

An HA administering Section 8 is not subject to federal Freedom of

Information Act (FOIA) and Privacy Act requirements. Comments recommend

that an HA should be required to make program records available for

public inspection as under the FOIA. This recommendation is not

adopted. The decision whether to release or deny release of program

information generally rests in the discretion of the HA, subject to any

restrictions under State or local law (but see Sec. 813.109(b)

concerning disclosure of information obtained pursuant to the family's

verification release or consent).

O. Conflict of Interest

Under the rule, certain officials or employees of an HA,

contractors, subcontractors or agents of an HA, and members of

Congress, are prohibited from holding a direct or indirect interest in

any program contract or arrangement. (Sec. 982.161(a)) Members of these

classes must disclose their interest or prospective interest to the HA

and to HUD. (Sec. 982.161(b)) As in the past, a HUD field office may

waive the conflicts requirements ``for good cause'' in an individual

case. (Sec. 982.161(c))

A comment recommends that a request for waiver should be deemed

automatically allowed unless rejected in 30 days. This recommendation

is not adopted.

P. Contract Forms

The HA must use the contract and other program forms prescribed by

HUD. (Sec. 982.162) Comment asks that HUD list the forms. The

regulation lists certain basic program contracts that must be used.

However, the rule does not give a complete list of the contracts and

other program forms. A HUD handbook or other HUD directive will list

the HUD-prescribed forms. There is no reason to clutter the regulation

with this information.

Q. Fraud Recovery

Comments state that an HA has no incentive to recover program funds

lost because of bad debts or fraud. In response, HUD notes that

existing regulations permit an HA to retain fifty percent of Section 8

fraud losses that the HA is able to recover from a family or owner by

litigation, court order or repayment agreement. (24 CFR part 792;

Section 326(d) of the Housing and Community Development Act of 1981 (42

U.S.C. 1437f note), as amended by 106 Stat. 3711, 10/28/92) The law and

regulation are intended to encourage HAs to investigate and pursue

fraud and abuse in the Section 8 program. The rule contains a cross-

reference to the separate regulation on Section 8 fraud recoveries.

(Sec. 982.163)

IV. Leasing a Unit

A. Information When Family Is Selected

1. Briefing and Information Packet

When a family is selected to participate, the family needs to know

how the program works. The HA gives the family an oral briefing, and an

information packet. In the HA briefing, the family receives a broad

description of how the program works, family and owner

responsibilities, and areas where the family can lease a unit. The

information packet reinforces the briefing, and supplies more detailed

information to the family. The final rule modifies requirements on the

briefing and information packet. (Sec. 982.301)

In the final rule, several elements are removed from the listing of

items that must be covered in the oral briefing, but are included in

the written information packet--a description of the housing quality

standards (HQS), and of factors the family should consider in renting a

unit.

The final rule drops a proposed provision that would have required

the HA to give prospective landlords information about the family's

rental history or about drug-trafficking by family members. Under the

final rule, the HA has the choice whether to furnish this type of

information to landlords. (Sec. 982.307(b)(2)) The HA is only required

to tell a prospective Section 8 landlord (from information in HA

records) the family's current address, and the family's current and

prior landlord. The HA policy on furnishing other information about the

family to landlords must be stated in the HA administrative plan.

(Sec. 982.54(d)(7)) The HA policy must be stated in the information

packet for the family. (Sec. 982.301(b)(8))

The oral briefing and information packet must explain where the

family may lease a unit, inside and outside the HA jurisdiction.

(Sec. 982.301(a)(1)(iii) and Sec. 982.301(b)(5)) If the family

qualifies to move outside the HA jurisdiction under portability, the

briefing and information packet must explain how portability works.

(Sec. 982.301(a)(2) and Sec. 982.301(b)(5))

The final rule adds a new provision that if the jurisdiction

includes any high poverty census tract, and if the family

[[Page 34668]]

is living in such a census tract, the HA briefing must explain the

advantages of moving to an area that does not have a concentration of

poor families, such as improved employment, educational opportunities

and decreased dropout rates. In the briefing, the HA may not discourage

the family from choosing to live anywhere in the HA jurisdiction, or

outside the HA jurisdiction under portability procedures.

(Sec. 982.301(a)(3))

The final rule provides that the briefing packet must include a

copy of the HUD prescribed ``lease addendum'' (required lease

language), and the form of request for lease approval. (Sec. 982.301(b)

(6) and (7))

The proposed rule would have required that the HA supply the family

certain types of information on prevention of lead-based paint

poisoning. The final rule provides that the HA must give the family the

HUD-prescribed lead-based paint brochure. (Sec. 982.301(b)(11))

2. Information About Landlords

The proposed rule would have provided that if requested by the

family, the HA would give the family available information about

prospective landlords. Comments state that the HA should provide

information about ``units'', rather than about prospective

``landlords''. Other comments state that the HA should not be allowed

to release landlord information without the landlord's consent, or that

HAs may be accused of steering families to landlords in particular

areas. HUD has not followed these suggestions.

The final rule requires that the briefing packet include a list of

landlords or other parties known to the HA who may be willing to lease

a unit to the family, or help the family find a unit.

(Sec. 982.301(b)(13)) The list may include owners or rental agents for

specific properties or units known to the HA (for example, an apartment

house with units rented to other program participants), or entities

that may provide access to numerous units and locations in the local

market, such as real estate agents, rental agents or social service

agencies with listings of possible rental openings. The HA may or may

not provide a listing of specific ``units''. The name of a single

listing agent may provide access to many specific units in the local

housing market.

In providing listings to assist a family, the HA is subject to

general program requirements designed to protect the family's practical

and legal freedom to search for an available unit. The HA may not

discourage the family from choosing to live anywhere in the HA

jurisdiction, or outside the HA jurisdiction under portability

procedures. (Sec. 982.301(a)(2)). The HA may not directly or indirectly

reduce the family's opportunity to select among available units.

(Sec. 982.353(f)) These general requirements apply both to the

provision of landlord and agent listings to the family, and to other

aspects of program administration. The HA may not design such lists in

order to steer families to particular areas, thereby reducing a

family's opportunity to select available units, or discouraging the

family from living anywhere the family may choose.

At the same time, the rule leaves the HA broad discretion and

authority to provide information to families in a practical and helpful

way. The HA is not required to provide a listing of every possible

landlord known to the HA. The rule does not state that the HA must

provide any specific number of listings.

Comments suggest that the HA should be required to give the tenant

a list of owners that are barred from participation, so families don't

waste time. HUD agrees that such information might be helpful in some

markets, or for some owners or units. However, HUD is not persuaded

that this practice will be universally beneficial, or should be

mandated by federal regulation. In many cases, it may be difficult for

tenants to correlate lists of barred ``owners'' with listings of units

available for rental in the local market.

3. Information for Disabled Persons

The proposed rule would have required that if a member of the

family were disabled, the HA must have provided information about

current ``available'' accessible units known to the HA. Comments state

that the HA does not know whether housing is available. Comments also

state that the HA should be required to give the family information

available to the HA of locations and contacts for accessible housing or

other assistance.

HUD agrees that HAs can only furnish available information on

possible openings in accessible units. The final rule provides that at

the request of a family that includes a disabled person the HA must

provide a current listing of accessible units ``known to the HA that

may be available'' for rental to program participants.

(Sec. 982.301(b)(14) (emphasis supplied))

Comments suggest that the oral briefing should use appropriate

procedures for communication with the disabled. Existing HUD

regulations at 24 CFR part 8 prohibit discrimination against disabled

persons in administration of HUD assistance programs. Section 8.6 of

these regulations requires recipients to take appropriate steps to

assure effective communication with applicants and beneficiaries. The

present rule is revised by adding a reference to these requirements.

(Sec. 982.301(a)(4))

B. Giving an Owner Information About a Family

The proposed rule would have provided that the HA must give a

prospective owner information in the HA's possession about rental

history or drug-trafficking by members of the family.

Some comments agree that HUD should require or allow the HA to

release information about the family to a prospective Section 8 owner.

The comments claim that providing the information to owners will

improve relations between the HA and landlords. Comments state that the

HA should both inform the family about the owner, and the owner about

the family.

Other comments contend that the HA should not act as a

clearinghouse for tenant information. HUD should not require or allow

an HA to give landlords information about prospective tenants.

Determination of tenant suitability is the responsibility of the owner.

The HA should not be involved in owner screening of tenants. The owner

can check tenant references. The proposed and final rule provide that

the HA must tell the owner that the HA has not screened the family for

suitability, and that such screening is the owner's responsibility.

Comments agree that the HA should so inform the owner.

The rule is revised to add a new provision stating that:

``Owners are permitted and encouraged to screen families on the

basis of their tenancy histories. An owner may consider a family's

background with respect to such factors as:

(1) Payment of rent and utility bills;

(2) Caring for a unit and premises;

(3) Respecting the rights of others to the peaceful enjoyment of

their housing;

(4) Drug-related criminal activity or other criminal activity

that is a threat to the life, safety or property of others; and

(5) Compliance with other essential conditions of tenancy.''

(Sec. 982.307(a)(2))

Comments state that the release of information about a family to

prospective owners may expose the HA to potential legal liability, or

violate confidentiality requirements under federal or State law. The

obligation for the HA to give landlords information on prospective

tenants adds a new bureaucratic requirement, and forces an HA to

maintain rental or behavioral data on individual tenants. Comments note

that HA release of tenant information

[[Page 34669]]

may block the family's effort to find suitable housing.

Comments ask HUD to clarify what types of ``rental history'' must

be communicated to a prospective landlord: Whether this term means

rent-paying history, and whether the requirement is limited to bona

fide file information or first hand information.

Other comments note HA files may contain hearsay, or inaccurate or

disputed information about the family. Comments state that the HA

should not release tenant information unless the HA obtained the

information as the family's landlord, or has other direct knowledge

that the information is truthful. Comments state that the HA should not

give out information without a release from the tenant, or that the

family should have the right to challenge information in the HA file.

HA communication gives legitimacy to allegations of a prior landlord.

Comments also suggest that landlords don't need information from the HA

since landlords can check references, and criminal convictions are a

matter of public record.

The final rule provides that when a family wants to lease a

dwelling unit, the HA ``may offer'' an owner HA information about

family tenancy history or drug trafficking. (Sec. 982.307(b)(2)) The

rule does not require the HA to release the information.

However, the final rule provides that the HA must give the owner:

--The family's current address, as shown in the HA records.

--The name and address (if known to the HA) of the landlord at the

family's current and prior address. (Sec. 982.307(b)(1))

The final rule requires the information packet for a newly selected

family to include a statement of the HA policy on providing information

to owners. (Sec. 982.301(b)(8)) The HA must give the same types of

information to all families and to all owners. (Sec. 982.307(b)(3))

Under the final rule, the policy on release of family information

to prospective landlords rests in the hands of the HA, the local agency

charged with administration of the tenant-based program. The final rule

merely confirms that HAs ``may'' offer the owner information about the

family in the HA's possession, thus confirming that there is no federal

bar to release of tenant information. However, the choice to exercise

this option is the election of the HA. Some HAs will wish to release

available information on program families, to enhance general owner

confidence and willingness to lease units under the tenant-based

programs. Other HAs will elect to avoid the legal exposure and

potential administrative problems in processing or releasing tenant

information.

In some States, there may be State or local laws affecting release

of tenant information to owners. Such laws may require the release of

such information, or may restrict the release of the information. The

federal regulation is not intended to pre-empt the operation of such

State or local laws.

If the HA wants to release tenant information, the HA must adopt a

policy on providing information to owners. The release of information

by the HA may not be left to casual ad hoc decisions of HA officials,

but must be based on an explicit HA policy.

C. Requesting HA Approval To Lease a Unit

After a family is selected, the HA issues a certificate or voucher

to the family. The family may search for a unit. The family must get HA

approval to lease a unit with assistance in the program. The final rule

restates and clarifies the procedure for requesting HA approval.

(Sec. 982.302; Sec. 982.303; Sec. 982.305; Sec. 982.306)

The proposed rule would have provided that the family requested

approval to rent the unit, but did not refer to a ``request for lease

approval''. The old program rules provided that a family submitted a

request for lease approval to the HA. Public comments state the rule

should keep the requirement to submit a request for lease approval.

Comments note that a request for lease approval is signed by the

landlord, confirms the landlord's agreement to rent the unit, and gives

basic information on terms of the proposed leasing. The form of the

request for lease approval facilitates review by the HA.

The final rule provides that the family must submit a request for

lease approval, and a copy of the proposed lease, during the term of

the certificate or voucher. (Sec. 982.302(c)) The HA has the discretion

to permit a family to submit more than one request at a time.

(Sec. 982.302(b)) The final rule also states that the HA may specify

the procedure for requesting approval to lease a unit, and that the

family must submit the request ``in the form and manner required by the

HA''. (Sec. 982.302(d))

D. Term of Certificate or Voucher

The family must request lease approval during the term of the

certificate or voucher issued by the HA. Extension or suspension of the

term gives the family more time to find a unit and request HA approval.

(Sec. 982.302; Sec. 982.303)

Comments offer different recommendations on the extent of HA

discretion to limit the term of a certificate or voucher. Some comments

stress that an HA should be required to give a family ample time to use

a certificate or voucher. Other comments state that HAs should have

broad discretion to set local policies on the certificate or voucher

term, and concerning any extension or suspension of the term. Comments

note that the administrative plan should include the HA standards for

granting extensions of the term.

Comments assert that the initial term should be longer than 60

days, or that the HA should be required to extend the initial term.

Some comments state that families need more time to find housing, or to

find units in non-minority or non-poverty neighborhoods. A comment

recommends that the certificate or voucher should have an initial 120

day term. The comment states that the HA should be required to grant

further extension if the family has made reasonable efforts to find

housing during the initial term.

Other comments state that HUD should retain the maximum 120 day

term (60 days plus an extension of up to 60 days) as under the old

rule. 120 days is a reasonable time to find a unit. Comments also state

that allowing HA discretion to set longer terms allows too much

variation between local HA programs.

Some comments state that the rules should require the HA to suspend

(toll) running of the term when the family has asked the HA for

approval to lease a unit, and is waiting for HA action on the family's

request. Unless the HA grants a suspension, the term continues to run,

and the family may be discouraged from trying to lease a unit in non-

minority or non-poverty areas. The family cannot control the time used

by the HA in deciding to approve or disapprove the unit. The family may

not have time to find another unit if the original unit is disapproved.

Other comments suggest that suspension is unfair to other applicants

waiting for housing.

Under previous HUD rules, the initial term of a certificate or

voucher was a minimum of 60 days. At its discretion, the HA could

extend the initial term up to a maximum of 120 days from the beginning

of the initial term. This basic 60 day to 120 day pattern is continued

in the final rule. The proposed rule did not set any maximum term. The

HA could decide whether to grant extensions, and the length of any

[[Page 34670]]

extension. The final rule provides, as under the old rule, that the

initial term plus any extensions may not exceed a total of 120 days.

(Sec. 982.303(b)(1))

The family may ask the HA to extend the term up to the 120 maximum

as a reasonable accommodation for a disabled person.

(Sec. 982.303(b)(2)) If the HA believes that a longer time is necessary

for this purpose in a special case, HUD will consider a request for

regulatory waiver of the 120 day maximum.

At its discretion, in accordance with HA policy as described in the

administrative plan, an HA may grant a ``suspension'' (tolling) of the

certificate or voucher term if the family submits a request for lease

approval during the term of a certificate or voucher. (Sec. 982.303(c))

``Suspension'' means stopping the clock on the term of a family's

voucher or certificate after the family submits a request for lease

approval. (Sec. 982.4; Sec. 982.54(d)(2)) The final rule permits the HA

to grant a suspension for ``any part of'' the period running from the

family's request for lease approval up to the time when the HA approves

or denies the request. (Sec. 982.303(c))

The rule requires the HA to establish in the administrative plan a

policy on when and whether extensions or suspension of the term may be

granted, including how the HA decides whether to grant extensions or

suspensions, and the length of any extension or suspension.

(Sec. 982.54(d)(2))

E. HA Approval To Lease a Unit

The HA must determine that a unit meets program requirements.

Before approving rental of a unit with assistance under the program,

the HA must determine that:

--The unit is eligible housing;

--HA inspection shows that condition of the unit satisfies the housing

quality standards (HQS);

--The lease is approvable and includes the ``lease addendum'' language

required by HUD;

--The rent to owner is reasonable; and

--If the unit will be assisted under the certificate program, the total

of contract rent plus any allowance for tenant-paid utilities does not

exceed the FMR/exception rent limit. (Sec. 982.305(a)) The HA may not

execute a HAP contract until all these requirements are satisfied.

The rule provides that all of the following actions must be

completed before the beginning of the lease term:

--The HA has inspected the unit, and determined that the unit satisfies

the HQS;

--The landlord and the tenant have executed the lease; and

--The HA has approved leasing of the unit in accordance with HUD

requirements. (Sec. 982.305(b))

A public comment states that the rule should allow an HA to execute

the HAP contract up to 60 days after commencement of the lease. Another

comment argues that execution of the HAP contract before the HA has

approved the unit would force the HA to pay rent to the owner before

the HA has approved the unit and the lease. The final rule is

consistent with the recommendations in these comments.

The final rule requires that the HAP contract must be executed no

later than 60 days from the beginning of the lease term.

(Sec. 982.305(c)(1)) However, the HA must use ``best efforts'' to

execute the HAP contract before the beginning of the lease term. The HA

may not approve the unit or execute the HAP contract until the HA has

determined that the unit and lease meet all program requirements.

(Sec. 982.305(a))

Comments object to the requirement that the lease must be executed

before the beginning of the lease term. The final rule retains this

requirement.

From the beginning of the lease term, the family's tenancy must be

subject to the statutory and basic tenancy requirements stated in the

required lease addendum. By execution of the lease, containing the

required provisions, the lease requirements are contractually binding

on the owner and the tenant. The lease makes explicit the intention of

the family and the owner to establish a tenancy in accordance with

requirements of the tenant-based programs.

Lease execution before commencement of the lease term is not

difficult. Each family is given a copy of the lease addendum in the

information packet. In general, owners are also familiar with this

requirement. The requirement to execute the lease before the

commencement of the term is also consistent with general practice in

the private rental market.

The HA may not approve the unit or execute the HAP contract, until

the HA determines that the tenancy meets all program requirements (as

listed in the rule). (Sec. 982.305(a)) The HA must make ``best

efforts'' to execute the HAP contract before the beginning of the lease

term. (Sec. 982.305(c)(1)) The HAP contract must be executed within a

maximum of 60 calendar days from the beginning of the lease term.

(Sec. 982.305(c)(1)) In accordance with normal administrative fee

procedures, the HA receives its administrative fee for each whole month

the unit is under lease.

The rule is revised to clarify what happens if the HAP contract is

not executed before the beginning of the lease term. The final rule

provides that:

--The HA may not pay any housing assistance payment to the owner until

the HAP contract has been executed. (Sec. 982.305(c)(2))

--If the HAP contract is executed during the first 60 days of the lease

term, the HA will pay housing assistance payments after execution of

the HAP contract (in accordance with the terms of the HAP contract), to

cover the portion of the lease term before execution of the HAP

contract (a maximum of 60 days). (Sec. 982.305(c)(3))

--Any HAP contract executed after the 60 days period is void, and the

HA may not pay any housing assistance payment to the owner.

(Sec. 982.305(c)(4))

Comments recommend that the rule should require the HA to approve

the unit and lease in a specific short period from submission of the

family request for lease approval. A period of 7 days is suggested. The

recommendation to prescribe a rigid uniform period from family

submission to HA approval is not adopted. The imposition of a uniform

deadline is not practical for HAs operating in different housing

markets, and as applied to the special circumstances of particular

cases--for example, time needed so that an owner can correct HQS

deficiencies. As noted above, however, the HA must execute the HAP

contract within 60 days after commencement of the tenancy.

F. HA Disapproval of Owner

1. Mandatory Denial

The rule requires that the HA must not approve rental of a unit

from an owner if the owner is subject to certain federal sanctions

(debarment, suspension or denial of participation under 24 CFR part

24). (Sec. 982.306(a)) The HA may or may not know that an owner is

subject to these sanctions. The final rule therefore specifies that the

HA's obligation to reject the owner only applies if the HA has been

informed of this fact by HUD or some other source.

The proposed rule would also have provided that the HA could never

approve rental from the owner if HUD had initiated an enforcement

action under the Fair Housing Act. The final rule is revised to provide

that the HA must not approve rental from the owner if so directed by

HUD when the owner has been the subject of equal opportunity

enforcement proceedings.

[[Page 34671]]

(Sec. 982.306(b)) Automatic disapproval of owners who have committed

fair housing violations might operate to deny housing opportunities for

low-income or minority families. Such automatic denial may be

inconsistent with fair housing policies. The appropriate remedy should

therefore be determined by HUD in the circumstances of the particular

case.

In addition, the final rule broadens the description of the

proceedings for which such rejection should apply. The HA must

disapprove the owner (when directed by HUD) if:

--The federal government has instituted an administrative or judicial

action against the owner for violation of the Fair Housing Act or other

federal equal opportunity requirements, and such action is pending.

--A court or administrative agency has determined that the owner

violated the Fair Housing Act or other federal equal opportunity

requirements. (Sec. 982.306(b))

The new provisions cover fair housing enforcement actions:

--By administrative or judicial action.

--For violation of the Fair Housing Act or other equal opportunity

requirements.

Comments suggest that the HA should only be required to reject an

owner because of complaints referred by the HA to a fair housing

enforcement agency. This comment is not adopted. Rejection of an owner

supports federal fair housing statutes, regardless of whether the

complaint originated with the HA itself.

2. Discretionary Denial

The rule provides that the HA has administrative discretion to deny

approval to lease a unit from an owner in certain other specified

cases. (Sec. 982.306(c))

The proposed rule would have provided that the HA could deny

approval if the owner had not paid State or local real property taxes.

Comments both support and object to allowing or requiring the HA to

refuse approval of an assisted tenancy on this ground. The final rule

permits the HA to deny approval if the owner has not paid State or

local real estate taxes, fines or assessments. (Sec. 982.306(c)(6)) The

rule does not direct the HA to exercise this authority. Each local HA

has administrative discretion whether or not to reject owner

participation for this reason. By rejecting participation of owners who

have not paid local levies, the HA gives the locality leverage for

collection of delinquent accounts. Under the final rule, the HA may

exercise this discretion for non-payment of local fines or assessments,

in addition to local real property taxes.

The proposed rule would have provided that the HA could deny

approval to lease a unit from an owner who had committed fraud or made

any false statement in connection with any federal housing program. The

final rule amends and broadens this language to provide that the HA may

deny approval if the owner has committed ``fraud, bribery or any other

corrupt or criminal act'' in connection with a federal housing program.

(Sec. 982.306(c)(2))

The revision protects the integrity and purpose of federal housing

assistance. The revision is intended to make clear that the HA has

broad authority to reject participation of a Section 8 owner who has

engaged in bribery or any other corrupt or criminal activity related to

a federal housing program. The HA may decline to accept an owner,

regardless of whether the owner's crime meets the technical indicia of

``fraud'' as defined by federal or State law. In a parallel revision,

the rule also provides that the HA may deny or terminate assistance for

a family that has committed corrupt or criminal acts in a federal

housing program. (Sec. 982.551(k); Sec. 982.552(b)(5))

The rule provides that the HA may reject an owner who has engaged

in ``drug-trafficking''. (Sec. 982.306(c)(3)) As defined in the rule

(Sec. 982.4), this term refers to commercial drug-dealing (manufacture,

sale or distribution of narcotics), but does not cover illegal drug

use. Comments ask why the rule only allows the HA to reject an owner

who engages in drug-trafficking, but not for any other drug-related

criminal activity. HUD believes that the rule is appropriately targeted

at allowing the HA to bar drug dealing owners from its program.

The HA may reject an owner with a ``history or practice'' of

violating Section 8 HQS or applicable housing standards under other

federal housing programs. (Sec. 982.306(c)(4)) Comments mistakenly

assert that the rule would require the HA to reject a unit if any owner

has a history of minor HQS violation. In fact, the rule leaves the

decision whether to reject an owner to the HA's administrative

discretion. Comments recommend that HUD should define ``history or

practice''. HUD believes that this is a sufficient description of the

case to be covered. The individual HA may more precisely focus on types

of owner behavior that should be reason for rejecting owner

participation.

The rule specifies that for purpose of the provisions on HA

disapproval of an owner, the term ``owner'' includes a ``principal or

other interested party''. (Sec. 982.306(e)) Rental real estate is often

held by a legal entity such as a limited partnership or corporation,

rather than an individual. A real estate investor may have an interest

in various properties held in the name of different legal entities, or

may have an interest in various partnerships or enterprises. The rule

clarifies that the ``owner'' is not merely the nominal entity that

holds legal title to the property to be rented, but also covers other

persons with an actual interest in the property. In applying the

authority for rejection of an ``owner'' in specific cases, the HA may

penetrate the veil of the form of ownership. The HA may deny approval

to rent a unit from an entity in which the principal or other

interested parties have engaged in activities that are grounds for

denial. For example, the HA may deny approval to rent from a

partnership where a general or limited partner has committed fraud in

connection with a federal housing program.

Comments recommend that HUD should require disclosure of any

individual or corporation with an ownership interest of more than 10

percent. The HA may require a prospective owner to disclose ownership

information, so that the HA can determine if the owner should be

rejected or approved. However, HUD will not direct HAs to require

disclosure, and will not regulate the nature or form of owner

disclosure.

Comments recommend that HUD should allow an HA to reject an owner

who has used foul language or threats against HA staff or tenants. This

comment is not adopted.

3. HA Policy

Comments suggest that an HA should not have discretion to decide

the criteria for disapproving owners. The HA should only determine

whether an owner has committed an action that is grounds for

disapproval. Comments also recommend that the rule should require an HA

to use the same criteria for approval or disapproval of all owners.

Comments state that HUD should only permit disapproval based on

reliable and credible evidence, and that the HA should only be allowed

to disapprove an owner because of ``recent'' owner action.

The final rule provides that the HA administrative plan must

include the HA policies on disapproval of owners. (Sec. 982.54(d)(8))

Since HUD has eliminated the requirement for HUD approval of the

administrative plan, the HA policies on owner approval are not

routinely submitted for HUD review or

[[Page 34672]]

approval. (Of course, HA administrative policy and practice are subject

to HUD audit, review and required revision.)

HAs may only reject owners for any of the grounds listed in the

rule. However, HAs retain broad discretion is deciding whether and how

to exercise the authority to reject owners for any of the allowable

discretionary grounds. The HA may determine the practicality and

benefit of rejecting owners for such grounds, in the locality, and as

applied to the circumstances of each individual case.

The decision to reject the owner rests in the discretion of the HA.

HUD will not require the HA to establish any special type of process or

evidentiary standard. HUD believes that the imposition of such

requirements would discourage HAs from rejecting owners for good and

substantial reasons, such as the owner's practice of renting units that

violate local code. The rule confirms explicitly that owners do not

have a right to participate in the program. (Sec. 982.306(d)) Therefore

the rejection of an owner's participation does not affect any owner

right or property interest. The HA may exercise its discretion to

reject an owner in accordance with local policy, and available

information.

G. Tenancy

1. Tenant Definition

The proposed rule would have added a new definition of the term

``tenant''. The proposed definition would have provided that a tenant

was the ``adult'' member of the assisted family who executed the lease

as lessee of the dwelling unit. Comments state that the new definition

is helpful, and approve adding this defined term.

The final rule revised the proposed definition by removing the

provision that the tenant must be an ``adult'' member of the family. In

the final rule, the term ``tenant'' is defined as ``the person or

persons (other than a live-in-aide) who executes the lease as lessee of

the dwelling unit''. (Sec. 982.4) The rule text clarifies that a tenant

must have legal capacity to enter into a lease under State and local

law. (Sec. 982.308(a)).

2. Approval of Lease

Any new lease or revision must be approved by the HA. Before

approval, the HA must determine that the lease meets program

requirements under the rule. (Sec. 982.308(b))

A lease must be executed by the tenant and the owner before the

beginning of the lease term. (Sec. 982.305(b)(2)) The lease must also

be approved by the HA before the beginning of the term.

(Sec. 982.305(b)(3)) Any new lease or revision must be approved in

advance by the HA, and must comply with program requirements.

(Sec. 982.308(b); Sec. 982.309(e)(1))

The rule provides that if the tenant and the owner enter into a new

lease or revision, the HA and owner must enter into a new HAP contract

to subsidize the tenancy under the new lease or revision.

(Sec. 982.309(e)(1)) Comments recommend eliminating the requirement for

execution of a new HAP for this purpose. This recommendation is not

adopted. The rule continues to require the use of a simple and uniform

process for commencement of the assisted tenancy--by execution of a

lease and HAP contract in each case. The HAP contract expresses the

HA's agreement to subsidize the tenancy under the new or revised lease.

3. Contents of Lease

The proposed rule would have required the lease to include word-

for-word all provisions required by HUD, and barred any provisions

prohibited by HUD. The lease language required by HUD is called the

``lease addendum''. (Sec. 982.308(c)(1)) The final rule provides that

the lease must include word-for-word all provisions required by HUD.

(Sec. 982.308(c)(2)) The rule provides that if there is any conflict

between the provisions required by HUD (lease addendum) and other

provisions of the lease, the provisions required by HUD shall control.

(Sec. 982.308(c)(3))

The lease addendum must state that certain types of lease

provisions are prohibited. (Sec. 982.308(d)) The statement of

prohibited lease provisions for the certificate and voucher programs in

the proposed rule is the same as language previously used in the old

voucher rule. This language is similar to, but more simply and clearly

stated, than the description of prohibited lease provisions in the old

certificate rule. A comment recommends that HUD should use the version

of prohibited lease provisions in the old certificate rule. This

comment is not adopted.

In all cases, the assisted lease must include the verbatim language

of the lease addendum. An HA may develop a model program lease that may

be offered for use by families and owners. A model lease must include

the language of the lease addendum, and must comply with program

requirements. However, the new rule prohibits the HA from requiring

families and owners to use a model program lease prescribed by the HA.

(Sec. 982.308(c)(2))

HA comments object to the prohibition against requiring use of an

HA model lease. Comments state that use of a model lease saves an HA

the cost of reviewing leases to assure compliance with required lease

provisions. HUD believes that mandating use of a model lease may unduly

restrict family choice of available housing. Owners may refuse to

execute program leases in the form of the HA-prescribed model lease

rather than using a form of lease familiar to the owner.

Comments recommend that the HA should be permitted to disapprove a

lease that does not comply with State or local law. This comment is

adopted. The final rule provides that the HA may review the proposed

lease to determine if the lease complies with State or local law, and

may decline to approve the lease if it does not comply with State or

local law. (Sec. 982.308(f)) It should be emphasized, however, that the

federal rule does not require that the HA review the lease for

compliance with State or local law. The decision to undertake such

review, or to decline lease approval for this reason lies in the HA's

discretion.

4. Term of Tenancy

The rule provides that the initial term of the lease must be for at

least one year, and must provide for ``automatic renewal'' after the

initial term. The lease may renew by an automatic indefinite extension

or by automatic extension for successive definite terms (for example,

month-to-month or year-to-year). (Sec. 982.309(b) (1) and (2))

The lease terminates if any of the following occurs:

--The owner terminates the lease.

--The tenant terminates the lease.

--The owner and the tenant agree to terminate the lease.

--The HA terminates the HAP contract.

--The HA terminates assistance for the family. (Sec. 982.309(b)(3))

The term of the lease and the HAP contract are the same. The term

of the HAP contract follows the term of the lease. (Sec. 982.309(a)(1))

The lease ends when the HAP contract ends. (Sec. 982.309(b)(2)(iv)) The

HAP contract ends when the lease ends. (Sec. 982.309(a)(2))

Comments approve the clarification that the initial lease term is

one year. Comments also approve the new language on automatic extension

of the initial year term, noting that the new regulation clears up

confusion under the prior rule. (Sec. 982.309(b) (1) and (2))

The owner may offer the family a new lease, for a term beginning at

any time after the initial term. The owner must give the tenant at

least 60 days written

[[Page 34673]]

notice of the offer. Comments recommend that the owner should also be

required to send the HA a copy of the offer. The comment is adopted.

(Sec. 982.309(e)(2))

Rent to the owner and the family share of rent may change during

the assisted lease. The rule does not require the execution of a new

lease or HAP contract for a change in family share in accordance with

HUD requirements, or a change in rent to owner in accordance with the

HA approved lease.

5. Termination of Tenancy

The rule and the statute provide that an owner may terminate an

assisted tenancy for serious or repeated violation of the lease,

violation of tenancy obligations under federal, State or local law, or

other good cause. (42 U.S.C. 1437f(d)(1)(B)(ii); Sec. 982.310) The

final rule provides that the owner may terminate tenancy for these

grounds ``during the term of the lease''. (Sec. 982.310(a)) The federal

requirements for termination of tenancy only apply during the term of

the assisted lease, but do not apply after a termination of the

assisted lease--for example, where the lease has terminated

automatically because the HAP contract has terminated.

Other Good Cause

As under the old rule, the rule provides that ``other good cause''

for termination of tenancy by the owner may include, but is not limited

to, any of the following examples:

--Failure by the family to accept the offer of a new lease or revision;

--A family history of disturbance of neighbors or destruction of

property, or of living or housekeeping habits resulting in damage to

the unit or premises;

--The owner's desire to use the unit for personal or family use; or

--A business or economic reason for termination of the tenancy (such as

sale of the property, renovation of the unit, desire to lease the unit

at a higher rental). (Sec. 982.310(d))

Comments recommend that HUD give more definition of ``other good

cause'', and suggest that the existing provisions have been used as

``legal loopholes'' for owner eviction of tenants. The recommendation

is not adopted. The statute permits eviction after the first year for

``other good cause'', as well as for family violation of the lease.

Eviction for good cause is not a ``loophole'', as asserted by the

comment, but is a ground for eviction specifically provided in the

statute. If an owner seeks to evict for this reason, the existence or

non-existence of cause is determined by the court in the owner's

eviction action. The good cause provisions in the present rule are

largely the same as provisions promulgated by the Department in 1984

for the certificate program (and subsequently incorporated in

regulations for the voucher program). In the preamble to the 1984 rule,

the Department noted that:

``a comprehensive regulatory definition of good cause in the

Section 8 Existing Housing Program (i.e., the certificate program)

is neither possible or desirable. The good cause category should

remain open to case by case determination by the courts. It is a

prime virtue of this statutory category that it permits termination

by owner in types of cases which cannot be readily foreseen.'' (49

FR 12233, March 29, 1984)

The rule recites key ``examples'' of cases that may be good cause,

but explicitly states that ``other good cause'' is not limited to the

listed examples. In the 1984 rule, HUD stated that:

``The good cause concept should be flexible and open to

application in concrete cases, but there is a critical need to

provide explicit regulatory assurance to prospective section 8

owners that legitimate owner concerns will be recognized as grounds

for termination of tenancy * * *. (T)his assurance may be essential

to promote broad participation by owners.'' (Id.)

Criminal Activity

The rule provides that the owner may evict a tenant for any

criminal action that threatens persons who reside in the ``premises''

or the ``immediate vicinity''. (Sec. 982.310(c)) In the rule,

``premises'' is defined as the building or complex in which the

dwelling unit is located, including common areas and grounds.

(Sec. 982.4) Comments support allowing eviction because of threats to

persons who reside in the vicinity. However, comments also recommend

that HUD should allow the owner to evict because of criminal activity

that is a threat to the owner's representative or staff.

An owner may only terminate a tenancy in Section 8 existing housing

for the grounds specified in the law. (42 U.S.C. 1437f(d)(1)(B)) The

rule implements statutory provisions which explicitly confirm that the

owner may evict a tenant for criminal activity that is a threat to

residents. The statute does not refer to criminal activity that is a

threat to other persons, who do not reside in the housing or the

vicinity, and does not refer to representatives of the owner. However,

threats or harm to owner representatives by the assisted household or

its guests may be ground for eviction if the threatening activity

constitutes a serious or repeated lease violation or is ``other good

cause'' for eviction of the tenant.

The rule permits an owner to evict the tenant for drug-related

criminal activity ``on or near'' the premises. (Sec. 982.310(c)(3))

Comments state that the program should not assist persons who engage in

drug-trafficking, whether the activity occurs on or off the premises.

The law provides that the owner may terminate tenancy because of any

drug-related criminal activity ``on or near'' the assisted premises.

(42 U.S.C. 1437f(d)(1)(B)(iii)) The language of the HUD rule follows

the eviction standard prescribed in the law.

During the term of an assisted lease, an owner may not evict a

tenant for drug crime unless the crime takes place ``on or near'' the

housing (unless the behavior is a serious or repeated lease violation

or is otherwise ``other good cause'' for eviction of the tenant).

However, the HA may terminate program assistance for drug-related

criminal activity or violent criminal activity by a family member,

regardless of where the criminal activity takes place. (Sec. 982.553)

HUD has explained the reason for this policy:

``The Department has not limited the proscribed (drug-related or

violent criminal) activities under this rule to activities carried

out on or near the premises. Section 8 certificates and housing

vouchers are a very mobile form of housing assistance. The holder

can lease suitable housing with Federal subsidy assistance anywhere

in the PHA's jurisdiction, in the metropolitan area, or in a

contiguous metropolitan area. If a PHA were (only) permitted to

terminate assistance for activities on or near the assisted

premises, the deterrent effect of this policy would be substantially

diminished because the family could lease housing outside the area

where the family member engages in the proscribed activities.

Furthermore, if the rule were limited to activities engaged in on or

near the premises which are being leased with Section 8 assistance,

the rule would not authorize a PHA to deny Section 8 assistance to a

former public housing tenant evicted for drug-dealing in public

housing * * *.'' (55 FR 28538, 28540, July 11, 1990)

The lease terminates when the HA terminates assistance for the family.

(Sec. 982.309(b)(3)(v))

Under the law and this rule, the owner may evict for drug crime

``on or near'' the premises. Comments suggest that the rule should

cover crime in an adjoining street, alley or other public right of way.

In this rule, HUD tracks the statutory standard, and does not attempt

to further define when a crime location is considered ``near'' the

assisted project or building. In general, this standard would cover

drug crime in a street or other right of way that adjoins the project

or building where a Section 8 unit is located. A landlord-tenant court

[[Page 34674]]

can apply the statutory standard to the circumstances of a particular

case.

6. Nature of Assisted Tenancy

Comments claim that the rule provides for a perpetual lease, and

discourages owner participation. Comments state that the rule prohibits

the owner from selling the assisted unit, and allows the HA to reduce

owner rents at will. Comments state that rule should allow termination

of tenancy without cause by the family or the owner after the first

year of the lease term. Comments assert that the owner is locked in,

whereas the family can terminate the lease on 60 days notice at the end

of the first year. By contrast, other comments claim that the rule

undermines existing protections for the tenant.

In fact, the rule does not undermine existing protections for the

tenant or the owner. Rather, HUD believes that the rule reflects a

reasonable balance between the interest of the assisted tenant and the

owner within the context of the existing law. On the one hand, the

lease protects the tenant against arbitrary and ungrounded termination

by the owner. On the other hand, the owner is not locked in, but may

terminate the tenancy for lease violation or other good cause.

After the initial year, the family may terminate the tenancy on

notice to the owner. After the initial year, the owner may terminate

the tenancy for other good cause--specifically including a ``business

or economic reason'' for termination of the tenancy. The rule does not,

as claimed by the comments, prohibit the owner from selling the unit.

The rule specifically states that a business reason for termination

after the initial year may include ``sale of the property''.

(Sec. 982.310(d)(1)(iv))

7. Notice by Owner

Notice of Grounds for Termination

By law, the owner must give the tenant a written notice that

specifies the grounds for termination of tenancy. (42 U.S.C.

1437f(d)(1)(B)(iv))

The proposed rule would have provided that the owner's notice of

grounds for termination could have been combined with and run

concurrently with any notices required under State or local law.

Comments suggest that the owner should be required to give the notice

of grounds with owner's notice to vacate, not later with the summons,

complaint or other pleading. HUD should require a minimum notice period

before commencement of the eviction action. The comment notes that

advance notice of eviction allows time for the tenant to negotiate a

resolution, and gives an opportunity for the HA to protect both the

tenant and the HA interest.

The final rule clarifies that the owner must give notice of the

grounds for eviction at or before commencement of the eviction action.

(Sec. 982.310(e)(1)(i)) The notice may be included in, or may be

combined with, any other owner eviction notice to the tenant.

(Sec. 982.310(e)(1)(ii)) Such other owner eviction notice means a

notice to vacate, or a complaint or other initial pleading used under

State or local law to commence an eviction action.

(Sec. 982.310(e)(2)(i))

Comments recommend that the rule require notice with sufficient

specificity to prepare a defense. The rule does not specify the form or

contents of the statutory notice. The rule also does not prescribe the

point at which the notice must be given, so long as the owner gives

notice of grounds at or before commencement of the eviction action.

Comments propose that the owner should be required to notify the HA

at the same time as the tenant. The final rule provides that the owner

must give the HA a copy of any owner eviction notice to the tenant.

(Sec. 982.310(e)(2)(ii))

Termination of HAP Contract--90 Days Notice

The owner must give 90 days notice before a termination of a

tenant-based HAP contract because of:

--Owner ``opt-out''.

--``Expiration'' of the HAP contract.

The owner must give written notice of the termination to the family,

the HA and HUD. (42 U.S.C. 1437f(c)(9) and (10), Sec. 982.455(b)(3))

The rule provides that expiration occurs in two cases:

--Automatic termination of the HAP contract. The proposed rule would

have provided that the contract terminates automatically three months

after the last housing assistance payment. The final rule now provides

that the HAP contract terminates six months (180 calendar days) after

the last housing assistance payment. (Sec. 982.455(a))

--A HUD determination to terminate the HAP contract because there is

insufficient funding to support continued assistance for the family.

``Opt-out'' refers to owner termination of tenancy for a business

or economic reason. (Sec. 982.455(b)(2)(ii); see 42 U.S.C. 1437f(c)(9))

On receiving the owner notice, the HUD field office must review the

notice and consider whether there are additional actions which should

be taken to avoid the termination. (Sec. 982.455(b)(4)(i)) The final

rule adds a new provision clarifying that the owner may proceed with

eviction whether HUD approves or disapproves, or fails to complete the

required review of the owner notice before expiration of the 90 day

review period. (Sec. 982.455(b)(4)(iv))

For a unit assisted under the certificate program, the proposed

rule would have provided that when HUD received notice of an opt-out or

expiration, HUD would have been required to offer the owner the

opportunity to enter into a new HAP contract at the maximum rent

allowed for a new program tenancy (subject to the FMR/exception rent

limit and the reasonable rent limit). The final rule provides that HUD

must offer a new HAP contract only when the owner gives notice of an

opt-out, but not in the case of an expiration.

(Sec. 982.455(b)(4)(ii)(B))

Comments recommend that the 90 days notice procedure should apply

to a termination because an owner wants to use the unit for personal or

family use. HUD should evaluate the lawfulness of the termination, and

offer incentives for the owner to keep the unit in the program. This

comment is not adopted. In the tenant-based programs, an ``opt-out''

only applies to an owner's termination of tenancy for a business or

economic reason.

Comments recommend that the requirement to give notice of grounds

for eviction should not apply to an owner opt-out. This comment is not

adopted. Owner's 90 days opt-out notice must state the reasons for the

termination, and will simultaneously satisfy the requirement to give

notice of grounds for termination.

8. Rent

Nonpayment of Housing Assistance Payment

The final rule provides that the family is not responsible for

payment of the portion of rent to owner covered by the housing

assistance payment under the HAP contract between the owner and the HA.

(Sec. 982.310(b)(1); Sec. 982.451(c)(4)(iii)) The HA failure to pay the

housing assistance payment to the owner is not a violation of the lease

between the tenant and the owner. During the HAP contract term, the

owner may not terminate the tenancy of the family for nonpayment of

this amount. (Sec. 982.310(b)(2))

Application of Tenant Payments

Comments recommend that the rule should specify how tenant payments

are applied. The comments state that HUD

[[Page 34675]]

should require that tenant payments must first be applied to current

rent, and that any excess should be first applied to other rent, and

only then to other non-rent purposes. The comment is not adopted. HUD

has no reason for such micromanagement of the Section 8 tenancy. HUD

will leave such questions for resolution in accordance with the lease

and local law.

9. Owner Late Fee

As in the past, the rules do not include any federally-imposed

limitation on owner charges of fees against the tenant for late payment

of rent in accordance with the lease and State and local law. Comments

recommend that the rule should limit owner late fees, should allow a

grace period for late payment of rent, and should prohibit eviction for

non-payment of late fees. The comments are not adopted.

HUD seeks to minimize interference in the relationship between

landlords and assisted tenants in order to encourage owner

participation in the program. In these programs, any regulation of

tenant-paid late fees will be left to local policy, rather than

encumbered by special HUD-imposed requirements that only apply to a

subsidized tenancy. HUD also believes that owner assessment of late

fees can perform a legitimate role as an encouragement for timely

payment of the tenant share of rent.

The owner receives the total rent (``rent to owner'') from two

sources--the housing assistance payment portion from the HA, and the

tenant portion from the family. Comments propose that HUD should

prohibit charging late fees to the tenant for delays in the HA payment

to the owner. The rule is revised to clarify the respective obligations

of the HA and the family to the owner for payment of the HA and tenant

portions of the rent, and for late fees for late payment by the HA or

the tenant. The rule now provides that the tenant is not responsible

for paying the HA share of the rent. This change will eliminate any

basis for a late charge against the tenant for the HA share of the

rent.

The final rule is revised to confirm that the HA must pay the owner

promptly when the housing assistance payment is due in accordance with

the HAP contract. (Sec. 982.451(c)(5)) In addition, the rule provides

that if the HA fails to make timely payment, the HA ``may be

obligated'' to pay a late fee ``in accordance with State or local

law''. However, unless authorized by HUD, the HA may only use

administrative fee income or administrative fee reserve for payment of

any such late fee. The HA may not use other Section 8 program receipts

to pay a late fee to the owner.

10. Termination and Notice by Family

Notice of Termination or Move

The family may terminate a lease after the first year. The lease

may not require the family to give the owner more than 60 days notice

of the termination. (Sec. 982.309(d)(1))

The family must notify the HA before moving from the unit, and must

give the HA a copy of any lease termination notice by the family to the

owner. Failure to notify the HA before the family moves, or to give the

HA a copy of the family's termination notice to the owner, is a breach

of family obligations under the program. (Sec. 982.309(d)(2);

Sec. 982.309(f); Sec. 982.551(g)(2))

Family's Right To Terminate the Lease

Comments express some confusion concerning the family's right to

terminate the lease on notice to the owner (under the existing and the

proposed rule). Some comments state that the family can move on one day

or other short notice to the landlord. Other comments state that such

short notice to landlords is unfair, discourages owner participation,

and is inconsistent with standard leasing practice. Other comments

assume that the tenant is required to give 60 days notice. Comments

recommend that the family should be required to give the owner and the

HA at least 30 days notice of termination. Comments state that the

family should be required to give minimum notice to the owner in

accordance with State and local law. Comments ask HUD to clarify the

relation between termination by tenant notice, and the provisions for

definite or indefinite extension of the initial lease term.

Some Section 8 lease requirements are prescribed by HUD. These

requirements are contained in the required ``lease addendum''. Except

for these program lease requirements, the terms of a Section 8

tenancy--like any private market tenancy--are governed by State law and

the language of the particular lease executed by the tenant and the

owner. The individual lease between a particular tenant and owner

contains both the standard lease addendum and any other lease

provisions agreed by the parties.

A tenant's right to terminate the lease, and the length of any

required termination notice, depend on the terms of the lease. It is

not true, as assumed by some comments, that the rule gives a Section 8

tenant the right to terminate the tenancy during the first year, or

that the tenant may terminate on one day or other short notice. In

fact, there is nothing in the HUD rule or HUD-prescribed lease addendum

permitting the tenant to terminate the lease during the first year of

the lease term.

The Section 8 tenant may terminate the lease at any time after the

first year. (Sec. 982.309(d)(1)) The program rule and lease addendum

only provide that the lease may not require the tenant to give more

than 60 days notice to the owner. In other respects, the particulars of

the tenant's right to terminate the tenancy depend on local law and the

terms of the tenant's lease.

In allowing the tenant to terminate after the first year (on no

more than 60 days notice to the owner), the rule seeks to provide rough

symmetry between the legal positions of the tenant and the owner.

During the first year, an owner may not terminate the tenancy for

``other good cause'' unless the owner is evicting because of some

action or non-action by the family. (Sec. 982.310(d)(2)) After the

first year, the owner may terminate for any ``other good cause''

(including termination for a business or economic reason), not limited

to termination because of action or non-action by the family. After the

first year, the tenant may terminate the lease on notice to the owner.

11. Security Deposit and Owner Claims When Family Moves

Proposed Rule

The owner may collect a security deposit from the family. As in the

past, the proposed rule would have limited the amount of the security

deposit. The proposed rule would have provided that the maximum

security deposit was one month's rent.

The proposed rule would have provided that an owner could claim

reimbursement from the HA for tenant damage and unpaid rent. The owner

could collect a claim for one month's rent minus the maximum security

deposit allowed by the HA. Under the proposed rule, the HA could

therefore have eliminated owner reimbursement claims by permitting the

owner to collect one month's rent as a security deposit.

Comments

Comments make various recommendations concerning the amount of the

maximum security deposit. Some comments claim that a tenant can't

afford to pay a one month deposit. Comments claim that the

authorization to collect one month's rent as a security deposit forces

the

[[Page 34676]]

family to lease a unit where the rent is low. Comments recommend that

the security deposit should be one month's family contribution

(generally 30 percent of family income).

Comments recommend allowing owner damage claims for up to two

months rent. These comments assert that the damage claim protection is

an important tool in persuading owners to rent to program families.

Other comments suggest that it would be better to eliminate owner

claims by increasing the maximum allowable security deposit. Family

payment of the security deposit promotes family responsibility. The

security deposit gives the tenant an incentive to minimize the owner's

claim for damage or unpaid rent.

Comments recommend that HUD should direct HAs to comply with a

federally-mandated timetable for processing of owner claims.

Final Rule

The final rule eliminates the right of the owner to claim

reimbursement from the HA for damages or other amounts owed by the

tenant under the lease. In this respect, the assisted tenancy will

function more like an ordinary tenancy in the private market. The owner

must look to the tenant for payment of any damages.

The final rule also eliminates the HUD-imposed limit on the amount

of owner security deposits. The rule provides that the owner may

collect a security deposit. (Sec. 982.313(a)) The HA is not required to

set any limit on the owner security deposit. However, the HA has

discretion to prohibit security deposits in excess of private market

practice, or in excess of security deposits for the owner's unassisted

units. (Sec. 982.313(b))

HUD believes that these changes tend to produce significant

benefits.

--Elimination of unnecessary distinctions between the tenant-based

program and a private market tenancy encourages broader participation

by owners of units outside of areas of minority and high poverty

concentration.

--The owner can no longer rely on the HA to pay tenant damages or

unpaid rent. This change gives the owner a stronger motivation to

screen assisted families the same as for unassisted private market

tenants, and to check for unit damage during occupancy.

--This change in turn reinforces the incentive for a program family to

take care of its unit before and during assisted occupancy.

--As suggested by comments, the need for the tenant to make a larger

security deposit from its own pocket creates a greater incentive to

avoid damage to the unit, and owner claims against the security

deposit.

--The elimination of owner claims relieves a major administrative

burden. The old owner claim procedure forced HAs to determine whether a

unit was damaged during occupancy, and whether any damage was the fault

of the tenant. Under the old system, it was often hard for the HA to

know who caused unit damage, and to sort out bona fide owner claims.

Elimination of the old claim system eliminates the need to develop and

operate a claims process that is fair to both families and owners.

--Since HAs will not pay owner claims, HAs will not deny or terminate

assistance for failure to pay such claims. The change will tend to

eliminate over time issues concerning denial or termination of a

family's assistance for failure to reimburse amounts paid by the HA in

owner claims on behalf of the families, including the need for

repayment agreements or for hearings to determine whether an owner's

claim was properly paid.

--Elimination of the old claim system saves both the amounts paid out

in claims and the cost of administration.

12. HA Payment After Family Move-Out

The rule provides that if a family moves out, the owner may keep

the housing assistance payment for the month when the family moves out.

The HA may not make any further payments. (Sec. 982.311(d)(1)) Comments

state that HUD should allow vacancy payments for an additional month.

The comments claim that an additional vacancy payment is an incentive

for owner participation, and is needed to attract owners of higher

quality units. Comments state that the elimination of vacancy claims

for the month after move-out is unfair to participating owners.

The final rule provides, as proposed, that payments will not be

made after the month of move-out. In the voucher program, the statute

prohibits assistance payments after the month the unit is vacated. (42

U.S.C. 1437f(o)(4)) The provision of a vacancy payment absorbs funds

that can be used to subsidize actual occupancies. Further, the use of

subsidy payments for vacant units is an unnecessary departure from

normal private market incentives and practice. In the tenant-based

programs as in the private market, owners can charge a rent comparable

to rents for a private unassisted rental. HUD is not persuaded that

this additional incentive is necessary or desirable to give program

families a reasonable access to units in the rental market. The voucher

program has functioned well without this incentive to owner

participation.

13. New Rule: Effect on Existing Tenancy

Comments ask how the changes under this rule affect existing

tenancies, and HAP contracts, that were entered before the new rule.

Comments ask if existing HAP contracts continue until termination, or

if contracts must be amended at the next recertification. Comments

express concern that the mode of implementing new regulatory

requirements may cause administrative burden and expense.

Nothing in the rule overrides or impairs the terms of outstanding

HAP contracts or leases entered into under the old regulations. The

rights of owners and tenants are determined by the provisions of

existing HAP contracts and leases. Owners and tenants are not required

to enter into new HAP contracts and leases. Housing assistance payments

will be made to the owners in accordance with the terms of the existing

HAP contracts.

An HA may encourage owners and tenants to execute new leases and

HAP contracts, in place of the existing contracts. However, the HA is

not required to convert the old contracts, and may not force the owners

and families to execute new contracts in accordance with the new

requirements. Any HAP contract entered into after the effective date of

the new rule must comply with requirements of the rule, and must be

executed on the HUD-prescribed form. Similarly, the HA may not approve

any new lease or revision unless the lease is in accordance with the

new rule.

H. Illegal Discrimination--HA Help for Family

Several provisions of the proposed rule indicate that an HA must

help a family that can't lease a unit because of illegal

discrimination. Comments ask HUD to state what the HA should do to

assist the family. The final rule requires that when a family claims

that illegal discrimination prevents the family from leasing a suitable

unit under the program, the HA must give the family information on how

to fill out and file a housing discrimination complaint. (Sec. 982.304)

I. When Housing Assistance Payments May Be Paid to Owner

The proposed rule would have provided that the HA could only have

made housing assistance payments to

[[Page 34677]]

the owner for a period the dwelling unit was leased to and occupied by

the family. The final rule provides that:

--Housing assistance payments shall be payable to the owner in

accordance with the terms of the HAP contract.

--Housing assistance payments may only be paid to the owner during the

lease term, and while the family is residing in the unit.

(Sec. 982.311(a))

The final rule also specifies that housing assistance payments

terminate if:

--The lease terminates,

--The HAP contract terminates, or

--The HA terminates assistance for the family. (Sec. 982.311(c))

The final rule clarifies the principles governing continuation of

payments to an owner during an eviction. The final rule provides that:

``Housing assistance payments terminate when the lease is

terminated by the owner in accordance with the lease. However, if

the owner has commenced the process to evict the tenant, and if the

family continues to reside in the unit, the HA must continue to make

housing assistance payments to the owner in accordance with the HAP

contract until the owner has obtained a court judgment or other

process allowing the owner to evict the tenant. The HA may continue

such payments until the family moves from or is evicted from the

unit.'' (Sec. 982.311(b))

J. Absence From Unit

Occupancy of Unit by Family

Section 8 is intended to provide subsidy for a unit leased to and

occupied by a low-income family. (See 42 U.S.C. 1437f) The family is

obligated to use the assisted dwelling for residence by members of the

family. (Sec. 982.551(h)(1)) The unit must be the family's only

residence.

The proposed and final rule state that the HA administrative plan

must include provisions governing how long the family may be absent

from the dwelling unit, and under what circumstances. The final rule

includes a more complete statement regarding HA policy on absence of

the assisted family from the unit. (Sec. 982.312)

The proposed rule would not have set any HUD-prescribed limit on

the length of family absence from the assisted unit. In the proposed

rule HUD invited comment on whether the regulation should establish a

specific federally defined outer limit on the time for which subsidy

may be paid for an empty unit, for specific causes or for any cause.

Absence From Unit: Comments

Public comments contain a spectrum of recommendations on the degree

of HA discretion to establish policies on the length of family absence

from an assisted unit:

--The HA should not have any right to terminate subsidy because of

family absence.

--The HA should have total discretion to set policy on family absence.

--The HA should have discretion to set policy within limits established

by HUD.

--HUD should set policy on family absence. The HA should not have

discretion to determine the policy.

Some comments object to granting the HA any power to limit family

absence. The HA should not be permitted to terminate assistance unless

the family abandons the unit. The family should be treated like any

renter. Comments also object to requiring that the family must only use

the assisted unit for residence by the family. Comments state that this

requirement burdens the family's freedom of movement and choice of

occupation.

Comments state that the HA should not establish a fixed cut-off

because of family absence from the units. The HA should consider the

facts of each case, including the length and reason for absence, and

the family's intention to return. The HA should not be allowed to

terminate assistance where the resident is absent:

--Because of employment, such as absence of a migrant worker.

--Because the resident is in drug treatment or prison.

--Because the resident is in a nursing home.

Comments state that an HA's absence policy should distinguish

between voluntary absence, as opposed to absence because the resident

is being treated for a disability. Comments state that the HA should

not terminate assistance unless the family fails to pay for rent or

utilities. Comments claim that termination of assistance because of

family absence discriminates against single person families, and

violates the Constitutional right to travel.

Most comments agree that HAs should have broad discretion to

establish local limits on absence from the unit. Some comments

recommend that HAs should have complete flexibility to determine

policies on absence from the unit, and that HUD should not set any

maximum. Other comments propose that HAs should have discretion within

outer limits set by HUD. Comments state that a HUD-imposed maximum is

appropriate so that practices of different HAs are consistent. Comments

note that consistency is desirable because of portability. Some

comments recommend that HUD should establish uniform rules on family

absence.

Comments also contain a wide range of recommendations on the

maximum length of absence from the unit (from 30 days to one year), and

of factors that should affect the period in which the HA continues

payments for an unoccupied unit. For example, comments propose allowing

a longer maximum absence period for cases where the resident is absent

because of documented illness or employment; or that assistance should

be terminated immediately if the resident is imprisoned. Comments

propose that the maximum absence period should be the same as the

period for automatic termination of assistance where the HA has not

made any assistance payment under the HAP contract (i.e., where the

income-based family share equals the full rent to owner).

Comments note that assistance should terminate right away if the

family has permanently vacated the unit. The HA should have power to

determine whether the family has vacated the unit.

Comments state that the HA must give the family notice and

opportunity for a hearing before terminating assistance because of

family absence.

Absence From Unit: Final Rule

The final rule provides that: ``The family may be absent from the

unit for brief periods. For longer absences, the HA administrative plan

establishes the HA policy on how long the family may be absent from the

assisted unit. However, the family may not be absent from the unit for

a period of more than 180 consecutive calendar days in any

circumstance, or for any reason. At its discretion, the HA may allow

absence for a lesser period in accordance with HA policy.

(Sec. 982.312(a))

``Absence'' is defined to mean that no member of the family is

residing in the unit. (Sec. 982.312(c))

The HA has broad discretion to set local policy on family absence,

but must state these policies in the HA administrative plan.

(Sec. 982.54(d)(10); Sec. 982.312(e)) The policy includes:

--How the HA determines whether or when the family may be absent, and

for how long. For example, the HA may establish policies on absences

because of vacation, hospitalization or imprisonment.

(Sec. 982.312(e)(1))

--Any provision for resumption of assistance after an absence,

including readmission or resumption of assistance to the family.

(Sec. 982.312(e)(2))

The final rule requires termination of housing assistance payments

if the

[[Page 34678]]

family is absent from its assisted unit for longer than the maximum

permitted absence. The term of the HAP contract and assisted lease also

terminate. (Sec. 982.312(b)) Before terminating payments under the HAP

contract, the HA must give the family the opportunity for an informal

hearing. (Sec. 982.555(a)(1)(vi); Sec. 982.555(a)(2)) The owner must

reimburse the HA for any housing assistance payment for the period

after the termination. (Sec. 982.312(b))

Under the final rule, the HA has great flexibility to establish

local policies on tenant absence, including different rules on the

length of allowable absence in different circumstances. The family may

be absent for ``brief'' periods. However, a family may not be away from

the unit for more than 180 consecutive days in any circumstances. The

HA has broad discretion to set policy for absences of less than 180

days.

As suggested by some comments, the 180 maximum absence interval is

the same as the interval for termination of the assistance contract

because no assistance is paid (termination because family contribution

equals the maximum HUD subsidy). (Sec. 982.455(a)) In the case of

family absence, assistance payments are terminated so that the HA does

not waste subsidy by continuing to pay for an empty unit. In the case

where no assistance has been paid for 180 days, the assistance contract

is terminated so that the program slot can be freed-up and used for

another family (even though the unit is occupied and the HA is not

making any payment for the unit).

As suggested by comments, HAs must distinguish between cases of

prolonged absence from a unit, and cases where the family simply moves

out of the unit. If the family moves out, the HA may not continue

assistance after the month when the family moves out. If the family has

not moved out, but is absent from the unit, the HA may elect to

continue assistance payments for a maximum of 180 days, as determined

in accordance with the HA policy.

In practice, of course, HAs will be confronted with difficult

problems in determining whether a family is actually living in, has

moved out, or is otherwise absent from the unit; and in determining the

length or reason for family absences. Under this rule, a family is

obligated to notify the HA before the family moves out.

(Sec. 982.309(f)) However, the family may fail to give this notice. The

HA may be uncertain whether the family moved out or intends to return

after an absence.

The final rule specifies that the family is obligated to give the

HA information on family absence from the unit, and to cooperate with

the HA for this purpose. (Sec. 982.312(d)(1); Sec. 982.551(i)) The HA

may adopt appropriate techniques to verify family occupancy or absence,

including letters to the unit, phone calls, visits, or questions to the

landlord or neighbors. (Sec. 982.312(d)(2))

K. Family Break-up

The proposed and final rule provide that the HA administrative plan

must describe the HA's discretionary policies on how to determine who

remains in the program if an assisted family breaks up. (final rule

Sec. 982.315) Resolution of these issues is left to HA discretion in

accordance with the HA policy. Comments generally agree that HUD should

leave resolution of such issues to the HA, and that the rule should

confirm that the HA's decision is final, and not subject to appeal.

Some comments request more guidance on how the HA should exercise its

discretion.

Other comments assert that HUD should establish a national policy

on who keeps the Section 8 subsidy after a family break-up. These

comments object to granting discretion for local HAs to decide these

issues, and object to the lack of regulatory guidance for exercise of

this discretion. These comments state that the absence of guidance may

lead to arbitrary and inequitable results, or violations of the Fair

Housing laws.

Comments suggest various factors or interests that could be

considered in deciding who receives assistance after a breakup:

--Whether assistance should stay with the family members who remain in

the unit (during or after the initial lease term).

--The interest of children.

--Spousal abuse.

--Medical condition.

--Special needs of a disabled family member for accessibility features.

The final rule confirms that the HA has authority to determine

which family members continue to receive assistance after a family

breaks up. The HA policy must describe how the HA determines what

family members will remain in the program if the family breaks up.

(Sec. 982.315(a): Sec. 982.54(d)(11)) The final rule makes clear that

the HA has broad discretion to decide these issues. The rule does not

require the HA to use any particular procedure for making such

decisions, and does not require the HA to consider any particular

factors. The rule confirms, as suggested by public comments, that the

factors to be considered by the HA in making this decision may include:

--Whether the assistance should remain with family members remaining in

the original assisted unit.

--The interest of minor children or of ill, elderly or disabled family

members.

--Whether family members are forced to leave the unit as a result of

actual or threatened physical violence against family members by a

spouse or other member of the household.

--Other factors specified by the HA. (Sec. 982.315(b))

The HA is not required to devise a complete set of rules for

disposing of the issues posed because of family break-up. The HA is

free to leave room for case by case decision, based on the

circumstances of individual cases. The HA is merely required to adopt a

procedure for handling these issues, and to state the procedure in the

administrative plan. Under this rule, the HA is not required to

routinely submit the administrative plan, including the HA family

break-up policy, for HUD review or approval.

The final rule provides that when a court determines the

disposition of property between members of the assisted family in a

divorce or separation under a settlement or judicial decree, the HA is

bound by the court's determination of which family members continue to

receive assistance in the program. (Sec. 982.315(c))

V. Where Family Can Live and Move

A. Eligible Housing

The rule provides that Section 8 tenant-based subsidy may not be

used for certain types of housing, and may not be combined with certain

other types of housing subsidy. (Sec. 982.352) The final rule revises

several provisions on this subject.

1. HUD-Owned Unit

When the proposed rule was published, the law provided that a

Section 8 ``owner'' must be either a ``private'' person or entity, or a

public housing agency. (42 U.S.C. 1437f(f)(1)) HUD is neither a private

entity nor a public housing agency. For this reason, the proposed rule

would have prohibited assistance for a unit that is owned by HUD.

However, the law was amended in 1994 to provide that an owner may be

``an agency of the Federal Government''. (Pub. L. 103-233, April 11,

1994, section 101(d), 108 Stat. 357, amending the Section 8 ``owner''

definition) This amendment was intended to permit HUD to receive

Section 8 housing assistance payments as a Section 8 owner when HUD

takes title to units covered by a Section 8 HAP

[[Page 34679]]

contract. Because of the statutory change, the final rule deletes the

prohibition against use of HUD-owned units.

2. Prohibition of Other Subsidy

The rule prohibits assistance for a unit that benefits from

``duplicative'' housing subsidy from a federal, State or local source.

(Sec. 982.352(c)(9)) The proposed rule would have added a new provision

that also prohibits assistance for a unit receiving, or which received

in the past 5 years, a local or State mortgage interest subsidy,

construction or rehabilitation subsidy or project-based rent-subsidy.

Public comments object to the proposed prohibition of assistance

for projects that benefit from a State or local interest subsidy, or

construction or rehabilitation subsidy. Comments point out that this

restriction would preclude use of housing developed with the benefit of

State or local subsidy, including housing for the disabled. Comments

note that the development and rehabilitation subsidies play a different

role from the Section 8 rental subsidy. Development subsidy increases

the supply of affordable housing. Although development subsidy reduces

debt service requirements, operators need rent to cover maintenance and

operating expenses. Rental subsidy helps families afford the rent.

After consideration of public comment, HUD has eliminated the

blanket prohibition of Section 8 assistance for housing that has

benefitted from a State or local subsidy for construction or

rehabilitation, or a mortgage interest subsidy. HUD agrees that

subsidies to increase the supply of affordable housing perform a

different role from Section 8 subsidies for rental of available

housing. Section 8 families should not be barred from renting such

housing.

The proposed rule would have prohibited use of units that received

subsidy in the past 5 years. The final rule does not include any

limitation on use of units that received any form of State or local

subsidy before receiving the Section 8 assistance. The final rule

prohibits a family from receiving tenant-based assistance for housing

currently assisted by a State or local ``rent subsidy''.

(Sec. 982.352(c)(8)) This prohibition applies whether the rent subsidy

is project-based or tenant-based.

In addition to the list of specific types of housing subsidies that

may not be combined with the Section 8 tenant-based subsidy, the final

rule continues to prohibit Section 8 assistance for a unit that is

assisted by ``any other'' duplicative governmental subsidy, from a

federal, State, or local government. (Sec. 982.352(c)(9)) This

prohibition is intended to promote maximum coverage from available

public subsidy resources, to avoid waste of scarce Section 8 subsidy,

and to avoid windfall payments to a subsidized family or owner.

The rule provides that HUD has authority to determine whether a

particular housing subsidy source is ``duplicative''. However, the rule

specifies that for this purpose housing subsidy does not include the

housing component of a welfare payment, a social security payment

received by the family, or a rent reduction because of a tax credit.

In the voucher program, a family may choose to lease a unit for a

rent exceeding the HA payment standard, and the excess rent is not

covered by an increase in the Section 8 housing assistance payment. The

family must therefore find funds to pay this additional amount. A

comment recommends that the rule should allow a State or local subsidy

that covers excess rent payment by the family, and thus hold the family

share below 30 percent of adjusted income. This comment is not adopted.

The final rule prohibits any other State or local rent subsidy for a

family assisted with Section 8 tenant-based assistance.

3. HA-Owned Housing

A family may lease housing that is owned by the HA responsible for

administration of the program. (Sec. 982.352(b)) By law, an HA may be a

Section 8 owner, and the HA as contract administrator may enter into a

contract with itself as the Section 8 owner. (42 U.S.C. 1437f(a))

Because of the inherent conflict in the HA's roles as contract

administrator and unit owner, the proposed rule provided that HUD must

have approved the unit rent before execution of the HAP contract.

Comments object to the requirement for HUD approval of unit rents.

Comments suggest that approval is not necessary if the rent is within

program guidelines. Other comments recommend that HUD should establish

initial rent thresholds for the HA program. The HA should only need HUD

approval if the proposed rents are above the pre-established level.

The final rule retains the requirement for HUD approval of the

rents for HA-owned tenant-based units. (Sec. 982.352(b)(iv) and (v))

When a family wants to rent a unit owned by the HA that runs the

program, the HA must inform the family (orally and in writing) that the

family may select any eligible dwelling. The unit must be freely

selected by the family, without HA pressure or steering.

(Sec. 982.352(b)(i))

4. Overlapping Assistance

A participant family may move to a new unit with continued tenant-

based assistance. Comments ask whether the assisted lease for a new

unit can commence before the termination of assistance on the prior

unit, or whether any overlap of assistance is a prohibited double

subsidy.

A new provision is added to make clear that the term of the

assisted lease for a new assisted unit may begin during the month the

family moves out of the first assisted unit. Overlap of the housing

assistance payment for the month when the family moves out and the

first assistance payment for the new unit is not considered to

constitute a duplicative housing subsidy. (Sec. 982.311(d)(2))

B. Portability

1. Area Where Family Can Rent

In the proposed rule, the ``leasing area'' was defined as the area

where a family can lease a unit with tenant-based assistance inside or

outside the HA jurisdiction. In the proposed rule, the ``extended

operation area'' was defined as ``an area which is outside the HA

jurisdiction (as determined by State or local law), but is inside the

same State, the same MSA, or an MSA that is next to the same MSA''. The

final rule does not include either of these terms and definitions.

The statute requires portability within the same State, same MSA

and a contiguous MSA as the HA. (42 U.S.C. 1437f(r)(1)) Many comments

object to expanding portability beyond the same State as the initial

HA. Others recommend national portability, but state that the

Department should allow HAs to limit the number of families moving

under portability, or require the families to show ``good cause''. The

final rule provides that a family may move under portability anywhere

in the United States in the jurisdiction of an HA administering a

Section 8 voucher or certificate program. (Sec. 982.353(b)(4))

2. Portability in First Year After Admission

The final rule revises provisions on portability during the first

year after a family's admission to the program. By law, portability

applies during this period if the family is ``living within'' the HA

jurisdiction ``at the time that such family applies'' for assistance

from the HA. (42 U.S.C. 1437f(r)(1))

The final rule provides that the family may lease a unit under

portability

[[Page 34680]]

during the first year after admission if either the household head or

spouse of an assisted family already had a ``domicile'' (legal

residence) in the jurisdiction of the initial HA at the time when the

family first submitted an application for participation in the program

to the initial HA. (Sec. 982.353(c)(1)) Generally, transient occupancy

does not constitute legal residence in a jurisdiction under State and

local law. The individual must intend to establish a home in the

jurisdiction.

If this test is not met, the family does not have any right to

portability during the first year of assisted occupancy. The proposed

rule would have provided that in this situation, the family ``may only

lease a unit in the (initial) HA jurisdiction''. The final rule

specifies that while the family does not have a right to portability,

the family may lease a unit outside the HA jurisdiction if the initial

and receiving HA voluntarily agree to allow a portability move by the

family to the jurisdiction of the receiving HA. (Sec. 982.353(c)(3))

3. Portability--Family Eligibility

The proposed rule would have provided that since a portable family

had already been determined eligible by the initial HA, the receiving

HA was not required to redetermine family eligibility for participation

in the program. The final rule provides that the initial HA is

responsible for determining whether the family is income eligible in

the area where the family wants to lease a unit. (Sec. 982.355(c)(1))

However, the receiving HA may opt to conduct a reexamination of income

in order to coordinate the anniversary of the HAP contract with the

reexamination date, or for other reasons. If the receiving HA opts to

conduct a new reexamination, the receiving HA may not delay issuing the

family a voucher or certificate or otherwise delay approval of a unit

unless the recertification is necessary to determine income

eligibility. (Sec. 982.355(c)(4))

Further, the final rule reiterates the general program admission

requirements (Sec. 982.201(b)(2)) as applied to portability:

--If the family is not a current participant in the initial HA

certificate or voucher program, the applicable income limit for

admission to the receiving HA certificate program or voucher program is

the receiving HA income limit for the area where the family will be

initially assisted in the program. The family may only use the

certificate or voucher to lease a unit in an area where the family is

income-eligible at admission to the receiving HA program.

(Sec. 982.353(d)(1))

--If a participant in the initial HA certificate or voucher program is

moving between these programs (the family is either moving from the

initial HA certificate program to the receiving HA voucher program, or

from the initial HA voucher program to the receiving HA certificate

program), the family must meet the eligibility criteria for the program

to which the family is being admitted. Since a family moving between

the voucher and certificate programs is continuously assisted, the

applicable income limit is the receiving HA low-income limit (80

percent of median income) for the area to which the family will move.

(Sec. 982.353(d)(2) and (3); see Sec. 982.201(b)(1))

--For continued assistance in the same program, income eligibility is

not redetermined. (Sec. 982.353(d)(3))

4. Portability--Funding

The proposed rule would have provided that if funding was

available, a receiving HA would be required to absorb the incoming

family with funding under its own consolidated ACC. The proposed rule

would have also required that HUD offer funding to the receiving HA to

cover the net annual increase in the HA tenant-based program because of

portability. These provisions are not mandated in the final rule.

While the Department received positive comments concerning the

mandatory absorption requirement, other comments assert that this

approach is flawed. The major concern was the impact the required

absorption of portable families would have on the receiving HA's

waiting list. By requiring HAs to absorb portable families with any

assistance available through new funding or turnover, the wait for

applicants at the receiving HA could be significantly lengthened.

Comments express skepticism that appropriated funds will fully fund the

net annual increase in the number of families absorbed into the

receiving HA program. Comments recommend that HUD require HAs to absorb

a certain number of families based on the amount of new funding or

historical turnover rates, and that HUD reimburse HAs for absorbing

families exceeding those thresholds.

Instead of prescribing a portability funding method that relies on

allocating appropriated funds that may be insufficient to reimburse

receiving HAs for portability moves at the desired level, and instead

of prescribing detailed procedures that may not work well in all

situations, the final rule allows HUD to exercise any of the following

options for portability reimbursements:

--HUD may transfer funds for assistance to portable families to the

receiving HA from funds available under the initial HA ACC.

--HUD may provide additional funding (e.g., funds for new units) to the

initial HA to compensate for funds transferred for portability

purposes.

--HUD may provide additional funding (e.g., funds for new units) to the

receiving HA to reimburse the HA for absorption of portable families.

--HUD may require the receiving HA to absorb portable families.

(Sec. 982.355(f))

It is anticipated that HUD will test all of the portability funding

options authorized by the regulations. In fact, the Notice of Funding

Availability published in the Federal Register on March 3, 1995

provides for use of up to 50 percent of the fair share allocation of

certificate and voucher funding for each allocation area to be

allocated as reimbursement to receiving HAs for the costs to assist

families that have moved under the portability procedures.

5. Portability--Billing and Administrative Procedures

The vast majority of comments agreed that most problems in

administering assistance for portable families are caused by the

billing process and differing HA portability procedures and information

requirements. In response to this concern, the final rule details the

portability procedures (Sec. 982.355(c)).

The final rule specifies that the initial HA must reimburse the

receiving HA ``promptly'', both for housing assistance payments and

administrative fees for a portability family. (Sec. 982.355(e)(2) and

(3)) HUD may reduce the initial HA's administrative fee for late

reimbursement to the receiving HA. (Sec. 982.355(e)(4))

The initial and receiving HA must follow financial procedures

required by HUD. The receiving HA must use a HUD-prescribed portability

billing form to bill the initial HA for housing assistance payments and

administrative fees. (Sec. 982.355(e)(5)) The initial and receiving HA

must comply with billing and payment deadlines under the financial

procedures.

VI. Dwelling Unit: Housing Quality Standards, Subsidy Standards,

Inspection and Maintenance

A. Housing Quality Standards (HQS): General

The rule provides that the housing quality standards or ``HQS'' are

the HUD

[[Page 34681]]

minimum quality standards for housing assisted under the tenant-based

programs. Program housing must comply with HQS, both at initial

occupancy and during the term of the assisted lease.

(Sec. 982.401(a)(1)) The HA inspects the unit before approving the

tenancy (Sec. 982.305(a) and (b)), and must reinspect the unit at least

once every year. (Sec. 982.405(a))

Comments note that HUD did not provide the HA with any latitude to

pass units with minor HQS violations. Comments recommend that HUD allow

HAs to pass units on a conditional basis to enable immediate leasing

for at-risk families in desperate need of housing. An HA would require

the owner of a unit with a conditional HQS approval to fully comply

with HQS within a specified period of time.

HUD has not adopted the recommendation to permit conditional

approvals of units that fail HQS. Conditional HQS approvals were

allowed for the Section 8 certificate program in the 1970's, but were

discontinued because of major enforcement problems. When conditional

approvals were allowed, many owners did not make promised repairs, or

HAs did not reinspect the conditionally approved units. The goal of the

Section 8 tenant-based programs is to assist eligible families to pay

rent for decent, safe, and sanitary housing. (See 42 U.S.C. 1437,

1437f(a) and 1437f(o)(5)) Assistance for units that do not meet the HQS

defeats this goal, and provides no incentive for owners to maintain

quality housing stock for rental by low-income families.

Comments suggest that HUD needs to review the whole question of

appropriate HQS standards. Comments state that HQS standards are

totally inadequate, and that some are too loose and others are

ridiculously tight. Other comment suggests that a Task Force should be

assembled to reexamine the HQS.

Program experience demonstrates that the HQS, when correctly

applied and administered, are an excellent standard for ensuring

minimum livability and safety. Alleged problems of the HQS standards

often result from inaccurate interpretations of the standards. For

example, comments on HQS often claim that requirements concerning

gutters, screens and storm doors are not essential, and should not be

covered by the HQS. In fact, these three items are not HQS

requirements. HUD will continue its efforts to explain the HQS criteria

and highlight common misunderstandings of HQS requirements.

Comments indicate that some HAs have been charging families for

repeat inspections, and object to this practice. HUD agrees that

charging a family for inspection of the unit is inappropriate. The HA

earns an administrative fee that covers the administration of the

tenant-based programs, including HQS inspections. In response to the

comment, the rule is amended to confirm that HA may not charge the

family or the owner for an initial inspection or a reinspection of the

unit. (Sec. 982.405(e))

B. Housing Quality Standards (HQS): Acceptability Criteria

Comments recommend using local codes instead of the regulatory HQS,

or recommend adding local code requirements to the regulatory HQS. The

final rule states, as proposed, that HUD may permit an HA to use

acceptability criteria variations that are based on local codes or

national standards, or may permit variations because of local climatic

or geographic conditions. (Sec. 982.401(a)(4)(iv))

The final rule also provides that HUD will not approve HQS

variations that unduly limit the amount and types of rental housing

stock available at or below the FMR that would otherwise meet the HQS

of the program (e.g., specific square footage requirements for kitchen

counter space). (Sec. 982.401(a)(4)(iv))

C. Housing Quality Standards (HQS): Specific Disposal

1. Food Preparation and Refuse Disposal

Comment requests that the acceptability criteria allow microwave

ovens, because some participants are willing to live in units that

provide them with microwave ovens instead of an oven and/or stove with

top burners. The HQS has been modified to allow microwave ovens as

follows:

--If the oven and stove are tenant-supplied: A microwave oven may be

substituted for an oven and/or stove with top burners.

--If the oven and stove are owner-supplied: A microwave oven may be

substituted for an oven and/or stove with top burners if the tenant

agrees and the owner treats all tenants alike (e.g., microwaves are

provided for both non-subsidized and subsidized tenants).

(Sec. 982.401(c)(2))

12. Space and Security

Space--Bedroom or Living/Sleeping Room

The proposed rule would have deleted the term ``living/sleeping''

room and substituted the term ``living/bedroom''. Comments ask for

clarification on whether or not the use of a different term meant that

HUD was revising current policy permitting other rooms not classified

as bedrooms (e.g., a den, living room or dining room with windows) to

be counted as a ``sleeping room''. HUD did not intend to change the

policy, which permits families to use a room with a window and two

electrical outlets as a living/sleeping room, to meet the HQS space

requirement of one bedroom or living/sleeping room for each two

persons. Editorial changes have been made throughout the rule to

restore the term ``living/sleeping''.

Comments object to the requirement that persons of opposite sex,

other than husband and wife or very young children, may not be required

to occupy the same bedroom or living/sleeping room. An HA comment

indicates that the agency requires unmarried ``live-ins'' who are

``significant others'' to share a bedroom. Comments suggest that HUD

state the requirement as two persons per bedroom with the proviso that

the head of household not be required to share a bedroom with a child,

and let the family make its own sleeping arrangements.

The comments indicate confusion about the relationship between the

HQS space requirements and the HA's occupancy requirements (now called

``subsidy standards''). The HQS space requirements set a standard for

the maximum number of people that can occupy the unit. The HQS space

standard does not dictate who sleeps in each bedroom or living/sleeping

room. Further, the HQS space requirements allow space other than

bedrooms to be considered ``living/sleeping rooms'' to ensure maximum

flexibility in determining whether a unit is overcrowded. In contrast,

the subsidy standards set by the HA determine subsidy levels, and are

generally based on the ages and sex of the family members, and on other

factors considered under the HA policy. (See Sec. 982.402)

Window

Comment asks if a combination storm/screen window is lockable, can

it be assumed that the inside window does not have to be lockable. The

commenter is correct. The rule provides any dwelling unit windows that

are accessible from the outside must be lockable.

(Sec. 982.401(d)(2)(iii))

The proposed rule would have provided that windows that are nailed

shut are acceptable if the windows are not needed as an alternate exit

in case of fire. Comment suggests that the

[[Page 34682]]

regulations should be revised to read as follows, ``Windows which are

nailed shut are acceptable only if these windows are not needed for

ventilation or as an alternate exit in case of fire''. HUD has adopted

this suggestion. (Sec. 982.401(d)(2)(iii))

3. Thermal Environment

Several comments suggest that HAs should be permitted to approve

Oxygen Depletion System (ODS) heaters in all rooms not used for

sleeping if permitted by local code. The Department has not adopted

this suggestion. ODS heaters are unvented space heaters. The HA must

request HUD approval of a variation in the acceptability criteria. (See

Sec. 982.401(e)(2)(ii))

4. Structure and Materials

Comment suggests that ceilings, walls and floors requirements be

changed from ``not have any serious defects such as severe bulgi

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