Housing Preservation Grant Program

SUMMARY: The Rural Housing and Community Development Service (RHCDS), a

successor Agency to the Farmers Home Administration (FmHA), proposes to

amend its Housing Preservation Grant regulations. The intended effect

is to allow replacement housing where the grantee has determined that

the costs for repair and rehabilitation on the recipient's (individual

homeowners only) existing housing are not economically feasible or

practical. These revisions will bring the regulations into conformance

with the Housing and Community Development Act of 1992 amending the

Housing Preservation Grant program, Section 533 of the Housing Act of

1949.

DATES: Comments must be received on or before June 16, 1995.

ADDRESSES: Submit written comments to the office of the Chief,

Regulations Analysis and Control Branch, Rural Economic and Community

Development, Room 6348, South Agriculture Building, Washington, D.C.

20250. All comments made pursuant to this notice will be available for

public inspection at the above address.

FOR FURTHER INFORMATION CONTACT: Sue M. Harris, Senior Loan Specialist,

Special Authorities Branch, Multiple Housing Processing Division,

RHCDS, USDA, Washington, D.C. 20250, Telephone (202) 720-1606 (This is

not a toll-free number).

SUPPLEMENTARY INFORMATION:

Classification

This rule has been determined to be not-significant for purpose of

Executive Order 12866 and therefore has not been reviewed by OMB.

The proposed regulation has been reviewed in light of Executive

Order 12778 and meets the applicable standards provided in sections

2(a) and 2(b)(2) of that Order. Provisions within this part which are

inconsistent with state law are controlling. All administrative

remedies pursuant to 7 CFR Part 1900 Subpart B must be exhausted prior

to filing suit.

Paperwork Reduction Act

The information collection requirements contained in this

regulation have been approved by the Office of Management and Budget

(OMB) under the provisions of 44 U.S.C. Chapter 35 and have been

assigned OMB control number 0575-0115 in accordance with the Paperwork

Reduction Act of 1980 (44 U.S.C. 3507). This proposed rule does not

revise or impose any new information collection or recordkeeping

requirement from those approved by OMB.

Environmental Impact Statement

This document has been reviewed in accordance with 7 CFR Part 1940,

Subpart G, ``Environmental Program.'' It is the determination of RHCDS

that this action does not constitute a major Federal action

significantly affecting the quality of the human environment and, in

accordance with the National Environmental Policy Act of 1969, P.L. 91-

190, an environmental impact statement is not required.

Programs Affected

This program/activity is listed in the Catalog of Federal Domestic

Assistance under number 10.433, Housing Preservation Grants.

Intergovernmental Consultation

This program is subject to the provisions of Executive Order 12372

which requires intergovernmental consultation with State and local

officials (7 CFR part 3015, Subpart V, 48 FR 29115, June 24, 1983.)

Regulatory Flexibility Act

The Administrator has determined that the proposed action will not

have a significant economic impact on a substantial number of small

entities because it contains normal business recordkeeping requirements

and minimal essential reporting requirements. The proposed action will

only affect a small number of rural communities.

Background and Drafting Information

The proposed rule incorporates Title VII, Section 711 of the

Housing and Community Development Act of 1992 (Pub. L. 102-550, dated

October 28, 1992) amending Section 533 of the Housing Act of 1949, 42

U.S.C. 1490m, allowing for replacement housing where the grantee has

determined that the costs for repair and rehabilitation on the

recipient's (individual homeowners only) existing housing is not

economically feasible or practical. RHCDS is making no other

significant changes other than allowing for replacement housing where

the grantee has determined that the costs for repair and rehabilitation

on the recipient's (individual homeowner) existing housing are not

economically feasible or practical.

Lists of Subjects for 7 CFR Part 1944

Grant programs--Housing and community development, Home

improvement, Loan programs--Housing and community development,

Nonprofit organizations, Rural housing.

Therefore, as proposed, Chapter XVIII, Title 7, Code of Federal

Regulations, is amended as follows:

PART 1944--HOUSING

1. The authority citation for Part 1944 continues to read as

follows:

Authority: 42 U.S.C. 1480; 5 U.S.C. 301; 7 CFR 2.23 and 2.70.

Subpart N--Housing Preservation Grants

2. Section 1944.651 is amended by removing the words ``if such

person has capacity to contract'' in paragraph (b) and by revising the

last two sentences of paragraph (a) to read as follows: [[Page 19169]]

Sec. 1944.651 General.

(a) * * * Such assistance will be used to reduce the cost of repair

and rehabilitation, to remove or correct health or safety hazards, to

comply with applicable development standards or codes, or to make

needed repairs to improve the general living conditions of the

resident(s), including improved accessibility by persons with

handicaps. Individual housing that is owner/occupied and is determined

by the grantee to be beyond repair or rehabilitation may qualify for

replacement housing.

* * * * *

3. Section 1944.652 is revised to read as follows:

Sec. 1944.652 Policy.

(a) The policy of RHCDS is to provide HPG's to grantees to operate

a program which finances repair and rehabilitation activities to

individual housing, rental properties, or co-ops for very low- and low-

income persons. Individual housing that is owner/occupied and is

determined by the grantee to be beyond repair or rehabilitation may

qualify for replacement housing. Grantees are expected to:

(1) Coordinate and leverage funding for repair and rehabilitation

activities, as well as replacement housing, with housing and community

development organizations and/or activities operating in the same

geographic area; and

(2) Focus the program to rural areas and smaller communities so

that it serves very low- and low-income persons.

(b) RHCDS intends to permit grantees considerable latitude in

program design and administration. The forms or types of assistance

must provide the greatest long term benefit to the greatest number of

persons residing in individual housing, rental properties, or co-ops

needing repair and rehabilitation, or replacement of individual

housing.

(c) Repairs and rehabilitation or replacement activities affecting

properties on or eligible for listing on the National Register of

Historic Places will be accomplished in a manner that supports national

historic preservation objectives as specified in Sec. 1944.673 of this

subpart.

4. Section 1944.653 is amended by adding a sentence to the end of

the paragraph to read as follows:

Sec. 1944.653 Objective.

* * * Further, individual housing that is owner/occupied and is

determined by the grantee to be beyond repair or rehabilitation may

qualify for replacement, except as specified in Sec. 1944.659 of this

subpart.

5. Section 1944.656 is amended by adding a sentence to the end of

the definition of ``Housing preservation'' and by adding the definition

of ``Replacement housing'' in alphabetical order, to read as follows:

Sec. 1944.656 Definitions.

* * * * *

Housing preservation. * * * The term housing preservation does not

apply to replacement housing.

* * * * *

Replacement housing. The replacement of existing, individual owner/

occupied housing where repair and/or rehabilitation assistance is not

economically feasible or practical. The term replacement housing does

not apply to housing preservation.

* * * * *

Sec. 1944.658 [Amended]

6. Section 1944.658 is amended by adding the words ``, as well as

for replacement housing'' after the word ``assistance'' in paragraph

(a)(2).

7. Section 1944.659 is added to read as follows:

Sec. 1944.659 Replacement housing.

Replacement housing applies only to existing, individual owner/

occupied housing. Replacement housing does not apply to rental

properties (single-unit or multiple-unit) or to cooperative housing

projects. The grantee is responsible for determining the extent of the

repairs and rehabilitation prior to any assistance given to an

individual homeowner. If the cost of such repairs and rehabilitation is

not economically feasible or practical, then the grantee may consider

replacing the existing housing with replacement housing, subject to the

following:

(a) The HPG grantee:

(1) Shall document the total costs for all repairs and

rehabilitation on the existing housing; and

(2) Shall document the basis for the determination that the costs

for all repairs and rehabilitation for the existing housing are not

economically feasible or practical;

(b) The individual homeowner:

(1) Must meet all requirements of Sec. 1944.661 of this subpart;

(2) Must have been denied a RHCDS section 502 loan;

(3) Must lack the income and repayment ability to replace their

existing home without the assistance of the HPG grantee; and

(4) Must be able to afford the replacement housing on terms set

forth by the HPG grantee;

(c) The existing home:

(1) Must be demolished to make way for the replacement housing; and

(2) May not be sold to make way for the replacement housing;

(d) The replacement housing:

(1) May be either new housing or a dwelling brought onto the site

of the existing housing;

(2) May use no more than $15,000 in HPG funds;

(3) Must meet all applicable requirements of Sec. 1944.16 of

Subpart A of this part; and

(4) May not be sold for a minimum of 5 years.

(e) Any monies received by the homeowner from selling salvaged

material after demolishing the existing home must be used towards the

replacement housing.

8. Section 1944.661 is amended by revising the introductory text of

paragraph (b)(2) and paragraph (b)(3) to read as follows:

Sec. 1944.661 Individual homeowners--eligibility for HPG assistance.

* * * * *

(b) * * *

(2) An undivided or divided interest in the property to be

repaired, rehabilitated, or replaced when not all of the owners are

occupying the property. HPG assistance may be made in such cases when:

* * * * *

(3) A leasehold interest in the property to be repaired,

rehabilitated, or replaced. When the potential HPG recipient's

``ownership'' interest in the property is based on a leasehold

interest, the lease must be in writing and a copy must be included in

the grantee's file. The unexpired portion of the lease must not be less

than 5 years and must permit the recipient to make modifications to the

structure or replace it without increasing the recipient's lease cost.

* * * * *

9. Section 1944.664 is amended by redesignating paragraphs (d)

through (g) as (e) through (h) respectively, by revising the words ``to

make improvements that'' to read ``where they'' in the first sentence

of the introductory text of newly redesignated paragraph (f); by adding

the words ``or replacement housing'' after the word ``preservation'' in

the introductory text of newly redesignated paragraph (g); by revising

the section heading, paragraph (a), and newly redesignated paragraphs

(h)(1) and (h)(3); and by adding paragraph (d) to read as follows:

Sec. 1944.664 Housing preservation and replacement housing assistance.

(a) Grantees are responsible for providing loans, grants, or other

comparable assistance to homeowners, [[Page 19170]] owners of rental

properties, co-ops for housing preservation or for replacement housing

as described in Sec. 1944.656 of this subpart.

* * * * *

(d) Authorized replacement housing assistance includes, but is not

limited to:

(1) Building a dwelling and providing related facilities for use by

the individual homeowner as a permanent resident;

(2) Providing a safe and sanitary water and waste disposal system,

together with related plumbing and fixtures, which will meet local

health department requirements;

(3) Providing minimum site preparation, including grading,

foundation plantings, and minimal landscaping;

(4) Providing special design features or equipment when necessary

because of physical handicap or disability of the HPG recipient or

member of the household;

(5) Purchasing and installing approved energy saving measures and

approved furnaces and space heaters which use a type of fuel that is

commonly used, and is economical and dependably available;

(6) Providing storm cellars and similar protective structures, if

typical for the area;

(7) Paying real estate taxes which are due and payable on the

existing dwelling/site at the time of closing, if this amount is not a

substantial part of the HPG assistance;

(8) Providing living area for the HPG recipient and all members of

the household as specified in Sec. 1944.16 (c) of subpart A of this

part; and

(9) Moving a dwelling onto the site of the demolished, previously

existing housing and meeting all HPG housing preservation requirements

for repair and rehabilitation;

(10) Providing funds for demolishing the existing housing; and

(11) Any other cost that is reasonable and justifiable directly

related to replacement activities.

* * * * *

(h) * * *

(1) Assist in the construction or completion of an addition

(excluding paragraph (c)(11) of this section) or a new dwelling. This

paragraph does not apply to replacement housing.

* * * * *

(3) Repair or rehabilitate, as well as replace any property located

in the Coastal Barrier Resources System.

10. Section 1944.665 is amended by revising the heading and the

first sentence to read as follows:

Sec. 1944.665 Supervision and inspection of work.

Grantees are responsible for supervising all rehabilitation and

repair work, as well as replacement housing financed with HPG

assistance. * * *

Sec. 1944.666 [Amended]

11. Section 1944.666 is amended by revising the reference

``Sec. 1944.64 (f)'' to read ``Sec. 1944.664 (g)'' in the last sentence

of paragraph (b)(3), and by adding the words ``, as well as for

replacement housing (individual homeowners only)'' after the word

``rehabilitation'' in paragraph (b)(6).

Sec. 1944.667 [Amended]

12. Section 1944.667 is amended by adding the words ``, or for

individual homes replaced,'' after the word ``rehabilitated'' in the

second sentence of the introductory text of paragraph (a).

13. Section 1944.670 is amended by revising paragraph (b) to read

as follows:

Sec. 1944.670 Project income.

* * * * *

(b) Grantees are encouraged to establish a program which reuses

income from loans after the grant period for continuing repair and

rehabilitation activities, as well as for individual housing replaced.

14. Section 1944.671 is amended by revising paragraph (a)(2) to

read as follows:

Sec. 1944.671 Equal opportunity requirements and outreach efforts.

* * * * *

(a) * * *

(2) The term ``residential real estate-related transaction''

includes the making or purchasing of loans, grants, or other financial

assistance for purchasing, constructing, improving, repairing, or

rehabilitating a unit or dwelling, as well as for replacement housing

for individual homeowners.

* * * * *

15. Section 1944.672 is amended by adding the words ``or housing

replacement'' after the word ``preservation'' in the fourth sentence of

paragraph (b); in paragraph (d), by revising the reference ``Paragraph

VII of exhibit C of this subpart'' to read ``Paragraph VIII of exhibit

C of this subpart''; and by revising the first sentence of paragraphs

(a) and (b) to read as follows:

Sec. 1944.672 Environmental requirements.

* * * * *

(a) The approval of an HPG grant for the repair, rehabilitation, or

replacement of dwellings shall be a Class I action. * * *

(b) The use of HPG funds by the grantee to repair, rehabilitate, or

replace specific dwellings is generally exempt from an RHCDS

environmental

review. * * *

* * * * *

Sec. 1944.673 [Amended]

16. Section 1944.673 is amended by adding the words ``and

replacement housing'' after the word ``preservation'' in the section

heading, and by revising the words ``rehabilitation or repair'' to read

``rehabilitation, repair, or replacement'' in the first sentence of

paragraph (b).

17. Section 1944.683 is amended by redesignating paragraphs (b)(3)

through (b)(7) as paragraphs (b)(4), through (b)(8) respectively, by

adding the words ``, as well as for replacement housing,'' after the

word ``rehabilitation'' in newly redesignated paragraph (b)(4)(i) and

after the word ``financed'' in newly redesignated paragraph (b)(8), and

by adding a new paragraph (b)(3) to read as follows:

Sec. 1944.683 Reporting requirements.

* * * * *

(b) * * *

(3) The use of HPG and any other funds for replacement housing.

* * * * *

Dated: March 22, 1995.

Michael V. Dunn,

Acting Under Secretary, Rural Economic and Community Development.

[FR Doc. 95-9262 Filed 4-14-95; 8:45 am]

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