Office of the Assistant Secretary for HousingFederal Housing Commissioner; Supportive Housing for the Elderly and Persons With Disabilities

SUMMARY: This rule represents the final rulemaking for HUD's Section

202 Program of Supportive Housing for the Elderly and the Section 811

Program of Supportive Housing for Persons with Disabilities, both of

which HUD has previously implemented through several interim rules. As

part of President Clinton's regulatory reinvention initiative, this

final rule also consolidates and streamlines the regulations for these

two programs in order to make them easier to use and understand. This

rule also eliminates obsolete regulations from 24 CFR part 885

regarding the Loans for Housing for the Elderly or Handicapped Program,

and moves the remaining provisions to a subpart within the consolidated

supportive housing regulations. Furthermore, information that is also

in the statute or that should be more appropriately placed in the

program handbook or in Notices of Funding Availability (NOFAs) has been

deleted from the regulations.

EFFECTIVE DATE: April 22, 1996.

FOR FURTHER INFORMATION CONTACT: Linda Cheatham, Director, Office of

Multifamily Housing Development, Department of Housing and Urban

Development, 451 Seventh Street SW., Room 6134, Washington, DC 20410,

telephone (202) 708-3000. (This number is not toll-free.) Hearing- or

speech-impaired persons may access that number by calling toll-free the

Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

A. Loans for Housing for the Elderly or Handicapped; Part 885

Under section 202 of the Housing Act of 1959 (12 U.S.C. 1701q) and

the regulations at 24 CFR part 885, HUD provided direct Federal loans

to assist private, nonprofit corporations and nonprofit consumer

cooperatives in the development of housing projects serving elderly or

handicapped families and individuals. Loans made under part 885 were

used to finance the construction or substantial rehabilitation of

projects for elderly or handicapped families, or to finance the

acquisition with or without moderate rehabilitation of existing housing

and related facilities for group homes for nonelderly handicapped

individuals.

HUD published two interim rules in the Federal Register on June 12,

1991 (56 FR 27070, 27104) establishing the Section 811 Program of

Supportive Housing for Persons with Disabilities (24 CFR part 890) and

the Section 202 Program of Supportive Housing for the Elderly (24 CFR

part 889). The interim rule for the Section 202 Program (56 FR 27104)

also amended part 885 and provided that part 885 would continue to

apply to projects for which Section 202 loan reservations were made in

Fiscal Year (FY) 1990 and prior years. The rule further provided,

however, that projects for the elderly selected for funding in FY 1991

and subsequent years would be covered by part 889. Since no new

projects are being funded under the regulations in part 885, many of

the provisions in that part that do not apply to the continued

management of the projects are unnecessary, and HUD can remove them

from the Code of Federal Regulations.

Therefore, this final rule removes several definitions from

Sec. 885.5. Second, this rule eliminates Secs. 885.200 through 885.405

and Sec. 885.415 regarding projects that received reservations under

section 202 of the Housing Act of 1959 and housing assistance under

section 8 of the United States Housing Act of 1937 (202/8 projects). No

new 202/8 projects will be funded, and all of the projects have either

closed or been converted to capital advances under either part 889 or

part 890. Third, this rule eliminates many sections in subpart C of

part 885 regarding projects for nonelderly handicapped families

receiving reservations under section 202 and project assistance

payments under section 202(h) of the Housing Act of 1959 (202/162

projects). No new 202/162 projects will be funded, and all existing

202/162 projects have closed or have been converted to capital advances

under part 890. Fourth, this rule will also remove other definitions

and provisions from part 885 that are merely explanatory or

duplicative. Lastly, this rule moves the remaining provisions from part

885 to subpart E of the new streamlined regulations for the supportive

housing programs.

B. June 12, 1991 Interim Rules

On June 12, 1991, HUD published in the Federal Register two interim

rules, one for the Section 202 Program of Supportive Housing for the

Elderly (56 FR 27104) and one for the Section 811 Program of Supportive

Housing for Persons with Disabilities (56 FR 27070). The interim rule

for the Section 202 Program (56 FR 27104) provided for the continued

applicability of part 885 to projects for which Section 202 loan

reservations had been made in fiscal year (FY) 1990 and prior years,

and to add part 889 establishing the new Section 202 Program of

Supportive Housing for the Elderly and enabling FY 1991 funding for the

program. The interim rule for the Section 811 Program (56 FR 27070)

added a new part 890 establishing the new program for persons with

disabilities. These two interim rules contained very similar

provisions. As stated in the preambles to both rules (56 FR 27070,

27104), HUD intended to establish additional requirements for the

supportive housing programs in separate rules.

HUD received 19 comments on the interim rule for the Section 202

Program, and 24 comments on the interim rule for the Section 811

Program. HUD responded to some objections raised by commenters by

changing the program requirements in the subsequent interim rules

discussed below. The following discussion summarizes the other comments

and provides HUD's responses to those comments.

1. Definition of ``Acquisition''

One commenter objected to the definition of ``acquisition'' in the

interim rule for the Section 811 Program (Sec. 890.105 of the interim

rule; Sec. 891.305 of this final rule). This definition provides that

property other than from the Resolution Trust Corporation (RTC) is only

eligible for acquisition if at least three years have elapsed from the

completion of the project or the beginning of occupancy to the date of

application. The commenter argued that HUD should eliminate this

limitation, since it is beyond the intent of the statute and it denies

the opportunity for acquisition of newer properties except through the

RTC.

HUD Response: HUD agrees and is removing the three year

requirement. Furthermore, HUD is removing the prohibition against

acquiring property to use as independent living facilities. Previously,

acquisition without rehabilitation was limited to group homes and

property from the Resolution Trust Corporation.

[[Page 11949]]

2. Definition of ``Independent Living Facility''

Three commenters objected to the definition of ``independent living

facility'' in Sec. 890.105 of the interim rule for the Section 811

Program. The definition limits projects for persons with chronic mental

illness to occupancy by 20 such persons. The commenters argued that the

statutory definition allows 24 persons, and makes no distinction

between persons with chronic mental illness and other persons with

disabilities. Some of the commenters argued that such a distinction by

HUD is a violation of the Fair Housing Act and section 504 of the

Rehabilitation Act of 1973. One of the commenters also objected to

allowing projects up to 40 persons, arguing that this is an

``inappropriately large upper limit'' that will result in the

segregation of persons with disabilities. However, the other commenter

argued that the smaller number of persons permitted in facilities for

persons with chronic mental illness will increase costs and make it

more difficult to develop such facilities in large urban areas.

HUD Response: Congress originally set the project size limit for

independent living facilities at 20 persons. Although an amendment to

the statute increased the project size limit to 24 persons (Pub. L.

102-27; approved April 10, 1991) (42 U.S.C. 8013(k)(4)), HUD chose to

retain the 20 person limit for independent living facilities for

persons with chronic mental illness. In FYs 1993, 1994, and 1995,

however, HUD decided that the project size limit for independent living

facilities would be 24 persons regardless of the disabled population

being served. HUD intends to retain this limit in future funding

cycles. In response to the commenter who objected to allowing projects

up to 40 persons, HUD intends to remove the upper limit on exceptions

to the project size limits in the next Notice of Funding Availability

to allow this determination to be made at the local level.

3. Definition of ``Person With Disabilities''

One commenter objected to the definition of ``person with

disabilities'' in the interim rule for the Section 811 Program

(Sec. 890.105 of the interim rule; Sec. 891.305 of this final rule),

which excludes persons whose sole impairment is alcoholism or drug

addiction. This commenter argued that this definition is contrary to

the Fair Housing Act, which protects persons disabled by alcoholism or

substance abuse (although not those who currently and illegally use or

are addicted to controlled substances).

HUD Response: HUD has consistently used a definition of ``person

with disabilities'' for the Section 811 Program and its predecessor,

the Section 202 Program, that excludes persons whose sole impairment is

alcoholism or drug addiction. In other words, drug or alcohol addiction

alone is not a qualifying condition for occupancy in Section 811

housing. Alcohol or drug addiction would not disqualify a person,

however, as long as the person meets the required three-pronged test

for eligibility as a person with a disability (i.e., physical, mental,

or emotional impairment is of long-continued and indefinite duration,

the impairment substantially impedes the person's ability to live

independently, and the person's ability to live independently could be

improved by more suitable housing conditions).

4. Definition of ``Sponsor''; Prohibited Relationships

One commenter suggested that the regulations for these programs be

changed to allow management contracts between the Owner and the Sponsor

or its nonprofit affiliate or wholly-owned for-profit subsidiary. This

commenter, who sponsors Section 202 and Section 811 projects, asserts

that the for-profit nature of its subsidiary has meant that the housing

needs of more people are fulfilled, since the net profits of the

subsidiary go back into the nonprofit Sponsor.

This commenter also objects to the provisions in the interim rules

that no officer or director of the Sponsor is permitted to have any

financial interest in any contract with the Owner in connection with

the rendition of services. This commenter describes a situation in

which the Owner's attorney is also an unpaid board member. This

arrangement is desirable because it allows the organizations to take

advantage of the attorney's unique expertise. However, under the

definition of ``Sponsor,'' the attorney's fees can no longer be paid

from project funds.

Another commenter asserted that these regulations make it virtually

impossible for Sponsors to pay for project management costs,

eliminating the benefits of repeat participation by experienced

nonprofit developers. Specifically, this commenter suggests that HUD

allow Sponsors to receive consultant fees, so that qualified Sponsors

that perform such services can be compensated accordingly.

HUD Response: The handbooks for the Section 202 and Section 811

Programs provide exceptions to these provisions by permitting the

Sponsor or its nonprofit affiliate to contract for a fee with the Owner

to provide management services and/or supportive services. Furthermore,

attorney's fees can be paid from project funds, unless the attorney is

an officer or board member of the Sponsor or Owner. The same

restriction that applies to other development team members also applies

to attorneys. As part of HUD's efforts to simplify the Section 202/811

development process, this rule eliminates the housing consultant's fee

in lieu of a developer's fee from which the Owner can pay the Sponsor

for consulting services.

5. Project Standards for Group Homes

With regard to Sec. 890.210(b) of the interim rule for the Section

811 Program (Sec. 891.310(a) of this final rule), one commenter

remarked that it may be impossible to meet the space per resident

requirements within the development cost limits. Another commenter

requested clarification on the provision requiring that a project

involving acquisition comply with applicable State requirements. In the

absence of such requirements, the project must comply with standards as

described in the interim rule (Sec. 890.210(b) of the interim rule;

Sec. 891.310(a) of this final rule). This commenter asked whether HUD's

standards apply if they are greater than the State's standards, and if

so this commenter requested HUD to state this clearly in the

regulations. The commenter also requested HUD to state clearly that in

no case must a project comply with State standards in violation of the

Fair Housing Act.

HUD Response: During the past five years of program operation, HUD

is not aware of Sponsors having difficulty in meeting the space per

resident requirements within the development cost limits. In the near

future, HUD will be closely examining the development cost limits to

ensure that they are reflective of their respective localities.

Previously, if the fund reservation was not adequate to support the

development of the project, an amendment to the fund reservation would

be made for HUD-approved expenses up to the maximum amount allowable.

Although there will still be amendments to the fund reservation, with

this final rule, amendments will be available only after initial

closing. In response to the commenter asking for clarification

regarding whether HUD's standards apply to acquisition projects if they

are greater than applicable State requirements, Sec. 891.310 of this

final rule requires that the project at least meet applicable State

requirements if they

[[Page 11950]]

exist, and if they do not, the project must meet the HUD requirements.

The purpose of this provision is to permit flexibility in the group

home standards when complying with the HUD requirements may prove to be

cost prohibitive. In regard to the request from the same commenter for

a statement that in no case must a project comply with State standards

in violation of the Fair Housing Act, HUD feels that such a statement

is unnecessary since participation in the program requires a Sponsor to

certify that it will comply with the requirements of the Fair Housing

Act and implementing regulations.

6. Limits on Number of Units

Three commenters objected to the provision of the interim rule for

the Section 202 Program limiting to 10 percent of the national

allocation the number of units for which national organizations can

apply (Sec. 889.215 of the interim rule; Sec. 891.215 of this final

rule). The commenters argued that this limitation is arbitrary, not

required by statute, and contrary to the goal of producing the highest

quality housing. Applications should be funded on merit and local need.

One commenter suggested that if limits are absolutely necessary, this

section should be revised so that the limit only applies if there are

at least 10,000 units being allocated for the program that year.

Furthermore, HUD should base the limits on the number of units awarded,

rather than the number of units for which the Sponsor is applying.

Finally, HUD should waive this requirement if there are no suitable

competing applicants in a particular region.

HUD Response: The limit on the number of Section 202 units for

which national organizations can apply was established to ensure that

organizations that are not national in scope would have a more

equitable opportunity to participate in the program. Contrary to the

opinion of the commenter, applications are funded based on merit and

local need. However, without a limit on the number of units that

national organizations can apply for, these organizations have a

competitive edge over qualified non-national organizations. This

results in a possible tendency to dominate the program. Although HUD

intends to continue placing a limit on the number of Section 202 units

a national organization can apply for, the requirement will be in the

Notice of Funding Availability published in the Federal Register once

Congress appropriates Section 202 funds to HUD. Therefore, this final

rule deletes the limit from the regulations.

7. Project Eligibility and Size Limits

Seven commenters requested additional guidance with regard to the

interim rule for the Section 811 Program, under which eligible projects

include dwelling units in multifamily housing developments,

condominiums, and cooperatives (Sec. 890.215(a)(3) of the interim

rule). These commenters argued that one of the core goals of the

National Affordable Housing Act was to expand available housing options

beyond group homes and independent living facilities. Therefore, HUD

should provide guidance as to the applicability of the requirements of

each section of the interim rule to the newly available options. One

commenter specifically asked for guidance with regard to limits on the

number of dwelling units within multifamily developments and limits on

the number of persons who may reside in such units.

Another commenter suggested that, in order to encourage independent

and integrated housing for persons with disabilities, the regulations

should not require the Sponsor to notify the municipality in the case

of acquisition of individual dwelling units in multifamily

developments, condominiums, and cooperatives.

Three commenters suggested that HUD develop strict guidelines for

waiving the project size limits of the Section 811 rule

(Sec. 890.215(c) of the interim rule). Several commenters asserted that

allowing the development of larger facilities through a waiver of the

size limits is contrary to the goal of providing quality services and

an integrated living environment. The other commenter suggested that

HUD require Sponsors to demonstrate thoroughly the necessity for such

an exception to the size limits. For instance, HUD should require the

Sponsor to demonstrate that there is no other residential site within a

reasonable distance that would make a smaller project feasible.

However, one commenter argued that rather than making these waivers

harder to obtain, HUD should make them easier to obtain by expediting

its review and approval of such waivers.

HUD Response: In response to the seven commenters that requested

guidance as to the applicability of each section of the interim rule to

the newly available options of dwelling units in multifamily housing

developments, condominiums, and cooperatives, HUD has determined that

detailed information concerning these housing options would be more

appropriate in a handbook and intends to issue a revised handbook in

the near future.

In response to the commenter that suggested that the Sponsor not be

required to notify the municipality when acquiring dwelling units in

multifamily developments, condominiums, and cooperatives in order to

encourage independent and integrated housing for persons with

disabilities, HUD does not find that notifying the municipality will

have any negative impact on integrating persons with disabilities. The

units will be dispersed within the structure and thus will be difficult

to identify as housing for disabled persons.

In response to the comments on exceptions to project size limits,

HUD has decided to eliminate from the regulation the section on project

size limits and exceptions. This information will appear in the annual

Notice of Funding Availability (NOFA). However, since HUD published the

last interim rule, HUD has expanded the criteria required for Sponsors

to request a waiver of the project size limits by adding that the

Sponsor must demonstrate why the site was selected, as well as how the

size of the project is consistent with State and/or local policies

governing similar facilities for the proposed population. Furthermore,

HUD intends to remove the upper limits on the number of units that can

be requested so that the size of the project can be determined more

appropriately at the local level.

8. Design and Cost Standards

This provision of the interim rules (Sec. 891.120(c) of this final

rule) provided that HUD would not fund certain amenities, such as

washers and dryers in individual units. One commenter objected, arguing

that easily accessible washers and dryers do not represent excessive

costs, but rather are especially important for older and frailer

persons. This commenter also noted that the failure to provide

individual laundry facilities may increase service costs for those

unable to carry their laundry to distant facilities. Several other

commenters remarked that features such as washers and dryers are

considered standard features in most new housing today, and many of the

excluded amenities can materially contribute to the independence of a

person with disabilities. These commenters argued that Sponsors should

be allowed to provide these amenities if they can do so within the cost

limits.

HUD Response: Section 202 and Section 811 projects must be modest

in design. Therefore, there are certain amenities such as atriums,

bowling alleys, and swimming pools, that are considered excessive and

are not

[[Page 11951]]

eligible to be paid for out of the capital advance (Sec. 891.120(c)).

However, there is no prohibition against the Sponsor including certain

excess amenities as long as they pay for them from other sources.

One commenter also objected to Sec. 890.220(b) in the interim rule

for the Section 811 Program, which provides that HUD will establish

limits on unit sizes and number of bathrooms for independent living

facilities. This commenter remarked that such specifications have

caused costly delays in construction, and that HUD should be more

flexible and result-oriented. HUD should focus on enforcing the

development cost limits and the incentives for savings, as well as the

minimum construction and space standards, rather than on design and

cost standards.

HUD Response: If the project is to be newly constructed and

designed from the beginning according to the maximum unit sizes and

number of bathrooms, HUD disagrees with the commenter that this

requirement could cause costly delays in construction. If the project

is to be rehabilitated, there is flexibility in meeting this

requirement when complying with the limitations would be too costly.

Also, if the Sponsor can develop the project with larger sized units

and more bathrooms within the appropriate development cost limit the

Sponsor is permitted to do so. The Sponsor can also pay for the extra

space and the associated operating cost with funds from other sources.

The reference to unit size and number of bathrooms for independent

living facilities will be in the handbook and not in the regulation.

9. Site and Neighborhood Standards

Two commenters objected to the provision of the interim rule for

the Section 811 Program (Sec. 890.230(g) of the interim rule;

Sec. 891.320(b) of this final rule) that prohibits developing projects

adjacent to certain types of facilities, such as schools or other

housing primarily for persons with disabilities. One of these

commenters argued that persons with disabilities might need to be close

to such supportive services, and developing a project on a site near

such services would decrease the cost of service delivery. This

commenter noted that HUD considers the proximity or accessibility of

such services as a selection criterion for funding

(Sec. 890.300(c)(6)(i)(A) of the interim rule). The other commenter

warned that this requirement contradicts the Fair Housing Amendments

Act of 1988, and that it fuels potential community opposition by

allowing opponents to protest that their area is ``concentrated'' with

other facilities for persons with disabilities.

HUD Response: HUD has determined that the location of the project

should be decided at the local level, and therefore has relaxed the

requirement in Sec. 891.320(b) of this final rule by indicating that

projects ``should'' rather than ``must'' be located in neighborhoods

where other family housing is located, and ``should not'' rather than

``may not'' be located adjacent to certain facilities. However, the

statute still prohibits more than one group home from being located on

one site, as well as a group home from being located on a site

contiguous to another site containing such a home.

10. Development Cost Limits

HUD received many comments on this provision of both interim rules.

One commenter remarked that the development cost limits are ``woefully

inadequate.'' Three commenters objected to the calculation of the

development cost limits under the interim rules. These commenters

asserted that HUD offices are instructed not to add an additional 10

percent for Costs Not Attributable, and this will result in lower

maximum cost limits. They reminded HUD to ensure that the High Cost

Factors are truly reflective of costs in the area, as is required by

the conference report on the National Affordable Housing Act.

Three commenters objected to the development cost limits for the

acquisition without rehabilitation of properties from the Resolution

Trust Corporation (RTC). The interim rules provided that in the case of

RTC properties that require no rehabilitation, the cost limits are

reduced to 85 percent of the limits listed in the rule. These

commenters asserted that there is no statutory basis for this reduction

and that the reduction will effectively eliminate these properties as

viable options.

Five commenters remarked that the interim rule for the Section 811

Program provides no guidance on development cost limits for dwelling

units in multifamily housing, condominiums, or cooperatives.

HUD Response: HUD will review the development cost limits, which

have been deleted from this final rule, to ensure that they adequately

reflect the cost of developing similar housing in the locality. HUD

will establish the development cost limits and all future changes to

them through a notice in the Federal Register.

Although there is no statutory basis for the lower development cost

limit for properties acquired from the RTC that will not need any

rehabilitation, the 85 percent limit is justified since properties can

be obtained less expensively from the RTC than they can from the

private market.

The reason that the interim rule for the Section 811 Program did

not provide guidance on development cost limits for dwelling units in

multifamily housing, condominiums, or cooperatives is that these

housing types are considered independent living units, and therefore

would use the appropriate development cost limit based upon the number

and size of the units and whether or not the structure has an elevator.

In this section (Sec. 891.140 of this final rule), HUD has provided

incentives for savings by providing that Owners whose actual

development costs are less than the initial fund reservation for the

capital advance will retain 50 percent of this savings in their

Replacement Reserve Account. The Owner will retain 75 percent of this

savings by adding energy efficiency features. One commenter asked for

further details concerning which energy efficiency features will

satisfy this incentive.

Six commenters remarked on the retention of the savings in the

Replacement Reserve Account, the funds in which may only be used for

repairs or replacements in or capital improvements of the project.

These commenters requested that HUD provide greater flexibility in the

use of these savings. The commenters suggested HUD change the

regulations in one of the following ways: relax the requirements for

the use of at least a portion of the funds in the Replacement Reserve

Account; retain the funds in the Residual Receipts Account; or split

the funds between the two accounts, so that the funds can be used for

resident services after all repair needs have been met. One commenter

further recommended that HUD's share of the savings should be placed in

a special account to provide needed repairs and modernization for those

Section 202 projects with no reserves on which to draw.

HUD Response: HUD will give further details concerning which energy

efficiency features will satisfy the incentive to retain 75 percent of

the savings in the program handbook.

In response to the request that HUD allow more flexibility in the

use of the savings, HUD believes that the appropriate account for any

savings received is the Replacement Reserve Account since there are no

other funds provided for needed repairs and maintenance. The Residual

Receipts Account is used for other purposes. The

[[Page 11952]]

statute specifically states that if there are savings, HUD retains 50

percent; it does not permit HUD's share to be folded back into the

project.

11. Term of Commitment

Two commenters expressed concern that although HUD requires that

housing assisted under both programs remain available to very low-

income elderly persons and persons with disabilities for 40 years (480

months), the initial contract for project rental assistance shall be

for 240 months, with an extension of not less than 60 months. This

commenter suggests that the regulations provide for contract extensions

for not less than 240 months, since rental assistance will be required

in order to ensure the housing is available.

HUD Response: HUD recognizes that project rental assistance funds

will be necessary to keep the Section 202 and Section 811 projects

viable for 40 years. However, in these times of uncertainty and extreme

budget constraints, HUD is unable to extend contracts for project

rental assistance for an additional 240 months. In fact, in the FY 1995

funding cycle, HUD was permitted to reserve project rental assistance

contract (PRAC) funds for only 60 months as opposed to the usual 240

months. HUD will do all it can to assure that residents of Section 202

and Section 811 housing will continue to receive rental assistance as

long as they remain eligible.

12. Other Financing Sources

Two commenters remarked on HUD's statement in the preamble to the

interim rule for the Section 202 Program (56 FR 27105) that HUD would

generally not accept borrowed funds from other sources. These

commenters suggested that HUD remove this limitation and allow Owners

to use such funds, since Congress intended to encourage mixed financing

(17 U.S.C. 1701q(h)(6)). One commenter suggested that local HUD offices

have the ability to approve such loans, especially ``soft loans'' or

secured grants to ensure program compliance, and that the regulations

should set general parameters on the loan terms.

HUD Response: Owners are permitted to use borrowed funds from other

sources in the case of secondary financing. Field offices must review

requests for approval of secondary financing, and provided the

documents meet HUD requirements, they will be approved.

13. Owner Deposit (Minimum Capital Investment)

HUD received many comments on this provision of both interim rules

(Sec. 891.145 of this final rule). These commenters remarked that this

deposit requirement is a serious financial burden. The commenters

further expressed concern that this provision penalizes Sponsors for

delays that are often beyond the Sponsors' control or even HUD-related.

Other delays are caused by having to obtain municipal approval, conduct

archeological investigations, examine subsurface conditions for toxic

leaks, conduct public hearings, and obtain a building permit.

The commenters offered several suggestions. One commenter suggested

that HUD adopt an approval process that is more decentralized, more

flexible, and result-oriented. Another commenter suggested that HUD

should return the deposit once the project has closed and project

viability is assured; such a provision would allow Sponsors to use the

experience gained in previous projects in the development of subsequent

projects. Another commenter suggested that HUD should treat the 18-

month and 6-month time periods as targets, giving local offices the

permission to extend the time periods based on determinations of

individual circumstances. Two commenters suggested that any processing

time by HUD offices in excess of the recommended times should be

credited to the Sponsor as an extension. Another commenter suggested

that if HUD is responsible for delaying the final closing beyond the 6-

month time period (plus a 2-month extension), then HUD should return

the full balance remaining in the Minimum Capital Investment. Finally,

one commenter suggested that the funds that are returned should be

placed in either the Replacement Reserve or Residual Receipts Accounts,

at the Sponsor's option.

HUD Response: Although HUD appreciates the recommendations, HUD

established the policies regarding the Minimum Capital Investment to

provide an incentive for Owners to reach final closing early, and so

far the policies are working. Therefore, HUD will not make any changes

to these policies at this time.

14. Provision of Services

HUD received one comment requesting clarification on the provision

in Sec. 889.260(b)(3) of the interim rule for the Section 202 Program

(Sec. 891.225 of this final rule) regarding the $15 per unit per month

service cost allowance. This commenter inquired whether the funding for

the service coordinator is different from or included in this $15 per

unit per month service allowance. Three commenters expressed concern

that $15 may be an insufficient service allowance for frail elderly

persons. One of these commenters suggested that more money be allocated

for service subsidies. The other commenter suggested that HUD revise

the dollar amount if it should prove to be insufficient, and at least

annually to reflect the changing cost of services. The third commenter

recommended that a copayment by the tenant receiving the service should

only be voluntary; since these tenants will have low incomes, they may

not have sufficient funds for all their needs.

Two commenters encouraged HUD to allow a $15 per unit operating

cost under the Section 811 Program as well as under the Section 202

Program, since operating costs for housing for persons with

disabilities may often be equal to or greater than those for elderly

persons.

HUD Response: The funding sources for service coordinators and the

$15 per unit per month service allowance are separate. The amount of

$15 per unit per month was determined based upon HUD's experience with

the Congregate Housing Services Program. At this time HUD has not had

sufficient experience with the service allowance in the Section 202

Program to determine whether the amount of $15 per unit per month is

sufficient. The Section 811 statute does not provide for any HUD

funding for supportive services.

15. Service Coordinator Funds in Housing for Frail Elderly Persons

Several commenters objected to HUD's decision that the only

developments that can receive service coordinator funding under the

Section 202 Program are those in which more than 50 percent of the

residents are ``frail.'' First, as one commenter asserted, the service

coordinator is instrumental in assessing clients to determine frailty.

Further, another commenter cited surveys indicating that approximately

25 percent of the residents in subsidized senior housing will require

services. Requiring twice that number of frail elderly tenants will

overwhelm management, even with a service coordinator. It will also

lead to an undesirable balance of ``well to frail'' residents. The

commenters argued that service coordinators are essential to every

development, and therefore HUD should provide service coordinator funds

for all developments regardless of the number of ``frail'' elderly

tenants.

One commenter expressed concern regarding the assessment of the

occupants' abilities (with regard to the ``activities of daily

living'') at the time the Sponsor is developing its supportive

[[Page 11953]]

services plan and the rest of its application. According to the

nondiscrimination requirements, such as section 504 of the

Rehabilitation Act of 1973 and the Americans with Disabilities Act,

this commenter asserts that it will be legally impossible to make such

determinations in advance. The commenter suggested that HUD require a

statement from the Sponsor certifying its intent to assess the physical

characteristics and abilities of the tenants following initial rent-up.

At that time the Sponsor would have a clear idea of the number of

tenants needing services and how to deliver those services.

HUD Response: In response to the objection that only projects with

at least 50 percent frail elderly persons are eligible for service

coordinator funding, the actual requirement is that projects

principally serving the frail elderly are eligible for service

coordinator funding. Limited funds should be provided where there is

the most need. In other projects that do not qualify for service

coordinator funding, management assumes many of the same functions as a

service coordinator.

The requirement to assess occupants' abilities with regard to the

activities of daily living at the time the Sponsor is developing its

supportive services plan and application does not violate section 504

or the Americans with Disabilities Act because the requirement is to

assess in general the abilities of potential occupants from the general

population.

16. Housing Only Independent Persons

With regard to the elderly program, one commenter objected that HUD

has created a loophole by allowing Sponsors to provide no supportive

services by housing all fully independent persons. This commenter cited

a draft of HUD's training materials providing that ``if the applicant

is not going to provide services, it only needs to justify market

demand for fully independent elderly.'' The commenter argued that this

may violate section 504 of the Rehabilitation Act of 1973, and it is

contrary to the purpose of the Section 202 Program. The commenter

suggested that HUD require all Sponsors to anticipate housing some

elderly persons requiring services and to plan for the delivery of such

services.

HUD Response: At the outset, a Sponsor may serve all fully

independent elderly people. However, eventually many occupants will

require services as they get older. Sponsors proposing to serve all

fully independent elderly people initially must describe in their

applications how they will address the service needs of their residents

as they ``age in place.''

17. Provision of Services to Nonresidents

With regard to the Section 202 Program, the statute provides that

HUD may permit the provision of services to elderly persons who are not

residents, as described in the preamble to that interim rule (56 FR

27106). However, one commenter urged HUD not to allow the provision of

services to nonresidents unless these recipients are very low-income,

there is available funding to assist these persons, and the needs of

current residents are fully met.

HUD Response: The Section 202 statute allows the Secretary to

permit the provision of services to elderly persons and persons with

disabilities who are nonresidents only if doing so will not adversely

affect the cost-effectiveness or operation of the program or add

significantly to the need for assistance.

18. Application Contents

HUD received several comments on the application requirements in

the interim rules. Several commenters on the elderly program suggested

that since many Area Agencies on Aging will serve as the primary

services liaisons with any new Section 202 housing development, the

regulations should strongly encourage their coordinated efforts during

the application process under the elderly program.

Another commenter objected to the requirement in the interim rule

for the Section 811 Program that Sponsors submit a certification from

the appropriate State or local agency that it has reviewed the

supportive services plan (Sec. 890.265(c)(19) of the interim rule). One

commenter asserted that some State and local agencies have a ``bias''

against nonprofit organizations operating housing for the populations

they also serve. Therefore, this commenter suggested that HUD allow the

waiver of this requirement upon sufficient documentation that the

supportive services plan is adequate.

Several commenters remarked on the requirement that sponsors

describe their ``ties to the community'' (Sec. 890.265(c) of the

interim rule). While this requirement could include evidence that the

sponsor is a viable part of the community and evidence of the sponsor's

ability to carry out the project, its past experience, and its

financial and programmatic capability, these commenters argued that HUD

cannot require statements of support or approval of the application by

members of the community. The commenters argued that this may be an

unnecessary and illegal requirement in violation of the Fair Housing

Amendments Act of 1988.

HUD Response: This final rule removes the application contents from

the regulations. Instead, HUD will include them in the annual NOFAs

published in the Federal Register for the programs, as well as in a

self-contained application. The requirement that Sponsors submit a

certification from the appropriate State or local agency with a

determination as to whether the supportive services plan is well

designed to meet the needs of persons with disabilities is statutory

and cannot be waived.

In response to the commenters who argued that HUD cannot require

statements of support or approval of the application by members of the

community, HUD revised this requirement in the interim rule published

in the Federal Register on May 5, 1993. Since the effective date of

that rule, applicants have been required to include in their

applications statements of support for the proposed project from

nongovernmental organizations that are familiar with the needs of the

population the project would serve. For example, an applicant proposing

to develop housing for people with chronic mental illness could include

in their application a letter of support for the project from a local

service provider that offers mental health services. Such letters of

support help HUD determine the Sponsor's ties to the community and the

amount of local support for the project, both of which are indicators

of the project's potential sucess.

19. Review of Applications for Fund Reservation

Four commenters objected to the ranking and selection process

described in the interim rule for the Section 811 Program (Sec. 890.300

(d) and (e) of the interim rule). Using this selection process, HUD

would fund all approvable applications that contain evidence of control

of an approvable site before it would fund any applications in which

the Sponsor had identified the site but did not yet have control of the

site. The commenters argued that this process makes all other selection

criteria subordinate to control of the site at the time of application.

This unduly restricts Sponsors from developing innovative housing

opportunities, and HUD should instead balance site control with the

other criteria.

HUD Response: In this final rule, HUD has removed the provisions on

the ranking and selection process from the

[[Page 11954]]

regulation. These provisions will appear in the annual NOFAs for the

programs. The statute requires HUD to use, as a selection criterion for

the Section 811 program, the extent to which the applicant has site

control. In order to implement this requirement, HUD created two

categories of applications; Category A for those applicants with

satisfactory evidence of an approvable site, and Category B for

applicants that had identified a site. Priority in selection was given

to Category A applicants. For the FY 1995 program, HUD changed the

procedures by eliminating the categories in favor of awarding bonus

points to applicants with satisfactory evidence of an approvable site.

HUD believes this procedure satisfies the statutory requirement without

making all other selection criteria subordinate. It does not unduly

restrict Sponsors from developing innovative housing opportunities, but

rather provides an incentive for Sponsors to lock-in suitable sites

that will result in much needed housing being available for persons

with disabilities sooner.

20. Cancellation of Fund Reservation

Two commenters suggested that if a project is cancelled, HUD should

reallocate the funds to another application in the same region in which

HUD had originally allocated them. This will fulfill the goal of

balancing housing opportunities across the country. Another commenter

remarked that HUD should at least inform the public of how HUD will

reallocate the funds by including this information in the regulations.

HUD Response: The appropriations act in effect for the year in

which a project is cancelled governs HUD's ability to recapture and

reuse Section 202 and Section 811 contract authority.

21. OMB Circular A-110

In the preamble to the interim rules (56 FR 27073, 27107), HUD

specifically requested comments regarding the use of OMB Circular A-110

entitled ``Grants and Agreements with Institutions of Higher Education,

Hospitals, and other Nonprofit Organizations--Uniform Administrative

Requirements.'' Three commenters responded that the use of this

circular should not be required. These commenters explained that the

development team concept is more appropriate for this program than the

competitive procurement process. Two of the commenters explained that

bidding would make it difficult for Sponsors to use professionals who

are experienced in the program and who are willing to defer fees

because of their relationship with Sponsors. The other commenter

asserted that competitive procurement is more costly and time-

consuming.

HUD Response: The Office of Management and Budget (OMB) has

determined that OMB Circular A-110 does not apply to the section 202

and section 811 Programs.

C. August 12, 1992 Interim Rules

On August 12, 1993, HUD published in the Federal Register two more

interim rules, one for the section 202 Program of Supportive Housing

for the Elderly (57 FR 36338), and one for the section 811 Program of

Supportive Housing for Persons with Disabilities (57 FR 36330). The

August 12, 1992 interim rules provided guidance on the development of

supportive housing, elements of which include requests for capital

advance financing, approval of such requests, and repayment of a

capital advance. These interim rules also provided guidance regarding

project rental assistance contracts.

HUD received one request for information and one comment in

response to the August 12, 1992 interim rules. The commenter requested

that HUD allow for-profit corporations, as well as nonprofit

organizations, to participate in the programs.

HUD Response: The section 202 and 811 statutes prohibit

participation in the programs by for-profit corporations.

D. May 5, 1993 Interim Rules

On May 5, 1993, HUD again published in the Federal Register two

interim rules, one for the section 202 Program of Supportive Housing

for the Elderly (58 FR 26836) and one for the section 811 Program of

Supportive Housing for Persons with Disabilities (58 FR 26816). As HUD

described in the preambles to these interim rules, the rules

incorporated amendments to the programs made by the Housing and

Community Development Act of 1992. The interim rules also clarified and

simplified many of the requirements in the regulations, including

substantial improvements to the selection process.

HUD received eight comments in response to the May 5, 1993 interim

rules. Several of the comments consisted of inquiries about specific

aspects of the regulations. Many of the other commenters commended HUD

on its efforts to clarify and simplify the application and selection

process. However, two commenters objected to the change in the

processes for Notices of Funding Availability (NOFAs). In the May 5,

1993 interim rules, HUD changed the NOFA process so that field offices

would no longer publish Invitations for Applications in newspapers; the

field offices must only notify media for minority persons, as well as

media for elderly persons and persons with disabilities, as applicable.

The commenters argued that this limits the availability of information

about relatively new programs that will provide urgently needed housing

opportunities.

HUD Response: HUD decided to eliminate the requirement that HUD

field offices publish Invitations for Applications in newspapers

because HUD could not afford to continue paying the advertising costs.

However, each field office keeps a mailing list of organizations that

are current customers, as well as those that have expressed an interest

in the programs but that have not yet participated, and mails to each

of them a copy of the NOFA as soon as it is published in the Federal

Register.

E. March 2, 1995 Interim Rules

On March 2, 1995, HUD published in the Federal Register two more

interim rules, one for each program (60 FR 11828, 11836). These rules

provided guidance on managing supportive housing for the elderly or

persons with disabilities. Specifically, these rules contained

provisions regarding Owner responsibilities, tenant responsibilities,

leases, security deposits, utility allowances, vacancy payments, and

HUD reviews.

HUD received two comments on this set of interim rules. One

commenter requested that HUD provide funds under other programs for

elderly housing.

HUD Response: HUD does provide funds under other programs such as

the Public Housing Program, the section 8 Rental Certificate and

Housing Voucher Program and the section 232 Program for elderly

housing.

The other commenter expressed two main concerns regarding civil

rights issues. First, this commenter emphasized that the required

receipt of supportive services may violate an individual's civil

rights. Therefore, this commenter urged HUD to include language

throughout the rule stressing that the available services are voluntary

and are not a condition of admission or continued occupancy. Second,

this commenter objected to the provision of ``diagnosis-specific''

housing, or housing for persons with similar disabilities or who

require a similar set of supportive services, under the section 811

Program. The commenter argued that this type of housing is contrary to

the goal of integration and general occupancy housing, and it fails to

[[Page 11955]]

affirmatively further fair housing goals. The commenter urged HUD to

limit the circumstances under which it will approve such housing.

HUD Response: HUD has been working with consumer advocacy

organizations on revisions to the Section 811 program. One of the major

issues of concern to consumers and organizations advocating on their

behalf is the delinking of housing and supportive services. Although

the acceptance of supportive services has never been required as a

condition of occupancy in a Section 811 project, HUD has discovered

that, in reality, just the opposite occurs. Therefore, in the NOFA for

the FY 1995 Section 811 program, HUD stated that the acceptance of

supportive services shall not be a condition of occupancy. This

statement shall continue to appear in the NOFA for the Section 811

program and it will also be added to the handbook.

In regard to the commenter objecting to the provision of

``diagnosis-specific'' housing or housing for persons with similar

disabilities or who require a similar set of supportive services, HUD's

policy is that a Sponsor may design a supportive services package that

is targeted to persons with similar disabilities such as persons with

physical disabilities, developmental disabilities or chronic mental

illness. With the Secretary's approval a Sponsor may design a

supportive services package targeted at any subset within these three

main categories (e.g., persons with mental retardation). This provision

is in the Section 811 statute. In any Section 811 project, however, the

Sponsor must permit occupancy by any qualified person with a disability

who could benefit from the housing and/or services provided regardless

of the person's disability.

F. The Fiscal Year 1995 Rescissions Act

The Fiscal Year 1995 Rescission Act (Pub. L. 104-19; approved July

27, 1995) provides in relevant part that in allocating the rescission

of $1.115 billion of FY 1995 funds, the Secretary may reduce the

appropriations needs of HUD by waiving any provision of section 202 of

the Housing Act of 1959 and section 811 of the National Affordable

Housing Act that the Secretary determines is not necessary to achieve

the objectives of these programs. On January 30, 1996 (61 FR 3047), HUD

published a notice in the Federal Register advising the public of the

impact of the rescissions on the Section 202 and Section 811 Programs.

As described in the notice, for projects funded in FY 1995, the

Secretary reserved PRAC funds at 75 percent of the estimated project's

total operating expenses to take into consideration estimated tenant

contributions. The Secretary also extended eligibility to low-income

households (in addition to very low-income households), waived the

Federal preferences for admission, and reduced the term of the PRAC to

5 years. The PRAC funds reserved for projects funded in FYs 1993 and

1994 that had not gone to initial closing or had an Addendum to the

Agreement to Enter into the Project Rental Assistance Contract (Forms

HUD-90172-A-CA and HUD-90172-B-CA) alerting the Owner of HUD's right to

reduce the PRAC reserved for the project at a later time were also

reduced by 25 percent. However, the authority in the FY 1995

Rescissions Act to waive statutory provisions is limited to achieving

the $1.115 billion rescission. Therefore, since the effects of the

Rescissions Act are temporary, this final rule does not change the

regulations to reflect the changes described in the January 30, 1996

notice.

II. Regulatory Reinvention

In response to Executive Order 12866 and President Clinton's

memorandum of March 4, 1995 to all Federal departments and agencies on

the subject of regulatory reinvention, HUD has reviewed all its

regulations to determine whether certain regulations can be eliminated,

streamlined, or consolidated with other regulations. As part of this

review, HUD determined that since the substance of the regulations in

24 CFR parts 885, 889, and 890 was very duplicative, these parts could

be consolidated and streamlined into one set of regulations. Therefore,

this final rule creates a new part 891 in title 24 of the Code of

Federal Regulations that will contain all the provisions for HUD's

Supportive Housing Programs. Subpart A of part 891 will contain all the

requirements that are similar in the programs. Subparts B and C of part

891 will contain requirements that are unique to the Section 202 and

Section 811 programs, respectively. Subpart D will contain the project

management provisions for the Section 202 and Section 811 programs.

Finally, subpart E will contain the regulations necessary for the

continued management of projects under the Loans for Housing for the

Elderly or Handicapped Program.

In addition to consolidating similar provisions, this rule also

removes provisions that are redundant of statutes or would more

appropriately appear in program handbooks or annual Notices of Funding

Availability (NOFAs). For example, many of the definitions in the

regulations come directly from section 202 of the Housing Act of 1959

and section 811 of the National Affordable Housing Act. The provisions

for the Elder Cottage Housing Demonstration Program are also redundant

of the statute (section 806 of the Cranston-Gonzalez National

Affordable Housing Act (Pub. L. 101-625; approved November 28, 1990).

This final rule removes the redundant provisions and replaces them, as

appropriate, with references to the statute. This final rule also

removes the sections on application requirements, review and approval

of applications, and the ranking and selection process. This

information will instead appear in the NOFAs published in the Federal

Register for these programs. As a result of this rule's consolidation

and streamlining, HUD will eliminate approximately 92 pages of

unnecessary regulations.

III. Lead-Based Paint

HUD is taking the opportunity, in this final rule, to update

technical aspects of its lead-based paint requirements to conform with

new recommendations of the Centers for Disease Control. For example, in

Secs. 891.155(g) and 891.325, HUD is changing the childhood age of

concern from under 7 years of age to under 6 years. In

Sec. 891.325(b)(2), HUD is changing the definition of ``elevated blood-

lead level (EBL),'' with respect to blood lead levels that require

environmental intervention, from 25 ug/dl (micrograms per deciliter) to

20 ug/dl for a single test or 15-19 ug/dl for two consecutive tests

several months apart. (See U.S. Department of Health and Human

Services, Public Health Service, Centers for Disease Control,

Preventing Lead Poisoning in Young Children, A Statement by the Centers

for Disease Control, October 1991.)

Analysis of the need for additional changes to the lead-based paint

requirements is being deferred until the publication of a separate

proposed rule that would implement sections 1012 and 1013 of the

Residential Lead-Based Paint Hazard Reduction Act of 1992 and revise

the lead-based paint requirements for all HUD programs. This proposed

rule is in its final stages of development.

IV. Other Matters

Environmental Impact

At the time of publication of the interim rules for these programs,

Findings of No Significant Impact with respect to the environment were

made in accordance with HUD regulations at 24 CFR part 50 implementing

section 102(2)(C) of the National Environmental Policy Act of 1969 (42

U.S.C. 4332). Those interim rules are being adopted

[[Page 11956]]

by this final rule without significant change in terms of environmental

impact. Accordingly, the initial Findings of No Significant Impact

remain applicable, and are available for public inspection and copying

between 7:30 a.m. and 5:30 p.m. weekdays at the Office of the Rules

Docket Clerk, 451 Seventh Street S.W., Room 10276, Washington, DC

20410-0500.

Regulatory Flexibility Act

Under the Regulatory Flexibility Act (5 U.S.C. 605(b)), the

undersigned hereby certifies that this final rule does not have a

significant economic impact on a substantial number of small entities.

The program will provide capital advances to private nonprofit

organizations and nonprofit consumer cooperatives to expand the supply

of supportive housing for the elderly and to nonprofit organizations to

expand the supply of supportive housing for persons with disabilities.

Although small entities will participate in the program, the rule will

not have a significant impact on them.

Executive Order 12606, The Family

The General Counsel, as the Designated Official for Executive Order

12606, The Family, has determined that the provisions of this final

rule will not have a significant impact on family formation,

maintenance, or general well-being, and thus is not subject to review

under the Order. No significant change in existing HUD policies or

programs will result from promulgation of this rule, as those policies

or programs relate to family concerns.

Executive Order 12612, Federalism

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

of Executive Order 12611, Federalism, has determined that the policies

contained in this rule will not have substantial direct effects on

States or their political subdivisions, or the relationship between the

Federal government and the States, or on the distribution of power and

responsibilities among the various levels of government. As a result,

the rule is not subject to review under the Order.

List of Subjects

24 CFR Part 885

Aged, Individuals with disabilities, Loan programs--housing and

community development, Low and moderate income housing, Reporting and

recordkeeping requirements.

24 CFR Part 889

Aged, Capital advance programs, Grant programs--housing and

community development, Loan programs--housing and community

development, Low and moderate income housing, Rent subsidies, Reporting

and recordkeeping requirements.

24 CFR Part 890

Capital advance programs, Civil rights, Grant programs--housing and

community development, Individuals with disabilities, Loan programs--

housing and community development, Low and moderate income housing,

Mental health programs, Reporting and recordkeeping requirements.

24 CFR Part 891

Aged, Capital advance programs, Civil rights, Grant programs--

housing and community development, Individuals with disabilities, Loan

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

housing, Mental health programs, Rent subsidies, Reporting and

recordkeeping requirements.

Accordingly, under the authority of 42 U.S.C. 3535(d), for the

reasons stated in the preamble, 24 CFR chapter VIII is amended as set

forth below:

PART 885--[REMOVED]

1. Part 885 is removed.

PART 889--[REMOVED]

2. Part 889 is removed.

PART 890--[REMOVED]

3. Part 890 is removed.

4. A new part 891 is added to read as follows:

PART 891--SUPPORTIVE HOUSING FOR THE ELDERLY AND PERSONS WITH

DISABILITIES

Subpart A--General Program Requirements

Sec.

891.100 Purpose and policy.

891.105 Definitions.

891.110 Allocation of authority.

891.115 Notice of funding availability.

891.120 Project design and cost standards.

891.125 Site and neighborhood standards.

891.130 Prohibited relationships.

891.135 Amount and terms of capital advances.

891.140 Development cost limits.

891.145 Owner deposit (Minimum Capital Investment).

891.150 Operating cost standards.

891.155 Other Federal requirements.

891.160 Audit requirements.

891.165 Duration of capital advance.

891.170 Repayment of capital advance.

891.175 Technical assistance.

Subpart B--Section 202 Supportive Housing for the Elderly

891.200 Applicability.

891.205 Definitions.

891.210 Special project standards.

891.215 Limits on number of units.

891.220 Prohibited facilities.

891.225 Provision of services.

891.230 Selection preferences.

Subpart C--Section 811 Supportive Housing for Persons With Disabilities

891.300 Applicability.

891.305 Definitions.

891.310 Special project standards.

891.315 Prohibited facilities.

891.320 Site and neighborhood standards.

891.325 Lead-based paint requirements.

Subpart D--Project Management

891.400 Responsibilities of Owner.

891.405 Replacement reserve.

891.410 Selection and admission of tenants.

891.415 Obligations of the household or family.

891.420 Overcrowded and underoccupied units.

891.425 Lease requirements.

891.430 Termination of tenancy and modification of lease.

891.435 Security deposits.

891.440 Adjustment of utility allowances.

891.445 Conditions for receipt of vacancy payments for assisted

units.

891.450 HUD review.

Subpart E--Loans for Housing for the Elderly and Handicapped

891.500 Purpose and policy.

891.505 Definitions

891.510 Displacement, relocation, and real property acquisition.

891.515 Audit requirements.

Section 202--Projects for the Elderly or Handicapped--Section 8

Assistance

891.520 Definitions applicable to 202/8 projects.

891.525 Amount and terms of financing.

891.530 Prepayment privileges.

891.535 Requirements for awarding construction contracts.

891.540 Loan disbursement procedures.

891.545 Completion of project, cost certification, and HUD

approvals.

891.550 Selection preferences.

891.555 Smoke detectors.

891.560 HAP contract.

891.565 Term of HAP contract.

891.570 Maximum annual commitment and project account.

891.575 Leasing to eligible families.

891.580 HAP contract administration.

891.585 Default by Borrower.

891.590 Notice upon HAP contract expiration.

891.595 HAP contract extension or renewal.

891.600 Responsibilities of Borrower.

891.605 Replacement reserve.

891.610 Selection and admission of tenants.

891.615 Obligations of the family.

891.620 Overcrowded and underoccupied units.

891.625 Lease requirements.

891.630 Termination of tenancy and modification of lease.

[[Page 11957]]

891.635 Security deposits.

891.640 Adjustment of rents.

891.645 Adjustment of utility allowances.

891.650 Conditions for receipt of vacancy payments for assisted

units.

Section 202--Projects for the Nonelderly Handicapped Families and

Individuals--Section 162 Assistance

891.655 Definitions applicable to 202/162 projects.

891.660 Project standards.

891.665 Project size limitations.

891.670 Cost containment and modest design standards.

891.675 Prohibited facilities.

891.680 Site and neighborhood standards.

891.685 Prohibited relationships.

891.690 Other Federal requirements.

891.695 Operating cost standards.

891.700 Prepayment of loans.

891.705 Project assistance contract.

891.710 Term of PAC.

891.715 Maximum annual commitment and project account.

891.720 Leasing to eligible families.

891.725 PAC administration.

891.730 Default by Borrower.

891.735 Notice upon PAC expiration.

891.740 Responsibilities of Borrower.

891.745 Replacement reserve.

891.750 Selection and admission of tenants.

891.755 Obligations of the family.

891.760 Overcrowded and underoccupied units.

891.765 Lease requirements.

891.770 Termination of tenancy and modification of lease.

891.775 Security deposits.

891.780 Adjustment of rents.

891.785 Adjustment of utility allowances.

891.790 Conditions for receipt of vacancy payments for assisted

units.

Authority: 12 U.S.C. 1701q; 42 U.S.C. 1437f, 3535(d), and 8013.

Subpart A--General Program Requirements

Sec. 891.100 Purpose and policy.

(a) Purpose. The Section 202 Program of Supportive Housing for the

Elderly and the Section 811 Program of Supportive Housing for Persons

with Disabilities provide Federal capital advances and project rental

assistance under section 202 of the Housing Act of 1959 (12 U.S.C.

1701q) (section 202) and section 811 of the National Affordable Housing

Act (42 U.S.C. 8013) (section 811), respectively, for housing projects

serving elderly households and persons with disabilities. Section 202

projects shall provide a range of services that are tailored to the

needs of the residents. Owners of Section 811 projects shall ensure

that the residents are provided with any necessary supportive services

that address their individual needs.

(b) General policy. (1) Supportive Housing for the Elderly. A

capital advance and contract for project rental assistance provided

under this program shall be used for the purposes described in Section

202 (12 U.S.C. 1701q(b)).

(2) Supportive Housing for Persons with Disabilities. A capital

advance and contract for project rental assistance provided under this

program shall be used for the purposes described in Section 811 (42

U.S.C. 8013(b)).

(c) Use of capital advance funds. No part of the funds reserved may

be transferred by the Sponsor, except to the Owner caused to be formed

by the Sponsor. This action must be accomplished prior to issuance of a

commitment for capital advance funding.

(d) Amendments. Subject to the availability of funds, HUD may amend

the amount of an approved capital advance only after initial closing

has occurred.

Sec. 891.105 Definitions.

The following definitions apply, as appropriate, throughout this

part. Other terms with definitions unique to the particular program are

defined in Secs. 891.205, 891.305, and 891.505, as applicable.

Affiliated entities means entities that the field office determines

to be related to each other in such a manner that it is appropriate to

treat them as a single entity. Such relationship shall include any

identity of interest among such entities or their principals and the

use by any otherwise unaffiliated entities of a single Sponsor or of

Sponsors (or of a single Borrower or of Borrowers, as applicable) that

have any identity of interest themselves or their principals.

Annual income is defined in part 813 of this chapter. In the case

of an individual residing in an intermediate care facility for the

developmentally disabled that is assisted under title XIX of the Social

Security Act and this part, the annual income of the individual shall

exclude protected personal income as provided under that Act. For the

purposes of determining the total tenant payment, the income of such

individuals shall be imputed to be the amount that the household would

receive if assisted under title XVI of the Social Security Act.

Household (eligible household) means an elderly or disabled

household (as defined in Secs. 891.205 or 891.305, respectively), as

applicable, that meets the project occupancy requirements approved by

HUD and, if the household occupies an assisted unit, meets the very

low-income requirements described in Sec. 813.102 of this chapter, as

modified by the definition of annual income in this section.

Housing and related facilities means rental housing structures

constructed, rehabilitated, or acquired as permanent residences for use

by elderly or disabled households, as applicable. The term includes

necessary community space. Except for intermediate care facilities for

individuals with developmental disabilities, this term does not include

nursing homes, hospitals, intermediate care facilities, or transitional

care facilities. For the Loans for the Elderly and Persons with

Disabilities Program, see Sec. 891.505.

Low-income families shall have the same meaning provided in section

3(b)(2) of the United States Housing Act of 1937 (42 U.S.C. 1437a).

National Sponsor means a Sponsor that has one or more Section 202

or one or more Section 811 project(s) under reservation, construction,

or management in two or more different HUD geographical regions.

Operating costs means HUD-approved expenses related to the

provision of housing and includes:

(1) Administrative expenses, including salary and management

expenses related to the provision of shelter and, in the case of the

Section 202 Program, the coordination of services;

(2) Maintenance expenses, including routine and minor repairs and

groundskeeping;

(3) Security expenses;

(4) Utilities expenses, including gas, oil, electricity, water,

sewer, trash removal, and extermination services. The term ``operating

costs'' excludes telephone services for households;

(5) Taxes and insurance;

(6) Allowances for reserves; and

(7) Allowances for services (in the Section 202 Program only).

Project rental assistance contract (PRAC) means the contract

entered into by the Owner and HUD setting forth the rights and duties

of the parties with respect to the project and the payments under the

PRAC.

Project rental assistance payment means the payment made by HUD to

the Owner for assisted units as provided in the PRAC. The payment is

the difference between the total tenant payment and the HUD-approved

per unit operating expenses except for expenses related to items not

eligible under design and cost provisions. An additional payment is

made to a household occupying an assisted unit when the utility

allowance is greater than the total tenant payment. A project rental

assistance payment, known as a ``vacancy payment,'' may be made to the

Owner when an assisted unit is vacant, in accordance with the terms of

the PRAC.

[[Page 11958]]

Rehabilitation means the improvement of the condition of a property

from deteriorated or substandard to good condition. Rehabilitation may

vary in degree from the gutting and extensive reconstruction to the

cure of substantial accumulation of deferred maintenance. Cosmetic

improvements alone do not qualify as rehabilitation under this

definition. Rehabilitation may also include renovation, alteration, or

remodeling for the conversion or adaptation of structurally sound

property to the design and condition required for use under this part,

or the repair or replacement of major building systems or components in

danger of failure. Improvement of an existing structure must require 15

percent or more of the estimated development cost to rehabilitate the

project to a useful life of 55 years.

Replacement Reserve Account means a project account into which

specified funds are deposited. Such funds may be used only with the

approval of the Secretary for repairs, replacement, and capital

improvements to the project.

Section 202 means section 202 of the Housing Act of 1959 (12 U.S.C.

1701q), as amended, or the Supportive Housing for the Elderly Program

authorized by that section.

Section 811 means section 811 of the National Affordable Housing

Act (42 U.S.C. 8013), as amended, or the Supportive Housing for Persons

with Disabilities Program authorized by that section.

Start-up expenses mean necessary costs (to plan a Section 202 or

Section 811 project, as applicable) incurred by the Sponsor or Owner

prior to initial closing.

Tenant payment to Owner equals total tenant payment less utility

allowance, if any.

Total tenant payment means the monthly amount defined in, and

determined in accordance with part 813 of this chapter.

Utility allowance is defined in part 813 of this chapter and is

determined or approved by HUD.

Very low-income families shall have the same meaning provided in

section 3(b)(2) of the United States Housing Act of 1937 (42 U.S.C.

1437a).

Sec. 891.110 Allocation of authority.

In accordance with 24 CFR part 791, the Assistant Secretary will

separately allocate the amounts available for capital advances for the

development of housing for elderly households and for disabled

households, less amounts set aside by Congress for specific types of

projects, and for amendments of fund reservations made in prior years,

for technical assistance, and for other contracted services.

Sec. 891.115 Notice of funding availability.

Following an allocation of authority under Sec. 891.110, HUD shall

publish a separate Notice of Funding Availability (NOFA) for the

Section 202 Program of Supportive Housing for the Elderly and for the

Section 811 Program of Supportive Housing for Persons with Disabilities

in the Federal Register. The NOFAs will contain specific information on

how and when to apply for the available capital advance authority, the

contents of the application, and the selection process.

Sec. 891.120 Project design and cost standards.

In addition to the special project standards described in

Secs. 891.210 and 891.310, as applicable, the following standards

apply:

(a) Property standards. Projects under this part must comply with

HUD Minimum Property Standards, unless otherwise indicated in this

part.

(b) Accessibility requirements. Projects under this part must

comply with the Uniform Federal Accessibility Standards (See 24 CFR

40.7 for availability), section 504 of the Rehabilitation Act of 1973

and HUD's implementing regulations (24 CFR part 8), and for new

construction multifamily housing projects, the design and construction

requirements of the Fair Housing Act and HUD's implementing regulations

at 24 CFR part 100. For the Section 811 Program of Supportive Housing

for Persons with Disabilities, see additional accessibility

requirements in Sec. 891.310(b).

(c) Restrictions on amenities. Projects must be modest in design.

Amenities not eligible for HUD funding include individual unit

balconies and decks, atriums, bowling alleys, swimming pools, saunas,

jacuzzis, and dishwashers, trash compactors, and washers and dryers in

individual units in supportive housing for the elderly or in

independent living facilities for persons with disabilities. Sponsors

may include certain excess amenities but they must pay for them from

sources other than the section 202 or 811 capital advance. They must

also pay for the continuing operating costs associated with any excess

amenities from sources other than the Section 202 or 811 project rental

assistance contract.

(d) Smoke detectors. After October 30, 1992, each dwelling unit

must include at least one battery-operated or hard-wired smoke

detector, in proper working condition, on each level of the unit.

Sec. 891.125 Site and neighborhood standards.

All sites must meet the following site and neighborhood

requirements:

(a) The site must be adequate in size, exposure, and contour to

accommodate the number and type of units proposed, and adequate

utilities (water, sewer, gas, and electricity) and streets must be

available to service the site.

(b) The site and neighborhood must be suitable from the standpoint

of facilitating and furthering full compliance with the applicable

provisions of Title VI of the Civil Rights Act of 1964, the Fair

Housing Act, Executive Order 11063 (27 FR 11527, 3 CFR, 1958-1963

Comp., p. 652); as amended by Executive Order 12259, (46 FR 1253, 3

CFR, 1980 Comp., p. 307)); section 504 of the Rehabilitation Act of

1973, and implementing HUD regulations.

(c) New construction sites must meet the following site and

neighborhood requirements:

(1) The site must not be located in an area of minority

concentration (or minority elderly concentration under the Section 202

Program) except as permitted under paragraph (c)(2) of this section,

and must not be located in a racially mixed area if the project will

cause a significant increase in the proportion of minority to

nonminority residents (or minority elderly to nonminority elderly

residents, under the Section 202 Program) in the area.

(2) A project may be located in an area of minority concentration

(or minority elderly concentration, under the Section 202 Program) only

if:

(i) Sufficient, comparable opportunities exist for housing for

minority elderly households or minority disabled households, as

applicable (or minority families, for projects funded under

Secs. 891.655 through 891.790), in the income range to be served by the

proposed project, outside areas of minority concentration (see

paragraph (c)(3) of this section for further guidance on this

criterion); or

(ii) The project is necessary to meet overriding housing needs that

cannot be met in that housing market area (see paragraph (c)(4) of this

section for further guidance on this criterion).

(3) (i) Sufficient does not require that in every locality there be

an equal number of assisted units within and outside of areas of

minority concentration. Rather, application of this standard should

produce a reasonable distribution of assisted units each year which

over a period of several

[[Page 11959]]

years will approach an appropriate balance of housing opportunities

within and outside areas of minority concentration. An appropriate

balance in any jurisdiction must be determined in light of local

conditions affecting the range of housing choices available for very

low-income minority elderly or disabled households, as applicable (or

low-income minority families, for projects funded under Secs. 891.655

through 891.790), and in relation to the racial mix of the locality's

population.

(ii) Units may be considered to be comparable opportunities if they

have the same household type (elderly or disabled, as applicable) and

tenure type (owner/renter); require approximately the same total tenant

payment; serve the same income group; are located in the same housing

market; and are in standard condition.

(iii) Application of this sufficient, comparable opportunities

standard involves assessing the overall impact of HUD-assisted housing

on the availability of housing choices for very low-income minority

elderly or disabled households, as applicable (or low-income minority

families, for projects funded under Secs. 891.655 through 891.790), in

and outside areas of minority concentration, and must take into account

the extent to which the following factors are present, along with any

other factor relevant to housing choice:

(A) A significant number of assisted housing units are available

outside areas of minority concentration.

(B) There is significant integration of assisted housing projects

constructed or rehabilitated in the past ten years, relative to the

racial mix of the eligible population.

(C) There are racially integrated neighborhoods in the locality.

(D) Programs are operated by the locality to assist minority

elderly or disabled households, as applicable (or minority families,

for projects funded under Secs. 891.655 through 891.790), that wish to

find housing outside areas of minority concentration.

(E) Minority elderly or disabled households, as applicable (or

minority families, for projects funded under Secs. 891.655 through

891.790), have benefitted from local activities (e.g., acquisition and

write-down of sites, tax relief programs for homeowners, acquisitions

of units for use as assisted housing units) undertaken to expand choice

for minority households (or families) outside of areas of minority

concentration.

(F) A significant proportion of minority elderly or disabled

households, as applicable (or minority households, for projects funded

under Secs. 891.655 through 891.790), have been successful in finding

units in nonminority areas under the Section 8 Certificate and Housing

Voucher programs.

(G) Comparable housing opportunities have been made available

outside areas of minority concentration through other programs.

(4) Application of the overriding housing needs criterion, for

example, permits approval of sites that are an integral part of an

overall local strategy for the preservation or restoration of the

immediate neighborhood and of sites in a neighborhood experiencing

significant private investment that is demonstrably changing the

economic character of the area (a ``revitalizing area''). An overriding

housing need, however, may not serve as the basis for determining that

a site is acceptable if the only reason the need cannot otherwise be

feasibly met is that discrimination on the basis of race, color, creed,

sex, or national origin renders sites outside areas of minority

concentration unavailable, or if the use of this standard in recent

years has had the effect of circumventing the obligation to provide

housing choice.

(d) The neighborhood must not be one that is seriously detrimental

to family life or in which substandard dwellings or other undesirable

conditions predominate, unless there is actively in progress a

concerted program to remedy the undesirable conditions.

(e) The housing must be accessible to social, recreational,

educational, commercial, and health facilities and services, and other

municipal facilities and services that are at least equivalent to those

typically found in neighborhoods consisting largely of unassisted,

standard housing of similar market rents.

(f) For the Section 811 Program of Supportive Housing for Persons

with Disabilities, the additional site and neighborhood requirements in

Sec. 891.320 apply.

Sec. 891.130 Prohibited relationships.

This section shall apply to capital advances under the Section 202

Program and the Section 811 Program, as well as to loans financed under

Secs. 891.655 through 891.790.

(a) Conflicts of interest. (1) Officers and Board members of either

the Sponsor or the Owner (or Borrower, as applicable) may not have any

financial interest in any contract with the Owner or in any firm which

has a contract with the Owner. This restriction applies so long as the

individual is serving on the Board and for a period of three years

following resignation or final closing, whichever occurs later.

(2) The following contracts between the Owner (or Borrower, as

applicable) and the Sponsor or the Sponsor's nonprofit affiliate will

not constitute a conflict of interest if no more than two persons

salaried by the Sponsor or management affiliate serve as nonvoting

directors on the Owner's board of directors:

(i) Management contracts (including associated management fees);

(ii) Supportive services contracts (including service fees) under

the Supportive Housing for the Elderly Program; and

(iii) Developer (consultant) contracts.

(b) Identity of interest. An identity of interest between the

Sponsor or Owner (or Borrower, as applicable) and any development team

member or between development team members is prohibited until two

years after final closing.

Sec. 891.135 Amount and terms of capital advances.

(a) Amount of capital advances. The amount of capital advances

approved shall be the amount stated in the notification of fund

reservation, including any adjustment required by HUD before the final

closing. The amount of the capital advance may not exceed the

appropriate development cost limit.

(b) Estimated development cost. The amount of the capital advance

may not exceed the total estimated development cost of the project (as

determined by HUD), less the incremental development cost associated

with excess amenities and design features to be paid for by the Sponsor

under Sec. 891.120.

Sec. 891.140 Development cost limits.

(a) HUD shall use the development cost limits, established by

Notice in the Federal Register and adjusted by locality, to calculate

the fund reservation amount of the capital advance to be made available

to individual Owners. Owners that incur actual development costs that

are less than the amount of the initial fund reservation shall be

entitled to retain 50 percent of the savings in a Replacement Reserve

Account. Such percentage shall be increased to 75 percent for Owners

that add energy efficiency features.

(b) The Replacement Reserve Account established under paragraph (a)

of this section may only be used for repairs, replacements, and capital

improvements to the project.

[[Page 11960]]

Sec. 891.145 Owner deposit (Minimum Capital Investment).

As a Minimum Capital Investment, the Owner must deposit in a

special escrow account one-half of one percent (0.5%) of the HUD-

approved capital advance, not to exceed $10,000, to assure the Owner's

commitment to the housing. Under the Section 202 Program, if an Owner

has a National Sponsor or a National Co-Sponsor, the Minimum Capital

Investment shall be one-half of one percent (0.5%) of the HUD-approved

capital advance, not to exceed $25,000.

Sec. 891.150 Operating cost standards.

HUD shall establish operating cost standards based on the average

annual operating cost of comparable housing for the elderly or for

persons with disabilities in each field office, and shall adjust the

standard annually based on appropriate indices of increases in housing

costs such as the Consumer Price Index. The operating cost standards

shall be developed based on the number of units. However, under the

Section 811 Program and for projects funded under Secs. 891.655 through

891.790, the operating cost standard for group homes shall be based on

the number of residents. HUD may adjust the operating cost standard

applicable to an approved project to reflect such factors as

differences in costs based on location within the field office

jurisdiction. The operating cost standard will be used to determine the

amount of the project assistance initially reserved for a project.

Sec. 891.155 Other Federal requirements.

In addition to the requirements set forth in 24 CFR part 5, the

following requirements in this Sec. 891.155 apply to the Section 202

and Section 811 Programs, as well as projects funded under

Secs. 891.655 through 891.790. Other requirements unique to a

particular program are described in subparts B and C of this part, as

applicable.

(a) Affirmative fair housing marketing. (1) The affirmative fair

housing marketing requirements of 24 CFR part 200, subpart M and the

implementing regulations at 24 CFR part 108; and

(2) The fair housing advertising and poster guidelines at 24 CFR

parts 109 and 110.

(b) Environmental. The National Environmental Policy Act of 1969,

HUD's implementing regulations at 24 CFR part 50, including the related

authorities described in 24 CFR 50.4. For the purposes of Executive

Order No. 11988, Floodplain Management (42 FR 26951, 3 CFR, 1977 Comp.,

p. 117); as amended by Executive Order 12148 (44 FR 43239, 3 CFR, 1979

Comp., p. 412)), and implementing regulations in 24 CFR part 55, all

applications for intermediate care facilities for persons with

developmental disabilities shall be treated as critical actions

requiring consideration of the 500-year floodplain.

(c) Flood insurance. The Flood Disaster Protection Act of 1973 (42

U.S.C. 4001).

(d) Labor standards. (1) All laborers and mechanics (other than

volunteers under the conditions set out in 24 CFR part 70) employed by

contractors and subcontractors in the construction (including

rehabilitation) of housing with 12 or more units assisted under this

part shall be paid wages at rates not less than those prevailing in the

locality, as determined by the Secretary of Labor in accordance with

the Davis-Bacon Act (40 U.S.C. 276a-276a-5). A group home for persons

with disabilities is not covered by the labor standards.

(2) Contracts involving employment of laborers and mechanics shall

be subject to the provisions of the Contract Work Hours and Safety

Standards Act (40 U.S.C. 327-333).

(3) Sponsors, Owners, contractors, and subcontractors must comply

with all related rules, regulations, and requirements.

(e) Displacement, relocation, and real property acquisition. (1)

Minimizing displacement. Consistent with the other goals and objectives

of this part, Sponsors and Owners (or Borrowers, if applicable) shall

assure that they have taken all reasonable steps to minimize the

displacement of persons (families, individuals, businesses, nonprofit

organizations, and farms) as a result of a project assisted under this

part.

(2) Relocation assistance for displaced persons. A displaced person

must be provided relocation assistance at the levels described in, and

in accordance with the requirements of, the Uniform Relocation

Assistance and Real Property Acquisition Policies Act of 1970, as

amended (URA) (42 U.S.C. 4201-4655), as implemented by 49 CFR part 24.

(3) Real property acquisition requirements. The acquisition of real

property for a project is subject to the URA and the requirements

described in 49 CFR part 24, subpart B.

(f) Intergovernmental review. The requirements for

intergovernmental review in Executive Order No. 12372 (47 FR 30959, 3

CFR, 1982 Comp., p. 197; as amended by Executive Order No. 12416 (48 FR

15587, 3 CFR, 1983 Comp., p. 186)) and the implementing regulations at

24 CFR part 52 are applicable to this program.

(g) Lead-based paint. (1) The requirements of the Lead-Based Paint

Poisoning Prevention Act (42 U.S.C. 4821-4846) and implementing

regulations at 24 CFR part 35 apply to any dwellings (except zero-

bedroom dwelling units) in section 811 housing that were:

(i) Constructed or substantially rehabilitated before 1978; and

(ii) In which any child under 6 years of age resides or is expected

to reside.

(2) Under the Section 811 Program and projects funded under

Secs. 891.655 through 891.790, the lead-based paint requirements

described in Sec. 891.325 also apply.

Sec. 891.160 Audit requirements.

Nonprofits receiving assistance under this part are subject to the

audit requirements in 24 CFR part 45.

Sec. 891.165 Duration of capital advance.

The duration of the fund reservation for the capital advance is 18

months from the date of issuance with limited exceptions up to 24

months, as approved by HUD on a case-by-case basis.

Sec. 891.170 Repayment of capital advance.

(a) Interest prohibition and repayment. A capital advance provided

under this part shall bear no interest and its repayment shall not be

required so long as the housing project remains available for very low-

income elderly families or persons with disabilities, as applicable, in

accordance with this part. The capital advance may not be repaid to

extinguish the requirements of this part. To ensure its interest in the

capital advance, HUD shall require a note and mortgage, use agreement,

capital advance agreement and regulatory agreement from the Owner in a

form to be prescribed by HUD.

(b) The transfer of physical and financial assets of any project

under this part is prohibited, unless HUD gives prior written approval.

Approval for transfer will not be granted unless HUD determines that

the transfer to a private nonprofit corporation or consumer cooperative

(under the Section 202 Program) or a nonprofit organization (under the

Section 811 Program) is part of a transaction that will ensure the

continued operation of the project for not less than 40 years (from the

date of original closing) in a manner that will provide rental housing

for very low-income elderly persons or persons with disabilities, as

applicable, on terms at least as advantageous to existing and future

tenants as the terms required by the original capital advance.

[[Page 11961]]

Sec. 891.175 Technical assistance.

For purposes of the Section 202 Program and the Section 811

Program, the Secretary shall make available appropriate technical

assistance to assure that applicants having limited resources,

particularly minority applicants, are able to participate more fully in

the programs.

Subpart B--Section 202 Supportive Housing for the Elderly

Sec. 891.200 Applicability.

The requirements set forth in this subpart B apply to the Section

202 Program of Supportive Housing for the Elderly only, and to

applicants, Sponsors, and Owners under that program.

Sec. 891.205 Definitions.

As used in this part in reference to the Section 202 Program, and

in addition to the applicable definitions in Sec. 891.105:

Acquisition means the purchase of (or otherwise obtaining title to)

existing housing and related facilities from the Resolution Trust

Corporation.

Activities of daily living (ADL) means eating, dressing, bathing,

grooming, and household management activities, as further described

below:

(1) Eating--May need assistance with cooking, preparing, or serving

food, but must be able to feed self;

(2) Bathing--May need assistance in getting in and out of the

shower or tub, but must be able to wash self;

(3) Grooming--May need assistance in washing hair, but must be able

to take care of personal appearance;

(4) Dressing--Must be able to dress self, but may need occasional

assistance; and

(5) Home management activities--May need assistance in doing

housework, grocery shopping, laundry, or getting to and from activities

such as going to the doctor and shopping, but must be mobile. The

mobility requirement does not exclude persons in wheelchairs or those

requiring mobility devices.

Congregate space (hereinafter referred to as community space) shall

have the meaning provided in section 202 (12 U.S.C. 1701q(h)(1)). The

term ``community spaces'' excludes offices, halls, mechanical rooms,

laundry rooms, parking areas, dwelling units, and lobbies. Community

space does not include commercial areas.

Elderly person means a household composed of one or more persons at

least one of whom is 62 years of age or more at the time of initial

occupancy.

Frail elderly means an elderly person who is unable to perform at

least three activities of daily living as defined in this section.

Owners may establish additional eligibility requirements acceptable to

HUD based on the standards in local supportive services programs.

Owner means a single-purpose private nonprofit organization that

may be established by the Sponsor that will receive a capital advance

and project rental assistance payments to develop and operate

supportive housing for the elderly as its legal owner. Owner does not

mean a public body or the instrumentality of any public body. The

purposes of the Owner must include the promotion of the welfare of the

elderly. The Owner may not be controlled by or under the direction of

persons or firms seeking to derive profit or gain therefrom.

Private nonprofit organization means any incorporated private

institution or foundation:

(1) That has tax-exempt status under section 501(c)(3) or (c)(4) of

the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.);

(2) No part of the net earnings of which inures to the benefit of

any member, founder, contributor, or individual;

(3) That has a governing board:

(i) The membership of which is selected in a manner to assure that

there is significant representation of the views of the community in

which such housing is located; and

(ii) That is responsible for the operation of the housing assisted

under this part; and

(4) That is approved by HUD as to administrative and financial

responsibility.

Services expenses means those costs needed to provide the necessary

services for the elderly tenants, which may include, but are not

limited to: health related activities, continuing education, welfare,

informational, recreational, homemaking, meal and nutritional services,

counseling, and referral services as well as transportation as

necessary to facilitate access to these services.

Sponsor means any private nonprofit entity, including a consumer

cooperative:

(1) No part of the net earnings of which inures to the benefit of

any private shareholder, member, founder, contributor, or individual;

(2) That is not controlled by, or under the direction of, persons

or firms seeking to derive profit or gain therefrom; and

(3) That is approved by the Secretary as to administrative and

financial capacity and responsibility. The term ``Sponsor'' does not

mean a public body or the instrumentality of a public body.

Sec. 891.210 Special project standards.

In addition to the applicable project standards in Sec. 891.120,

resident units in Section 202 projects are limited to efficiencies or

one-bedroom units. If a resident manager is proposed for a project, up

to two bedrooms could be provided for the resident manager unit.

Sec. 891.215 Limits on number of units.

(a) HUD may establish, through publication of a notice in the

Federal Register, limits on the number of units that can be applied for

by a Sponsor or Co-sponsor in a single geographical region and/or

nationwide.

(b) Affiliated entities that submit separate applications shall be

deemed to be a single entity for purposes of these limits.

(c) HUD may also establish, through publication of a notice in the

Federal Register, the minimum size of a single project.

Sec. 891.220 Prohibited facilities.

Projects may not include facilities for infirmaries, nursing

stations, or spaces for overnight care.

Sec. 891.225 Provision of services.

(a) In carrying out the provisions of this part, HUD shall ensure

that housing assisted under this part provides services as described in

section 202 (12 U.S.C. 1701q(g)(1)).

(b) (1) HUD shall ensure that Owners have the managerial capacity

to perform the coordination of services described in 12 U.S.C.

1701q(g)(2).

(2) Any cost associated with this paragraph shall be an eligible

cost under the contract for project rental assistance. Any cost

associated with the employment of a service coordinator shall also be

an eligible cost, except if the project is receiving congregate housing

services assistance under section 802 of the National Affordable

Housing Act. The HUD-approved service costs will be an eligible expense

to be paid from project rental assistance, not to exceed $15 per unit

per month. The balance of service costs shall be provided from other

sources, which may include co-payment by the tenant receiving the

service. Such co-payment shall not be included in the Total Tenant

Payment.

Sec. 891.230 Selection preferences.

For purposes of the Section 202 Program, the selection preferences

in 24 CFR part 5, subpart D apply.

[[Page 11962]]

Subpart C--Section 811 Supportive Housing for Persons With

Disabilities

Sec. 891.300 Applicability.

The requirements set forth in this subpart C apply to the Section

811 Program of Supportive Housing for Persons with Disabilities only,

and to applicants, Sponsors, and Owners under that program.

Sec. 891.305 Definitions.

As used in this part in reference to the Section 811 Program, and

in addition to the applicable definitions in Sec. 891.105:

Acquisition means the purchase of (or otherwise obtaining title to)

existing structures to be used as housing for persons with

disabilities, including housing and related facilities from the

Resolution Trust Corporation. Capital advances are not available in

connection with facilities owned and operated by the Sponsor as housing

for persons with disabilities.

Congregate space (hereinafter referred to as community space) means

space for multipurpose rooms, common areas, and other space necessary

for the provision of supportive services. Community space does not

include commercial areas.

Disabled household means a household composed of:

(1) One or more persons at least one of whom is an adult (18 years

or older) who has a disability;

(2) Two or more persons with disabilities living together, or one

or more such persons living with another person who is determined by

HUD, based upon a certification from an appropriate professional (e.g.,

a rehabilitation counselor, social worker, or licensed physician) to be

important to their care or well being; or

(3) The surviving member or members of any household described in

paragraph (1) of this definition who were living in a unit assisted

under this part, with the deceased member of the household at the time

of his or her death.

Nonprofit organization means any institution or foundation:

(1) That has tax-exempt status under section 501(c)(3) of the

Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.);

(2) No part of the net earnings of which inures to the benefit of

any Board member, founder, contributor, or individual;

(3) That has a governing board;

(i) The membership of which is selected in a manner to assure that

there is significant representation of the views of the community in

which such housing is located (including persons with disabilities);

and

(ii) That is responsible for the operation of the housing assisted

under this part; and

(4) That is approved by HUD as to financial responsibility.

Owner means a single-purpose nonprofit organization established by

the Sponsor that will receive a capital advance and project rental

assistance payments to develop and operate, as its legal owner,

supportive housing for persons with disabilities under this part. The

purposes of the Owner must include the promotion of the welfare of

persons with disabilities. The Owner may not be controlled by or under

the direction of persons or firms seeking to derive profit or gain

therefrom.

Person with disabilities shall have the meaning provided in Section

811 (42 U.S.C. 8013(k)(2)). The term ``person with disabilities'' shall

also include the following:

(1) A person who has a developmental disability, as defined in

section 102(7) of the Developmental Disabilities Assistance and Bill of

Rights Act (42 U.S.C. 6001(5)), i.e., if he or she has a severe chronic

disability which:

(i) Is attributable to a mental or physical impairment or

combination of mental and physical impairments;

(ii) Is manifested before the person attains age twenty-two;

(iii) Is likely to continue indefinitely;

(iv) Results in substantial functional limitation in three or more

of the following areas of major life activity:

(A) Self-care;

(B) Receptive and expressive language;

(C) Learning;

(D) Mobility;

(E) Self-direction;

(F) Capacity for independent living;

(G) Economic self-sufficiency; and

(v) Reflects the person's need for a combination and sequence of

special, interdisciplinary, or generic care, treatment, or other

services which are of lifelong or extended duration and are

individually planned and coordinated.

(2) A person with a chronic mental illness, i.e., a severe and

persistent mental or emotional impairment that seriously limits his or

her ability to live independently, and which impairment could be

improved by more suitable housing conditions.

(3) A person infected with the human acquired immunodeficiency

virus (HIV) and a person who suffers from alcoholism or drug addiction,

provided they meet the definition of ``person with disabilities'' in

Section 811 (42 U.S.C. 8013(k)(2)). A person whose sole impairment is a

diagnosis of HIV positive or alcoholism or drug addiction (i.e., does

not meet the qualifying criteria in section 811 (42 U.S.C. 8013(k)(2))

will not be eligible for occupancy in a section 811 project.

Sponsor means any nonprofit entity:

(1) That has tax-exempt status under section 501(c)(3) of the

Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.);

(2) No part of the net earnings of which inures to the benefit of

any private shareholder, member, founder, contributor or individual;

(3) That is not controlled by or under the direction of persons or

firms seeking to derive profit or gain therefrom;

(4) That has a governing board the membership of which is selected

in a manner to assure that there is significant representation of the

views of persons with disabilities; and

(5) That is approved by HUD as to administrative and financial

capacity and responsibility.

Sec. 891.310 Special project standards.

In addition to the applicable project standards in Sec. 891.120,

the following special standards apply to the Section 811 Program and to

projects funded under Secs. 891.655 through 891.790:

(a) Minimum group home standards. Each group home must provide a

minimum of 290 square feet of prorated space for each resident,

including a minimum area of 80 square feet for each resident in a

shared bedroom (with no more than two residents occupying a shared

bedroom) and a minimum area of 100 square feet for a single occupant

bedroom; at least one full bathroom for every four residents; space for

recreation at indoor and outdoor locations on the project site; and

sufficient storage for each resident in the bedroom and other storage

space necessary for the operation of the home. If the project involves

acquisition (with or without rehabilitation), the structure must at

least be in compliance with applicable State requirements. In the

absence of such requirements, the above standards shall apply.

(b) Additional accessibility requirements. In addition to the

accessibility requirements in Sec. 891.120(b), the following

requirements apply to the Section 811 Program and to projects funded

under Secs. 891.655 through 891.790:

(1) All entrances, common areas, units to be occupied by resident

staff, and amenities must be readily accessible to and usable by

persons with disabilities.

(2) In projects for chronically mentally ill individuals, a minimum

of 10 percent of all dwelling units in an independent living facility

(or 10 percent of all bedrooms and bathrooms in a group home, but at

least one of each such space), must be designed to be

[[Page 11963]]

accessible or adaptable for persons with disabilities.

(3) In projects for developmentally disabled or physically disabled

persons, all dwelling units in an independent living facility (or all

bedrooms and bathrooms in a group home) must be designed to be

accessible or adaptable for persons with physical disabilities. A

project involving acquisition and/or rehabilitation may provide a

lesser number if:

(i) The cost of providing full accessibility makes the project

financially infeasible;

(ii) Fewer than one-half of the intended occupants have mobility

impairments; and

(iii) The project complies with the requirements of 24 CFR 8.23.

(4) For the purposes of paragraph (b) of this section, the

following definitions apply:

(i) Accessible describes a site, building, facility, or portion

thereof that complies with the Uniform Federal Accessibility Standards

and that can be approached, entered, and used by physically disabled

people;

(ii) Adaptability means the ability of certain building spaces and

elements, such as kitchen counters, sinks, and grab bars, to be added

or altered so as to accommodate the needs of either disabled or

nondisabled persons, or to accommodate the needs of either disabled or

nondisabled persons, or to accommodate the needs of persons with

different types or degrees of disability.

Sec. 891.315 Prohibited facilities.

This section shall apply to capital advances under the Section 811

Program, as well as loans financed under subpart E of this part.

Project facilities may not include infirmaries, nursing stations,

spaces dedicated to the delivery of medical treatment or physical

therapy, padded rooms, or space for respite care or sheltered

workshops, even if paid for from sources other than the HUD capital

advance or loan. Except for office space used by the Owner (or

Borrower, if applicable) exclusively for the administration of the

project, project facilities may not include office space.

Sec. 891.320 Site and neighborhood standards.

In addition to the requirements in Sec. 891.125 and Sec. 891.680,

if applicable, the following site and neighborhood requirements apply

to the Section 811 Program:

(a) Travel time and cost via public transportation or private

automobile, from the neighborhood to places of employment providing a

range of jobs for very low-income workers (or low-income workers, as

applicable), must not be excessive.

(b) Projects should be located in neighborhoods where other family

housing is located. Projects should not be located adjacent to the

following facilities, or in areas where such facilities are

concentrated: schools or day-care centers for persons with

disabilities, workshops, medical facilities, or other housing primarily

serving persons with disabilities. Not more than one group home may be

located on any one site and no such home may be located on a site

contiguous to another site containing such a home.

Sec. 891.325 Lead-based paint requirements.

In addition to the other Federal requirements described in

Sec. 891.155, the following lead-based paint requirements apply to the

Section 811 Program and to projects funded under Secs. 891.655 through

891.790:

(a) The requirements of the Lead-Based Paint Poisoning Prevention

Act (42 U.S.C. 4821-4846) and implementing regulations at 24 CFR part

35 (except as superseded in paragraph (b) of this section) apply to the

dwellings (except zero-bedroom dwelling units or units that are

certified by a qualified inspector to be free of lead-based paint or

the lead-based paint hazards have been eliminated) in housing assisted

under this subpart and to projects funded under Secs. 891.655 through

891.790 that:

(1) Were constructed before 1978; and

(2) In which any child under 6 years of age resides or is expected

to reside.

(b) (1) This paragraph (b) implements the provisions of the Lead-

Based Paint Poisoning Prevention Act, 42 U.S.C. 4821 et seq., by

establishing procedures to eliminate, as far as practicable, the

hazards of lead-based paint poisoning with respect to covered

structures for which assistance is provided under the Section 811

Program and under Secs. 891.655 through 891.790. This paragraph (b) is

promulgated under 24 CFR 35.24(b)(4) and supersedes, with respect to

these programs, the requirements prescribed in subpart C of 24 CFR part

35.

(2) The following definitions apply to this section:

Applicable surface means all intact and nonintact painted interior

and exterior surfaces of a residential structure.

Chewable surface means all protruding painted surfaces up to five

feet from the floor or ground, that are readily accessible to children

under 6 years of age, e.g., protruding corners, windowsills and frames,

doors and frames, and other protruding woodwork.

Defective paint surfaces means a surface on which the paint is

cracking, scaling, chipping, peeling, or loose.

Elevated blood lead level or EBL means excessive absorption of

lead: that is, a confirmed concentration of lead in whole blood of 20

ug/dl (micrograms of lead per deciliter) for a single test or of 15-19

ug/dl in two consecutive tests 3-4 months apart.

Lead-based paint means a paint surface, whether or not defective,

identified as having a lead content greater than or equal to 1 mg/cm2

(milligram per square centimeter) or .5 percent by weight or 5000 parts

per million (PPM).

(3) In the case of a structure constructed before 1978, the Sponsor

must inspect the structure for defective paint surfaces before it

submits site information. If defective paint surfaces are found,

treatment in accordance with paragraph (a)(5) of this section is

required. Correction of defective surfaces found during the initial

inspection must be completed before initial occupancy of the project.

Correction of defective paint conditions discovered at periodic

inspection must be completed within 30 calendar days of their

discovery. When weather conditions prevent completion of repainting of

exterior surfaces within the 30-day period, repainting may be delayed,

but covering or removal of the defective paint must be completed within

the prescribed period.

(4) In the case of a structure constructed before 1978, if the

Owner (or Borrower, if applicable) is presented with test results that

indicate that a child under the age of 6 years occupies the structure

and has an elevated blood lead level (EBL), the Owner (or Borrower, if

applicable) must cause the unit to be tested for lead-based paint on

chewable surfaces. Testing must be conducted by a State or local health

or housing agency, by an inspector certified or regulated by a State or

local health or housing agency, or an organization recognized by HUD.

Lead content shall be tested by using an X-ray fluorescence analysis

(XRF) or by laboratory analysis of paint samples. Where lead-based

paint on chewable surfaces is identified, covering or removal of the

paint surface in accordance with paragraph (a)(5) of this section is

required and treatment shall be completed within the time limits in

paragraph (b)(3) of this section.

(5) Treatment of defective paint surfaces and chewable surfaces

must consist of covering or removal of the

[[Page 11964]]

paint in accordance with the following requirements:

(i) A defective paint surface shall be treated if the total area of

defective paint on a component is:

(A) More than 10 square feet on an exterior wall;

(B) More than 2 square feet on an interior or exterior component

with a large surface area, excluding exterior walls and including, but

not limited to, ceilings, floors, doors, and interior walls; or

(C) More than 10 percent of the total surface area on an interior

or exterior component with a small surface area, including, but not

limited to, window sills, baseboards and trim.

(ii) Acceptable methods of treatment are: removal by wet scraping,

wet sanding, chemical stripping on or off site, replacing painted

components, scraping with infra-red or coil type heat gun with

temperatures below 1100 degrees, HEPA vacuum sanding, HEPA vacuum

needle gun, contained hydroblasting or high pressure wash with HEPA

vacuum, and abrasive sandblasting with HEPA vacuum. Surfaces must be

covered with durable materials with joints and edges sealed and caulked

as needed to prevent the escape of lead contaminated dust.

(iii) Prohibited methods of removal are: open flame burning or

torching; machine sanding or grinding without a HEPA exhaust;

uncontained hydroblasting or high pressure wash; and dry scraping

except around electrical outlets or except when treating defective

paint spots no more than two square feet in any one interior room or

space (hallway, pantry, etc.) or totalling no more than twenty square

feet on exterior surfaces.

(iv) During exterior treatment, soil and playground equipment must

be protected from contamination.

(v) All treatment procedures must be concluded with a thorough

cleaning of all surfaces in the room or area of treatment to remove

fine dust particles. Cleanup must be accomplished by wet washing

surfaces with a lead solubilizing detergent such as trisodium phosphate

or an equivalent solution.

(vi) Waste and debris must be disposed of in accordance with all

applicable Federal, State and local laws.

(6) In lieu of the procedures set forth in the preceding clause,

the Owner (or Borrower, if applicable) may, at its discretion, abate

all interior and exterior chewable surfaces in accordance with the

methods set out paragraph (a)(5) of this section.

(7) The Owner (or Borrower, if applicable) must take appropriate

action to protect tenants from hazards associated with abatement

procedures.

(8) The Owner (or Borrower, if applicable) must keep a copy of each

inspection report for at least three years. If a unit requires testing,

or treatment of chewable surfaces based on the testing, the Owner must

keep the test results, and, if applicable, the certification of

treatment indefinitely. The records must indicate which chewable

surfaces in the units have been tested or treated. If records establish

that certain chewable surfaces were tested, or tested and treated, in

accordance with the standards prescribed in this section, these

surfaces do not have to be tested or treated at any subsequent time.

Subpart D--Project Management

Sec. 891.400 Responsibilities of Owner.

(a) Marketing. (1) The Owner must commence and continue diligent

marketing activities not later than 90 days before the anticipated date

of availability of the first unit or occupancy of the group home.

Market activities shall include the provision of notices of the

availability of housing under the program to operators of temporary

housing for the homeless in the same housing market.

(2) Marketing must be done in accordance with a HUD-approved

affirmative fair housing marketing plan and all Federal, State or local

fair housing and equal opportunity requirements. The purpose of the

plan and requirements is to achieve a condition in which eligible

households of similar income levels in the same housing market area

have a like range of housing choices available to them regardless of

discriminatory considerations such as their race, color, creed,

religion, familial status, disability, sex or national origin.

(3) At the time of PRAC execution, the Owner must submit to HUD a

list of leased and unleased assisted units (or in the case of a group

home, leased and unleased residential spaces) with a justification for

the unleased units or residential spaces, in order to qualify for

vacancy payments for the unleased units or residential spaces.

(b) Management and maintenance. The Owner is responsible for all

management functions. These functions include selection and admission

of tenants, required reexaminations of incomes for households occupying

assisted units or residential spaces, collection of tenant payments,

termination of tenancy and eviction, and all repair and maintenance

functions (including ordinary and extraordinary maintenance and

replacement of capital items). All functions must be performed in

compliance with equal opportunity requirements.

(c) Contracting for services. (1) With HUD approval, the Owner may

contract with a private or public entity for performance of the

services or duties required in paragraphs (a) and (b) of this section.

However, such an arrangement does not relieve the Owner of

responsibility for these services and duties. All such contracts are

subject to the restrictions governing prohibited contractual

relationships described in Sec. 891.130. (These prohibitions do not

extend to management contracts entered into by the Owner with the

Sponsor or its nonprofit affiliate.)

(2) Consistent with the objectives of Executive Order No. 11625 (36

FR 19967, 3 CFR, 1971-1975 Comp., p. 616; as amended by Executive Order

No. 12007 (42 FR 42839, 3 CFR, 1977 Comp., p. 139)); Executive Order

No. 12432 (48 FR 32551, 3 CFR, 1983 Comp., p. 198); and Executive Order

No. 12138 (44 FR 29637, 3 CFR, 1979 Comp., p. 393; as amended by

Executive Order No. 12608 (52 FR 34617, 3 CFR, 1987 Comp., p. 245)),

the Owner will promote awareness and participation of minority and

women's business enterprises in contracting and procurement activities.

(d) Submission of financial and operating statements. The Owner

must submit to HUD:

(1) Within 60 days after the end of each fiscal year of project

operations, financial statements for the project audited by an

independent public accountant and in the form required by HUD; and

(2) Other statements regarding project operation, financial

conditions and occupancy as HUD may require to administer the PRAC and

to monitor project operations.

(e) Use of project funds. The Owner shall maintain a separate

interest bearing project fund account in a depository or depositories

which are members of the Federal Deposit Insurance Corporation or

National Credit Union Share Insurance Fund and shall deposit all tenant

payments, charges, income and revenues arising from project operation

or ownership to this account. All project funds are to be deposited in

Federally insured accounts. All balances shall be fully insured at all

times, to the maximum extent possible. Project funds must be used for

the operation of the project (including required insurance coverage),

and to make required deposits to the replacement reserve under

Sec. 891.405, in accordance with HUD-approved budget.

[[Page 11965]]

Any remaining project funds in the project funds account (including

earned interest) following the expiration of the fiscal year shall be

deposited in a Federally-insured residual receipts account within 60

days following the end of the fiscal year. Withdrawals from this

account may be made only for project purposes and with the approval of

HUD. If there are funds remaining in the residual receipts account when

the mortgage is satisfied, such funds shall be returned to HUD.

(f) Reports. The Owner shall submit such reports as HUD may

prescribe to demonstrate compliance with applicable civil rights and

equal opportunity requirements. See Sec. 891.410(a).

(Approved by the Office of Management and Budget under control

number 2502-0470)

Sec. 891.405 Replacement reserve.

(a) Establishment of reserve. The Owner shall establish and

maintain a replacement reserve to aid in funding extraordinary

maintenance and repair and replacement of capital items.

(b) Deposits to reserve. The Owner shall make monthly deposits to

the replacement reserve in an amount determined by HUD.

(c) Level of reserve. The reserve must be built up to and

maintained at a level determined by HUD to be sufficient to meet

projected requirements. Should the reserve reach that level, the amount

of the deposit to the reserve may be reduced with the approval of HUD.

(d) Administration of reserve. Replacement reserve funds must be

deposited with HUD or in a Federally-insured depository in an interest-

bearing account(s) whose balances(s) are fully insured at all times.

All earnings including interest on the reserve must be added to the

reserve. Funds may be drawn from the reserve and used only in

accordance with HUD guidelines and with the approval of, or as directed

by, HUD.

Sec. 891.410 Selection and admission of tenants.

(a) Written procedures. The Owner shall adopt written tenant

selection procedures that ensure nondiscrimination in the selection of

tenants and that are consistent with the purpose of improving housing

opportunities for very low-income elderly persons and persons with

disabilities (as applicable); and reasonably related to program

eligibility and an applicant's ability to perform the obligations of

the lease. Owners shall promptly inform in writing any rejected

applicant of the grounds for any rejection. Additionally, Owners shall

maintain a written, chronological waiting list showing the name, race,

gender, ethnicity, and date of each person applying for the program.

(b) Application for admission. The Owner must accept applications

for admission to the project in the form prescribed by HUD, and (under

the Section 202 Program only) is obligated to confirm all information

provided by applicant families on the application. Applicant households

applying for assisted units (or residential spaces in a group home)

must complete a certification of eligibility as part of the application

for admission. Applicant households must meet the disclosure and

verification requirements for Social Security Numbers, as provided by

24 CFR part 5, subpart B. Applicant families must sign and submit

consent forms for the obtaining of wage and claim information from

State Wage Information Collection Agencies, as provided by 24 CFR part

5, subpart B. Both the Owner and the applicant household must complete

and sign the application for admission. On request, the Owner must

furnish copies of all applications for admission to HUD.

(c) Determination of eligibility and selection of tenants. (1) The

Owner is responsible for determining whether applicants are eligible

for admission and for the selection of households. To be eligible for

admission, an applicant must be an elderly person or a person with

disabilities, as applicable (as defined in Secs. 891.205 and 891.305,

respectively); must meet the disclosure and verification requirements

for Social Security Numbers, as provided by 24 CFR part 5, subpart B;

must sign and submit consent forms for the obtaining of wage and claim

information from State Wage Information Collection Agencies, as

provided by 24 CFR part 5, subpart B; and must be a very low-income

family, as defined in Sec. 891.105.

(2) Under the Section 811 Program:

(i) In order to be eligible for admission, the applicant must also

meet any project occupancy requirements approved by HUD.

(ii) Owners shall make selections in a nondiscriminatory manner

without regard to considerations such as race, religion, color, sex,

national origin, familial status, or disability. An Owner may, with the

approval of the Secretary, limit occupancy within housing developed

under this part 891 to persons with disabilities who have similar

disabilities and require a similar set of supportive services in a

supportive housing environment. However, the Owner must permit

occupancy by any qualified person with a disability who could benefit

from the housing and/or services provided regardless of the person's

disability.

(d) Unit assignment. If the Owner determines that the household is

eligible and is otherwise acceptable and units (or residential spaces

in a group home) are available, the Owner will assign the household a

unit or residential space in a group home. If the household will occupy

an assisted unit, the Owner will assign the household a unit of the

appropriate size in accordance with HUD's general occupancy guidelines.

If no suitable unit (or residential space in a group home) is

available, the Owner will place the household on a waiting list for the

project and notify the household when a suitable unit or residential

space may become available. If the waiting list is so long that the

applicant would not be likely to be admitted for the next 12 months,

the Owner may advise the applicant that no additional applications for

admission are being considered for that reason.

(e) Ineligibility determination. If the Owner determines that an

applicant is ineligible for admission or the Owner is not selecting the

applicant for other reasons, the Owner will promptly notify the

applicant in writing of the determination, the reasons for the

determination, and the applicant's right to request a meeting to review

the rejection, in accordance with HUD requirements. The review, if

requested, may not be conducted by a member of the Owner's staff who

made the initial decision to reject the applicant. The applicant may

also exercise other rights (e.g., rights granted under Federal, State

or local civil rights laws) if the applicant believes he or she is

being discriminated against on a prohibited basis.

(f) Records. Records on applicants and approved eligible

households, which provide racial, ethnic, gender and place of previous

residency data required by HUD, must be retained for three years. See

Sec. 891.410(a).

(g) Reexamination of household family income and composition. (1)

Regular reexaminations. The Owner must reexamine the income and

composition of the household at least every 12 months. Upon

verification of the information, the Owner must make appropriate

adjustments in the total tenant payment in accordance with part 813 of

this chapter, as modified by Sec. 891.105, and must determine whether

the household's unit size is still appropriate. The Owner must adjust

tenant payment and the project rental assistance payment, and must

carry out any unit transfer in accordance with HUD standards. At the

time of reexamination under paragraph (g)(1) of

[[Page 11966]]

this section, the Owner must require the household to meet the

disclosure and verification requirements for Social Security Numbers,

as provided by 24 CFR part 5, subpart B. For requirements regarding the

signing and submitting of consent forms by families for obtaining of

wage and claim information from State Wage Information Collection

Agencies, see 24 CFR part 5, subpart B.

(2) Interim reexaminations. The household must comply with the

provisions in its lease regarding interim reporting of changes in

income. If the Owner receives information concerning a change in the

household's income or other circumstances between regularly scheduled

reexaminations, the Owner must consult with the household and make any

adjustments determined to be appropriate. See 24 CFR part 5, subpart B

for the requirements for the disclosure and verification of Social

Security Number at interim reexaminations involving new household

members. For requirements regarding the signing and submitting of

consent forms by families for the obtaining of wage and claim

information from State Wage Information Collection Agencies, see 24 CFR

part 5, subpart B. Any change in the household's income or other

circumstances that result in an adjustment in the total tenant payment,

tenant payment, and project rental assistance payment must be verified.

(3) Continuation of project rental assistance payment. (i) A

household shall remain eligible for project rental assistance payment

until the total tenant payment equals or exceeds the gross rent (or a

pro rata share of the gross rent in a group home). The termination of

subsidy eligibility will not affect the household's other rights under

its lease. Project rental assistance payment may be resumed if, as a

result of changes in income, rent or other relevant circumstances

during the term of the PRAC, the household meets the income eligibility

requirements of 24 CFR part 813 (as modified in Sec. 891.105) and

project rental assistance is available for the unit or residential

space under the terms of the PRAC. The household will not be required

to establish its eligibility for admission to the project under the

remaining requirements of paragraph (c) of this section.

(ii) A household's eligibility for project rental assistance

payment may be terminated in accordance with HUD requirements for such

reasons as failure to submit requested verification information,

including information related to disclosure and verification of Social

Security Numbers, as provided by 24 CFR part 5, subpart B or failure to

sign and submit consent forms for the obtaining of wage and claim

information from State Wage Information Collection Agencies (as

provided by 24 CFR part 5, subpart B).

(h) Selection preferences. Under the Section 202 Program, the

selection preferences in 24 CFR part 5, subpart D apply.

Sec. 891.415 Obligations of the household or family.

This section shall apply to capital advances under the Section 202

Program and the Section 811 Program, as well as loans financed under

subpart E of this part.

(a) Requirements. The household (or family, as applicable) shall:

(1) Pay amounts due under the lease directly to the Owner (or

Borrower, as applicable);

(2) Supply such certification, release of information, consent,

completed forms or documentation as the Owner (or Borrower, as

applicable) or HUD determines necessary, including information and

documentation relating to the disclosure and verification of Social

Security Numbers, as provided by 24 CFR part 5, subpart B, and the

signing and submission of consent forms for the obtaining of wage and

claim information from State Wage Information Collection Agencies, as

provided by 24 CFR part 5, subpart B;

(3) Allow the Owner (or Borrower, as applicable) to inspect the

dwelling unit or residential space at reasonable times and after

reasonable notice;

(4) Notify the Owner (or Borrower, as applicable) before vacating

the dwelling unit or residential space; and

(5) Use the dwelling unit or residential space solely for residence

by the household (or family, as applicable) and as the household's (or

family's) principal place of residence.

(b) Prohibitions. The household (or family, as applicable) shall

not:

(1) Assign the lease or transfer the unit or residential space; or

(2) Occupy, or receive assistance for the occupancy of, a unit or

residential space governed under this part 891 while occupying, or

receiving assistance for the occupancy of, another unit assisted under

any Federal housing assistance program, including any section 8

program.

(Approved by the Office of Management and Budget under control

number 2502-0470)

Sec. 891.420 Overcrowded and underoccupied units.

If the Owner determines that because of change in household size,

an assisted unit is smaller than appropriate for the eligible household

to which it is leased, or that the assisted unit is larger than

appropriate, project rental assistance payment with respect to the unit

will not be reduced or terminated until the eligible household has been

relocated to an appropriate alternate unit. If possible, the Owner

will, as promptly as possible, offer the household an appropriate

alternate unit. The Owner may receive vacancy payments for the vacated

unit if the Owner complies with the requirements of Sec. 891.445.

Sec. 891.425 Lease requirements.

This section shall apply to capital advances under the Section 202

Program and the Section 811 Program, as well as loans financed under

subpart E of this part.

(a) Term of lease. The term of the lease may not be less than one

year. Unless the lease has been terminated by appropriate action, upon

expiration of the lease term, the household and Owner (or family and

Borrower, as applicable) may execute a new lease for a term not less

than one year, or may take no action. If no action is taken, the lease

will automatically be renewed for successive terms of one month.

(b) Termination by the household (or family, as applicable). All

leases may contain a provision that permits the household (or family)

to terminate the lease upon 30 days advance notice. A lease for a term

that exceeds one year must contain such provision.

(c) Form. The Owner (or Borrower, as applicable) shall use the

lease form prescribed by HUD. In addition to required provisions of the

lease form, the Owner (or Borrower) may include a provision in the

lease permitting the Owner (or Borrower) to enter the leased premises

at any time without advance notice when there is reasonable cause to

believe that an emergency exists or that health or safety of a family

member is endangered.

Sec. 891.430 Termination of tenancy and modification of lease.

The provisions of part 247 of this title apply to all decisions by

an Owner to terminate the tenancy or modify the lease of a household

residing in a unit (or residential space in a group home).

Sec. 891.435 Security deposits.

This section shall apply to capital advances under the Section 202

Program and the Section 811 Program, as well as loans financed under

subpart E of this part. For loans financed under subpart E of this

part, the requirements in Sec. 891.635 also apply.

(a) Collection of security deposits. At the time of the initial

execution of the lease, the Owner (or Borrower, as applicable) will

require each household

[[Page 11967]]

(or family, as applicable) occupying an assisted unit or residential

space in a group home to pay a security deposit in an amount equal to

one month's tenant payment or $50, whichever is greater. The household

(or family) is expected to pay the security deposit from its own

resources and other available public or private resources. The Owner

(or Borrower) may collect the security deposit on an installment basis.

(b) Security deposit provisions applicable to units. (1)

Administration of security deposit. The Owner (or Borrower, as

applicable) must place the security deposits in a segregated interest-

bearing account. The amount of the segregated, interest-bearing account

maintained by the Owner (or Borrower) must at all times equal the total

amount collected from the households (or families, as applicable) then

in occupancy plus any accrued interest and less allowable

administrative cost adjustments. The Owner (or Borrower) must comply

with any applicable State and local laws concerning interest payments

on security deposits.

(2) Household (or family, as applicable) notification requirement.

In order to be considered for the refund of the security deposit, a

household (or family) must provide the Owner (or Borrower, as

applicable) with a forwarding address or arrange to pick up the refund.

(3) Use of security deposit. The Owner (or Borrower, as

applicable), subject to State and local law and the requirements of

paragraphs (b)(1) and (b)(3) of this section, may use the household's

(or family's, as applicable) security deposit balance as reimbursement

for any unpaid amounts that the household (or family) owes under the

lease. Within 30 days (or shorter time if required by State or local

law) after receiving notification under paragraph (b)(2) of this

section, the Owner (or Borrower) must:

(i) Refund to a household (or family) that does not owe any amount

under the lease the full amount of the household's (or family's)

security deposit balance;

(ii) Provide to a household (or family) owing amounts under the

lease a list itemizing each amount, along with a statement of the

household's (or family's) rights under State and local law. If the

amount that the Owner (or Borrower) claims is owed by the household (or

family) is less than the amount of the household's (or family's)

security deposit balance, the Owner (or Borrower) must refund the

excess balance to the household (or family). If the Owner (or Borrower)

fails to provide the list, the household (or family) will be entitled

to the refund of the full amount of the household's (or family's)

security deposit balance.

(4) Disagreements. If a disagreement arises concerning

reimbursement of the security deposit, the household (or family, if

applicable) will have the right to present objections to the Owner (or

Borrower, if applicable) in an informal meeting. The Owner (or

Borrower) must keep a record of any disagreements and meetings in a

tenant file for inspection by HUD. The procedures of this paragraph do

not preclude the household (or family) from exercising its rights under

State or local law.

(5) Decedent's interest in security deposit. Upon the death of a

member of a household (or family, as applicable), the decedent's

interest, if any, in the security deposit will be governed by State or

local law.

(c) Reimbursement by HUD for assisted units. If the household's (or

family's, if applicable) security deposit balance is insufficient to

reimburse the Owner (or Borrower, if applicable) for any amount that

the household (or family) owes under the lease for an assisted unit or

residential space, and the Owner (or Borrower) has provided the

household (or family) with the list required by paragraph (b)(3)(ii) of

this section, the Owner (or Borrower) may claim reimbursement from HUD

for an amount not to exceed the lesser of:

(1) The amount owed the Owner (or Borrower); or

(2) One month's per unit operating cost (or contract rent, if

applicable), minus the amount of the household's (or family's) security

deposit balance. Any reimbursement under this section will be applied

first toward any unpaid tenant payment (or rent, if applicable) due

under the lease. No reimbursement may be claimed for any unpaid tenant

payment (or rent) for the period after termination of the tenancy. The

Owner (or Borrower) may be eligible for vacancy payments following a

vacancy in accordance with the requirements of Sec. 891.445 (or

Secs. 891.650 or 891.790, as applicable).

Sec. 891.440 Adjustment of utility allowances.

This section shall apply to projects funded under the Section 202

Program, to independent living complexes funded under Section 811

Program, and to projects financed with loans under subpart E of this

part. The Owner (or Borrower, as applicable) must submit an analysis of

any utility allowances applicable. Such data as changes in utility

rates and other facts affecting utility consumption should be provided

as part of this analysis to permit appropriate adjustments in the

utility allowances for assisted units. In addition, when utility rate

changes would result in a cumulative increase of 10 percent or more in

the most recently approved utility allowances, the Owner (or Borrower)

must advise HUD and request approval of new utility allowances.

Whenever a utility allowance for an assisted unit is adjusted, the

Owner (or Borrower) will promptly notify affected households (or

families, as applicable) and make a corresponding adjustment of the

tenant payment (or rent, as applicable) and the amount of the project

rental assistance payment (or housing or project assistance payment, as

applicable).

(Approved by the Office of Management and Budget under control

number 2502-0470)

Sec. 891.445 Conditions for receipt of vacancy payments for assisted

units.

(a) General. Vacancy payments under the PRAC will not be made

unless the conditions for receipt of these project rental assistance

payments set forth in this section are fulfilled.

(b) Vacancies during rent-up. For each unit (or residential space

in a group home) that is not leased as of the effective date of the

PRAC, the Owner is entitled to vacancy payments in the amount of 50

percent of the per unit operating cost (or pro rata share of the group

home operating cost) for the first 60 days of vacancy, if the Owner:

(1) Conducted marketing in accordance with Sec. 891.400(a) and

otherwise complied with Sec. 891.400;

(2) Has taken and continues to take all feasible actions to fill

the vacancy; and

(3) Has not rejected any eligible applicant except for good cause

acceptable to HUD.

(c) Vacancies after rent-up. If an eligible household vacates an

assisted unit (or residential space in a group home) the Owner is

entitled to vacancy payments in the amount of 50 percent of the

approved per unit operating cost (or pro rata share of the group home

operating cost) for the first 60 days of vacancy if the Owner:

(1) Certifies that it did not cause the vacancy by violating the

lease, the PRAC, or any applicable law;

(2) Notified HUD of the vacancy or prospective vacancy and the

reasons for the vacancy upon learning of the vacancy or prospective

vacancy;

(3) Has fulfilled and continues to fulfill the requirements

specified in Sec. 891.400(a) (2) and (3) and Sec. 891.445(b) (2) and

(3); and

(4) For any vacancy resulting from the Owner's eviction of an

eligible household, certifies that it has complied with Sec. 891.430.

(d) Prohibition of double compensation for vacancies. If the

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Owner collects payments for vacancies from other sources (tenant

payment, security deposits, payments under Sec. 891.435(c), or

governmental payments under other programs), the Owner shall not be

entitled to collect vacancy payments to the extent these collections

from other sources plus the vacancy payment exceed the approved per

unit operating cost.

Sec. 891.450 HUD review.

HUD shall conduct periodic on-site management reviews of the

Owner's compliance with the requirements of this part.

Subpart E--Loans for Housing for the Elderly and Handicapped

Sec. 891.500 Purpose and policy.

(a) Purpose. The program under subpart E of this part provides

direct Federal loans under section 202 of the Housing Act of 1959 (42

U.S.C. 1701q) for housing projects serving elderly or handicapped

families and individuals. The housing projects shall provide the

necessary services for the occupants which may include, but are not

limited to: Health, continuing education, welfare, informational,

recreational, homemaking, meal and nutritional services, counseling,

and referral services, as well as transportation where necessary to

facilitate access to these services.

(b) General policy. A loan made under subpart E of this part shall

be used to finance the construction or the substantial rehabilitation

of projects for elderly or handicapped families, or for the acquisition

with or without moderate rehabilitation of existing housing and related

facilities for group homes for nonelderly handicapped individuals.

(c) Applicability. Subpart E of this part applies to all fund

reservations made before October 1, 1990, except for loans not

initially closed that were converted to capital advances. Specifically,

Sec. 891.520 through 891.650 of subpart E apply to projects for elderly

or handicapped families that received reservations under section 202 of

the Housing Act of 1959 (12 U.S.C. 1701q) and housing assistance under

section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437 et

seq). Sections 891.655 through 891.790 of subpart E apply to projects

for nonelderly handicapped families receiving reservations under

section 202 and project assistance payments under section 202(h) of the

Housing Act of 1959.

Sec. 891.505 Definitions.

For the purposes of this subpart E:

Act means section 202 of the Housing Act of 1959, as amended (12

U.S.C. 1701q).

Borrower means a private nonprofit corporation or a nonprofit

consumer cooperative that may be established by the Sponsor, which will

obtain a Section 202 loan and execute a mortgage in connection

therewith as the legal owner of the project. ``Borrower'' does not mean

a public body or the instrumentality of any public body. The purposes

of the Borrower must include the promotion of the welfare of elderly

and/or handicapped families. No part of the net earnings of the

Borrower may inure to the benefit of any private shareholder,

contributor, or individual, and the Borrower may not be controlled by

or under the direction of persons or firms seeking to derive profit or

gain therefrom. Because of the nonprofit nature of the Section 202

program, no officer or director, or trustee, member, stockholder or

authorized representative of the Borrower is permitted to have any

financial interest in any contract in connection with the rendition of

services, the provision of goods or supplies, project management,

procurement of furnishings and equipment, construction of the project,

procurement of the site or other matters whatsoever.

Elderly family means:

(1) Families of two or more persons the head of which (or his or

her spouse) is 62 years of age or older;

(2) The surviving member or members of any family described in

paragraph (1) of this definition living in a unit assisted under

subpart E of this part with the deceased member of the family at the

time of his or her death;

(3) A single person who is 62 years of age or older; or

(4) Two or more elderly persons living together, or one or more

such persons living with another person who is determined by HUD, based

upon a licensed physician's certificate provided by the family, to be

essential to their care or well being.

Handicapped family means:

(1) Families of two or more persons the head of which (or his or

her spouse) is handicapped;

(2) The surviving member or members of any family described in

paragraph (1) of this definition living in a unit assisted under

subpart E of this part with the deceased member of the family at the

time of his or her death;

(3) A single handicapped person over the age of 18; or

(4) Two or more handicapped persons living together, or one or more

such persons living with another person who is determined by HUD, based

upon a licensed physician's certificate provided by the family, to be

essential to their care or well being.

Handicapped person or individual means:

(1) Any adult having a physical, mental, or emotional impairment

that is expected to be of long-continued and indefinite duration,

substantially impedes his or her ability to live independently, and is

of a nature that such ability could be improved by more suitable

housing conditions.

(2) A person with a developmental disability, as defined in section

102(7) of the Developmental Disabilities Assistance and Bill of Rights

Act (42 U.S.C. 6001(5), i.e., a person with a severe chronic disability

that:

(i) Is attributable to a mental or physical impairment or

combination of mental and physical impairments;

(ii) Is manifested before the person attains age twenty-two;

(iii) Is likely to continue indefinitely;

(iv) Results in substantial functional limitation in three or more

of the following areas of major life activity:

(A) Self-care;

(B) Receptive and expressive language;

(C) Learning;

(D) Mobility;

(E) Self-direction;

(F) Capacity for independent living;

(G) Economic self-sufficiency; and

(v) Reflects the person's need for a combination and sequence of

special, interdisciplinary, or generic care, treatment, or other

services that are of lifelong or extended duration and are individually

planned and coordinated.

(3) A person with a chronic mental illness, i.e., if he or she has

a severe and persistent mental or emotional impairment that seriously

limits his or her ability to live independently, and whose impairment

could be improved by more suitable housing conditions.

(4) Persons infected with the human acquired immunodeficiency virus

(HIV) who are disabled as a result of infection with the HIV are

eligible for occupancy in section 202 projects designed for the

physically disabled, developmentally disabled, or chronically mentally

ill depending upon the nature of the person's disability. A person

whose sole impairment is alcoholism or drug addition (i.e., who does

not have a developmental disability, chronic mental illness, or

physical disability that is the disabling condition required for

eligibility in a particular project) will not be considered to be

disabled for the purposes of the section 202 program.

Housing and related facilities means rental or cooperative housing

structures constructed or substantially

[[Page 11969]]

rehabilitated as permanent residences for use by elderly or handicapped

families, or acquired with or without moderate rehabilitation for use

by nonelderly handicapped families as group homes. The term includes

structures suitable for use by families residing in the project or in

the area, such as cafeterias or dining halls, community rooms, or

buildings, or other essential service facilities. In the case of

acquisition with or without moderate rehabilitation, at least three

years must have elapsed from the later of the date of completion of the

project or the beginning of occupancy to the date of the application

for a Section 202 fund reservation. Except for intermediate care

facilities for the mentally retarded and individuals with related

conditions, this term does not include nursing homes, hospitals,

intermediate care facilities, or transitional care facilities.

Nonelderly handicapped family means a handicapped family in which

the head of the family (and spouse, if any) is less than 62 years of

age at the time of the family's initial occupancy of a project.

Section 8 Program means the housing assistance payments program

that implements section 8 of the United States Housing Act of 1937 (42

U.S.C. 1437f note).

Sec. 891.510 Displacement, relocation, and real property acquisition.

(a) Minimizing displacement. Consistent with the other goals and

objectives of subpart E of this part, Sponsors and Borrowers shall

assure that they have taken all reasonable steps to minimize the

displacement of persons (families, individuals, businesses, nonprofit

organizations, and farms) as a result of a project assisted under

subpart E of this part.

(b) Relocation assistance for displaced persons. A displaced person

(defined in paragraph (f) of this section) must be provided relocation

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

requirements of the Uniform Relocation Assistance and Real Property

Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 4201-

4655), as implemented by 49 CFR part 24. A displaced person shall be

advised of his or her rights under the Fair Housing Act (42 U.S.C.

3601-3619). If the comparable replacement dwellings are located in

areas of minority concentration, minority persons also must be given,

if possible, referrals to suitable, decent, safe, and sanitary

replacement dwellings not located in such areas.

(c) Real property acquisition requirements. The acquisition of real

property for a project is subject to the URA and the requirements

described in 49 CFR part 24, subpart B.

(d) Appeals. A person who disagrees with the Sponsor's/Borrower's

determination concerning whether the person qualifies as a ``displaced

person,'' or with the amount of relocation assistance for which the

person is eligible, may file a written appeal of that determination

with the Sponsor/Borrower. A low-income person who is dissatisfied with

the Sponsor's/Borrower's determination on his or her appeal may submit

a written request for review of that determination to the HUD field

office.

(e) Responsibility of Sponsor/Borrower. The Sponsor/Borrower shall

certify that it will comply (i.e., provide assurance of compliance, as

required by 49 CFR part 24) with the URA, the regulations at 49 CFR

part 24, and the requirements of this section, and shall ensure such

compliance notwithstanding any third party's contractual obligation to

comply with these provisions. The Sponsor/Borrower shall maintain

records in sufficient detail to demonstrate compliance with the

provisions of this section. The Sponsor/Borrower shall maintain data on

the race, ethnic, gender, and handicap status of displaced persons.

(f) Definition of a displaced person. (1) For purposes of this

section, the term ``displaced person'' means a person (family,

individual, business, nonprofit organization, or farm) that moves from

real property, or moves personal property from real property,

permanently, as a direct result of acquisition, rehabilitation, or

demolition for a project assisted under this part. This includes any

permanent, involuntary move for an assisted project including any

permanent move from the real property that is made:

(i) After notice by the Sponsor/Borrower to move permanently from

the property if the move occurs on or after:

(A) The date of the submission of an application to HUD that is

later approved, if the Sponsor has control of an appropriate site; or

(B) The date that the Sponsor obtains control of an approvable

site, if such control is obtained after the submission of an

application to HUD:

(ii) Before the date described in paragraph (f)(1)(i) of this

section, if the Sponsor, Borrower or HUD determines that the

displacement resulted directly from acquisition, rehabilitation, or

demolition for the project;

(iii) By a tenant-occupant of a dwelling unit, if any one of the

following three situations occurs;

(A) The tenant moves after execution of the Agreement between the

Sponsor/Borrower and HUD, and the move occurs before the tenant is

provided written notice offering him or her the opportunity to lease

and occupy a suitable, decent, safe, and sanitary dwelling in the same

building/complex upon completion of the project under reasonable terms

and conditions. Such reasonable terms and conditions include a monthly

rent and estimated average monthly utility costs that do not exceed the

greater of:

(1) The tenant's monthly rent and estimated average monthly utility

costs before the Agreement; or

(2) The total tenant payment, as determined under 24 CFR 813.107,

if the tenant is low-income, or 30 percent of gross household income,

if the tenant is not low-income; or

(B) The tenant is required to relocate temporarily, does not return

to the building/complex, and either:

(1) The tenant is not offered payment for all reasonable out-of-

pocket expenses incurred in connection with the temporary relocation;

or

(2) Other conditions of the temporary relocation are not

reasonable; or

(C) The tenant is required to move to another dwelling in the same

building/complex but is not offered reimbursement for all reasonable

out-of-pocket expenses incurred in connection with the move, or other

conditions of the move are not reasonable.

(2) Notwithstanding the provisions of paragraph (f)(1) of this

section, however, a person does not qualify as a ``displaced person''

(and is not eligible for relocation assistance at URA levels), if:

(i) The person has been evicted for cause based upon a serious or

repeated violation of the terms and conditions of the lease or

occupancy agreement, violation of applicable Federal, State, or local

law, or other good cause, and HUD determines that the eviction was not

undertaken for the purpose of evading the obligation to provide

relocation assistance.

(ii) The person moved into the property after the submission of the

application and, before signing a lease and commencing occupancy, was

provided written notice of the project, its possible impact on the

person (e.g., displacement, temporary relocation or a rent increase)

and the fact that he or she will not qualify as a displaced person as a

result of the project;

(iii) The person is ineligible under 49 CFR 24.2(g)(2); or

(iv) HUD determines that the person was not displaced as a direct

result of

[[Page 11970]]

acquisition, rehabilitation, or demolition for the project;

(3) The Sponsor/Borrower may request, at any time, a HUD

determination of whether a displacement is or would be covered by this

section.

Sec. 891.515 Audit requirements.

Nonprofits receiving assistance under this part are subject to the

audit requirements in 24 CFR part 45.

Section 202 Projects for the Elderly or Handicapped--Section 8

Assistance

Sec. 891.520 Definitions applicable to 202/8 projects.

The fol

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