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

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A96-6312

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** March 22, 1996
- **Citation:** 61 FR 11948

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A96-6312. Public record. Not legal advice.