Office of the Assistant Secretary for Community Planning and Development; Community Development Block Grant Program; Streamlining Final Rule

SUMMARY: This final rule amends HUD's regulations for the Community

Development Block Grant (CDBG) Program. In an effort to comply with the

President's regulatory reform initiatives, this rule will streamline

the CDBG regulations by eliminating provisions that are redundant of

statutes or are otherwise unnecessary. This final rule will make the

CDBG regulations clearer and more concise.

EFFECTIVE DATE: April 19, 1996.

FOR FURTHER INFORMATION CONTACT: Deirdre Maguire-Zinni, Director,

Entitlement Communities Division, Room 7282, Department of Housing and

Urban Development, 451 Seventh Street, SW., Washington, DC 20410,

telephone number (202) 708-1577. (This telephone number is not toll-

free). Hearing- or speech-impaired persons may access this number via

TDD by calling the Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: On March 4, 1995, President Clinton issued a

memorandum to all Federal departments and agencies regarding regulatory

reinvention. In response to this memorandum, the Department of Housing

and Urban Development conducted a page-by-page review of its

regulations to determine which can be eliminated, consolidated, or

otherwise improved. While the Community Development Block Grant

regulations serve as important program guidance, HUD has determined

that the regulations can be improved and streamlined by eliminating

unnecessary provisions.

Several provisions in the CDBG regulations repeat statutory

language from the Housing and Community Development Act of 1974, as

amended (42 U.S.C. 5301 et seq.) (the Act), and other statutes. It is

unnecessary to maintain statutory requirements in the Code of Federal

Regulations (CFR), since those requirements are otherwise fully

accessible and binding. Furthermore, if regulations contain statutory

language, HUD must amend the regulations whenever Congress amends the

statute. Therefore, this final rule will remove repetitious statutory

language and replace it with a citation to the specific statutory

section for easy reference.

Other provisions in the CDBG regulations apply to more than one

program, and therefore HUD repeated these provisions in different

subparts within part 570. This repetition is unnecessary, and updating

these scattered provisions is cumbersome and often creates confusion.

Therefore, this final rule will consolidate these duplicative

provisions.

Some provisions in the CDBG regulations are obsolete. For instance,

Congress has not appropriated funds for the Urban Development Action

Grant (UDAG) program since Fiscal Year 1988. While several approved

grants have not yet reached the final close-out stage, it is

unnecessary for HUD to maintain all of the regulations for these

grants. Therefore, this rule removes many of the UDAG provisions from

subpart G of part 570, such as those related to the submission and

approval of applications for new grants. This rule also removes

obsolete regulations regarding Urban Renewal projects in subpart N.

Loans and grants are no longer authorized under the Urban Renewal

program. All of the existing projects are the subject of close-out

agreements that contain all the regulatory provisions. Therefore, HUD

can remove the obsolete regulations in subpart N.

This final rule makes the following specific amendments:

1. Amends Sec. 570.1 by updating paragraphs (a)(4) and (b) to refer

to Special Purpose Grants, rather than the Secretary's Fund program;

2. Moves the essential language of Sec. 570.2 into a new paragraph

(c) in Sec. 570.1, and removes the unnecessary remainder of Sec. 570.2;

3. Amends Sec. 570.3 by removing the statutory language from

several definitions, by updating the definition of ``CDBG funds'' to

include funds received under Sec. 570.405 or under section 108(q) of

the Housing and Community Development Act of 1974, and by updating the

definition of ``Discretionary grant'' to refer to Special Purpose

Grants, rather than to the Secretary's Fund;

4. Adds a streamlined Sec. 570.5, which contains a reference to

HUD's waiver authority in the CDBG program. This section was

inadvertently removed in the General HUD Program Requirements final

rule, published in the Federal Register on February 9, 1996 (61 FR

5198);

5. Amends Sec. 570.200(a)(3) by removing the statutory language and

clarifying the requirements for the HUD-administered Small Cities

Program. This rule also corrects Sec. 570.200(a)(3), which was recently

amended in a final rule published on November 9, 1995 (60 FR 56892), to

clarify that Insular areas must use 70 percent of their CDBG funds for

activities that benefit low- to moderate-income persons each year;

6. Removes obsolete provisions regarding the New Communities

program, maintaining a savings clause in Sec. 570.403;

7. Corrects Sec. 570.420(e)(2) to refer to Sec. 570.208(d)(5) or

(6), in addition to Sec. 570.208(a);

8. Removes obsolete provisions regarding the UDAG program from

subpart G;

9. Consolidates, to the extent possible, the provisions in

Secs. 570.488 and 570.606, which are essentially the same. In effect,

this rule removes most of the information in Sec. 570.488, maintaining

a cross-reference to Sec. 570.606, and makes minor conforming changes

to Sec. 570.606 so that it applies both to grantees and States/state

recipients. This rule makes no substantive changes to the requirements

in Sec. 570.606;

10. Removes the statutory and other repetitive language in

Secs. 570.600, 570.601, 570.603, 570.604, 570.605, 570.608, 570.701,

and 570.706, maintaining statutory citations for easy reference;

11. Makes conforming changes to Secs. 570.703(d) and 570.704 to

reflect the consolidation of Secs. 570.488 and 570.606;

12. Removes obsolete provisions regarding Urban Renewal projects

from subpart N, maintaining a savings clause in Sec. 570.800; and

13. Makes conforming changes to Sec. 570.904 to reflect this rule's

amendment to Sec. 570.601.

This final rule will eliminate approximately 34 pages of unnecessary

regulations from the CFR.

Justification for Final Rulemaking

HUD generally publishes a rule for public comment before issuing a

rule for effect, in accordance with its own regulations on rulemaking

in 24 CFR part 10. However, part 10 provides for exceptions to the

general rule if the agency finds good cause to omit advance notice and

public participation. The good cause requirement is satisfied when

prior public procedure is ``impracticable, unnecessary, or contrary to

the public interest'' (24 CFR 10.1).

[[Page 11475]]

HUD finds that good cause exists to publish this rule for effect

without first soliciting public comment. This rule merely removes

unnecessary regulatory provisions and does not establish or affect

substantive policy. Therefore, prior public comment is unnecessary.

Other Matters

Regulatory Flexibility Act

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

U.S.C. 605(b)), has reviewed and approved this final rule, and in so

doing certifies that this rule will not have a significant economic

impact on a substantial number of small entities. This rule streamlines

the Community Development Block Grant regulations by removing

unnecessary provisions. The rule will have no adverse or

disproportionate economic impact on small businesses.

Environmental Impact

This rule does not have an environmental impact. This rule simply

amends existing regulations by consolidating and streamlining

provisions; it does not alter the environmental effect of the

regulations being amended. At the time of development of regulations in

part 570, a Finding of No Significant Impact with respect to the

environment was made in accordance with HUD regulations in 24 CFR part

50 that implement section 102(2)(C) of the National Environmental

Policy Act of 1969 (42 U.S.C. 4332). That finding remains applicable to

this rule, and is available for public inspection between 7:30 a.m. and

5:30 p.m. weekdays in the Office of the Rules Docket Clerk, Office of

General Counsel, Room 10276, Department of Housing and Urban

Development, 451 Seventh Street, SW, Washington, DC.

Executive Order 12612, Federalism

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

of Executive Order 12612, Federalism, has determined that 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. No programmatic or policy changes

will result from this rule that would affect the relationship between

the Federal Government and State and local governments.

Executive Order 12606, The Family

The General Counsel, as the Designated Official under Executive

Order 12606, The Family, has determined that this rule will not have

the potential for 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.

List of Subjects in 24 CFR Part 570

Administrative practice and procedure, American Samoa, Community

development block grants, Grant programs--education, Grant programs--

housing and community development, Guam, Indians, Lead poisoning, Loan

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

housing, New communities, Northern Mariana Islands, Pacific Islands

Trust Territory, Pockets of poverty, Puerto Rico, Reporting and

recordkeeping requirements, Small cities, Student aid, Virgin Islands.

Accordingly, 24 CFR part 570 is amended as follows:

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

1. The authority citation for part 570 continues to read as

follows:

Authority: 42 U.S.C. 3535(d) and 5300-5320.

Subpart A--General Provisions

2. Section 570.1 is amended by revising the section heading,

paragraph (a)(4), and the second sentence of paragraph (b); and by

adding a new paragraph (c), to read as follows:

Sec. 570.1 Purpose and primary objective.

(a) * * *

(4) Special Purpose Grants (subpart E);

* * * * *

(b) * * * In the application of the subparts to Special Purpose

Grants or the Urban Development Action Grant program, the reference to

funds in the form of grants in the term ``CDBG funds'', as defined in

Sec. 570.3, shall mean the grant funds under those programs. * * *

(c) The primary objective of the programs authorized under title I

of the Housing and Community Development Act of 1974, as amended, is

described in section 101(c) of the Act (42 U.S.C. 5301(c)).

Sec. 570.2 [Removed]

3. Section 570.2 is removed.

4. Section 570.3 is amended by adding introductory text; and by

revising the definitions of ``Age of housing'', ``Buildings for the

general conduct of government'', ``CDBG funds'', ``Discretionary

grant'', ``Extent of growth lag'', ``Extent of housing overcrowding'',

``Indian tribe'', ``Metropolitan area'', ``Metropolitan city'',

``Microenterprise'', ``Nonentitlement area'', ``State'', ``Unit of

general local government'', and ``Urban county''; to read as follows:

Sec. 570.3 Definitions.

The terms HUD and Secretary are defined in 24 CFR part 5. All of

the following definitions in this section that rely on data from the

United States Bureau of the Census shall rely upon the data available

from the latest decennial census.

* * * * *

Age of housing means the number of year-round housing units, as

further defined in section 102(a)(11) of the Act.

* * * * *

Buildings for the general conduct of government shall have the

meaning provided in section 102(a)(21) of the Act.

CDBG funds means Community Development Block Grant funds, including

funds received in the form of grants under subpart D, F, or

Sec. 570.405 of this part, funds awarded under section 108(q) of the

Housing and Community Development Act of 1974, loans guaranteed under

subpart M of this part, urban renewal surplus grant funds, and program

income as defined in Sec. 570.500(a).

* * * * *

Discretionary grant means a grant made from the various Special

Purpose Grants in accordance with subpart E of this part.

* * * * *

Extent of growth lag shall have the meaning provided in section

102(a)(12) of the Act.

Extent of housing overcrowding shall have the meaning provided in

section 102(a)(10) of the Act.

* * * * *

Indian tribe shall have the meaning provided in section 102(a)(17)

of the Act.

* * * * *

Metropolitan area shall have the meaning provided in section

102(a)(3) of the Act.

Metropolitan city shall have the meaning provided in section

102(a)(4) of the Act.

Microenterprise shall have the meaning provided in section

102(a)(22) of the Act.

* * * * *

Nonentitlement area shall have the meaning provided in section

102(a)(7) of the Act.

* * * * *

[[Page 11476]]

State shall have the meaning provided in section 102(a)(2) of the

Act.

Unit of general local government shall have the meaning provided in

section 102(a)(1) of the Act.

Urban county shall have the meaning provided in section 102(a)(6)

of the Act. For the purposes of this definition, HUD will determine

whether the county's combined population contains the required

percentage of low- and moderate-income persons by identifying the

number of persons that resided in applicable areas and units of general

local government based on data from the most recent decennial census,

and using income limits that would have applied for the year in which

that census was taken.

* * * * *

5. Section 570.5 is revised to read as follows:

Sec. 570.5 Wavers.

HUD's authority for the waiver of regulations and for the

suspension of requirements to address damage in a Presidentially

declared disaster area is described in 24 CFR part 5 and in section 122

of the Act, respectively.

Subpart C--Eligible Activities

6. Section 570.200 is amended by revising the introductory text of

paragraph (a)(3) to read as follows:

Sec. 570.200 General policies.

(a) * * *

(3) Compliance with the primary objective. The primary objective of

the Act is described in section 101(c) of the Act. Consistent with this

objective, Entitlement recipients and recipients of the HUD-

administered Small Cities program in Hawaii must ensure that over a

period of time specified in their certification not to exceed three

years, not less than 70 percent of the aggregate of CDBG fund

expenditures shall be for activities meeting the criteria under

Sec. 570.208(a) or Sec. 570.208(d)(5) or (6) for benefitting low- and

moderate-income persons; Insular area recipients must meet this

requirement for each separate grant. The requirements for the HUD-

administered Small Cities program in New York are in

Sec. 570.420(e)(2). Additional requirements for the HUD-administered

Small Cities program in Hawaii are in Sec. 570.430(e). In determining

the percentage of funds expended for such activities:

* * * * *

7. Section 570.403 is revised to read as follows:

Sec. 570.403 New Communities.

The regulations for New Communities grants in this section, that

were effective immediately before April 19, 1996, will continue to

govern the rights and obligations of recipients and HUD with respect to

grants under the New Communities program.

Subpart F--Small Cities

8. Section 570.420 is amended by revising the first sentence of

paragraph (e)(2) to read as follows:

Sec. 570.420 General.

* * * * *

(e) * * *

(2) In addition to the objectives described in paragraph (e)(1) of

this section, with respect to grants made through the Small Cities

Program, not less than 70 percent of the total of grant funds from each

grant and Section 108 loan guarantee funds received under subpart M of

this part within a fiscal year must be expended for activities which

benefit low- and moderate-income persons under the criteria of

Sec. 570.208(a) or Sec. 570.208(d)(5) or (6). * * *

* * * * *

Subpart G--Urban Development Action Grants

9. Section 570.450 is revised to read as follows:

Sec. 570.450 Purpose.

The purpose of urban development action grants is to assist cities

and urban counties that are experiencing severe economic distress to

help stimulate economic development activity needed to aid in economic

recovery. This subpart G contains those regulations that are essential

for the continued operation of this grant program.

Secs. 570.451, 570.452, 570.453, 570.454, 570.455, 570.458, 570.459,

and 570.460 [Removed]

10. Sections 570.451, 570.452, 570.453, 570.454, 570.455, 570.458,

570.459, and 570.460 are removed.

11. Section 570.461 is revised to read as follows:

Sec. 570.461 Post-preliminary approval requirements; Lead-based paint.

The recipient may receive preliminary approval prior to the

accomplishment of notification, inspection, testing, and abatement as

described in Sec. 570.608, but no funds will be released until such

actions are complete and evidence of compliance is submitted to HUD.

Sec. 570.462 [Removed]

12. Section 570.462 is removed.

13. Section 570.463 is amended by revising the undesignated

sentence of paragraph (a) to read as follows:

Sec. 570.463 Project amendments and revisions.

(a) * * * The applicant must hold at least one public hearing prior

to making a significant revision to the application.

* * * * *

14. Section 570.466 is revised to read as follows:

Sec. 570.466 Additional application submission requirements for

Pockets of Poverty--employment opportunities.

Applicants for Action Grants under the Pockets of Poverty provision

must describe the number and, to the extent possible, the types of new

jobs (construction and permanent) that will be provided to the low- and

moderate-income residents of the Pocket of Poverty as a direct result

of the proposed project. If the application calls for job training

programs (such as those related to the CETA program) or job recruiting

services for the pocket's residents, then such proposed activities must

be clearly and fully explained. HUD requires applicants to ensure that

at least 75 percent of whatever permanent jobs initially result from

the project are provided to low- and moderate-income persons and that

at least 51 percent of whatever permanent jobs initially result from

the project are provided to low- and moderate-income residents from the

pocket. HUD encourages applicants to ensure that at least 20 percent of

all permanent jobs are filled by persons from the pocket qualified to

participate in the CETA program on a continuous basis. HUD requires all

applicants to continuously use best efforts to ensure that at least 75

percent of all permanent jobs resulting from any Action Grant-assisted

project are provided to low- and moderate-income persons and that at

least 51 percent of all permanent jobs resulting from any Action Grant-

assisted project are provided to low- and moderate-income residents

from the pocket. The application should clearly describe how the

applicant intends to meet initial and continuous job requirements.

Private participating parties must meet these employment requirements

in the aggregate. To enable the private participants to do so, lease

agreements executed by a private participating party shall include:

(a) Provisions requiring lessees to follow hiring practices that

the private participating party has determined will enable it to meet

these requirements in the aggregate; and

(b) Provisions that will enable the private participating party to

declare a default under the lease agreement if the lessees do not

follow such practices.

[[Page 11477]]

Sec. 570.467 [Removed]

15. Section 570.467 is removed. Subpart I--State Community

Development Block Grant Program

16. Section 570.480 is amended by revising the last sentence of

paragraph (a) to read as follows:

Sec. 570.480 General.

(a) * * * Other subparts of part 570 are not applicable to the

State CDBG Program, except as expressly provided otherwise.

* * * * *

17. Section 570.488 is revised to read as follows:

Sec. 570.488 Displacement, relocation, acquisition, and replacement of

housing.

The requirements for States and state recipients with regard to the

displacement, relocation, acquisition, and replacement of housing are

in Sec. 570.606 and 24 CFR part 42.

Subpart K--Other Program Requirements

18. Section 570.600 is amended by revising paragraph (a) to read as

follows:

Sec. 570.600 General.

(a) This subpart K enumerates laws that the Secretary will treat as

applicable to grants made under section 106 of the Act, other than

grants to States made pursuant to section 106(d) of the Act, for

purposes of the Secretary's determinations under section 104(e)(1) of

the Act, including statutes expressly made applicable by the Act and

certain other statutes and Executive Orders for which the Secretary has

enforcement responsibility. This subpart K applies to grants made under

the Insular areas program in Sec. 570.405, with the exception of

Sec. 570.612. The absence of mention herein of any other statute for

which the Secretary does not have direct enforcement responsibility is

not intended to be taken as an indication that, in the Secretary's

opinion, such statute or Executive Order is not applicable to

activities assisted under the Act. For laws that the Secretary will

treat as applicable to grants made to States under section 106(d) of

the Act for purposes of the determination required to be made by the

Secretary pursuant to section 104(e)(2) of the Act, see Sec. 570.487.

* * * * *

19. Section 570.601 is revised to read as follows:

Sec. 570.601 Public Law 88-352 and Public Law 90-284; affirmatively

furthering fair housing; Executive Order 11063.

(a) The following requirements apply according to sections 104(b)

and 107 of the Act:

(1) Public Law 88-352, which is title VI of the Civil Rights Act of

1964 (42 U.S.C. 2000d et seq.), and implementing regulations in 24 CFR

part 1.

(2) Public Law 90-284, which is the Fair Housing Act (42 U.S.C.

3601-3620). In accordance with the Fair Housing Act, the Secretary

requires that grantees administer all programs and activities related

to housing and community development in a manner to affirmatively

further the policies of the Fair Housing Act. Furthermore, in

accordance with section 104(b)(2) of the Act, for each community

receiving a grant under subpart D of this part, the certification that

the grantee will affirmatively further fair housing shall specifically

require the grantee to assume the responsibility of fair housing

planning by conducting an analysis to identify impediments to fair

housing choice within its jurisdiction, taking appropriate actions to

overcome the effects of any impediments identified through that

analysis, and maintaining records reflecting the analysis and actions

in this regard.

(b) Executive Order 11063, as amended by Executive Order 12259 (3

CFR, 1959-1963 Comp., p. 652; 3 CFR, 1980 Comp., p. 307) (Equal

Opportunity in Housing), and implementing regulations in 24 CFR part

107, also apply.

20. Section 570.603 is revised to read as follows:

Sec. 570.603 Labor standards.

(a) Section 110(a) of the Act contains labor standards that apply

to nonvolunteer labor financed in whole or in part with assistance

received under the Act. In accordance with section 110(a) of the Act,

the Contract Work Hours and Safety Standards Act (40 U.S.C. 327 et

seq.) also applies. However, these requirements apply to the

rehabilitation of residential property only if such property contains

not less than 8 units.

(b) The regulations in 24 CFR part 70 apply to the use of

volunteers.

21. Section 570.604 is revised to read as follows:

Sec. 570.604 Environmental standards.

For purposes of section 104(g) of the Act, the regulations in 24

CFR part 58 specify the other provisions of law which further the

purposes of the National Environmental Policy Act of 1969, and the

procedures by which grantees must fulfill their environmental

responsibilities. In certain cases, grantees assume these environmental

review, decisionmaking, and action responsibilities by execution of

grant agreements with the Secretary.

22. Section 570.605 is revised to read as follows:

Sec. 570.605 National Flood Insurance Program.

Notwithstanding the date of HUD approval of the recipient's

application (or, in the case of grants made under subpart D of this

part or HUD-administered small cities recipients in Hawaii, the date of

submission of the grantee's consolidated plan, in accordance with 24

CFR part 91), section 202(a) of the Flood Disaster Protection Act of

1973 (42 U.S.C. 4106) and the regulations in 44 CFR parts 59 through 79

apply to funds provided under this part 570.

23. Section 570.606 is revised to read as follows:

Sec. 570.606 Displacement, relocation, acquisition, and replacement of

housing.

(a) General policy for minimizing displacement. Consistent with the

other goals and objectives of this part, grantees (or States or state

recipients, as 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 activities assisted under this part.

(b) Relocation assistance for displaced persons at URA levels. (1)

A displaced person shall be provided with relocation assistance at the

levels described in, and in accordance with the requirements of 49 CFR

part 24, which contains the government-wide regulations implementing

the Uniform Relocation Assistance and Real Property Acquisition

Policies Act of 1970 (URA) (42 U.S.C. 4601-4655).

(2) Displaced person. (i) For purposes of paragraph (b) of this

section, the term ``displaced person'' means any person (family,

individual, business, nonprofit organization, or farm) that moves from

real property, or moves his or her personal property from real

property, permanently and involuntarily, as a direct result of

rehabilitation, demolition, or acquisition for an activity assisted

under this part. A permanent, involuntary move for an assisted activity

includes a permanent move from real property that is made:

(A) After notice by the grantee (or the state recipient, if

applicable) to move permanently from the property, if the move occurs

after the initial official submission to HUD (or the State, as

[[Page 11478]]

applicable) for grant, loan, or loan guarantee funds under this part

that are later provided or granted.

(B) After notice by the property owner to move permanently from the

property, if the move occurs after the date of the submission of a

request for financial assistance by the property owner (or person in

control of the site) that is later approved for the requested activity.

(C) Before the date described in paragraph (b)(2)(i)(A) or (B) of

this section, if either HUD or the grantee (or State, as applicable)

determines that the displacement directly resulted from acquisition,

rehabilitation, or demolition for the requested activity.

(D) After the ``initiation of negotiations'' if the person is the

tenant-occupant of a dwelling unit and any one of the following three

situations occurs:

(1) The tenant has not been provided with a reasonable opportunity

to lease and occupy a suitable decent, safe, and sanitary dwelling in

the same building/complex upon the completion of the project, including

a monthly rent that does not exceed the greater of the tenant's monthly

rent and estimated average utility costs before the initiation of

negotiations or 30 percent of the household's average monthly gross

income; or

(2) The tenant is required to relocate temporarily for the activity

but the tenant is not offered payment for all reasonable out-of-pocket

expenses incurred in connection with the temporary relocation,

including the cost of moving to and from the temporary location and any

increased housing costs, or other conditions of the temporary

relocation are not reasonable; and the tenant does not return to the

building/complex; or

(3) The tenant is required to move to another unit in the building/

complex, but is not offered reimbursement for all reasonable out-of-

pocket expenses incurred in connection with the move.

(ii) Notwithstanding the provisions of paragraph (b)(2)(i) of this

section, the term ``displaced person-'' does not include:

(A) A person who is evicted for cause based upon serious or

repeated violations of material terms of the lease or occupancy

agreement. To exclude a person on this basis, the grantee (or State or

state recipient, as applicable) must determine that the eviction was

not undertaken for the purpose of evading the obligation to provide

relocation assistance under this section;

(B) A person who moves into the property after the date of the

notice described in paragraph (b)(2)(i)(A) or (B) of this section, but

who received a written notice of the expected displacement before

occupancy.

(C) A person who is not displaced as described in 49 CFR

24.2(g)(2).

(D) A person who the grantee (or State, as applicable) determines

is not displaced as a direct result of the acquisition, rehabilitation,

or demolition for an assisted activity. To exclude a person on this

basis, HUD must concur in that determination.

(iii) A grantee (or State or state recipient, as applicable) may,

at any time, request HUD to determine whether a person is a displaced

person under this section.

(3) Initiation of negotiations. For purposes of determining the

type of replacement housing assistance to be provided under paragraph

(b) of this section, if the displacement is the direct result of

privately undertaken rehabilitation, demolition, or acquisition of real

property, the term ``initiation of negotiations'' means the execution

of the grant or loan agreement between the grantee (or State or state

recipient, as applicable) and the person owning or controlling the real

property.

(c) Residential antidisplacement and relocation assistance plan. In

accordance with section 104(d) of the Act, each grantee must adopt,

make public, and certify (or, as applicable, each State must ensure

that each state recipient adopts, makes public, and certifies to the

State) that it is following a residential antidisplacement and

relocation assistance plan providing one-for-one replacement units

(paragraph (c)(1) of this section), and relocation assistance

(paragraph (c)(2) of this section). As applicable, section 106(d)(5)(A)

of the Act requires the state recipient also to certify to the State

that it will minimize displacement of persons as a result of assisted

activities. Except with regard to the State CDBG Program, the plan

shall also indicate the steps that will be taken consistent with other

goals and objectives of this part to minimize the displacement of

families and individuals from their homes and neighborhoods as a result

of any activities assisted under this part.

(1) One-for-one replacement of low/moderate-income dwelling units.

(i) All occupied and vacant occupiable low/moderate-income dwelling

units that are demolished or converted to a use other than as low/

moderate-income dwelling units in connection with an activity assisted

under this part must be replaced with low/moderate-income dwelling

units.

(ii) Replacement low/moderate-income dwelling units may be provided

by any government agency or private developer, and must meet the

following requirements:

(A) The units must be located within the jurisdiction of the

grantee (or the state recipient, as applicable). To the extent feasible

and consistent with other statutory priorities, the units shall be

located within the same neighborhood as the units replaced.

(B) The units must be sufficient in number and size to house no

fewer than the number of occupants who could have been housed in the

units that are demolished or converted. The number of occupants who

could have been housed in units shall be determined in accordance with

applicable local housing occupancy codes. The grantee (or state

recipient, as applicable) may not replace those units with smaller

units (e.g., a 2-bedroom unit with two 1-bedroom units), unless the

grantee (or state recipient, as applicable) has provided the

information required under paragraph (c)(1)(iii)(G) of this section.

(C) The units must be provided in standard condition. Replacement

low/moderate-income dwelling units may include units that have been

raised to standard from substandard condition if:

(1) No person was displaced from the unit as a direct result of an

assisted activity (see definition of ``displaced person'' in paragraph

(c)(3)(ii) of this section; and

(2) The unit was vacant for at least three months before execution

of the agreement between the grantee and the property owner.

(D) The units must initially be made available for occupancy at any

time during the period beginning one year before the grantee's (or

state recipient's, as applicable) submission of the information

required under paragraph (c)(1)(iii) of this section and ending three

years after the commencement of the demolition or rehabilitation

related to the conversion.

(E) The units must be designed to remain low/moderate-income

dwelling units for at least 10 years from the date of initial

occupancy. Replacement low/moderate-income dwelling units may include,

but are not limited to, public housing, or existing housing receiving

Section 8 project-based assistance under the United States Housing Act

of 1937.

(iii) Before the grantee (or state recipient, as applicable) enters

into a contract committing it to provide funds under this part for any

activity that will directly result in the demolition of low/moderate-

income dwelling units or the conversion of low/moderate-income dwelling

units to another use, the grantee (or state recipient, as applicable)

must make public, and submit the

[[Page 11479]]

following information in writing to the HUD Field Office (or State, as

applicable) for monitoring purposes:

(A) A description of the proposed assisted activity;

(B) The location on a map and number of dwelling units by size

(number of bedrooms) that will be demolished or converted to a use

other than for low/moderate-income dwelling units as a direct result of

the assisted activity;

(C) A time schedule for the commencement and completion of the

demolition or conversion;

(D) The location on a map and the number of dwelling units by size

(number of bedrooms) that will be provided as replacement dwelling

units. If such data are not available at the time of the general

submission, the submission shall identify the general location on an

area map and the approximate number of dwelling units by size, and

information identifying the specific location and number of dwelling

units by size shall be submitted and disclosed to the public as soon as

it is available;

(E) The source of funding and a time schedule for the provision of

replacement dwelling units;

(F) The basis for concluding that each replacement dwelling unit

will remain a low/moderate-income dwelling unit for at least 10 years

from the date of initial occupancy; and

(G) Information demonstrating that any proposed replacement of

dwelling units with smaller dwelling units (e.g., a 2-bedroom unit with

two 1-bedroom units) is consistent with the needs analysis contained in

the HUD-approved consolidated plan; or, for purposes of the State CDBG

program, consistent with the housing needs of low- and moderate-income

households in the jurisdiction. A grantee that is not required to

submit a consolidated plan to HUD must submit information demonstrating

that the proposed replacement is consistent with the housing needs of

low- and moderate-income households in the jurisdiction.

(iv)(A) The one-for-one replacement requirement of paragraph (c)(1)

of this section does not apply to the extent the Field Office

determines, based upon objective data, that there is an adequate supply

of vacant low/moderate-income dwelling units in standard condition

available on a nondiscriminatory basis within the jurisdiction of the

grantee (or state recipient, as applicable). In determining the

adequacy of supply, HUD will consider whether the demolition or

conversion of the low/moderate-income dwelling units will have a

material impact on the ability of low- and moderate-income households

to find suitable housing. HUD will consider relevant evidence of

housing supply and demand including, but not limited to, the following

factors: the housing vacancy rate in the jurisdiction; the number of

vacant low/moderate-income dwelling units in the jurisdiction

(excluding units that will be demolished or converted); the number of

eligible families on waiting lists for housing assisted under the

United States Housing Act of 1937 in the jurisdiction; the needs

analysis contained in any applicable HUD-approved consolidated plan;

and relevant past or predicted demographic changes.

(B) HUD may consider the supply of vacant low/moderate-income

dwelling units in a standard condition available on a nondiscriminatory

basis in an area that is larger than the jurisdiction of the grantee

(or state recipient, as applicable). Such additional dwelling units

shall be considered if the Field Office determines that the units would

be suitable to serve the needs of the low- and moderate-income

households that could be served by the low/moderate-income dwelling

units that are to be demolished or converted to another use. HUD will

base this determination on geographic and demographic factors, such as

location and access to places of employment and to other facilities.

(C) The grantee (or state recipient, as applicable) must submit the

request for determination under paragraph (c)(1)(iv) of this section

directly to the Field Office (or State, as applicable). Simultaneously

with the submission of the request, the grantee (or state recipient, as

applicable) must make the submission public and inform interested

persons that they have 30 days from the date of submission to provide

to HUD (or to the State, as applicable) additional information

supporting or opposing the request. For purposes of the State CDBG

program, if the State, after considering the submission and the

additional data, agrees with the request, the State must provide its

recommendation with supporting information to HUD.

(2) Relocation assistance under section 104(d) of the Act. Under

section 104(d), each ``displaced person'' (defined in paragraph

(c)(3)(ii) of this section) is entitled to choose to receive either

assistance at URA levels (see paragraph (b) of this section) or the

following relocation assistance:

(i) Advisory services at the levels described in 49 CFR part 24,

subpart C (General Relocation Requirements). Tenants shall be advised

of their rights under the Fair Housing Act (42 U.S.C. 3601-19) and of

replacement housing opportunities in such a manner that, to the extent

feasible, will provide a choice between relocating within their

neighborhoods and other neighborhoods consistent with the

responsibility of the grantee (or the state recipient, as applicable)

to affirmatively further fair housing;

(ii) Payment for moving expenses at the levels described in 49 CFR

part 24, subpart D.

(iii) The reasonable and necessary cost of any security deposit

required to rent the replacement dwelling unit, and for credit checks

required to rent or purchase the replacement dwelling unit.

(iv) Interim living costs. The grantee (or state recipient, as

applicable) shall reimburse a person for actual reasonable out-of-

pocket costs incurred in connection with temporary relocation,

including moving expenses and increased housing costs, if:

(A) The person must relocate temporarily because continued

occupancy of the dwelling unit constitutes a substantial danger to the

health or safety of the person or the public; or

(B) The person is displaced from a ``low/moderate-income dwelling

unit,'' none of the comparable replacement dwelling units to which the

person has been referred qualifies as a low/moderate-income dwelling

unit (defined in paragraph (c)(3)(iii) of this section), and a suitable

low/moderate-income dwelling unit is scheduled to become available in

accordance with paragraph (c)(1) of this section. (Because a

``comparable replacement dwelling unit'' may be made affordable to a

person through a rental assistance payment and its market rent may

exceed the Fair Market Rent (FMR) under the Section 8 Existing Housing

Program, it may not meet the definition of a ``low/moderate-income

dwelling unit''.)

(v) Replacement housing assistance. Persons are eligible to receive

one of the following two forms of replacement housing assistance:

(A) Each person must be offered rental assistance equal to 60 times

the amount necessary to reduce the monthly rent and estimated average

monthly cost of utilities for a replacement dwelling (comparable

replacement dwelling or decent, safe, and sanitary replacement dwelling

to which the person relocates, whichever costs less) to the ``Total

Tenant Payment,'' as determined under Sec. 813.107 of this title. All

or a portion of this assistance may be offered through a certificate or

housing voucher for rental assistance (if available) provided through

the Local Public Agency under Section 8 of the United States Housing

Act of 1937. If a Section

[[Page 11480]]

8 certificate or housing voucher is provided to a person, the grantee

(or state recipient, as applicable) must provide referrals to

comparable replacement dwelling units for which the owner is willing to

participate in the Section 8 Existing Housing Program. To the extent

that cash assistance is provided, it will be provided in installments.

(B) If the person purchases an interest in a housing cooperative or

mutual housing association and occupies a decent, safe, and sanitary

dwelling in the cooperative or association, the person may elect to

receive a lump sum payment. This lump sum payment shall be equal to the

capitalized value of 60 monthly installments of the amount that is

obtained by subtracting the ``Total Tenant Payment,'' as determined

under Sec. 813.107 of this title, from the monthly rent and estimated

average monthly cost of utilities at a comparable replacement dwelling

unit. To compute the capitalized value, the installments shall be

discounted at the rate of interest paid on passbook savings deposits by

a Federally insured bank or savings and loan institution conducting

business within the jurisdiction of the grantee (or state recipient, as

applicable). To the extent necessary to minimize hardship to the

household, the grantee (or state recipient, as applicable) shall,

subject to appropriate safeguards, issue a payment in advance of the

purchase of the interest in the housing cooperative or mutual housing

association.

(C) Displaced low/moderate income tenants shall be advised of their

right to elect relocation assistance pursuant to the Uniform Relocation

Assistance and Real Property Acquisition Policies Act of 1970 and the

regulations appearing at 49 CFR part 24 as an alternative to the

relocation assistance available under paragraph (c)(2) of this section.

(3) Definitions. For purposes of providing section 104(d)

assistance under paragraph (c) of this section:

(i) Comparable replacement dwelling unit. The term ``comparable

replacement dwelling unit'' means a dwelling unit that:

(A) Meets the criteria of 49 CFR 24.2(d) (1) through (6); and

(B) Is available at a monthly cost for rent plus estimated average

monthly utility costs that does not exceed the ``Total Tenant Payment''

determined under Sec. 813.107 of this title, after taking into account

any rental assistance the household would receive.

(ii) Displaced person. (A) The term ``displaced person'' means any

low/moderate-income family or individual that moves from real property,

or moves his or her personal property from real property, permanently

and involuntarily, as a direct result of the conversion of a low/

moderate-income dwelling unit (defined in paragraph (c)(3)(iv) of this

section) or demolition in connection with an activity assisted under

this part. A permanent involuntary move for an assisted activity

includes a permanent move from real property that is made:

(1) After notice by the grantee (or state recipient, as applicable)

to move permanently from the property, if the move occurs after the

initial official submission to HUD for grant, loan, or loan guarantee

funds under this part that are later granted; or, for purposes of the

State CDBG Program, if the move occurs after the initial submission of

an application to the State by the recipient requesting assistance

under this subpart that is later granted for the requested activity.

(2) After notice by the property owner, to move permanently from

the property, if the move occurs after the date of submission of a

request for financial assistance by the property owner (or person in

control of the site) that is later approved for the requested activity.

(3) Before the date described in paragraph (c)(3)(ii)(A) (1) or (2)

of this section, if either HUD or the grantee (or State or state

recipient, as applicable) determines that the displacement directly

resulted from the conversion of a low/moderate-income dwelling unit or

demolition in connection with the requested activity.

(4) After the execution of the agreement by the grantee (or state

recipient, as applicable) covering the rehabilitation or demolition, if

the person is the tenant-occupant of a dwelling unit and any one of the

following three situations occurs:

(i) The tenant has not been provided with a reasonable opportunity

to lease and occupy a suitable decent, safe, and sanitary dwelling in

the same building/complex upon completion of the project, including a

monthly rent that does not exceed the greater of the tenant's monthly

rent and estimated average utility costs before the execution of such

agreement (or, for purposes of the State CDBG Program, before the

``initiation of negotiations''), or the ``Total Tenant Payment'' for

the person as determined under Sec. 813.107 of this title; or

(ii) The tenant, required to relocate temporarily for the activity,

does not return to the building/complex; and either the tenant is not

offered payment for all reasonable out-of-pocket expenses incurred in

connection with the temporary location (including the cost of moving to

and from the temporary location and any increased housing costs), or

other conditions of the temporary relocation are not reasonable; or

(iii) The tenant is required to move to another unit in the

building/complex, but is not offered reimbursement for all reasonable

out-of-pocket expenses incurred in connection with the move.

(B) Notwithstanding the provisions of paragraph (c)(3)(ii)(A) of

this section, the term ``displaced person'' does not include:

(1) A person who is evicted for cause based upon serious or

repeated violations of material terms of the lease or occupancy

agreement. To exclude a person on this basis, the grantee (or state

recipient, as applicable) must determine that the eviction was not

undertaken for the purpose of evading the obligation to provide

relocation assistance under this section;

(2) A person who moves into the property after the date of the

notice described in paragraph (c)(3)(ii)(A) (1) or (2) of this section,

but received a written notice of the expected displacement before

commencing occupancy.

(3) A person who is not displaced as defined under 49 CFR

24.2(g)(2).

(4) A person who the grantee (or State, as applicable) determines

is not displaced as a direct result of the conversion of a low/

moderate-income dwelling or demolition in connection with an assisted

activity. For a grantee or State to exclude a person on this basis, HUD

must concur in that determination.

(C) A grantee may, at any time, request HUD to determine whether a

person is a displaced person under paragraph (c) of this section.

(iii) Low/moderate-income dwelling unit. The term ``low/moderate-

income dwelling unit'' means a dwelling unit with a market rent

(including utility costs) that does not exceed the applicable Fair

Market Rent (FMR) for existing housing established under 24 CFR part

888, except that the term does not include a unit that is owned and

occupied by the same person before and after the assisted

rehabilitation.

(iv) Standard condition and substandard condition suitable for

rehabilitation. (A) If the grantee has a HUD-approved consolidated

plan, the definitions of ``standard condition'' and ``substandard

condition suitable for rehabilitation'' established in the plan will

apply.

(B) For purposes of the State CDBG program, a State may define the

terms ``standard condition'' and ``substandard condition suitable for

rehabilitation'', or

[[Page 11481]]

it may allow the state recipient to establish and make public its

definition of these terms. If a State permits the recipient to

establish its definition of these terms, the State must determine if

the state recipient's definition is acceptable.

(v) Vacant occupiable dwelling unit. The term ``vacant occupiable

dwelling unit'' means a vacant dwelling unit that is in a standard

condition; a vacant dwelling unit that is in a substandard condition,

but is suitable for rehabilitation; or a dwelling unit in any condition

that has been occupied (except by a squatter) at any time within the

period beginning one year before the date of execution of the agreement

by the grantee (or state recipient, as applicable) covering the

rehabilitation or demolition.

(d) Optional relocation assistance. Under section 105(a)(11) of the

Act, the grantee may provide (or the State may permit the state

recipient to provide, as applicable) relocation payments and other

relocation assistance to persons displaced by activities that are not

subject to paragraphs (b) or (c) of this section. The grantee may also

provide (or the State may also permit the state recipient to provide,

as applicable) relocation assistance to persons receiving assistance

under paragraphs (b) or (c) of this section at levels in excess of

those required by these paragraphs. Unless such assistance is provided

under State or local law, the grantee (or state recipient, as

applicable) shall provide such assistance only upon the basis of a

written determination that the assistance is appropriate (see, e.g., 24

CFR 570.201(i), as applicable). The grantee (or state recipient, as

applicable) must adopt a written policy available to the public that

describes the relocation assistance that the grantee (or state

recipient, as applicable) has elected to provide and that provides for

equal relocation assistance within each class of displaced persons.

(e) Acquisition of real property. The acquisition of real property

for an assisted activity is subject to 49 CFR part 24, subpart B.

(f) Appeals. If a person disagrees with the determination of the

grantee (or the state recipient, as applicable) concerning the person's

eligibility for, or the amount of, a relocation payment under this

section, the person may file a written appeal of that determination

with the grantee (or state recipient, as applicable). The appeal

procedures to be followed are described in 49 CFR 24.10. In addition, a

low- or moderate-income household that has been displaced from a

dwelling may file a written request for review of the grantee's

decision to the HUD Field Office. For purposes of the State CDBG

program, a low- or moderate-income household may file a written request

for review of the state recipient's decision with the State.

(g) Responsibility of grantee or State. (1) The grantee (or State,

if applicable) is responsible for ensuring compliance with the

requirements of this section, notwithstanding any third party's

contractual obligation to the grantee to comply with the provisions of

this section. For purposes of the State CDBG program, the State shall

require state recipients to certify that they will comply with the

requirements of this section.

(2) The cost of assistance required under this section may be paid

from local public funds, funds provided under this part, or funds

available from other sources.

(3) The grantee (or State and state recipient, as applicable) must

maintain records in sufficient detail to demonstrate compliance with

the provisions of this section.

(Approved by the Office of Management and Budget under OMB control

number 2506-0102.)

24. Section 570.608 is amended by revising paragraph (a) to read as

follows:

Sec. 570.608 Lead-based paint.

(a) Prohibition against the use of lead-based paint. Section 401(b)

of the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4831(b))

and regulations in 24 CFR part 35, subpart B apply to residential

structures constructed or rehabilitated with assistance provided under

this part 570.

* * * * *

Subpart M--Loan Guarantees

25. Section 570.701 is amended by revising the definition of

``Public entity'', to read as follows:

Sec. 570.701 Definitions.

* * * * *

Public entity shall have the meaning provided for the term

``Eligible public entity'' in section 108(o) of the Act.

* * * * *

26. Section 570.703 is amended by revising paragraphs (d)(1) and

(d)(2), to read as follows:

Sec. 570.703 Eligible activities.

* * * * *

(d) * * *

(1) Required under the provisions of Sec. 570.606(b) or (c); or

(2) Determined by the public entity to be appropriate under the

provisions of Sec. 570.606(d).

* * * * *

27. Section 570.704 is amended by revising paragraphs (a)(2)(i)(D),

(b)(8)(vii), and (e); to read as follows:

Sec. 570.704 Application requirements.

(a) * * *

(2) * * *

(i) * * *

(D) The proposed activities likely to result in displacement and

the public entity's plans, consistent with the policies developed under

Sec. 570.606 for minimizing displacement of persons as a result of its

proposed activities.

* * * * *

(b) * * *

(8) * * *

(vii) It will comply with the requirements governing displacement,

relocation, real property acquisition, and the replacement of low and

moderate income housing described in Sec. 570.606.

* * * * *

(e) Displacement, relocation, acquisition, and replacement of

housing. The public entity (or the designated public agency) shall

comply with the displacement, relocation, acquisition, and replacement

of low/moderate-income housing requirements in Sec. 570.606 in

connection with any activity financed in whole or in part with

guaranteed loan funds.

28. Section 570.706 is revised to read as follows:

Sec. 570.706 Federal guarantee; subrogation.

Section 108(f) of the Act provides for the incontestability of

guarantees by HUD under subpart M of this part in the hands of a holder

of such guaranteed obligations. If HUD pays a claim under a guarantee

made under section 108 of the Act, HUD shall be fully subrogated for

all the rights of the holder of the guaranteed debt obligation with

respect to such obligation.

Subpart N--Urban Renewal Provisions

29. Section 570.800 is revised to read as follows:

Sec. 570.800 Urban Renewal regulations.

The regulations governing urban renewal projects and neighborhood

development programs in subpart N of this part, that were effective

immediately before April 19, 1996, will continue to govern the rights

and obligations of recipients and HUD with respect to such projects and

programs.

Secs. 570.801, 570.802, 570.803, and 570.804 [Removed]

30. Sections 570.801, 570.802, 570.803, and 570.804 are removed.

[[Page 11482]]

Subpart O--Performance Reviews

31. Section 570.904 is amended by revising the introductory text of

paragraph (b), and by revising paragraph (c), to read as follows:

Sec. 570.904 Equal Opportunity and Fair Housing Review Criteria.

* * * * *

(b) Review for equal opportunity. Title VI of the Civil Rights Act

of 1964 (42 U.S.C. 2000d et seq.), and implementing regulations in 24

CFR part 1, together with section 109 of the Act (see Sec. 570.602),

prohibit discrimination in any program or activity funded in whole or

in part with funds made available under this part.

* * * * *

(c) Fair housing review criteria. See the requirements in the Fair

Housing Act (42 U.S.C. 3601-20), as well as Sec. 570.601(a), which sets

forth the grantee's responsibility to certify that it will

affirmatively further fair housing.

* * * * *

Dated: March 7, 1996.

Mark C. Gordon,

General Deputy Assistant Secretary for Community Planning and

Development.

[FR Doc. 96-6418 Filed 3-19-96; 8:45 am]

BILLING CODE 4210-29-P