Changes to Admission and Occupancy Requirements in the Public Housing and Section 8 Housing Assistance Programs

SUMMARY: This proposed rule addresses several changes related to

admission and occupancy requirements of public housing and section 8

assisted housing that were made by the Quality Housing and Work

Responsibility Act of 1998 (referred to as the ``1998 Act''). With

respect to admission and occupancy, this rule includes important

changes concerning choice of rent, community service and self-

sufficiency in public housing. This rule also includes important

changes concerning admission preferences and determination of income

and rent in public housing and Section 8 housing assistance programs.

Some of the provisions included in this rule are already in effect, as

more fully discussed in HUD's Notice of Initial Guidance on the 1998

Act, published on February 18, 1999 (``Initial Guidance Notice''), and

HUD's interim rule on the PHA Plan, also published on February 18, 1999

(PHA Plan interim rule). The provisions that are already in effect are

identified in this rulemaking.

DATES: Comment due date: June 29, 1999.

ADDRESSES: Submit comments regarding this proposed rule to the

Regulations Division, Office of General Counsel, Room 10276, Department

of Housing and Urban Development, 451 Seventh Street, SW, Washington,

DC 20410-0500. Please refer to the above docket number and title.

Facsimile (FAX) comments are not acceptable. A copy of each

communication submitted will be available for public inspection and

copying between 7:30 a.m. and 5:30 p.m. weekdays at the above address.

FOR FURTHER INFORMATION CONTACT: For the public housing and tenant-

based Section 8 housing assistance programs--Patricia Arnaudo, Senior

Program Manager, Office of Public and Assisted Housing Delivery,

Department of Housing and Urban Development, 451 Seventh Street, SW,

Room 4112, Washington, DC 20410; telephone (202) 708-0744, or the

Public and Indian Housing Resource Center at 1-800-955-2232.

For the Section 8 project-based programs--Willie Spearmon,

Director, Office of Multifamily Business Products, Office of Housing,

Department of Housing and Urban Development, 451 Seventh Street, SW,

Room 6138, Washington, DC 20410; telephone (202) 708-3000.

(With the exception of the telephone number for the PIH Resource

Center, these are not toll-free telephone numbers.) Persons with

hearing or speech impairments may access these numbers via TTY by

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

SUPPLEMENTARY INFORMATION:

Background--the 1998 Act

Comprehensive Reforms to Public Housing and Section 8 Programs

The Quality Housing and Work Responsibility Act of 1998 (title V of

the FY 1999 HUD appropriations Act, Pub.L. 105-276, 112 Stat. 2518,

approved October 21, 1998) (referred to in this rule as ``the 1998

Act'' or ``the Act'') amended the United States Housing Act of 1937 (42

U.S.C. 1437, et seq., ``the 1937 Act'') to make comprehensive changes

to HUD's public housing, tenant-based assistance, and Section 8

project-based programs. Some of the reforms made by the 1998 Act affect

public housing only, and some of the reforms affect Section 8 tenant-

based and project-based programs as well. Throughout this preamble and

in the provisions of 24 CFR part 5 addressed in this rule, HUD

indicates where the matter under discussion applies only to one program

or to more than one program.

This Proposed Rule

What This Rule Addresses

This rule addresses both provisions of the 1998 Act that are

already in effect, and provisions that are being implemented by this

rule. The chart provided in this preamble shows:

(1) Which sections of the 1998 Act are being addressed by this

rule,

(2) Which of the 1998 Act changes being implemented in this rule

apply to which HUD programs, and

(3) Which sections of the 1998 Act are effective now.

Several Conforming Amendments Included in This Rule

HUD will accept comments on any of the regulatory changes included

in this rule. The provisions of the 1998 Act that are already in effect

have been implemented directly from the statute, without exercise of

discretion by HUD. In order to bring HUD's regulations up to date with

the changes made by the 1998 Act, the final rule published after

consideration of comments on this proposed rule will need to

incorporate these changes. Therefore, the conforming regulatory changes

that need to be made to the regulations in 24 CFR parts 5 and 960 have

been included in this rule, so the reader can review the regulations in

their amended and updated form. Since these changes do not reflect

exercise of discretion, however, HUD is not likely to change these

provisions in response to public comment.

Regulatory Location of Statutory Provisions

In some cases, a statutory provision being implemented could be

placed either in specific program regulations, such as part 982

covering Section 8 tenant-based assistance, or in the regulations

governing programs authorized by the 1937 Act, part 5. This proposed

rule and other proposed rules being issued at approximately the same

time may contain overlapping provisions. When the final rules are

issued, we will make the final determination about the appropriate

regulatory location of the provisions and place them in the appropriate

part.

Program Changes That Require Appropriations Act Approval

Some of the 1998 Act provisions make changes to HUD programs that

would take effect only upon approval in appropriations acts. These

changes are not included in this rule. If approved in appropriations

acts, they will be implemented by notice. Examples of provisions that

are dependent upon appropriations act approval are the addition of

exclusions from income for medical expenses of nonelderly families and

for child and spousal support, and the addition of earned income

disallowances in the Section 8 program for earned income.

Previous Proposed Rule on Admission and Occupancy

A proposed rule streamlining the admission and occupancy provisions

applicable to public housing and making other changes was published in

the Federal Register on May 9, 1997 (62 FR 25728). The May 9, 1997

proposed rule is withdrawn. HUD intends to issue a second proposed rule

to implement the 1998 Act safety and security provisions for public and

assisted housing and expects to make other streamlining changes similar

to those

[[Page 23461]]

proposed in the May 9, 1997 rule at that time.

Again, the chart that follows presents a summary overview of what

this rule addresses. In the chart, the term PBC refers to project-based

certificates.

BILLING CODE 4210-32-P

[[Page 23462]]

[GRAPHIC] [TIFF OMITTED] TP30AP99.003

BILLING CODE 4210-32-C

[[Page 23463]]

Organization of Rule

While the rule is published for public comment, HUD may reconsider

the organization of this rule, and not only this rule but the existing

codified regulations. HUD may determine that the regulations proposed

by this rule or proposed to be revised by this rule can be better

organized. HUD also may determine that regulatory text can be worded

more plainly and clearly, and some regulatory provisions can be

consolidated with others, or if they are provisions that are likely to

change frequently, these provisions (if not imposing binding

requirements) may be better left to non-regulatory sources (such as

notices, guidance documents, etc.) Accordingly, HUD may make

organizational changes (including streamlining and plain language

changes) at the final rule stage. Any comments on the organization of

this rule or the existing regulations is welcome.

II. Specific Changes to Admission and Occupancy Requirements

This section of the preamble discusses the changes made to

admission and occupancy requirements of the 1937 Act by the 1998 Act

and the regulatory changes that will be made as a result of the

statutory amendments. Some of these statutory sections were also

discussed in the Initial Guidance Notice on the 1998 Act, published in

the Federal Register on February 18, 1999 (64 FR 8192). For the

convenience of any reader who would like a reference to the discussion

of a certain section of the new statute provided in the Initial

Guidance Notice, this section provides the applicable reference.

Using Computer Matching Results (24 CFR 5.211) (Section 508 of the 1998

Act Amending Section 3 of the 1937 Act)

For some time, HUD has conducted a computer matching initiative to

provide one independent source for verifying resident income. HUD can

disclose the matched information to the PHAs, in the case of

information matched from Social Security records. Since HUD is

precluded by law from disclosing Federal tax return data to PHAs,

section 508 of the 1998 Act adds a requirement that when HUD notifies

an assisted family of information regarding family income, earnings,

wages, or unemployment compensation, the family must disclose the

information to the public housing agency. This rule adds a new section,

24 CFR 5.211 to implement these provisions.

The rule provides that once the family discloses the information to

the PHA, the PHA must review the information for accuracy and take

appropriate action. Appropriate action may include review of the

information with the tenant and changing the family's rent as needed.

If the PHA verifies a case of documented fraud, it should take action

to recover excess housing assistance received by the tenant due to

unreported income, or evict the tenant or terminate assistance, and

take other appropriate administrative or legal action. HUD will be

providing additional information on its computer matching initiative.

Section 508 of the Act was discussed in the Initial Guidance Notice

at 64 FR 8198, beginning in the middle column.

Change From HA to PHA (Sec. 5.214)

In the definitions provided in 24 CFR 5.214, HUD removes the

definition of ``HA.'' This acronym HA refers to a housing agency, which

was the collective term used by HUD to refer to both a public housing

agency and an Indian housing authority. The Native American Housing

Assistance and Self-Determination Act (NAHASDA) (Pub.L. 104-330,

approved October 26, 1996) eliminated several separate programs of

Indian housing assistance and replaced them with a single block grant

program. NAHASDA also provided that affordable housing assistance be

made directly to Federally-recognized tribes, which in turn may

designate a housing entity to act on their behalf by becoming the

NAHASDA block grant program recipient. The practical consequence is

that Indian housing authorities (or ``tribally designated entities'')

are now governed by separate regulations, implementing NAHASDA.

Therefore, the only remaining category of housing agency recognized

under the 1937 Act is a Public Housing Agency or ``PHA.'' HUD's rule

amending part 982, published elsewhere in today's Federal Register,

provides a broader definition for HA. At the final rule stage, the part

5 regulations may incorporate this definition.

Repeal of Preference for Elderly, Disabled, and Displaced Over Other

Singles (24 CFR 5.405, 960.407) (Section 506 of the 1998 Act Amending

Section 3(b) of the 1937 Act)

This rule removes the current regulatory giving preference to

elderly, disabled, or displaced families over other single persons in

all 1937 Act programs (Sec. 5.405(b)), in compliance with section 506

of the Act. In addition, this rule includes a conforming change to

remove the outdated public housing provisions (Sec. 960.407(b), (c),

and (d)). A PHA may continue to have this type of preference as part of

its local preference policies. If a PHA does not keep as its highest

preference a preference for elderly, disabled, or displaced families

over other singles as a local preference, the PHA will have to

rearrange its current waiting list.

Repeal of Federal Preferences in Admission and Selection for Assistance

(24 CFR 5.410-5.430, 960.204, 960.407) (Sections 514 and 545 of the

1998 Act Amending Sections 6 and 8 of the 1937 Act)

The Federal preferences, which have long applied to public housing

and Section 8 housing assistance payments programs, are repealed by the

1998 Act. The system of Federal preferences provided that some

significant portion of applicants who are involuntarily displaced,

living in substandard housing, or paying more than 50 percent of family

income for rent, were to be given preference in admission and selection

for assistance over other families. Congress had suspended this system

of preferences on an annual basis in appropriations acts beginning on

January 26, 1996, until this repeal.

Although the 1998 Act eliminates the Federal preferences, the Act

continues to allow PHAs to establish their own system for making

dwelling units or Section 8 assistance available to families having

certain characteristics, now requiring this system of preferences to be

linked to their PHA Annual Plan. Each PHA's system of preferences

established must be based upon local housing needs and priorities, as

determined by the PHA using generally accepted data sources, including

waiting list data and any information obtained during public comment on

the PHA Annual Plan and under the requirements applicable to the

Consolidated Plan (see 24 CFR part 91, subpart B). These requirements

are reflected in the PHA Plan interim rule.

The 1998 Act (in section 514) also includes a statement that a PHA

should consider preferences for individuals who are victims of domestic

violence, consistent with the PHA Annual Plan. Section 514(e) provides:

It is the sense of the Congress that, each public housing agency

involved in the selection of eligible families for assistance under

the United States Housing Act of 1937 (including residency in public

housing and tenant-based assistance under section 8 of such Act),

should, consistent with the public housing agency plan of the

agency, consider preferences for individuals who are victims of

domestic violence.

Under the rule, PHA policies may provide preferences for veterans,

as a needy population.

[[Page 23464]]

To implement the elimination of the Federal preferences, this rule

removes Secs. 5.415, 5.420, 5.425, and 5.430 and revises Secs. 960.204

and 960.407 to remove references to the term ``Federal preference.''

This rule also makes several changes to Sec. 5.410:

--It reflects the new link of a PHA's local preferences with the PHA

Annual Plan.

--For Section 8 programs other than the Certificate/Voucher, Project-

based Certificate, and Moderate Rehabilitation, it gives project owners

more flexibility in determining their own tenant selection plan. The

rule does the following:

(1) Continues the prohibition on use of residency requirements;

(2) Removes reference to use of the PHA's local preferences (which

was located in Sec. 5.410(d)(2)(iii)); and

(3) Specifically authorizes the owner to use a preference for

working families, providing it does not give greater weight to an

applicant based on the amount of the employment income.

This last provision is included in the revised Sec. 5.410(c)(1),

which preserves a responsible entity's authority to adopt a preference

for working families (currently found in Sec. 4.415(b)(1)), retaining

the reference to anti-skipping protections (currently found in

Sec. 5.410(e)(2)) in the revised Sec. 5.410(g). This authority for

working family preferences separate from any local preferences adopted

by a PHA is derived from section 513(c)(4) of the Act, which describes

the income targeting requirements for project-based Section 8 assisted

housing.

Sections 514 and 545 were discussed in the Initial Guidance Notice

at 64 FR 8200, beginning in the right hand column, and 64 FR 8207,

middle column, respectively.

Income Targeting (24 CFR 5.607) (Section 513 of the 1998 Act Amending

Section 16 of the 1937 Act)

The 1998 Act (section 513) completely revises the income targeting

provisions formerly found in section 16 of the 1937 Act.

For Public Housing

The 1998 Act imposes a general rule that not less than 40 percent

of admissions in any fiscal year must be families whose income does not

exceed 30 percent of median income for the area--``extremely low-income

families.'' The Act, however, allows a PHA to decrease the percentage

of extremely low-income families admitted to public housing if the PHA

has given new Section 8 tenant-based assistance to more than the

required number of extremely low-income families, subject to several

restrictions. Even in that event, the PHA cannot reduce the percentage

of extremely low-income families in public housing below 30 percent.

For Section 8 Project-Based Assistance

For Section 8 project-based assistance, the percentages of units to

which families with incomes higher than 50 percent of median income may

be admitted and the anti-skipping restriction remain the same. This

rule, however, adds a provision (Sec. 5.410(c)(1)) permitting owners to

adopt a preference for working families, as discussed above. This rule

also adds a new requirement for admission of at least 40 percent

extremely low-income families to a particular project in a fiscal year.

The income targeting requirements do not apply to project-based

assistance made available to prevent or ameliorate the effects of

displacement.

For Section 8 Tenant-Based Assistance

For Section 8 tenant-based assistance, PHAs must target 75 percent

of new admissions to extremely low income families. A PHA may use

admission of extremely low-income families in its section 8 tenant-

based program that exceed 75 percent of it admissions in a fiscal year

(``credit'') to reduce the number of admissions of extremely low income

families in its public housing program. This credit, however, must be

the lesser of: (1) 10 percent of the families initially given section 8

tenant-based assistance during the year; or (2) the number of families

who are not extremely low income and who have been admitted to public

housing in projects located in census tracts having a poverty rate of

30 percent or more.

Section 8 tenant-based assistance targeting requirements do not

apply to a low-income family that is ``continuously assisted'' under

the 1937 Act or to a low-income or moderate income family that is

displaced as a result of the prepayment of the mortgage or voluntary

termination of an insurance contract on eligible low-income housing.

New Definition Added

Because of the importance of the term ``extremely low-income

family,'' this rule adds a definition for this term in Sec. 5.603.

Facilitating Administration of Income Targeting

A PHA can facilitate administration of income targeting if it

applies these requirements on the same annual basis as the fiscal year

of its public housing or tenant-based program.

Section 513 was discussed in the Initial Guidance Notice at 64 FR

8199, right hand column.

Annual Income, Adjusted Income (24 CFR 5.603, 5.609, 5.611) (Section

508 of the 1998 Act amending Section 3 of the 1937 Act)

Exclusions Versus Deductions

HUD has long made a distinction between exclusions from income used

to determine ``annual income'' for eligibility, and deductions for use

in determining ``adjusted income,'' and therefore rent. Section 508 of

the 1998 Act changed the calculation of adjusted income by adding a

number of mandatory deductions to determine adjusted income, which in

some cases reflected HUD's exclusions from annual income. For example,

HUD's regulations already exclude from ``annual income'' the earned

income of minors. The Act adopted a mandatory deduction from income

used to calculate ``adjusted income'' for earned income of minors.

Given the statutory enactment of this as a deduction, this rule removes

the exclusion from annual income and places earned income of minors as

a deduction in calculating ``adjusted income,'' to avoid providing a

duplicate benefit on the same subject.

The 1998 Act adopted the requirement alaready found in HUD's

regulatory definition of ``child care expenses'' (in 24 CFR 5.603) that

they must be ``reasonable.'' The Act revised the definition of

dependents to include not only full-time students at traditional

educational institutions, but also persons pursuing full-time

vocational training. HUD's definition of ``full-time student'' (in 24

CFR 5.603) already included vocational training, but only in the

context of certificate granting vocational schools. In this rulemaking,

HUD revises the definition of ``full-time student'' (in Sec. 5.603) to

refer generally to ``vocational training.''

Permissive Deductions--Applicable to Public Housing Only

For public housing, the 1998 Act created deductions for PHAs to

use, if they so choose, to promote self-sufficiency and for other

purposes. A PHA that decides to provide permissive deductions must

describe its deductions in the agency's written policies. HUD cannot

assure the provision of additional subsidy to the PHA to cover reduced

income resulting from such permissive deductions, however.

The 1998 Act lists a number of examples of permissive deductions:

to

[[Page 23465]]

the extent these amounts have not already been deducted from annual

income or reimbursed to the family from other sources:

(1) Excessive travel expenses, in an amount not to exceed $25 per

family per week for travel related to employment, education, or

training.

(2) An amount of a family's earned income, based on any of the

following:

(i) All the earned income of the family;

(ii) The amount earned by particular members of the family;

(iii) The amount earned by families having certain characteristics;

or

(iv) The amount earned by families or members during certain

periods or from certain sources.

Other deductions include but are not limited to payroll deductions,

such as social security taxes, income taxes and medical insurance

premiums. In setting policies on permissive deductions, PHAs are

encouraged to coordinate with their local Temporary Assistance for

Needy Families (TANF) agencies to assure that assisted housing and TANF

support one another. The permissive deductions replace the current

optional exclusions from annual income for public housing. (The

proposed rule removes the optional exclusions from the definition of

annual income, 24 CFR 5.609.)

Section 508 was discussed in the Initial Guidance Notice at 64 FR

8198, middle column.

Minimum Rents (24 CFR 5.616) (Section 507 of the 1998 Act Amending

Section 3(a) of the 1937 Act)

Section 507 follows the previous statutory authority of requiring

minimum rents of up to $50 for public housing and the Section 8

certificate, voucher, and moderate rehabilitation programs. For section

8 project-based assistance, the minimum rent is $25. In the public

housing and the Section 8 programs other than the vouchers, ``minimum

rent'' refers to minimum total tenant payment (TTP) and not a minimum

tenant rent (TR). As provided in Sec. 5.613, the total tenant payment

is the highest of several calculations, one of which is the minimum

rent. So, for example, if 30 percent of a family's ``monthly adjusted

income'' were $42, and 10 percent of the family's unadjusted ``monthly

income'' were $20, and a PHA had set the minimum rent at $50, the

amount of the ``total tenant payment'' would be $50. What the family

paid (``tenant rent'') might be less or more than that, depending on

whether the family pays its own utilities. A family paying its own

utilities would be entitled to a utility reimbursement, if the utility

allowance were greater than the TTP.

Total Tenant Payment (TTP)

To remove current confusion in the old definition of TTP and

clarify that it applies to all programs, this rule changes the current

definition to include current statutory definitions and adding a

definition of minimum rent.

Section 507 of the Act was discussed in the Initial Guidance Notice

at 64 FR 8197, left hand column.

Self-Sufficiency Incentives--Public Housing Only (24 CFR 5.612)

(Section 508 of the 1998 Act Amending Section 3 of the 1937 Act)

Disallowance of Earned Income

For public housing only, the 1998 Act exempts earned income for

families who start work or self-sufficiency programs. The Act phases in

the impact on rent of an increase in earned income of certain families.

A PHA cannot increase a public housing family's rent for a period of 12

months if the increase in income results from (1) earnings of a

previously unemployed family member; (2) earnings of a family member

during participation in a self-sufficiency or job training program; or

(3) earnings of a family member that had been receiving welfare in the

previous six months. After the 12-month disallowance, a family's rent

increase must be phased in. The phased-in rent cannot increase as a

result of the earned income by more than 50 percent (50%) for an

additional 12 months. HUD is implementing this statutory provision by

directing PHAs not to increase the family's annual income, on which the

income-based rent is based, to reflect such an increase in income. The

actual change in family income will be recorded in the data system,

however. (New Sec. 5.612 reflects this change.)

As families move into the work force for the first time, they often

experience periods of employment and unemployment. The rule as proposed

does not place a limit on the number of times a family or an individual

can benefit from the disallowance of earned income; the 1998 Act

contains no specific limitations. HUD specifically asks for comments on

this subject, including limits on the number of times a family or

individual can take advantage of the disallowance.

Previous Earned Income Disregard

The income disregards formerly applicable only to public housing

(under 24 CFR 5.609) are being removed. These include PHA optional

exclusions from annual income. These exclusions are replaced with

similar permissive deductions reflected in the new definition of

adjusted income (24 CFR 5.611). Families who have been given optional

income exclusions under the old rules must be permitted to retain those

exclusions until the family's next annual reexamination.

The new 12-month disallowance (under 24 CFR 5.612) replaces the

current 18-month earned income disregard for persons going from

training programs to work (under 24 CFR 5.609(c)(13)). Families who

currently have an 18-month disregard, or who qualify for such disregard

on or before September 30, 1999, can continue that disregard for the 18

months or as long as they would have qualified under the old rule.

Individual Savings Account

Under the 1998 Act, PHAs may establish and maintain individual

savings accounts for public housing residents who pay income-based

rents. Where the PHA has a policy to offer individual savings accounts,

a family may choose an individual savings account instead of being

given the 12-month disallowance of earned income and phasing in of a

rent increase. Families who choose individual savings accounts would

pay the higher rent and the PHA would deposit the increased amount in

the savings account. Once established, a family could access the

account for purchasing a home, paying education costs, moving out of

public housing, or other purposes promoting self-sufficiency. PHAs are

not required to provide the savings account option. However, savings

accounts are a good way to help families reach self-sufficiency. If a

PHA offers savings accounts, the PHA needs to have written policies on

management of the accounts. (See 24 CFR 5.612 and 5.614(a)(2).) These

policies could be modeled after the Family Self-Sufficiency (FSS)

escrow accounts found at 24 CFR part 984 or Turnkey III accounts at 24

CFR part 904. At a minimum, a PHA savings account policy must: (1)

provide for payment of interest and annual notification to the resident

of account status; and (2) provide that any balance in such an account

when the family moves out is the property of the family.

Section 508 was discussed in the Initial Guidance Notice at 64 FR

8198, middle column.

[[Page 23466]]

Income Changes Resulting From Welfare Program Requirements (24 CFR

5.618) (Section 512 of the 1998 Act Amending Section 12 of the 1937

Act)

The 1998 Act addresses the interaction of welfare programs and

HUD's treatment of income for purposes of determining rent in the

public housing and Section 8 tenant-based assistance programs. The Act

provides (in section 12(d) of the 1937 Act) that a family's rent must

not be decreased as a result of a reduction in welfare benefits based

on either (1) fraud by a member of the family; or (2) the family's

failure to comply with the welfare program's requirement for work

activities or participation in an economic self-sufficiency program.

HUD is implementing this statutory provision by directing the

responsible entities not to reduce the family's annual income, on which

the income-based rent is based, to reflect such a reduction in welfare

benefits. The actual change in family income will be recorded in the

data system, however.

If a reduction in income results from the expiration of a lifetime

limit on benefits or a loss of benefits because of a durational time

limit on welfare benefits despite compliance with work requirements,

the rule directs the responsible entity to reflect the reduced income

in determination of the family's annual income.

In addition, when a family is adversely affected by reductions in

welfare benefits as described in this section, the rule requires the

responsible entity to notify families that they have the right to a

review through a grievance hearing in accordance with Sec. 966.55(e)

for public housing, or through the use of an informal hearing under

Sec. 982.555(a)(i) for section 8 tenant-based certificate and voucher

programs. (See the revision to Sec. 966.55(e) to reflect this for

public housing.)

The addition of a new Sec. 5.618, which applies to public housing

and Section 8 tenant-based programs, reflects treatment of welfare

benefit reductions.

Section 512 was discussed in the Initial Guidance Notice at 64 FR

8199, left hand column.

Rents in Public Housing (24 CFR 5.603, 5.614) (Section 523 of the 1998

Act Amending Section 3(a) of the 1937 Act)

Section 523 of the 1998 Act makes significant changes to the rents

charged for public housing units. Legislative history notes that the

current rent policies provides disincentives to work and upward

mobility. The Act gives PHAs significant flexibility to develop rent

policies to encourage self-sufficiency. In addition, public housing

residents can choose annually between paying an income-based rent or a

flat rent. Rent policies also can be used to help PHAs provide for

deconcentration of poverty and income mixing. Both income-based and

flat rents must be determined by the PHAs in accordance with their

written policies. (Rents are the subject of the new 24 CFR 5.614. In

this rule, HUD revises the definition of ``tenant rent'' in Sec. 5.603

to reflect the differences among the programs now that PHAs have

flexibility in determining rents in public housing.)

Income-Based Rents

In general, the monthly rental amount, including any applicable

utility allowance, calculated under this method must not exceed the

highest of the following: 30 percent (30%) of the family's monthly

adjusted income; 10 percent (10%) of the family's monthly income; or

the welfare rent, if applicable. The monthly rental amount cannot be

less than the minimum rent set by the PHA. The 1998 Act permits PHAs to

set income-based rents at an amount less than the maximum of 30 percent

of monthly adjusted income/10 percent of monthly income/welfare rent.

This gives PHAs considerable flexibility in setting income-based rent

structures. PHAs could set income-based rents at a fixed percentage

below 30 percent, could have a rent schedule which sets the same rent

amount for families whose income are within a certain income range,

impose ceiling rents, etc. HUD cannot assure PHAs that it can provide

additional subsidy to cover any reduced income resulting from such

policies. Future operating subsidy distribution is the subject of

negotiated rulemaking.

Flat Rents

Flat rents are intended as an incentive for residents to remain in

public housing after they have attained a level of self-sufficiency.

Working families will provide positive role models for other residents.

The Act requires flat rent be set at ``rental value,'' which HUD

interprets to be reasonable market value. In establishing reasonable

market value, PHAs should review rent of comparable units in the

community. A PHA must document its means for establishing the

reasonable market value. Methods that a PHA may consider in

establishing reasonable market value include using the area's Section 8

rent reasonableness survey for comparable developments. PHAs should

review their flat rents as often as necessary to assure they comply

with the regulatory requirements, but at least annually. HUD cannot

assure PHAs that it can provide additional subsidy to cover any reduced

income resulting from such policies. Future operating subsidy

distribution is the subject of negotiated rulemaking.

Family Choice

The 1998 Act requires PHAs to give families a choice among options

for rents. The options provided must include at least a flat rent and

an income-based rent. This choice must be given to each family

annually. PHAs must provide residents with enough information to make

an informed choice. For example, a PHA could provide the family both

the income-based rent and the flat rent for the unit. If the PHA has

not completed a current examination of the family's income (because the

family has been on flat rent and the PHA's policy is not to conduct

annual re-examinations on such families), the PHA should provide a

worksheet or other information on how income-based rent is determined

so the family could calculate its own income-based rent amount.

Switching Rent Methods to Lower Rent Because of Financial Hardship

The 1998 Act requires a PHA to immediately switch a family from a

flat rent to an income-based rent if the PHA determines that the family

has a financial hardship circumstance. The PHA must develop written

policies stating what the PHA will consider a financial hardship. The

PHA's policy must include situations in which the income of the family

has decreased because of loss or reduction of employment; death in the

family or loss of assistance; or increase in the family's expenses for

medical costs, child care, transportation, or education. PHAs can

include additional circumstances. Because the 1998 Act requires that

PHAs immediately switch rents, a PHA will need to conduct an

examination of the family's income in order to switch the rent as

quickly as possible, but the rent should be lowered no later than the

first of the month following the month the family reported the

hardship.

Retaining Ceiling Rents

The 1998 Act permits PHAs that currently have ceiling rents to

retain those rents instead of developing flat rents. HUD interprets

this to mean that PHAs may retain ceiling rent instead of flat rents

for three years, after which time those ceiling rents must be adjusted

to the same levels as required for flat rents. Ceiling rents are

subject to the limitations that a family cannot be required to pay more

than its income-based rent. Therefore, families with ceiling rents must

be given a reduced

[[Page 23467]]

rent if their income goes down. The PHA must continue to conduct annual

reexaminations of income for families who choose ceiling rents, since

the three year income review is not applicable to the ceiling rent

provision.

Section 523 was discussed in the Initial Guidance Notice at 64 FR

8202, right hand column.

New Community Service and Self-Sufficiency Requirements for Public

Housing (24 CFR 960.603-960.611) (Section 512 of the 1998 Act Amending

Section 12 of the 1937 Act)

Section 512 of the 1998 Act adds a new requirement for non-exempt

residents of public housing. Each non-exempt adult public housing

resident must contribute eight (8) hours for each month of community

service or participate in a self-sufficiency program for 8 hours in

each month. (The exemptions are discussed later in this section.)

Community service is service for which the individual volunteers. A new

subpart F is added to 24 CFR part 960, establishing the community

service and self-sufficiency requirements.

Each PHA Annual Plan must include a description of how the

community service and self-sufficiency requirements will be

implemented. The new subpart F of 24 CFR part 960 outlines basic

parameters for implementing the community service and self-sufficiency

requirement, while retaining flexibility for PHAs to develop

initiatives responsive to local circumstances. PHAs are encouraged to

partner with qualified resident councils or resident management

corporations, community and volunteer groups, or other third party

contractors to assist PHAs with program administration.

The Relationship of Community Service and Self-Sufficiency

Since community service is considered a tool to assist residents in

becoming responsible and self-sufficient, a number of community service

activities are considered self-sufficiency activities. A PHA policy may

provide for combining or substituting community service hours with

approved self-sufficiency hours to reach the 8 hour monthly

requirement.

Community Service

Community service offers public housing residents an opportunity to

contribute to the communities that support them. In establishing

community service policies, PHAs should not limit community service to

a single type of activity and/or a single location in which the

activity is to be performed. A PHA could include as community service

activities improving the physical environment of the resident's

development, volunteer work in a local school, hospital or child care

center, working with youth organizations, helping neighborhood groups

on special projects, or participation in programs that develop and

strengthen resident self-responsibility such as drug and alcohol abuse

counseling and treatment, household budgeting and credit counseling,

and English proficiency. The 1998 Act specifically prohibits political

activity as community service.

A PHA can administer its own community service program, form

cooperative relationships with other entities in order to make

opportunities available for residents or contract the entire community

service program to a third party, including qualified resident

councils. A PHA may use a combination of these options. A PHA must

ensure that its own community service programs as well as programs

developed through cooperative relationships or contracts with third

parties are accessible for persons with disabilities.

In administering its own program, a PHA or its authorized designee

identifies the most appropriate community service opportunities for

residents and directly supervises the performance of the community

service. This approach might include developing a directory of eligible

opportunities from which residents could select.

Instead of managing the entire process, a PHA could link residents

with agencies seeking volunteers. Under this approach, the PHA's

administrative duties would be limited to monitoring the

appropriateness of the service and confirming a resident's

participation.

Another alternative is for the PHA to contract with another entity

to run the community service program. The contract entity would then

perform all necessary administrative functions. The PHA would be

responsible to assure contract compliance. PHAs must follow their

procurement policies and 24 CFR 85.36 to contract out their community

service programs.

When for-profit third party contractors are used, the PHA should

ensure that the administrators overseeing the program do not have a

financial interest in the entity where community service participants

are assigned. The PHA also should ensure that the conditions under

which the work is to be performed are not otherwise hazardous, that the

work is not labor that would be performed by the PHA's employees

responsible for essential maintenance and property services, or that

the work is otherwise unacceptable. The Senate Committee Report on this

provision noted that community service is not to be perceived as

punitive or demeaning activity, but rather community service should be

considered as rewarding activity that will assist residents in

improving their own and their neighbors' economic and social well-being

and give residents a greater stake in their communities. (Senate Report

at pg 21).

Self-Sufficiency

Participation in self-sufficiency activities can satisfy part or

all of a resident's requirement to perform community service. A non-

exempt adult public housing resident may participate in an economic

self-sufficiency program for 8 hours in each month. The 1998 Act

defines economic self-sufficiency program to include activities that

are designed to encourage, assist, train or facilitate economic

independence. In setting policies for this requirement, PHAs are

encouraged to look at a broad range of self-sufficiency activities. In

addition to apprenticeships and job readiness training, such activities

as substance abuse and mental health counseling and treatment, English

proficiency, and household budgeting and credit counseling may be

considered activities which promote economic self-sufficiency. As with

community service, a PHA could operate its own economic self-

sufficiency program, develop linkages with other agencies (e.g., TANF),

or contract for services to be provided to its residents.

Geographic Location

The 1998 Act discusses the geographic location where the resident

must perform the community service or participate in the economic self-

sufficiency activity. The location includes PHA-owned property and the

community at large. The Congressional intent is that residents provide

service to their own communities. In rural areas, a resident's

community may encompass a large geographic area, while in dense urban

settings, the community may be a neighborhood. In its policy, a PHA

should make clear the meaning of ``community.''

Exemptions

The 1998 Act provides a list of exemptions to the requirement for

community services and economic self-sufficiency. These include adults

who are 62 years of age or older, persons with disabilities, persons

engaged in work activities (as defined by section

[[Page 23468]]

407(d) of the Social Security Act), and persons participating in a

welfare to work program, or receiving assistance from and in compliance

with a State program funded under part A, title IV of the Social

Security Act. (For purposes of the community service requirement, an

adult is a person 18 years or older.) PHAs need to develop policies and

procedures for determining and documenting residents' exemptions.

Generally PHAs should re-verify an adult's exemption status annually.

There are, of course, obvious exceptions. For example, an individual

exempt by being over 62 years in age would not need re-verification.

PHAs must establish policies that permit residents to change

exemption status during the year if their situation changes. Unemployed

residents, for example, must be able to request a determination of

exemption if they find work or start a training program.

Persons eligible for a disability deduction are not necessarily

automatically exempt from the community service, economic self-

sufficiency requirement. The 1998 Act defines ``disability'' very

narrowly for the purpose of the community service requirement. Further,

the Act states that a person is exempt only to the extent the

disability makes the person ``unable to comply'' with the community

service requirement. The PHA must ensure that the community service and

self-sufficiency programs are accessible to persons with disabilities.

The PHA must document all exemptions for the resident's file.

Policies must identify what kinds of documentation the PHA will accept.

Generally, PHAs should follow the same standards of documentation for

exemptions as they do for other verifications.

While the 1998 Act exempts categories of persons based on their

characteristics, such as age or employment, the Act does not exempt

adult residents of particular developments or kind of units. Therefore,

families who pay flat rent, live in public housing units within market

rate developments, or families who are over income when they initially

occupy a public housing unit are not automatically exempt.

Cooperative Relationships With Welfare Agencies

The 1998 Act calls upon all PHAs to make their best efforts to

enter into cooperative relationships with the agencies that provide

assistance to their clients. PHAs should seek and advocate for

agreements to target assistance to PHA clients. Agreements with such

agencies will not only facilitate exchange of information, they will

expand the choice of community service and self-sufficiency programs

available to PHA clients and facilitate coordination of those services.

As noted in the Initial Guidance Notice, the 1998 Act amends the Public

Housing Management Assessment Program (PHMAP) (and the successor

program--the Public Housing Assessment System (PHAS)) to include the

extent of a PHA's coordination, promotion or provision of effective

self-sufficiency programs.

Lease Requirements

Under the 1998 Act, public housing leases must have 12 month terms.

The lease must be automatically renewable except for noncompliance with

the community service requirements. An annual signing process is not

necessary. The public housing lease also must provide for termination

and eviction for noncompliance with the community service requirements.

Any lease changes (including addenda) must be made in accordance with

the provisions of 24 CFR 966.3, including notice to tenants and

opportunity for comment. The PHA must implement this provision for each

family at the family's next regularly scheduled annual reexamination on

or after October 1, 1999, and for families admitted after October 1,

1999. The PHA may not renew or extend the lease if a household contains

a nonexempt adult who has failed to comply with the community service

requirement.

Documentation

Reasonable documentation must be provided to verify the community

service requirements. The documentation must be placed in the

resident's file at the time of reexamination.

Noncompliance

Each PHA must determine, on an annual basis, if non-exempt

residents are in compliance. The PHA must have a policy which permits

noncompliant families to cure the noncompliance. Such a policy must

require the noncompliant adult and the head of household to sign an

agreement to make up the hours needed within the next 12-month period.

Continued noncompliance will result in eviction of the entire family,

unless the noncompliant family member is no longer a part of the

household.

Section 512 was discussed in the Initial Guidance Notice at 64 FR

8199, left hand column.

Occupancy by Police Officers and Over-Income Families (24 CFR Parts 5

and 960) (Sections 524 and 548 of the 1998 Act Amending Sections 3 and

8 of the 1937 Act)

Section 524 of the 1998 Act amends section 3(a) of the 1937 Act to

provide that PHAs and owners may allow police officers to reside in

public housing or assisted housing under the requirements of the

statute. Under this section, small PHAs may also rent units to over-

income families on a month-to-month basis, in accordance with statutory

requirements, if there are no eligible families applying for assistance

for that month, provided that the over-income family agrees to vacate

(with at least 30 days notice) when the unit is needed for an income-

eligible family. Section 548 of the Act provides for law enforcement

and security personnel in project-based section 8 housing assistance to

increase security.

Section 524 of the Act was discussed in the Initial Guidance Notice

at 64 FR 8202, right-hand column. Section 548 of the Act was discussed

in the Initial Guidance Notice at 64 FR 8204, middle column.

Changes to Existing Self-Sufficiency Programs--Public Housing and

Section 8 Certificate/Voucher Programs (24 CFR Part 984) (Section 509

of the 1998 Act Amending Section 23 of the 1937 Act)

Section 509 of the 1998 Act amended section 23 of the 1937 Act to

make several changes to the Family Self-Sufficiency Program, which were

effective on October 21, 1998. Section 509 provides that the mandatory

minimum FSS program size will not increase when a PHA receives

incremental Section 8 funding or public housing units on or after

October 21, 1998. Section 509 also allows PHAs to reduce their

mandatory minimum FSS program size obligation as families successfully

complete their FSS contracts.

HUD's regulations (24 CFR part 984) are amended to clarify that for

public housing, receipt of incremental housing units means reservation

of funds to acquire or construct additional public housing units on or

after October 21, 1998. Similarly, for Section 8 certificate and

voucher funding, receipt of funds means reservation of funds for the

Section 8 certificate and voucher programs. An expanded listing of

excluded funding categories that did not increase a PHA's mandatory

minimum program size is now included in 24 CFR 984.105. The regulations

in part 984 are also amended to clarify that PHAs may continue to

implement and administer

[[Page 23469]]

FSS programs larger than the required levels, and that HUD approval of

the PHA's FSS action plan authorizes the PHA to implement a voluntary

FSS program.

In addition, Sec. 984.306(b)(1) has been revised so that PHAs can

now approve a family's move outside the PHA's jurisdiction during the

first 12 months of a family's FSS contract of participation. The

regulatory definition of welfare assistance in Sec. 984.103 also has

been revised so that it does not disadvantage working families and

families with persons with disabilities.

Section 509 was discussed in the Initial Guidance Notice at 64 FR

8198, right hand column.

III. Findings and Certifications

Public Reporting Burden

The information collection requirements contained in Secs. 5.410,

5.612, 5.614, 5.616, 960.605, and 984.201 have been submitted to the

Office of Management and Budget (OMB) under the Paperwork Reduction Act

of 1995 (44 U.S.C. 3501-3520). In accordance with the Paperwork

Reduction Act, HUD may not conduct or sponsor, and a person is not

required to respond to, a collection of information unless the

collection displays a currently valid OMB control number.

Comments regarding the information collections contained in the

rule must be submitted by June 29, 1999. Comments on these information

collections should refer to the title of this rule and must be sent to:

Reports Liaison Officer, Mildred Hamman, Department of Housing and

Urban Development, 451 Seventh Street, SW, Room 4238, Washington, DC

20410.

Specifically, comments are solicited from members of the public and

affected entities concerning the proposed collection of information to:

(1) Evaluate whether the proposed collection of information is

necessary for the proper performance of the functions of the agency,

including whether the information will have practical utility;

(2) Evaluate the accuracy of the agency's estimate of the burden of

the proposed collection of information;

(3) Enhance the quality, utility, and clarity of the information to

be collected; and

(4) Minimize the burden of the collection of information on those

who are to respond, including through the use of appropriate automated

collection techniques or other forms of information technology, e.g.,

permitting electronic submission of responses.

The burden of the information collections is estimated as follows:

----------------------------------------------------------------------------------------------------------------

Number of Responses per Total ann. Hours per Total ann.

Section of 24 CFR respondents resp. responses response hours

----------------------------------------------------------------------------------------------------------------

5.410 (Resid. Prefs.)........... 3,400 1 3,400 16 54,400

5.611 New Deductions............ 3,400 1 3,400 8 27,000

5.612(c) Indiv Sav Accounts..... 8,000 1 8,000 2 16,000

5.614(c) Written Rent Options... 3,400 1 3,400 16 54,400

5.618(b) Welf. Rent Verif....... 3,400 1 3,400 3 10,200

5.618(c) Welf. Rent Notice...... 3,400 1 3,400 1 3,400

960.605(c) Comm Serv............ 3,400 1 3,400 1 3,400

984.201 FSS Action Plan 2577- .............. .............. .............. .............. ..............

0178 exp 7/31/99...............

960.505 Over Inc Fams in Small 500 1 500 1 500

PHAs...........................

-------------------------------------------------------------------------------

Total Burden................ .............. .............. .............. .............. 169,300

----------------------------------------------------------------------------------------------------------------

Regulatory Review

The Office of Management and Budget (OMB) reviewed this proposed

rule under Executive Order 12866, Regulatory Planning and Review. OMB

determined that this proposed rule is a ``significant regulatory

action,'' as defined in section 3(f) of the Order (although not

economically significant, as provided in section 3(f)(1) of the Order).

Any changes made to the proposed rule subsequent to its submission to

OMB are identified in the docket file, which is available for public

inspection in the office of the Department's Rules Docket Clerk, Room

10276, 451 Seventh Street, SW, Washington, DC 20410-0500.

Impact on Small Entities

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

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

doing certifies that this rule would not have a significant economic

impact on a substantial number of small entities. The proposed rule

begins the rulemaking process to implement changes to admission and

occupancy requirements in public housing made by the Quality Housing

and Work Responsibility Act of 1998. Although HUD has determined that

this proposed rule would not have a significant economic impact on a

substantial number of small entities, HUD welcomes comments regarding

any less burdensome alternatives to this rule that will meet HUD's

objectives as described in this preamble.

Environmental Impact

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. 4223). The Finding is available for public inspection

during regular business hours in the Office of the Rules Docket Clerk,

Office of General Counsel, Department of Housing and Urban Development,

Room 10276, 451 Seventh Street, SW, Washington, DC 20410.

Federalism Impact

The General Counsel, as the Designated Official for HUD under

Section 6(a) of Executive Order 12612, Federalism, has determined that

this proposed rule would not have federalism implications concerning

the division of local, State, and Federal responsibilities, and

therefore review under the order is not required. The proposed rule is

exclusively concerned with admission and occupancy requirements in

public housing. No programmatic or policy changes will result from this

rule that would affect the relationship between the Federal government

and State and local governments.

Unfunded Mandates Reform Act

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1532)

establishes requirements for Federal agencies to assess the effects of

their regulatory actions on State, local, and tribal governments and

the private sector. This proposed rule does not impose a Federal

mandate that will result in the expenditure by State, local, or tribal

[[Page 23470]]

governments, in the aggregate, or by the private secto, or $100 million

or more in any one year.

Catalog

The Catalog of Federal Domestic Assistance numbers for these

programs are 14.850, 14.855, and 14.857.

List of Subjects

24 CFR Part 5

Administrative practice and procedure, Aged, Claims, Drug abuse,

Drug traffic control, Grant programs--housing and community

development, Grant programs--Indians, Individuals with disabilities,

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

income housing, Mortgage insurance, Pets, Public housing, Rent

subsidies, Reporting and recordkeeping requirements.

24 CFR Part 960

Aged, Grant programs--housing and community development,

Individuals with disabilities, Public housing.

24 CFR Part 966

Grant programs--housing and community development, Public housing.

24 CFR Part 984

Grant programs--housing and community development, Rent subsidies,

Reporting and recordkeeping requirements.

Accordingly, HUD proposes to amend parts 5, 960, and 966 of title

24 of the Code of Federal Regulations as follows:

PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS

1. The authority citation for part 5 continues to read as follows:

Authority: 42 U.S.C. 3535(d), unless otherwise noted.

Subpart B--Disclosure and Verification of Social Security Numbers

and Employer Identification Numbers; Procedures for Obtaining

Income Information

2. Add a new Sec. 5.211, to read as follows:

Sec. 5.211 Disclosure of income matching information to the public

housing agency.

(a) Public housing residents and section 8 tenant-based

participants must disclose the letter and other information they

received from HUD regarding their income (under HUD's income

verification initiative) to the PHA.

(b) The PHA must verify the accuracy of the income data, change

rent amounts, or terminate assistance, as appropriate, when public

housing residents or Section 8 tenant-based participants disclose

income information, as described in paragraph (a) of this section.

Sec. 5.214 [Amended]

3. Amend Sec. 5.214 by removing the definition of ``HA''.

Subpart D--Definitions and Other General Requirements for

Assistance Under the United States Housing Act of 1937

Sec. 5.400 [Amended]

4. Amend Sec. 5.400 by removing the parenthetical phrase.

5. Amend Sec. 5.403 to add a definition of responsible entity, to

read as follows:

Sec. 5.403 Definitions.

* * * * *

Responsible entity means:

(1) For the public housing program, the Section 8 tenant-based

assistance program (part 982 of this title), the Section 8 project-

based certificate assistance program (part 983 of this title), and the

Section 8 moderate rehabilitation program (part 882 of this title), the

responsible entity means the PHA administering the program under an ACC

with HUD;

(2) For all other Section 8 programs, the responsible entity means

the Section 8 owner.

Sec. 5.405 [Amended]

6. Amend Sec. 5.405 as follows:

a. By removing from the last sentence of paragraph (a) the phrase:

``who are not elderly persons, or displaced persons, or persons with

disabilities'';

b. By removing paragraphs (b) and (d); and

c. By redesignating paragraph (c) as paragraph (b).

7. Revise Sec. 5.410, to read as follows:

Sec. 5.410 Selection preferences.

(a) Applicability. The preferences for admission to the various

programs differ. For each program, the preferences are administered by

the responsible entity.

(b) Local preferences in public housing. A PHA may establish a

system for admitting or selecting families for assistance that provides

preference to families having certain characteristics. A system of

preferences must be based on local housing needs and priorities, as

determined by the PHA using generally accepted data sources, including

waiting list and any information obtained during public comment on the

PHA Annual Plan and under the requirements applicable to the

Consolidated Plan. Additionally, consistent with the PHA's Annual Plan,

the PHA should consider preferences for individuals who are victims of

domestic violence.

(c) Preferences in project-based Section 8 assistance programs

other than project-based certificates and moderate rehabilitation. (1)

The responsible entity may give preference to working families. In

implementing a preference for working families, the responsible entity

is subject to the anti-skipping provision of paragraph (g) of this

section regarding income levels. (If a responsible entity adopts a

preference for working families, the entity must not give greater

weight to an applicant based on the amount of employment income, and an

applicant household must be given the benefit of the preference if the

head of the household, spouse, or sole member of the household is age

62 or older or is receiving social security disability benefits,

supplemental security income disability benefits, or any other payments

based on an individual's inability to work.) A responsible entity may

give preference to graduates of, as well as active participants in,

educational and training programs that are designed to prepare

individuals for the job market.

(2) Owners must develop a written tenant selection plan in

accordance with program requirements. Owners are permitted to use PHA

local preferences in their tenant selection plan. If an owner elects to

make use of local preferences established by a PHA, the tenant

selection plan must describe how any preferences will be used.

(d) Preference in the Section 8 tenant-based, project-based

certificate, and moderate rehabilitation programs. The PHA may

establish a system of local preferences for selection of families

admitted to the program that are consistent with the PHA Plan. (See

Secs. 982.207, 983.203, and 882.514 of this title.)

(e) Residency preferences. (1) Public housing. A preference for

admission or selection for assistance of families who reside anywhere

in a specified ``residency preference area'' is permitted to respond to

local needs and priorities. Applicants who are working or who have been

notified that they are hired to work in the residency preference area

must be treated as residents of the residency preference area, and a

residency preference may not be based on how long the applicant has

resided in or worked in the residency preference area.

(2) Section 8 programs other than tenant-based certificate/voucher,

project-based certificate, and moderate

[[Page 23471]]

rehabilitation programs. In these programs, local residency

requirements are prohibited.

(3) Section 8 certificate/voucher, project-based certificate, and

moderate rehabilitation programs. See Secs. 982.207(b), 983.203(a), and

882.514(b) of this title.

(f) Use of other factors in public housing and project-based

Section 8 housing. The responsible entity may, in selecting a family

for a particular unit, match other characteristics of the applicant

family with the type of unit available, for example, number of

bedrooms. In selection of a family for a unit that has special

accessibility features, the responsible entity must give preference to

families who include persons with disabilities and can benefit from

those features of the unit (see Secs. 8.27 and 100.202 of this title).

Also, in selection of a family for a unit in a public housing mixed

population project, the responsible entity must give preference to

elderly families and disabled families (see, for example, subpart D of

part 960 of this title).

(g) Section 8 income-based admission. In Section 8 programs, the

responsible entity may not select an applicant for admission in an

order different from the order on the waiting list for the purpose of

selecting a relatively higher income family for admission.

(h) Informing applicants about admission preferences. (1) The

responsible entity must inform all applicants about available

preferences and must give applicants an opportunity to show that they

qualify for available preferences.

(2) If the responsible entity determines that the notification to

all applicants on a waiting list required by paragraph (h)(1) of this

section is impracticable because of the length of the list, the

responsible entity may provide this notification to fewer than all

applicants at any given time.

* * * * *

Secs. 5.415, 5.420, 5.425, and 5.430 [Removed]

8. Remove Secs. 5.415, 5.420, 5.425, and 5.430.

Subpart F--Income Limits, Annual Income, Rent and Examinations for

the Public Housing and Section 8 Programs

9. Amend Sec. 5.601 as follows:

a. Revise the heading of Sec. 5.601;

b. Remove existing paragraphs (a)(2)(iii) and (b);

c. Redesignate the introductory text of paragraph (a) as new

paragraphs (a) and (b), introductory text;

d. Redesignate paragraphs (a)(1) through (a)(3) as paragraphs

(b)(1) through (b)(3);

e. Add new paragraphs (c) and (d).

The revised heading of Sec. 5.601, revised paragraphs (a) and (b),

introductory text, and new paragraphs (c) and (d) read as follows:

Sec. 5.601 Purpose, applicability and reporting.

(a) Purpose. This subpart provides the definitions and requirements

for income limits for admission, annual income, adjusted income, total

tenant payments, utility allowances and reimbursements, and

reexamination of income and family composition for the programs listed

in paragraph (b) of this section.

(b) Programs covered. This subpart covers the following HUD

programs:

(1) * * *

* * * * *

(c) Income eligibility for assistance. No family other than a low-

income family shall be eligible for admission to a program covered by

this subpart, unless otherwise determined by HUD.

(d) Reporting. PHAs and owners must comply with HUD-prescribed

reporting requirements that will permit HUD to maintain the data

necessary to monitor compliance with the income eligibility

restrictions of this subpart.

(Approved by the Office of Management and Budget under Control

number 2502-0204)

10. In Sec. 5.603, revise the definitions of full-time student, and

tenant rent, and add definitions of extremely low-income family and

responsible entity, to read as follows:

Sec. 5.603 Definitions.

* * * * *

Extremely low-income family. A family whose annual income does not

exceed 30 percent of the median income for the area, as determined by

HUD, with adjustments for smaller and larger families.

* * * * *

Full-time student. A person who is attending school or vocational

training on a full-time basis.

* * * * *

Responsible entity. For the public housing and the Section 8

tenant-based assistance (part 982 of this title), project-based

certificate assistance (part 983 of this title) and moderate

rehabilitation program (part 882 of this title), the responsible entity

means the PHA administering the program under an ACC with HUD. For all

other Section 8 programs, the responsible entity means the Section 8

owner.

* * * * *

Tenant rent. The amount payable monthly by the family as rent to

the unit owner (Section 8 owner or PHA in public housing).

* * * * *

Sec. 5.605 [Removed]

11. Remove Sec. 5.605.

12. Revise 5.607 to read as follows:

Sec. 5.607 Income Limits for Admission.

(a) Public housing.--(1) Income mix. For admission to a PHA's

public housing unit, the PHA may establish and use criteria for

selection of residents for units in public housing developments that

will produce a mix of incomes in the developments, subject to the

provisions of this section. (The PHA's admissions policies that are

designed to deconcentrate poverty and to bring a mix of incomes into

developments are an element of its PHA Plan, part 903 of this title.)

(2) Targeting.--(i) General. At least 40 percent of the admissions

to the public housing program in each fiscal year must be extremely low

income families, as defined in Sec. 5.603.

(ii) Exceptions. ``Credit'' provisions of paragraph (d) of this

section permit the level of extremely low income families admitted to

other HUD programs in a given fiscal year to affect the general

targeting requirement for admissions to public housing.

(3) Prohibition. In complying with paragraph (a)(2) of this

section, the PHA must not concentrate very low-income families in one

public housing development or one building within a development. For

this purpose, very low-income families includes other families with

relatively low incomes.

(4) Effect of Section 8 tenant-based assistance on public housing

targeting. The PHA may reduce the required number of public housing

units to which extremely low-income families must be admitted to the

extent the PHA has credits, in the same fiscal year, for admissions of

extremely low-income families to its Section 8 tenant-based assistance

program beyond the number required for that program.

(i) Maximum number of credits. The PHA may not have more credits

than the lesser of:

(A) Ten percent of the total number of families admitted to the

Section 8 tenant-based assistance program during the fiscal year; or

(B) The number of the PHA's public housing units in projects

located in census tracts with a poverty rate of 30 percent or more that

are made available and filled by eligible families who are not

extremely low-income families.

[[Page 23472]]

(ii) Limitation on use of credits. In any fiscal year, at least 30

percent of a PHA's admissions to public housing units must be extremely

low-income families, despite the availability of credits.

(b) Section 8 tenant-based assistance. (1) Targeting. Not less than

75 percent of the families admitted to a PHA's tenant-based Section 8

program during the PHA fiscal year must be families whose annual income

does not exceed the following amounts as determined by HUD:

(i) 30 percent of the area median income, with adjustments for

smaller and larger families; or (ii) A higher or lower percent of the

area median income, if HUD determines a higher or lower percent is

necessary because of unusually high or low family incomes.

(2) Conversion of assistance. Conversion of assistance for a

participant in the PHA certificate program to assistance in the PHA

voucher program does not count as an ``admission,'' and is not subject

to targeting under paragraph (b)(1) of this section.

(3) Inapplicability of targeting. Admission of the following

categories of families is not subject to targeting under paragraph

(b)(1) of this section:

(i) A low-income family that is continuously assisted under the

1937 Act; or

(ii) A low-income or moderate-income family that is displaced as a

result of the prepayment of the mortgage or voluntary termination of an

insurance contract on eligible low-income housing, as defined at

Sec. 248.101 of this title.

(4) Jurisdictions served by more than one PHA. If two or more PHAs

that administer Section 8 tenant-based assistance have an identical

jurisdiction, these PHAs shall be treated as a single PHA for purposes

of meeting the targeting requirements of this section. In such a case,

the PHAs shall cooperate to assure that aggregate admissions by such

PHAs comply with the targeting requirement under paragraph (b)(1) of

this section. If such PHAs do not have a single fiscal year, HUD will

determine which PHA's fiscal year is used for this purpose.

(5) Use of family's income. The annual income (gross income) of an

applicant family is used both for determination of income-eligibility

under Sec. 5.601(c) and for PHA income-targeting under paragraph (b)(1)

of this section.

(c) Section 8 project-based assistance. (1) Applicability. Income

limits established by paragraph (c)(2) of this section apply to the

following programs:

(i) Section 8 New Construction or Substantial Rehabilitation (parts

880 and 881 of this title);

(ii) Section 8 Property Disposition and Loan Management Set-Aside

(part 886 of this title);

(iii) Section 8 Project-Based Certificate (part 983 of this title);

(iv) Section 8 Moderate Rehabilitation (part 882 of this title);

(v) Low-income housing preservation program (LIHPRA or ELIHPA, in

effect before November 28, 1990); and

(vi) Section 8 following conversion from the Rent Supplement or

Section 236 Rental Assistance Payments programs.

(2) Targeting. At least 40 percent of families admitted to a

project in a fiscal year must be extremely low-income families.

(3) Limitation on admission of non- very low-income families.--(i)

Admission to units available before October 1, 1981. Not more than 25

percent of the dwelling units that were available for occupancy under

Annual Contributions Contracts (ACC) and Section 8 Housing Assistance

Payments Contracts taking effect before October 1, 1981 and that are

leased on or after that date shall be available for leasing by low-

income families other than very low-income families. HUD reserves the

right to limit the admission of low-income families other than very

low-income families to these units.

(ii) Admission to units available on or after October 1, 1981. Not

more than 15 percent of the dwelling units that initially become

available for occupancy under Annual Contributions Contracts (ACC) and

Section 8 Housing Assistance Payments (HAP) Contracts on or after

October 1, 1981 shall be available for leasing by low-income families

other than very low-income families. Except with the prior approval of

HUD under paragraphs (d) and (e) of this section, no low-income family,

other than a very low-income family shall be admitted to these units.

(iii) Request for exception. A request by a PHA or owner for

approval of admission of low-income families other than very low-income

families to units described in paragraph (c)(3)(ii) of this section

must state the basis for requesting the exception and provide

supporting data. Bases for exceptions that may be considered include

the following:

(A) Need for admission of a broader range of tenants to preserve

the financial or management viability of a project because there is an

insufficient number of potential applicants who are very low-income

families;

(B) Commitment of an owner to attaining occupancy by families with

a broad range of incomes; and

(C) Project supervision by a State Housing Finance Agency having a

policy of occupancy by families with a broad range of incomes supported

by evidence that the Agency is pursuing this goal throughout its

assisted projects in the community, or a project with financing through

Section 11(b) of the 1937 Act (42 U.S.C. 1437i) or under Section 103 of

the Internal Revenue Code (26 U.S.C. 103).

(iv) Action on request for exception. Whether to grant any request

for exception is a matter committed by law to HUD's sole discretion,

and no implication is intended to be created that HUD will seek to

grant approvals up to the maximum limits permitted by statute, nor is

any presumption of an entitlement to an exception created by the

specification of certain grounds for exception that HUD may consider.

HUD will review exceptions granted to owners at regular intervals. HUD

may withdraw permission to exercise those exceptions for program

applicants at any time that exceptions are not being used or after a

periodic review, based on the findings of the review.

Sec. 5.609 [Amended]

13. Amend Sec. 5.609 as follows:

a. Redesignate the introductory text of existing paragraph (b)(6)

except heading as paragraph (b)(6)(ii) and redesignate existing

paragraph (b)(6) (i) and (ii) as paragraphs (b)(6)(ii) (A) and (B).

b. Add, after the heading of paragraph (b)(6), a new paragraph (i)

to read as follows:

* * * * *

(b) * * *

(6) * * * (i) The amount of reduced welfare income that is

disregarded specifically because the family engaged in fraud or failed

to comply with an economic self-sufficiency or work activities

requirement.

* * * * *

c. Remove paragraphs (c)(1) and (c)(13) and renumber the remaining

paragraphs as (c) (1) through (15).

d. Remove paragraph (d) and redesignate paragraph (e) as paragraph

(d).

14. Revise Sec. 5.611 to read as follows:

Sec. 5.611 Adjusted income.

Adjusted income means annual income (as determined by the PHA) of

the members of the family residing or intending to reside in the

dwelling unit, after making the following deductions:

(a) Mandatory deductions. In determining adjusted income, a PHA

[[Page 23473]]

must deduct the following amounts from annual income:

(1) $480 for each dependent;

(2) $400 for any elderly family or disabled family;

(3) The sum of the following, to the extent the sum exceeds three

percent of annual income:

(i) Unreimbursed medical expenses of any elderly family or disabled

family; and

(ii) Unreimbursed reasonable attendant care and auxiliary apparatus

expenses for each member of the family who is a person with a

disability, to the extent necessary to enable any member of the family

(including the member with a disability) to be employed;

(4) Any reasonable child care expenses necessary to enable a member

of the family to be employed or to further his or her education; and

(5) The amount of any earned income of a family member (other than

the family head or spouse) who is not 18 years of age or older.

(b) Permissive deductions--for public housing only. A PHA may

establish other deductions from annual income. The PHA must identify

these deductions in its written policies and must grant them to every

family who qualifies.

15. Add a new Sec. 5.612 to read as follows:

Sec. 5.612 Self-Sufficiency incentives--applicable to public housing

only.

(a) Limit on rent increases. The PHA must not increase the annual

income of an eligible family as a result of increased income due to

employment during the 12-month period beginning on the date on which

the employment is commenced. Eligible families are those that reside in

public housing:

(1) Whose income increases as a result of employment of a family

member who was previously unemployed for one or more years. For

purposes of this section, ``previously unemployed'' includes a person

who has earned, in the previous twelve months, no more than would be

received for 10 hours of work per week for 50 weeks at the established

minimum wage.

(2) Whose employment income increases during the participation of a

family member in any family self-sufficiency or other job training; or

(3) Who is or was, within 6 months, assisted under any state

program for temporary assistance for needy families funded under Part A

of Title IV of the Social Security Act, as determined by the PHA in

consultation with the local TANF agency, and whose earned income

increases.

(b) Phase-in of rent increases. Upon expiration of the 12-month

period described in paragraph (a) of this section, the rent payable by

a family may be increased due to continued employment of a family

member except that for the 12-month period following expiration of the

12 month disallowance, the increase may not be greater than 50 percent

of the amount of the total rent increase.

(c) Individual Savings Accounts. As an alternative to the

disallowance of earned income described in paragraph (a) of this

section or the phase-in of rent increase described in paragraph (b) of

this section, a PHA may provide for individual savings accounts for

public housing residents who pay an income-based rent, in accordance

with a written policy, which must include the following provisions:

(1) The PHA must advise the family that the savings account option

is available;

(2) At the option of the family, the PHA must deposit in the

savings accounts an amount equal to the total amount that otherwise

would have been applied to the family's rent payment as a result of

employment;

(3) Amounts deposited in a savings account may be withdrawn only

for the purpose of:

(i) Purchasing a home;

(ii) Paying education costs of family members;

(iii) Moving out of public or assisted housing; or

(iv) Paying any other expense authorized by the PHA for the purpose

of promoting the economic self-sufficiency of residents of public

housing.

(4) The PHA must maintain the account in an interest bearing

investment and must credit the family with the interest income; and

(5) At least annually the PHA must provide the family with a report

on the status of the account.

(6) The PHA must provide that any balance in such an account when

the family moves out is the property of the family unless the family is

not in compliance with the lease.

16. Revise Sec. 5.613 to read as follows:

Sec. 5.613 Total tenant payment.

(a) Total tenant payment is the highest of the following amounts,

rounded to the nearest dollar:

(1) 30 percent of the family's monthly adjusted income;

(2) 10 percent of the family's monthly income;

(3) If the family is receiving payments for welfare assistance from

a public agency and a part of those payments, adjusted in accordance

with the family's actual housing costs, is specifically designated by

such agency to meet the family's housing costs, the portion of those

payments which is designated for housing; or

(4) Minimum rent, in accordance with applicable provisions of

Sec. 5.616.

(b) If the family's welfare assistance is ratably reduced from the

standard of need by applying a percentage, the amount calculated under

paragraph (a)(3) of this section is the amount resulting from one

application of the percentage.

17. Add a new Sec. 5.614 to read as follows:

Sec. 5.614 Choice of rent in public housing.

(a) The amount payable monthly by the family as rent to the PHA is

the rent selected annually by the family from the options offered under

the PHA's rent policies. The options must include:

(1) Flat rent. A flat rent is the amount of tenant rent based on

the market value of the unit, as determined by the PHA. The flat rent

is designed to encourage self-sufficiency and to avoid creating

disincentives for continued residency by families who are attempting to

become economically self-sufficient. A PHA must take reasonable steps

to determine market value, and generally should use a comparability

study. The comparability study would analyze relevant factors for the

community in which the unit is located, including unassisted rents for

housing of similar age, location, condition, amenities, design and

size. The PHA must maintain records regarding the calculation and

establishment of flat rents; and

(2) Income-based rent. An income-based rent is the amount of tenant

rent based on the family's income, as determined by the PHA, and the

PHA's rent policies, which may specify a percentage of family income, a

schedule of amounts, or some other feasible system. The income-based

rent, including any applicable utility allowance, must not exceed the

total tenant payment. A PHA may administer income-based rents in a way

that involves depositing a portion of the tenant rent to an escrow or

savings account, imposing a ceiling on tenant rents, adopting

permissive income deductions (24 CFR 5.611(b)), or other reasonable

amounts, as long as the tenant rent plus any utility allowance does not

exceed total tenant payment. (See Sec. 5.611(b).)

(b) Ceiling rent. A PHA may retain ceiling rents instead of flat

rents for a period of three years from [insert effective date of final

rule]. After this three year period, the PHA must adjust the ceiling

rents to the same level as flat

[[Page 23474]]

rents under this section; however, ceiling rents are subject to

paragraph (a) of this section, the annual reexamination requirements,

and the limitation that the tenant rent plus any utility allowance may

not exceed the total tenant payment.

(c) Information for families. For the family to make an informed

choice about its rent options, the PHA must provide sufficient

information for an informed choice. Such information must include at

least the following information:

(1) The dollar amounts of tenant rent for the family under each

option; and

(2) The PHA's policies on switching type of rent in circumstances

of financial hardship.

(d) Changing type of rental payment. If the PHA determines that the

family is unable to pay the flat rent because of financial hardship,

the PHA must immediately switch the family's rental payment from flat

rent to income-based rent.

(e) Written policies on financial hardship. The PHA must establish

written policies for determining financial hardship circumstances.

Policies must include situations in which the family:

(1) Has experienced a decrease in income because of changed

circumstances, loss or reduction of employment, death in the family,

and reduction in or loss of earnings or other assistance;

(2) Has experienced an increase in expenses, because of changed

circumstances, for medical costs, child care, transportation,

education, or similar items; and

(3) Such other situations determined by the PHA to be appropriate.

18. Add a new Sec. 5.616, to read as follows:

Sec. 5.616 Minimum rent.

(a) Minimum rent. A family must pay at least a minimum rent,

established by the responsible entity. For public housing and the

section 8 certificate, voucher and moderate rehabilitation programs,

the PHA may establish a minimum rent of $0 to $50. For other section 8

programs, the amount is $25. This minimum rent includes tenant rent

plus any utility allowance. The responsible entity must grant an

exemption from payment of this minimum rent if the family is unable to

pay that rent as a result of financial hardship, as described in the

responsible entity's written policies.

(b) Financial hardship. The financial hardships that must be

included are the following:

(1) When the family has lost eligibility for or is awaiting an

eligibility determination for a Federal, State, or local assistance

program;

(2) When the family would be evicted as a result of the imposition

of the minimum rent requirement;

(3) When the income of the family has decreased because of changed

circumstances, including loss of employment;

(4) When a death has occurred in the family; and

(5) Other circumstances determined by the responsible entity or

HUD.

(c) Request for hardship exemption.--(1) For public housing. (i) If

a family requests a hardship exemption, the PHA must suspend the

minimum rent requirement immediately, until the PHA determines whether

there is a qualifying financial hardship and whether the hardship is

long-term.

(ii) If the PHA determines that there is a qualifying hardship, but

that it is temporary, the PHA reinstates the minimum rent from the time

of suspension. The PHA cannot evict the family for nonpayment of the

amount of minimum rent in excess of tenant rent otherwise payable

during the 90-day period beginning on the date the family requested an

exemption. The PHA must offer the family a reasonable repayment

agreement for the amount of back rent owed.

(2) For section 8 certificate, voucher and moderate rehabilitation

programs and project-based section 8 assistance. (i) If a family

requests a hardship exemption, the responsible entity must suspend the

minimum rent requirement beginning the month following the family's

hardship request until the responsible entity determines whether there

is a qualifying financial hardship and whether it is temporary or long

term.

(ii) If the responsible entity determines that there is a

qualifying financial hardship, but that it is temporary, the

responsible entity may not impose a minimum rent for a period of 90

days from the date of the family's request. At the end of the 90-day

suspension period, a minimum rent is imposed retroactively to the time

of suspension. The family must be offered a responsible repayment

agreement for the amount of back rent owed.

(3) For all programs. (i) If the responsible entity determines

there is no qualifying hardship exemption, the responsible entity must

reinstate the minimum rent including the back payment for minimum rent

from the time of suspension on terms and conditions established by the

responsible entity.

(ii) If the responsible entity determines there is a qualifying

long-term financial hardship, the responsible entity must exempt the

family from the minimum rent requirements.

(d) Appeal of financial hardship determination. A family who

appeals a financial hardship determination through the public housing

grievance procedure is exempt from any escrow deposit that may be

required by the regulations governing these procedures.

19. In Sec. 5.617, revise paragraph (a); redesignate existing

paragraph (b) as paragraph (c); and add a new paragraph (b), to read as

follows:

Sec. 5.617 Redetermination and verification of family income and

composition.

(a) Initial determination and regular redeterminations.--(1)

Section 8. The responsible entity must conduct a redetermination of

family income and composition at least annually.

(2) Public housing. (i) For families who pay an income-based rent,

the PHA must conduct a redetermination of family income and composition

at least annually and must make appropriate adjustments in the rent

after consultation with the family and upon verification of the

information.

(ii) For families who choose flat rents, the PHA must review the

income of the family in accordance with the PHA's established policies,

at least once every three years.

(iii) For all families who include nonexempt individuals, as

defined in 24 CFR 960.602, the PHA must determine compliance once each

12 months with community service and self-sufficiency requirements in

24 CFR 960, subpart F.

(iv) The PHA may use the results of these evaluations to require

the family to move to an appropriate size unit.

(b) Interim redeterminations.--(1) When the redetermination is

conducted. A family may request an interim redetermination of family

income or composition because of any changes since the last

determination. The responsible entity must make the interim

redetermination within a reasonable time after the family request. The

responsible entity may adopt policies prescribing when and under what

conditions the family must report a change in family composition.

(2) How the redetermination is conducted. In the case of a PHA,

interim redeterminations must be conducted consistent with policies in

its PHA Annual Plan. The change in income is annualized, even if the

income is not expected to last for a full year. If the income changes

again, the new amount

[[Page 23475]]

of monthly income will be annualized again.

* * * * *

20. Add a new Sec. 5.618, to read as follows:

Sec. 5.618 Treatment of income changes resulting from welfare program

requirements for public housing and section 8 tenant-based programs.

(a) General. A responsible entity must not reduce the annual income

of a family residing in public housing or reduce the contribution

toward rent of a family receiving Section 8 tenant-based assistance

because of a reduction in the family's welfare assistance specifically

because of fraud or failure to participate in an economic self-

sufficiency program or comply with a work activities requirement. A

reduction in welfare assistance is not to be treated as failure to

participate in an economic self-sufficiency program or to satisfy a

work activities requirement if the reduction results from:

(1) The expiration of a lifetime limit on receiving benefits;

(2) When a family has sought but cannot find employment; or

(3) The family has complied with welfare program requirements but

loses welfare because of a durational time limit such as a cap on

welfare benefits for a period of no more than two years in a five-year

period.

(b) Verification. When a family requests a rent reduction based on

a reduction in family income from welfare, the responsible entity must

obtain written verification from the welfare agency of the basis for

the reduction. If the reduction is specifically the result of the

family's failure to participate in an economic self-sufficiency program

or comply with work activities requirements or fraud by the family, the

responsible entity must not reduce the family's rent.

(c) Notification to families. Responsible entities must notify

families who are adversely affected by the requirements of this section

that they have the right to review through the PHA's grievance

procedure (for public housing) without paying a deposit in escrow, or

through use of the informal hearing procedure under 24 CFR

982.555(a)(i) (for Section 8 tenant-based certificate and voucher

programs).

21. Add a new Sec. 5.619, to read as follows:

Sec. 5.619 Occupancy by police officers in public housing and section

8 project-based housing.

(a) Public housing--(1) Police officer. A person determined by the

PHA to be, during the period of residence of that person in public

housing, employed on a full-time basis as a duly licensed professional

police officer by a Federal, State or local government or by any agency

of these governments. An officer of an accredited police force of a

housing agency may qualify.

(2) Occupancy in public housing. For the purpose of increasing

security for the residents of a public housing development, the PHA may

allow police officers who would not otherwise be eligible for public

housing, to reside in a public housing dwelling unit. The PHA must

include in its PHA Annual Plan the number and location of the units to

be occupied by police officers, and the terms and conditions of their

tenancies.

(b) Section 8 project-based housing--(1) Police officer (including

security personnel). To be considered eligible for occupancy in section

8 project-based housing, the police officer must be employed full time

(not less than 35 hours per week) by a governmental unit or a private

employer and compensated expressly for providing police or security

services.

(2) Occupancy in section 8 project-based housing. (i) Owners must

submit a written plan to their local HUD Field Office for authorization

to lease an available unit to over-income police officers. The owner's

application must include:

(A) A statement detailing existing social and physical conditions

of the property and the owner's informed assessment of the need for

crime deterrence for that property;

(B) A statement of the anticipated benefits that the presence of

police officers will create at the property and in the community;

(C) A description of the proposed gross rent for the unit and any

special conditions for occupancy, including the rent that would

ordinarily be charged for the unit and the owner's annual maintenance

cost for the unit (this rent may be a flat rent and not related to the

income of the police officer);

(D) The terms of the lease including a provision that states that

the police officer's right of occupancy is dependent on the

continuation of the employment that qualified the officer for residency

in the property under the plan;

(ii) An owner may not offer a unit to a police officer if the

officer would displace an income eligible tenant from leasing the

available unit, or would require an existing tenant to move to make the

unit available to the officer.

PART 960--ADMISSION TO, AND OCCUPANCY OF, PUBLIC HOUSING

22. The authority citation for part 960 continues to read as

follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437n, and 3535(d).

Subpart B--Admission, Rent and Reexamination

Sec. 960.204 [Amended]

23. Amend Sec. 960.204 by removing from paragraph (a)(2)(iii) the

phrase ``federal preference, ranking preference, or local'', in

paragraph (a)(3)(ii) by adding a semicolon after the words ``waiting

list'', and by removing the remainder of paragraph (a)(3)(ii).

24. Revise Sec. 960.209 to read as follows:

Sec. 960.209 Regular and interim redeterminations and verification of

family income and composition.

The PHA must conduct regular and interim redeterminations of family

income and composition in accordance with Sec. 5.617 of this title.

Subpart D--Preference for Elderly Families and Disabled Families in

Mixed Population Projects

25. Revise Sec. 960.407 to read as follows:

Sec. 960.407 Selection preference for mixed population projects.

(a) The PHA must give preference to elderly families and disabled

families equally in determining priority for admission to mixed

population projects. The PHA may not establish a limit on the number of

elderly families or disabled families who may be accepted for occupancy

in a mixed population projects.

(b) In offering available units to elderly families and disabled

families in mixed population projects, the PHA should first offer units

with accessible features to persons with disabilities who require the

accessibility features of the unit, in accordance with the requirements

of Secs. 8.27 and 100.202(c)(3) of this title.

26. Revise subpart E to read as follows:

Subpart E--Occupancy by Over-Income Families

Sec.

960.503 Definitions.

960.505 Occupancy by over-income families in certain public

housing.

[[Page 23476]]

Subpart E--Occupancy by Over-Income Families

Sec. 960.503 Definitions.

Eligible families. Families who are eligible for residence in

public housing assisted under the United States Housing Act of 1937 (42

U.S.C. 1437).

Over-income family. An individual or family who is not a low-income

family at the time of initial occupancy.

Sec. 960.505 Occupancy by over-income families in certain public

housing.

A PHA that owns or operates fewer than two hundred fifty (250)

units, may rent a unit in a public housing development to an over-

income family, in accordance with its PHA Annual Plan, under the

following circumstances.

(a) There are no eligible families on the waiting list; or

(b) There are no eligible families applying for assistance in that

month;

(c) Before offering the unit to an over-income family, the PHA

publicizes the availability of the unit for eligible families--

including publishing a thirty (30) day notice in one newspaper of

general circulation;

(d) The over-income family rents the unit on a month-to-month basis

for a rent charge that is not less than the cost to operate the unit;

(e) The over-income family signs an agreement to vacate the unit

when needed by an eligible family; and

(f) The PHA gives the over-income family notice to vacate the unit

when the unit is needed for an eligible family, and this notice is

given at least thirty (30) days before the over-income family is to

vacate.

27. Add a new subpart F to read as follows:

Subpart F--Community Service and Self-Sufficiency Requirements

Sec.

Sec. 960.603 Definitions.

Sec. 960.605 General requirements.

Sec. 960.607 Determining resident noncompliance.

Sec. 960.609 Prohibition against replacement of employees.

Sec. 960.611 Third-party coordinating.

Subpart F--Community Service and Self-Sufficiency Requirements

Sec. 960.603 Definitions.

Exempt individual. An adult who is:

(1) 62 years or older;

(2) Is a person with vision impairment or other person with

disabilities, as defined under 216(i)(l) or 1614 of the Social Security

Act (42 U.S.C. 416(i)(1); 1382c), and who is unable to comply with this

section, or is a primary caretaker of such individual;

(3) Is engaged in a work activity as defined under section 407(d)

of the Social Security Act (42 U.S.C.607(d), as in effect on and after

July 1, 1997);

(4) Meets the requirements for being exempted from having to engage

in a work activity under the State program funded under part A of title

IV of the Social Security Act (42 U.S.C. 601 et seq.) or under any

other welfare program of the State in which the PHA is located,

including a State-administered welfare-to-work program; or

(5) Is in a family receiving assistance under a State program

funded under part A of title IV of the Social Security Act (42 U.S.C.

601 et seq.) or under any other welfare program of the State in which

the public Housing Agency is located, including a State-administered

welfare to work program, and has not been found by the State or other

administering entity to be in noncompliance with such a program.

Community Service. For purposes of this section, community service

is the performance of voluntary work or duties in the public benefit

that serve to improve the quality of life and/or enhance resident self-

sufficiency, or/and increase the self-responsibility of the resident

within the community in which the resident resides. Political activity

is excluded.

Economic Self-Sufficiency program. Any program designed to

encourage, assist, train, or facilitate the economic independence of

participants and their families or to provide work for participants.

These programs may include programs for job training, employment

training, work placement, basic skills training, education, English

proficiency, work fare, financial or household management,

apprenticeship, and any program necessary to ready a participant to

work (such as substance abuse or mental health treatment).

Sec. 960.605 General Requirements.

(a) Participation. Except for residents exempted in Sec. 960.603 of

this subpart, each adult resident of a public housing development

shall:

(1) Contribute 8 hours per month of community service (not

including political activities); or

(2) Participate in an economic self-sufficiency program for 8 hours

per month.

(b) Effective date of participation. The requirement is effective

for all nonexempt residents following execution of a lease, containing

these provisions, by the family head of household.

(c) PHA obligation. PHAs must, at a minimum:

(1) Develop a local policy for administration of a community

service and economic self-sufficiency program.

(2) Provide written notification of the provisions of the community

service requirements to all residents. The notice should describe the

requirement, identify who is exempt and how exemption will be verified.

The PHA should state when the requirement is effective, as well as the

obligations and responsibilities of adult family members, and the

consequences of non-compliance.

(3) Determine for each public housing family which family members

are subject to or exempt from the community service and self-

sufficiency requirement and approves the resident's planned activities

to fulfill the requirement.

(4) No more or less frequently than annually, review and determine

the compliance of residents with the requirements at least 30 days

before lease term expires. Determine any changes to each adult family

members exempt or nonexempt status.

(5) Retain reasonable documentation of community service

participation or exemption in participant files.

(6) Comply with the civil rights requirements in 24 CFR part 5.

Sec. 960.607 Determining resident noncompliance.

If the PHA determines that a resident who is not an ``exempt

individual'' has not complied with the community service requirement,

the PHA must notify the resident:

(a) Of the noncompliance;

(b) That the determination is subject to the PHA's administrative'

grievance procedure;

(c) That unless the resident enters into an agreement under

paragraph (d) of this section, the lease of the family of which the

noncompliant adult is a member may not be renewed. However, if the

noncompliant adult moves from the unit, the lease may be renewed;

(d) That before the expiration of the lease term, the PHA must

offer the resident an opportunity to cure the noncompliance during the

next twelve-month period; such a cure includes a written agreement by

the noncompliant adult to complete as many additional hours of

community service or economic self-sufficiency activity needed to make

up the total number of hours required over the 12 month term of the

lease.

Sec. 960.609 Prohibition against replacement of employees.

In implementing the community service requirement, the PHA may not

[[Page 23477]]

substitute community service for work ordinarily performed by public

housing employees or replace a job at any location where community work

requirements are performed.

Sec. 960.611 Third-party coordinating.

The PHA may administer the community service directly, or through

partnerships with qualified organizations, including resident

organizations, or agencies or institutions with a community mission.

The PHA must ensure that community service programs that are based

directly or through partnerships with qualified organizations or

through contracts with such organizations are accessible to persons

with disabilities.

PART 966--LEASE AND GRIEVANCE PROCEDURES

28. The authority citation for part 966 continues to read as

follows:

Authority: 42 U.S.C. 1437a, 1437d note, and 3535(d).

29. In Sec. 966.4, revise the introductory text and add a new

paragraph (f)(13), to read as follows:

Sec. 966.4 Lease requirements.

Each public housing lease must have a 12-month term, which must be

automatically renewed for all purposes except noncompliance by an adult

member with the community service requirements of part 960, subpart F

of this title.

* * * * *

(f) * * *

(13) To contribute 8 hours per month of community service (not

including political activities), unless otherwise exempt. The 8 hour

each month requirement can be a combination of PHA-approved community

service or economic self-sufficiency activities. (See part 960, subpart

F of this title.)

30. Revise Sec. 966.55(e) to read as follows:

Sec. 966.55 Procedures to obtain a hearing.

* * * * *

(e) Escrow deposit. (1) Before a hearing is scheduled in any

grievance involving the amount of rent (as defined in Sec. 966.4(b) of

subpart A of this part) that the PHA claims is due, the family must pay

an escrow deposit to the PHA. When a family is required to make an

escrow deposit, the amount is the amount of rent the PHA states is due

and payable as of the first of the month preceding the month in which

the family's act or failure to act took place. After the first deposit,

the family must deposit the same amount monthly until the family's

complaint is resolved by decision of the hearing officer or hearing

panel.

(2) A PHA must waive the requirement for an escrow deposit where

required by Sec. 5.616 of this title (concerning financial hardship of

minimum rent requirements) or Sec. 5.618 of this title (concerning

reduction in welfare benefits related to work requirements). Unless the

PHA waives the requirement, the family's failure to make the escrow

deposit will terminate the grievance procedure. A family's failure to

pay the escrow deposit does not waive the family's right to contest in

any appropriate judicial proceeding the PHA's disposition of the

grievance.

* * * * *

PART 984--SECTION 8 AND PUBLIC HOUSING FAMILY SELF-SUFFICIENCY

PROGRAM

31. The authority citation for part 984 continues to read as

follows:

Authority: 42 U.S.C. 1437f, 1437u, and 3535(d).

32. Throughout part 984, remove the terms ``an HA'' and ``HA'' and

add in their place the terms ``a PHA'' and ``PHA''.

33. Amend Sec. 984.101 by removing paragraph (c) and revising

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

Sec. 984.101 Purpose, scope, and applicability.

* * * * *

(b) * * *

(3) Unless the PHA receives an exemption under Sec. 984.105:

(i) Each PHA that receives funding for additional rental

certificates or rental vouchers in FY 1993 through October 20, 1998,

must operate a Section 8 FSS program. Receiving funding for additional

certificates or vouchers means reservation of funds for the Section 8

certificate or voucher program.

(ii) Each PHA that receives funding for additional public housing

units in FY 1993 through October 20, 1998, must operate a public

housing FSS program. Receiving funding for additional public housing

units means reservation of funds to acquire or construct additional

public housing units.

34. In Sec. 984.103, revise the definition of welfare assistance to

read as follows:

Sec. 984.103 Definitions.

* * * * *

Welfare assistance means income assistance from Federal or State

welfare programs, and includes assistance provided under the Temporary

Assistance to Needy Families (TANF) program, and general assistance.

Welfare assistance does not include assistance solely directed to

meeting housing expenses, and does not include programs that provide

health care, child care or other services for working families.

* * * * *

Sec. 984.105 [Amended]

35. Amend Sec. 984.105 as follows:

a. Revise paragraph (a);

b. Redesignate paragraphs (d)(1), (d)(2), (d)(3), and (d)(4) as

paragraphs (d)(1)(i), (d)(1)(ii), (d)(1)(iii), and (d)(1)(iv);

c. Redesignate the text of paragraph (d) as (d)(1) and add a new

heading for redesignated paragraph (d)(1); and

d. Add a new paragraph (d)(2). The revised and added paragraphs of

Sec. 984.105 read as follows:

Sec. 984.105 Minimum program size.

(a) General. A PHA must operate an FSS program of the minimum size

determined in this section. Paragraph (c) of this section prescribes

the conditions under which HUD may grant an exception to this

requirement, and paragraph (d) of this section states the conditions

under which the minimum size calculated under this paragraph (a) may be

reduced. A PHA may always operate a program of a larger size than the

minimum.

(1) Determining minimum program size. The minimum size of an FSS

program is equal to:

(i) Public housing. (A) The total number of public housing units

reserved in FY 1993 through October 20, 1998; plus

(B) The number of public housing units reserved in FY 1991 and FY

1992 under the FSS incentive award competitions; minus

(C) The number of families that have graduated from the FSS program

on or after October 21, 1998, by fulfilling their FSS contract of

participation obligations.

(ii) Section 8. (A) The total number of applicable rental

certificates and rental vouchers reserved in FY 1993 through October

20, 1998; plus

(B) The number of rental certificates and rental vouchers reserved

under the combined FY 1991/1992 FSS incentive award competition; minus

(C) The number of families who have graduated from the FSS program

on or after October 21, 1998, by fulfilling their contract of

participation obligations.

(2) Applicable public housing units. In determining minimum program

size, all additional public housing rental units reserved in FY 1993

through October 20, 1998 will be counted.

(3) Inapplicable Section 8 certificates and vouchers. (i) Renewals.

Except for

[[Page 23478]]

the renewal of funding that initially carried an FSS program

obligation, renewal funding for rental certificates and vouchers

reserved in fiscal year 1993 through October 20, 1998 is not counted

when determining the FSS minimum program size.

(ii) PHAs with existing FSS obligation. When determining the

minimum FSS program size for a PHA that already had an FSS obligation,

funding reserved in fiscal year 1993 through October 20, 1998 for the

following categories is not counted:

(A) Funding for families affected by the termination, expiration or

owner opt-outs under Section 8 project-based programs;

(B) Funding for families affected by demolition or disposition of a

public housing project and replacement of public housing projects;

(C) Funding for families affected by conversion of assistance from

the Section 23 leased housing or housing assistance payments program to

the Section 8 program;

(D) Funding for families affected by the sale of a HUD-owned

project; and (E) Funding for families affected by the prepayment of a

mortgage or voluntary termination of mortgage insurance.

(iii) PHAs with no existing FSS obligation. If a PHA with no

existing FSS obligation received certificate and voucher funding under

the categories described in paragraph (a)(3)(ii) of this section in

fiscal year 1993 through October 20, 1998, the first such funding

counts towards the PHA's minimum FSS program size.

* * * * *

(d) * * *

(1) Approval of exception. * * *

(2) Expiration of exception. Full and partial exceptions to the

minimum size of an FSS program will expire three years from the date of

HUD's approval of the exceptions. If a PHA seeks to continue an

exception after its expiration, the PHA must submit a new request and a

new certification to HUD for consideration. Revised FSS Action Plan

policies must be stated in the PHA's Annual Plan.

* * * * *

36. Revise paragraphs (a) and (c) of Sec. 984.201 to read as

follows:

Sec. 984.201 Action Plan.

(a) Requirement for Action Plan. A PHA must have a HUD-approved

Action Plan that complies with the requirements of this section before

the PHA implements an FSS program, whether the FSS program is a

mandatory or voluntary program.

* * * * *

(c) Plan submission.--(1) Initial submission.

(i) Mandatory program. Unless the dates stated in paragraph (c) of

this section are extended by HUD for good cause, a PHA that is

establishing its first FSS program must submit an Action Plan to HUD

for approval within 90 days after the PHA receives notice from HUD of:

(A) Approval of the PHA's application for incentive award units; or

(B) Approval of other funding that establishes the obligation to

operate an FSS program, if the PHA did not apply for FSS incentive

award units.

(ii) Voluntary program. The PHA must submit its Action Plan and

obtain HUD approval of the plan before the PHA implements a voluntary

FSS program, including a program that exceeds the minimum size for a

mandatory program.

(2) Revision. Following HUD's initial approval of the Action Plan,

no further approval of the Action Plan is required unless the PHA

proposes to make policy changes to the Action Plan or increase the size

of a voluntary program; or HUD requires other changes. The PHA must

submit any changes to the Action Plan to HUD for approval.

* * * * *

Sec. 984.301 [Amended]

37. Amend Sec. 984.301 by redesignating paragraphs (a)(1), (a)(2),

and (a)(3), as paragraphs (a)(2)(i), (a)(2)(ii), and (a)(2)(iii);

adding a new paragraph (a)(1) and a new heading for redesignated

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

Sec. 984.301 Program implementation.

(a) Program implementation deadline. (1) Voluntary program. There

is no deadline for implementation of a voluntary program. A voluntary

program, however, may not be implemented before the requirements of

Sec. 984.201 have been satisfied.

(2) Mandatory program. * * *

* * * * *

38. Revise Sec. 984.306 (b) to read as follows:

Sec. 984.306 Section 8 residency and portability requirements.

* * * * *

(b) Initial occupancy.--(1) First 12 months. A family participating

in the Section 8 FSS program must lease an assisted unit, for a minimum

period of 12 months after the effective date of the contract of

participation, in the jurisdiction of the PHA that selected the family

for the FSS program. However, the PHA may approve a family's request to

move outside of the PHA's jurisdiction during this period.

(2) After the first 12 months. After the first 12 months of the FSS

contract of participation, the FSS family may move outside the

jurisdiction of the initial PHA, consistent with applicable Section 8

program regulations (part 982 of this title).

* * * * *

Dated: April 8, 1999.

Andrew Cuomo,

Secretary.

[FR Doc. 99-10565 Filed 4-29-99; 8:45 am]

BILLING CODE 4210-32-P