Voluntary Conversion of Developments From Public Housing Stock

SUMMARY: This proposed rule implements a recent revision to the statute

authorizing the public housing and Section 8 housing assistance

programs to allow a Public Housing Agency (PHA) to convert any public

housing project it owns to tenant-based assistance where the conversion

would satisfy statutory objectives. If, after conducting a conversion

assessment, the PHA determines that the following conditions are met,

it may convert the project: Conversion will not be more expensive than

continued operation of the project conversion will benefit residents

and the community; and conversion will not adversely affect the

availability of affordable housing in the community. The statute

requires every PHA to conduct and submit to HUD a conversion assessment

for its projects no later than October 1, 2001. However, HUD has the

authority to exclude developments or categories of developments from

the assessment requirement, or to streamline the conversion assessment

requirements, and this rule does include streamlining for specified

categories of developments.

DATES: Comments Due Date: September 21, 1999.

ADDRESSES: Interested persons are invited to 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. Communications should

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: Rod Solomon, Deputy Assistant

Secretary for Policy, Program and Legislative Initiatives, Department

of Housing and Urban Development, Office of Public and Indian Housing,

451 Seventh Street, SW, Room 4116, Washington, DC 20410; telephone

(202) 708-0713 (this is not a toll-free telephone number). Persons with

hearing or speech disabilities may access this number via TTY by

calling the free Federal Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Statutory Basis

Section 22 of the United States Housing Act of 1937 (42 U.S.C. 1437

et seq.) (the ``1937 Act''), as amended by section 533 of the Quality

Housing and Work Responsibility Act of 1998 (title V of the FY 1999 HUD

Appropriations Act; Public Law 105-276, approved October 21, 1998; 112

Stat. 2518-2680) (the ``Public Housing Reform Act''), authorizes Public

Housing Agencies (PHAs) to convert a development to tenant-based

assistance by removing the development or a portion of a development

from its public housing inventory and providing for relocation of the

residents or provision of tenant-based assistance to them. This action

is permitted only when that change would be economical, be beneficial

to residents of the development and the surrounding area, and not have

an adverse impact on the availability of affordable housing.

The statute requires a PHA to perform a conversion assessment as

the first step toward the change. If that produces support for

converting the units, the PHA may develop, and submit, a conversion

plan to HUD. A PHA may convert the public housing only if the

conversion plan has been approved by HUD. The statute also requires

certain assessment actions be taken before October, 1, 2001.

II. Relationship of Voluntary Conversions to Required Conversions

This proposed rule would implement the voluntary conversion

requirements set forth in section 22 of the 1937 Act through the

creation of a new 24 CFR part 972, subpart B. Subpart A of new 24 CFR

part 972 would implement section 537 of the Public Housing Reform Act,

which added a new section 33 to the 1937 Act. New Section 33 sets forth

provisions for the required conversion of distressed public housing to

tenant-based assistance. HUD is implementing section 33 of the 1937 Act

through a separate proposed rulemaking.

Section 202 of the Departments of Veterans Affairs and Housing and

Urban Development and Independent Agencies Appropriations Act, 1996 (42

U.S.C. 1437l note) provided for a program of required conversion of

distressed public housing. HUD implemented that statute by issuing the

regulations now found at 24 CFR part 971. In addition to creating new

section 33, section 537 of the Public Housing Reform Act repealed

section 202. However, those developments that have already been

identified by PHAs or by HUD for conversion, or for assessment of

whether such conversion is required, continue to be subject to the

requirements of section 202 and the part 971 regulations implementing

that section.

III. Description of Specific Sections

A. Conversion Assessment Requirements

The Public Housing Reform Act requires that a PHA conduct a

conversion assessment for each development that it operates as public

housing. HUD is given the authority to exempt certain classes of

developments from this requirement, or streamline the requirements of

the conversion assessment. In this rule, HUD has streamlined the

requirements of the conversion assessment, but requires that every PHA

review and determine the best course of action with respect to each

development that it operates as public housing.

Any PHA that has passed the Public Housing Assessment System (PHAS)

physical conditions indicator must either conduct a conversion

assessment for each public housing development, or certify that it has

reviewed the operations of the development, and has determined that a

full conversion assessment is unnecessary. Any PHA that has failed the

PHAS physical conditions indicator must conduct a conversion assessment

for each public housing development; however, a streamlined assessment

may be conducted. The streamlined conversion assessment for these PHAs

must include the cost analysis, comparing the cost of providing tenant-

based assistance with the cost of continuing to operate the development

as public housing, for each public housing development. This will

ensure that the PHA, with respect to each development, at least makes

and considers the threshold determination whether it is more economical

to convert the public housing. Any PHA that intends to convert a

development to tenant-based assistance must conduct the full conversion

assessment, including all of the elements listed in Sec. 972.209.

PHAs will be receiving their first PHAS scores at various times

during the period for which conversion assessments are required. The

last of

[[Page 40241]]

these scores would be received with ample time remaining in this period

for PHAs to conduct the required streamlined assessments, in the event

they fail the physical conditions indicator. PHAs that do not want to

wait for PHAS scores, however, may fulfill the assessment requirement

by conducting the streamlined assessments (cost test only) for each

development.

HUD believes that Congressional intent was to ensure that every PHA

review the operations of developments operated as public housing, and

determine if conversion would be appropriate. The Senate Committee

Report (S. Rep. No. 105-21, at 27 (1997)) states that this section

``provides a framework for assessing the relative costs of tenant-based

assistance and public housing so that PHAs can make informed judgements

about their policies.'' At the same time, Congress did not intend for

the requirements of a conversion assessment to place an undue burden on

PHAs, and therefore gave HUD broad authority to waive or provide for

streamlined assessments (S. Rep. No 105-21, at 27 (1997)).

The certifications and streamlined assessments that HUD is

proposing will fulfill both of these intentions. PHAs whose

developments are most at risk, where HUD has found that the PHA's stock

does not meet basic standards, must conduct a streamlined assessment,

including the cost analysis. All others at least must consider the

relative costs of public housing and vouchers with respect to each

development. This will ensure that PHAs consider the most appropriate

future action for all developments, and that PHAs with substandard

physical conditions assess the relative costs of tenant-based

assistance and public housing before determining the best course of

action for each of these properties. HUD is considering the use of a

web-based cost comparison calculator on HUD's internet homepage that

would reduce the calculation burden on PHAs. HUD is also considering a

refinement of the existing cost calculation in the appendix to part 972

to include a more precise net present value calculation.

A conversion assessment, or certification with respect to any

development for which a conversion assessment is not necessary, must be

submitted to HUD no later than October 1, 2001. PHAs should include the

conversion assessments, or certifications as part of the next PHA

Annual Plan to be submitted to HUD, after their completion. If the next

PHA Annual Plan submission will not be submitted to HUD by October 1,

2001, a PHA must have the conversion assessment on file by October 1,

2001, and include it in the next PHA Annual Plan submission. A PHA may

otherwise elect to undertake a conversion assessment at any time for

any or all of its developments, and submit it to HUD as part of its

next PHA Annual Plan.

Although HUD believes that it has streamlined the conversion

assessment in such a way that PHAs will not be burdened by the

requirements, HUD specifically invites any comments regarding how the

requirements for conversion assessments can more efficiently fulfill

the purposes of this section.

A full conversion assessment is required for any PHA that seeks

approval to convert a property to tenant-based assistance. A full

conversion assessment includes the cost analysis, an analysis of the

market value of the public housing, an analysis of the rental market

conditions, an analysis of the likely impact of conversion on the

neighborhood, and, if applicable, a description of any actions that

will be taken to convert the public housing.

The cost analysis, which is required as part of the full conversion

assessment, and is necessary to implement a conversion plan, uses the

methodology currently used for purposes of required conversion

requirements (See Appendix to 24 CFR part 971). The appendix to new

part 972 would retain this comparison on a monthly cost basis; the

results would not change if one calculated a net present value for the

remaining useful life of the public housing, because the monthly costs

for both public housing and tenant-based assistance would be multiplied

by the number of months in question. In response to statutory language

that the cost of public housing must be based on ``the remaining useful

life of the project,'' HUD has made one specific change to the

methodology used for the cost analysis. This change is in the amount of

time on which a PHA may amortize its modernization spending. In the

current cost test, a PHA must use a time frame of twenty years in

keeping with the expected life of the capital improvements (30 years if

the work is equivalent to new construction). A PHA that is voluntarily

conducting a conversion assessment and seeking approval for conversion

may be permitted by HUD to use a time frame of less than 20 or 30

years, so long as the time frame is chosen in five year intervals (i.e.

5 years, 10 years, or 15 years), and the PHA provides HUD with a

justification to why a shorter time frame is a reasonable estimate of

the property's remaining useful life.

The cost analysis compares the cost of operating a revitalized

public housing development with the cost of providing tenant based

assistance to the residents of the public housing development. HUD

realizes, however, that those PHAs wishing to voluntarily convert a

development may not have a proposed revitalization plan. Further, HUD

is concerned that those PHAs wanting to voluntarily convert a public

housing development may not have sufficient incentive to fully consider

whether that development could be revitalized, and in particular may

not fully consider whether vacancies and operating costs could be

reduced through the reasonable investment of funds in the development.

Therefore, HUD is seeking comments on whether to give a PHA the option

to:

1. Prepare a revitalization plan for the public housing development

(for purposes of the cost analysis, the operating costs of the

development would be based on the revitalization plan); or

2. For purposes of the cost analysis, assume that a revitalized

development would result in a 10% reduction in current operating costs

(this option would only be available to those PHAs that calculate

current operating costs based on no greater than a 10% vacancy rate).

The statute states that the cost analysis should be conducted on

both a net present value basis, and in terms of new budget authority.

The appendix thus adds a calculation for new budget authority. The

difference between that calculation and the calculation for net present

value is that any capital investment in the public housing is not

amortized over the remaining useful life in a manner that reflects the

cost of expending the capital funds immediately. In order for a PHA to

convert a public housing development, the cost of tenant-based

assistance has to be less than the cost of public housing, both on a

net present value basis, and based on new budget authority.

The analysis of market value requires that a PHA purchase

independent appraisals. Although Congress states that it did not intend

for PHAs to need expensive, new appraisals (S. Rep. No. 105-21, at 27

(1997)), under the proposed rule this part of the conversion assessment

is not mandatory for any PHA except those that are planning to convert

a public housing development to tenant-based assistance. HUD believes

that appraisals are the most effective means to undertaking the

required estimates of market value.

[[Page 40242]]

An analysis of the rental market conditions, and an analysis of the

impact of conversion on the neighborhood must be included in the

conversion assessment as well. PHAs should rely, to the greatest extent

possible, on existing data sources. In addition, PHAs that are

conducting a conversion assessment for more than one property may be

able to use the same information and analyses in the assessments

submitted to HUD.

HUD specifically invites comments on whether additional guidance

should be given regarding how PHAs should conduct the analysis of

rental market conditions and the analysis of the impact on the

neighborhood and how these analyses relate to the PHA's obligation to

affirmatively further fair housing.

B. Conversion Plan

In order for a PHA to convert a public housing development to

tenant-based assistance, a PHA must submit, and HUD must approve a

conversion plan. A conversion plan must be consistent with any

settlement agreement that the PHA has entered into. A conversion plan

must be submitted to HUD as part of the PHA Annual Plan submission.

Although the conversion plan will be part of a PHA Annual Plan

submission, the conversion plan will be subject to a separate approval

from HUD. A separate approval is required because the standards for

approval of the conversion plan differ from the standards for approval

of the PHA Annual plan submission. A PHA may not proceed with

conversion until it receives a separate written approval of its

conversion plan from HUD.

A PHA may not demolish or dispose of units or property until

completion of the required environmental review under 24 CFR part 58

(if a Responsible Entity has assumed environmental responsibility for

the project) or 24 CFR part 50 (if HUD is performing the environmental

review). Further, HUD will not approve a conversion plan until

completion of the required environmental review. However, before

completion of the environmental review, HUD may approve the targeted

units for deprogramming and may authorize the PHA to undertake other

activities proposed in the conversion plan that do not require

environmental review (such as certain activities related to the

relocation of residents), as long as the buildings in question are

adequately secured and maintained.

If a conversion plan is approved by HUD, the PHA may remove the

public housing from the inventory and relocate the residents using

tenant-based or project-based assistance. If the PHA proposes in its

conversion plan to demolish or dispose of the development, the

conversion plan will serve as the demolition or disposition

application, and a separate application will not be required by HUD.

Alternatively, the PHA may retain ownership of the converted buildings

as rental units or for other purposes.

Once a conversion plan is approved, tenants may be relocated using

tenant-based assistance. A PHA must apply for Section 8 tenant-based

assistance and the PHA will be given a priority for receiving tenant-

based assistance. Although the statute also gives HUD the authority to

consent to a transfer of the funds used for public housing to tenant-

based assistance, HUD believes that the most direct way to fund the

Section 8 tenant-based assistance is through annual appropriations. As

the development is removed from the public housing inventory, public

housing operating subsidy and modernization funding will phase out

under the usual process. HUD may require that funding for the initial

year of tenant based assistance be provided from the new public housing

Capital Fund, Operating Fund, or both.

IV. Issues Highlighted for Public Comment

Although HUD welcomes public comment on all aspects of this

proposed rule, in particular it seeks comments on the following issues.

Public comment is invited on this proposed rule in its entirety,

including those issues discussed elsewhere in the preamble. All

comments will be considered in the development of the final rule.

A. Use of Voluntary Conversion Process To Promote Housing

Deconcentration

HUD requests comments on the possible use of the voluntary

conversion process to promote deconcentration of assisted housing,

through partial conversion to vouchers of public housing developments,

and subject to compliance with the standards of this regulation. For

example, a PHA might decide to retain one third of a large public

housing development as public housing, and leverage private financing

to renovate the development. Two thirds of the public housing units

would be replaced with vouchers to be used elsewhere. If successful,

such an approach might result in public housing in a mixed-income

setting, vouchers used in a manner that deconcentrates poverty and

renovation of private market units in an area that needs revitalizing.

Would such a result be desirable, financially feasible, or workable, in

many situations? If such a result would be desirable, what would HUD

need to do to promote it in appropriate situations?

B. Total Development Cost (TDC) Calculation

Section 520 of the Public Housing Reform Act made several changes

to the requirements governing the Total Development Cost (TDC) limit

for public housing development. Due to these changes, it may no longer

be appropriate to use full TDC for accrual. It may be more appropriate

to use a housing construction cost component of TDC. This reflects the

idea that accrual should primarily be based on the hard costs of

revitalization. Unlike TDC, housing construction cost does not include

the soft costs associated with redevelopment, and therefore HUD

believes that using housing construction cost may yield a better

estimate of accrual. HUD may make this change at the final rule stage

and specifically requests comment on this issue.

C. Impact of Conversion on Minorities and Persons With Disabilities

HUD requests comments on the best means to ensure that fair housing

considerations are appropriately addressed during the voluntary

conversion process. In particular, HUD requests comments on whether a

description should be required, as part of a full conversion

assessment, of the proposed conversion's impact on racial and ethnic

minorities and persons with disabilities. This will assist the PHA to

carry out its responsibilities under the nondiscrimination requirements

of the Fair Housing Act (42 U.S.C. 3601 et seq.) to affirmatively

further fair housing.

V. Findings and Certifications

Public Reporting Burden

The information collection requirements contained in Secs. 972.209

and 972.217 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.

The burden of the information collections in this proposed rule is

estimated as follows:

[[Page 40243]]

Reporting and Recordkeeping Burden

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

Estimated

Number of average time Estimated

Section reference Number of responses per for annual burden

parties respondent* requirement (in hours)

(in hours)*

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

972.209........................................ 330 1 8 2,640

972.217........................................ 165 1.5 28 6,930

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

Total Reporting and Recordkeeping Burden .............. ............... .............. 9,570

(Hours)...................................

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

* The number of responses and times estimated are averages.

Although the information collections are largely specified by

section 22 of the United States Housing Act of 1937, HUD is nonetheless

interested in receiving comments on the most efficient way to collect

information necessary to reviewing the necessary elements of this

conversion program. In accordance with 5 CFR 1320.8(d)(1), HUD is

soliciting comments from members of the public and affected agencies

concerning this 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.

Interested persons are invited to submit comments regarding the

information collection requirements in this proposal. Comments must be

received within sixty (60) days from the date of this proposal.

Comments must refer to the proposal by name and docket number (FR-4476)

and must be sent to:

Joseph F. Lackey, Jr., HUD Desk Officer, Office of Management and

Budget, New Executive Office Building, Washington, DC 20503;

and

Mildred Hamman, Reports Liaison Officer, Office of the Assistant

Secretary for Public and Indian Housing, Department of Housing and

Urban Development, 451--7th Street, SW, Room 4244, Washington, DC 20410

Impact on Small Entities

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

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

and in so doing certifies that this rule will not have a significant

economic impact on a substantial number of small entities. The reasons

for HUD's determination are as follows:

(1) A Substantial Number of Small Entities Will Not be Affected.

The entities that would be subject to this rule are public housing

agencies that administer public housing. Under the definition of

``Small governmental jurisdiction'' in section 601(5) of the RFA, the

provisions of the RFA are applicable only to those few public housing

agencies that are part of a political jurisdiction with a population of

under 50,000 persons. The number of entities potentially affected by

this rule is therefore not substantial.

(2) No Significant Economic Impact. This rule requires PHAs to

perform conversion assessments for certain developments using readily

available data to determine whether those developments should be

converted to tenant-based assistance. HUD has provided for streamlined

assessments, including certifications for any PHA that has passed the

Public Housing Assessment System (PHAS) physical conditions indicator

and a conversion assessment limited to the cost analysis for other

PHAs.

This is a one-time requirement as contemplated by the Public

Housing Reform Act. Smaller PHAs will have fewer developments to

consider, and the burden on them should consequently be proportionally

smaller. Ultimately, the goal of the rule is to promote more efficient

delivery of affordable housing to residents of current public housing

developments. This efficiency should benefit small PHAs and large PHAs

alike.

Accordingly, the economic impact of this rule will not be

significant, and it will not affect a substantial number of small

entities. Notwithstanding HUD's determination that this rule will not

have a significant economic effect on a substantial number of small

entities, HUD specifically invites 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

has been made in accordance with HUD regulations at 24 CFR part 50,

which implement section 102(2)(C) of the National Environmental Policy

Act of 1969 (42 U.S.C. 4223). The Finding of No Significant Impact is

available for public inspection between the hours of 7:30 a.m. and 5:30

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

General Counsel, Room 10276, Department of Housing and Urban

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

Federalism Impact

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

of Executive Order 12612, Federalism, has determined that this rule

will not have federalism implications concerning the division of local,

State, and Federal responsibilities. The rule merely states the

preconditions for a PHA to voluntarily convert a public housing

development to tenant-based assistance. No programmatic or policy

change will result from this rule that will affect the relationship

between the Federal government and State and local governments.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.

1531-1538) 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

any Federal mandates on any State, local, or tribal governments or the

private sector within the meaning of Unfunded Mandates Reform Act of

1995.

Regulatory Planning and Review

The Office of Management and Budget (OMB) reviewed this rule under

Executive Order 12866, Regulatory

[[Page 40244]]

Planning and Review. OMB determined that this rule is a ``significant

regulatory action'' as defined in section 3(f) of the Order (although

not an economically significant regulatory action under the Order). Any

changes made to this rule as a result of that review 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.

Catalog of Federal Domestic Assistance Number

The Catalog of Federal Domestic Assistance number for the program

affected by this rule is 14.850.

List of Subjects in 24 CFR Part 972

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

income housing, Public housing.

For the reasons discussed in the preamble, HUD proposes to amend

title 24 of the Code of Federal Regulations as follows:

1. Add part 972, subpart B and an appendix to part 972 to read as

follows:

PART 972--CONVERSION OF PUBLIC HOUSING TO TENANT-BASED ASSISTANCE

Subpart A--[Reserved]

Subpart B--Voluntary Conversion of Public Housing Developments

Sec.

972.201 What is the definition of ``conversion''?

972.203 What is the purpose of this subpart?

972.205 What is the procedure for a PHA to follow if it wants to

convert a public housing project to tenant-based assistance?

972.207 For what developments must a PHA perform a conversion

assessment?

972.209 What does a conversion assessment contain?

972.211 When does a PHA submit a conversion assessment to HUD?

972.213 What conditions must be addressed in the conversion

assessment that will allow HUD to approve conversion?

972.215 What is the public and resident consultation process for

developing a conversion plan?

972.217 What are the components of a conversion plan?

972.219 When does a PHA submit a conversion plan to HUD?

972.221 What is the HUD process for approving the conversion plan?

972.223 What action does HUD take with respect to a PHA's

conversion plan?

972.225 When may a PHA proceed to convert a development?

Appendix to Part 972--Methodology of Comparing Cost of Public Housing

With the Cost of Tenant-Based Assistance

Authority: 42 U.S.C. 1437t, 14372-5, 3535(d).

Subpart A--[Reserved]

Subpart B--Voluntary Conversion of Public Housing Developments

Sec. 972.201 What is the definition of ``conversion''?

For purposes of this subpart, the term ``conversion'' means the

removal of public housing units from the inventory of a Public Housing

Agency (PHA), and the provision of tenant-based, or project-based

assistance for the residents of the public housing that is being

removed. The term ``conversion,'' as used in this subpart, does not

necessarily mean the physical removal of the public housing

development.

Sec. 972.203 What is the purpose of this subpart?

This subpart implements section 22 of the United States Housing Act

of 1937 (42 U.S.C. 1437t). The purposes of this subpart are to:

(a) Require PHAs to perform an assessment which considers

developments for which conversion of public housing may be appropriate;

and

(b) Provide a basis for a PHA to take action for conversion on a

voluntary basis.

Sec. 972.205 What is the procedure for a PHA to follow if it wants to

convert a public housing project to tenant-based assistance?

(a) A PHA must perform a full conversion assessment, in accordance

with Secs. 972.209-972.211, and submit it to HUD as part of the next

PHA Annual Plan submission.

(b) A PHA must prepare a conversion plan, in accordance with

Sec. 972.217, and submit it to HUD, as part of the next PHA Annual

Plan, within one year after submitting the conversion assessment.

(c) A PHA may proceed to convert the project if HUD approves the

conversion plan.

Sec. 972.207 For what developments must a PHA perform a conversion

assessment?

(a) General rule. (1) Required initial conversion assessment. A PHA

must conduct a full conversion assessment in accordance with

Sec. 972.209 for each development once during the period of October 1,

1999 through September 30, 2001, unless:

(i) The development is subject to required conversion, under

subpart A of this part or part 971 of this title;

(ii) The development is the subject of a plan for demolition that

has not been disapproved by HUD; or

(iii) A HOPE VI revitalization grant has been awarded for the

development.

(2) Optional future conversion assessments. A PHA may otherwise

elect to undertake a conversion assessment at any time for any or all

of its developments, and submit it to HUD as part of its next PHA

Annual Plan.

(b) Streamlined Assessment. With respect to the required initial

conversion assessment, the following streamlining will apply:

(1) PHAs that have passed the Public Housing Assessment System

(PHAS) physical conditions indicator. (i) Any PHA that passes the

physical condition component of PHAS (part 902, subpart B, of this

chapter) may designate developments for which it will not conduct a

conversion assessment.

(ii) In order not to assess a particular development, the PHA must

certify that it:

(A) Has reviewed the development's operation as public housing;

(B) Considered converting the public housing to tenant-based

assistance; and

(C) Concluded that an assessment is unnecessary because conversion

would not satisfy the three conditions necessary for voluntary removal

set forth in Sec. 972.213(a).

(iii) A PHA must maintain documentation of the reasoning with

respect to each development for which it certifies that an assessment

is unnecessary.

(2) PHAs that fail the PHAS physical condition indicator. (i) Any

PHA that does not receive a passing score on the PHAS physical

conditions indicator must conduct an assessment for each development

except those listed in paragraphs (a)(1)-(3) of this section.

(ii) However, any PHA that is required to perform a conversion

assessment for a development, may submit to HUD a streamlined

conversion assessment that includes the cost analysis, comparing the

cost of providing tenant-based assistance with the cost of continuing

to operate the development as public housing, described at

Sec. 972.209(a).

(c) Full assessment required for conversion. A PHA must submit a

full conversion assessment (not a streamlined assessment under

paragraph (b) of this section) for any public housing project it wishes

to convert to tenant-based assistance.

Sec. 972.209 What does a conversion assessment contain?

The conversion assessment contains five elements, as described

below:

(a) Cost analysis. A PHA must conduct a cost analysis comparing the

[[Page 40245]]

cost of providing Section 8 tenant-based assistance with the cost of

continuing to operate the development as public housing for the

remainder of its useful life. See the Appendix to this part for the

required methodology for this cost analysis.

(b) Analysis of the market value. (1) A PHA must have an

independent appraisal conducted to compare the market value of the

development before and after rehabilitation. In both cases, the market

value must be based on the use of the development as public housing.

(2) In addition, the appraisal must compare:

(i) The market value of the development before rehabilitation,

based on the use of the development as public housing, with the market

value of the development after conversion; with

(ii) The market value of the development after rehabilitation,

based on the use of the development as public housing, with the market

value of the development after conversion.

(3) A copy of the appraisal findings and the analysis of market

value of the development in the conversion assessment must be provided

in the conversion assessment.

(c) Analysis of rental market conditions. (1) A PHA must conduct an

analysis of the likely success of using tenant-based assistance for the

residents of the public housing development. This analysis must include

an assessment of the availability of decent and safe dwelling units

rented at or below the payment standard established for Section 8

tenant-based assistance.

(2) In conducting this assessment, a PHA must take into account:

(i) Its overall use of rental certificates or vouchers under lease

and the success rates of using Section 8 tenant-based assistance in the

community for the appropriate bedroom sizes; and

(ii) Any particular characteristics of the specific residents of

the public housing which may affect their ability to be housed.

(d) Impact analysis. A PHA must describe the likely impact of

conversion of the public housing development on the neighborhood in

which the public housing is located. This should include:

(1) The impact on the availability of affordable housing in the

neighborhood; and

(2) The impact on the concentration of poverty in the neighborhood.

(e) Conversion implementation. If a PHA intends to convert the

development (or a portion of it) to tenant-based assistance, the

conversion assessment must include a description of any actions the PHA

plans to take in converting the development. This must include a

general description of the planned future uses of the development, and

the means, and timetable for accomplishing such uses.

Sec. 972.211 When does a PHA submit a conversion assessment to HUD?

(a) Required initial conversion assessment. (1) A PHA must submit a

conversion assessment, or certification that a conversion assessment is

unnecessary, for any development for which it is required under

Sec. 972.207(a) no later than October 1, 2001. The conversion

assessment, or the certification that a conversion assessment is

unnecessary, must be submitted to HUD as part of the next PHA Annual

Plan after its completion. If the next PHA Annual Plan submission will

not be submitted to HUD by October 1, 2001, a PHA must have the

conversion assessment on file by October 1, 2001, and include it in the

next PHA Annual Plan submission.

(b) Optional future conversion assessments. A PHA may otherwise

elect to undertake a conversion assessment for any or all of its

developments, and submit it to HUD as part of its next PHA Annual Plan.

(c) Required updated conversion assessment. Where a PHA proposes to

convert a development to tenant-based assistance, it must submit an

updated conversion assessment if the conversion assessment otherwise

would be more than one year older than the conversion plan to be

submitted to HUD. To update a conversion assessment, a PHA must ensure

that the analysis of rental market conditions is based on the most

recently available data, and must include any data that have changed

since the initial conversion assessment. A PHA may submit the initial

cost analysis and comparison of the market value of the public housing

before and after rehabilitation and/or conversion if there is no reason

to believe that such information has changed significantly.

Sec. 972.213 What conditions must be addressed in the conversion

assessment that will allow HUD to approve conversion?

(a) Conditions. In order to convert a public housing development,

the PHA must conduct a conversion assessment that demonstrates that the

conversion of the development:

(1) Will not be more expensive than continuing to operate the

development (or portion of it) as public housing;

(2) Will principally benefit the residents of the public housing

development to be converted and the community; and

(3) Will not adversely affect the availability of affordable

housing in the community.

(b) Evidence. (1) The relative expense of continuing operation as

public housing or conversion to tenant-based assistance may be

demonstrated by the cost analysis and market value analysis.

(2) The benefit to residents and the community may be demonstrated

in the rental market analysis, the analysis of the impact on the

neighborhood, the market value analysis, and the proposed future use of

the development.

(3) The impact on affordable housing may be demonstrated in the

rental market analysis and the analysis of the impact of conversion on

the neighborhood.

Sec. 972.215 What is the public and resident consultation process for

developing a conversion plan?

(a) A conversion plan must be developed in consultation with

appropriate public officials and with significant participation by

residents of the development.

(b) The requirement for consultation with public officials may be

satisfied by obtaining a certification from the appropriate State or

local officials that the conversion plan is consistent with that

government's Consolidated Plan. This may be the same certification as

is required for the PHA Annual Plan that includes the conversion plan,

so long as the certification specifically addresses the conversion

plan.

(c) To satisfy the requirement for significant participation by

residents of the development, in addition to the public participation

requirements for the PHA Annual plan, a PHA must:

(1) Hold a meeting with the residents of the affected sites at

which the PHA:

(i) Explain the requirements of section 22 of the United States

Housing Act and these regulations, especially as they apply to

residents of affected developments; and

(ii) Provides draft copies of the conversion plan to them.

(2) Provide a reasonable comment period for residents; and

(3) Summarize the resident comments for HUD and consider these

comments in developing the final conversion plan.

Sec. 972.217 What are the components of a conversion plan?

A conversion plan must:

(a) Describe the conversion and future use or disposition of the

public housing development. If the future use of the development is

demolition or disposition, the PHA is not required to submit a

demolition or disposition application, so long as the PHA submits,

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and HUD approves a conversion plan, which includes a description of the

future uses of the development.

(b) Include a timetable, showing when any actions will be taken in

converting the development, relocating the tenants, and when the future

use will take place.

(c) Include an impact analysis of the conversion on the affected

community. This may include the description that is required as part of

the conversion assessment.

(d) Include a summary of the resident comments received when

developing the conversion plan.

(e) Include the statement used to notify each family residing in

the affected public housing 90 days before conversion that the

development will no longer be used as public housing and to explain the

benefits that will be offered, which must include at least the

following information:

(1) The PHA will offer the family comparable tenant-based or

project-based assistance that meets the Housing Quality Standards (HQS)

for decent, safe and sanitary housing, and that is located in an area

that is generally not less desirable than the displaced person's

original development;

(2) The PHA will provide the family with actual and reasonable

relocation expenses that they incur as a result of the conversion;

(3) The PHA will provide any counseling the family needs as a

result of being displaced by the conversion; and

(4) If the development is used as housing after conversion, the PHA

will ensure each resident may choose to remain in the housing, using

tenant-based assistance towards rent.

(f) Confirm that any proceeds received from the conversion are

subject to the limitations under section 18(a)(5) of the United States

Housing Act of 1937 (42 U.S.C. 1437p(a)(5)) applicable to proceeds

resulting from demolition or disposition.

(g) Summarize why the conversion assessment for the public housing

project supports the three condition necessary for conversion described

in Sec. 972.213(a).

Sec. 972.219 When does a PHA submit a conversion plan to HUD?

A PHA that wishes to convert a public housing project to tenant-

based assistance must submit a conversion plan to HUD. A PHA must

prepare a conversion plan, in accordance with Sec. 972.217, and submit

it to HUD, as part of the next PHA Annual Plan within one year after

submitting the conversion assessment.

Sec. 972.221 What is the HUD process for approving the conversion

plan?

Although a PHA will submit its conversion plan to HUD as part of

the PHA Annual Plan, the conversion plan will be treated separately for

purposes of HUD approval. A PHA needs a separate written approval from

HUD in order to proceed with conversion. HUD will make reasonable

efforts to respond to a conversion plan within 90 days.

Sec. 972.223 What action does HUD take with respect to a PHA's

conversion plan?

(a) When a PHA submits a conversion plan to HUD, HUD will review it

to determine whether:

(1) The conversion plan is complete and includes all of the

information required under Sec. 972.217; and

(2) The conversion plan is consistent with the conversion

assessment the PHA submitted.

(b) HUD will disapprove a conversion plan only if HUD determines

that:

(1) The conversion plan is plainly inconsistent with the conversion

assessment;

(2) There is reliable information and data available to the

Secretary that contradicts the conversion assessment; or

(3) The conversion plan is incomplete or otherwise fails to meet

the requirements under Sec. 972.217.

Sec. 972.225 When may a PHA proceed to convert a development?

(a) A PHA may proceed to convert a development covered by a

conversion plan only after receiving written approval of the conversion

plan from HUD. This approval will be separate from the approval that

the PHA receives for its PHA Annual Plan. A PHA may apply for tenant-

based assistance in accordance with Section 8 program requirements, and

will be given priority for receiving tenant-based assistance to replace

the public housing units.

(b) A PHA may not demolish or dispose of units or property until

completion of the required environmental review under part 58 of this

title (if a Responsible Entity has assumed environmental responsibility

for the project) or part 50 of this title (if HUD is performing the

environmental review). Further, HUD will not approve a conversion plan

until completion of the required environmental review. However, before

completion of the environmental review, HUD may approve the targeted

units for deprogramming and may authorize the PHA to undertake other

activities proposed in the conversion plan that do not require

environmental review (such as certain activities related to the

relocation of residents), as long as the buildings in question are

adequately secured and maintained.

(c) For purposes of determining operating subsidy eligibility, the

submitted plan will be considered the equivalent of a formal request to

remove dwelling units from the PHA's inventory and ACC and approval (or

acceptance). Units that are vacant or are vacated on or after the

written notification date will be treated as approved for deprogramming

under Sec. 990.108(b)(1) of this title, and will also be provided the

phase down of subsidy pursuant to Sec. 990.114 of this title.

(d) HUD may require that funding for the initial year of tenant

based assistance be provided from the new public housing Capital Fund,

Operating Fund, or both.

Appendix to Part 972--Methodology of Comparing Cost of Public

Housing With the Cost of Tenant-Based Assistance

I. Public Housing-Net Present Value

The costs used for public housing shall be those necessary to

produce a revitalized development as described in the next

paragraph. These costs, including estimated operating costs,

modernization costs and costs to address accrual needs must be used

to develop a per unit monthly cost of continuing the development as

public housing. That per unit monthly cost of public housing must be

compared to the per unit monthly Section 8 cost.

The estimated cost of the continued operation and modernization

as public housing shall be calculated as the sum of total operating,

modernization, and accrual costs, expressed on a monthly per

occupied unit basis. The costs shall be expressed in current dollar

terms for the period for which the most recent Section 8 costs are

available.

A. Operating Costs

1. The proposed revitalization plan must indicate how unusually

high current operating expenses (e.g, security, supportive services,

maintenance, utilities) will be reduced as a result of post-

revitalization changes in occupancy, density and building

configuration, income mix and management. The plan must make a

realistic projection of overall operating costs per occupied unit in

the revitalized development, by relating those operating costs to

the expected occupancy rate, tenant composition, physical

configuration and management structure of the revitalized

development. The projected costs should also address the comparable

costs of buildings or developments whose siting, configuration, and

tenant mix is similar to that of the revitalized public housing

development.

2. The development's operating cost (including all overhead

costs pro-rated to the development--including a Payment in Lieu of

Taxes (PILOT) or some other comparable payment, and including

utilities and utility allowances) shall be expressed as total

operating costs per month, divided by the

[[Page 40247]]

number of units occupied by households. For example, if a

development will have 1,000 units occupied by households and will

have $300,000 monthly in non-utility costs (including pro-rated

overhead costs and appropriate P.I.L.O.T.) and $100,000 monthly in

utility costs paid by the authority and $50,000 monthly in utility

allowances that are deducted from tenant rental payments to the

authority because tenants paid some utility bills directly to the

utility company, then the development's monthly operating cost per

occupied unit is $450--the sum of $300 per unit in non-utility

costs, $100 per unit in direct utility costs, and $50 per unit in

utility allowance costs.

3. In justifying the operating cost estimates as realistic, the

plan should link the cost estimates to its assumptions about the

level and rate of occupancy, the per-unit funding of modernization,

any physical reconfiguration that will result from modernization,

any planned changes in the surrounding neighborhood and security

costs. The plan should also show whether developments or buildings

in viable condition in similar neighborhoods have achieved the

income mix and occupancy rate projected for the revitalized

development. The plan should also show how the operating costs of

the similar developments or buildings compare to the operating costs

projected for the development.

4. In addition to presenting evidence that the operating costs

of the revitalized development are plausible, when the per-unit

operating cost of the renovated development is more than ten percent

lower than the current per-unit operating cost of development, then

the plan should detail how the revitalized development will achieve

its reduction in costs. To determine the extent to which projected

operating costs are lower than current operating costs, the current

per-unit operating costs of the development will be estimated as

follows:

a. If the development has reliable operating costs and if the

overall vacancy rate is less than twenty percent, then these costs

will be divided by the sum of all occupied units and vacant units

fully funded under PFS plus fifty percent of all units not fully

funded under PFS. For instance, if the total monthly operating costs

of the current development are $6.6 million and it has 1,000

occupied units and 200 vacant units not fully funded under PFS (or a

17 percent overall vacancy rate), then the $6.6 million is divided

by 1100--1000 plus 50 percent of 200--to give a per unit figure of

$600 per unit month. By this example, the current costs of $600 per

occupied unit are at least ten percent higher than the projected

costs per occupied unit of $450 for the revitalized development, and

the reduction in costs would have to be detailed.

b. If the development currently lacks reliable cost data or has

a vacancy rate of twenty percent or higher, then its current per

unit costs will be estimated as follows. First, the per unit cost of

the entire authority will be computed, with total costs divided by

the sum of all occupied units and vacant units fully funded under

PFS plus fifty percent of all vacant units not fully funded under

PFS. Second, this amount will be multiplied by the ratio of the

bedroom adjustment factor of the development to the bedroom

adjustment factor of the Housing Authority. The bedroom adjustment

factor, which is based on national rent averages for units grouped

by the number of bedrooms and which has been used by HUD to adjust

for costs of units when the number of bedrooms vary, assigns to each

unit the following factors:.70 for 0-bedroom units, .85 for 1-

bedroom units, 1.0 for 2-bedroom units, 1.25 for 3-bedroom units,

1.40 for 4-bedroom units, 1.61 for 5-bedroom units, and 1.82 for 6

or more bedroom units. The bedroom adjustment factor is the unit-

weighted average of the distribution. For instance, if the

development with one thousand occupied units had in occupancy 500

two-bedroom units and 500 three-bedroom units, then its bedroom

adjustment factor would be 1.125--500 times 1.0 plus 500 times 1.25,

the sum divided by 1,000. Where necessary, HUD field offices will

arrange for assistance in the calculation of the bedroom adjustment

factors of the Housing Authority and its affected developments.

c. As an example of estimating development operating costs from

PHA operating costs, suppose that the Housing Authority had a total

monthly operating cost per unit of $500 and a bedroom adjustment

factor of .90, and suppose that the development had a bedroom

adjustment factor of 1.125. Then, the development's estimated

current monthly operating cost per occupied unit would be $625--or

$500 times 1.25 (the ratio of 1.125 to .90).

B. Modernization

The cost of modernization is the initial revitalization cost to

meet viability standards, that cost amortized over twenty years

(which is equivalent to fifteen years at a three percent annual real

capital cost for the initial outlay). Expressed in monthly terms,

the modernization cost is divided by 180 (or 15 years times 12

months). Thus, if the initial modernization outlay to meet viability

standards is $60 million for 1,000 units, then the per-unit outlay

is $60,000 and the amortized modernization cost is $333 per unit per

month (or $60,000 divided by 180). However, when revitalization

would be equivalent to new construction and the PHA thus is

permitted to amortize the proposed cost over thirty years (which is

equivalent to twenty-two and one-half years at a three percent

annual real capital cost to the initial outlay), the modernization

cost will be divided by 270, the product of 22.5 and 12, to give a

cost per unit month of $ 222.

C. Accrual

The monthly per occupied unit cost of accrual (i.e., replacement

needs) will be estimated by using the latest published HUD unit

total development cost limits for the area and applying them to the

development's structure type and bedroom distribution after

modernization, then subtracting from that figure half the per-unit

cost of modernization, then multiplying that figure by .02

(representing a fifty year replacement cycle), and dividing this

product by 12 to get a monthly cost. For example, if the development

will remain a walkup structure containing five hundred two-bedroom

occupied and five hundred three-bedroom occupied units, if HUD's

Total Development Cost limit for the area is $70,000 for two-bedroom

walkup structures and $92,000 for three-bedroom walkup structures,

and if the per unit cost of modernization is $60,000, then the

estimated monthly cost of accrual per occupied unit is $85. This is

the result of multiplying the value of $51,000--the cost guideline

value of $81,000 minus half the modernization value of $60,000--by

.02 and then dividing by 12.

D. Overall Cost

The overall current cost for continuing the development as

public housing is the sum of its monthly post-revitalization

operating cost estimates, its monthly modernization cost per

occupied unit, and its estimated monthly accrual cost per occupied

unit. For example, if the operating cost per occupied unit month is

$450 and the amortized modernization cost is $333 and the accrual

cost is $85, the overall monthly cost per occupied unit is $868.

E. Adjustment for Shorter Remaining Useful Life (Used Only for

Voluntary Conversion--See Subpart B of This Part)

Where a PHA demonstrates that it is reasonable to use a

remaining useful life of five, ten or fifteen years rather than

twenty or thirty years, the PHA shall divide total modernization

costs by 45 to determine the monthly per unit cost if a five year

remaining useful life is used, 90 if a ten year remaining useful

life is used, and 135 if a fifteen remaining useful life is used.

II. Public Housing-New Budget Authority (Used Only for Voluntary

Conversion--See Subpart B of This Part)

This cost analysis shall be conducted in the same manner as the

net present value analysis, with one exception. The total capital

cost shall be divided by the total number of months in the remaining

useful life used in the analysis (e.g. for a 20 year remaining

useful life, divide the total capital cost by 240) rather than the

lower denominator which reflects amortization of capital costs,

taking into account the immediate expenditure of capital funds, in

the net present value model.

III. Tenant-Based Assistance

The estimated cost of providing tenant-based assistance under

Section 8 for all households in occupancy shall be calculated as the

unit-weighted averaging of the monthly Fair Market Rents for units

of the applicable bedroom size; plus the most recent administrative

fee applicable to newly funded Section 8 rental assistance during

the year used for calculating public housing operating costs (e.g.,

the administrative fee for units funded in fiscal years 1995 and

1996 is the monthly administrative fee amount in column C of the

January 24, 1995 Federal Register at 60 FR 4764); plus the amortized

cost of demolishing the occupied public housing units, where the

cost per unit is not to exceed ten percent of the TDC prior to

amortization. For example, if the development has five hundred

occupied two-bedroom units and five hundred occupied three-bedroom

units and if the Fair Market

[[Page 40248]]

Rent in the area is $600 for two bedroom units and is $800 for three

bedroom units and if the administrative fee comes to $46 per unit,

and if the cost of demolishing 1000 occupied units is $5 million,

then the per unit monthly cost of tenant based assistance is $774

($700 for the unit-weighted average of Fair Market Rents, or 500

times $600 plus 500 times $800 with the sum divided by 1,000; plus

$46 for the administrative fee; plus $28 for the amortized cost of

demolition and tenant relocation (including any necessary

counseling), or $5000 per unit divided by 180 in this example). In

voluntary conversion, this Section 8 cost would then be compared to

the cost of revitalized public housing development, both in terms of

net present value and new budget authority--in the example of this

section, both the revitalized public housing cost (net present

value) of $868 monthly per occupied unit, and the revitalized public

housing cost (new budget authority) of $785 monthly per occupied

unit would exceed the Section 8 cost of $774 monthly per occupied

unit. Therefore, the PHA would have the option of preparing a

conversion plan for the development under subpart B of this part.

In required conversion, the Section 8 cost would be compared

with the cost of the revitalized public housing development on a net

present value basis. In the example in this section, the revitalized

public housing cost on a net present value basis of $868 per month

would exceed the Section 8 cost of $774 monthly per occupied unit.

Therefore the PHA would be required to convert the development under

the requirements of subpart A of this part.

IV. Detailing the Section-8 Cost Comparison: A Summary Table

The section 8 cost comparison methods are summarized, using the

example provided in this section IV.

A. Key Data, Development

The revitalized development has 1000 occupied units. All of the

units are in walkup buildings. The 1000 occupied units will consist

of 500 two-bedroom units and 500 three-bedroom units. The total

current operating costs attributable to the development are $300,000

per month in non-utility costs, $100,000 in utility costs paid by

the PHA, and $50,000 in utility allowance expenses for utilities

paid directly by the tenants to the utility company. Also, the

modernization cost for revitalization is $60,000,000, or $60,000 per

occupied unit. This will provide standards for viability but not

standards for new construction. The cost of demolition and

relocation of the 1000 occupied units is $5 million, or $5000 per

unit, based on recent experience.

B. Key Data, Area

The unit total development cost limit is $70,000 for two-bedroom

walkups and $92,000 for three-bedroom walkups. The two-bedroom Fair

Market Rent is $600 and the three-bedroom Fair Market Rent is $800.

The applicable monthly administrative fee amount, in the most recent

Federal Register Notice, is $46.

C. Preliminary Computation of the Per-Unit Average Total

Development Cost of the Development

This results from applying the location's unit total development

cost by structure type and number of bedrooms to the occupied units

of the development. In this example, five hundred units are valued

at $70,000 and five hundred units are valued at $92,000 and the

unit-weighted average is $81,000.

D. Current Per Unit Monthly Occupied Costs of Public Housing (Net

Present Value)

1. Operating Cost............ $450 (total monthly costs divided by

occupied units: in this example, the sum

of $300,000 and $100,000 and $50,000--

divided by 1,000 units).

2. Amortized Modernization $333 ($60,000 per unit divided by 180 for

Cost. standards less than those of new

construction).

3. Estimated Accrual Cost.... $85 (the per-unit average total

development cost minus half of the

modernization cost per unit, times .02

divided by 12 months: in this example,

$51,000 times .02 and then divided by

12).

4. Total Per Unit Public $868.

Housing Costs.

E. Per Unit Monthly Occupied Costs of Public Housing (New Budget

Authority)

1. Operating Cost............ $450 (total monthly costs divided by

occupied units: in this example, the sum

of $300,000 and $100,000 and $50,000--

divided by 1,000 units).

2. Modernization Cost........ $250 ($60,000 per unit divided by 240 for

standards less than those of new

construction).

3. Estimated Accrual Cost.... $85 (the per-unit average total

development cost minus half of the

modernization cost per unit, times .02

divided by 12 months: in this example,

$51,000 times .02 and then divided by

12).

4. Total Per Unit Public $785.

Housing Costs.

F. Current per Unit Monthly Occupied Costs of Section 8

1. Unit-weighted Fair Market $700 (the unit-weighted average of the

Rents. Fair Market Rents of occupied bedrooms:

in this example, 500 times $600 plus 500

times $800, divided by 1000).

2. Administrative Fee........ $46.

3. Amortized Demolition and $28 ($5000 per unit divided by 180).

Relocation Cost.

4. Total Per Unit Section 8 $774.

Costs.

G. Result

In this example, because revitalized public housing costs, both

on a net present value basis, and based on new budget authority,

exceeds current Section 8 costs, a conversion plan would be

permissible under voluntary conversion, Subpart B of this Section.

Under required conversion, because revitalized public housing costs

on a net present value basis exceed Section 8 costs, the PHA would

be required to convert the public housing development under subpart

A of this Section.

Dated: June 23, 1999.

Harold Lucas,

Assistant Secretary for Public and Indian Housing.

[FR Doc. 99-18774 Filed 7-22-99; 3:35 pm]

BILLING CODE 4210-33-P